Platinum continued to trade tightly rangebound, staying inside $2050-2070 all day, and ending near the low end at $2055/oz., down $10. Overnight, platinum has slipped lower.

Silver’s decline was shorter and less pronounced than gold’s, as it bounced off of $17.90 an hour before New York opened and began to climb, eventually reaching $18.40 before easing slightly to close at $18.37/oz., up 28 cents. Overnight, silver has been flat.
(Click here for charts)

Once again platinum spun its wheels, but both gold and silver followed Tuesday’s gains with another strong day yesterday.

The usual suspects did their part yesterday, as oil pushed to new highs and the dollar continued to slide.

But perhaps labor issues played in. As the Hightower Report wrote: “July silver pushed above yesterday’s highs and was threatening the May 26th high of 18.375 by the end of the session. In addition to finding support from outside market forces like the weak dollar and soaring commodity prices which make silver an attractive alternative investment, the growing number of mines going out on strike also lent support.

Reports that workers at two more mines in Peru threatened to go out on strike lent support as well. While the latest struck mines primarily produce copper, zinc and gold, the strike action in general appears to be spreading across all types of mines, which implies silver could be affected as well. Peru is the world largest producer of silver.”

Of gold, Kitco’s Jon Nadler wrote that, “Another stab at the $947 to $950 zone could be in the cards, barring a selling bout in oil, or the opposite in the dollar.”

Nadler added that, “Bullion remains fairly well-supported near the $920 and $930 marks at the moment, as participants factor in a small ECB rate hike … and little in the way of a Fed response to inflationary pressures in the near term.”

Meanwhile, platinum and palladium have been struggling, especially in the wake of the plunge in U.S. auto sales in June.

“The noble metal cannot ignore the scary numbers coming from auto dealer lots in the U.S. — the worst in a decade,” Nadler wrote. “Every car not sold could eventually result in a car not produced and a few less grams of platinum, palladium, rhodium not taken from the market.”
Source: Gold, Silver Continue to Push Higher, Platinum Lags on Depressed Auto Sales

This week it was announced that their Madagascan assets are being taken over at $4 a share – for which you’ll get cash – while their other Southern African assets are being rolled into a new company, for which you’ll get a share.

If you bought, and I hope some of you did, you can treat yourself to a new frock…

Pan African’s story shows the enormous possibilities that lie in the junior mining sector, even in this bear market. But the takeover, which came from Asia Thai Mining, has wider implications, which I’ll come to in a moment. You can’t argue with a quick profit, but, given the breadth and depth of Pan African’s assets, I think Asia Thai have got themselves a bargain.

Another exciting opportunity – for the whole mining sector

Meanwhile, Jinshan (CA:JIN), another junior mining company I have been recommending (and which I own shares in myself), has had some exciting news, which also has enormous wider ramifications.

Jinshan is a Canada-listed gold producer in China. After several years of exploration and development, its mine finally went into production last summer. By the end of this year it should be producing at a rate of just over 100,000 ounces a year at a cash cost of between $350 and $400 per ounce. It’s a very nice little junior mining story, thank you very much.

Then last week it was announced that China’s largest state-owned gold mining company, the imaginatively-named China Gold, had bought a 42% position in the company.

Why have the Chinese done this? And what is the significance for Jinshan?

Firstly, it gives Jinshan access to a great deal of money – the same money, ultimately, that made the 12% purchase of Rio and now is building a stake in BP – and Jinshan will be making serious acquisitions. Previously these would have been limited by Jinshan’s $450m market cap. Not anymore. Deals can be done for cash now, meaning less dilution for shareholders, and for much larger companies than would previously have been possible.

If any such acquisition happens – and I hear they want to have made one by autumn – surely a listing in Hong Kong will be on the agenda, which will significantly raise the company’s profile.

Are the Chinese trying to create a new reserve currency?

The Chinese, on the other hand, want access to Jinshan (for that, read Canadian) mining expertise. China is the largest gold producer in the world. The country has hundreds of mines, but, astonishingly, Jinshan’s modest 100,000-150,000 ounce producer is one of the biggest.

In other words, despite being the world’s largest producer, China’s mines are underexplored and underdeveloped. Jinshan president Jay Chmelauskas reckons they could be operating at as little as 10% of their potential. Jinshan head of exploration, Keith Patterson, feels that China has as much exploration opportunity as anywhere. This is a man who not so long ago went out into Argentina with a pick and a notepad and helped make the Navidad discovery, now regarded as the biggest undeveloped silver deposit in the world.

China is a great sponge. The Chinese will hoping that they can learn from Jinshan. They will be refining, if you’ll forgive the pun, their gold mining expertise. For Jinshan it means they will gain access to many of China’s existing gold mines and no doubt acquire some of the better ones.

This is yet more evidence, if you needed it, of China’s unquenched thirst for resources. But Jinshan is a gold miner. Why would the Chinese want gold? Do the Chinese govt all want new earrings? What could possibly interest the Chinese about gold mining?

Richard Russell, the veteran US newsletter writer, observed a few weeks back that China is the largest gold producer in the world and the largest holder of dollars. As the dollar implodes, could it be, he suggested, that the Chinese have designs on global reserve currency status? If so, they will have the dollars and the gold to back it. This Jinshan deal might be further evidence of Chinese monetary aspiration.Can you imagine our glorious Labour government doing anything similar?

