Friday 25th May 2018

Resource Clips


Posts tagged ‘oil’

Who’s doing what, and why?

May 10th, 2018

Four banks manipulate six commodities to manage other markets, says Ed Steer

by Greg Klein

Probably the most facile way to dismiss a conspiracy theorist is to label the person “a conspiracy theorist.” Conventional thinking gives the term negative connotations, even though history and current events have an inconvenient tendency to reveal conspiracies in action. Ed Steer’s interest in bullion manipulation started with the Hunt brothers’ 1970s silver conspiracy. Having spent decades watching the machinations of others, the newsletter writer and Gold Anti-Trust Action Committee board member adamantly declares that “there are no markets, just interventions.”

Four banks manipulate six commodities to manage other markets, says Ed Steer

Ed Steer speaks at the International Mining
Investment Conference, held in
Vancouver on May 15 and 16.

Drawing on the work of GATA and analyst Ted Butler, Steer believes precious metals “have been managed actively” in the COMEX futures market since 1973. Price suppression supports “the paper game they’re playing in the stock and bond markets,” a game that’s continued since the U.S. dropped the gold standard in 1971, he argues.

“We’ve had a complete blow-up of paper assets because of unlimited money printing. They don’t want that showing up in the commodities market because the moment that it does, all the paper’s going to rush out of Wall Street, the bond market, the Dow and every other index, and into gold and silver in particular and commodities in general. And that’s not what they want to happen.”

If those two metals merit suppression, so do platinum and palladium. “You couldn’t have a $3,000 or $4,000 platinum price while gold’s sitting at $1,200,” he states. “People would start asking questions.”

Not just bullion but, more recently, copper and crude too. “If you can control the prices of those six, you can pretty well control the prices of other commodities, whether they’re wheat, oats, sugar, lumber or whatever. There will be circumstances of course when supply-demand factors in some commodities will cause a run-up in prices. But overall, they keep those six commodities under price control and, when they do that, they can control everything else.”

Who are they? He attributes special prominence to JPMorgan Chase. “They’re the biggest players in all four precious metals, and they’re also in the crude oil market to a certain extent. It’s JPMorgan Chase, HSBC USA, Scotiabank here in Canada, and most likely Citigroup, but JPMorgan is by far the ringleader. There may be some investment houses involved as well like Morgan Stanley and I think Goldman Sachs, which is now a bank. So it’s the Wall Street paperhangers, four or five of them versus everybody else. There’s also lots of foreign banks involved, maybe up to 30, but their positions are very, very minor compared to the big traders that control almost 50% of the COMEX futures market in gold right now.

Four banks manipulate six commodities to manage other markets, says Ed Steer

“This is total collusion. They all buy at the same time, they all sell at the same time…. There’s no free market in any of this.”

Now, with the gold-silver ratio sometimes surpassing 80 to one, Steer blames this extraordinary divergence on the same tactics.

“JPMorgan has taken silver down from $49 in 2011 all the way to $16 or $17, and they’ve held it there. If the gold-silver ratio were even close to normal it would be around 25 or 30 to one. Of course that would be double or triple the silver price that we have today, and even that doesn’t fully take into account supply and demand. As far as I’m concerned the silver price should be well over $100 an ounce by now and the ratio should be about 20 to one.”

Oil presents another example. “It’s up over 30% since the middle of December. The gold price has done basically nothing. That’s not what normally happens. When oil prices rise, it’s a sign that commodity prices will rise and of course gold and silver are normally the leading indicators. The metals aren’t being allowed to function as leading indicators because they’re trying to get the oil price up without affecting gold and silver prices—and they’ve done an awesome job of that.”

It doesn’t make any difference how many bombs fall on Syria, Iraq or Iran, or what the supply-demand situation is. It all depends on what’s happening in the COMEX futures market.

External forces play little or no role, he maintains. “It doesn’t make any difference how many bombs fall on Syria, Iraq or Iran, or what the supply-demand situation is. It all depends on what’s happening in the COMEX futures market.”

He does concede, however, “If things got really extreme, if downtown Tehran disappeared under a mushroom cloud, that would probably move the markets.”

