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Worldwide Depression - - Think Again!Ken ReserResearch & Investor Relations Consultant ykgold@telus.net March 7th, 2009 World-wide depression? Maybe for those over-leveraged in the auto industry, housing, and other fixed assets with huge debt loads but definitely not for those involved in world-wide industrial projects from what I read & see happening. Many investors are obviously running scared and you can’t blame them with the endless media fear mongering going on and especially from the new US President and his so called dream team. What I see is possibly the greatest opportunity in our lifetimes for base metals mining investment and at unbelievable over-sold, fire-sale conditions. There’s a lot more for people to consider than just all the fearsome media & political commentary at work. Please bear with me and read on. Consider These ‘Few’ Pertinent & Recent News Facts:
*Advanced Stage 2009 Industrial Project Activity For East Coast States Exceeds $85 Billion, accounting for only 28% of total US Industrial Project Activity. Mar. 03/09 Source: www.Industrialinfo.com *KBR Posts $88 Million Fourth-Quarter Profit:
SUGAR LAND--March 3, 2009--Researched by Industrial Info Resources (Sugar Land, Texas)--Engineering and construction firm KBR Incorporated (NYSE:KBR) (Houston, Texas) has reported a fourth-quarter 2008 net income of $88 million, up 23.9% year over year, on strong revenue across the board, especially in the Services business unit. Net income for the year totaled $319 million, compared with $302 million in 2007. As part of our International Industrial Database, Industrial Info is tracking 43 active projects worth $42.1 billion involving KBR. The largest of the projects is a $12 billion grassroot refinery in Saudi Arabia that Industrial Info has been monitoring since March 2006. Source: www.industrialinfo.com *Welspun Gujarat Commissions Tubular Steel Pipe Facility in Arkansas:
BANGALORE, INDIA--March 3, 2009--Researched by Industrial Info Resources (Sugar Land, Texas)--Indian steel-pipe manufacturer Welspun Gujarat Stahl Rohren Limited (BSE:532144) (WGSRL)(Bharuch, Gujarat) recently commissioned an API-certified state-of-the-art tubular steel pipe mill in Little Rock, Arkansas. The new facility's pipe mill has the capacity to produce 300,000 tons of helically submerged arc-welded pipes. Source: www.Industrialinfo.com *Bahia Mineracao Plans $1.6 Billion Iron Ore Project in Brazil:
CORDOBA, ARGENTINA--February 3, 2009--Researched by Industrial Info Resources (Sugar Land, Texas)--Brazilian mining company Bahia Mineracao Limitada (Salvador) is planning to develop a $1.6 billion iron ore project in the state of Bahia in northeastern Brazil. The Pedra de Ferro project, to be located about 32 kilometers south of the city of Caetite, entails the construction of an open pit mine and concentrator to process 25 million tons of iron ore per year. Source: www.Industrialinfo.com
*Gazprom and Total Show Interest In Nigeria's Trans-Sahara Gas Pipeline Network:
GALWAY, IRELAND--March 3, 2009--Researched by Industrial Info Resources (Sugar Land, Texas)--Nigeria's Trans-Sahara proposed gas pipeline project linking the African continent with the European Union is garnering unprecedented attention from leading global energy companies. Total SA (NYSE:TOT) (Paris, France) and OAO Gazprom (OTC:OGZPY) (Moscow, Russia) recently expressed interest in being associated with the 4,128-kilometer gas pipeline network that will connect Europe with Nigeria through Niger and Algeria. Source: www.Industrialinfo.com *MTA Pushes Forward with Phase I of $16 Billion Subway Project in New York City Creating Hundreds of Long-Term Construction Jobs:
SUGAR LAND--February 27, 2009--Researched by Industrial Info Resources (Sugar Land, Texas)--During a time of almost daily announcements of banks failing, industrial giants begging for federal financial aid and major companies initiating layoffs and job cuts of epic proportions, finding places where long-term employment is virtually guaranteed is a rarity. However, in downtown New York City, such a place exists thanks to the Metropolitan Transportation Authority (MTA) (New York, New York) and its construction arm, MTA Capital Construction (New York) Source: www.Industrialinfo.com *Planned U.S. Industrial Project Starts at $301 Billion in 2009:
SUGAR LAND--February 25, 2009--Industrial Info Resources (Sugar Land, Texas) is currently tracking more than 5,300 industrial projects totaling $301 billion in the U.S. scheduled to begin construction in 2009. This number, while high, represents a 1.3% decrease in planned project starts that were measured for a similar study in 2008. Project fallout in 2009 is expected to be high as economic conditions force project owners to hold on to cash and defer projects out between six and 12 months. Source: www.Industrialinfo.com *Northwest China's Shaanxi Province Nails Down 309 Key Construction Projects:
