mining Finance -Famine to feastto Famine

Hallgarten & CompanyChristopher Ecclestone4 February 2010

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Driver – the dollar carry-trade

• The Fed provides cheap dollars to the large banks

• The provide cheap leverage to the hedge funds

• The hedge funds utilise the money for carry-trades

• Either in foreign markets… e.g. Brazil

• Or in commodities like gold or oil…

But when the carry-trade starts to unravel then:

• The funds start to liquidate the holdings or they face:

• Market losses AND currency losses

• The money is repaid to the banks and then repaid to the Fed or soaked up by the Fed’s reverse repo system

• The gold price decline started around one week after the Fed introduced its reverse repo system

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IPOs - Deadsville

Pretty dire state of the new issue market…

Only Rusal…

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The Recent Phases

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What next?

• Tossing out the faded tulips

• Some predatory M&A

• Some hedging reappearing

• Changes in the financing “industry”?

• The public get offered some valued added vehicles?

• The year of the Specialty Metal

• Base metals explorers move forward or wither