But sometime in the foreseeable future, those in control will have to let bullion rise, he adds. “It’s very hard to defend this price right now. Demand is exceeding supply, certainly in gold. They’re going to have to increase the prices in both gold and silver, but whether they’ll allow prices to run free remains to be seen. They might just allow gold to rally $300 or $400 or so, and up to $50 in silver, and hold the prices at that new level. But they’re going to have to let it go sooner or later and I think the day is coming sooner.”

That would mean the two metals do offer a safe haven after all. “I think this COMEX futures paper game is going to end pretty soon and those who were already positioned are going to reap substantial rewards. It’s better to be a year or two early rather than five minutes or two days late.”

Ed Steer speaks at the International Mining Investment Conference, held in Vancouver from May 15 to 16. For a 25% admission discount click here and enter the code RESOURCECLIPS.

Read about conference speakers Jayant Bhandari and Simon Moores.

Visual Capitalist looks at China’s staggering demand for commodities

March 4th, 2018

by Jeff Desjardins | posted with permission of Visual Capitalist

China’s staggering demand for commodities

 

Over 50% of all steel, cement, nickel and copper goes there

The Chart of the Week is a Friday feature from Visual Capitalist.

It’s said that in China, a new skyscraper is built every five days.

China is building often, and it’s building higher. In fact, just last year, China completed 77 of the world’s 144 new supertall buildings, spread through 36 different Chinese cities. These are structures with a minimum height of 656 feet (200 metres).

For comparison’s sake, there are only 113 buildings in New York City’s current skyline that are over 600 feet.

Unbelievable scale

It’s always hard to put China’s size and scope in perspective—and Visual Capitalist has tried before by showing you 35 Chinese cities as big as countries, or highlighting the growing prominence of the domestic tech scene.

This chart also falls in that category and it focuses on the raw materials that are needed to make all this growth possible.

Year of data Commodity China’s % of global demand Source
2017 Cement 59% Statista
2016 Nickel 56% Statista
2017 Coal 50% NAB
2016 Copper 50% Global X Funds
2017 Steel 50% World Steel Association
2017 Aluminum 47% MC Group
2016 Pork 47% OECD
2017 Cotton 33% USDA
2017 Rice 31% Statista
2017 Gold 27% China Gold Association, WGC
2017 Corn 23% USDA
2016 Oil 14% Enerdata

Note: Because this data is not all in one easy place, it is sourced from many different industry associations, banks and publications. Most of the data comes from 2017, but some is from 2016.

China demand > world

There are five particularly interesting commodity categories here—and in all of them, China’s demand equals or exceeds that of the rest of the world combined.

Cement: 59%
The primary ingredient in concrete is needed for roads, buildings, engineering structures (bridges, dams, etc.), foundations and in making joints for drains and pipes.

Nickel: 57%
Nickel’s primary use is in making stainless steel, which is corrosion-resistant. It also gets used in superalloys, batteries and an array of other uses.

Steel: 50%
Steel is used for pretty much everything, but demand is primarily driven by the construction, machinery and automotive sectors.

Copper: 50%
Copper is one of the metals driving the green revolution and it’s used in electronics, wiring, construction, machinery and automotive sectors primarily.

Coal: 50%
China’s winding down coal usage—but when you have 1.4 billion people demanding power, it has to be done with that in mind. China has already hit peak coal, but the fossil fuel does still account for 65% of the country’s power generated by source.

Posted with permission of Visual Capitalist.

Richard Truman of Geoscience B.C. discusses how various stakeholders benefit from the organization’s research

February 20th, 2018

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Paved with mineralization

October 27th, 2017

Norman B. Keevil’s memoir retraces Teck’s—and his own—rocky road to success

by Greg Klein

Norman B. Keevil’s memoir retraces Teck’s—and his own—rocky road to success

Profitable right from the beginning, Teck’s Elkview mine “would become
the key chip in the consolidation of the Canadian steelmaking coal industry.”
(Photo: Teck Resources)

 

“We were all young and relatively inexperienced in such matters in those days.”