BEIJING--February 9, 2009--Researched by Industrial Info Resources (Sugar Land, Texas)--In order to promote economic development, Northwest China's Shaanxi province has nailed down 309 key construction projects with a total estimated investment of $160 billion Source: www.Industrialinfo.com *Construction of CGNPC's $10.2 Billion Yangjiang Nuclear Power Project Progresses Smoothly:
BEIJING--February 9, 2009--Researched by Industrial Info Resources (Sugar Land, Texas)--Following the official kickoff on December 16, 2008, construction of the Yangjiang nuclear power project, the largest nuclear power project in China, has been progressing smoothly in southern China's Guangdong province. The majority of the civil work construction is complete, according to China Guangdong Nuclear Power Corporation (CGNPC) (Shenzhen). Source: www.Industrialinfo.com *Vibrant Gujarat Summit Attracts Investments of $152.8 Billion Through 444 Commitments on Day One:
BANGALORE, INDIA--January 19, 2009--Researched by Industrial Info Resources (Sugar Land, Texas)--The prevalent worldwide financial crisis notwithstanding, the ongoing 4th Vibrant Gujarat Global Investors' Summit 2009 in Ahmedabad, Gujarat, saw 444 memorandums of understanding being signed on day one, with the nation's industrial movers and shakers pledging to invest $152.8 billion across several sectors in the state. The total value of investment commitments made on the first day exceeds what was pledged during the 3rd summit in January 2007, when 363 memorandums were signed for projects worth $94 billion. Source: www.Industrialinfo.com *China Power Investment Signs Agreement with Hunan Province to Develop $8.76 Billion in Power Projects:
BEIJING--January 16, 2009--Researched by Industrial Info Resources (Sugar Land, Texas)--China Power Investment Corporation (CPIC) (Beijing) and the government of Hunan province have signed a strategic-cooperation framework agreement for power projects in Hunan. According to the agreement, CPIC will invest $8.76 billion to promote the construction of power projects in the province. Source: www.Industrialinfo.com *Note: You can receive free daily alerts from Industrial Info.com by subscription on their website. This is an invaluable tool when you try to guage the economic pulse of the world in general. *Worldwide Pipeline Report: P&GJ's latest worldwide figures that indicate 160,136 miles of new and planned oil and gas pipelines are under construction and planned. North American pipeline companies are planning and constructing 35,217 miles of oil and gas pipelines. The remaining 124,919 miles represent new and planned pipelines worldwide. (Source:) http://www.allbusiness.com/transportation/pipeline-transportation-oil-gas/11766171-1.html *New Nuclear Reactors Worldwide: In the United States, the Nuclear Regulatory Commission has now received combined licence applications for 26 new reactors -Rising demand for electricity and the need to reduce greenhouse gas emissions could drive an almost fourfold jump in nuclear power reactors under operation worldwide by 2050, the Paris-based Nuclear Energy Agency said last year. -The agency forecast the number of functioning nuclear reactors in the world could rise to 1,400 by 2050, from 439 now, while nuclear power's share of total electricity production worldwide could grow to 22 percent, from 16 percent today -China- Following the roll out of the State Council’s stimulus package, the National Energy Administration announced large sets of projects including power plants, oil refineries and a second west-east gas pipeline. Construction on the eastern section of the RMB142.2 billion pipeline began in February in Shenzhen. Construction on the western segment began last year and is expected to be completed by the end of 2009. When operational in 2011, the 8,704 kilometer pipeline will cross 15 regions and carry 30 billion cubic meters of natural gas every year to Zhejiang, Shanghai, Guangdong and Hong Kong. -The government has already approved the construction of 10 nuclear power reactors with a capacity of 1,000 megawatts each according to statements released by the NDRC last November. In addition, China plans to "start building eight more nuclear power plants in the next three years, with 16 reactors whose total installed capacity will surpass 10 GW," NEA officials told state media in early February. *Infrastructure Spending to Jump Worldwide: This year governments around the world will spend 2.9% of world GDP on infrastructure, up from 2.2% in 20087according to Infrastructure Investor, citing projections for 2009 compiled by consultancy CG/LA. Norman Anderson. Washington D.C. based consulting firm, CG/LA. Norman Anderson, predicts global infrastructure spending will jump 0.7% this year (or increase by an additional $280 billion),according to Infrastructure Investor. The firm says the push for renewed infrastructure will be led by developed countries, although China (which unveiled plans in November 2008 to spend $586 billion on infrastructure investment over the next two years) will be a notable exception to this trend. Right here at home, CG/LA foresees that the U.S. will carry out roughly $190 billion in infrastructure spending, notes Infrastructure Investor. The firm also believes that President Obama’s proposed Infrastructure Bank will become a reality.\ China’s Infrastructure Spending: As I write this and was about to give a figure of the previously stated $600 Billion spending package that China had planned for 2009, I’m told they are going to update that figure publicly tomorrow. I’d bet odds money that $600 B will be increased substantially. We’ll see.
Ok! Enough of that for now. Considering that we have not even covered many of the Canadian, Russian, Brazilian, Indian, Saudi, African (etc) mega projects in the works as there are so many more examples of billions being spent in worldwide Industrial Projects thru and beyond 2009 that I could go on for pages.
The point is that all these projects and many, many others not mentioned herein (ie: Railroads in China, Bridge Construction projects, Refineries, Ship building, Military, etc etc) are going to weigh heavily on base metal demand this year and for years to come and current base metal supply has been curtailed big time over the last few months with mine closures and new mines dead in the water because they are unable to obtain Capex funding. This is fast becoming a huge set-up for rapid gains in Metals prices going forward. Keep in mind it isn’t just low metals prices that are spurring this growth. Most were in planning stages long before the down-turn and now with depressed metal prices there will likely be an onslaught of new ones coming to light. Now Consider The Smart Money: So where has the so-called “Smart Money” been moving over the 3-4 months? Contrary to many retail investors knowledge it’s been flowing quite substantially into Private Placements and “Bought” financings in Jr & Mid-Cap mining Co’s. Consider that roughly speaking, over $400 M has been laid out in this sector over the recent 4 months, much of which has gone into the Jr’s with Gold & Base Metal projects of merit. Why is this happening when the mining sector is at what “appears” to be an all time low in terms of confidence & interest to the general investor? Because it ‘IS’ smart money and not unlike the continued investment in the Oil/Gas exploration sector, those who are quietly investing this money in Base Metal miners see what many don’t, and are just too nervous because of all the negativity out there. I could give a long list of some of the co’s that have completed P/P’s and bought deals since Sept /08 up to the end of Feb/09 for those who want names but this editorial would become far to long. Let’s just say there are over 30 Jr’s in the mining sector that I found with little effort, all of whom have completed their Financings & P/P’s with no difficulty. Most of these recent Jr financings have been in the range of $100K to $300-$400K and even a few whom garnered much more. If you’d like a list of some of those I’ve researched, or wish to participate in future Private Placements of Jr Gold & Base Metal companies I’m affiliated or involved with send me an email. Bought Financings: I myself had no realization that there were any “bought” financings currently being done until a little bird spoke to me and I started doing some research. We all know that when a financing is done as a “Bought” deal that somebody either knows something or they think they do and consequently the public doesn’t even have the opportunity to participate before it’s already done. To me this is a big confidence signal that things are not nearly as bad as many would have us believe. From all the data I can find the total amount of bought deals over the last 4 months is well over $5 Billion to a possible $7 or $8B if one digs deep enough. All this is being done with little to no fan-fare by mining media. Related News: Another fact just released by BNN.com today states that Canadians invested $1.8 Billion in Mutual Funds in Feb /09 alone. We all know that money goes straight into the stockmarket. Sounds to me like another sign of market confidence out there somewhere. MetalBulletin.com 04 March 2009 11:29
LME: prices are well supported at present, with LMEX rising 2.8% day-on-day to 1,728. The appreciation is heavily influenced by expectations that China's stimulus packages will boost metals demand.