The good times are ahead for junior miners

The deal also has ramifications for the junior mining sector. Admittedly, the Chinese are buying a stake in a Chinese gold mine. But all the same, Jinshan is – or was – a junior. This is a first, and it could open the floodgates. Don’t forget the Asian takeover of Pan African. It’s possible that we are seeing the early stages of a wave of cash-rich Asian takovers of undervalued junior miners. The junior mining sector is coming alive, my friends – enjoy the ride.

You are not going to see the fireworks you saw with Pan African. But Jinshan is in a nice steady uptrend. It is now making the transition from junior to significant player, and I would expect to see the stock some 50% higher within 12 months, possibly more. I recommended it as a buy below $2.50 and I maintain that recommendation. If you’re impatient or you think it won’t make it back down to $2.50, you may want to start accumulating here. I’ll leave that to you. But if you believe in gold and you believe in China, you should own some Jinshan.

Source: http://www.moneyweek.com/file/45537/why-you-should-buy-this-chinese-gold-miner.html

–Take the Mexican stand off between BHP and Rio Tinto. BHP feels its exposure to coking coal, oil, and gas gives it an earnings advantage over Rio. Not so!, says Rio. Rio says its exposure to iron ore, copper, and aluminium means it will grow is earnings more and sooner than BHP.

–Energy earnings versus metals earnings. It kind of reminds you of the Priority Dispute between Newton and Leibniz over who invented the calculus, doesn’t it? Chicken, egg. Egg, chicken. Cluck.

–Aluminium is an energy-intensive metal, and therefore more price sensitive in an energy-scarce world. This is to Rio’s advantage, the company reckons. “The price for aluminium now has a new base,” Rio’s chief economist Vivek Tulpule told investors in Melbourne this week.

–”Margins for existing aluminium producers who have cheap energy, their own bauxite, and who aren’t exposed to the Chinese currency, go up. This is a phenomenon that people have only started to clue on to very recently.”

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–Tulpule also said that, “Though Chinese aluminium supply had traditionally risen in tandem with demand, keeping a lid on prices, soaring energy costs in China and rising bauxite costs had made Chinese producers the most expensive in the world.”

–In gold, the mantle of lowest-cost producer has always been coveted. In resource, the mantle of lowest-energy-intensity may be the key to figuring out which resources will go up the fastest. Energy-sensitive resources will see producers get hit hard by rising costs. This will cause some to close up shop, reducing production and supply. Prices will rise.

–”An energy shortage in Chile may do for copper what cuts in electricity supplies did for platinum in South Africa — spark a record-setting rally in prices,” according to Heather Walsh at Bloomberg. “Chile may be forced to limit power use for the first time since 1999 because a drought has reduced water levels at hydroelectric reservoirs.”

–Proximity and possession of energy may even better than access to cheap capital in coming years. Energy is a kind of capital, isn’t it? If that’s the case, Australia has a huge capital base, with its reserves of coal, natural gas, and uranium.

–Thermal coal prices are set to double from US$55 to US$125. That’s based on the agreement between Japan’s Chubu electric power and Xstrata which should be come the benchmark for 2000-09 contract prices. Spot prices for thermal coal have tripled in the last year. Spot coking coal (steel marking) prices have quadrupled in the last 12 months, and in the last two months they’ve doubled. Notice a pattern?

–”The value of announced cross-border acquisitions by China so far this calendar year is now US$24.5 billion from 56 deals according to Thomson Financial-already almost equaling the record of $US29.8 billion for all of 2007,” according to Colleen Ryan in the Financial Review. As usual in the financial world, the easiest way to find where asset prices are headed is to follow the money.

–”China’s acquisitions of foreign targets reached US$15 billion in the mining sector-the most active sector, largely comprising companies engaged in metals, mining, and chemicals-rising from just US$243 million in the same period last year,” Ryan writes. Are you listening BHP?

–While the great strategic game for control over Australia’s tangible resource wealth plays out here, a tawdry game of “hide the garbage assets” continues to play out in New York. “One look at the Goldman Sachs’ numbers Wednesday should tell you the credit crunch is far from over,” reports Liz Moyer at Forbes.

–”Despite the Federal Reserve’s dramatic efforts to shake loose the financial system, banks still can’t come up with accurate prices for hundreds of billions of dollars’ worth of mortgage securities, corporate loans and other assets.”

– These assets that can’t be traded and which no one wants to buy are called Level Three assets, named for the part of the balance sheet on which they reside. The banks have stuck them there the way some people might stick a crazy Aunt in the attic to avoid being embarrassed in front of the neighbours. Shut up Aunt Tilda!

–There are a lot of Aunts in the attic. “Level 3 assets now make up 13% of the $771 billion of assets Goldman holds at fair value, according to regulatory filings. Of the $96 billion, Goldman is on the hook itself for $82 billion, and that ‘economic exposure’ is up 50% from the fourth quarter.” And it’s not just Goldman.

–”The increases from the fourth quarter in Level 3 exposures weren’t as stark at Morgan Stanley or at Lehman Brothers. Morgan Stanley had $78 billion of Level 3 assets, or 17% of its assets held at fair value, up 6% from last November. Lehman had $42.5 billion in Level 3 assets, 14% of assets held at fair value, up 1% from November. The three investment banks are the first of a series of banks to file their quarterly reports detailing Level 3 exposures. The total is only expected to rise.”