He was referring to copper futures, a peril then unfamiliar to him. But the remark’s a bit rich for someone who was, at the time he’s writing about, 43 years old and president/CEO of a company that opened four mines in the previous six years. Still, the comment helps relate how Norman B. Keevil enjoyed the opportune experience of maturing professionally along with a company that grew into Canada’s largest diversified miner. Now chairperson of Teck Resources, he’s penned a memoir/corporate history/fly-on-the-wall account that’s a valuable contribution to Canadian business history, not to mention the country’s rich mining lore.

Norman B. Keevil’s memoir retraces Teck’s—and his own—road to success

Norman B. Keevil
(Photo: Teck Resources)

Never Rest on Your Ores: Building a Mining Company, One Stone at a Time follows the progress of a group of people determined to avoid getting mined out or taken out. In addition to geoscientific, engineering and financial expertise, luck accompanies them (much of the time, anyway), as does acumen (again, much of the time anyway).

Teck gains its first foothold as a predecessor company headed by Keevil’s father, Norman Bell Keevil, drills Temagami, a project that came up barren for Anaconda. The new guys hit 28% copper over 17.7 metres. Further drilling leads to the three-sentence feasibility study:

Dr. Keevil: What shall we do about Temagami?

Joe Frantz: Let’s put it into production.

Bill Bergey: Sounds good to me.

They schedule production for two and a half months later.

A few other stories relate a crucial 10 seconds in the Teck-Hughes acquisition, the accidental foray into Saskatchewan oil, the Toronto establishment snubbing Afton because of its VSE listing, an underhanded ultimatum from the British Columbia government, getting out of the oyster business and winning an unheard-of 130% financing for Hemlo.

Readers learn how Murray Pezim out-hustled Robert Friedland. But when it came to Voisey’s, Friedland would play Inco and Falconbridge “as though he were using a Stradivarius.” Keevil describes one guy welching on a deal with the (apparently for him) unarguable excuse that it was only a “gentleman’s agreement.”

Norman B. Keevil’s memoir retraces Teck’s—and his own—rocky road to success

Through it all, Teck gets projects by discovery or acquisition and puts them into production. Crucial to this success was the Teck team, with several people getting honourable mention. The author’s closest accomplice was the late Robert Hallbauer, the former Craigmont pit supervisor whose team “would go on to build more new mines in a shorter time than anyone else had in Canadian history.” Deal-making virtuoso David Thompson also gets frequent mention, with one performance attributed to his “arsenal of patience, knowledge of the opponents, more knowledge of the business than some of them had, and a tad of divide and conquer…”

Partnerships span the spectrum between blessing and curse. International Telephone and Telegraph backs Teck’s first foray into Chile but frustrates its ability to do traditional mining deals. The Elk Valley Coal Partnership puts Teck, a company that reinvests revenue into growth, at odds with the dividend-hungry Ontario Teachers’ Pension Plan. Working with a Cominco subsidiary, Keevil finds the small-cap explorer compromised by the “ephemeral response of the junior stock market.” And smelters rip off miners. But that doesn’t mean a smelter can’t become a valued partner.

Keevil argues the case for an almost cartel-like level of co-operation among miners. Co-ordinated decisions could avoid surplus production, he maintains. Teck’s consolidation of Canada’s major coal mines helped the industry stand up to Japanese steelmakers, who had united to take advantage of disorganized Canadian suppliers. “Anti-trust laws may be antediluvian,” he states.

Keevil admits some regrets, like missing Golden Giant and a Kazakhstan gold project now valued at $2 billion. The 2008 crash forced Teck to give up Cobre Panama, now “expected to be a US$6 billion copper mine.” Teck settled a coal partnership impasse by buying out the Ontario Teachers’ share for $12 billion. Two months later the 2008 crisis struck. Over two years Teck plunged from $3.6 billion in net cash to $12 billion in net debt.

But he wonders if his own biggest mistake was paying far too much for the remaining 50% of Cominco when an outright purchase might not have been necessary. Keevil attributes the initial 50%, on the other hand, to a miracle of deal-making.