Signs of a recovery of the nation's economy persist, with the February PMI (which is a proxy for metals demand) rebounding to 49.0, from 45.3 (values below 50 still reflect a contraction). The production sub-index rose to 51.2, showing expansion for the first time since June 2008.
Copper Today: Up $0.11 @ $1.70 p/lb. Stark contrast to price over the last few months. Copper is always considered the bell weather metal for growth, but then the Auto, Housing. & Commercial Const industry are the key end users of Copper, so maybe the Copper price may not give sufficient warning for higher Base Metal prices this time around. More Infrastructure/Copper News Just Out: Copper Jumps to 3-Month High; China May Boost Stimulus Spending
By Millie Munshi March 4 (Bloomberg) -- Copper prices surged to the highest in three months on signs that China will boost government spending to revive its economy, increasing metal demand. Premier Wen Jiabao will announce a new stimulus package tomorrow, adding to an earlier 4 trillion yuan ($585 billion) spending plan, said Li Deshui, a former central bank policy maker. China is the world’s biggest metal consumer. Copper prices jumped 5.8 percent yesterday on speculation China’s consumption will climb. US, China
Economic Projects To Increase International Copper Demand LUSAKA, March 4 (Xinhua) -- Zambia's Standard Chartered Bank has said the stimulus package in the United States and China will increase demand for copper and prices should appreciate, Zambia Daily Mail reported on Wednesday. The 787 billion U.S. dollars stimulus package in the United States will include expenditure on copper-intensive projects such as public transport and school buildings while China has a stimulus package of 568 billion dollars to boost the infrastructure market, which is copper-intensive, the newspaper said. China's Spending Spree Likely To Include Canadian CompaniesDuncan Mavin, Financial Post Published: Wednesday, March 04, 20 HONG KONG - Asia's dealmakers say a Chinese resource spending spree will accelerate throughout the next 12 months, with Canadian mining and energy companies likely on the shopping list. Chinese buyers have already scooped up US$70-billion worth of global resource assets so far this year, as Beijing looks to secure its energy and resource future by spending some of its US$2-trillion in foreign exchange reserves. The overseas buying trend will pick up steam in the months ahead, according to China and Hong Kong-based corporate dealmakers, investment bankers and private equity players surveyed by Royal Bank of Scotland and Mergermarket. (Excerpt) In Summation, I’d say for any investor looking to regain some of the massive stock market losses we’ve all had, one should take a much broader look at fundamentals of worldwide industrial growth and quit dwelling on the financial turmoil & negativity caused by Wall St & Bankers greed, Politicians endless posturing, as well as the turmoil caused by the mortgage crisis and keep your eyes focused on how and why growth in all the varied industrial sectors of the World will be the main factor for renewed and possible rapid & sharp increases in the demand and pricing of Base Metals in the months ahead. There are exceptional Jr Miners with base metal projects out there trading for mere pennies compared to last two years highs. Some predict Wars, others predict the end of Fiat money, the Banking system and World-wide depression or even worse. Well folks, “Chicken Little” is a children’s fictional character and the Sky isn’t falling from my contrarian viewpoint, but Base Metals are finite and the world grows and moves steadily onward regardless of anyone’s prognostications, including my own.
Ken Reser Research & Investor Relations Consultant ykgold@telus.net March 7th, 2009
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