Tuesday, April 23, 2013

Hazards of mining: What can be done?

Image Source: latimesblogs.latimes.com

Recently, a Tibetan gold mine made international headlines when a massive landslide buried workers who were sleeping there. Unlike the highly televised plight of the miners in Mexico who were trapped several stories underground for days, this story did not have quite such a hopeful ending, and it has yet again sparked the recurring debate about the dangers of mining.

Image Source: gpssystems.net

The United States Department of Labor has issued several policies about how miners work and how the environment should be maintained, at minimum, to remain safe for all workers. This includes a range of regulations involving every aspect of working in a mine, starting from the worker’s clothing or uniform to the site’s size, location, and housing, storage, or equipment.

Like most professions, safety in mining starts with education. In addition to being trained for the job, miners are also taught how to handle every possible emergency situation and how to survive for long periods of time in the condition of their mines. Although it is impossible to be prepared for every possible bad situation, training workers in basic survival significantly increases their chance of making it out of a desperate situation alive.

Image Source: economist.com


Safety of its workers is a top priority at Petaquilla Minerals, an established gold mining company in Panama. Under the leadership of Richard Fifer, its director and chairman of the board, the company provides its workers with technical advice on occupational and environmental risk protection. This blog offers the latest on the mining industry.

Sunday, April 21, 2013

REPOST: What’s Behind the Crash in the Gold Market?

In this article, Christopher Matthews of TIME Business discusses the factors behind the recent crash in the value of gold.


One of the more interesting phenomena to take place in the markets in recent memory has been the seemingly invincible rise in the value of gold. In the decade between 2001 and 2011, the price of gold rose from $256 per oz. to a high of $1,920 — a whopping 650% return for those lucky enough to have timed the trade perfectly.



But since 2011, the gold market has shown signs of weakness, culminating in a multiday crash that began on Thursday and continued into Monday.



According to the Wall Street Journal: 


Gold futures for April delivery fell $140.40, or 9.4%, Monday to a two-year low at $1,360.60 an ounce on the Comex division of the New York Mercantile Exchange. That extended their bear-market descent of more than 20% from their 2011 all-time high. Since Thursday, gold prices have declined by more than $203 an ounce, a record skid since the futures began trading in the U.S. in 1974.


The first thing gold skeptics like Warren Buffett will remind you about the precious metal is that it doesn’t have nearly the utility of other commodities like oil or copper. Sure, we use it for jewelry or dental fillings, but mostly we just let it sit there. In 1998, Buffett famously quipped: “Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.” It’s true: unlike stocks, gold doesn’t pay a dividend. And unlike oil, it isn’t a vital commodity that powers other parts of the economy.



Though Buffett may be justified in personally shying away from investing in the shiny metal, in other respects he underplays its significance. Gold has held an enduring place in human history, and a central role in international monetary policy from the early 19th century until 1971. The so-called gold standard — a system in which national currencies were ultimately redeemable for a fixed amount of gold — was the law of the land in much of the world until 1971, when Richard Nixon formally severed the convertibility of the dollar. Since that time, governments across the world have been in the peculiar position of having their currency backed by nothing more than faith. For instance, under this system, the U.S. could theoretically print and spend money endlessly, with no fear that its spending of dollars would deplete its stock of gold.



Since 1971, this era of “floating” currencies has been a contributing factor in developed countries’ ability to take on more and more debt, a dynamic that has reached new highs since the financial crisis. The rise of gold in recent years can be explained in part by investors’ understandable lack of confidence in governments’ ability to keep their debt under control, and therefore the value of their currencies high. In fact, central banks across the world in recent years have also diversified their holdings into gold as a hedge against a decline in the value of the dollar.


In addition, it has become much easier for the average investor to invest in gold through exchange-traded gold funds or derivatives.



All of these factors have contributed to gold’s rise, but what about its recent crash? It’s impossible to pinpoint the exact cause of any market correction, and analysts have floated a range of possible reasons, from the Cypriot central bank’s need to sell off some its gold reserves to pay for its bailout to recent data showing weakness in the Chinese economy. But nobody knows for sure why gold is declining in value because it’s nearly impossible to pinpoint gold’s fundamental value. Most assets are valued at the sum of the future income they produce, but of course gold produces no income. It has no inherent value beyond the fact that humans have always valued it.



Gold is often spoken of as a hedge against inflation, but really gold is a hedge against catastrophe. Compact and convenient to transport, it’s the one commodity that you can expect to be valuable no matter the political situation. In other words, gold is a great bet if you think there’s going to be a revolution.



Any student of history knows that change, often violent change, is the one constant that can be relied on. Gold enthusiasts are absolutely right to question whether our current monetary regime of floating currencies — now in its fourth decade — will last. After all, the post–WW II Bretton Woods monetary regime, which came to an end when the U.S. abandoned the gold standard, lasted less than 30 years. And the classic gold-standard era (1871–1913) lasted roughly as long as our current monetary regime. History tells us that change is gonna come; the hard part is figuring out what the change will look like.