For the most part Keevil ends his account in 2005, when he relinquishes the top job to Don Lindsay. By that time the company had 11 operating mines and a smelting/refining facility at Trail. A short chapter on the following 10 years, among the most volatile since the early ’70s, credits Teck with “a classic recovery story which deserves a full chapter in the next edition of Never Rest on Your Ores.” Such a sequel might come in another 10 years, he suggests.

Let’s hope he writes it, although it’ll be a different kind of book. As chairperson he won’t be as closely involved in the person-to-person, deal-to-deal, mine-to-mine developments that comprise the greatest strength of this book—that and the fact that the author grew with the company as it became Canada’s largest diversified miner.

Meanwhile, maybe Lindsay’s been keeping a diary.

The author’s proceeds go to two organizations that promote mining awareness, MineralsEd and Mining Matters.

Visual Capitalist: How commodities performed in H1 and why they’re very cheap

July 5th, 2017

by Jeff Desjardins | posted with permission of Visual Capitalist | July 5, 2017

If you’re looking for action, the commodities sector has traditionally been a good place to find it.

With wild price swings, massive up-cycles, exciting resource discoveries and extreme weather events all playing into things, there’s rarely a dull day in the sector. That being said, it’s hard to remember a more lacklustre period for commodities than the last couple of years.

For commodity bulls, the good news is that the sector is no longer tanking. The bad news, however, is that all the recent action has been in relatively niche sectors, as metals like cobalt, zinc and lithium all have their day in the sun.

At the same time, the big commodities (gold, oil, copper) have all slid sideways, having yet to revisit their former periods of glory.

Commodity winners so far

Before we highlight why commodities could still be cheap, let’s look at recent performance to get some context. Here are the commodities that have positive returns in H1 2017 so far:

How commodities performed in H1 and why they’re very cheap

 

Palladium is the best performer in 2017 so far, and it has now almost passed platinum in price. That would be the first time since 2001 that this has happened, and for the stretch of 2007 to 2012 it was even true that palladium traded at a $1,000 deficit to platinum.

Agricultural goods like rough rice, lean hogs, oats and wheat have also gotten more expensive so far this year. Meanwhile, metals like gold, copper and silver have seen modest gains—but only after dismal performances in the last part of 2016.

The losers so far

Here is the scoreboard for the commodities in negative territory, with the most noticeable losses in sugar and energy.

How commodities performed in H1 and why they’re very cheap

 

Are commodities cheap?

From the post-crisis bottom in 2009 until today, the S&P 500 is up a staggering 215.4%.

During that same timeframe, most major commodities crashed and then went sideways. The Goldman Sachs Commodity Index (GSCI) is down roughly 31.2%, which is a strong juxtaposition to how equities have done.

This extreme divergence can be best seen in this long-term chart, which compares the two indices since 1971.

How commodities performed in H1 and why they’re very cheap

 

In other words: Despite the lack of action in commodities that we noted earlier, the sector has never been cheaper relative to equities, even going back 45 years.

That means that there could be some much-needed action soon.

Posted with permission of Visual Capitalist.

Infographic visualizes the world’s deepest oil well

March 20th, 2017

Infographic by Fuel Fighter | text by Jeff Desjardins | posted with permission of Visual Capitalist | March 20, 2017

In the world’s deepest gold mine, workers venture four kilometres below the Earth’s surface to extract gold from a 0.8-metre-wide vein of ore.

While these depths are impressive, mining is limited by the frailty of the human body. Going much deeper would be incredibly dangerous, as limitations such as heat, humidity, logistics and potential seismic activity all become more intense.

Luckily, the oil industry does not have such human restrictions and drilling deep into the Earth’s crust is instead limited by a different set of circumstances—how deep can the machinery and technology go before the unfathomable heat and pressure renders it inoperable?

The world’s deepest oil well

This infographic comes to us from Fuel Fighter and it helps visualize the mind-boggling depths of the world’s deepest oil well, which is located in a remote corner of eastern Russia.

 

Visualizing the world’s deepest oil well

 

The world’s deepest oil well, known as Z-44 Chayvo, goes over 12 kilometres into the ground—equal to 15 Burj Khalifas (the tallest skyscraper) stacked on top of each other. That’s also equal to twice the record height for air balloon flight.

