tea leaves... seawould be ironic... and a final blow to the wallnuts... to see this bought out at much higher prices so soon after getting canned myself in the spike down... the tea leaves must be read here soon... how long does this last? this many ounces in Canada? what majors look at the economics of projexts now and in comparison going forward when they see things as they are now in places like Tanzania? Then you look at average ounce in ground valuations for SEA... and you have to shake your head... this will likely be my last post here...
July 27 (Reuters) - Tanzania, Africa's fourth largest gold producer, has told mining companies operating for more than five years to start paying a corporate tax of 30 percent, citing rising prices of precious metals at the world market.
Tanzania's gold export earnings rose 31 percent last year to $1.879 billion from $1.436 billion a year before on higher world prices for the commodity, Sospeter Muhongo, energy and minerals minister, told parliament on Friday.
The minister said the government wants to earn higher revenues from mining companies due to the rising gold price and added the government had ordered audits of all large-scale gold mines in the country to ensure they started paying corporate taxes after recovering their costs of production.
"I am instructing all mining companies that have been in operation for more than five years to start paying corporate tax without any excuses," he said.
"If they claim they are still making losses and can't contribute to the national economy through taxes, they should shut down their mines and leave because minerals do not rot."
Major gold mining companies in Tanzania include African Barrick Gold Plc, which has four gold-producing mines, AngloGold Ashanti Ltd and Resolute Mining Ltd.
He did not say which of these mines were affected, but said Geita Gold Mine owned by AngloGold Ashanti and the Golden Pride mine owned by Resolute had already paid a total of 228.5 billion shillings in corporate taxes.
He said Tanzania was also evaluating 11 bids from investors for a stake in the state-run Buhemba gold mine. The government regained ownership of the mine this year after reversing its 2005 privatisation to a local company amid allegations of graft in the previous sale of the mine.
It is much smaller than mines run by the big companies.
The country has also invited bids for a joint venture project to develop a state-run coal mine with 35.5 million tonnes of reserves, the country's energy and minerals minister said Friday.
The government said the project would also involve construction of a 200-megawatt coal-fired power plant at a cost of $400 million.
"By June 2012, the State Mining Corp received bids from 16 foreign and local companies to enter into joint venture to develop this project," Muhongo said.
He said Tanzania has 136.5 million pounds of uranium oxide, with Australia-based miner Mantra Resources given a go-ahead to build a $450 uranium mine at a world heritage park after the project received approval from UNESCO, the U.N. cultural agency. (Editing by George Obulutsa and Jeffrey Benkoe)
I. Gold valuation update for July – Avg $38/oz ($34 June and $47 Dec/11)
Even as gold (again) broke through $1600 this week, we have seen only marginal improvement in depressed junior gold valuations. This is a direct result of broad-based risk aversion that we have seen since March 2011, in smaller, high-risk equities.
There is another problem affecting these projects, and it goes beyond the frustration of trying to finance in this economy - many of the major gold producers are running into significant operating and capital cost problems.
Just this week gold mining giant Barrick (TSX: T.ABX, Stock Forum) released financials and it is clear they bit off more than they could chew in South America. Its Pascua-Lama project in the Andes Mountains is expected to cost $8 billion (50% more than budgeted). This is not only a massive cost over-run, but in Argentina and Chile where political and country risk are very high.
Barrick stated that they are shifting their strategy away from a focus on growing gold production to improving the rate of return for shareholders. This will help the gold price as it improves the supply/demand fundamentals, but it highlights the problems faced on “many” gold exploration projects – for majors and juniors alike.
Typically the juniors could also depend upon the blue sky potential of a merger or takeover by a major. Right now those are few and far between. Because of this, the blue sky premiums that many of these companies would command in the past, are just not there.
Certain projects will command a higher valuation if the economics are strong - higher grade, shallow, and have low (realistic) capital costs. Without this companies are really struggling with their valuations. Some mining promoters are also able to create a story that attracts momentum traders, but that is typically short lived.
Right now capital and operating costs are the Red Flags of the industry. If there is a hint that they will be high, then institutional money is reluctant to invest, and big banks even more so.
You can clearly see this in the tables below with companies like Exeter (TSX: T.XRC, Stock Forum). Not only do they have over $60 million in the bank but a massive base and precious metals project in South America. In the valuation I give them NO credit for the other metals and yet the gold portion carries a valuation of only $2 per gold ounce!
It is very unfortunate to see this but investors feel the deposit will never be developed and must assume no one will ever have an interest in buying or merging with them. This may not be a realistic assumption, but until the market pays attention, it is deemed worthless. A terrible situation if you are XRC shareholders or management.
The tables contain many very attractive investment opportunities if you have the patience. One in particular that stands out is Victoria Gold (TSX: V.VIT, Stock Forum; 28 cents) but there are many if you do your research and focus on balance sheets, grades and depth.