Dear CIGAs,

With the world's mineral resources being depleted by unprecedented demand from developing nations, mining companies and end users are desperately looking for new sources of supply.

That being said, is it any wonder that some of the most pre-eminent names on the global mining scene (Homestake, Placer Dome, Inco and Falconbridge to name a few) have simply disappeared - gobbled up by competitors who realize that buying mineral resources on the open market is a lot easier than discovering the resources themselves.

Given the high capital cost and risk associated with exploration in virgin territory, most of these predatory companies are looking closely at established mineral belts where mines have been found and are still being discovered. It's not rocket science but just common sense.

What we've seen so far on the merger front is only the tip of the proverbial iceberg. In the coming years, companies with good land positions in the world's most prolific mineral belts will reap the rewards of their efforts at premiums that will shock you by today's standards. In fact, the targeting process is happening as I speak.

Mega mergers ahead for mining industry
Fri Apr 11, 2008 6:13pm BST
By Ignacio Badal - Analysis

SANTIAGO (Reuters) - With metal prices holding in what many call a super cycle, the global trend toward mergers and acquisitions will continue among miners, according to analysts and executives who attended the CRU/Cesco copper week in Santiago this week.

Small and medium-sized miners, and juniors who are still in the exploration stage, are the easiest targets for bigger companies, but the acquisition wave won't likely stop there, they said.

Mining analysts agree the market will soon see more huge takeover bids announced, like the failed attempt by Brazilian mining giant Vale for more than $90 billion.

Executives say acquisitions will continue because global copper demand is growing and supplies are tight, so new supply has to be brought on line. The easiest way to do that is to buy existing producers.

Companies will be on the lookout for producing assets and smaller players won't have the same access to financing to bring new output on line.

"(Mining) costs have skyrocketed in recent years, with the subprime crisis and the disappearance of securitized debt markets ... it is increasingly difficult to finance, meaning only the best capitalized players can afford to invest," said Bart Melek, a Toronto-based analyst with BMO Capital Markets.

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Dear Comrades In Golden Arms (CIGAs),

1. The OTC derivative disaster is far, far, far from over.
2. The Fed will participate in public debt offerings as well as the buying of crap paper at mark to model prices.
3. Today's GE earnings disappointment has more to do with their key position as a dealer in credit derivatives.
4. GE's smooth earning gains over the past years may well have to do with earnings smoothing OTC derivatives.
5. The company just retained by the Fed to value their growing portfolio of OTC derivatives was yesterday, themselves, chastised for overvaluation of their own OTC derivative holdings.

Lehman Brothers are taking desperate measures to find cash. All tricks are allowed...

Best regards,
CIGA Christopher

Lehman Makes Move to Turn Unsold Debt to Cash
By Reuters

Lehman Brothers Holdings, looking to raise cash, packaged $2.8 billion of unsold loans into bonds, then used some of the securities as collateral to borrow from the Federal Reserve, people familiar with the deal said Friday.

Lehman transferred loans that included some risky leveraged buyout debt into a new investment entity called Freedom, which then issued securities, about $2.26 billion of which were rated investment-grade, they said.

The bank used a relatively small amount of those securities as collateral for a low-interest, short-term cash loan from the Federal Reserve.

The move should give Lehman more money to finance its activities but also raises questions about the quality of the collateral the Federal Reserve is receiving from dealers to which it lends money.

"There's a significant hazard to the Federal Reserve taking poor assets onto its balance sheet," said James Ellman, president of hedge fund Seacliff Capital in San Francisco.

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Jim Sinclair's Commentary

Keep in mind that GE was a major dealer in credit and earnings smoothing derivatives. What you really have not seen is the non-financial major public companies fessing up on their OTC derivative disaster. They are out there and they are big. Still all are marked to model.

GE Says Profit Fell, Citing Finance; Forecast Reduced (Update5)
By Rachel Layne

April 11 (Bloomberg) -- General Electric Co. unexpectedly reported its first quarterly profit decline since 2003, sending U.S. and European stocks lower, as the credit market's seizure spread to the world's third-largest company by market value.