Perhaps more importantly to the operator, Exxon Neftegas Ltd, the wells on this shelf are expected to produce a total of 2.3 billion barrels of oil.

That’s some serious depth

But even before the Z-44 Chayvo Well and other holes like it were drilled on the eastern side of Russia, the famous Kola Superdeep Borehole set the record for drill depth.

Located in western Russia, this time just 10 kilometres from the border with Norway, the Kola Superdeep Borehole was rumoured to have been discontinued in 1992 because it actually reached “hell” itself. At its most extreme depth, the drill had pierced a super-hot cavity and scientists thought they heard the screams of damned souls.

All folklore aside, the Kola Superdeep Borehole is super interesting in its own right. It revealed many important things about our planet and it still holds the record for depth below the surface.

Read more about deep underground mining.

Infographics: Think again about natural resources

February 23rd, 2017

Among the news from Resource Works is the #ThinkAgain campaign, a series of infographics that “set the record straight on myths, misunderstandings, ‘alternative facts’ and fake news about resources.”

Here’s the current batch. Resource Works promises more to come.

Infographics: Think again about natural resources

Infographics: Think again about natural resources

Infographics: Think again about natural resources

Infographics: Think again about natural resources

Infographics: Think again about natural resources

Infographics: Think again about natural resources

Infographics: Think again about natural resources

Infographics: Think again about natural resources

Infographics: Think again about natural resources

Infographics: Think again about natural resources

Infographics: Think again about natural resources

Infographics: Think again about natural resources

Infographics: Think again about natural resources

Posted with permission of Resource Works, a non-profit research and advocacy organization “supporting a respectful, fact-based public dialogue on responsible resource development in B.C.”

Infographic: Countries of origin for raw materials

November 16th, 2016

Graphic by BullionVault | text by Jeff Desjardins | posted with permission of Visual Capitalist | November 16, 2016

Every “thing” comes from somewhere.

Whether we are talking about an iPhone or a battery, even the most complex technological device is made up of raw materials that originate in a mine, farm, well or forest somewhere in the world.

This infographic from BullionVault shows the top three producing countries of various commodities such as oil, gold, coffee and iron.

Infographic Countries of origin for raw materials

 

The many and the few

The origins of the world’s most important raw materials are interesting to examine because the production of certain commodities is much more concentrated than others.

Oil, for example, is extracted by many countries throughout the world because it forms in fairly universal circumstances. Oil is also a giant market and a strategic resource, so some countries are even willing to produce it at a loss. The largest three crude oil-producing countries are the United States, Saudi Arabia and Russia—but that only makes up 38% of the total market.

Contrast this with the market for some base metals such as iron or lead and the difference is clear. China consumes mind-boggling amounts of raw materials to feed its factories, so it tries to get them domestically. That’s why China alone produces 45% of the world’s iron and 52% of all lead. Nearby Australia also finds a way to take advantage of this: It is the second-largest producer for each of those commodities and ships much of its output to Chinese trading partners. A total of two-thirds of the world’s iron and lead comes from these two countries, making production extremely concentrated.

But even that pales in comparison with the market for platinum, which is so heavily concentrated that only a few countries are significant producers. South Africa extracts 71% of all platinum, while Russia and Zimbabwe combine for another 19% of global production. That means only one in every 10 ounces of platinum comes from a country other than those three sources.

Graphic by BullionVault | posted with permission of Visual Capitalist.

Ever deeper, ever higher

October 11th, 2016

China takes on three mining frontiers, but not without competition

by Greg Klein

This is the first of a two-part feature. See Part 2.

Nearly a century before laggard Europeans got around to their Age of Exploration, Chinese merchant vessels had been travelling at least as far as eastern Africa, returning with vast shiploads of treasure. The voyages ended abruptly in 1433, for reasons debated by historians, and rulers ordered a massive merchant fleet destroyed. That largely left the New World to Westerners, evidently not a policy China intends to repeat. Now the country plans the conquest of three new frontiers: “deep underground, deep sky and deep sea.”

