AHA Investor Feb/March 2012

R e a l G o l d • R e a l S i lv e r • R e a l A s s e t s • R e a l W e a l t h

AHA.InvestorAU$8.95 | Volume 2, Issue #7

Feb/mAR 2012

EXCLUSIVE IG Markets’ Commodities Forecast 2012

On Buying Bullion (by Bullion Buyers)

PlusGolden Mining Opportunies, The Silver Eagle, and What Happened when Iceland said No

The Greek Tragedy

The end of the Euro?

Valcambi Gold Forever Swiss

Sales please contact +61 415 875 008 or email [email protected]

secure investment

buy/sell gold and silver BullionVisit us www.australiangualmetals.com

Suit5, level2, 88 Pitt St. Sydney 2000 (02) 9216 6000

Gold and Silver

4 | AHA.Investor Feb/Mar 2012

8 World News

14 2011: AHA Timelines & Top Issues

SPECIAL REPORT: 2012 Predictions

18 Exclusive IG Markets share their Commodity forecasts for AHA readers

24 Simon Black on the US Domestic front

SPECIAL REPORT: FOCUS EUROPE

26 The Eurozone – Europe in Crisis

31 European Debt: Investors Beware – Dan Denning

Hard Asset Investment

34 On Owning Bullion – The New Bullion Buyers Guide. New to Bullion Buying? This is a must read for you.

38 Iceland – Freezing out the Banks & Going it Alone – with Bill Wilson

42 Gold & The Shadow Banking System – Greg Canavan

44 Argentina – What Happens when Inflation Happens

Numismatics

46 The Eagle Has Landed

Art Investment

50 Art Trends 2011 / 2012 – with Al Bailey

Mining & Investment

54 Bassari Resources: Out of Africa

56 Mining Investment News

66 Contact Directory

contents

26

31

46

Oct/Nov 2011 AHA.Investor | 5

uardian Vaults and Guardian Gold can offer you this ultimate solution to your entire bullion investment experience in one location.

Privately owned and the first of its kind in Australia (established in 2002) your bullion is fully allocated in individual safe deposit boxes, ensuring that you have physical possession of your bullion, suitable for individuals and SMSF.

We continue to surpass the expectations of our clients, with the highest level in security, procedures and protocols together with personalised customer service.

Experience the difference that Guardian Vaults and Guardian Gold can offer and you too will realise the benefits.

Gold and Silver sales

Free delivery to the vault with every purchase

Complimentary insurance*

High Security Safe Deposit Box FacilityBiometric hand scan

Digital photo recognitionPersonal security pin codes

On site security guardSecurity lounge

Bullet proof air lock & guard room

Jenny TremaineManaging Director

Guardian Vaults Pty LtdGuardian Gold Pty Ltd

creating seamless solutions for your bullion investment, delivery,

insurance & secure storage

www.guardianvaults.com.au www.guardian-gold.com.au100 William Street, Melbourne, Australia, 3000

Telephone: 03 9606 0588 or 03 96704488

G

*Conditions Apply


PUBLISHER: FREERMEDIA

EDITORIAL: Mike Woodcock

LAYOUT: Andrew Folos, DAI Rubicon Design

FEATURE WRITER: Linnet Good

CONTRIBUTORS:

– Alistair Bailey, Executive Director, Art Equity

– Tim Staermose, Chief Investment Strategist, Sovereign Man

– Jay Richards of Aliom

– Michael J Moore of Author Services

– Robert Jackman, Managing Director, The Rare Coin Company

- Bill Wilson, President of Americans for Limited Government

The Publisher would also like to thank Kerry Stevenson of Symposium,

the Bullion Baron; Andrew Folos and his team (Hi Frank),

Tristan Bunn at Port Phillip Publishing and the tireless administrators

of SilverStackers.com.au.

Tim Price’s article on Europe and Tim Staermose’s piece on Asia both

appear courtesy of Sovereign Man. We find Simon Black’s daily musing from

various known and unknown corners around the world extremely informative

and entertaining.

ABOUT US, DISCLAIMER: Australian Hard Asset Investor is 100%

Australian owned and independent. We don’t sell gold, silver, hard

assets or financial advice to anyone.

All commentary and advice in this publication is of a general nature

only, and doesn’t consider your individual circumstances or financial

objectives. You should always consult a licensed financial advisor for

your investment advice.

CONTACT US FOR ADVERTISINGEnquires to the Publisher: [email protected]

Advertising Enquires: [email protected]

SUBSCRIPTIONSwww.ahainvestor.com

AHA.InvestorWelcome to AHA Investor

Our first issue of 2012 has some broad ground to cover. Fortunately it’s ground we’re

getting to know.Last year we launched what is

still the only hard asset focused magazine in the country.

Our goal was to turn more and more people on to the idea of owning bullion, art, and investment pieces that hold and grow in intrinsic value. Since then, we’ve reached well over 40,000 readers nation-wide - helping them

understand the value of tangible assets in our over- leveraged world. We’ve interviewed gold producers for you, and bullion retailers. We’ve gone inside a diamond laboratory, on tour to Sothebys, and down mine shafts - and we’ve helped our readers understand how to profit from these sectors by showing them how they work and what to expect.

Along the way we’ve met some fascinating individuals, from all parts of the hard asset set. From high-end jewelers to numismatic investors, and everything in between, we’ve left no stone unturned in our quest to preserve and grow your wealth.

This issue is no different. We’ve spoken with IG Markets, and have their take on commodities for you across 2012. And the year of the U.S. Presidential elections, we’re sharing Simon Black’s views on the U.S. and what they can expect.

In our view, across the water Europe is in trouble. We’ve taken a close look there as well. But there’s also good news – Iceland has fared their storm well; and the future looks especially bright for commodities-based economies – like ours.

We have art investment for you across 2012 with Al Bailey, and we look an American classic in our Numismatics section.

Finally we bring you some mining opportunities both here and abroad (For those of us with – and without - relatives that hold majority ownership in major mining conglomerates.)

Wishing you all the best for 2012 – and Good Investing!

Mike WoodcockEditorAHA Investor

P U B L I S H E R ’ S L E T T E R

R e a l G o l d • R e a l S i lv e r • R e a l A s s e t s • R e a l W e a l t hAHA.InvestorAU$8.95 | Volume 2, Issue #7

Feb/mAR 2012

EXCLUSIVE IG Markets’ Commodities

Forecast 2012

On Buying Bullion

(by Bullion Buyers)

PlusGolden Mining Opportunies,

The Silver Eagle,

and What Happened

when Iceland

said No

The Greek Tragedy

The end of the Euro?

A tribute to the inventor of the first chronograph.Monopusher chronograph, self-windingmanufacture movement. 30 min. and 60 sec. rotating disccounters fixed on the counter bridge. 72h power reserve. Crafted in the Montblanc Manufacture in Le Locle,Switzerland.

nicolas rieussec timewriter.

SYDNEY 75 CASTLEREAGH STREET - 115 KING STREET | MELBOURNE 175 COLLINS STREET | BRISBANE QUEENS PLAZA

1300 36 4810 | WWW.MONTBLANC.COM


w o R L d n E w S | Hard Asset Updates

woRLd nEwS UPdATES

Silver StackersIndependent forum for thosewho love to stack Silver and Gold

www.silverstackers.com

Forum Charts Forex Calculators Bookshop Twitter Facebook Advertising

Index Rules Search Register Login

Silver Stackers®

Platinum ShineS

Continuing on (and as our analysts predicted in our last issue), Platinum spent January near its highest in at least 25 years.

Platinum’s cheap price compared with gold and the threat of supply constraints from South Africa have made it attractive to buyers, analysts said, although stocks are still relatively plentiful and the

new Bullion ConCePt from Valcambi

Sydney distributors Bullionlist are bringing the latest offering from Valcambi to our shores. Roughly the size and shape of a credit card, this 50g gold bar is one of the cleanest offerings we’ve seen in a while. Presented in a convenient plastic walled and pre-scored into 50 x 1g cells, the bar has the unique ability to be easily divided up accurately into single gram units. Perfect for absolutely unique gifts (or the ultimate ‘tip’!), each 50g bar is issued with a serial numbered assay certificate inside a tamper-proof plastic sheath.

demand outlook in Europe is soft.“Near term, the possibility of a short-covering rally cannot be ignored.

But it doesn’t really change the obstacles that platinum will likely encounter this year,” a spokesman for UBS confirmed in a note. The gold/platinum ratio -- a measure of the number of platinum ounces needed to buy an ounce of gold, which has typically held below 1 -- hovered near its highest in at least 25 years.

Feb/Mar 2012 AHA.Investor | 9

Hard Asset Updates | w o R L d n E w S

woRLd nEwS UPdATES

aRt inVeStment takes wing at Christies

A rare first edition of John James Audubon’s illustrated The Birds of America depicting more than 400 life-size North American species in four monumental volumes was purchased January 21st at auction for $US7.9 million ($A7.6 million).

Christie’s auction house identified the buyer as an American collector who bid by phone.

The winning bid was within the presale estimate of $7 million to $10 million for the work, considered a masterpiece of ornithological art.

Another complete first edition of The Birds of America sold at Sotheby’s in London in December 2010 for $11.5 million, a record for the most expensive printed book sold at auction.

The set at Christie’s was offered for sale by the heirs of the 4th Duke of Portland. It was accompanied by a complete first edition, five-volume set of Audubon’s Ornithological Biography.

Experts estimate that 200 complete first-edition copies were produced over an 11-year period, from 1827 to 1838.

Today, 120 are known to exist, with 107 in institutions and 13 in private hands. The book, part scientific and part art, includes 435 hand-coloured, life-size prints of 497 bird species, made from engraved copper plates based on Audubon’s original watercolours.

Audubon sold the engraved plates in a subscription series in England, Europe and North America.

From UBS on the Greek default/restructuring: “Would . . . restructuring make the Greek situation sustainable? No. Sorry, but no is the answer. Even with full repudiation of the Greek debt, the situation would not be sustainable. In that event, the deficit would move to the primary balance, 5-6% last year. Not sustainable. And the current account deficit would be in the high single digits. Not sustainable either.” The next major debt repayment Greece faces is a €14.5bn bond redemption on 20 March. In all likelihood, the Greek government will not have the cash to repay the bond, which means this is in effect the deadline for restructuring the country’s debt.

uBS hiGhliGhtS RiSk of outRiGht GReek default

There are two scenarios in which talks could nonetheless carry on after that date. First, if our above hypothesis is wrong and Greece does in fact have the cash to repay the maturing bond – we doubt this is the case. Second, if Greece receives external support from the IMF and/or other European countries. This would be akin to the Fund and/or European states bailing out investors – again, we doubt this will happen. So, if the debt is not restructured before 20 March, Greece is very likely to default.”



woRLd nEwS UPdATESBloomBeRG: ChineSe inVeStment to be given official ‘push’

China’s stocks regulator will “actively” push pension and housing funds to begin investing in capital markets, and encourage long-term investors such as insurers and corporate pension plans to buy more shares.” The China Securities Regulatory Commission will also allow the creation of sovereign debt futures and explore other new products such as high-yield corporate bonds and municipal debt, the regulator said in a statement on its website yesterday, citing Chairman Guo Shuqing’s comments during a national work conference in Beijing.

In the world’s largest centrally planned economy (which also happens to be the one Australia is hoping will shield against any fallout from a worsening Eurozone), one hopes the effect will be as intended.

iRan watCh: gold & silver assets frozen

Reuters report that the EU has agreed to freeze the assets of the Iranian central bank and ban all trade in gold and other precious metals with the Iranian Central Bank and other public bodies in Iran. According to IMF data, at the last official count (in 1996), Iran had reserves of just over 168 tonnes of gold. The FT reported in March 2011 that Iran has bought large amounts of bullion on the international market to diversify away from the dollar, citing a senior Bank of England official.

uS-led sanctions under threat

India Trade Secretary Rahul Khullar confirmed in January that the Indian delegation to Iran would work around the U.S. sanctions to protect oil supplies and promote Indian exports.

The government source said Iran has agreed to step up imports from India which added up to some $2.7 billion in 2010/11 and including oilmeal, rice and tea.

“This will cushion them (Iran) to some extent from exchange rate volatility,” the source said.

With India now joining China and Russia in direct trade oil agreements, the US dollar is coming under increased pressure as the preferred ‘petrodollar’ medium of exchange. This is definitely a time to keep an eye on developments around the straits of Hormuz.

Gold Stackers have opened their new offices in the Wales Building, on the corner of Swanston and Collins St in the heart of Melbourne’s gold precinct.

Centrally located, investors will be able to pick up online purchases made through the Gold Stackers website, redeem physical bullion from the popular unallocated gold and silver programs, meet with the team for personalised brokerage services, as well as access educational offerings in a dedicated training room with a range of forthcoming courses and seminars.

“Rather than set up a slick retail showroom that would have incurred costs we would need to pass along to recoup, we felt an office format was more suited to our business model and client needs” said Ben Giddins, one of the directors of Gold Stackers. “Our client base is both local and national, consisting of online shoppers, private investors, as well as the wholesale trade. The new office provides us with a larger space for secure order fulfillment, as well as a discreet dealing room for added privacy.”.

Gold Stackers is located on Level 8, 227 Collins St, and can be contacted on (03) 9077 5771, or via their website at www.goldstackers.com.au.

SEOUL, South Korea - South Korean customs officials say they have arrested eight men over a scheme to allegedly smuggle gold out of the country by hiding it in their rectums.

The Korea Customs Service said Monday the men allegedly transformed $260,000 in gold bars into small beads and smuggled them in their rectums to Japan two times in 2010 to avoid import taxes.

South Korea says Japanese custom officials caught the men on their second attempt and sent them home after imposing fines. Later, one of the suspects allegedly orchestrated an unsuccessful bid to smuggle gold bars from Mongolia to Hong Kong using a similar method.

Meanwhile, South Korean officials gathered evidence against them at home. They say the suspects recently admitted to the smuggling after initial denials.


woRLd nEwS UPdATES

the trusted name in bullion

Add gold and silver to your portfolio. Add value for life.

www.bullionmoney.com.au p: 02 8677 4289

Suite 102, 25 George Street. Parramatta, NSW 2150, Australia

BULLION MONEY

awaRd winninG fund manaGeRS see golden futures

Duet Commodities Fund (winners of the 2012 MENA Fund Manager of the Year award) had a stellar 2011 and is already making their picks known for 2012. From their updates: ‘Our central forecast in gold remains constructive as our long term view targets $2,500 in 2012. Our core view is that gold will head higher to the $2,500 range driven by consequential USD weakness once the EU crisis dissipates and the US steps into the limelight. A weaker USD is not undesirable in the world order as everyone (especially China) understands that the US consumer is the driver for global consumer confidence and consequential consumption led demand.” While we think the Eurozone might have more immediate impact bringing some commodities (especially gold) back off the boil in the short term, it’s hard to argue with Duet’s successes and longer term assessments.



woRLd nEwS UPdATES

Buy Gold and Silver on the Spot�

�

�

Trade with live pricesFull range of coins and barsEase and convenience ofbuying online

Online trading at www.perthmintbullion.com Call The Perth Mint Bullionline on1300 201 112 (8.30am - 4.30pm AWST)

Gold aS diVeRSifiCation StRateGyNew research by New Frontier Advisors (“NFA”) confirms

gold’s unique role as a diversifier and foundation asset in the portfolios of euro-based investors, especially at a time of heightened currency and investment risk.

The report, ‘Gold as a strategic asset for European investors’, commissioned by the World Gold Council, explores gold as a strategic asset across five sets of asset

allocation studies, including four using historical data spanning 1986 to 2010, and one using the 1999 to 2010 time frame.

The paper highlights that an optimal strategic allocation to gold for euro-based investors ranges from 2-3% for the most diversified and lowest risk portfolios, to 4-9% for portfolios split 50/50 between equities and bonds, to as high as 10% for portfolios with the majority of assets in equities.



woRLd nEwS UPdATES

Gold mineS re-opening

MELBOURNE, Jan 9 AAP - A junior resources company chaired by mining identity Miles Kennedy will re-start the stalled Fortnum gold project in Western Australia, after agreeing to buy it for $35 million.

Resource and Investment will pay cash and shares to acquire Fortnum and a nearly 1800 square kilometre tenement package in WA’s mid-west from Cayman Island hedge fund BlueCrest.

Thee tenements in the Bryah-Padbury basin - north-west of Meekatharra - are near Sandfire Resources’ high quality DeGrussa copper-gold deposit.

Mr Kennedy, chief executive of Lonrho Mining, is a board member of Sandfire.

He said Fortnum was ready to be restarted despite being shut down in May, 2007, when previous owner Gleneagle Gold went into receivership amid low gold prices.

The site includes a 1.2 million ounce resource with a mine life of at least 10 years and a processing plant.

Mr Kennedy said that would give Resource and Investment the opportunity to be a gold producer in less than 18 months and to consolidate a world-class exploration portfolio.

“The nice thing about this acquisition is that the plant is there, there’s a 100-man camp complete with swimming pool, airstrip, water licences and all the licences in place,” he told AAP.

“It will be a two-pronged attack, to get the plant running and producing 50,000 ounces a year from the known gold deposits.

“And equally exciting for us is the very large land package taking us to over 2000sq km (including existing land owned by the company).”

When Gleneagle went into receivership, gold prices were as low as $400 to $600 per ounce, with production costs of about $800 per ounce.

If prices stayed near current levels of above $1600 - after climbing above $1800 in 2011 - the company would post a $35 million profit in its first year of production, paying for the acquisition, Mr Kennedy said.

The company hopes to uncover more gold deposits at 100 existing drill holes, along with copper in the region.

imf lookS to BolSteR CaPital

The latest news from the International Monetary Fund that it wants to bolster its capital by at least $500 billion to help insulate global economies from the Eurozone debt crisis could be a bullish sign for gold. The euro regained some strength, pushing the U.S dollar down. Speculators have large short positions betting against the euro.

“The market took heart that this would help ease fiscal problems facing the Eurozone,” Marc Ground, precious metals analyst with Standard Bank, reported in a client note, in the Wall Street Journal. “This renewed confidence has seen markets adopt a cautious risk-on stance, pulling the dollar down and consequently easing downward pressure on precious metals.”


S P E c I A L f E AT U R E | 2011: AHA Timelines & Top Issues


Feb/Mar 2

011

Apr/May 2

011Launch Issue Kitco USD Gold ounce Feb 2011 average: $1372

AHA Investor’s launch was impossible to miss. Featuring a pile of ABC’s finest bullion on the front cover, the issue drew immediate attention in the investor and bullion buying community. Offering readers an inside view of the metals, art and collectables investment space, our audience responded with

enthusiasm and overwhelming support. We went inside a bullion dealer with our exclusive feature

interview with The Gold Company; and we entered the world of numismatics with Sydney dealer Jim Noble. Our coverage of the art scene kicked off with some brilliant perspectives from Al Bailey of Art Equity, and we put the minerals and mining sector under the microscope with Kerry Stevenson.