GE dropped as much as 12 percent in New York trading, the most since the October 1987 market crash. The decline wiped out as much as $42.2 billion in market capitalization, or more than the 2006 gross domestic product of Ecuador.

Chief Executive Officer Jeffrey Immelt cut the annual forecast he had once told investors was ``in the bag'' for 2008 and repeated as recently as March 13. GE now says capital markets seized up just days later, forcing it to cut the value of some securities in the last two weeks of the quarter and blocking some asset sales. The Federal Reserve's March 14 move to help rescue Bear Stearns Cos. created ``a different world,'' he said today.

``We hate disappointing investors,'' Immelt said on the GE- owned CNBC television network. ``It's not part of the company. It's not part of the culture. We take accountability for that.''

Profit from continuing operations dropped to $4.36 billion, or 44 cents a share, from $4.93 billion, or 48 cents, a year earlier. Revenue rose 8 percent to $42.2 billion, less than GE's prediction of about $44 billion. GE was expected to earn 51 cents a share, the average of 15 analyst estimates in a Bloomberg poll.

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Jim Sinclair’s Commentary

Who said a Municipality cannot go broke? Who guaranteed this debt?

Largest U.S. Municipal Bankruptcy Looms in Alabama: Joe Mysak
Commentary by Joe Mysak

April 11 (Bloomberg) -- They're talking more about Chapter 9 municipal bankruptcy in Jefferson County, Alabama, the home of the largest city in the state, Birmingham.

Who can blame them?

The county is now being whipsawed by an ill-thought-out debt policy and the collapse of the bond insurers. Credit-rating downgrades all around have triggered a series of events that are no longer in the county's control, leaving it at the mercy of securities firms that have little room for maneuver themselves.

This has produced a steady series of stories in my new favorite newspaper, the Birmingham News, all about how the county is preparing to declare bankruptcy any day.

Perhaps the best article ran on Sunday, April 6. It began: ``Jefferson County officials have laid the groundwork for the largest municipal bankruptcy in the nation's history while publicly saying they have no imminent plans for a filing.''

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Jim Sinclair’s Commentary

Looks like a statement of "This is it."

IMF warns of 'fire and ice' threat to the world
By Edmund Conway in Washington
Last Updated: 12:32am BST 11/04/2008

"Opening the IMF's spring meetings, Dominique Strauss-Kahn told ministers coming to Washington that there was only limited time to repair the financial system after the worst crisis since the Great Depression."

The head of the International Monetary Fund has warned that the world economy is trapped between "fire and ice" - the threat of slumping growth and of rising inflation.

Opening the IMF's spring meetings, Dominique Strauss-Kahn told ministers coming to Washington that there was only limited time to repair the financial system after the worst crisis since the Great Depression.

Speaking with oil prices at record highs, he declared that "inflation may be back" and warned the relentless rise of food prices would hit efforts to reduce poverty in Africa and Asia.

In a final blow to the so-called "Goldilocks theory" that developing nations' growth will help keep the world economy supported in the coming months, he debunked the idea that rich and poorer countries could "decouple".

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Jim Sinclair’s commentary

The OTC derivative move towards true value (ZIP), called a meltdown, is omnipresent and omnipotent.

Mizuho's $4bn sub-prime hit Asia's biggest
Peter Alford, Tokyo | April 12, 2008

MIZUHO Financial Group has taken the biggest sub-prime hit yet of any Asian financier, with losses of Y420 billion ($4.4 billion) at its wholesale brokerage unit.

Problems elsewhere in the group would increase the total US housing-related losses and write-downs for the year to March 31 to Y565 billion, a Mizuho spokeswoman confirmed yesterday.

For the first time a Japanese financial house has confirmed sub-prime damage on a scale approaching that incurred by US and European investment banks.

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