As the JSE's all share index has claimed record highs almost weekly since the beginning of the year, shares in mining company Gold Fields have halved in value on the back of a struggling gold price and heightened labour tensions.

But besides these factors, which affect the gold industry as a whole, Gold Fields, Africa's second-biggest miner, is also trying to fight off the US Securities Exchange Commission's (SEC) investigation into alleged corruption and bribery activity related to a black economic empowerment (BEE) deal concluded three years ago.

Last week the SEC, which regulates companies listed on the US stock exchanges, confirmed that it was investigating whether Gold Fields was in contravention of the US Foreign Corrupt Practices Act (FCPA) after the company awarded R2,1bn worth of shares and cash payments to senior leaders of the ANC, as well as members of parliament and people linked to President Jacob Zuma, as part of a BEE deal announced in 2010.

The act authorises the prosecution of entities and individuals suspected of making payments to "foreign government officials to assist in obtaining or retaining business", says the US department of justice on its website.

The law, passed by Congress in 1977, has jurisdiction over companies based anywhere in the world that do business in the US - including having a listing or raising funds.

Sibanye Gold's empowerment deal

Gold Fields has American depositary receipts listed on the NYSE Euronext, which falls under the regulatory authority of the SEC, and consequently the anti-bribery provisions of the FCPA.

Gold Fields unbundled most of its SA assets into Sibanye Gold earlier this year in a move meant to hedge the company from the risks associated with operating some of the world's deepest, most dangerous and labour intensive gold mines.

The only SA operation to survive was South Deep, a mechanised mine with about 66% of the group's minerals in reserve. Gold Fields' other operations are in Ghana and Latin America.

It is alleged that the company awarded shares to people connected to the SA government to secure mining rights in SA.

Gold Fields announced the BEE deal early in 2010, and in August that year received its new-order mining rights for its South Deep assets.

Members of the BEE consortium were awarded free shares and an upfront "dividend" of about R73m as part of the deal. The BEE deal was a prerequisite of the SA government for the granting of new-order mining rights to South Deep mine, which is about 45km south-west of Johannesburg.

Politicians getting benefits

The company recently admitted that ANC chairman Baleka Mbete holds a stake worth R25m in the Invictus Gold consortium, which owns 9% of Gold Fields' largest asset, South Deep.

Mbete served as SA's deputy president for a year until May 2009 and as speaker of parliament from 2004 to 2008.

At least two other members of parliament at the time of the deal - or their proxy representatives - were named as beneficiaries of the R2,1bn deal, as was Jerome Brauns, a lawyer who had represented Zuma in court. The son of Mendi Msimang, the ANC's former treasurer-general; Dudu Myeni, the executive chairman of the Jacob Zuma Foundation; and deputy president Kgalema Motlanthe's life partner are also listed as beneficiaries.

In addition, Gold Fields hired Gayton McKenzie and Kenny Kunene, who had been convicted of robbery and fraud respectively, to organise the transaction, paying them millions in shareholder funds for doing so.

The SEC has fined large international companies billions of dollars for corrupt behaviour. German-based Siemens has been fined in the past and it now has drug makers Novartis and GlaxoSmithKline in its spotlight for alleged corrupt practices in China, where they are accused of hiring relatives of influential politicians to improve their chances of doing business in that country. Retailer Walmart is also being investigated for its business practices in Mexico.

Pressure placed on Gold Fields says Holland

Earlier this year senior executives at Gold Fields seemed to acknowledge that they might have engaged in activity that would not pass FCPA scrutiny, or even SA's own Prevention and Combating of Corrupt Activities Act.

Former Gold Fields chairman Mamphela Ramphele told Business Day in March that government had "shoved the list of some" Invictus shareholders down Gold Fields' throat "with an ultimatum that if the preferred individuals were not taken on board, it would be denied a mining licence".

Chief executive Nick Holland, who declined to be interviewed by Financial Mail, has also said the company was under pressure to include certain people in the deal.

Holland told Business Day there were certain people at the department who had decided they had a lot of power and authority and were going to wield it. "We got into a position where we were delayed [being granted the mining right]." Gold Fields had to go along with the demands to continue being in business.