While all this was going on, we also offered our readers some insight into what’s driving the macro-economies. Our aim? To help readers understand the drivers of hard assets: why gold is going up, what investment art matters, and why a rare coin in the hand is worth any amount of toxic derivate assets.

Not enough? We also gave away a kilo of investment silver. Not bad for our first issue!

PLUS:

Gold, Diamonds, Bulls & Bears:The Cohens: Three generations of diamond & bullion traders(and why gold is money)

PersPectiveson Profit

AHA.InvestorR e a l G o l d • R e a l S i lv e r • R e a l A s s e t s • R e a l W e a l t hA u s t r A l i A n H A r D A s s E t s

AU$7.95 | Volume 1, Issue #1 February/march 2011

BULLIon GIVeAWAY: WIn A kILo of sILVer! see p.15

Investing in Art:

Good as GoldThe honesty of bullion: Wealth,

Security and a decade of growth

The Rolex Submariner: Classic Bond Cool

Valentines Gift guide

AND win a kilo of silver

New Gold Buyers GuideWith gold climbing we HAD to do this. Interviewing a bullion dealer; getting the inside track from a Swiss gold importer, sharing the reasons and stories behind actual bullion investors - all in a day’s work. Putting

it all together to make it easy for readers to get ALL the facts on bullion buying: that’s the part that matters. We also took a close look at some of the drivers behind the Egyptian uprising, the history of silver as money, and featured the Perth Mint platinum ‘platypus’ on the cover.

Rea l Go ld • R e a l S i lv e r • R e a l A s s e t s • R e a l Wea l t h

Win Perth Mint Gold! SEE P.40

SECURE YOUR

WEALTH:Special Report: The Ultimate

Gold Buyers Guide

History of SilverThe Demonetisation

Middle East Uprising:Dan Denning on Egypt, Oil & the currency quake

PLUSDeep Red Sea:

‘Double Red’ Sea Dweller watch

Art Update with Art Equity, Numismatics from Coinworks,

AND

Perth Mint goes Platinum: The New Platypus

Win Perth Mint Gold!


APRIl/mAY 2011

30 January 2011People’s Bank of China Adviser Xia Bin suggests China should increase its Gold and Silver reserves.

7 February 2011JP Morgan announces that they will accept physical Gold bullion as collateral for investors who want to borrow cash or securities

5 March 2011 Richard Russell (Dow Theory Letters) said “Warren Buffett’s problem is that he only understands balance sheets and earnings. The value of a Picasso or a gem diamond or a bar of gold is outside Buffett’s understanding. Which is sad, because Buffett’s lack of understanding has kept many an American on the sidelines while gold surged higher in terms of Buffett’s beloved paper currencies.”

5 April 2011 Jin Ulrich (JP Morgan China Chairwoman) says “Gold is Seen as an Alternative to Paper Currencies”.

4 May 2011 Bloomberg reports that Mexico has increased their Gold reserves by 93.3 tonnes (from 6.9 tonnes in January to over 100 in March a 14x increase). Russia increased their reserves by 18.8 tonnes to 811.1 and in he same month Thailand expanded it’s assets by 9.3 tonnes (bringing their total to 108.9 tonnes).

20 May 2011Financial Times reports World Gold Council data showing China overtook India as the world’s largest buyer of Gold bars and coins in the first quarter with 93.5 tonnes purchased.

With last year a tumultuous one for both world events and hard assets, we thought we’d look back and draw a line in the sand on 2011. Issue by issue, we’ve had you covered!

AHA Investor celebrates


2011: AHA Timelines & Top Issues | S P E c I A L f E AT U R E

June/July 2

011

August/

Septem

ber 2011

INVESTING in DIAMONDS

What you need to know

The Krugerrand:The original Bullion Coin

Swiss Goldwith George Vo

Fat Prophets:Half Yearly Forecast

PLUSArt Investment

Golden BullsMining updates


JuNe/JulY 2011

And your chance to WIN A DIAMOND

Rea l Go ld • R e a l S i lv e r • R e a l A s s e t s • R e a l Wea l t hThe Diamond IssueWhat’s now called The Diamond Issue was a real standout. Highlighting diamonds as an investment piece at the time was risky; but for all our early movers, a good call. We also took a closer look

at that Swiss gold, and got to know that infamous South African expat, the kruggerand. As if that wasn’t enough, we scooped investment stars Fat Prophets put together their commodities half-yearly forecast for us, and put the spotlight on silver miners Argent minerals.

Rise & Rise of Gold While putting together the August & September issue it became increasingly apparent to us that Gold was about to make a break out and up. Our issue hit the streets early August, with Gold trading in the low $1600’s. By the end of the month, it had crossed $1800, touching $1895 in early September. . . before

coming back down to reality at the low $1600’s. I call this Gold acting like Silver (traditionally more volatile a metal.) There’s a range of reasons for the jump and even more for the selloff . . . we looked at most of them in the August/September issue, ahead of the curve.

Featuring Greg Canavan, George Vo & Dr Alex Cowie on Inflation, Gold Stocks and why this metal matters

InvestmentJewellery

PERTH MINT DRAGONS

NEW ARTInvestment Rulings

PLUSWIN ALL

THREE TEN OUNCE SOUTHERN CROSS SILVER BARS!


WIN THIRTY OUNCES OF SILVER! SEE P.35


AuG/seP 2011

The RISE & RISE OF GOLD

COPPER PLAYS, MINING STOCKS AND MORE!

21 June 2011Financial Times reports that Greek citizens are emptying savings accounts and buying gold as they brace themselves for the possibility of a sovereign default and a run on the banks.

11 July 2011 Ron Paul: “Why do central banks hold it (gold) if it’s not money?” Ben Bernanke: “Well, it’s tradition.”

1 August 2011Perth Mint reports they have received coin industry offers to purchase the entire Gold Lunar coin mintage (30,000 x 1oz) due for release later in the year. The offers were rejected to ensure their usual distributors receive a fair allocation.

11 August 2011 Bild Zeitung, Germany’s biggest- selling newspaper, prints a front page article encouraging the purchase of Gold. Gold “is better than cash,” the article read, “While any amount of money can be printed, gold is limited,” making it “one of the safest investments in crisis times.”

19 September 2011Financial Times reports that European central banks have become net buyers of gold for the first time in more than two decades.

AHA Investor celebrates it’s 2 year!


S P E c I A L f E AT U R E | 2011: AHA Timelines & Top Issues

Oct/Novem

ber 2011

Dec/Jan 2

012Flags IssueOur biggest issue yet saw some of our biggest calls. Looking at the fundamental drivers of hard assets means looking closely at those parts of the world that are driving it. That’s how we accurately predicted the increasing political turmoil in Egypt post-Mubarak. It’s also how we knew why Greece would be back in the

headlines over Christmas, and why the eventual outcome will be enormously destabilising for currencies.

To give our readers an action plan we spoke with currency traders Knowledge to Action, getting some straightforward ideas to respond and prosper in a moving market. To keep the focus on hard assets, we shared with our readers the thoughts of Canadian billionaire Eric Sprott and where he thinks the Gold and Silver markets are headed longer term; as well as Ron Currie of Perth Mint of the phenomenal response to their ‘Lunar Dragon’ bullion coins.

PLUS



oCT/NoV 2011

The Gold Symposium comes to Sydney, Nov 14th & 15th: Eric Sprott, Dan Denning, Hinde Capital, Kerry Stephenson, Focus Minerals & much more

Forex Trading:Behind the Scenes with Linnet Good

WIN A SOLID GOLD NUGGET!

Greece, China, Egypt:

Numismatics:Fire-Breather: Dragon Unveiled!

3 Countries, 3 Fortunes

WIN A SOLID GOLD NUGGET! SEE P.57

“Royalty and Eminence Comes with Gold”

www.goldderoyale.com.auSuite 103, 192 Ann Street, Brisbane, Queensland 4000, Australia

Tel: 07 38305319 • Fax: 07 30365787

AH

A.In

vesto

rIS

SU

E 5

Inside the Gold SymposiumTo finish off the year in style, we went inside the Gold Symposium as guests of Kerry Stevenson. We spoke with miners, explorers, investors, refiners, producers, investors and retailers. We spoke with the conference speakers and conference attendees; but what we mostly did

was listen. We shared the best and brightest in our Dec/Jan issue; along with coverage of where we see China going over the next 12 months, and thanks to the Rare Coin Company we found a unique physical investment strategy that’s delivering consistent double figure growth.

R e a l G o l d • R e a l S i lv e r • R e a l A s s e t s • R e a l W e a l t h


DeC/Jan 2011

Hidden Treasures Legacy planning with Linnet Good

Art Investment

On the floor at Christies with

Al Bailey

Australian Banknotes 13% annualised

return over the past 5 years

– what’s next?

A White Christmas AHA Investor Holiday Buyers Guide

Gold Investment Unveiled

WIN A Kilo of iNVESTMENT SilVEr SEE P.43

Inside Sydney’s Gold Symposium

PLUS WIN A KILO OF INVESTMENT SILVER

7 November 2011 Germany rejects a proposal by France, Britain and the US to have German gold reserves used as collateral for the Eurozone bailout fund. Germany Economy Minister Philipp Roesler said on Monday that the German people’s gold reserves cannot be touched and “must remain off limits.”

17 November 2011 World Gold Council reports that Gold demand in the third quarter of 2011 reached 1,053.9 tonnes (+6% compared to the same period last year). Investment demand in Europe reached a record quarterly value of €4.6bn, equating to 118.1 tonnes - a year-on-year increase of 135%.Investment demand in Europe reached a record quarterly value of €4.6bn, equating to 118.1 tonnes - a year-on-year increase of 135%.

AHA.Investor


2011: AHA Timelines & Top Issues | S P E c I A L f E AT U R E

TM

AHA Investor has gone from

strength to strength for 2 simple

reasons. Firstly, we’re right more

often than we’re wrong. And

secondly, and most importantly,

it’s our readers. I can’t thank our

loyal readership enough for their

support, feedback, story ideas

and occasional ‘improvement

opportunities’ presented

through 2011. Thank you for all

your support. I look forward to

bringing you more in 2012.

Oh, because I like a happy

ending . . . Kitco Gold in USD

(to Jan 27) shows average

$1647; a 20% total gain over

12 months. Might be worth a

look . . . see you on the bourse!


2011 was a tough year for risk assets in general, and will be better known for traders looking for a return of their investment rather than return on their investment. It has been about reacting to headlines be it political or economic, resulting in massive correlations in many asset classes and pronounced spikes in volatility.

It has also been a tail of mixed fortunes in the commodities markets, and while currency

moves and macro forces have played a part there have been individual themes which have resulted in very different outcomes on price action. Copper, for example was touted at the start of the year as being a place most strategists wanted to be leveraged to, given a paper deficit of between 350,000 to 500,000 metric tonnes and the view destocking in China would create upside in prices and imports. This was the case for the most part, with the CME price trading to $4.59 per tonne, but with fears of a European recession, fall in Chinese manufacturing and subsequent concerns of a ‘hard landing’, the price pulled back from its high and ended the year down

S P E c I A L R E P o R T | 2012 Predictions


21%. On the other hand West Texas Intermediate (WTI) and Brent have closed the year with gains of 4.7% and 12.8% respectively, assisted by an improving US economy through Q3 and Q4, while tensions in the Middle East and Northern Africa have kept supply tight.

There have also been steep falls in other industrial metals such as zinc, lead, nickel and aluminium.

Spot gold has closed the year

in positive territory against all G10 currencies, most notably in euros (up 13.7%), while gold in US dollar and Australian dollar terms both gained just over 10%. Silver and platinum fared worse, seeing declines of 10% and 21.2% respectively.

The 2012 global economy2012 is shaping to up to be a make or break year for Europe, and this will have huge ramifications on the global economy and subsequently commodity prices. As it stands, it seems consensus is for global growth to be around 3.5%, little changed from the 2011 performance; however the risks seem skewed to the downside, given the huge deleveraging and austerity seen in Europe. It seems we are going to see Europe decouple from the rest of the world, with a contraction of around 0.2% (ECB current forecasts are for a range of -0.4% to +1%),

We are cautious on China’s housing issues, and are starting to see property prices come under pressure given the massive over capacity; we feel this is an area the market needs to pay close attention to in 2012.

while growth is expected in all other economies. According to recent calculations by Morgan Stanley, the 3.5% estimate is premised on 1.2% growth in the G10 region, while emerging markets should grow at or around 5.7%.

Importantly, on current projections the US is still expected to ‘muddle through’ with around 2% growth, while China will see another solid year of around 8.5% growth.

China will be a key factor in driving commodity price action, notably in the industrial metals. We know the risks around the property market, and it is still very much a consensus that a hard landing will be avoided over the coming year. The key arguments for a stable outcome are premised on the fact that China has low public debt at 15.4% of GDP, so the authorities still have the fiscal firepower to shore up growth, while the PBOC have plenty of scope to loosen policy through cutting Reserve Ratio Requirements (RRR), at the same time lifting restrictions on the property market. It can also use its massive war chest of capital to do more on a fiscal level, by perhaps boosting infrastructure which will assist growth.

We are cautious on China’s housing issues, and are starting to see property prices come under pressure given the massive over capacity; we feel this is an area the market needs to pay close attention to

2012 Predictions | S P E c I A L R E P o R T

A look in the rear view mirror



in 2012. It will certainly require prudent management from the Chinese authorities, and recent comments from ratings agency Fitch warned that there was already a ‘massive build up in leverage’ which is eroding the ability of lenders to generate economic growth by expanding credit. In the long term, China will need to ramp up consumption as a percentage of GDP, which at 34% is significantly lower than many Western economies. Investment and the national savings rate are around 50% of GDP; both are coming off recent highs pointing to signs of a distorted economy.

It will also be interesting to see if there are any implications from the ‘handover’ process to new Chinese leadership which takes place later in the year.

Depending on the commodity will

determine how closely one has to have a

view on moves in the forex market.



The impact from future currency movesDepending on the commodity will determine how closely one has to have a view on moves in the forex market. The correlation with moves in EUR/USD were certainly much more pronounced in the precious metals complex than say energy or the industrial metal prices, although when there was a big move in EUR/USD, this would still have an impact. We are starting to see signs that this correlation will become less

apparent in 2012, mainly because the huge amounts of liquidity being pumped into the system by the ECB through its refinancing operations for banks, as well as another 50-basis point cut should be taken as a positive for risk assets, such as commodities. Given the improving US economy through Q3 and Q4, it is hard to see the Federal Reserve doing a fresh round of MBS purchases at this stage. So, taking this into account, we feel EUR/USD has downside risks in 2012, however as mentioned, the impact of this decline should be felt less on other risk assets.

On the contrary, we are keeping a close eye on the ECB and its stance on QE as perhaps one of the key drivers of the precious metals complex in 2012. One could make an argument that under its current bond buying program (SMP), it is already embarking on weaker euro policy having expanded its balance sheet to record levels, accumulating well over €200 billion of sovereign debt. These bond purchases have all been sterilised, however one has to think if economic conditions do deteriorate and sovereign yields climb dramatically higher, then Mario Draghi could argue it would be prudent in the interests of future price stability (their one mandate) that bond buying should be increased and perhaps unsterilised. It is worth noting recent comments in the Financial Times from the much respected outgoing ECB executive Mr Bini-Smaghi noted, ‘I do not understand the quasi-religious discussions about quantitative easing’ and ‘if conditions changed - I would see no reason why such an instrument, tailor-made for the

specific characteristics of the euro area should not be used’. These are extremely interesting and show that QE has been discussed by the Central Bank, and has certainly gotten a few traders talking. Any signs of unsterilised bond purchases (QE) by the ECB will almost certainly see EUR/USD testing 2010 low of 1.1877, while precious metals (notably in euros), equities and AUD/USD will fly. Actions by the ECB along with the Chinese growth are two major focal points for 2012.

The outlook for commodities in 2012Gold is certainly our preference in the precious metals complex. The fundamental story is still very positive, with clear central banks buying to diversify; JP Morgan recently noted that Russia’s gold reserves have increased by 14.5 million ounces or 113% since 2006. Physical demand from China and India has doubled to 1.8 million per kilogram each year since 2008, while on the flip side, production, while still growing 6.2% year-on-year in 1H11 is still lacklustre relative to demand. European leaders seem to be reactionary as opposed to pro-active, and while no backstop is in place to stop the spread of contagion from a potential restructuring of Greek debt, one has to think a fallout in confidence should support the case for gold appreciation, with the price easily making a new high if QE, either from the ECB or Fed, becomes reality. Until we see a weekly close below the September low of $1532, we remain bullish but cautious. If we do witness it, our

Physical demand from China and India has doubled to 1.8 million per kilogram each year since 2008



stance would change and a deeper correction would be expected.

We are perhaps less bullish on the platinum group metals, given it lacks even less safe-haven status than gold and has limited investment demand. Its key-end markets are the jewellery and automotive industries, and given the risks to global growth and consumer confidence, this could put the demand structure at risk.

It is hard to predict longer-term price movements in any commodity let alone the energy complex, given a geo-political or weather event could happen at any time. The median price as surveyed by 33 analysts by Bloomberg suggests the price of WTI will reach $105 by Q412 (with a range of $80 to $120), and we would probably agree with that, especially if we see stimulative measures by emerging market nations. There is no denying the improvement we have seen in US growth in Q3 and Q4, but the bigger implication will come from an increased slowdown in Europe and a subsequent loss of confidence, and therefore question how US growth will hold up in the first half of 2012?. Goldman Sachs recently suggested that the European crisis could shave off one percentage point from growth over the next year, although the uncertainty around this baseline estimate is large.

The energy market remains tight and will continue to be heavily influenced by tensions in the Middle East, however its worth remembering that oil over the longer term is self-correcting, and unless part of the gains are

genuinely down to an improving economic backdrop and demand picture, then higher oil prices have significant implications on growth.

On the base metals side, it is probably quite prudent to be cautiously optimistic on copper, especially as it is set to register another record deficit in 2012. The supply/demand equation is positive, especially given the expected loosening of credit going into 2H12 in China. We should see the country continue to re-stock in the first half, though the question traders are asking is, are firms re-stocking for actual consumption purposes? As it stands, it seem a consensus that prices will remain range bound in the short term, but could see good upside going into the second half of the year.

Despite the clear macro headwinds, aluminium looks set to outperform other base metals in 2012. On one hand, global supply is expected to expand by more than 4 million tonnes, however with prices not far away from cost of production levels (around $1850 to$1900 per tonne), this should limit the downside as production will likely be curbed. There is evidence that China is on a path to becoming a net importer of aluminium as well, which should elevate prices.

