While the details of the conference were in danger of being overlooked in the hubbub surrounding the unwelcome and unexpected attendance of Zimbabwe’s President Robert Mugabe, some aid groups called for an African ‘green revolution’, while UN Secretary-General Ban Ki-moon argued that food production would have to grow by 50% by 2030 to stave off starvation. Hungry people, he warned, are angry people – a redundant observation, perhaps, given the doubling in food prices this past year has already seen riots from Buenos Aires to Manila.

There are some forces driving the current food crisis that this week’s UN food summit can’t tackle, says The Guardian, be it terrible harvests or rising demand from China and India. However, “there is one measure ministers might take that could have a real and rapid impact: call a go-slow on biofuels”. According to the International Monetary Fund, biofuels have been responsible for 20%-30% of the rise in food prices.

And the Secretary General of the UN’s Food and Agriculture Organisation, Jacques Diouf, pulled no punches in denouncing America’s policy of diverting 100 million tonnes of cereals from human consumption “to satisfy a thirst for fuel for vehicles.”

Be that as it may, biofuels “have got too much attention”, says Bronwen Maddox in The Times, and the World Bank’s Robert Zoellick “rightly called for the issue not to dominate the summit”. Indeed, “a cocktail of factors – low stocks and a weak dollar, soaring energy prices, and “a hunger for richer foods” have also contributed to the current crisis, says the BBC’s Stephanie Holmes.

Even so, “politicians in Europe and America should recognise that the subsidised growing of bio-fuels has been an error”, says The Daily Telegraph. “Yet the EU refuses to accept this is mistaken and has decided that 10% of all transport fuel should come from biofuels by 2020. The subsidies should be repealed.”

Source: Biofuels Power Global Food Crisis Talks

Anybody with any sense has steered well clear of Zimbabwe for the last few years. But as the election process got underway it seemed that risk hungry investors were alive and well. Stocks in mining companies operating in Zimbabwe leapt in Johannesburg, London and Sydney as news that Robert Mugabe’s days as president could be numbered. The change in leadership hasn’t materialised, but let’s look at what happened.

Where there is risk, there are bargains…

In Sydney platinum producer Zimplats rose 11%, the biggest rise in a year! Around 68% of Zimplats is owned by South Africa’s Impala Platinum (Implats) and in Joburg, Implats too saw its share price jump 3.9%.

Then in the big smoke, LonZim, the investment fund established by mining group Lonrho, rose an impressive 14.85% to close at 116.50p. LonZim wants to raise around US$140 million on London’s Alternative Investment Market (AIM) to purchase assets in Zimbabwe in the event of an economic upturn. Rumour has it that the fund has already raised $65m.

Aquarius Platinum was another gainer — its share price leapt 8.1%. And take a look at this — London’s African Consolidated Resources soared 36% in just two days! The company felt compelled to put out a statement saying it had no idea why the share had moved so dramatically. That said, speculators that didn’t then take their profits will be kicking themselves now. The share price has fallen nearly a third since!

Still, enthusiasm for Zimbabwe is not exactly new. In October, asset management and investment company Imara used its newly launched Botswana-based Zimbabwe Fund to invest $13.5 million in 17 of the 82 companies listed on the Zimbabwe Stock Exchange. They must be chuffed — the Zimbabwean stock exchange’s mainstream industrial index has gained 600% this year!

And if you’ve been reading our diaries you’ll know that the Chinese too have been actively seeking mining opportunities in Zimbabwe. They are after gold, platinum and even uranium. The Chinese have already proved their interest is real. Last year they put money into Zimasco Consolidated Enterprises, Zimbabwe’s largest ferrochrome producer.

The nightmare isn’t over

So there is some truth in the saying where there is risk there are also bargains to be had. But there are big risks, not to mention ethical considerations; the nightmare is most certainly not over. Mugabe and his ruling Zanu-PF party were never going to relinquish power easily and second round of the presidential election now seems certain. Even Zimbabwe’s opposition leader, Morgan Tsvangirai, who is said to have won the election, has left the country. And some argue that investing in Zimbabwe will only prolong Mugabe’s reign of terror.

If stability does come to Zimbabwe, which is looking increasingly unlikely, the rewards will be long overdue. For sure, companies operating here have been hanging on by a thread. It has not exactly been an easy ride.

Take ACR, for example — Mugabe’s government cancelled its title to mine the rich Marange diamond fields in eastern Zimbabwe. Rio Tinto too saw the production of diamonds from its 78% owned Murowa operation fall 40% – given economic uncertainty the mining giant simply couldn’t justify the necessary US$20m investment to keep the operation going. And Murowa is Zimbabwe’s biggest producer of rough stones.

Indeed, countless mines (more than 100 since 1998) have had to close because of skyrocketing operational costs. Then Mugabe decided to introduce a nationalisation law that forced miners to cede majority ownership to locals. Add to that foreign exchange troubles, power cuts and power struggles, and it is plain to see that the list of woes has been endless.

But if a miner can’t look on the bright side then he is in the wrong job. David Brown, chief executive of Implats, the world’s number two producer, called Zimbabwe a “big blue sky opportunity”.

Certainly many mining companies have remained committed to Zimbabwe. After all they know what is in the ground! Zimbabwe has large gold and diamond deposits. And it is has the second biggest platinum reserves in the world after South Africa.

Last month, for example, Implats said it would aim to increase platinum output from its Zimbabwe mines by 100,000 ounces to 260,000 ounces annually by 2010. That meant a commitment of $360 million to expand its Mimosa and Zimplats operations.

Then Anglo Platinum, the world’s biggest platinum producer, and Rio Tinto both said that despite the troubles, they remained committed.

