Asia Gold-China premiums up on investment demand; Indian market on hold

The Australian government has approved the $1.3B takeover of Anvil Mining (TSE:AVM) by China-based Minmetals Resources Ltd. The deal announced on September 30th required approval from the Australian Foreign Investment Review Board for the acquisition. The Minmentals offer of C$8 per Anvil share in cash represents a 38% premium on the $5.79 price the market was offering before the acquisition was announced last month. Anvil was trading at around $7.83 on Monday.

Silvercorp Metals, China’s biggest silver miner, was changing hands for $9.72 in Toronto on heavy volumes shortly after the open Monday, up almost 19% after a report by the forensic accounting arm of KPMG showed no truth to allegations of $1 billion in accounting fraud at the company. Shareholders who held onto their Silvercorp stock during the rollercoaster ride that started on September 2 when the company had to go public with the accusations, believed to be the work of shortsellers that had built up a massive position in the stock, are now able to show a handsome profit for their loyalty. The company is suing two New York-based websites – Chinastockwatch.com and Alfredlittle.com – for spreading false information and is seeking punitive and compensatory damages.

One of the Seven Great Wonders of the World is being threatened by mining. Reuters reports that legal and illegal mines operating below the Great Wall of China are tearing chunks of the wall away and allowing the historic landmark to crumble: About 200 km (124 miles) southwest of Beijing, in rural Laiyuan county in Hebei province, dozens of small mines are threatening the stability of the centuries-old wall as prospectors dig for copper, iron, molybdenum and nickel, state news agency Xinhua reported. Some mines have excavated within 100 meters of the wall.

In early morning trade in New York, copper for delivery in December jumped 5.5% from yesterday's 15-month low to trade at $3.23 a pound after France and Germany made positive noises about tackling Europe's debt problem promising a definitive agreement by heads of state "by Wednesday at the latest." Copper is also being lifted by supply worries – Reuters reported on Friday China's copper smelters are slowing their rate of refined copper production as supplies of raw material concentrate and scrap fall. Two strikes at mines owned by US-based producer Freeport McMorran has cut production while shipments from the world's No. 1 copper mine, BHP's Escondida in Chile, could be delayed to next year after recent work stoppages.

China's net coal imports this year are expected to reach around 150 million tonnes less than last year's 164.83 million tonnes, state news agency Xinhua said on Friday, citing the country's coal association. The annual output is estimated to exceed 3.5 billion tonnes this year, compared with about 3.3 billion tonnes last year. Domestic demand will keep rising at a moderate pace amid steady economic growth, but uncertainty in the macro economy will decelerate demand growth, predicted Wang Zhanjun, an official with China National Coal Association. Meanwhile the state electricity authority said power cuts were likely this winter due to tight coal supplies and a fall in hydroelectric output. China relies on coal for the vast majority of its power-generating capacity.

The rout in industrial metals has claimed another victim: iron ore. On the same day that copper tumbled nearly 7% for its biggest slide in a month, Bloomberg reports that iron ore's largest decline in 15 months is showing no signs of recovery, according to analysts:

The world's number one iron ore producer Vale is considering shifting from iron ore pricing based on the previous quarter’s prices to levels more aligned with the spot price the company's chief executive said on Tuesday. The Brazilian company's new willingness comes after more Chinese steel mills seek to postpone shipments or default on contracts as spot iron ore prices drop from historic highs above $170 to levels of around $150. BHP, Vale and Rio Tinto control nearly 70% of the 1 billion tonne annual iron ore seaborne trade and dominate price talks which in the past were characterized by secretive negotiations and annual contracts. Just last week global number one miner BHP Billiton announced plans to create a new, more transparent system for pricing iron ore called Global Ore by the end of the year or early next year.

Hong Kong’s Chinese Gold & Silver Exchange Society, a century-old bullion bourse, will start trading gold quoted in yuan today, boosting the city’s status as an offshore hub for the currency.

Despite bans on export of iron ore from India, the price of the steelmaking ingredient has fallen in China. Business Standard reports that the price of iron ore originating from India has dropped 12% in Chinese markets to $168 a tonne, compared to $191 a tonne two weeks ago. The website quotes the chairman of Maya Iron Ores, a commodities brokerage, saying that Chinese steelmakers and traders expect the market to drop even further due to global financial turmoil and reduced demand: