country writer.., page-16

Hi fitnfam and Bazza, you're obviously watching what's going on in the world. There are a lot of gold 'owners' - countries, central and private banks, various organisations and individuals - all wondering whether their gold really exists.

FML's situation and forward planning have to be viewed in the context of what is happening on the international gold scene, and I welcome their decision to leave in the ground any gold which cannot be mined and processed profitably at current prices.

I would not just be surprised, I would be amazed if FML and Shandong have not been running the ruler over and holding discussions with other gold miners to source significant quantities of higher grade ore which can be profitably mined and processed at current or lower gold prices, rather than depleting their existing gold in ground.

Their existing holdings will sooner or later prove to be a source of substantial profits for FML; the gold price is likely to be forced much higher in the not too distant future as momentum builds for paper gold owners to exert pressure for physical delivery or proof of the existence of their bullion.

It's only a matter of time before there is going to be a mad scramble to buy large quantities of bullion to cover the paper shorts.

Countries reported to be in the process of trying to repatriate or having recently repatriated their gold, mainly from the USA and UK, include Gemany, Venezuela, Ecuador, Mexico, Romania, Azerbaijan, Libya, Iran, Brazil, Chile, The Netherlands, and possibly Switzerland.

Germany has apparently agreed to allow the USA to send back 300 tonnes (just one fifth of their 1,500 tonnes reportedly held in the US), over a period of 7 years. Yes, 7 years, just to get back 300 tonnes.

And the US apparently refused Germany permission to audit their gold supposedly held in the US. What does that tell us? It certainly doesn't inspire confidence that the US actually still holds Germany's gold. Maybe it's been sold, or leased, or maybe it's been accidentally mixed up with someone else's gold, and they're having trouble identifying who owns what. Who knows?

And why did Venzuela have to wait almost six months for just 170 tonnes of its gold to be repatriated, mainly from the UK?

There have been stories floating around for well over a year now about private individuals being unable to reclaim gold and silver lodged with banks for safe keeping.

It has been estimated that there is about 95 times more 'paper gold' in existence than the total amount of gold which has ever been mined, so there are a lot of gold 'holders' who just have a piece of paper without any physical bullion to back it up.

Many countries, especially China, are soaking up large amounts of physical gold, and the writing is clearly on the wall that there is a looming shortage developing.

FML is in the enviable position of having substantial cash at a time when there are many companies which are severely cash restrained, and they should be able to pick up some good projects and assets at bargain prices.

Cheers,
Mike