http://www.dredge.com/products.htm
http://www.dredge.com/links.htm
Ellicott has designed and manufactured over 1500 dredges, more than any other manufacturer, and has served customers in over 80 countries. We market our products through two divisions.
The Ellicott Division sells pre-engineered standard dredges primarily to the marine contracting and sand and gravel markets. The Mud Cat Division sells auger dredges and small cutterhead and bucketwheel dredges primarily for industrial wastes, hazardous wastes, pond and lake reclamation, and marinas.
Ellicott's History of Excellence
Over a Century of Innovative Design
and Worldwide Service
1885 Designed and manufactured power transmission components and dredge machinery.
1907 Built all of the cutter dredges used in construction of the Panama Canal. First machine delivered was a steam-driven, 900 HP, 20-inch dredge.
1931 Delivered the 20-inch cutter dredge ORION still in operation at the Charleston Navy Yard.
1938 Designed and manufactured all of the dredging equipment aboard the 5,000 cubic yard hopper dredge GOETHALS for the U.S. Army Corps of Engineers. Ellicott has supplied dredge components for over 20 Corps hopper dredges.
1941 Built the dredge MINDI, a 10,000 HP, 28-inch cutter suction dredge still operating in the Panama Canal.
1952 Delivered a 12,250 HP, 36-inch cutter suction dredge for the St. Lawrence Seaway. Most powerful dredge in the world when built for the St. Lawrence Seaway.
1954 Developed portable swinging ladder Canal Dragon dredges with design features that guaranteed maximum maneuverability in narrow waterways.
1955 Designed and constructed two 36-inch, 10,000 HP dredges, each with two 10,000 HP booster pumps (60,000 total pumping HP) for the Steep Rock Iron Ore Mine in Canada. These dredges, still in operation today, mined 160 million cubic yards of material in five years. One dredge, the FLORIDA, now owned by Great Lakes, has since dredged the fill for Honolulu airport and the world's largest manmade pier in Long Beach, California (14 million cubic yards in 1990.)
1968 Delivered two 27-inch Series 5000 SUPER-DRAGONS™ to a large U.S. contractor which, after 20 years of operation, still considers them its most effective units.
1969 Became the first company to lease 400, 600, and 800 HP dredges for short term usage.
1970 Designed first 33-inch Series 10000 SUPER-DRAGON™, JEAN RIGAL, with a ladder pump. The 10,500 HP dredge overcame barometric limitations associated with deep digging to 100 feet.
1971 Constructed Series 7000 SUPER-DRAGON™ with 900 HP submerged ladder pump and 3,600 HP hull pump for Venezuela.
1971 Mud Cat first designed and patented the Auger dredge concept.
1975 Introduced one-time transportable, integral hull dredges: Series 4500 and Series 6000 dredges for Indonesia.
1976 Introduced and patented underwater Bucket Wheel Excavator for Australian and Florida mining projects.
1977 Built first standard WHEEL-DRAGON™ dredge (B890) complete with spud carriage system.
1977 Delivered a fleet of 16 Series 700 DRAGONS™ for Indonesia. World record for the largest quantity of dredges in one order.
1978 Delivered 24 inch, 4000 HP WHEEL-DRAGON™ with 500 HP Bucket Wheel Excavator.
1980 Delivered two custom-designed electric mining dredges, 6,800 total HP, for the phosphate industry. Field assembly was required in remote Florida location. Start-up just nine and twelve months, respectively, from contract signing.
1982 Designed and delivered Series 370 (10") DRAGON™ dredge, transported completely assembled on a single flatbed trailer. Over 50 Series 370 DRAGON™ dredges have been sold.
1983 Designed and delivered to South Korea a Series 17000, 30-inch SUPER-DRAGON™ with 1,000 HP ladder pump, twin hull pumps each rated at 6,000 HP, and 1,500 HP cutter. One of 3 largest non-self-propelled dredges in world today.
