A Melman Minute — December 9, 2010

Our world of mining has been making headlines on its own of late and one that caught our eyes was an item in Canada's "Financial Post" which read, "Mining sector faces host of new regulations" with the sub-headline "Effects not known." That last one raises the obvious question of, "how can legislators can pass laws when they do not know what their effect will be?"

Quite surprisingly, the direction of some of these changes may work to the benefit of the industry. Some of the new provisions listed in the article include giving companies more flexibility regarding the preparation of NI 43-101 reports and suggestions that it not be required to prepare an entire new technical report to support a short form prospectus required to raise new funds.

Other welcome provisions would be to extend the time available to prepare a new technical report following initial release of scientific and technical information and alterations to the reporting forms to make them less rigid and more adaptable.

However, there are some negative items to report. Ontario recently passed "Bill 173" which adds to the consultation requirements when it comes to First Nations negotiations and revision of the list of lands which will not be open for staking. Some observers feel these regulations could "...complicate the process by emboldening objections and interventions as the mining industry fears."

Anyone looking for a radical change toward fiscal limitations in America as a result of the recent elections which saw the Republican Party advances might want to hold their breath for a while. The GOP leadership saw fit to nominate one of Congress' most noted spenders, Rep. Hal Rogers of Kentucky, to the post of Chairman of the House Appropriations Committee which oversees Congressional spending. According to the Wall Street Journal, Rep. Rogers' spending habits are so generous to the people of his state that, "Kentucky officials are so appreciative of the money Rep. Hal Rogers has brought the state that several years ago they renamed the Daniel Boone Parkway after him." In fact, that publication reports that one of Rogers' nicknames is "Prince of Pork."

Yet another story which points toward 'business as usual' for American government is an item relating to the new tax bill President Obama has been pushing. One would think that it would include a simple statement that the Bush-era tax cuts are to be extended for two years, which is the gist of the publicity which we have been hearing. That might have taken only one or two pages at best, but clearly that is not the way of the regulators and politicians. No, it appears that Senators and Representatives are lining up at the trough to obtain special tax considerations for their favored constituents as noted by the WSJ when it reported, "...lawmakers and lobbyists were trying to attach favored provisions into what is likely to become one of the biggest bills to pass the lame duck Congress." (Our emphasis)

Yet another headline on the electronic media pointed toward Congress passing a new spending resolution covering the next nine months in the amount of, get this, $1.2 trillion for just the period of one full-term pregnancy. Somehow, that does not smack of spending contraction to us.

As a result of all these machinations, the bond market is apparently taking notice that debts and money creation will be moving forward virtually unimpeded and they have been hitting the bond markets with waves of selling, as can be seen from the chart of the US Treasury 30-year bond which was trading at the lowest level in several months at the close yesterday.

As of 7:00 AM PDT this morning precious metals are recovering from recent selling with gold once again approaching the $1,400 level and silver up about 70 cents to well above $29.00. Base metals have encountered light selling so far while mining share indexes are slightly improved on the strong precious metals performances. Financial markets in both the USA and Canada have opened to the plus side, the US Dollar is close to unchanged, Crude oil is once again nearing the $90 level and interest rate futures are little changed.

All quotes US$ unless otherwise noted.

Next Melman Minute will be Friday, December 10, 2010 when we plan to discuss evidence that economic performance might indeed improve, at least for the short term, and that could be welcome news for the base metals prices.

← All A Melman Minute