LATimes notes that 'the gold market is moving east'

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China Refines Its Role in Global Gold Market

By David Pierson
Los Angeles Times
Sunday, February 26, 2012

http://www.latimes.com/business/la-fi-china-gold-20120227,0,4040073.stor...

A bit player only a decade ago, China has emerged as one of the most important forces in the global gold market, helping fuel the rising value of the precious metal.

Already the world's largest producer -- it overtook South Africa in 2007 -- China is now bedecking itself in bling. It's on track to become the globe's largest consumer of gold as early as this year, knocking off India, whose elaborate wedding dowries kept it on top for years.

Some of China's gold is going to its central bank as the government quietly boosts reserves. But the biggest driver is Chinese consumers. They're snapping up jewelry, coins, and bars as a hedge against inflation and to flaunt their rising wealth.

To witness the frenzy firsthand, head to Beijing's Caishikou Department Store, a four-story gold emporium that rang up sales of $1.5 billion last year. Visitors be warned: Sharpen your elbows and be ready to push.

... Dispatch continues below ...


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Sona Discovers Potential High-Grade Gold Mineralization
at Blackdome in British Columbia -- 13.6g over 1.5 Meters

From a Company Press Release
November 22, 2011

VANCOUVER, British Columbia -- With its latest surface diamond drilling program at its 100-percent-owned, formerly producing Blackdome gold mine in southern British Columbia, Sona Resources Corp. has discovered a potentially high-grade gold-mineralized area, with one hole intersecting 13.6 grams of gold in 1.5 meters of core drilling.

"We intersected a promising new mineralized zone, and we feel optimistic about the assay results," says Sona's president and CEO, John P. Thompson. "We have undertaken an aggressive exploration program that has tested a number of target zones. Our discovery of this new gold-bearing structure is significant, and it represents a positive development for the company."

Sona aims to bring its permitted Blackdome mill back into production over the next year and a half, at a rate of 200 tonnes per day, with feed from the formerly producing Blackdome mine and the nearby Elizabeth gold deposit property. A positive preliminary economic assessment by Micon International Ltd., based on a gold price of $950 per ounce over eight years, has estimated a cash cost of $208 per tonne milled, or $686 per gold ounce recovered.

For the company's complete press release, please visit:

http://www.sonaresources.com/_resources/news/SONA_NR18_2011-opt.pdf



To buy a necklace, shopper Wang Li recently fought her way through a scrum of cash-waving customers hanging over a glass counter loaded with gold chains, Mao pins, pendants of Christ on the cross, and more.

"I thought about buying Swarovski crystal, but I don't think it will ever be as valuable as gold," said Wang, a 24-year-old teacher who treats herself to a new piece of yellow-metal jewelry about once a month. "Besides, I like how feminine gold makes me feel."

On another floor, customer Zhang Li waited in line to purchase gold bars, an investment he describes as the only safe bet left for ordinary Chinese.

"If I had invested in stocks or property last year, I would have lost money," said Zhang, 36.

Chinese demand reached nearly 770 metric tons last year, up 20% from the year before, according to the World Gold Council in London. Desire for the yellow metal is so strong that China is buying record amounts from abroad because its mines can't keep pace. China imported more gold than India in the fourth quarter of 2011.

Gold in New York hit a three-month high Thursday before slipping $9.80 Friday to $1,775.10 an ounce. Analysts said strong demand from China is a factor in the recent run-up.

"There's no doubt that China will eventually be No. 1," said Jeff Clark, a senior precious metals analyst for Casey Research in Stowe, Vt. "Our jaws have been dropping at the volumes being imported for over a year now."

Gold for centuries has been a store of wealth and a symbol of good fortune in China. But China's heavyweight status in the gold market is more recent. In 2002 the central government lifted controls and set up the Shanghai Gold Exchange, allowing the metal to be priced by market forces.

In addition, Chinese consumers eventually were allowed to purchase bullion through commercial banks. Today China accounts for 26% of global gold demand, up from 6% a decade ago.