1984 Designed and delivered 24-inch 5,000 HP contractor's dredge with spud carriage, suitable for either standard cutter or bucketwheel.
1984 Designed and delivered special Barge Unloader to Maryland Port Authority for transferring dredge material from barges to a contained disposal area.
1985 Designed and delivered 500 HP Bucket Wheel Excavator to a heavy minerals mine for use in cemented hardpan material.
1985 Made first air freight delivery of an 18-inch, 1,410 HP dredge to Colombia. Largest air shipment ever from Miami airport.
1985 Delivered world's first Dual Wheel Excavator (Bucketwheel) for alluvial mining. This patented excavator is now the standard for mining and is offered in sizes ranging from 40 HP to 1,500 HP.
1986 Received 51st dredge patent; this one was for a bucketwheel improvement.
1987 Won President Ronald Reagan's "E" Award for Excellence in Exports.
1987 Purchased Mud Cat, the original worldwide designer and builder of auger dredges and formed the Mud Cat™ Division, incorporating auger products with the Ellicott designed 270/370 Cutterhead and B490 Bucketwheel dredges.
1987 Sold 500th Mud Cat™ Auger Dredge.
1987 Delivered two remote controlled Mud Cat™ dredges for hazardous and explosive materials, one auger and one cutterhead.
1988 Sold 50th Bucketwheel Excavator, a 250 HP dual wheel for tin mining in Brazil. Ellicott has sold more Bucketwheels than all other builders combined - over 60.
1988 Designed and delivered world's first Hoe Mounted Dredging Excavator. A Bucketwheel excavator with a pump module, the patented "Hoe Dragon", is installed on a backhoe for flexible mining applications.
1989 Delivered in just 11 months a 4,400 HP electric deep digging (25 meter) 24 inch dredge with spud carriage and 160-inch diameter, 900 HP Dual Wheel Excavator. Largest mineral sands dredge in the world.
1990 Sold 3 bucketwheel dredges for salt mining (2 in Middle East and 1 in China) showing continued leadership in this market, the hardest material dredged.
1992 Delivered in just 13 months a 16,000 HP 36" diesel electric SUPER-DRAGON™ to South Korea. 2,500 HP on ladder pump, twin hull pumps each rated at 5,000 HP and 1,500 HP cutter. World's most modern large cutter dredge.
1992 Delivered 5 dredges from stock for emergency Mt. Pinatubo volcanic ash clean up.
1992 Designed and built patented environmental dredge, Series 370 PDP, with special vibrating auger for thixotropic sludge and innovative use of positive displacement pump. Design endorsed by Canadian Government's Environmental Agency for turbidity control.
1993 Built North America's largest and most modern mining dredge, a 4,600 HP 24 electric powered unit for mineral sands. Turnkey contract.
1993 Awarded contract for new design 20-dredge for HIDROVIA project in South America.
1993 Awarded contract for sludge processing and composting equipment by leading international environmental company.
1993 Supplied three sets of dredges and booster pumps for uranium tailings clean-up in Canada.
1993 In a report on dredge selection criteria, Environment Canada gives Mud Cat™ the highest rating of any type of dredge in all categories of environmental performance.
1994 Dredges delivered to over 10 countries in one year.
1994 Mud Cat™ auger dredge successfully used in Russian refinery oil clean-up.
1994 U.S. President Clinton honors Ellicott at White House for company's growth.
1995 Received $20+MM order from Government of Indonesia confirming Ellicott's role as principal supplier of dredges to this port-dependent territory.
1995 First sales of new WeedCat™ and TrashCat™ product line of water management boats.
1995 Developed and delivered first "Aqua-Combo" water management boat for shoreline and beach maintenance at Rochester, Lake Ontario.