The fundamental picture to us on nickel, lead and zinc is less attractive, and would be our least favoured exposures in the industrial metals space. Zinc looks especially unattractive, given the structural oversupply currently seen with the demand picture falling away.

Despite the clear macro headwinds,

aluminium looks set to outperform other base

metals in 2012.


Protect your future wealth by choosing to invest in Gold and Silver with your Self Managed Super Fund. Purchasing real Bullion is a sure-fire way to balance your portfolio needs, looking after your wealth now and for the years to come.

We’ve been trading for over 35 years, so feel free to contact us today to discuss your SMSF and investment needs today.

Phone to purchase your bullion -

1800 987 648 Or research & buy instantly online - www.ainsliebullion.com.au

Purchase Real Bullion safely and securely through our website.

See the spot prices and purchase instantly online.

6am to 10pm Everyday

QUICK & EASY



Predictions?I t’s like the Charades of thought experiments…

good for laughs at a cocktail party, but ultimately meaningless. Serious personal and financial plans

cannot be developed from mere conjecture– it takes significant research, uncovering little-known facts, reviewing historical examples, and looking for ongoing signs that either reinforce or void hypotheses.

I’d like to share a few with you today. In my assessment, these ideas are not so much predictions, but rather mathematical near-certainties that underpin some of my own plans and investments.

Note– the timing for these is loose, not based on some fixed calendar date (Mayan or Gregorian). Some may occur this year, others may not arise for another 3, 4, even 5-years. But with each passing day, the likelihood becomes stronger.

1) Social Security in the US, and public pensions in Western Europe, will be completely restructured.That which cannot be sustained will not be sustained, and the public pension Ponzi scheme is at the top of the list. This is already happening in the European countries that have had to face the music already, but the rest will soon follow.

Why? Because at a $1.725 trillion cost, the US government spent nearly 75% of all tax revenue on Medicare and Social Security last year. And the situation will only get worse. Tax revenues are falling in a dismal economy, while the retiree demographic and rising healthcare costs are pushing up entitlement spending year in, year out.

Even by the US GAO’s own math, these entitlements constitute a $33 trillion liability. And amazingly enough, it’s even worse in Europe.

Not to mention, public pensions represent a neat little kitty for cash-strapped politicians to raid… and

the likelihood of these criminals allowing the funds to end up where they were promised is incredibly low.

Inflating away the debt is certainly the preferred course of action as it is more politically palatable. Inflating away a $33 trillion liability in the available time frame, however, is nearly impossible…not without sparking hyperinflation.

Rather, retirees and prospective retirees are going to be hit squarely between the eyes with a restructuring of what had been promised to them for their entire lives. And most will be completely unprepared.

2) Epic failure: the ‘ah-ha’ momentAt some point, even the most dim-witted American is going to realize that his country is flat broke. Most Europeans are starting to realize it… but Americans have an incredible ability to ignore the obvious and kick the can down the road.

This may arise from some major infrastructure failure, or another epic natural disaster– the mother of all hurricanes, or an ill-located earthquake– that absolutely levels a major city. And it’ll stay that way. The government will be too broke to rebuild, and too uncreditworthy to borrow.

The city will remain an architectural graveyard, an American Pompeii that becomes a monument to insolvency. And it will be the ultimate ‘ah-ha’ moment as people are finally shaken from their apathy and blissful ignorance. This will mark the start of the mania phase for everything ranging from firearm purchases to expatriation.

3) Gun controlWith over 129,000 federal background checks registered on Black Friday 2011, the previous single day gun sales record was shattered by 32% according to FBI records. And baby, we ain’t seen nothin’ yet.

From ancient Carthage to Nazi Germany, history is full of examples of how a citizenry is systematically disarmed by its government prior to a major erosion of civil liberties and restructuring of the social contract. The calculus is quite simple– government is interested in maintaining the status quo, i.e. their power at our expense.

Consequently, attempts at gun control become a foregone conclusion in times of social and economic turmoil.

by Simon BlackOr near-certainties?New Year’s predictions are always a fun exercise. We can bet each other over the price of gold on December 31, 2012, or who will win the White House this year, or even make wild, black swan predictions.



4) Western governments pull a MubarakIn an effort to stamp out dissent, Western governments begin utilizing Internet and mobile kill switches, censoring web sites, and increasing their authority over telecommunications architecture. Google’s ‘don’t be evil’ mantra becomes the de facto ‘ignorance is strength’ from 1984 as every major service provider becomes a willing accomplice.

Facial recognition technology will become ingrained with public surveillance under the banner of national security. All Internet activity is monitored. Privacy ceases to exist in the developed west.

5) WarIn his book Civilization, historian Niall Ferguson pokes a bit of fun at Karl Marx when he refers to nationalism as ‘the cocaine of the Middle Class’. Nothing unites people like a common enemy, and the time-tested trick to get an entire society to forget about their domestic plight is to start a war.

Boogeyman terrorists have done a marvelous job keeping society in check, but in a world of scarce resources and economic decay, a more conventional conflict may ensue. After all, to the victors go the spoils, and many countries won’t be above taking what they need by force: water, farmland, oil, etc.

6) Dollar dominance endsAs I travel around the world, I’m constantly struck by high levels of inflation. From Thailand to Egypt to Sri Lanka to Uruguay, uncomfortably high inflation is prevalent, particularly major categories like fuel, food, and housing. Poor people don’t but iPads.

With its genesis in the Fed’s quantitative easing measures, inflation has become a major US export, right after Hollywood movies, hip hop music, and worthless debt instruments. America ships dollars overseas, and developing nations literally pay the price.This is unsustainable, and the dollar’s status as the global reserve currency will continue to decline. In the coming years, you can expect to see the US Treasury issuing debt (at much higher yields) denominated in a foreign currency– perhaps Chinese renminbi, or a to-be-determined new monetary reserve unit.


A S S E T I n v E S T m E n T | Where are they now?

Where are they now? | A S S E T I n v E S T m E n T


““Under the circumstances, discussions with Greece

and the official sector are paused for reflection on the

benefits of a voluntary approach.” Debt talks “have not

produced a constructive response.””The Institute of International finance, January 13, 2012

“From our point of view, the second Greek aid package including this restructuring must be in place quickly. Otherwise it won’t be possible to pay out the next tranche for Greece.”German chancellor Angela merkel, January 8th 2012

Europein crisis

There is a terrible hubris at the heart of mankind. Like every other living thing on the planet we are products of nature, but we consider

ourselves to be well above it. We are beset by regular reminders of our vulnerability, but quickly dismiss them off-handedly to a spiritual plane, calling them “acts of God” as if to show that we could never have prevented them.

In a significant essay for Foreign Affairs, “The Black Swan of Cairo,” Nassim Taleb shows how the efforts of our authorities to suppress volatility actually end up making the world less predictable and more dangerous.

“Although the stated intention of political leaders and economic policy makers is to stabilize the system by inhibiting fluctuations, the result tends to be the

opposite. These artificially constrained systems become prone to “Black Swans” – that is, they become extremely vulnerable to large-scale events that lie far from the statistical norm and were largely unpredictable to a given set of observers.”

There is an analogy from the natural world. In the 1960s and 1970s, mid-western American states fell victim to scores of wildfires. Constant interventions by the US Forest Service appeared to have little positive impact – if anything, the problems seemed to worsen. Over time, foresters came to appreciate that fires were a normal and healthy element of the forest ecosystem.

By continually suppressing small fires, they were unwittingly creating the conditions for larger and less containable wildfires in the future. Naturally occurring fires are necessary to remove old forest cover,

“This unprecedented crisis, probably the worst since the

Second World War is not over yet but there are reasons

for hope and we must, we can keep confidence in the future.

2012 will be the year of all the risks but also of hopes.”

nicholas Sarkozy, dec 31 2011


underbrush and debris. If they are suppressed, the inevitable fire to come has a far greater store of latent fuel at its disposal.

Economist Murray Rothbard jangled the sensibilities of the Keynesians when he wrote his classic study, “America’s Great Depression:”

“If government wishes to see a depression ended as quickly as possible, and the economy returned to normal prosperity, what course should it adopt? The first and clearest injunction is: don’t interfere with the market’s adjustment process. The more the government intervenes to delay the market’s adjustment, the longer and more gruelling the depression will be, and the more difficult will be the road to complete recovery.”

But politicians must be seen to be doing something – like encouraging the construction of a £33 billion white elephant rail link in the middle of an austerity recession.

Not interfering with the market’s adjustment process is simply allowing Schumpeterian “creative destruction” to operate, and cleanse the forest. But

that process is anathema to well-compensated entrenched interests that suckle from the teat of the State. Banks, for example.

So while “laissez faire” would accelerate any banking crisis and shorten the resultant economic contraction, it would reveal the identity of too many naked swimmers when the tide retreats. Instead, courtesy of highly paid lobbyists, we get a long drawn out depression. The example of Japan’s zombie banks from the 1990s is still fresh, but ignored in the west.

Rothbard identified the ways in which government can hobble the adjustment process:1. Prevent or delay liquidation. Lend money to

shaky businesses, call on banks to lend further.2. Inflate further. Further inflation blocks the

necessary fall in prices, thus delaying adjustment and prolonging depression. Further credit expansion creates more malinvestments which, in their turn, will have to be liquidated in some later depression. A government’s “easy money” policy prevents the market’s return to the necessary high interest rates.

3. Keep wage rates up.4. Keep prices up.5. Stimulate consumption and discourage

saving. More saving and less consumption would speed recovery; more consumption and less saving aggravate the shortage of saved capital even further.

6. Subsidize unemployment. Any subsidization of unemployment (via unemployment “insurance”, relief, etc.) will prolong unemployment indefinitely, and delay the shift of workers to the fields where jobs are available.An iatrogenic illness is one caused by the doctor

himself. The economies of the west now face policy measures of the sort highlighted by Rothbard that are stated to be in our interests, but which are more likely to do harm to the patient and prolong the recession.

Taleb uses the example of the turkey before Thanksgiving. The turkey is fed for 1,000 days and every day seems to reaffirm the farmer’s generosity of spirit. Until the last day, when the turkey’s confidence and contentment is at its maximum. The “turkey problem” occurs when “a naïve analysis of stability is derived from the absence of past variations”.

To put it another way, the US property market cannot decline because it hasn?t declined in living memory. As Taleb puts it, as humans we inhabit two systems simultaneously: the linear and the complex.

The linear is predictable and permits the use of mathematical tools of high predictive value.

Complex systems,on the other hand, are marked

S P E c I A L R E P o R T | Focus Europe


Focus Europe | S P E c I A L R E P o R T

by an absence of visible causal links between their elements, “masking a high degree of interdependence and extremely low predictability.” They also incorporate non-linear elements often called “tipping points.”

One reason for the severity of the financial crisis, and the losses incurred by banks, is that bankers and financial analysts were using linear tools in a non-linear, highly complex environment otherwise known as the financial markets. The models didn’t work.

The problem we face now as investors will end up being existential for some banking institutions and sovereigns. Our (uncontentious) core thesis is that throughout the west, more debt has been accumulated over the past four decades than can ever be paid back.

The question, effectively to be determined on a case-by-case basis, is whether bondholders are handed outright default (which looks increasingly like the case to come in Greece) or whether the authorities, in their understandable but misguided attempts to keep the show on the road, resort to a policy of inflation that could at some point easily spiral out of control.

As Rothbard wrote, “The longer the inflationary boom continues, the more painful and severe will be the necessary adjustment process… the boom cannot continue indefinitely, because eventually the public awakens to the governmental policy of permanent inflation, and flees from money into goods, making its purchases while [the currency] is worth more than it will be in future.”

“The result will be a ‘runaway’ or hyperinflation, so familiar to history, and particularly to the modern world. Hyperinflation, on any count, is far worse than any depression: it destroys the currency – the lifeblood of the economy; it ruins and shatters the middle class and all ‘fixed income groups;’ it wreaks havoc unbounded… To avoid such a calamity, then, credit expansion must stop sometime, and this will bring a depression into being.”

It may be a new year, but we are beset by the same problems that have been recurring since the crisis began. In most cases, those problems have worsened. One of the few improvements has been in the recapitalisation of Anglo-Saxon banks, but continental European banks seem acutely vulnerable to the potential outcome of a disorderly sovereign default.

Since the problems are the same, so are our preferred solutions: a specific focus on only the most creditworthy sovereign and quasi-sovereign debt (where it offers a positive real return); a specific

focus on only the most defensive and internationally diversified equities; genuinely uncorrelated investments; and exposure to objectively the highest quality currencies, namely precious metals.

Euro zone politicians and policy makers have had plenty of time to come to terms with the continent’s problems, and continue to show no willingness to grasp admittedly difficult nettles.

It is symptomatic of the balkanised and adversarial nature of politics in the euro zone (a unified body that exists in theory but barely in fact) that Christian Noyer, chairman of the French central bank, anticipated France’s credit downgrade by suggesting that Britain should be downgraded first.

As the Hildebrand scandal also revealed, most of Europe’s central bankers are not fit to sweep the streets. And still time is running out. Readers of a certain age will recall a late 1980s rock anthem called “The Final Countdown.” It was released by “big hair” 80’s stadium rockers ‘Europe.’

GC_Advert_AHA_FINAL_OUTLINED.indd 1 19/01/12 11:43 AM


Don’t Invest inEUrOpE’S DEbT

By dan denning

Talk about an interesting contrast. There were two different but important investment stories across early

January. But only one of them got any real press coverage. Not surprisingly, the one that didn’t get

much coverage is the story that could make 2012 a much better year for Aussie investors than 2011. But

for old time’s sake, let’s start with the old news.

Europe is sinking. On Friday January the 13th, Standard and Poor’s cut the credit ratings of nine European countries. S&P’s biggest scalp was

France. France has lost its AAA credit rating and been put on a “negative outlook”; the financial equivalent of the naughty corner.

The downgrades weren’t all that surprising. After all, on December 5th 2011, S&P warned the Europeans to get their divided house in order. Almost nothing constructive or helpful to solve Europe’s debt problem has happened since then. In the currency markets, the

Focus Europe | S P E c I A L R E P o R T


S P E c I A L R E P o R T | Focus Europe

euro made new lows against the Australian dollar.

In its Friday announcement S&P said, “Today’s rating actions are primarily driven by our assessment that the policy initiatives that have been taken by European policy makers in recent weeks may be insufficient to fully address ongoing systemic stresses in the euro zone.” You don’t say?

Austria was also relieved of its AAA rating in Friday’s action. This poses a problem for Europe’s bailout fund, the European Financial Stability Facility (EFSF). France and Austria have signed up to provide about €180 billion to the EFSF. Subtract €180 from €440 (the original total funding of the EFSF) and you get €260 billion - the current capacity of the fund minus French and Austrian contributions.

Remember, though, that the EFSF is already on the hook for contributing €130 billion to the second Greek bailout (because the first bailout of €109 billion worked so well). That would leave the fund with €130 billion to bail out the rest of Europe, which hardly seems like enough at this point. It won’t be long before the EFSF has its own credit rating cut.

Incidentally, the Greek’s had their own mini-crisis on Friday. The Greek government is in talks with private creditors to restructure Greek debt. Because creditors are talking about taking a voluntary 50% loss on their government bonds, a deal would not result in a technical default. It would, however, reduce Greece’s total government debt by about €100 billion and unlock the next €130 billion in bailout funds.

The trouble is, talks between Greece and its creditors broke down on Friday. A large chunk of Greek debt matures in mid-March. But it’s possible the Greeks could default

before then. That would certainly spice things up. And in any event, even if the current restructuring deal is reached, it would only reduce Greek debt from 160% of GDP to 120% of GDP.

In other words, the Greeks - and all of Europe - still have the problem of how to grow out of decades of Welfare State debt. This is especially hard when the Welfare State and the common currency have rendered huge parts of southern Europe economically uncompetitive, with high youth unemployment, poor demographics, and large government debt burdens.

You’ve heard all that before, though. In fact, all of this is old news for the equity market, which is why we don’t expect the Aussie market to react much today. We could be wrong, of course. But Italian and Spanish banks were down last week in anticipation of the S&P action. What’s more, the Long Term Refinancing Operation (LTRO) by the European Central Bank (ECB) late last year was designed to make the EFSF less important. How?

The ECB hopes that if banks can refinance long-term loans for 36 months with the ECB, it will ease liquidity concerns in Europe’s banking system. That might inspire the banks and private investors to buy up government bonds. And you don’t need a bailout mechanism (EFSF) if the banks and private investors are willing to buy European government bonds again.

But why would you buy European government bonds right now? You wouldn’t! You’d rather invest in the asset class that’s going to be behind the next 50 years of growth. It’s not debt. It’s energy. Just ask the Chinese and the Saudis.

in other words, the Greeks - and all of

europe - still have the problem of how to

grow out of decades of welfare State debt.

The 58-year-old politically incorrect secret that could help you identify under-priced stocks

in any market − at any time!

n 1952, Ben Graham – author of The Intelligent Investor – revealed a timeless secret to readers of Mademoiselle magazine...

Today this same secret could help you to:

● Pick the best buys on the ASX – and steer you away from the stocks you need to avoid...● Pinpoint the true value of any stock – at any time – so you never overpay for a worthless share...● Ignore misleading indicators of value – like dividend yields – so you don’t get sucked in to panic selling. The secret: revealedThis is it… ‘Buy stocks the way you buy groceries, not perfume...’ Know the difference between price and value. Know how to spot a great deal. And know what you’re getting before you buy. Do this and it can help you lock in almost-certain gains. So... how do you do this?

Follow the intelligent investor’s checklist...

Take Warren Buffett’s advice and value the business, not the share.Focus on… 1. Its economic prospects2. The people running it3. And always invest with a ‘margin of safety’If you find a business with a value of $1 that’s selling for 80 cents… BUY! Because the market will re-rate the stock and YOU could pocket 20 cents for every 80 you invest!

Follow this three-step approach and you’re almost mathematically guaran-teed to make gains!

So how do you track down these ASX bargains?

You could start by reading my weekly investment publication: Sound Money. Sound Investments. In it, you’ll find recommendations for businesses to buy, sell, hold, watch and avoid – that could make you safe, virtually certain gains. Subscribers receive...● 26 reports revealing the hidden value of ASX stocks and sectors – so you can be sure you’re getting quality stocks at a good price...

● 26 analytical updates on the latest economic news and how it could affect every investment you make...

● Access to the complete back-issue archive – so you don’t miss out on any valuable advice...

● Share tips: so you don’t have to work out which stocks to buy and sell...

● Regular portfolio updates so you can track each tip’s progress...

