Risk off? Having sold most of its own, IMF now lauds gold as 'safe asset'

Section:

IMF Warns of Fresh Global Threat

By Robin Harding
Financial Times, London
Wednesday, April 11, 2012

http://www.ft.com/intl/cms/s/0/b597638c-83e8-11e1-9d54-00144feab49a.html

WASHINGTON -- A growing shortage of safe assets poses a new threat to global financial stability, the International Monetary Fund warned on Wednesday.

Sovereign debt crises are reducing the number of governments that investors trust to issue "risk-free" bonds just as new financial regulations are increasing demand for safe securities from banks.

The report shows how reforms in the wake of the 2007-09 crisis may create new pinch points in the global financial system that could cause trouble in the future.

"Safe-asset scarcity could lead to more short-term volatility jumps, herding behaviour, and runs on sovereign debt," said the IMF in a chapter of its new Global Financial Stability Report. "In the future, there will be rising demand for safe assets, but fewer of them will be available, increasing the price for safety in global markets."

... 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



Safe assets play a range of roles in financial markets. Government bond yields are used to price other assets, banks and insurers hold highly-rated bonds as buffers of capital and liquidity against times of crisis, and they are used as collateral against derivatives and short-term loans.

If there were a shortage of safe assets, it could exacerbate a future financial crisis as investors scrambled for the limited supply available, pushing their prices ever higher.

The IMF said that the role of central banks in providing large amounts of short-term, safe, liquid assets may be hiding the problem in the short term. For example, the European Central Bank has supplied large amounts of short-term liquidity to its banks.

The Fund identified $74.4 trillion of potentially safe assets today, including gold, investment-grade government and corporate debt, and covered bonds. But it warned that 16 per cent of the potential safe government debt supply to 2016 could disappear if governments continued to borrow at current rates and hence made their debt more risky.

To address the issue the fund called on policy makers to manage the demand for safe assets and to try to increase the supply.

To manage demand, it advised that banks be required to set aside some capital against sovereign debt, to avoid creating an artificial appetite for government bonds; it called for careful implementation of new liquidity rules that could increase bank demand for safe assets by $2 trillion to $4 trillion; and it said that central clearing houses should adopt flexible collateral rules so as not to tie up too many safe assets.

On the supply side, it said that safe assets were another reason for countries to tackle their fiscal problems, so their debt would still be seen as safe. It also suggested reforms -- such as rules to make sure issuers share in losses or wider use of covered bonds -- so that private securitisation could become a source of safe assets again.

Covered bonds have security against a portfolio of mortgages and a claim on the underlying bank, so they are seen as particularly safe.

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Prophecy Platinum (TSXV: NKL) and Ursa Major Minerals
Sign Combination Agreement

Company Press Release
Friday, March 2, 2012

VANCOUVER, British Columbia, Canada -- Prophecy Platinum Corp. (TSX-V: NKL, OTC-QX: PNIKF, Frankfurt: P94P) and Ursa Major Minerals Inc. have signed a binding letter of agreement for a business combination through a proposed all-share transaction. In doing so Prophecy and Ursa have acted at arm's length and the transaction has been negotiated at arm's length.

Prophecy will issue one common share in exchange for every 25 outstanding common shares of Ursa. Ursa options and warrants will be exchanged for options and warrants of Prophecy on an agreed schedule.

Prophecy's offer represents a value of about $0.15 per each common share of Ursa based on Prophecy's share price of $3.70 as at March 1, representing a premium of 130 percent to Ursa's March 1 closing price of $0.065.

Prophecy is to subscribe for $1 million common shares of Ursa by way of private placement financing at $0.06 per share, subject to regulatory approval. Upon placement completion, John Lee and Greg Hall, current Prophecy directors, will be appointed to Ursa's board.

Prophecy thus will become a mid-tier resource company with a robust and
diversified pipeline of platinum nickel projects, including:

-- The fully permitted open-pit Shakespeare PGM-Ni-Cu mine close to Sudbury, Ontario, infrastructure with near-term production capabilities.

-- The flagship Wellgreen (Yukon) PGM-Ni-Cu project with more than 10 million ounces of Pt-Pd-Au inferred resource. Drilling is under way and a preliminary economic assessment study is pending.

-- Manitoba's Lynn Lake Ni-Cu project with more than 262 million pounds Ni and 138 million pounds Cu measured and indicated.

For the complete announcement, please visit Prophecy Platinum's Internet site here:

http://www.prophecyplat.com/news_2012_mar02_prophecy_platinum_ursa_major...