1996 Delivered two Series 4170 SUPER-DRAGON™ Dredges to Vietnam in a precedent setting export.
1998 Sold six Series 370HP Mud Cat™ dredges for coal tailings cleanup in USA.
1999 Developed state-of-the-art new high performance Mud Cat™ dredge, the MC-2000.
1999 Delivered an MC-2000 Mud Cat™ dredge specially outfitted for an environmental project in Sweden
1999 Signed a license agreement with Arab Contractors in Egypt to build two Series 1170 dredges and one Series 1870 dredge
2000 Delivered two swinging ladder 12" automated dredges for reprocessing coal fines utilizing Ellicott's newly developed slurry density optimization system
2000 Delivered two Series 670 DRAGON model dredges for canal maintenance in Nigeria
2000 Delivered a Mud Cat™ SP-810 auger dredge for a member of the Royal Family in Abu Dhabi for building an artificial island in the Arabian Gulf
2000 MC-2000 auger dredge completes the most successful PCB sediment removal project ever, Fox River, Wisconsin
2000 Signed contract in Vietnam during President Clinton's historic visit, for two dredges to rebuild irrigation networks destroyed by flooding.
2001 Delivered MC-2000 with new excavator design for use in contaminated sediment cleanup projects.
2001 Developed new dredging technology for environmental sediment removal - the most maneuverable dredge ever built - 8" swinging ladder dredge for tailings reclamation and pond maintenance - using no cables.
2001 Designed the innovative SANDMINER™ aggregate production dredge, a new concept in improving the productivity of sand and gravel producers, utilizing a tri-tubular truss ladder concept.
2002 Baltimore Dredges, LLC acquires Ellicott assets.
2002 Designed and delivered new 10" aggregates dredge to site development company in Delaware
2002 Received patent for MC-2000 low turbidity pumping system
2003 Baltimore Dredges, LLC (Ellicott) and Liquid Waste Technology acquired by Baltimore Dredge Enterprises, LLC
2003 Mud Cat™ MC-2000 auger dredge named new standard in the industry for environmental dredges
2003 U.S. Army Corps of Engineers finds the Mud Cat™ Dredge 95% to 99% efficient!
2005 Delivered Swinging Ladder Dredge to the State of Ohio with electronic proportional control and display, and split control console for added visibility
2005 Delivered a 16" Series 1170 "DRAGON" dredge to a new customer in the United Arab Emirates
2005 Delivered the final dredge in a precedent-setting 4 dredge order from the State of Delaware
2005 Delivered two state-of-the-art MC-2000's used as the primary tool for US EPA-sponsored cleanup of PCBs at Superfund project in New Bedford, MA
2005 Delivered 50 dredges for various projects worldwide
2005 Served over 200 customers in 25 countries
2006 The Port of Baltimore salutes Ellicott as the exporter of "Dependable Dredging Equipment"
2006 U.S. Commerce Department Awards Ellicott its "Export Achievement Award"
Ellicott Dredges, LLC
1425 Wicomico St., Baltimore, Maryland 21230 U.S.A.
Email: Sales Department
Toll Free: 888-870-3005 888-870-3005 Phone (410) 625-0808 (410) 625-0808 Fax (410) 545-0200
Monday, November 30, 2009
REGISTRAR & TRANSFER COMPANY
http://www.rtco.com/mkt/marketing_specialized.asp
Founded in 1899, Registrar and Transfer Company is the nation's oldest, most widely respected specialist in the stock transfer business. Over the years, thousands of banks and public companies, such as Inland Real Estate Corporation, Praxair Inc., Dillards Inc., Chico's FAS Inc., M&T Bank Corporation, and Commerce Bancorp Inc., trading on all U.S. exchanges, have relied on us to provide efficient, complete, in-house services with the very highest standards of professional, yet personal customer service.
At R&T, we add true value to your organization by providing unparalleled service and quality for very low fees. We pride ourselves in being an industry leader with the expertise and flexibility to quickly recognize and adapt to the changing needs of our clients and their investors. Our innovation and technology solutions enhance our clients' shareholder relations and help them control out-of-pocket expenses. R&T's in-house, full-service printing facility, Commerce Financial Printers (CFP), provides our clients major savings on their printing costs. More importantly, one phone call can coordinate the entire annual meeting process. This, coupled with our wide array of other services, truly offers our clients one source for all their stock transfer needs.