Special offer: try it for 60 days at no risk

You can take a risk-free trial of Sound Money. Sound Investments for the next 60 days, by going to www.portphillippublishing.com.au/aha.

For 60 days, you’ll have full access to the Sound Money. Sound Investments service, so you can see whether this

kind of investing is right for you. If – during your trial – you decide it isn’t, you can apply for a full membership refund, no questions asked!

Three special reports now available

Claim your risk-free trial today and you’ll receive these special reports, FREE:

8 Simple Rules for Investing like Ben Graham – Find out how to avoid rookie mistakes and invest in sound companies at a discount...

The Art and Science of Valuation – Discover how to lock in all-but guaranteed investment gains...

The Definition of Sound Money – Learn how to protect your wealth with under-priced assets...

These reports are yours to keep – FREE – even if you don’t continue after your trial.

Limited time: take 50% off the publisher’s price!

For more details on this limited-time offer visit www.portphillippublishing.com.au/ahato claim your no-obligation risk-free trial for the next 60 days, your three FREE reports and 50% off the membership price.

Greg Canavan – Australia’s leading value investor and editor of Sound Money, Sound Investments. A regular financial observer for CNBC, Sky Business’s ‘The Perrett Report’, Lateline Business, Ninemsn Finance, The Sydney Morning Herald, The Australian and Boardroom Radio.

Sound Money Sound Investments is published by Port Phillip Publishing Pty Ltd.Registered Office: Port Phillip Publishing Ltd Pty, Level 1, 10 Fitzroy Street, St Kilda, VIC 3182

Port Phillip Publishing Pty Ltd (ACN: 117 765 009) (AFS License: 323 988).

I


H A R d A S S E T I n v E S T m E n T | Owning Bullion

A.D. Gibson

How did you get started in precious metals?

I took over a rather capital intensive business about two weeks before the GFC hit the world good an proper. I remember sending off the last bit of paperwork and then turning on the news to hear that the stock market had plummeted more than 6% during the day. Finance to expand basically disappeared overnight, and even though the business was established, had good cashflow and generated a decent return I hadn’t been in business for more than two years so there was no way anyone was going to lend me any money. I had a lot of money in cash at that point but I decided to wait and see how things played out before putting it all into the business.

Essentially, I was sitting around waiting for something to happen and I bought a couple of sovereigns on a whim, thinking that coin collecting would be an interesting distraction. From there, I bought a few more things and then decided to sell some of them when I found a some coins I really, really wanted and then I found the Perth Mint and became interested in bullion.

I’ve actually spent a lot of my working life around cash, but I didn’t really think about the time and skill that goes into making this stuff that we all want and use on a daily basis until I started reading about the history of money and discovered how we manufacture it today. I now have a much better appreciation for the technical proficiency and artistic talent that goes into minting a really good looking coin.

what surprises about the industry? Something that both surprises and annoys me about the industry is the way in which many dealers handle their legal obligations, particularly the requirement for buyers to provide identification in certain circumstances. Some dealers go above and beyond what the law requires to help prevent money laundering and that

creates implications for buyers’ privacy and security. I think people don’t really value their privacy generally as much as they should but updating your relationship status on Facebook is quite different to buying thousands of dollars worth of very liquid and hard-to-trace assets. Dealers shouldn’t ask for ID if they don’t need it and buyers shouldn’t just hand it over because someone asks.I’m also surprised at how so few people actually know anything about precious metals (beyond being able to get cash for their old jewellery at a booth in their local shopping centre). It wasn’t that long ago that gold and silver were actually in the coins we use every day and precious metals underpinned the entire world’s financial system, yet if you ask someone what the silver in a 1966 50c coin is worth most people will either say its worth 50c, a few dollars or won’t even try to guess. Only two generations have passed since the United States stopped backing it’s currency with gold and precious metals have just dropped off the radar for most people.

what’s coming next in precious metals? I think a lot of people are going to start taking an interest in precious metals as prices continue to rise. Actually that isn’t strictly true: regular fiat currency will continue to be devalued as governments around the world create more of it and the yardstick we measure prices in will make it look like they’re rising.

One of the interesting things I’ve noticed is that there isn’t any particular demographic that is trading in precious metals. The people I’ve met in my travels span all ethic groups, genders and age brackets and its especially interesting how many young people are keen on gold and silver. I have a feeling this actually has something to do with real estate because a lot of young people I know have pretty much given up on the idea of ever owning their own house – they look at the rising prices, go off

Bullion buyersIn most investment communities it’s easy to get an opinion from an advisor. It can prove much harder to get the same thing from an actual investor. For many first time bullion investors, it can be almost impossible to talk to someone that has been through the process of buying themselves. AHA Investor, in collaboration with online bullion discussion community Silver Stackers, has done the hard work for you. Presented here are the first hand experiences of actual bullion buyers: what made them get started, what surprised them, and what they see coming next in this fascinating industry.


Owning Bullion | H A R d A S S E T I n v E S T m E n T

•

•

•

•

and save some money and then find that prices have risen even faster than their savings so they can’t meet the LvR (Loan to Value Ratio – ed) they need to get a home loan from the bank. Of course they’ve still got the money to invest in something so they look around for investments that come in bite-size pieces and since precious metals are hard assets (like real estate) and don’t have a high barrier to entry either, buying some gold and silver seems to fit the bill pretty well.

Then there is all the talk of Australian real estate being overpriced and how we’re due for a correction. Frankly, its very scary how many people don’t even acknowledge the possibility that property prices could fall and if you look back, that is exactly the same attitude that people had before every crash in every kind of market since some Dutchman woke up one day and thought some tulips would look nice in his front garden.

It all makes precious metals look pretty attractive.I also don’t think demand from China and India is going

to let up any time soon. If either of those countries goes into recession their people will be looking to move their wealth into something safe and that will put even more pressure on demand. If China goes into recession, for example, their demand for our raw materials will drop off


H A R d A S S E T I n v E S T m E n T | Owning Bullion

and the value of our dollar will fall. Since gold and silver work the same way as foreign currencies, they effectively have an “exchange rate” which will work in favour of whoever is holding gold and silver.

Whatever happens, I think precious metals are an important part of a diversified investment portfolio.

H. J. Baron

How did you get started in precious metals?I am still relatively new to precious metals and investing in general (circa 3-4 years).

After purchasing a house to live in during 2006 I followed this by looking for an investment property in 2007. Over the course of the year it became apparent prices were rising very strongly (Adelaide saw around 20-30% growth over 2007). Suburbs where you were able to buy close to neutrally geared at the start of the year only had properties by the end of the year that would cost hundreds of dollars per week to hold (partial cause was two rate rises over 2007). Figures for property were not stacking up.

This led me to look for other investment ideas in late 2007/early 2008. It was fairly obvious when I started investigating at this time that there were some very serious issues facing the US & the world. The size of the debt/credit bubble seemed almost unimaginable and I had been completely oblivious to it!

I started researching avenues of protecting ones assets. Gold and Silver came up numerous times and they seemed to be powering on at the time (early 2008). I bought my first physical metal (a 1 kilo Silver bar for AUD$750) on March 28th only a few months before the metals fell precipitously over July to October. I didn’t let this put me off, in fact the months I’d now spent researching meant that I bought this dip all the way to the

bottom (both Silver and Gold).Later in 2008 as the metals rose it became apparent that

there were Gold and Silver stocks that had been smashed in the metals selloff that would hugely benefit from the recovering price of the metals. The first I ever bought was Troy Resources (ASX: TRY) for around 90c, as I recall their cash backing at the time was around 75c and they had significant Gold assets, worth much more than the market was valuing them. Today TRY is trading at over $3.50. That’s the story for many of the stocks I traded short term at the time and forms some of the reasoning for the longer term hold strategy I use today (for precious metal related exploration/mining companies).

what surprises you about the industry?I would say one of the biggest surprises has been the large number of Gold top callers, negative sentiment and general ignorance about the precious metals bull market coming from mainstream media. Suffice to say I rarely turn to mainstream media for my news or information these days.

Another surprise has been the lack of interest in precious metal exploration and mining stocks. The HUI (Gold stock index in the US) peaked in March 2008 at 520 with Gold peaking around US$1030 at this time, 3 years later and Gold is 39% higher than the 2008 peak, yet the HUI is only around 10% higher than its peak.

what’s coming next? Mania. Fortunes will be made and lost. We are currently seeing unprecedented demand for retail sized bars and coins. Some recent figures include the 6.4m American Silver Eagles produced by the US Mint in January 2011, at last count Perth Mint production of 1 kilo coins was approximately 183,000 (on an annualized basis) or 14% of Australian Silver mine production…


Owning Bullion | H A R d A S S E T I n v E S T m E n T

GOLD IS MONEY

There will never be a more critical time to buy gold and silver. When financial markets are uncertain, smart investors put their money into gold and silver. Why? Because even in the worst of economic times, gold and silver are the ultimate store of value. Buying gold and silver is the best way to preserve your wealth and protect your savings. If you are looking to invest in gold, contact The GoldCompany. The GoldCompany provides customers with a secure and confidential means to buy investment gold and silver (LBMA Good Delivery bars) or to sell scrap, unwanted gold, platinum, silver and diamonds. You can also combine the two with our unique GoldSwap service. The GoldCompany, specialists in all your precious metals and diamond trading requirements.

1300 506 707

The GoldCompany HeadquartersSuite 1, Level 1 Piccadilly Tower133 Castlereagh StreetSydney NSW 2000

www.goldcompany.com.au

Royal Canadian Mint recently commented about the struggle to keep up with demand for their popular 1oz Silver Maple coin.

I suspect, like most other bull markets before it, this one will finish in a speculative frenzy which will drive the price of Gold and Silver to unimaginable heights. However the celebrations will likely be short as usually following a bull market gone bubble comes the inevitable bust. What’s interesting is that I am now investing in this sector to increase my net wealth, whereas the first purchases were more so as a wealth protection tool.

G. M. Tegun

How did you get started in precious metalsI’ve been interested in owning Gold since 1990 (I recall a conversation with my high school Economics teacher where I expressed an interest in buying Gold). Whilst I was in the UK in 2000 I wanted to buy Sovereigns but spent my money on beer instead. Fast forward a few years and I was trying to make sense of a crazy world wide real estate bubble when I kept on reading advice recommending people buy gold. The more I researched the more it (buying gold) made sense.

what surprises you about the industry? I’m most surprised at the lack of knowledge of precious metals held by the general public. Investing for the majority of people comes in the form of cash in the bank, shares or real estate. It’s my opinion that financial advisors don’t promote holding physical precious metals because there isn’t a commission in it for them let alone a trailing commission. Those in the finance sector make money on the churn. If everyone followed Harry Browne’s Permanent portfolio and held 25% of their wealth in physical Gold and Silver then the parasitical finance sector may well starve. After all, buying Gold and Silver isn’t exactly rocket science. Just buy from a reputable seller, don’t try to be too smart, put it in your safe and you should be just fine.

what’s coming next?Interesting times – you can take that to the bank! Theories of what’s coming next vary from business as usual to TEOTWAWKI. In the last decade we have seen bank runs, company collapses and some poor workers losing their retirement savings in the US. Having a physical position in Gold helps me sleep well at night.


S E c T I o n n A m E | Story Name

Sound Money. Sound Investments. editor Greg Canavan reveals....

The 58-year-old politically incorrect secret that could help you identify

under-priced stocksin any market − at any time!

To find out what it is visit....www.PortPhillipPublishing.com.au/aha

Sound Money Sound Investments is published by Port Phillip Publishing Pty Ltd.Registered Office: Port Phillip Publishing Ltd Pty, Level 1, 10 Fritzroy Street, St. Kilda, VIC 3182

Port Phillip Publishing Pty Ltd (ACN: 117 765 009) (AFS License: 323 988).


Iceland | H A R d A S S E T I n v E S T m E n T

Iceland’s

By Bill wilson

iceland is free. and it will remain so, so long as her

people wish to remain autonomous of the foreign

domination of her would-be masters — in this case,

international bankers.

On April 9 of last year, the fiercely independent people of island-nation defeated a referendum that would have bailed out the UK and the Netherlands who had covered the deposits of British and

Dutch investors who had lost funds in Icesave bank in 2008.At the time of the bank’s failure, Iceland refused to cover the losses. But

the UK and Netherlands nonetheless have demanded that Iceland repay them for the “loan” as a condition for admission into the European Union.

In response, the Icelandic people have told Europe to go pound sand. The final vote was 103,207 to 69,462, or 58.9 percent to 39.7 percent. “Taxpayers should not be responsible for paying the debts of a private institution,” said Sigriur Andersen, a spokeswoman for the Advice group that opposed the bailout.

independencefrom InternatIonal Banks


H A R d A S S E T I n v E S T m E n T | Iceland

A similar referendum in 2009 on the issue, although with harsher terms, found 93.2 percent of the Icelandic electorate rejecting a proposal to guarantee the deposits of foreign investors who had funds in the Icelandic bank. The referendum was invoked when President Olafur Ragnur Grimmson vetoed legislation the Althingi, Iceland’s parliament, had passed to pay back the British and Dutch.

Under the terms of the agreement, Iceland would have had to pay £2.35 billion to the UK, and €1.32 billion to the Netherlands by 2046 at a 3 percent interest rate. Its rejection for the second time by Iceland is a testament to its people, who feel they should bear no responsibility for the losses of foreigners endured in the financial crisis.

That opposition to bailouts led to Iceland’s decision to allow the bank to fail in 2008. Not that the taxpayers there could have afforded to. As noted by Bloomberg News, at the time the crisis hit in 2008, “the banks had debts equal to 10 times Iceland’s $12 billion GDP.”

“These were private banks and we didn’t pump money into them in order to keep them going; the state did not shoulder the

responsibility of the failed private banks,” Iceland President Olafur Grimsson told Bloomberg Television.

The voters’ rejection came despite threats to isolate Iceland from funding in international financial institutions. Iceland’s national debt has already been downgraded by credit rating agencies, and now those same agencies have promised to do so once again as punishment for defying the will of international bankers.

This is just the latest in the long drama since 2008 of global institutions refusing to take losses in the financial crisis. Threats of a global economic depression and claims of being “too big to fail” have equated to a loaded gun to the heads of representative governments in the U.S. and Europe. Iceland is of particular interest because it did not bail out its banks like Ireland did, or foreign ones like the U.S. did.

If that fervor catches on amongst taxpayers worldwide, as it has in Iceland and with the tea party movement in America, the banks would have something to fear; that is, the inability to draw from limitless amounts of funding from gullible government officials and central banks. It appears that the root cause is government guarantees, whether explicit or implicit, on risk-taking by the banks.

Ultimately, such guarantees are not necessary to maintain full employment or even prop up an economy with growth, they are simply designed to allow these international institutions to overleverage and increase their profit margins in good times — and to avoid catastrophic losses in bad times.

The lesson here is instructive across the pond, but it is a chilling one. If the U.S. — or any sovereign for that matter — attempts to restructure their debts, or to force private investors to take a haircut on their own foolish gambles, these international institutions have promised the equivalent of economic war in response. However, the alternative is for representative governments to sacrifice their independence to a cadre of faceless bankers who share no allegiance to any nation.

It is the conflict that has already defined the beginning of the 21st Century. The question is whether free peoples will choose to remain free, as Iceland has, or to submit.

bill Wilson is the president of Americans for Limited Government. You can follow bill on Twitter at @billWilsonALG.

Under the terms of the agreement, Iceland would have

had to pay £2.35 billion to the UK, and €1.32 billion to the Netherlands by 2046 at a 3

percent interest rate.

* Performance of spot gold price v S&P/ASX 200 Accum. Index, 1 October 2007 to 28 February 2009. BetaShares Capital Ltd (ACN 139 566 868 AFS License 341181) (“BetaShares”) is the product issuer. A product disclosure statement (“PDS”) is available at www.betashares.com.au. You should read the PDS for the BetaShares Gold Bullion ETF (A$ Hedged) and consider your individual objectives, financial situation and needs and obtain financial advice before deciding to invest. You can purchase units in the ETF on the ASX. Past performance is not an indicator of future performance. QAU_SI01

solid gold

Contact your adviser or online broker www.betashares.com.au

Gold has always provided protection in times of uncertainty. In most recent memory, during the GFC, gold returned 27% while shares slumped by 45%*.

The BetaShares Gold Bullion ETF offers the simplest way to invest in gold. You can trade it on the ASX just like any share and, better still, currency risk is hedged so all you get is pure gold.

Australian-owned and managed, BetaShares is affiliated with BetaPro Management, one of the largest ETF issuers in North America.

AsX code: QAUBetaShareS Gold Bullion etF (a$ hedGed)


H A R d A S S E T I n v E S T m E n T | Gold & The Shadow Banking System

US banks fund European banks and vice versa. And both of these banking systems help fund the assets of the Aussie banks. Which is why

APRA, Australia’s banking regulator, has asked the banks to do their own stress test - modelling a sharp rise in unemployment and collapse in the Aussie property market.

The problem with self-stress testing is that the results are always too hopeful. It’s easy enough to assume a certain fall in property prices or a few percentage points rise in the unemployment rate. But the banks stress test in isolation. What about counterparty risk?

Prior to the collapse of the US property market, the US banks all thought they would pull through OK. They didn’t take into account the collapse of a counterparty.

This is a crucial point to consider. We reckon counterparty risk could well be in for the phrase of the year in 2012.

What does it mean?Here’s an example. In the US, banks that had

excessive exposure to residential mortgages hedged this risk by buying insurance with AIG. In their stress tests, they thought they were safe. They thought AIG would cover their losses if the housing market went south. AIG went bankrupt.

We’re pretty sure that scenario wasn’t modelled. AIG was a counterparty to the banks. There is always a risk

And THE SHAdow BAnkInG SySTEm

the counterparty won’t pay out on the insurance claim. That’s what counterparty risk means.

The point is you can’t really conduct an accurate stress test in such an interconnected world. You cannot accurately model counterparty risk. These stress tests are an attempt to build confidence in an inherently fragile industry. Confidence is the backbone of the banking system. It’s a con game.

How Shadow Banking worksAn examination of the shadow banking system shows you just how fragile banking is. Weekend DR editor Nick Hubble sent this IMF working paper through yesterday. It explains how the shadow banking system works. If you have the time and inclination, it makes for fascinating - and scary - reading.

We’ll sum up the best points here. Firstly, the IMF paper points out the role of traditional banking/finance is to transform the short-term savings of households into longer-term assets. The banks do this via lending the money for mortgages. Or it is done via you investing with an asset manager to buy bonds or shares. Either way, your cash is ‘transformed’ into a longer-term security.

The IMF paper then points out the role of shadow banks. (Which include hedge funds, exchange traded funds, sovereign wealth funds, central banks, pension funds, insurance companies and managed funds.) And that role is to transform these longer-term assets back into shorter-term liquid investments.