Though the spotlight has fallen squarely on the company's management team, questions remain about what role the board of directors played in landing Gold Fields in such a predicament.

Questions remain unanswered

Did the independent board members, whose job it is to oversee management, ask the right questions and sufficiently scrutinise the deal? Whose interests were they looking out for when they recommended that investors approve the transaction? Did they exercise the due care and diligence vested on them by the Companies Act when they approved the transaction? And why did they agree to hide the names of most of the beneficiaries of the deal from the public, including the company's own investors?

The Companies Act clearly states that the board must place the interests of the company above anything else, including that of management.

But the deal's inclusion of parliamentary policy makers and senior politicians, including those linked to the presidency, had the potential to severely undermine the country's BEE policy and carried moral and legal risks for the company - something the board of directors should have flagged and scrutinised.

The company's chairman, Cheryl Carolus, sent the FM a statement through public relations company Brunswick, saying that the board, when examining the BEE deal, received information from a range of sources and advice from a number of legal and other advisers who collectively influenced its decisions.

"The board has acted deliberately and appropriately and in full compliance with the law," says Carolus.

The paradox is that she, like Ramphele, made a name for herself as a freedom fighter and political activist who championed clean governance and transparency.

The FM sent Gold Fields a list of questions inquiring whether individuals with well-publicised histories of fraud, robbery and corruption were deemed to be best qualified to handle billions of rand in investors' money. The FM also asked the company to name the government officials who allegedly forced it to choose certain beneficiaries for the deal and to state the benefit or contribution those individuals brought to the company.

Payments questioned

Also, why did Gold Fields deem it necessary to pay out R73m in cash to these beneficiaries in 2010 when they had never contributed financially to the company in any way?

The only response was the press release from Brunswick and the fact that neither the board nor management was prepared to speak to the FM

The SEC probe raises further uncomfortable questions on whether the board was complicit in the alleged corrupt activities for which the company is now being investigated.

Some investors are willing to give the company the benefit of the doubt. "It is important to remember that the SEC accusations against Gold Fields are accusations at this stage; there is no proof yet," says David Couldridge, a senior investment analyst at Element Investment Managers

Regarding Holland's claims of having been pressured by government into accepting politically connected people into the deal, Couldridge says shareholders are never privy to the goings-on behind the scenes, where negotiations for licences happen. "You don't know what pressure is being put on management. As a miner, if you have no mining rights, you have no business," he says.

The department of mineral resources has consistently denied any wrongdoing by its officials. "The department participated and co-operated fully during the investigation by Gold Fields' independent attorneys, and articulated the role of the department, as well as the administrative processes that were followed to convert Gold Fields' old-order mining rights in respect of its South Deep mine," says spokesman Ayanda Shezi

Making no attempt to answer the FM's questions sent to the department, Shezi said "all the questions" being asked by the media were put to the department during the investigation by a US law firm hired by Gold Fields to probe the deal.

"Nothing untoward has been found [by the appointed law firm] in relation to the department's role, or any of its officials, in the conversion process," says Shezi.

Last year, however, Holland named individuals in the department, including former deputy director-general Jacinto Rocha, as those who had unfairly pressured him into what now seems illegal activity. Rocha told Business Times this week that the department "never dictated to them on the nature of the deal and who to include".

Couldridge says that the legal and moral challenges facing Gold Fields will "now hopefully, at the end of it all, encourage a move towards a more sustainable form of BEE, where people who really need the empowerment benefit".

Read more:

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Tana Gold Mining Related News Gold used in nuclear beam test

http://www.movellas.com/en/group/bullettingtopic/201309120438436157/201308300609243509

Gold foil was used to help scientists determine if the Idaho National Laboratory's (INL) NRAD neutron beam still meets national standards after its nuclear reactor received upgrades, Joe Campbell of INL reports.

"We wanted to make sure we still met ASTM's Category I standard after the core upgrade, but we realized that other researchers wishing to conduct examinations here would find a precise map of the beam's intensity very useful. Testing with an array of gold foil targets was the best way to do that," said INL postdoc researcher Aaron Craft.

Gold is the best material for the job because of its short half-life and "how it reacts to exposure to the neutron flux in a reactor."

