London, U.K. – Ahead of this year’s Mines and Money conference in London on Dec. 6th & 7th, your Northern Miner correspondent spent the week in Europe’s financial capital, where the late November sky was not the only thing to be slightly overcast and gloomy.
On Monday, the Organization for Economic Co-operation & Development (OECD) warned the United Kingdom has already begun to slide back into recession. The Paris-based group lowered its global growth forecasts and said the U.K. economy would likely contract 0.03% in the fourth quarter and 0.15% the following quarter, meeting the technical criteria for a recession with two successive quarters of contraction. The eurozone as a whole would shrink by 1% this quarter and by 0.4% in the first quarter of 2012, the OECD reported. It is predicting slightly positive economic growth for the eurozone overall in 2012 at 0.2%, and slightly better growth in the U.K. over the same period at 0.5%. It noted a “negative event” in the eurozone, however, such as a default by Italy or Spain, could lead to a more serious global contraction.
The OECD report was followed on Tuesday by the autumn statement of Britain’s Chancellor of the Exchequer, George Osborne, the cabinet minister responsible for economic and financial matters in the U.K. Osborne announced £15 billion of government spending cuts which will see 710,000 public sector jobs axed over the next several years. Unemployment is forecast to increase to 8.7%. To combat this, the Chancellor simultaneously announced a £30-billion national infrastructure program designed to promote economic growth. It will fund over 500 road, rail and port improvements, and be paid for with £20 billion in private pension funds as well as £10 billion in “extra capital spending” over the next two terms of government.
Also during the week of Nov. 28 to Dec. 2, the Bank of England joined the central banks of most major Western countries in a coordinated effort to help lower the cost of borrowing in reaction to the latest credit crunch. The banks said they would lower the cost of existing dollar swap lines by 50 basis points from Dec. 5 onwards, and arrange bilateral swaps to provide liquidity for other currencies.
The big three credit rating agencies, Standard & Poors, Moody’s and Fitch, all announced downgrades or reviews of U.K. banks and European debt this week. On Wednesday, S&P cut its ratings on 15 major lenders across the globe, including Barclays, HSBC, Lloyds and the Royal Bank of Scotland in the U.K. The cuts followed Moody’s warning on Monday that it may soon downgrade subordinated debt of 87 banks across 15 European Union nations on concerns that governments would be too cash-strapped to bail out holders of the riskier securities.
The Guardian newspaper ran a front-page story on Nov. 28 unveiling the British government has been “secretly helping Canada push its ‘dirty’ fuel.” The left-wing paper said Shell and BP, which both have large oil sands projects in Alberta, have been successfully lobbying the U.K. government to support Canada’s campaign against proposed European penalties on selling petroleum from the oil sands to members of the European Union since it is considered ‘dirtier’ than conventional sources.
Elsewhere in London, approximately 60 protesters from the Occupy London movement stormed a building housing the Swiss-based mining giant Xstrata (XTA-L). Two hundred others were held outside within a police cordon. The group said they targeted Xstrata because it reportedly had the highest-paid chief executive of a FTSE 100 share index company over the past year. Apparently, several of the protesters reached the roof of the building and unveiled a banner reading, “All power to the 99%.”
In other company-related news, Russia-focused gold miner Highland Gold (HGM-L) has agreed to pay US$110 million to a joint venture partner for an additional 48.3% interest in its operating Novoshirokinskoye gold mine in Russia’s Chita region, bringing its total interest to 96%. The company has also received approval from the state authorities for full construction of the Belaya Gora gold mine in southeastern Russia. Barrick Gold (ABX-T, ABX-N) owns a 20.4% interest in Highland.
Lastly, Africa-focused gold miner Randgold Resources (RRS-L, GOLD-Q) has cut its 2011 production target for the second time this year. The company cited a string of problems, including work stoppages, wet weather and a mill breakdown at its Tongon gold mine in Ivory Coast, as the reasons for why it was cutting the forecast down to between 690,000 oz. and 700,000 oz. Randgold trimmed the forecast for the first time in August, from as much as 790,000 oz. gold down to between 740,000 oz. and 760,000 oz., following abnormally heavy rainfall at its Loulo/Gounkoto gold mining complex in Mali.
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