The mechanics of this process are complex. But in effect, the shadow banking system simply monetises long-term securities. This creates liquidity, which creates more demand for longer-term securities like shares and bonds.

The world today is so inter-connected that if you try to explain things in

isolation it becomes meaningless. You have to look at everything to see

how the pieces fit together.

GOlD


Gold & The Shadow Banking System | H A R d A S S E T I n v E S T m E n T

The Beginning of the End for Shadow BankingThis system worked ‘brilliantly’ for all involved for many years. Through a combination of ignorance and blind confidence, the system kept expanding. But the US housing bust was the beginning of the end.

The shadow banking system had effectively monetised the stock of US housing - a long term, illiquid asset. Once everyone realised the stupidity of this ‘system’ it was game over. The shadow banking market has been deflating ever since.

With the recent revelations surrounding MF Global’s abuse of the shadow banking system, you can bet it will continue to deflate in the years to come.

why Gold can Be your Safeguard Asset in a Shadow Banking EnvironmentOnce you grasp the basics you can see why money printing is the only way out for the monetary authorities. You can also see how the credit boom got out of control, how it affects your wealth and, as you’ll see in a moment, why gold will benefit in the end.

This system deflation will continue to have major implications for liquidity creation. You’re already seeing the effects of this in Europe. The European banks are struggling to get funding from the shadow banks. Less liquidity means a higher cost of remaining liquid funds. That’s why Aussie banks are struggling with higher funding costs despite the RBA lowering rates. The shadow banks fund Australia’s banks too.

This is why global central banks will step in and start monetising debt soon. To ensure against a violent deflationary downdraft, central banks will replace the liquidity that the shadow banks are no longer creating.

Because if they don’t, you’ll soon see bank failures. That will have a domino effect around the world. Ben Bernanke knows this and will use the printing press to prop up the system. He’s trying to act cool now, but he has no choice.

The ECB, to its credit, is trying to put the value of the euro ahead of the interest of the banks and their desire for money printing. But doing so while trying to maintain the structure of the Eurozone will prove an impossible task. Something will have to give. Either the ECB relents and prints, or the Eurozone breaks up and the peripheral countries turn to the printing press as an easy route to improved competitiveness.

Once all this transpires the gold price will soar. If you think of the financial markets as an inverted pyramid, gold sits at the bottom. On top of this

GOlD sits physical paper currency. Stacked on top are more ephemeral forms of ‘money’ - such as government bonds, commercial paper and asset backed securities - created by modern finance and the shadow banks in search of a free lunch.

But the credit bubble bust in 2007 has made the question ‘what is money’ more and more important. With each round of central bank money printing, the market will collectively think harder about the answer to that question.

It will come to the conclusion that money is not something central banks can create on a whim. As the pyramid of ‘money’ implodes, the world’s wealth will cascade down into the golden tip.

At that point, we think gold, priced in paper currency, will be worth many times its current value. In the short term, it may have further to fall. But in the long term, gold will always remain as a protector of wealth. After all, there is no counterparty risk with physical gold. It’s your asset, but no one else’s liability.

Greg Canavan for The Daily reckoning Australia


H A R d A S S E T I n v E S T m E n T | Argentina – What Happens when Inflation Happens

another consequence of

W ithin a matter of days, the country had burned through several presidents, the currency collapsed, inflation soared, unemployment shot up, crime rates spiked, and the government

defaulted on its debt.After limping along for most of the last decade with a socialist agenda, the

government of Argentina is at it again. The economy is rapidly deteriorating, and street-inflation has surpassed 25%.

Naturally, the administration of President Cristina Fernandez insists that inflation is not a problem, despite the Argentine peso losing 25% of its value against the US dollar over the last three-years (and far more against gold).

Meanwhile, Fernandez has borrowed her plays from Atlas Shrugged. She’s imposed capital controls, raided pension funds, nationalized private property, and taken control of the media… all in a vain attempt to delay the endgame.

A few weeks ago, the government passed a package of new laws, essentially criminalizing public protest under the auspices of combating terrorism. The legislation, snuck in at a midnight session during the holiday period, provides severe punishment for various crimes under a very broad definition of terrorism.

Fernandez herself maintains that the law would -never- be invoked to restrict the legitimate rights of Argentines. This, from a woman who simultaneously passed legislation to seize control of the country’s newspaper industry.

In her latest move, Fernandez has stepped up her saber-rattling over the Falkland Islands, a nearby archipelago that has been a British territory since

economic declineNearly 10-years ago to the day, the government of Argentina

collapsed. Beset by weighty deficit spending and a completely

unrealistic currency peg to the US dollar, Argentina became

the poster child for the golden rule of economics: ‘that which is

unsustainable will not be sustained.’ It’s reversion to the mean.

by Simon Black


Argentina – What Happens when Inflation Happens | H A R d A S S E T I n v E S T m E n T

economic decline

1833 (it is now self-governing). You may remember that Argentina invaded the Falklands in 1982 and was subsequently defeated after a bloody conflict with Britain.

It’s a sore subject in Argentina; the government still claims sovereignty over the Falklands (known as Las Malvinas in Argentina), and Fernandez is waving the flag once again.

Last month Argentine naval forces were sent to frustrate commercial fishing around the disputed territory. And in the most recent development, Argentina, Brazil, and Uruguay announced that they were closing their seaports to any ship flying a Falklands flag (all 25 of them…)

Argentina has also mounted pressure on the British government to reopen negotiations over the Falklands’

sovereignty. Thus far, the Brits have refused.Cristina Fernandez’s BFF Hugo Chavez recently added to tensions by

saying, “The English are still threatening Argentina. Things have changed. We are no longer in 1982. If conflict breaks out, be certain Argentina will not be alone, as it was back then.”

At this point, it’s all just tough talk and petty annoyances. But here’s the thing– there are four billion barrels of oil estimated to be within the Falklands’ territorial waters.

Given the utter insanity with which Fernandez governs her country and the desperation in the Argentine economy, one cannot rule out the possibility of her trying to grab Las Malvinas by force. After all, military conflict is the ultimate social distraction.

I’ve often written that economics drives everything. A solid, vibrant, competitive economy lifts an entire nation into prosperity, while deteriorating fundamentals and a socialist agenda create inflation, unemployment, and social turmoil.

War is just another one of those consequences. And given the vast deterioration in the global economy coupled with deeply-seeded conflicts around the world, the Falklands is just one of many that we may have to look forward to in 2012.


n U m I S m AT I c S | The eagle has landed

The American Silver Eagle is the official Silver bullion coin of the United States and the most popular Silver 1 ounce coin in the world (by

measure of number minted). Produced by the United States Mint they were first struck in 1986 with an annual release since. It has a nominal face value of $1, but of course anyone watching the spot price of Silver would know that its commodity value is much higher today and usually a premium will be paid over spot to cover the cost of minting as well.

Generally speaking the older American Silver Eagles don’t achieve a large premium to newer coins given their high mintages (compared with small mintage bullion coins such as the Perth Mint Lunar & Kookaburra series which do achieve a premium when sold out); however they can be purchased for a lower premium to begin with and the demand for American Silver Eagles makes them extremely liquid for resale.

Over the last 4 years running we have seen the number of American Silver Eagles sold (annually) make a new record. 19.5m sold in 2008 (up from less than 10m in 2007), then 28.7m in 2009, 34.6m in 2010 and finally 39.8m in 2011, these are all much higher than the average 9.5m sold per year between 2000-2007 (see the included chart).

It’s interesting that legislation for the American Silver Eagle bullion program initially stipulated that the Silver used to mint the coins come from the national stockpile (from locally mined/supplied Silver). However a change was made in 2002 with the introduction of the “Support of American Eagle Silver Bullion Program Act” which allowed the purchase of Silver on the open market once the Silver stockpile is depleted. It’s just as well the ability to purchase on the open market was introduced as the 2011 mintage number has resulted in American Silver Eagles produced exceeding the availability of domestically mined Silver.

In 2010 the United States produced 38.6m ounces of Silver and production for 2011 is estimated to be finalised lower than this, so the 39.8m American Silver Eagles sold in 2011 will eclipse local production. The neighbour to the north of the US, Canada, is looking at a similar situation with sales estimates of Canadian

Maple 1 ounce Silver coins expected to eclipse domestic production as well.

In January (2012) alone the US Mint has reported that more than 5 million 1 ounce American Silver Eagles have been sold (64,500 1 ounce American Gold Eagles) and we are only a little over half way through the month as I write this. It’s looking likely that January 2012 will prove to be a record month for sales (after January 2011 smashed previous records) which will set the stage for another record year! If the sales growth trend continues we could see American Silver Eagle sales of 45 million or even higher in 2012.

The current demand for Silver coins is very promising; other worldwide mints have also been struggling to keep up with demand. The Perth Mint sold out of their Lunar and Kookaburra 1 ounce bullion coins in record time (limited mintages) and have just recently announced that they’ve

sold 170,000 Koala’s in the first couple of weeks in January. To put that number in perspective it is more Koalas than was sold in either 2007 or 2008 and is over 50% of the number sold in 2009 (which was the year with highest number sold since 2007). Another popular 1 ounce investment coin is the 1 ounce Silver Chinese Panda which has seen the mintage increase dramatically over the past several years, from 1.5 million in 2010 to 3 million in 2011 and just announced 8 million in 2012 (although there is the potential for this number to be increased if demand warrants it).

With such feverish demand for American Silver Eagles and other 1 ounce Silver coins it’s easy to get excited about the impact this record level of retail demand will have on the spot price of Silver.

Bullion Baronwww.bullionbaron.com

The Eagle has Landed | n U m I S m AT I c S

has landed!THE EAGLE



From bullion and gold Exchange Traded Funds, to Fine Arts, heritage investment and Australia’s booming mining & minerals industry, we get to the source and the heart of true wealth.

Featuring articles, interviews, industry commentary and the very best in real asset investment, Australian Hard Asset Investor offers readers a fresh perspective on investing in the Australian economy.

This metals and hard asset focussed magazine helps retailers, refiners and producers invest in and educate this exciting and rapidly growing market.

Wherever Wealth is Stored

INVESTING in DIAMONDS

What you need to know

The Krugerrand:The original Bullion Coin

Swiss Goldwith George Vo

Fat Prophets:Half Yearly Forecast

PLUSArt Investment

Golden BullsMining updates


JuNe/JulY 2011

And your chance to WIN A DIAMOND



Win Perth Mint Gold! SEE P.40

SECURE YOUR

WEALTH:Special Report: The Ultimate

Gold Buyers Guide

History of SilverThe Demonetisation

Middle East Uprising:Dan Denning on Egypt, Oil & the currency quake

PLUSDeep Red Sea:

‘Double Red’ Sea Dweller watch

Art Update with Art Equity, Numismatics from Coinworks,

AND

Perth Mint goes Platinum: The New Platypus

Win Perth Mint Gold!


APRIl/mAY 2011

AHA.InvestorRea l Go ld • R e a l S i lv e r • R e a l A s s e t s • R e a l Wea l t h

Aug/Sep 2011 AHA.Investor | 15

Taking Stock | H a r d a s s e t I n v e s t m e n t

Taking STock

By Greg Canavan, sound money. sound Investments

14 | AHA.Investor Aug/Sep 2011

t hroughout 2011, one of the great frustrations of precious metals investors has been the prolonged underperformance of the gold stocks relative to the gold price. The general sales spiel from the investment community is that gold stocks give you leverage to the gold price. So if bullion rises by, say, five per cent, you should expect your gold stocks to do even better.

The script hasn’t gone according to plan this year. As you can see on the accompanying chart, since the start of the year the gold price (as measured by the gold ETF, ASX code: GOLD) has increased by around five per cent. But the gold stock index has declined nearly 10 per cent.

This is reverse leverage and not the way things are meant to work!

A new dawn? Gold miners balance increased profitably

& increased costs

H a r d a s s e t I n v e s t m e n t | Taking Stock

Wall St to Main St: gold exchange traded funds (ETF’s) are becoming far more mainstream

With the Eurozone in crisis and the U.S. economy continuing to limp along, it’s getting harder to spot the easy winners. With Gold starting to rise again, Sound Money Sound Investments editor Greg Canavan takes a closer look at the stocks that underpin the companies that produce our favourite heavy metal.

Raphael Jewellers | C l a s s i C s & C o l l e C t i b l e sC l a s s i C s & C o l l e C t i b l e s | Raphael Jewellers

Making it


Raphael JewellersW here are – initially – two

fundamental things you need to know about investing in diamonds. They can be a terrific investment: just like gold,

diamond prices have been heading up and up, with no ceiling in sight as yet.

Walking into the Strand Arcade, built in 1891 in Sydney’s George Street, the overall impression is of soaring glass and wrought iron, sunlight, tiles and timber. Up in the second tier of shops above the ground floor lies the polished gem within the arcade’s extravagant setting: Raphael Jewellers.

Occupying two shop fronts, the store is decorated with an eclectic collection of stunning antiques that act as a context for the precious jewellery and objets d’art produced on site by jeweller brothers, Raphael and Joseph Akelian.

Although my interview is with Joseph, he is occupied with clients when I arrive, and I am greeted by his older brother Raphael, who founded the business in 1988. Originally intending to follow his father into medicine, Raphael had only just begun his studies as a young man, when he was asked to assist a neighbour, a diamond merchant, in his back yard studio. There, his passion for crafting precious jewellery bloomed, and he never looked back.

Sixteen years younger, Joseph grew up in the business, coming in after school to sit by his brother at the workbench and be inspired. He says he loved the glamour and the charm of it all. One day when he was 16, Raphael told him he would be serving everyone who came in to the store that afternoon. After each customer, Raphael critiqued his service and gave him pointers for improvement.

He was evidently a natural, however. His favourite aspect of the business is interacting with the clients; getting to know them and their tastes; creating a warm and gracious atmosphere. As we talk, Joseph

Hard Assets. All too often, it’s easy to focus on the bottom line - the purity of the bullion, the carat, clarity & cut of a fine diamond. But sometimes - sometimes - a hard asset can be just this, and also so much more. In the rarified world of high-end, hand made investment jewellery, value becomes the sum of many parts, magnfied by the skill of the artisan. AHA Investor goes behind the scenes into this world where beauty intermingles with lasting value.

Linnet Good reports.

frequently waves to people passing by the window. He has clearly built strong, friendly relationships with the arcade’s traders and clientele.

Inspired by European and English traditions, the business harks back to the old idea of developing the relationship between a client and his or her jeweller. Clients don’t just purchase one piece; they build up an investment collection over time. Joseph and Raphael get to know the buyers and their families, to understand their tastes and style, and they develop a feel for what will appeal to each of them.

One client wanted to give his partner some “fun, diamond drop earrings”. Joseph says that by “fun”, the gentleman meant long and sparkly. They knew that the lady in question was elegant and quite conservative, and they went through a careful process to develop something that would interpret and satisfy the inspiration but also be something that she would actually wear.

The end result was lovely: long drop earrings with an antique feel to the central piece, with more

modern, kite shapes at either end; all covered in diamonds. The earrings have a lot of natural movement, constituting part of their beauty. Joseph says, “We’re sure she’ll love them.”

He describes the design style at Raphael

Jewellers as “classic with an edge”. Classic, because anyone spending thousands of dollars on a piece of jewellery will want it to be timeless – and wearable – rather than faddish, but the Raphael customer also appreciates that nothing here is ordinary. Everything is distinctive, and most pieces are unique.

With jewellery at this level, Joseph explains, there’s no point to having the best gem in the world if the setting does it no justice, or the best setting in the world for an inferior stone. The quality of the craftsmanship, the stone/s, the setting and the design concept must all be excellent. Every element comes together to produce a piece with a value that goes beyond the intrinsic price of materials plus labour.

“Clients don’t just purchase one piece;

they build up an investment collection

over time.”


Raphael Jewellers | C l a s s i C s & C o l l e C t i b l e sC l a s s i C s & C o l l e C t i b l e s | Raphael Jewellers

Making it


Raphael Jewellers Where are – initially – two fundamental things you need to know about investing in diamonds. They can be a terrific investment: just like gold,

diamond prices have been heading up and up, with no ceiling in sight as yet.

Walking into the Strand Arcade, built in 1891 in Sydney’s George Street, the overall impression is of soaring glass and wrought iron, sunlight, tiles and timber. Up in the second tier of shops above the ground floor lies the polished gem within the arcade’s extravagant setting: Raphael Jewellers.

Occupying two shop fronts, the store is decorated with an eclectic collection of stunning antiques that act as a context for the precious jewellery and objets d’art produced on site by jeweller brothers, Raphael and Joseph Akelian.

Although my interview is with Joseph, he is occupied with clients when I arrive, and I am greeted by his older brother Raphael, who founded the business in 1988. Originally intending to follow his father into medicine, Raphael had only just begun his studies as a young man, when he was asked to assist a neighbour, a diamond merchant, in his back yard studio. There, his passion for crafting precious jewellery bloomed, and he never looked back.

Sixteen years younger, Joseph grew up in the business, coming in after school to sit by his brother at the workbench and be inspired. He says he loved the glamour and the charm of it all. One day when he was 16, Raphael told him he would be serving everyone who came in to the store that afternoon. After each customer, Raphael critiqued his service and gave him pointers for improvement.

He was evidently a natural, however. His favourite aspect of the business is interacting with the clients; getting to know them and their tastes; creating a warm and gracious atmosphere. As we talk, Joseph

Hard Assets. All too often, it’s easy to focus on the bottom line - the purity of the bullion, the carat, clarity & cut of a fine diamond. But sometimes - sometimes - a hard asset can be just this, and also so much more. In the rarified world of high-end, hand made investment jewellery, value becomes the sum of many parts, magnfied by the skill of the artisan. AHA Investor goes behind the scenes into this world where beauty intermingles with lasting value.

Linnet Good reports.

frequently waves to people passing by the window. He has clearly built strong, friendly relationships with the arcade’s traders and clientele.

Inspired by European and English traditions, the business harks back to the old idea of developing the relationship between a client and his or her jeweller. Clients don’t just purchase one piece; they build up an investment collection over time. Joseph and Raphael get to know the buyers and their families, to understand their tastes and style, and they develop a feel for what will appeal to each of them.

One client wanted to give his partner some “fun, diamond drop earrings”. Joseph says that by “fun”, the gentleman meant long and sparkly. They knew that the lady in question was elegant and quite conservative, and they went through a careful process to develop something that would interpret and satisfy the inspiration but also be something that she would actually wear.

The end result was lovely: long drop earrings with an antique feel to the central piece, with more

modern, kite shapes at either end; all covered in diamonds. The earrings have a lot of natural movement, constituting part of their beauty. Joseph says, “We’re sure she’ll love them.”