"Gold as it is found in nature—gold-197—contains no traces of its radioactive isotopes. But, when exposed to a neutron beam, a small percentage of a given sample of gold will turn to gold-198, which has a half-life of 2.7 days."

"The percentage of gold-198 created is directly proportional to the intensity of the neutron beam that hits each sample in the array. Using the half-life of 2.7 days for gold-198, and the data from the sample counts done in MFC's Analytical Lab, I then have everything I need to create a precise map of NRAD's beam intensity," Craft explained. "Such a map can help attract other researchers who need to examine or test samples after exposure to a neutron flux that matches NRAD's profile."

Source:

TANA GOLDFIELDS Articles

Tana Goldfields Articles 10 tips how to avoid gold investment scams

Tips to remember while investing in gold

Lovaii Navlakhi of International Money Matters recommends that upto 5-7 percent of the portfolio should be invested in gold and the best way to do this is through the ETF route.

In an interview to CNBC-TV18, Lovaii Navlakhi, International Money Matters shared his views on what should retail investors do with gold now after government hiked import duty on gold to 10 percent to arrest the declining value of rupee and contain the fiscal deficit to 3.7 percent of the GDP.

Below is the verbatim transcript of his interview on CNBC-TV18

Q: The government is coming down heavily on curbing the appetite for gold, what does this mean for the retail investor, what should he do with his investments? Should he branch out to gold, should he branch out of gold?

A: Gold needs to be a part of every investor’s portfolio. We normally recommend that up to 5-7 percent of the portfolio should be invested in gold. During uncertain times you can enhance that allocation to 10-15 percent. Therefore, the best way to invest in gold is going through an exchange traded fund (ETF) route.

You need a Demat account, you can buy the units of gold based on number of grams and their rate. But the real issue is when people look at the past performance of any investment, any asset class and decide to put in bulk money. So anyone who has invested prior to April or early April this year will be staring at losses at this point in time. 

You should look at strict asset allocation and if you have invested 5 percent in gold, the value of gold has gone up 20 percent so your allocation to gold has increased marginally. You take out the profits every three-six months and that way you will ensure that you are within the asset allocation. 

For people who have put a large chunk of their money in gold, at this point in time the thought should be how do I reduce it from 20-25 percent of my portfolio to 10 percent? They should have three-six months’ time window and in a staggered manner they will gradually reduce this allocation to gold so that they are within the asset allocation norms. Very much like an SIP, how you invest gradually, divestment also could be done gradually.

Overall, gold is a hedge against inflation and if you are expecting growth to come back in markets globally then it may not be the asset class that will outperform but it still needs to be there as part of the asset allocation.

Q: My mutual funds portfolio consists of HDFC Top 20 , HDFC Equity Fund , DSP Small and Midcap and Reliance Vision Fund . Is this a profitable portfolio or should I make some changes?

A: He has invested a variety of funds, there are couple of large cap funds, a multi cap fund and a midcap fund. So he has created a decent portfolio. I am assuming they are equally allocated. 

If one was to look at performance then Reliance Vision Fund has underperformed in the last five years. It has gone only by about 13-14 percent in the last five years whereas all the other three funds have gone up by about 50 percent. So, Reliance Vision Fund is something that he should consider exiting.

Among the three schemes, DSP Small & Midcap is a midcap scheme, whereas HDFC Top 200 and HDFC Equity are large cap oriented. In the last five years they have shown equal performance. But the difference is stark in the past one year as well as three years.

While large caps have done okay, they have been flat in the last three years or so, the CNX Midcap index has fallen by 7 percent per annum. So he has to keep in mind that midcaps would typically take a longer period to perform especially if you have entered there in bad times. But it doesn’t mean that he shouldn’t have an allocation to midcaps.

If I look at specific schemes in each of these three categories, there are better schemes available. So for an HDFC Top 200 may be he can replace with Birla SL Frontline Equity . With HDFC Equity he can replace ICICI Pru Dynamic Plan . He can replace DSP midcap with ICICI Discovery. It is important to look at exit loads and capital gains impact so he should keep that in mind before he does that. He should not take out and put all the money into new fund simultaneously. Best if he has a financial advisor and if he doesn’t have one he should get one.