Contact Us :: Corporate Relations
For answers to common questions, please check our FAQ section.
--------------------------------------------------------------------------------
Department Phone Numbers and Email:
General Information (908) 497-2300 (908) 497-2300 Send Email
Executive Office (800) 525-7686 (800) 525-7686 Send Email
Investor Relations (800) 368-5948 (800) 368-5948 Send Email
Corporate Relations (800) 866-1340 (800) 866-1340 Send Email
R&T Marketing Department (800) 456-0596 (800) 456-0596 Send Email
Commerce Financial Printers (800) 866-1547 (800) 866-1547 Send Email
--------------------------------------------------------------------------------
Executive Phone Numbers and Email:
Extension Direct Line Email
Thomas Montrone
President and CEO 2333 (908) 497-2333 (908) 497-2333 Send Email
Mary Rose Cascaes
Executive Vice President and COO 2334 (908) 497-2334 (908) 497-2334 Send Email
William Tatler
Vice President and Chief of Staff 2547 Send Email
Fax (908) 497-2314
--------------------------------------------------------------------------------
To contact Corporate Relations by mail, address your correspondence to:
Registrar And Transfer Company
ATTN: Corporate Relations Department
10 Commerce Drive
Cranford, NJ 07016
Founded in 1899, Registrar and Transfer Company is the nation's oldest, most widely respected specialist in the stock transfer business. Over the years, thousands of banks and public companies, such as Inland Real Estate Corporation, Praxair Inc., Dillards Inc., Chico's FAS Inc., M&T Bank Corporation, and Commerce Bancorp Inc., trading on all U.S. exchanges, have relied on us to provide efficient, complete, in-house services with the very highest standards of professional, yet personal customer service.
At R&T, we add true value to your organization by providing unparalleled service and quality for very low fees. We pride ourselves in being an industry leader with the expertise and flexibility to quickly recognize and adapt to the changing needs of our clients and their investors. Our innovation and technology solutions enhance our clients' shareholder relations and help them control out-of-pocket expenses. R&T's in-house, full-service printing facility, Commerce Financial Printers (CFP), provides our clients major savings on their printing costs. More importantly, one phone call can coordinate the entire annual meeting process. This, coupled with our wide array of other services, truly offers our clients one source for all their stock transfer needs.
Contact Us :: Corporate Relations
For answers to common questions, please check our FAQ section.
--------------------------------------------------------------------------------
Department Phone Numbers and Email:
General Information (908) 497-2300 (908) 497-2300 Send Email
Executive Office (800) 525-7686 (800) 525-7686 Send Email
Investor Relations (800) 368-5948 (800) 368-5948 Send Email
Corporate Relations (800) 866-1340 (800) 866-1340 Send Email
R&T Marketing Department (800) 456-0596 (800) 456-0596 Send Email
Commerce Financial Printers (800) 866-1547 (800) 866-1547 Send Email
--------------------------------------------------------------------------------
Executive Phone Numbers and Email:
Extension Direct Line Email
Thomas Montrone
President and CEO 2333 (908) 497-2333 (908) 497-2333 Send Email
Mary Rose Cascaes
Executive Vice President and COO 2334 (908) 497-2334 (908) 497-2334 Send Email
William Tatler
Vice President and Chief of Staff 2547 Send Email
Fax (908) 497-2314
--------------------------------------------------------------------------------
To contact Corporate Relations by mail, address your correspondence to:
Registrar And Transfer Company
ATTN: Corporate Relations Department
10 Commerce Drive
Cranford, NJ 07016
Arctic Oil and Gas Provides Update on Financing of Norton Sound/Onshore Placer Gold Projects in Alaska
Wed Jan 7, 2009 4:00pm EST
LAS VEGAS, NV, Jan 07 (MARKET WIRE) --
Arctic Oil and Gas Corp. (the "Company") (PINKSHEETS: AOAG) today
released an update on financing arrangements currently underway for their
Norton Sound and Onshore Placer Gold Mining Projects in Nome, Alaska
which is scheduled for development in 2009.