A glimmer of hope

The business community would like to see Mr Tsvangirai in power, but nothing short of a miracle would be needed for this to materialise now. And even if it did, the economy will still be in tatters. Michell Gavin, an adjunct scholar on Africa at the Council of Foreign Relations, couldn’t have put it better. An “all-hands-on-deck effort” would be necessary to rescue Zimbabwe, she was reported saying in Time magazine.

Okay, so the international community which vehemently boycotted Zimbabwe is ready to step in with financial support. The Brits, it seems, are already expected to dig deep into their pockets to bring the country back from the dead. Allegedly £1bn a year emergency aid and development package is on the cards. That would triple the aid currently being supplied to Zimbabwe.

So there may be a glimmer of golden hope. Worth watching! Though it could very easily be snuffed out.

Keep mining,

Erin and Isabel

In 1957, the BBC’s usually serious current affairs programme Panorama ran a feature on spaghetti trees being harvested by the Swiss. The really good news for the spaghetti farmers they said was the malevolent and highly destructive spaghetti weevil had been eradicated. Afterwards, the Beeb was bombarded by viewers interested in cultivating their own spaghetti trees.

In the absence of any obvious spoofs today the news throws up a few candidates:

UBS – many more billions destroyed for the Swiss bank on the broken porches of America’s derelict neighbourhoods – surely the investment equivalent of trying to cultivate spaghetti trees. Bank chairman Marcel Ospel is stepping down and a rights issue is in the works. Mr Market appears relieved at the news. The shares were up 6% this morning, though less than half the price of one year ago.

Max Mosley – President of the Formula 1 motor racing governing body Federation Internationale de l’Automobile (FIA) and son of one-time notorious English fascist Sir Oswald Mosley. According to a Times report Mr Mosley “…spent five hours with five prostitutes in an underground torture chamber in Chelsea last Friday indulging in sado-masochistic sex.” Ouch. More on the offspring of notorious fascists, including Hitler’s nephew, used car salesman Paddy Hitler, can be found in The Times.

Robert Mugabe. Could it be Zimbabwe manage to dump the old tyrant who has brought this once prosperous country to its knees? A nation remarkable now for all the wrong reasons – hyper inflation, the lowest life expectancy and one of the highest rates of AIDS infection.

Ex-Diana butler Paul Burrell, paparazzo James Andanson and Harrods department store boss Mohamed al-Fayed’s head of security John Mcnamara. All branded liars by Lord Justice Scott Baker in the never-ending inquest into the death of Princess Diana which found “no evidence” to support claims of an Establishment plot. Its reported cost to us, the taxpayer, is £6m. All that to get to the point most reasonable-minded folk had reached a decade ago.

Okay, enough fooling. But just to be out of the first quarter of the year feels like a relief. Anyone chancing their money in the stock market has had a rough ride. The FTSE 100 notched up its worst performance in more than five years, says ODL Securities in a note – down 11.7% since January. The sharp sell-off presents a buying opportunity argues Charles Stanley. The prospective PE is now a modest 10.7x against a historical average of 14x with many juicy yields to be had (assuming they don’t cut!) that exceed the 10 year gilt yield of 4.4%.

But then when recession comes earnings fall and those slippery PE numbers can start making fools out of us. The trick to smart investing, as Mark Slater (son of Jim, and a chip off the old block) once commented, was finding those companies where earnings were going up so fast that at some point the company would be re-rated by the market thereby boosting the share price. But then the reverse is also true – we can find the anticipated re-rating soon becomes a depressing de-rating, crushing the stock and exciting only the short-sellers.

In the US, estimates for earnings have been falling as the economic outlook got worse. At the start of the year analysts forecast 4.7% earnings growth for the S&P 500 companies in the first quarter. This was reduced to a fall of 5.5% forecast last week and a fall of 8.1% forecast this week says a Reuters report. Quite a rehash in a short time. Charles Stanley notes that in the course of a typical recession earnings decline 30% but current estimates are for 13% growth. This looks “optimistic” it says with admirable understatement.

Falls of up to 20% in Europe over the past quarter have been led by banking fools UBS and SocGen. Japanese stocks (this editor’s least favourite stock market) continue to go nowhere though appear to have escaped little direct exposure to subprime, circa $5bn. It faces its own housing slump and recession too, say Charles Stanley.

Emerging market stocks in bubble markets such as China and India have been flattened. As colleague Manraaj Singh, editor of Profit Hunter, noted: “the benchmark Chinese Shanghai Composite Index fell three per cent yesterday – that puts it 43 per cent below its record high last October and down 34 per cent since the beginning of the year.” China’s 300 leading stocks now trade on a less bloated 19.5x, says Manraaj, against over 30x previously.

China is not without her problems. Charles Stanley notes its inflation rate is now near 9%. Any readers who caught last night’s Channel 4 Dispatches programme on what the Dalai Lama calls the ‘cultural genocide’ of Tibet will wonder how this summer’s Beijing Olympic Games are going to pan out. Economically Tibet itself is undergoing a boom as money and miners flood in to exploit its natural resources. Tibet boasts half the world’s lithium and large copper and chromium deposits, says The Week. There’s gold and oil there too.

“Is the UK going into a recession in the next year?” That was the question posed on our website last month and this is the response:

14% said “no”
21% said “yes, within 3 months”
29% said “yes, within 6 months”
34% said “yes, within 12 months”

Lehman Bros recently upped the probability of a UK recession to a 1 in 3 chance. Fellow Reckoners think that’s way too optimistic. It’s a 1 in 2 within six months and a near racing certainty within a year.

The new poll for this month asks: Which out of these precious metals will be the star player in April and have the highest price rise?

Gold, Silver, Platinum or Palladium

Visit the website to vote, it only takes a second.