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http://tanagold.over-blog.com/gold-stocks-miners-junior-miners-and-exploration

Gold stocks are a popular method for people who want to invest in the rising price of physical gold. Gold stocks can cover mining, production and exploration -- and typically -- have a levered effect when reacting to the price of gold (this means they are more volatile investments).

As part of her ongoing coverage of gold and precious metals, Alix Steel frequently analyzes gold stocks in her daily gold brief.

By Gary Tanashian

The commodity complex is famous for a sort of ‘Whack-a-Mole’ quality to it. Do you remember back in the go-go days when it was NatGas (2005)? Uranium (2007)? Crude Oil (2008) and then a cluster of Copper (2011), Grains (2011) and Silver (2011)?

Well today none of them are doing much. Oil went up but could be topping, Copper went down but is bouncing hard, Uranium, Gas and Grains are nowhere. The result is this…

The CCI index is at support but in an intermediate bear trend. A break of 550 brings on the commodity/inflation trade. That is a long way away and I have my doubts it will be able to get going any time soon.

They are already talking about the death of the dollar again in the inflationist camp. That is because the dollar has been dropping hard. Here is the daily chart showing that it is simply in the same Reverse Symmetrical Triangle that we used to note its risk of correction in early July. Now we note its support, with maybe a little more downside room before it finds a platform from which it can rally again.

Exercise caution when an inflationist tells you about hyperinflation and the death of the dollar. Again, NFTRH is not a gold bull and certainly not a gold stock bull because of the inflation argument. The gold sector analysis is bullish because the big picture economic contraction environment is intact and that is more likely to include a stronger dollar than a weak one. Here is the USD bull signal chart introduced back in NFRH 230:

Bottom Line

The US dollar is in an uptrend out of the 2011 inflation hysteria lows.

We are on a big picture economic contraction. Within this there are people on the right and left goring each other out over politics [NFTRH 251 included discussion about political motivations in other segments. Rabid members of each political pole suffer extreme bias and should be rejected by successful long-term market players]. The Gold-CCI ratio just stair steps through time and space and does not care about any of it. It went nowhere during Bush and the last inflationary cyclical bull market. Today it is biased up with huge swings in a deflationary phase during Obama and unprecedented policy making by the current Fed regime.

If Au-CCI breaks down NFTRH terminates its biggest picture view. If it is bottoming here, we are good to go.* Gold declined vs. commodities in the post 2008 period. That was inflationary. Gold has declined vs. commodities in the post 2011 period. But this period is not inflationary. Something has changed.

Meanwhile, we might as well add the Ag-CCI ratio to the mix since silver has done so much hard work in bleeding off the [inflation-fueled] excesses from 2011. It is at a major support zone vs. commodities and may be ready to emphasize the ‘money’ side of its monetary/industrial commodity cross-dress routine.

* With respect to the sector that in my opinion now has the best risk vs. reward proposition in the stock market, we noted the following in another segment:

 

“To review, a gold mining operation wants to see an ongoing economic contraction in place. The problem of late is that policy makers have been fighting the contraction – and winning! Yes, as we have reported for months, the Semiconductor canaries are tweeting in the coal mine and wouldn’t you know that manufacturing followed them to recovery.

That is the past and present. What we are interested in is the future.”

 

We spent the last 8 months in risk management mode (with respect to the precious metals) and now are intact and ready to capitalize on coming trends. If macro analysis tells me that the bull view is the wrong view on gold, silver and the miners we will take that bitter pill and deal in its reality.

But the thing is, the work (which goes well beyond this snippet excerpt) is signalling a major risk vs. reward setup even as legions of trend followers (see the 2 year decline in Gold-CCI above) have all the intellectualized reasoning and hard evidence (of economic growth, which we saw coming before most currently chest thumping bulls) they need to call Gold’s Fear and Uncertainty Trade Dead.

Folks, these are the markets and they are going to wash away people with political blinders, impenetrable egos and all sorts of others who refuse to do the daily work to remain unbiased. If you would like a service that works hard to manage what is, not what preconceived notions would have us believe is, join me at NFTRH in managing what look to be big changes coming to a macro near you in the months ahead.