He describes the design style at Raphael

Jewellers as “classic with an edge”. Classic, because anyone spending thousands of dollars on a piece of jewellery will want it to be timeless – and wearable – rather than faddish, but the Raphael customer also appreciates that nothing here is ordinary. Everything is distinctive, and most pieces are unique.

With jewellery at this level, Joseph explains, there’s no point to having the best gem in the world if the setting does it no justice, or the best setting in the world for an inferior stone. The quality of the craftsmanship, the stone/s, the setting and the design concept must all be excellent. Every element comes together to produce a piece with a value that goes beyond the intrinsic price of materials plus labour.

“Clients don’t just purchase one piece;

they build up an investment collection

over time.”

36 | AHA.Investor Aug/Sep 2011 Aug/Sep 2011 AHA.Investor | 15

Taking Stock | H a r d a s s e t I n v e s t m e n t

Taking STock

By Greg Canavan, sound money. sound Investments


throughout 2011, one of the great frustrations of precious metals investors has been the prolonged underperformance of the gold stocks relative to the gold price. The general sales spiel from the investment community is that gold stocks give you leverage to the gold price. So if bullion rises by, say, five per cent, you should expect your gold stocks to do even better.

The script hasn’t gone according to plan this year. As you can see on the accompanying chart, since the start of the year the gold price (as measured by the gold ETF, ASX code: GOLD) has increased by around five per cent. But the gold stock index has declined nearly 10 per cent.

This is reverse leverage and not the way things are meant to work!

A new dawn? Gold miners balance increased profitably

& increased costs

H a r d a s s e t I n v e s t m e n t | Taking Stock

Wall St to Main St: gold exchange traded funds (ETF’s) are becoming far more mainstream

With the Eurozone in crisis and the U.S. economy continuing to limp along, it’s getting harder to spot the easy winners. With Gold starting to rise again, Sound Money Sound Investments editor Greg Canavan takes a closer look at the stocks that underpin the companies that produce our favourite heavy metal.

PLUS:

Gold, Diamonds, Bulls & Bears:The Cohens: Three generations of diamond & bullion traders(and why gold is money)

PersPectiveson Profit

AHA.InvestorR e a l G o l d • R e a l S i lv e r • R e a l A s s e t s • R e a l W e a l t hA u s t r A l i A n H A r D A s s E t s

AU$7.95 | Volume 1, Issue #1 February/march 2011

BULLIon GIVeAWAY: WIn A kILo of sILVer! see p.15

Investing in Art:

Good as GoldThe honesty of bullion: Wealth,

Security and a decade of growth

The Rolex Submariner: Classic Bond Cool

Valentines Gift guide

AND win a kilo of silver

Subscribe & Save!

Get your next copy of AHA Investor delivered to your door. Not only will you save on the newstand price, but we’ll also include an extra issue free of charge.

7 Issues of Australian Hard Asset Investor delivered for only $47.70 inc gst!

Visit www.AHAInvestor.com or www.magshop.com.au and act now, or visit our stand at the Gold Symposium in Sydney’s Luna Park on Nov 14th & 15th.

Buy the

Right Diamond at the right price

The DCLA Diamond buying workshop includes: The 4C’s of diamond grading | Establishing quality & value

Questions to ask when buying | Understanding Diamond Certificates Diamond treatments, how they affect value | Synthetic diamonds, and their value

Buy, sell, or take a workshop with Australia's most trusted name in diamonds.

dcladiamondexchange.com.au

value | purchase | sell

To find out more, call 1300 66 DCLA

GC_DCLA_AHAINVESTOR_JANT2012_R1.indd 1 19/01/12 6:53 PM


Buy the

Right Diamond at the right price

The DCLA Diamond buying workshop includes: The 4C’s of diamond grading | Establishing quality & value

Questions to ask when buying | Understanding Diamond Certificates Diamond treatments, how they affect value | Synthetic diamonds, and their value

Buy, sell, or take a workshop with Australia's most trusted name in diamonds.

dcladiamondexchange.com.au

value | purchase | sell

To find out more, call 1300 66 DCLA

GC_DCLA_AHAINVESTOR_JANT2012_R1.indd 1 19/01/12 6:53 PM


I t is fair to say that 2011 has been an interesting year for the art market, both domestically and in

the international arena. The major auction houses are yet to publish their annual sales reports but on the surface figures for Sothebys at least suggest an increase of around 12% with auction turnover nudging US$4.9billion. Certainly the first half of the year had a runaway freight train quality about it (Sothebys recorded its best first 6-months in its illustrious history) with the sales at least meeting expectations but in many cases exceeding them – it seemed as if 2011 would not only consolidate but surpass the remarkable recovery experienced in 2010. However, results from September to the gavel falling on the last lot of season, the results became far more sporadic – an issue that has plagued the Australian auction scene for the past 24 months. Many analysts have suggested that this trend is directly correlated to the continued concerns surrounding sovereign debt in the Eurozone – deep down we all wanted to believe that Berlusconi had got it right – and to an

extent this has been a contributing factor and taken its toll but is it really the only reason? I’m not so sure about that.

The Mei Moses All Art Index points to another very solid year for 2011 with the index “closing” up 11% from 12 months ago. Some reports go on to reference that the All Art Index has outperformed the S&P 500 Total Returns Index, which to be frank just struggled to find any consistency in a tempestuous 12 months, for the second consecutive year and the sixth time over the last 10 years. Just like auction results themselves, it always pays to dig a little deeper than simply accept statistics at face value. One of the significant attractions in Fine Art Investment is that it provides a level of true diversification for the single underlying reason that it is largely uncorrelated to the more traditional asset classes. It has to be naïve or foolhardy to then make direct correlations between the results of the All Art Index and that of the S&P 500 TRI because both markets are governed by their own nuances and fundamentals which often don’t translate into each other’s markets. Have you ever heard the very stoic finance reporters announce “The Dow rallies on news that a Lichenstein sells for US$43.2M at Christies” or “Eurozone fears abated as Gerhard Richter hits new auction record”? If we take the results in context, as I believe Mei Moses intend, then the comparative allows us to see the confidence levels in the market as opposed to a direct comparison – after all there is no mechanism to trade the index returns in Art as there are in the Equity markets. As an investor in this space it is paramount that you don’t find yourself comparing apples with bowler hats.

One of the trends that established itself very firmly in 2011 was the increase in Auction houses facilitating private treaty sales. It is estimated that in 2010, Private Treaty accounted for US$1 billion in turnover for the two majors. During the first 6-months of 2011, Christies reported private treaty sales were up by 57% while Sothebys saw this side of their business grow by some 114% which included the sale of four Matisse bronzes for a reputed US$120M. There is a tote running to see if Sothebys can topple their 2007 record year for total turnover (auction + private treaty) of US$6.2 Billion – I doubt it BUT it will damn close. It is believed that the most expensive work ever sold was also transacted by private treaty in 2011 with reports suggesting that an undisclosed buyer raided the penny jar to scrap together US$250M for Cezanne’s The Card Players. While unknown for now, the identity of the buyer will eventually surface however we will never really know how much was paid for the work such is the beauty of private treaty and testament to how opaque the art market can be when it wants to. As the collector and philanthropist Eli Broad once said, “Nobody really likes to be the one to set a record….”

The second clear trend to establish itself was the re-emergence of the Post-War & Contemporary Sector.The top prices at Sotheby’s and

A R T I n v E S T m E n T | Art Trends 2011 / 2012

Art Investment


Christie’s were for American abstract expressionist and Pop art. The previously under-rated Clyfford Still soared to a record price of $61.9M for 1949-A-No.1, while Roy Lichtenstein’s I Can See The Whole Room!.......And There’s Nobody In It, which Raj and I saw at Christies in London during the preview in October, fetched $43.26M in the November sales in New York. The 1961 Lichenstein painting is widely regarded as the very first Pop Art painting by the artist and is most certainly the first of his works inspired by cartoons.

Interestingly, both lots were guaranteed under the irrevocable bid system, something that has yet to appear in the Australian market, by the Qatari Royal Family with many believing that they went on to be the one holding the paddle for the winning bid. While the bidding on the Lichenstein was syncopated if not laborious at times, the Still was a different matter, with the bidding holding perfect beat to the auctioneer’s metronome – he even scolded one bidder at US$35M for stuttering slightly over raising the bar to US$35.5M before the metronome settled in again.

There has been a fair bit of debate over the use of irrevocable bids versus auction house or third party backed guarantees. Indeed the cynics argue that this is therefore not a true market value. Under an irrevocable bid, the guarantor is entitled to bid on the work throughout the course of the auction, driving the price beyond their IB where as a third party guarantor is not entitled to bid on the lot in question. Regardless of the debate about whether or not clandestine deals have been hatched in the corridors, what is irrefutable is that the Lichenstein

Art Trends 2011 / 2012 | A R T I n v E S T m E n T


A R T I n v E S T m E n T | Art Trends 2011 / 2012

has proven to be a fantastic investment. The painting last went to the hammer in 1988 when it sold for US$2.09M (a then record for the artist’s work at auction)giving the vendor a CAGR of 14.08% when they sold in 2011. What is of more interest is that the buyer in 1988 returned a staggering CAGR of 36.71% over a 27 year period for the previous owner, who purchased the work in 1961 for meager US$450.00. Lichenstien’s I Can See the Whole Room!...And

There’s Nobody in it has generated a CAGR of 25.79% over the last 50, yes that’s right 50, years.

The third and very significant trend to establish itself in 2011 can be seen in the sale of the most expensive painting sold at auction in 2011.

A previously unseen Picasso? The Clyfford Still I mentioned earlier or maybe a Gustav Klimt which had been stolen by the Gestapo in 1938? No. In fact the artist in question has yet to see his work venture into the key sales in London, Paris and New York. In May, at auction in Beijing, Qi Biashi’s work Eagle Standing on Pine Tree sold for US$65.29M through China Guardian Auctions. Despite there being murmurings about the very opaque nature the reporting of results from auctions on the mainland, the impact China as both a market and as a buyer

on the Global Art Market can no longer be under-estimated nor ignored. While activity on the mainland will inevitably subside, Hong Kong has fast established itself as a major hub for the world art market. In much the same way as the BRICs economies have grown in significance for the broader markets, so too has their purchasing power been of note in the Art markets, with China very much at the forefront.

A further indication of how significant China has become can be seen in the purchase of the Hong Kong Art Fair by Art Basel. The role of the major art fairs (Basel, Frieze, FIAC, Masstricht and Dubai) will continue to strengthen as becoming an increasingly important stage for Contemporary art to trade within the primary markets. These major fairs allow the major galleries to brand themselves while the major collectors are able to waltz around a smorgasbord of work over the course of a few days in a performance which in itself the Fairs would no doubt argue is a work of art. I’m not quick so sure on that point and certainly wouldn’t suggest that it if it was to be viewed as a work, that it would harbour the same investment potential that the Lichenstein did…even if Andreas Gursky took a photo of the whole thing.

The Australian auction market did not perhaps

One of the trends that established itself very firmly in 2011 was the increase in Auction houses facilitating private treaty sales


Art Trends 2011 / 2012 | A R T I n v E S T m E n T

enjoy quite the vigour in 2011 that broader art market enjoyed, however the auctions turned over AU$99.92M for 2011. The Bulls amongst us would immediately say that it was still a turnover in excess of US$100M. Despite closing down 3% on 2010 in terms of turnover, the Australian market was far less reliant on the AU$1M+ works than the previous year, with the 9 works which breached this level accounting for 14% of turnover. Along the way 29 new Artists records were set, which included the AU$1.2M for Arthur Boyd and AU$1.02M for Jeffrey Smart. From these high prices we also started to see a shift in buying patterns and behaviour. The likes of Olley (who sadly passed away in 2011), Ray Crooke and Eric Thake saw significant moves in their prices but it was the move in the contemporary sector that was of most interest. Ben Quilty’s Frog Torana smashed his previous record, selling for AU$88,000.00 (inclusive of BP), while Del Kathryn Barton continued to move ever higher but it was the emergence of the likes of David Noonan, Andrew Browne, Peter Powditch and Jon Cattapan that holds more interest.

Perhaps the most significant result at auction was set overseas before being replicated in Australia throughout 2011. In May, Christies London sold Wet Afternoon, a lino-cut print, by Ethel Spowers for AU$84,000.00. In November both Deutscher and Hackett and Sothebys Australia presented the works from the same edition for sale, with Sotheby’s selling for AU$66,000.00 and D+H for AU$73,000.00 and in doing so setting a record for a limited edition print by an Australian Artist (sold at auction in Australia). The sale for the highest price paid for a living Australian Artists work – Ron Mueck’s Big Baby AU$1.38M

by Charles Saatchi also lends credence to the impact and significance international buyers could have on the Australian Art market moving forward.

Time to dust down the crystal ball and see what we might expect from the Art Market for 2012.

I think it would churlish to suggest that it will be more of the same and that the concerns we face in the Eurozone and its broader impact will not have ramifications in the Art Markets globally. We are seeing a greater number of new buyers coming to the market however there is generally less speculation out there – the purchase of David Hammons On Loan for US$206,500.00 (Christies New York) which is a painted coat hook and dust installation (I kid you not) being a an exception to prove the rule. We have seen in the Australian market a far greater number of new buyers entering the market place and in the most part being met with a volume of work being released onto the secondary market in the sub-AU$20K range which has created

buying opportunities. As I mentioned earlier I think that the increased

significance of the Art Fairs will have a major impact in 2012 and I also believe we will see the major auction houses internationally continue to drive the Private Treaty avenues to compete with the Larry Gagosian’s of this world. In Australia, private treaty I believe will start to dominate the secondary market and the auction houses will follow their lead from the majors and look to be more active in this space but it is the primary market in Australia that still harbours the best buying from an investment perspective. Of course if the World Bank’s predictions are correct and we are on the cusp of the oblivion that GFC Mark-II could represent then the buying will inevitably shift and those that have both the cash, the stomach and the bottle to make the play in tumultuous times will be very well placed to make some superb acquisitions. Certainly we are already seeing investors thinking outside the share. Only time will tell but it always worth remembering – the investment will always lie in the quality.

Alistair bailey ©Jan 2012

The third and very significant trend to establish itself in 2011 can be seen in the sale of the most expensive painting sold at auction in 2011


m I n I n G & I n v E S T m E n T | Bassari Resources: Out of Africa

A west African StoryGold and Silver mining stocks have had a

rough time over the past 12 months as the debt crisis in Europe has deteriorated. The

ASX Gold Miners Index (XGD) fell from its April 2011 peak of 8500 to an October low of 6000

(a 30% fall), an index price not seen since July 2010 when Gold was trading several

hundred dollars lower at AUD$1300.

I f nothing else this crisis has shown that although miners can benefit from a higher Gold price, they don’t always rise when the price of Gold

rises and often fall harder than the metal when the spot price corrects. Gold stocks are far from the safe haven that physical metals are, although with the right timing and company a lot of money can be still be made trading or holding them (with the wrong timing and company a lot of money can be lost as well!).

The XGD is made up primarily of larger companies; some of the junior mining and exploration companies have seen an even larger fall than the XGD as Gold corrected from US$1920 in early September to the late December low of just over $1500.

Bassari Resources:


Bassari Resources: Out of Africa | m I n I n G & I n v E S T m E n T

In this case the decay in share price can’t only be attributed to the Gold correction and western debt woes, BSR have also had some company related issues. For example their Douta alluvial gold project was put on care and maintenance in the second quarter after operational issues arose and due to a lack of plant/equipment availability.

However, 2011 also bought many successes for the company. In May 2011 BSR released their maiden resource for the Makabingui Project of 240,000oz Gold; this was increased by 126% in December to 543,000oz Gold. The resource includes a higher grade zone of 189,000oz Gold at 4.5g/t. The resource announcements have come following an aggressive drilling program which is continuing into the New Year (2012).

Some of the most impressive results from Makabingui (location of their JORC resource) included 7m @ 54.3g/t Au from 165.3m, 2m @ 37.3g/t Au and 3m @ 14g/t Au (some intercepts which had visible Gold in the mineralised lodes/drill core).

The Konkouto Prospect (35km North East of Makabingui) also

Bassari Resources (BSR) is one of the junior mining companies which have seen their share price decimated as fear gripped the markets in 2011. In early 2011 BSR traded briefly above 20c per share, later that year in September BSR traded for a short time around 8c per share, today the share price is trading below 5c (up to 75% lower than early 2011, 40% lower than September and not far from the lows seen in the middle of the GFC).

returning notable grades with intercepts of 20m @ 1.7g/t Au (including 4m @ 3.8g/t Au) and 5m @ 1.5g/t Au and more recently results announced in January, 50m @ 2.5 g/t gold and 20m @ 3.0 g/t gold. Drilling confirms an east-west trending mineralised zone over a strike length in excess of 600 metres, open in both directions and at depth, which has prompted BSR to commit to another 12 holes (1000m) drilling at this prospect in the first quarter of 2012. There are also still assay results pending from both Makabingui and Konkouto, unfortunately the company has been at the mercy of long lab wait times which seems to be quite typical of African based Gold exploration companies at the moment.

BSR has an interest in 3 contiguous permits (located in Birimian Gold Belt, Senegal, West Africa) with an area of around 1000 square km, within this lies 80km of strike with 13 prospects identified. The region BSR’s tenements lie in are host to 50 million ounces of Gold already.

The risk from Europe and other indebted western nations continues to form a dark cloud over the prospects for junior mining companies like BSR who still at these early stages need to regularly seek funding from the market in order to progress their development. However if they can continue to source adequate funding the exciting grades being delivered and impressive speed at which they’ve started to prove a mineable resource should continue and see BSR flourish in 2012.

Bullion Baronwww.bullionbaron.com

Disclosure: At the time of writing the article bullion baron held shares in bSr.


m I n I n G & I n v E S T m E n T | Mining News

NSW Greens welcome mining royalties reviewSYDNEY, Jan 6 AAP - A review of laws giving coal seam gas (CSG) miners a five-year break from paying royalties to the state has been welcomed by the NSW Greens.

NSW Premier Barry O’Farrell confirmed on Friday that the so-called royalty holiday arrangements for CSG miners were “being looked at”.

Existing law means any firm developing CSG wells within the state don’t pay a dollar in royalties until five years after production begins.

After five years miners then pay a six per cent royalty, rising every year to 10 per cent after 10 years.

In Queensland, CSG miners pay a 10 per cent royalty from the first day of production.

“The current arrangements are a slap in the face to the NSW community,” NSW Greens MP Jeremy Buckingham said in a statement.

“Certainly the gas royalty rate in NSW should at least match Queensland’s 10 per cent.”

A spokesman for resources and energy minister Chris Hartcher said the timescale for the review and who would conduct it was yet to be decided.

