Hong Kong buyer plans to crack metal delivery bottlenecks at LME

Section:

HKEx Plans LME Warehousing Shake-Up

By Jack Farchy
Financial Times, London
Sunday, June 17, 2012

http://www.ft.com/intl/cms/s/0/a5f8007e-b86f-11e1-a2d6-00144feabdc0.html

The prospective buyer of the London Metal Exchange has warned that it will clamp down on the lucrative metal warehousing business that has attracted investments from Goldman Sachs and Glencore.

Hong Kong Exchanges & Clearing, which on Friday announced an agreement to buy the 135-year-old group for L1.4 billion, said it was planning to change the rules governing the LME's network of warehouses in an attempt to shorten the wait to take delivery of metal.

Long queues to remove aluminium from LME warehouses have sparked angry confrontations between consumers of metal, such as Coca-Cola, PepsiCo, and General Motors, and warehouse owners, including Goldman, JPMorgan, Glencore, and Trafigura.

Banks and trading houses have rushed to buy warehousing companies to profit from the fact that large quantities of metal have become surplus to requirements since the financial crisis. But now that the metal is needed, consumers say, it can take more than a year to be delivered.

... Dispatch continues below ...


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Prophecy Platinum (TSXV:NKL) Announces Encouraging Rhodium, Ruthenium, Osmium,
Iridium Assays from WS11-188 of Wellgreen Project in Yukon Territory, Canada

Company Press Release
May 25, 2012

VANCOUVER, British Columbia, Canada -- Prophecy Platinum Corp. (TSX-V: NKL; OTC-QX: PNIKF; Frankfurt: P94P) is pleased to provide results of full spectrum 6E (Platinum, Palladian, Rhodium, Ruthenium, Osmium, and Iridium) analysis of platinum group elements on the first batch of samples from the company's wholly-owned Wellgreen PGM-Ni-Cu project in the Yukon Territory, Canada.

The company enlisted Activation Laboratories (Actlabs) of Ancaster, Ontario, to conduct a full-spectrum 6E analysis of samples taken from the 2011 drill hole WS11-188. Adding Rh, Ru, Os, and Ir to Pt and Pd increased the total PGE content (6E) by an average of 28 percent, based on a population of 90 samples, most of which are from disseminated sulphide-type mineralization.

Assay results with 6E exceeding 0.50 ppm (0.5 g/t) (excluding copper and gold assays) are tabulated at Prophecy's Internet site and are available with assay results from the entire batch of 90 samples here:

http://prophecyplat.com/news_2012_may25_prophecy_platinum_announces_rare...



The problem is most acute at warehouses owned by Glencore in the Netherlands and Goldman in Detroit. The premium to buy a cargo of aluminium for immediate delivery has soared to record highs as a result, in spite of large stocks, consumers say.

Charles Li, chief executive of HKEx, told the Financial Times that warehousing was a "very challenging issue." The LME's responses to date -- which include increasing the rate at which the largest warehouses must deliver metal -- "generally speaking fit the problem," he said.

Martin Abbott, chief executive of the LME, has in the past attributed the problem to logistical challenges in removing metal from warehouses and low interest rates that make it easy to finance inventories.

"It is no longer just a simple logistic challenge issue. ... There are behaviour issues. We need to look at the rules, what behaviour they encourage and what behaviour they discourage," Mr Li said. In a later statement clarifying his views, he added: "Our position is no different from the current LME position."

HKEx's bid must still pass a vote of the LME's shareholders, of which the largest are JPMorgan and Goldman Sachs.

Warehouse companies earn a fee while they hold metal, even if it has not left because of queues. Consumers and some traders have complained that because queues guarantee a future revenue stream, producers are being persuaded to store their metal.

"As long as warehouses continue to offer incentives to attract metal that is guaranteed to stay in storage for prolonged periods, less metal is available for actual usage," said Nick Madden, chief procurement officer at Novelis, the top buyer of aluminium.

The LME said: "We are constantly monitoring the way that LME warehousing functions and will take action when appropriate."

Simon Collins, head of dry bulk commodities at Trafigura, the second-largest metals trader, said: "We would welcome a review by HKEx of LME rules on warehousing and delivery."

The dispute, along with a disagreement about raising trading fees, has caused many LME shareholders to lose faith in its management structure. Half the board is made up of banks and brokers, including Goldman.

Numerous investors say concerns about governance are one reason LME shareholders are likely to vote for a sale.

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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