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LCH.Clearnet starts accepting gold as collateral
By Alex MacDonald
Dow Jones Newswires
via Fox Business
Tuesday, August 21, 2012
http://www.foxbusiness.com/news/2012/08/21/lchclearnet-to-accept-gold-as...
U.K.-based clearinghouse LCH.Clearnet Group Ltd. said Tuesday it will accept a certain specification of gold bullion called loco London gold as collateral for margin-cover requirements on over-the-counter precious-metals forward contracts and on Hong Kong Mercantile Exchange precious-metals contracts starting Aug. 28.
LCH.Clearnet Group Ltd. has already been using gold as collateral since 2011 but now will accept loco London gold as collateral. Loco London gold is equivalent to a 400-ounce bar, or 12.5 kilograms of gold, that is stored in London.
The push to use gold as collateral follows similar steps from a growing number of exchanges and banks to increase the use of gold as an acceptable deposit, reinforcing the precious metal's allure as an alternative currency.
... Dispatch continues below ...
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:
http://prophecyplat.com/news_2012_june18_prophecy_platinum_announces_res...
CME Clearing Europe, the London-based clearinghouse of CME Group Inc., announced last Friday that it planned to accept gold bullion as collateral for margin requirements on over-the-counter commodities derivatives.
IntercontinentalExchange Inc. (ICE) also uses gold as collateral.
LCH.Clearnet Group Ltd. said it would limit the amount of loco London gold that could be used as collateral to 40% of the total margin-cover requirement for a member across all products and a maximum of $200 million, or roughly 130,000 troy ounces, per member group.
LCH.Clearnet also said it would apply a haircut of 14% to the use of gold as collateral. The haircut is in keeping with similar actions taken by CME Clearing Europe.
Clearinghouses apply haircuts across a wide range of asset classes to reduce pricing risk should the collateral asset, whether gold or government securities, depreciate in value.
Clearinghouses sit in the middle of a transaction, assuming the counterparty risk involved when two parties trade. Initial and variation margins are collected from members to fulfill their obligations should any problems arise.
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