Which brings us to the wisdom of investing in gold. While gold enthusiasts may be right to question the sustainability of the dollar’s role as the world’s currency, or government’s ability to keep spending at appropriate levels, that doesn’t necessarily mean that gold is a can’t-miss investment. After all, the most likely result of government overspending is inflation, and even high inflation like we experienced in the 1970s won’t necessarily lead to the collapse of governments or our current monetary order. And if it’s just inflation you are worried about, many assets hedge against inflation — assets that are otherwise safer and easier to value than gold.



As I said before, it’s impossible to pinpoint the exact cause of any market correction, but the severity of the dip in gold is most likely a product of gold’s ill-defined value. If you’re holding gold because of a warranted-but-vague lack of confidence in government’s ability to keep a lid on inflation, I can understand why a slight dip in its value would send you running for the exits. It would make sense to get out of gold and into an inflation hedge that is less speculative.


But let’s not mistake yesterday’s decline for the end of the gold bull run. As the recent brouhaha over the virtual currency Bitcoin has shown, the issues confronting traditional currency have not been resolved. And, unlikely as it may be, the world’s oldest currency may have yet another role to play in the ongoing history of money.
Richard Fifer, father of Panamanian mining, is the chairman of the board of directors of Petaquilla Minerals Ltd., a leading gold mining company. Its website offers more news and information on the mining industry.

Richard Fifer, Father of Panamanian mining, is the chairman of the board of directors of Petaquilla Minerals Ltd., a leading gold mining company. Its website offers more news and information on the mining industry.

Tuesday, April 16, 2013

REPOST: Is China buying up Africa?

China is slowly but evidently surpassing other developed nations in the business of exploiting renewable energy resources. This article from CNN talks about the country's progress in exploring Africa.



The world's second superpower is pouring billions of dollars into Africa, running oil and mining firms all over the continent.
China is constructing everything from roads and bridges to stadiums and important government buildings.
The headquarters of the African Union, perhaps the most important political building in Africa, was built entirely with Chinese money, to the tune of $200 million.
And while China is aggressively investing in Africa, the U.S. appears to be sitting on the sidelines. China has passed the U.S. to become Africa's biggest trading partner. 
Xi Jinping became China's new leader just two weeks ago and right now Xi is in Africa as one part of his first trip abroad as president.
Africa is the world's fastest growing market and has the world's richest mineral reserves, so obviously there's money to be made. But do the Chinese want more?
Some argue that this is a new form of colonialism – a repeat of Africa's hated past.
Nigeria's central bank governor recently said, “China takes our primary goods and sells us manufactured ones. This was also the essence of colonialism. Africa is now willingly opening itself up to a new form of imperialism."
Many Africans see a thin line between capitalism and colonialism.
Ian Bremmer is the president of the Eurasia Group and he told CNN’s Ali Vleshi that both Africans and Chinese are getting the benefit of this trade and investment
“Clearly the Chinese are not picky where they invest. They typically go places that the West doesn't have as much.”
As a consequence, Bremmer says the Chinese tends to invest in less developed places that are less democratic and more authoritarian. In those regions, the African governments may be seeing a lot of cash, but their people are seeing a lot less.
“The Chinese clearly are getting what they want in the deal either way,” Bremmer said.
Even in more democratic countries, the people may be uneasy with the Chinese presence. Bremmer recounted a Nigerian official who told him that the Chinese were by far the most effective trade partner that the Nigerians had – much more so than the United States because the Chinese write checks, plus they are willing to come in and build infrastructure.
And the African governments may prefer this, because unlike the U.S. investment, China doesn’t come with strings attached.
“In the last couple days, Xi Jinping has been down in Africa and he made it very clear that when China comes to Africa, there will not be any political strings. And he's clearly implying that while the United States wants you to be democratic, they want you to pay attention to human rights. So, my God, the Chinese won't do that.”
But Bremmer said there actually are a different set of strings attached.
“The Chinese quid pro quo typically involves lots of Chinese content, lots of Chinese labor that they're sending over to these countries to work, which hurts local unemployment issues. And of course, the availability of commodities, including food, to be exported to China. There's sometimes a Faustian bargain in these countries.”
It appears to be coming without geopolitical or other strategic interest, other than economic gain for China.
“I think it is ultimately good for Africans because Africa is getting governed better," Bremmer said. "Fifty percent of Africa's 1.1 billion people now live in cities. Their women are getting educated. As that happens, you start to see better demographics. They're more sustainable. There's less poverty, of course, and the government improves. And when the government improves, the investment starts looking less colonial.”
Bremmer said if one day China's investments places like Nigeria come full circle and start looking more colonial, “that government has no one but themselves to blame.”

Few people know mining as well as Richard Fifer does. Read about his work on this website.