$250 million Gold Mine Financing
The Company management and JV Partners RE Shell Group/Concha Holdings have
begun actively seeking financing arrangements since first announcing their
unique $250 million forward gold offering at $500 per ounce to qualified
investors, banks, and institutions. The company is pleased to announce
that, beginning on Friday, December 9, 2009, management will be making the
first of several presentations to potential institutional buyers who have
expressed interest in the gold offering.
NI 43-101 Compliant Reserves Report
The Company's geologist Jim Halloran, a widely respected independent
geologist with intimate knowledge of the placer deposits of Nome and
Alaska alluvial gold regions, is currently preparing a new NI 43-101
compliant reserves report to provide additional investor security to the
forward gold purchase offer. The report is based on data and drill sample
results of Nome offshore placer deposits extending into AOAG's lease
application areas taken from ship-based sampling campaigns conducted by
the JV Partners, Westgold and others. The company expects to have the
report in hand by mid February.
Gold Dredge Construction:
The West Coast shipyard which previously built dredges designed by the JV
group has construction schedule openings and is ready to commence new
dredge construction immediately when funds are available. The additional
dredges will allow for the production of up to 300,000 more ounces gold
annually at a cost of $200-$300 per oz.
Reporting Status
The company anticipates having all SEC filings brought current by March
2009 and has initiated the financial auditing process with their certified
accountants.
About Arctic Oil and Gas
Arctic Oil and Gas Inc. is focusing on its gold reserves by pooling its
Norton Sound OCS applications of which it is an 80% equity partner into
the new 50%-50% profit-sharing joint venture with the R.E Shell Trust, a
long-established gold dredging-engineering group, whose principals have
produced millions of ounces of gold utilizing suction-cutter ocean going
dredges of their own design. The JV partners intend to finance and develop
two or more large-scale placer mines starting on the JV granted State
leases, commencing gold production in 2009-2010.
Additional placer gold prospects are being sought in warmer Pacific
regions accessible by sea, in order to utilize the planned offshore gold
dredges during the Alaska winter months when ice prevents mining
operations.
JV PLACER GOLD; 2009-2010 PRODUCTION PROJECTS.
Norton Sound Alaska Oceanic Placer Gold Project; OCS 720 square mile
Leases Application and 2,000 acre Granted State Waters Leases. With 5-10
million ounce Gold placer resource potential at 250,000 - 500,000+ ounces
per year production rate.
Denali Placer Gold Project; Alaska Onshore fully permitted Claims with
approximately 500,000 ounce drill indicated reserves and 400 yard per hour
dredge mining equipment already on site. With plans to upgrade production
equipment to a 100,000 ounces per year operation in 2009.
OIL-GAS: The Company and partners have speculative Claims and lease
applications over four areas with proven and potential oil and or gas
reserves. The Company believes that in the future the oil price will rise
to levels which will justify their development.
Please visit www.arcticoag.com
This announcement contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, Section 21E of the
Securities Exchange Act of 1934 and the Private Securities Litigation
Reform Act of 1995. Actual results may differ from management's
expectations. These forward-looking statements involve risks and
uncertainties that include, among others, risks associated with resource
exploration risks related to competition, management of growth, new
products, services and technologies, potential fluctuations in operating
results, international expansion, commercial agreements, acquisitions and
strategic transactions, government regulation and taxation. More
information about factors that potentially could affect AOAG's financial
results is included in its filings with the Securities and Exchange
Commission.
Contact:
Peter Sterling
323-356-7777 323-356-7777
Email Contact
Copyright 2009, Market Wire, All rights reserved.