A number of environmental and landholder groups remain opposed to CSG mining, in part because of the controversial methods used to extract gas from the ground.

Miners inject liquid and other material at high pressure deep into the ground to fracture coal seams.

Environmental groups claim the technique - known as fracking - can pollute water supplies.

In December the NSW government extended until April a moratorium on the technique until the completion of an independent review of the environmental impact.

Platinum group metals rose after Alcoa Inc’s revenue beat expectations and the company gave a positive outlook for global demand for bellwether industrial metal aluminum, especially in the automotive markets.

Gold and silver have also started the year with a very positive surge across both metals.

“It’s not so much investors are buying gold because the world is falling part. It’s just another place to for people make money,” said Rick Bensignor, chief market strategist Merlin Securities.

“Silver is well away from its 200-day (moving average) while gold is at it. So, if metals are going to move, silver has room to go before it’s going to hit resistance,” said Bensignor.

A 10 per cent drop in gold prices in December and a decline in money managers’ speculative net long positions -- or bullish bets -- have left the metal with plenty of scope to rise, analysts said.

Commerzbank analyst Daniel Briesemann said that there was still a lot of catch-up potential for precious metals, since funds had slashed their net long position.

On the physical side of the market, buyers in India, the world’s biggest gold consumer, took advantage of a drop in local prices to a one-week low to stock up ahead of the wedding season beginning later this month, dealers in Mumbai said.

Platinum Group Metals Rise



Bright aluminium mood lifts AluminaMELBOURNE, Jan 10 AAP - Shares in Australia’s Alumina have shot up after its joint venture partner Alcoa gave a positive outlook for aluminium demand.

Melbourne-based Alumina’s main asset is its 40 per cent stake in Alcoa World Alumina and Chemicals (AWAC), with Alcoa holding the other 60 per cent.

Alcoa, the world’s largest alumina business, posted a loss from continuing operations of $US193 million ($A188.85 million) in the three months to December 31.

Its fourth quarter revenue rose six per cent to $US6 billion ($A5.87 billion), beating analysts’ expectations.

Alcoa forecast seven per cent growth in global aluminum demand this year - compared to 10 per cent in 2011 - and 12 per cent in China driven by the aerospace and automotive markets.

Growth is also expected in transportation, packaging and construction.

Investors focused on the positive outlook, sending Alumina’s shares up nearly 6.85 per cent to $A1.17 on Tuesday.

AWAC’s results for the quarter were impacted by a drop of six per cent in the price of aluminum in the fourth quarter, taking the full-year drop to 18 per cent.

Australia’s two biggest states are suffering from a property confidence slump as investors go on the hunt in resource-rich areas of the country.

A Property Council-ANZ survey found real estate professionals were more confident about demand from investors in the Northern Territory, South Australia, Western Australia and Queensland during 2012, with confidence levels were down in NSW and Victoria.

The confidence in the resource-rich states was linked to major projects such as the $30 billion INPEX Ichthys gas field project in the NT.

Confidence in the Territory jumped from 120 points in September to 145 points, making it the top performing state.

It was a similar picture in South Australia where confidence rose from 99 to 105.

Queensland recovered from a period of uncertainty, rising 10 points from 103 to 113 while Western Australia increased from 122 to 127.

Property Council chief executive Peter Verwer said the poor performance of the larger, southeastern states was worrying.

“With the resource-driven states firing the country still needs at least either Victoria or NSW to be performing well,” he said.

Victoria dropped from 100 points in September into negative territory of 97 while NSW slipped from 107 to 105.

Mr Verwer said Victoria had been a stand-out economic performer for the past half decade, driven largely by population growth; but now that the growth was petering out confidence was shrinking.

In NSW, where people were adjusting to a new government, investors were “starting to get fidgety”. The worst performed in the December quarter was the ACT which fell from 102 to 94 points.

FED:Fortune favours the resource rich: survey

Alumina prices were also lower in the three months to December, while cost pressures increased, Alumina chief executive John Bevan said.

“The impact of the difficult market conditions and some restructuring initiatives on AWAC’s quarterly result was partly offset by productivity gains,” he said.

There was also an after tax profit of $US30 million ($A29.36 million) from the sale of land in Australia which was surplus to requirements, Mr Bevan said.

Alcoa has forecast a global aluminium supply deficit of 600,000 tons in 2012, following cutbacks in production.

The company, which has 17 per cent of global production, last week announced it would close 12 per cent of its aluminium smelting capacity, cutting 240,000 tonnes a year.

It has not flagged a shutdown of any Australian operations.

Mining giant Rio Tinto has also shut down capacity amid plant failures and industrial disputes.

It is also in the process of selling many of its aluminium assets, including all of its Australian smelters and its troubled Gove bauxite mine in the Northern Territory.


Mining News | m I n I n G & I n v E S T m E n T

Jack Hills mine gets the nodMELBOURNE, Jan 10 AAP - An expansion of the Jack Hills iron ore mine part-owned by troubled miner Murchison Metals has received environmental approval from the Western Australian government.

Murchison has agreed to sell all its interests in the mine along with the Oakajee Port & Rail to joint venture partner Mitsubishi Development for $325 million, in the absence of a superior offer.

The troubled Oakajee project is designed to cater for several Mid West mining players.

Murchison’s stocks plunged last year amid significant funding uncertainty and large reductions in planned direct ship ore production from the mine from 10 million tonnes per annum (Mtpa) to just 1.35 Mtpa over the first 10 years of production.

The company’s shares peaked at $5.88 in 2007 but have mostly fallen since and were up half a cent at 41 cents on Tuesday.

It agreed to sell after admitting during the year it could not fund its share of the two projects, worth a combined $10 billion.

Would-be Oakajee customer China’s Sinosteel also mothballed its $2 billion Weld Range iron ore project.

Murchison will now be left with just a few exploration tenements and little funds if it pays shareholders with cash received from the sale of key assets to Mitsubishi.

MELBOURNE, Jan 9 AAP - A junior resources company chaired by mining identity Miles Kennedy will re-start the stalled Fortnum gold project in Western Australia, after agreeing to buy it for $35 million.

Resource and Investment will pay cash and shares to acquire Fortnum and a nearly 1800 square kilometre tenement package in WA’s mid-west from Cayman Island hedge fund BlueCrest.

Thee tenements in the Bryah-Padbury basin - north-west of Meekatharra - are near Sandfire Resources’ high quality DeGrussa copper-gold deposit.

Mr Kennedy, chief executive of Lonrho Mining, is a board member of Sandfire.

He said Fortnum was ready to be restarted despite being shut down in May, 2007, when previous owner Gleneagle Gold went into receivership amid low gold prices.

The site includes a 1.2 million ounce resource with a mine life of at least 10 years and a processing plant.

Mr Kennedy said that would give Resource and Investment the opportunity to be a gold producer in less than 18 months and to consolidate a world-class exploration portfolio.

“The nice thing about this acquisition is that the plant is there, there’s a 100-man camp complete with swimming pool, airstrip, water licences and all the licences in place,” he told AAP.

“It will be a two-pronged attack, to get the plant running and producing 50,000 ounces a year from the known gold deposits.

“And equally exciting for us is the very large land package taking us to over 2000sq km (including existing land owned by the company).”

When Gleneagle went into receivership, gold prices were as low as $400 to $600 per ounce, with production costs of about $800 per ounce.

If prices stayed near current levels of above $1600 - after climbing above $1800 in 2011 - the company would post a $35 million profit in its first year of production, paying for the acquisition, Mr Kennedy said.

The company hopes to uncover more gold deposits at 100 existing drill holes, along with copper in the region.

The company’s shares fell four cents to 60 cents on Monday.

Junior miner picks up gold play for $35m



SANTIAGO, Jan 2 AFP - Chilean state mining firm Codelco said Monday it was exercising its option to buy a 49 per cent stake in a copper mining venture held by Anglo American in the latest twist of a long legal battle.

Less than two weeks after the London-based firm filed a breach of contract suit against Codelco, the Chilean group -- the world’s top copper producer -- said it had filed documents with market regulators to exercise the purchase option based on a 1978 contract between the two firms.

It said the British-South African Anglo American group refused to provide enough information for a final price, and that consequently it set the price at about $US6 billion ($A5.94 billion) for the unit known as Anglo American Sur.

Codelco exercises Anglo American option

Codelco, which announced plans for the purchase in October, has said it would finance it under a deal with Japanese trading house Mitsui.

The legal dispute heated up when Anglo American announced it had sold a 24.5 per cent stake in its Chilean copper activities to Japan’s Mitsubishi Corporation for $US5.39 billion.

Codelco swiftly filed suit in a bid to guarantee its right to purchase a full 49 per cent share of Anglo American Sur (AAS), after the sale to Mitsubishi presumably reduced the stake available.

Anglo American countered on December 22 with a breach of contract suit, saying Codelco had prematurely sought to use its option and prevented the British-based firm from exercising its contractual right to sell to Mitsubishi.

On Monday, Anglo American reiterated in a statement that “it was under no obligation to sell any of AAS shares to Codelco”.

“In line with Chilean legislation and since Codelco did not honour the contract, Codelco does not have the right to exercise its purchase option with respect to Anglo American Sur and, therefore, any claim to exercise this option is null and void,” the statement said.

Anglo American again stressed that it was “open to working with Codelco to find a trade deal in the interest of shareholders of the two companies”.

But analysts cited by Chilean media said that given the lack of agreement, a protracted legal battle could be expected.

“On average, five years for this type of cases,” said Antonio Gaspar, a professor of commercial law at Diego Portales University in Santiago.

According to the 1978 contract, Codelco has the option every three years to buy up to 49 per cent of AAS -- and the Chilean mining giant in October announced plans to do that in January 2012.

The deal would give Codelco control of the operations which include the copper deposits known as Los Broncos and El Soldado, as well as the Chagres smelting facility and exploration projects in Chile.

The unit, which last year produced about 260,000 tons of copper, would be integrated in Codelco’s Andina division, and boost the output for the company which produces about 11 per cent of the world’s copper.

Anglo American is among the world’s largest mining companies, listed on the London and Johannesburg stock exchanges.



w w w . a u r o r a e t l u n a . c o m

Australia’s largest range of gold and silver bullion coins

at very competitive prices

Premier distributor of the stunning Southern

Cross silver bars

BRISBANE, Dec 29 AAP - Those who oppose the reopening of a coal mine west of Brisbane are flying in the face of reality, the peak body for the mining industry says.

Campaigners led by Flight Centre managing director Graham Turner have launched a Supreme Court bid to halt plans by Singapore-based OGL Resources Limited to reopen the Ebenezer Coal Mine near Rosewood, west of Ipswich, next year.

Queensland Resources Council chief executive Michael Roche says mining plays a significant part in the history of Ipswich and gives its economy an important boost.

“Latest data compiled by the QRC shows that in 2010-11 some 2,600 people in the Ipswich local government area (LGA) relied on the mining industry, directly and indirectly, for their jobs,” Mr Roche said in a statement.

“...Subject to continued commercial viability and compliance with the highest standards of environmental performance, there is no reason why mining cannot continue to provide an important injection into the Ipswich economy.”

It comes as the Mining Minister Stirling Hinchliffe reiterated the government’s assurance that approval has not been given

Qld coal opponents ‘out of touch’: minersto OGL Resources Limited to mine a further 9202ha of privately owned land in the area, known as the Bremer View Coal Project.

“This area has a mineral development licence which only allows low impact exploration and development activities until 2015,” Mr Hinchliffe said in a statement.

“This licence does not authorise any form of large-scale commercial mining.”

Mr Hinchliffe said the Ebenezer Coal Mine has been in “care and maintenance mode” since 2002 but has a current mining lease.

The Ipswich City Council supported the reopening of the mine, he said.

He confirmed his department had received a Supreme Court application to set aside its decision to renew the Ebenezer Coal Mine lease and said the correct legal processes would be followed.

“Any proposal to develop a new coal mine is subject to a comprehensive assessment of potential environmental impacts before its considered for approval, along with extensive opportunity for community consultation,” he said.



SYDNEY, Jan 11 AAP - South African miner Exxaro is set to buy locally listed African Iron, a prospective iron ore miner in the Republic of Congo, for up to $338 million.

Exxaro has the support of at least one major African Iron shareholder and the takeover target’s board after lodging a friendly, off-market takeover bid.

The success of the offer now lies with other major shareholders, including fellow Republic of Congo iron ore developer Equatorial Resources.

Exxaro and African Iron have signed an implementation agreement for the takeover, which the South African miner said would help to meet its ambition of developing a major iron ore project in the rapidly emerging west African region.

Exxaro has offered 51 cents for each African Iron share, but will pay 57 cents per share, if it is able to acquire 75 per cent or more of the total shares.

The higher price values African Iron at about $338 million.

The news boosted African Iron shares by 40 per cent, up 16 cents to 56 cents

on the Australian stock exchange on Wednesday.

Cape Lambert Resources, which holds 20 per cent of African Iron’s shares, has signed a pre-bid acceptance agreement with Exxaro.

Foster Stockbroking analysts said they were optimistic Exxaro would take at least a 50 per cent stake in African Iron.

Reaching the 75 per cent level would be contingent on the acceptance by Equatorial Resources, which holds a 19 per cent stake in African Iron, and institutional shareholders Blackrock and Och Ziff Capital Management Group, which both hold 14 per cent, they said.

Equatorial Resources has welcomed Exxaro’s interest in the region, but has not indicated if it would be willing to accept the offer.

Exxaro’s offer will remain open until February 14.

The Foreign Investment Review Board has already approved the deal, and South African regulatory approvals have also been received.

Takeover offer boosts African Iron shares

CANBERRA, Jan 2 AAP - A coal seam gas (CSG) operator denies claims contaminated water has leaked from a dam at a project in northwest NSW, killing various trees.

Narrabri resident Tony Pickard says he discovered dead ironbark, cypress and bull oak trees while driving through the Bibblewindi State Forest, about 40km southwest of Narrabri, on Friday.

He believes CSG exploration in the area by Santos has contaminated a dam in the forest.

“Based on what I’ve seen at other sites, it’s definitely coal seam gas water that has leaked out of the system, and just spilt into the environment,” he told AAP.

Santos spokesman Sam Crafter blames rain for the excess water, which he says has been blackened by eucalyptus leaves.

“It (the rainwater) gathers in an area in the forest, it doesn’t move easily,” he told AAP.

He said regular maintenance work was being conducted at one of the company’s dams in the area but there had been “no release of water or any leaks at any of our sites”.

Mr Pickard rejected Mr Crafter’s comments, saying he didn’t believe there had been heavy rainfall in the area, and that he had seen black stains “on virgin soil” in areas where there were no trees.

“The rain stopped just before Christmas, he said.

“The area, while spongy, was reasonably dry.”

He said trees such as those that had died didn’t typically grow where rainfall was heavy.

A spokeswoman from the NSW Environment Protection Authority said the matter was being investigated.

Coal Seam Gas miner denies poisoning trees



MELBOURNE, Jan 8 AAP - Rio Tinto will compulsorily acquire the remaining shares in Canadian uranium company Hathor Exploration after increasing its stake to nearly 94 per cent.

The global mining giant had extended its $C654 million ($A623 million) offer for Hathor to last Friday, January 6, to allow remaining shareholders to sell their shares.

Rio Tinto is offering $C4.70 ($4.48) a share to take over Hathor and as of December 22 - when the offer was extended - owned 87.26 per cent of the outstanding Hathor common shares.

Hathor is based near western Canada’s Athabasca Basin, supplying about a fifth of the world’s uranium.

Hathor’s board of directors recommended the bid after Rio Tinto trumped North American-focused uranium miner Cameco’s $C4.50-a-share bid.

Rio said in a statement on the weekend it intended to acquire all outstanding Hathor common shares through a compulsory acquisition under the Canada Business Corporations Act.

The company said it had now taken up 119.5 million Hathor common shares, representing 93.76 per cent of Hathor shares.

Rio Tinto employs more than 13,000 people in Canada in alumina, aluminium, iron ore, diamond and titanium dioxide operations.

It declared force majeure - freedom from contractual liability - on aluminium output from two of its smelters in Canada last week following a union lockout that has left it operating at one-third capacity.

RIO TINTO Expands Uranium HoldingsMELBOURNE, Jan 11 AAP - A Chinese state-owned power company

has moved closer to a possible takeover of Australia’s Extract Resources after getting Namibian Government approval.

Extract says approval had been given to Taurus Mineral Ltd taking a controlling interest in Extract.

Taurus is owned by Chinese state-owned Guangdong Nuclear Corp (CGNPC) Uranium Resources Co. Ltd and the China-Africa Development Fund (CADFund).

Extract’s Husab uranium deposits in Namibia are reputedly the fourth-largest in the world and the mine could be among the top three.

The Namibian Government regards the proposed mine as crucial, having said previously it would contribute five per cent to Namibia’s gross domestic product and 20 per cent to exports, with a mining life of 20 years.

It is interested in buying 10 per cent stakes in the mine and the Chinese company that would control it.

CGNPC has been targetting Extract through a STG632 million ($A955.19 million) bid for UK-based nuclear company Kalahari Minerals.

Kalahari is Extract’s main shareholder with a 43 per cent stake and the Chinese takeover of Extract is dependent on a takeover of Kalahari first.

Australia’s corporate watchdog, ASIC, said last month that CGNPC had to launch a $2.2 billion takeover ($8.65 per share) for Extract if it successfully acquired Kalahari under Australian laws.

Shares in Extract were flat on Wednesday - while the overall market had gained almost one per cent - trading at $8.49 by the close of trade.

China wants new sources of uranium to help shore up resource security for the country, which is the world’s largest energy user and a keen user of nuclear power.

The bid has been labelled the boldest display of support for the sector since the Japanese nuclear disaster in March.

CGNPC would have to bid for Extract in less than four weeks if it acquires more than 50 per cent of Kalahari, Extract said in a statement on Wednesday.

Extract has suggested there were alternatives to CGNPC’s takeover.“Extract’s independent directors are continuing to review all available

opportunities to maximise shareholder value, and intend to make a recommendation in relation to the proposed Extract Offer if and when such an offer is made,” the company said in a statement on Wednesday.

Rio Tinto operates the neighbouring Rossing uranium mine and owns 14 per cent of Extract, making it the second-biggest shareholder.

China firm close to

bidding for Extract


m m I n I n G & I n v E S T m E n T | Mining News

SYDNEY, Jan 4 AAP - Coal explorer Bandanna Energy is hoping to get funding to develop its mines in Queensland’s Bowen Basin as it pursues discussions with a number of third parties.

The company said it terminated a formal review that was being undertaken with investment bank UBS in 2011.

