CME Clearing Europe will take gold as collateral
Looks like gold is as good as gold again -- that is, money.
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By Nandini Sukumar and Nicholas Larkin
Friday, August 17, 2012
CME Clearing Europe will accept physical gold as collateral, extending the list of assets it is prepared to receive as regulators globally push more derivatives trading through clearing houses.
CME Group Inc.'s European clearing house, based in London, appointed Deutsche Bank AG, HSBC Holdings Plc, and JPMorgan Chase & Co. as gold depositaries. There will be a 15 percent charge on the market value of gold deposits and a limit of $200 million or 20 percent of the overall initial margin requirement per clearing member based on whichever is lower, Andrew Lamb, chief executive officer of CME Clearing Europe, said today.
"We started with a narrow range of government securities and are now extending that," Lamb said in an interview today. "We recognize there will be a massive demand for collateral as a result of the clearing mandate. This is part of our attempt to maintain the risk-management standard and to offer greater flexibility to clearing members and end clients."
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CME Clearing Europe, which started on May 6 last year, plans to offer interest-rate swaps and more commodities later this year, he said. In the U.S., the Dodd-Frank Act means more derivatives than ever will be processed at a clearing house while the European Markets Infrastructure Regulation is doing the same in the region. JPMorgan in February last year said it will allow gold to be used as collateral for trading, following similar moves by CME Group and Intercontinental Exchange Inc. Investors and central banks are expanding gold holdings on demand for a protection of wealth and alternative to currencies. Gold held in bullion-backed exchange-traded products reached a record 2,417.3 metric tons on Aug. 10, data compiled by Bloomberg show. Central banks bought 254.2 tons in the first half of 2012 and may add close to 500 tons for the year as a whole, the London-based World Gold Council said yesterday.
Gold for immediate delivery traded at $1,616.77 an ounce by 1:40 p.m. in London. Prices are up 3.4 percent this year, extending 11 consecutive annual gains.
Derivatives clearing in Europe is dominated by LCH.Clearnet Ltd., owner of the world’s largest interest-rate-swap clearinghouse, and Intercontinental Exchange (ICE), which processes trades in European-based credit-default swaps and energy commodities such as Brent oil futures.
A clearinghouse reduces the potential harm from a member firm’s default by acting as the buyer to every seller and the seller to every buyer. Most futures-exchange operators, including Deutsche Boerse AG (DB1), its Eurex Clearing, CME and ICE own clearinghouse and don't permit similar contracts traded on competing venues to be processed with theirs.
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Prophecy Platinum Announces Wellgreen Preliminary Economic Assessment:
38% Pre-Tax IRR, $3.0 Billion NPV, and a 37-Year Mine Life
Company Press Release
VANCOUVER, British Columbia, Canada -- Prophecy Platinum Corp. (TSX-V: NKL, OTC-QX: PNIKF, Frankfurt: P94P) reports the results of an independent NI 43-101-compliant preliminary economic assessment for its fully owned Wellgreen nickel-copper-platinum group metals project in the Yukon Territory.
The independent assessment, prepared by Tetra Tech, evaluated a base case of an open-pit mine (with a mining rate of 111,500 tonnes per day), an on-site concentrator (with a milling rate of 32,000 tonnes per day), and an initial capital cost of $863 million. The project is expected to produce (in concentrate) 1.959 billion pounds of nickel, 2.058 billion pounds of copper, and 7.119 million ounces of platinum, palladium, and gold during a mine life of 37 years with an average strip ratio of 2.57.
The financial highlights of the preliminary economic assessment, shown in U.S. dollars, are as follows:
Payback period: 3.55 years
Initial capital investment: $863 million
IRR pre-tax (100% equity): 38 percent
NPV pre-tax (8% discount): $3 billion
Mine life: 37 years
Total mill feed: 405.3 million tonnes
Mill throughput: 32,000 tonnes per day
Prophecy Chairman John Lee says: "We are pleased with the preliminary economic assessment results. The numbers indicate that Wellgreen is one of most exciting mineral projects in the Yukon. The company is drilling to upgrade and expand the resource base. The infrastructure is excellent as the project is only 1,400 meters in altitude and 14 kilometers from the paved Alaska Highway, which leads to the Haines deep seaport. Discussions are under way with support from local stakeholders regarding permitting and logistics."
For the complete press release, please visit: