Published today in the UK Telegraph is an article entitled: A 'Copper Standard' for the world's currency system? by Ambrose Evans-Pritchard. It's basic premise is that China is buying up more copper, nickel and other metals than it needs for its infrastructure projects or manufacturing sector, and that the reason for this is two-fold.
The first basic reason is because they know that the rate at which the U.S. Treasury notes are being printed, their value will be dropping soon. The other reason proposed is that China wants to move to a world reserve currency that is backed by a basket of metals, including copper. Here are some interesting quotes from the article:
"Hard money enthusiasts have long watched for signs that China is switching its foreign reserves from US Treasury bonds into gold bullion. They may have been eyeing the wrong metal. China's State Reserves Bureau (SRB) has instead been buying copper and other industrial metals over recent months on a scale that appears to go beyond the usual rebuilding of stocks for commercial reasons."
"Nobu Su, head of Taiwan's TMT group, which ships commodities to China, said Beijing is trying to extricate itself from dollar dependency as fast as it can. 'China has woken up. The West is a black hole with all this money being printed. The Chinese are buying raw materials because it is a much better way to use their $1.9 trillion of reserves. They get ten times the impact, and can cover their infrastructure for 50 years.' "
"While it makes sense for China to take advantage of last year's commodity crash to restock cheaply, there is clearly more behind the move. 'They are definitely buying metals to diversify out of US Treasuries and dollar holdings,' said Jim Lennon, head of commodities at Macquarie Bank."
"John Reade, metals chief at UBS, said Beijing may have a made strategic decision to stockpile metal as an alternative to foreign bonds. 'We're very surprised by Chinese demand. They are buying much more copper than they will need this year. If this is strategic, there may be no effective limit on the purchases as China's pockets are deep.' "
"Zhou Xiaochuan, the central bank governor, piqued the interest of metal buffs last month by calling for a world currency modelled on the "Bancor", floated by John Maynard Keynes at Bretton Woods in 1944. The Bancor was to be anchored on 30 commodities - a broader base than the Gold Standard, which had caused so much grief in the 1930s. Mr Zhou said such a currency would prevent the sort of "credit-based" excess that has brought the global finance to its knees."
"One thing is clear: Beijing suspects that the US Federal Reserve is engineering a covert default on America's debt by printing money. Premier Wen Jiabao issued a blunt warning last month that China was tiring of US bonds. "We have lent a huge amount of money to the US, so of course we are concerned about the safety of our assets," he said."
The good news for Noront in this regard is that we have the highest grade copper/nickel/platinum/palladium/etc. deposit in North America, along with abundant chromite, and we are continuing to drill holes and prove up more. And we are willing to listen to all reasonable buyout offers!