Such are the goals of Three Deep, a five-year plan announced last month by the country’s Ministry of Land and Resources. China’s funding R&D that would take mineral exploration deeper than ever on land and at sea, while exploring from outer space as well. But formidable as they are, the three frontiers aren’t completely uncharted. The expansionist, resource-hungry regime will have competition.

China takes on three mining frontiers, but not without competition

By 2020 the country wants the ability to mine land-based deposits that begin two kilometres in depth, find minerals at three kilometres, and identify oil and gas at 6.5 to 10 kilometres, the South China Morning Post reported October 5. China intends to develop underground communities too, although those details were even more scarce.

China also plans technology for undersea mineral exploration and mining, working towards the ability to send a remotely operated vehicle (ROV) to 11 kilometres’ depth by 2020, the paper added. That’s slightly beyond the deepest known point of any seabed. The country has already sent an ROV seven kilometres deep in the Pacific. In the Indian Ocean, Chinese have been studying seabed mining technology on a 10,000-square-kilometre area south of Madagascar, the SCMP stated.

Going from the depths to the heavens, China wants 27 satellites in orbit by 2020 to conduct surveys and research, partly on terrestrial mineral potential. The country also has expressed ambitions for moon and Mars landings, and for sending its citizens into space. A Chinese competitor to SpaceX, One Space Technology, plans its first commercial rocket launch in 2018.

SpaceX, of course, retains its Elon Musk confidence even after the Falcon 9 rocket blew up prior to take-off last month, destroying a $300-million communications satellite. Having received NASA contracts to ferry people and cargo to the International Space Station, Musk continues to talk about sending colonists to Mars. He’s already sent some lithium stocks to the moon.

Probably among the more credible companies talking about mining the heavens are Planetary Resources and Deep Space Industries. Both develop technology for NAFTA and both have signed MOUs with Luxembourg that would help finance mineral exploration and mining of near-Earth asteroids. The Grand Duchy, a global leader in satellite communications, has announced its willingness to invest in extra-terrestrial mining to become a world leader in other worlds. The country also plans to create a legal framework for its outer space endeavours, after the U.S. passed legislation giving Americans the right to keep any extra-terrestrial commodities they extract.

Deep Space says it will launch its Prospector X experimental asteroid explorer “in the near future.” By the first half of the next decade, Planetary expects to begin small-scale extraction of asteroid water for its oxygen and hydrogen.

Already a nine-year veteran of the main asteroid belt, NASA’s Dawn craft now orbits the dwarf planet Ceres after having studied the proto-planet Vesta. Last month the space agency’s NASA OSIRIS-REx set off for the asteroid Bennu, with arrival expected in 2018 and return in 2023.

JAXA, the Japan Aerospace Exploration Agency, has been to that neighbourhood and back after its Hayabusa craft delivered asteroid samples in 2010.

Last month the European Space Agency ended the 12-year, eight-billion-kilometre odyssey of its Rosetta craft, which spent the last two years studying a comet. In a joint project with Russia’s Roscosmos, the ESA expects to land a capsule on Mars on October 19 to search for signs of previous life.

Russia’s moon exploration program sees potential for minerals delivered by asteroid impact. “In the next few years, all scheduled moon flights will focus on its southern polar region, where low-temperature reservoirs of rare earths, as well as unknown volatile substances, have been detected,” Industrial Minerals quoted Vladislav Shevchenko of Moscow State University. Given higher commodity prices, mining could be viable, he added.

Boeing NYSE:BA recently matched Musk’s big talk as CEO Dennis Muilenburg spoke about sending holidayers to orbiting tourist traps prior to linking up with the Red Planet. “I’m convinced the first person to step foot on Mars will arrive there riding a Boeing rocket,” Bloomberg quoted him last week. As a NASA contractor Boeing competes with SpaceX on its own and through the United Launch Alliance, a JV with Lockheed Martin NYSE:LMT.

This is the first of a two-part feature. See Part 2.

The non-profit group Resource Works points out green energy’s reliance on oil, gas and mining

July 18th, 2016

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