-0-
© Thomson Reuters 2009. All rights reserved. Users may download and print extracts of content from this website for their own personal and non-commercial use only. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters. Thomson Reuters and its logo are registered trademarks or trademarks of the Thomson Reuters group of companies around the world.
Thomson Reuters journalists are subject to an Editorial Handbook which requires fair presentation and disclosure of relevant interests.
LAS VEGAS, NV, Jan 07 (MARKET WIRE) --
Arctic Oil and Gas Corp. (the "Company") (PINKSHEETS: AOAG) today
released an update on financing arrangements currently underway for their
Norton Sound and Onshore Placer Gold Mining Projects in Nome, Alaska
which is scheduled for development in 2009.
$250 million Gold Mine Financing
The Company management and JV Partners RE Shell Group/Concha Holdings have
begun actively seeking financing arrangements since first announcing their
unique $250 million forward gold offering at $500 per ounce to qualified
investors, banks, and institutions. The company is pleased to announce
that, beginning on Friday, December 9, 2009, management will be making the
first of several presentations to potential institutional buyers who have
expressed interest in the gold offering.
NI 43-101 Compliant Reserves Report
The Company's geologist Jim Halloran, a widely respected independent
geologist with intimate knowledge of the placer deposits of Nome and
Alaska alluvial gold regions, is currently preparing a new NI 43-101
compliant reserves report to provide additional investor security to the
forward gold purchase offer. The report is based on data and drill sample
results of Nome offshore placer deposits extending into AOAG's lease
application areas taken from ship-based sampling campaigns conducted by
the JV Partners, Westgold and others. The company expects to have the
report in hand by mid February.
Gold Dredge Construction:
The West Coast shipyard which previously built dredges designed by the JV
group has construction schedule openings and is ready to commence new
dredge construction immediately when funds are available. The additional
dredges will allow for the production of up to 300,000 more ounces gold
annually at a cost of $200-$300 per oz.
Reporting Status
The company anticipates having all SEC filings brought current by March
2009 and has initiated the financial auditing process with their certified
accountants.
About Arctic Oil and Gas
Arctic Oil and Gas Inc. is focusing on its gold reserves by pooling its
Norton Sound OCS applications of which it is an 80% equity partner into
the new 50%-50% profit-sharing joint venture with the R.E Shell Trust, a
long-established gold dredging-engineering group, whose principals have
produced millions of ounces of gold utilizing suction-cutter ocean going
dredges of their own design. The JV partners intend to finance and develop
two or more large-scale placer mines starting on the JV granted State
leases, commencing gold production in 2009-2010.
Additional placer gold prospects are being sought in warmer Pacific
regions accessible by sea, in order to utilize the planned offshore gold
dredges during the Alaska winter months when ice prevents mining
operations.
JV PLACER GOLD; 2009-2010 PRODUCTION PROJECTS.
Norton Sound Alaska Oceanic Placer Gold Project; OCS 720 square mile
Leases Application and 2,000 acre Granted State Waters Leases. With 5-10
million ounce Gold placer resource potential at 250,000 - 500,000+ ounces
per year production rate.
Denali Placer Gold Project; Alaska Onshore fully permitted Claims with
approximately 500,000 ounce drill indicated reserves and 400 yard per hour
dredge mining equipment already on site. With plans to upgrade production
equipment to a 100,000 ounces per year operation in 2009.
OIL-GAS: The Company and partners have speculative Claims and lease
applications over four areas with proven and potential oil and or gas
reserves. The Company believes that in the future the oil price will rise
to levels which will justify their development.
Please visit www.arcticoag.com
This announcement contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, Section 21E of the
Securities Exchange Act of 1934 and the Private Securities Litigation
Reform Act of 1995. Actual results may differ from management's
expectations. These forward-looking statements involve risks and
uncertainties that include, among others, risks associated with resource
exploration risks related to competition, management of growth, new
products, services and technologies, potential fluctuations in operating
results, international expansion, commercial agreements, acquisitions and
strategic transactions, government regulation and taxation. More
information about factors that potentially could affect AOAG's financial
results is included in its filings with the Securities and Exchange
Commission.