The Brisbane-based company said on Wednesday that interest by a number of third parties, “particularly in joint venture participation in key Bowen Basin projects”, will now continue via discussions outside the “formal, competitive process”.

“... The outcome of these discussions is expected to provide funding solutions for major project capital expenditure,” the company said in a statement.

Bandanna Energy also said that, following the upgrade of the resources for the Springton domain within the Springsure Creek tenement in late December, it now had a Joint Ore Reserves Committee (JORC) total resource inventory of 1,620.5 million tonnes.

This included 1,031.5 million tonnes of resources identified within its 100 per cent-owned Bowen Basin tenements and a net 589 million tonnes, representing 50 per cent share of total resources identified within tenements of the South Galilee Coal Project.

“This inventory positions Bandanna as one of the largest thermal coal explorers/developers listed on the ASX.

“With a four Mtpa port allocation in Stage 1 of the Wiggins Island Coal Export Terminal in Gladstone, Bandanna has a clear pathway to significant coal production commencing in 2014.”

Bandanna added that mining engineer John Pegler had joined the company’s board on January 1.

Bandanna seeking partners for coal mines

ADELAIDE, Jan 3 AAP - A new iron ore mine is to begin production within three months on South Australia’s Eyre Peninsula, creating 150 jobs.

IronClad Mining has received final approval for its Wilcherry Hill project and key infrastructure and mining contracts are set to be signed.

The company on Tuesday said it expected infrastructure work at the site to start later this month with the first ore production expected in the March quarter this year.

The first exports to the company’s Chinese customers will begin in the June quarter.

“We are focusing on the employment of local people in order to enhance the project’s connection with the area’s community while at the same time building a reliable workforce,” executive

NEW IRON, NEW JOBS for South Australia

chairman Ian Finch said.“As the second junior mining

company to move into iron ore production in SA in recent times and the first from the state’s Eyre Peninsula region, our contracting strategy is working well for IronClad and for South Australia’s expanding resources industry and the flow-on effect from that upsurge.

“Years of planning and hard work are now only weeks away from coming to fruition for our company.”

The Wilcherry Hill project is a joint venture between IronClad and Trafford Resources Ltd.

Ore production in the first year of operation is expected to be one million tonnes, rising to two million the following year.



SIGNATURE METALS LTD (SBL): Signature Metals Ltd (SBL) and LionGold Corp Ltd (LIGO) have entered into a Bid Implementation Agreement under which LIGO will make an off-market offer for all the shares in the company. Consideration is one LIGO share for every 34 SBL shares held, fractions will be rounded up. The offer is not be subject to minimum acceptance condition. SBL Directors unanimously recommend shareholders accept the offer in the absence of a better offer and intend to do likewise in regard to their own shareholdings. LIGO is now entitled to 5.053% of the voting power in SBL. The offer remains open until 17 February 2012.

MSF SUGAR LTD (MSF): Mitr Siam International P/L (Mitr) is offering for all the shares in the company. Consideration is $4.45 cash per share. Conditional on 50.1% share acceptance, approvals from regulatory authorities including Bank of Thailand. FIRB approval has been received. MSF Directors unanimously recommend shareholders accept the offer in the absence of a better offer and intend to do the same in regard to their own shareholdings. Independent advice concludes the offer is fair and reasonable. The offer remains open until 10 February 2012.

LAGUNA RESOURCES NL (LRC): Kingsgate Consolidated Ltd (KCN) is offering for all the shares in the company. Consideration is $3.75 cash per share. Independent Directors unanimously recommend shareholders accept the offer in the absence of a better offer. KCN the largest shareholder is now entitled to 95.83% of voting power in LRC. Independent Directors do not hold shares in LRC, therefore will not be accepting the offer. Independent advice has concluded the offer is fair and reasonable. The offer is unconditional and remains open till 13 January 2012.

HASTINGS DIVERSIFIED UTILITIES LTD (HDF): APT Pipelines Ltd a wholly owned subsidiary of APA Group (APA) is offering for all the securities in HDF. Consideration is 0.326 APA securities plus $0.50 cash per HDF security. Conditional on 90% share acceptance, FIRB, ACCC and various regulatory approvals. HDF Directors recommend securityholders reject the offer. APA is now entitled to 20.70% of the voting power in HDF.

CONTANGO CAPITAL PARTNERS LTD (CCQ): Contango Microcap Ltd (CTN) are offering for all the shares in the company not yet owned. Consideration is $0.90 cash per share. Shareholders who accept the offer and are entitled to receive the final dividend will also receive same without any reduction to the offer price, provided the final dividend does not exceed $0.03 cents per share. Conditional on 50.1% minimum share acceptance. Independent Directors recommend shareholders accept the offer in the absence of a better offer. Independent advice concludes the offer is fair and reasonable. CTN is now entitled to 71.10% of the voting power in CCQ. The offer remains open until 20 January 2012.

takeoVeRSLIVING AND LEISURE AUSTRALIA GROUP(LLA): Merlin Entertainments Australia Pty Ltd (Merlin) is offering for all the stapled securities in the company. Consideration is 5.14 cents per LLA stapled security held. Conditional on 90% share acceptance, obtaining consents to the change of control in regard to the Melbourne Aquarium, Mooloolaba Underwater World and Busan Aquarium. FIRB approval has been received. LLA Directors unanimously recommend securityholders accept the offer in the absence of a better offer and intend to do the same in regard to their own securityholdings. Merlin has entered into a pre-bid agreement with Arctic LES Ireland Ltd (Arctic), LLA’s largest securityholder, who holds 48.86% of Stapled Securities, to sell to Merlin 19.99% of the Stapled Securities on the terms set out in the Security and Deferred Settlement Agreement between Merlin and Arctic. Arctic intends to accept the offer on or before 31 January 2012 subject to there being no better offer at that time. Triumph II Investments Ireland Ltd who holds 19.3% of the Stapled Securities, intends to accept the offer before (a) the offer becoming free of the conditions relating to FIRB approval and third party approvals, or (b) Merlin receiving acceptances under the offer for at least 51% of the Stapled Securities on issue, subject to there being no higher offer at that time. Morgan Stanley Australia Securities Ltd (Morgan Stanley) who holds 538 million Stapled Securities with a relevant interest of 19.75%, intends to accept the offer after 31 January 2012, or the date which is one business day after the earlier of (a) the offer becomes free of the conditions relating to FIRB approval and third party approvals, or (b) the Bidder has received acceptances of at least 51% of LLA. Independent advice has concluded the offer is fair and reasonable to security holders. The offer will remain open until 30 March 2012.

ANVIL MINING LTD (AVM): Minmetals Resources Ltd (Minmetals) is offering for all the shares in the company. Consideration is C$8.00 per share. Conditional on Minmetals and affiliates owning at least 66.666% of AVM on a fully diluted basis, Minmetals shareholder approval, FIRB approval, 90% share acceptance and ACCC approval. Minmetals has entered into a lockup agreement with AVM Directors and AVM’s largest shareholder who hold 40.1% of AVM on a fully diluted basis excluding money options. AVM Directors conclude the offer is in the best interest of shareholders and unanimously recommend shareholders accept the offer. The offer remains open till 9 January 2012.


d I R E c T o R y | Contacts

ABC Bullion Australian Bullion Company (NSW Pty Ltd) Suite 30 Level 6, 88 Pitt Street Sydney NSW 2000Call (02) 9231 4511 www.abcbullion.com.au

Ainslie Bullion Company289 Queen St, Brisbane, QLD 4000iaCall 1800 819 474 / +61 7 3221 0500www.ainsliebullion.com.au

Aliom Financial MarketsLevel 4, 131 York StSydney 2000Call 02 8246 8500

Argyle Pink Diamonds2 Kings Park RoadWest Perth, WA, 6005Call +61 8 9482 1052

Art Equity16-20 Barrack StreetSydney 2000Call (02) 9262 6660www.artequity.com.au

Autore PearlsSydney Head OfficeLevel 5, 125 York Street, Sydney NSW 2000 AUSTRALIAT: +61 2 9285 2222 F: +61 2 9285 2255www.pearlautore.com.au

The Blender Gallery16 Elizabeth StreetPaddington 2021Call (02) 9380 7080www.blender.com.au

Brisbane Vintage WatchesShop 23 Ground Level Brisbane Arcade160 Queen StreetBrisbane Qld 4000Call +61 7 3210 6722 www.brisbanevintagewatches.com

BullionDealsPO Box 36,Point Lookout, North Stradbroke IslandQLD, 4183Call 0458 912 570www.bulliondeals.com.au

Calleija JewellersBrisbaneShop 102 Seaworld DriveMain Beach QLDCall +617 5528366

SydneyThe Westin SydneyNumber 1 Martin Place SydneyCall +612 9233 6661

LondonShop 14 The Royal Arcade28 Old Bond StreetMayfair LondonCall +44(0)20 7499 8490www.calleija.com.au

CoinworksPO Box 1060HawksburnVictoria Australia 3142Ph +61 3 9642 3133www.coinworks.com.au

Fat ProphetsLevel 322 Market Street Sydney NSW 2000 Call 1 300 88 11 77 www.fatprophets.com.au

Contact Directory


Contacts | d I R E c T o R y

Generation OneGenerationOne is a movement for all Australians - Indigenous and non-Indigenous. It is a non-partisan movement and will listen to any and all contributions that can help break the poverty traps, in our generation.Ph 02 9310 2600www.generationone.org.au

Gold Bullion AustraliaBrisbane Office(Secure office - contact for appointment)Level 23 127 Creek StreetBrisbane Qld 4000Call 1300 754 602

Melbourne Office(Secure office - contact for appointment)HWT TowerLevel 23, 40 City RoadSouthgate, Vic 3006Call 1300 754 602

Sydney Office(Secure office - contact for appointment)Level 32, 1 Market StreetSydney NSW 2000Call 1300 754 602

Head OfficeShop 2 / 2713 Main PlaceBroadbeachGold Coast QLD 4218Call 1300 754 602www.goldbullionaustralia.com.au

Gold Company, TheSuite 1, Level 1, Piccadilly Tower, 133 Castlereagh Street Sydney NSW 2000Call 02 9020 5150 / National: 1300 506 707www.goldcompany.com.au

Gold De RoyaleSuite 103 192 Ann Street Brisbane, Queensland 4000Call 07 38305319www.goldderoyale.com.au

IG Markets LtdLevel 7, 417 St Kilda RoadMelbourne VIC 300 Call 1800 601 799 www.igmarkets.com.au

J Farren Price JewellersShop 2, St James Centre80 Castlereagh Street Sydney NSW 2000 Call (02) 9231 3299 www.jfarrenprice.com.au

L.G.Humphries & Sons. 149 Castlereagh St, Sydney AustraliaPh (02) 9267 7691www.lgh.net.au

Mont Blanc Boutiques Sydney75, Castlereagh StreetSydney, NSW 2000Ph: +61 2 9233 3927

115-117, King StreetSydney NSW 2000Ph: +61 2 9231 5671

Melbourne175-177, Collins Street,Melbourne, Vic, 3000.Ph: +61 3 9663 5077

BrisbaneShop 12, Queens Plaza,Edward St, Brisbane, Queensland 4000Ph: +61 7 3012 9150www.montblanc.com


d I R E c T o R y | Contacts

Noble NumismaticsSydneyGround Floor169 Macquarie StreetSydney NSW 2000Call +61 2 9223 4578

MelbourneLevel 7350 Collins StreetMelbourne VIC 3000Call +61 3 9600 0244www.noble.com.au

Perth Mint310 Hay Street East Perth WA 6004Bullion Bars & Coins Sales InquiriesCall 1300 201 112 / +61 8 9421 7428www.perthmint.com.au

Port Phillip Publishing Level 1, 10 Fitzroy Street,St. Kilda, VIC 3182,Australia Call 1300 78 29 11 www.portphillippublishing.com.au

Raphael JewellersShop 118, Gallery Level 2The Strand Arcade412 – 414 George Street Sydney 2000Ph: 02 9233 4843

SilverStackerswww.SilverStackers.com.au

SPOTMEXUnit 11, Level 3K1 Building16 Innovation ParkwayBirtinya QLD 4575Ph : 07 3375 7578

State Street Global Advisors Australia, LimitedLevel 17 420 George Street Sydney NSW 2000 Tel: +61 2 9240 7600

Southern Cross Bullionwww.southerncrossbullion.com.au

SymposiumLevel 9, 66 King StreetSydney, NSW 2000Call +61 2 9299 4350 www.symposium.net.au

Utopia2 Danks StreetWaterloo 2017Call (02) 9699 2900www.utopiaartsydney.com.au

Varoujan Jewellers70 Castlereagh StreetSydney 2000Ph: 02 9232 2328

Victoria & Albert AntiquesShop 17, The Strand Arcade 412 - 414 George St, Sydney NSW 2000Call (02) 9221 7198

Watch TraderLevel 8, 350 Collins Street, Melbourne, VIC, 3000Call 1800 60 20 71www.watchtrader.com.au

Feb/Mar 2012 AHA.Investor | 69 2011

/201

2 C

alen

dar

September

Resources Roadshow Sydney Tuesday 20th 5.30pm – 8.30pm Establishment

Resources Roadshow Melbourne Wednesday 21st 12.30pm – 2.30pm CQ Functions

October

Resources Roadshow Melbourne Monday 17th 12.30pm – 2.30pm CQ Functions


November

The Gold Symposium Sydney Mon 14th – Tues 15th 9.00am – 5.00pm Luna Park

Resources Roadshow Sydney Tuesday 22nd 5.30pm – 8.30pm Establishment

Resources Roadshow Melbourne Wednesday 23rd 12.30pm – 2.30pm CQ Functions

www.symposium.net.au • [email protected] • +61 2 9299 4350

2011

2012February


Resources Roadshow Melbourne Wednesday 15th 12.30pm– 2.30pm CQ Functions

March


Resources Roadshow Melbourne Wednesday 28th 12.30pm – 2.30pm CQ Functions

April

Resources Roadshow Melbourne Monday 23rd 12.30pm – 2.30pm CQ Functions


May

The Great Australian Outback Golf Challenge Broken Hill Sunday 20th 10.00am – 7.00pm Golf and Country Club

Resources and Energy Symposium Broken Hill Mon 21st – Wed 23rd 9.00am – 5.00pm Entertainment Centre

June



July


Resources Roadshow Melbourne Wednesday 25th 12.30pm – 2.30pm CQ Functions

August

Resources Roadshow Sydney Tuesday 21st 5.30pm – 8.30pm Establishment

Resources Roadshow Melbourne Wednesday 22nd 12.30pm – 2.30pm CQ Functions

September



MinExpo USA Mon 24th – Wed 26th 9.00am – 5.00pm Las Vegas Convention Centre

October

Resources Roadshow Sydney Tuesday 23rd 5.30pm – 8.30pm Establishment


November

The Gold Symposium Sydney Mon 12th – Tues 13th 9.00am – 5.00pm Luna Park



2011/2012 Events Calendar


AHA INVESTOR • Real Gold • Real Silver • Real Assets • Real Wealth

f I n A L w o R d

After a busy year it’s good to look back and try and find examples of how best to move

forward. We looked back a little further – to the 1997/98 Asian crisis. At the time, I had just long finished a stint in the Forex arm of a certain well-known retail bank – and was enjoying the view from the sidelines. Fascinating stuff at the time, the contrast to today’s response is stark and makes essential reading. From Tim Staermose, Chief Investment Strategist at Sovereign Man.

There is a delicious irony in the world of economic policy at the moment.

Back in 1997 and 1998 I had a ringside seat to the Asian financial crisis from my trading desk in Seoul. When everything collapsed, the policy prescriptions from the World Bank and IMF for Asia’s sick economies was to:1. HIKE interest rates,2. CUT government spending,3. Further deregulate, liberalize,

and open their economies to foreign investment to attract capital;

4. And let their zombie banks FAIL.Though, they experienced

brutal recessions after swallowing this tough medicine, the two countries which carried out these policies to the fullest extent: South Korea, and Indonesia, are today among the most successful and dynamic economies in Asia, and the WORLD.

Since emerging from recession in 2000, Indonesia has enjoyed more than a decade of fast,

uninterrupted economic growth. In fact, one emerging markets funds manager told me this week that Jakarta today is “far too modern” to interest him now. It has already “emerged.”

South Korea also emerged bigger, better, and stronger from the crisis 14 years ago. On my last trip there in late 2010 ahead of the G20 meeting in Seoul, I was astounded how far it had come since I’d last been there in 2003.

I remember having a chat with my cab driver and telling him it really looked to me as though Korea had reached “developed country status.” Becoming a “seon-jin-guk” as they call it in Korean was always one of the burning desires of Korean politicians, bureaucrats, business people, and ordinary citizens alike.

My cabbie was far too modest and said, “No. We still have a long way to go,” as he waved my visa card in front of a payment gadget mounted on his dashboard that instantly deducted the fare and had me on my way in about 5 seconds flat, without having to fumble around for change or sign anything.

South Korea today is the most wired country on the planet. So good are their technology companies, spearheaded by Samsung Electronics, they even have Apple running scared.

I recently retired my Blackberry. The replacement won’t be an iPhone. It’ll be Samsung’s Galaxy S2. All my friends who have them say they’re, “Way better.”

Bottom line — Indonesia and South Korea “reset” their systems

back in the late 1990s and have emerged stronger and more dynamic than ever.

The Asian crisis, back then was brought on by the same things that led to the current crisis in Europe and the US (and the one I believe is coming to China): Too much cheap money. Too much borrowing by people who couldn’t afford it, to buy non-productive assets. And an insanely leveraged banking system run amuck.

Today, the same Western policymakers whose advice got Indonesia and South Korea quickly back on the rails are giving the EXACT OPPOSITE prescriptions for their own economies.

They’ve CUT interest rates to near ZERO. Governments have SPENT trillions of borrowed money that they have no hope of ever repaying on ill-advised “stimulus.”

They’ve BAILED OUT nearly all the brain-dead banks, keeping them on life support in a coma. Protectionist rhetoric is building up, and more onerous regulations are being ushered in.

This is what Japan did after its 1980s bubble. And look at them now. They’re stuck in a time warp, and the Japanese economy remains in a funk.

It doesn’t take a genius to see that if they persist with their current approach, Europe and America are going to end up exactly like Japan. And places such as South Korea, and even Indonesia, are eventually going to leave them in the dust.

Mike WEditor & PublisherAHA Investor


Don’t let my voice be the only one.To find out what you can do to help, go to

www.generationone.org.au– Madeleine Madden

“Royalty and Eminence Comes with Gold”

www.goldderoyale.com.auSuite 103, 192 Ann Street, Brisbane, Queensland 4000, Australia

Tel: 07 38305319 • Fax: 07 30365787

AHA Investor Feb/March 2012

Documents

Transcript of AHA Investor Feb/March 2012