"Chinese demand has traded positions with the U.S. in the last decade," said Albert Cheng, Far East managing director of the World Gold Council. "It's very clear the gold market is moving east."

Meanwhile, consolidation and foreign investment in China's mining industry produced larger, technologically sophisticated players. The result? The nation's gold production has nearly doubled in the last decade to 360 metric tons last year.

No group has welcomed China's liberalization of gold more than the country's middle class.

Rising incomes have whetted consumers' appetite for jewelry and other luxury goods. But it's also about security. With the real estate and stock markets gyrating and banks paying minimal interest rates on savings accounts, many Chinese view gold as the best vehicle to protect their savings from inflation.

"Gold in China is always about safety," said Andy Xie, an independent economist in Shanghai and the former chief Asia Pacific economist for Morgan Stanley. "It's the preferred asset when the world is in chaos. China has failed to give people a sense of security."

Although international gold prices have retreated from their peak of $1,891 an ounce in August, analysts expect values to be partly buoyed by demand from central banks in emerging markets, including China.

China's government is suspected of quietly stockpiling more gold to diversify its $3.2-trillion holdings of foreign reserves and reduce its reliance on the U.S. dollar. China rarely discloses its purchases. But it's assumed the central bank holds a little more than 1,000 metric tons of gold -- still a small fraction of government holdings in the U.S. and Eurozone.

Add in strong demand from gold-crazy consumers and "it's safe to say demand still has a long way to go in China," said Clark at Casey Research.

That's created a huge opportunity for retailers. Hong Kong's Chow Tai Fook plans to open 2,000 stores in China. The luxury brand already boasts revenue greater than Tiffany & Co. and raised $2 billion in an initial stock offering in Hong Kong in December.

But no gold merchant is better known in Beijing than Caishikou, whose core customers are working-class Chinese.

Formerly a traditional department store selling clothes and other goods, Caishikou now specializes in gold. It sells a dazzling array of ornaments and jewelry at prices that range from $63 chains to an elaborately detailed $135,000 dragon encased in glass. Everything is 24 karat, a prerequisite for Chinese buyers.

Fighting her way through the aisles recently was Li Jinfeng, a 45-year-old chicken farmer who had traveled from neighboring Hebei province to buy jewelry for her daughter's dowry. Business has been good, and Li didn't think twice about tapping her savings.

"In the old days, only the rich people in my village could have gold," said Li, whose pierced ears were adorned with flower-shaped gold earrings.

Nearby, Li Lei, a 49-year-old retiree, was picking out a pair of bright gold rings to give her parents on their 50th wedding anniversary.

"I feel obliged to buy something nice for them," Li said. "Money may lose its value, but gold will not."

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Prophecy Coal (TSX: PCY) Wins Positive Feasibility Study
for the 600-MW Chandgana Power Plant in Mongolia

Company Press Release
January 17, 2012

VANCOUVER, British Columbia, Canada -- Prophecy Coal Corp. (TSX: PCY, OTCQX: PRPCF, Frankfurt: 1P2) has received a positive feasibility study for the company's 600-megawatt Chandgana Mine-Mouth Power Project in central Mongolia. The report was independently prepared by Ralf Thomsen, project manager at Steag, a German firm specializing in the planning, financing, construction, and operation of highly efficient thermal power plants for fossil fuels.

The study covers technical specifications, deployment, and financial analysis of a 4x150-mw thermal power plant to be built adjacent to Prophecy's Chandgana Tal coal deposit, which contains 140 million tonnes of measured coal. Last year the power plant received a construction license and the coal deposit received a mining license. Engineering, procurement, and construction management selection and project financing discussion have begun and are expected to be concluded this year.

Construction is planned to start in April 2013, with the first 150-mw unit being commissioned in October 2015 and subsequent units to start in April 2016, October 2016, and April 2017. With proper maintenance the project will have 30 years of commercial operation.

For the complete statement from the company, including maps and charts, please visit:

http://www.prophecycoal.com/news_2011_jan17_prophecy_receives_power_plan...