Contact:
Peter Sterling
323-356-7777 323-356-7777
Email Contact
Copyright 2009, Market Wire, All rights reserved.
-0-
© Thomson Reuters 2009. All rights reserved. Users may download and print extracts of content from this website for their own personal and non-commercial use only. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters. Thomson Reuters and its logo are registered trademarks or trademarks of the Thomson Reuters group of companies around the world.
Thomson Reuters journalists are subject to an Editorial Handbook which requires fair presentation and disclosure of relevant interests.
Thursday, November 19, 2009
SEDAR
http://www.sedar.com/issuers/company_issuers_b_en.htm
1.
What is SEDAR?
SEDAR is the System for Electronic Document Analysis and Retrieval, the electronic filing system for the disclosure documents of public companies and investment funds across Canada.
2.
Who files documents on SEDAR?
All Canadian public companies and investment funds are generally required to file their documents in the SEDAR system. In addition, some third parties who are involved in public company transactions such as take-over bids or proxy contests may be required to file.
3.
What documents are included?
Most of the documents which are legally required to be filed with the Canadian Securities Administrators and many documents which may be filed with the Canadian exchanges (market centres) are included in the SEDAR system. For insider reports, please refer to www.sedi.ca. A complete list of all documents which are included is contained in the SEDAR Filer Manual. Click here to learn more about the SEDAR Filer Manual.
4.
What is a SEDAR profile?
The SEDAR profile contains basic information about public companies, investment funds and investment fund groups, such as their addresses, contact information, stock exchange listings.
5.
What information is available on this Web site?
This Web site contains copies of all documents filed in the SEDAR system that have become available to the public as of the most recently completed business day, as well as profiles of all SEDAR public company and investment fund filers. Documents filed only with Canadian exchanges are not available on the Web site.
6.
When are documents filed on SEDAR publicly accessible?
When a public company or investment fund files securities documents with the Canadian securities regulatory authorities through SEDAR, the documents are initially private and confidential. The securities commissions then make the appropriate documents publicly available after a review process. These documents are made accessible to SEDAR Data Resellers, and may appear within their systems, from the moment they are made “public”. Continuous disclosure documents such as news releases, financial statements, notice of meeting date and annual reports do not require the securities commissions' review and are immediately available to SEDAR Data Resellers. For information on SEDAR data resellers, click here.
7.
When are the documents made available on this Web site?
When a public company or investment fund files securities documents with the Canadian securities regulatory authorities through SEDAR, the documents initially have a status of "private". The securities commissions then make the appropriate documents publicly available after a review process. These public documents will be accessible on this Web site the following day. Continuous disclosure documents such as news releases, financial statements, notice of meeting date and annual reports do not require the securities commissions' review and are available on the Web site the next day. For example, a news release filed through SEDAR on a Friday will be accessible on the Web site as of the Saturday. Updates to a company's profile also appear on the SEDAR Web site the following day (see FAQ no. 13).
8.
Why are there different data formats for filed documents?
In developing SEDAR, the Canadian Securities Administrators tried to balance the needs of filers seeking a way to efficiently file their documents on SEDAR against the desire to make the documents easily available to the public. When SEDAR was first initiated, CDS determined that the three most common electronic document formats used by filers were MS Word, WordPerfect and PDF. The decision was made to adopt these common formats as the standard for SEDAR filings. With Release 6 of the SEDAR filing application in September, 1999, PDF is now the only acceptable filing format for filers' documents. Because documents filed previous to this date remain in their original filing format, some of the documents you retrieve are in MS Word or WordPerfect.
9.
Who is responsible for management of SEDAR?
CDS INC., a subsidiary of the Canadian Depository for Securities Limited, manages the SEDAR system on behalf of the CSA. CDS is responsible for the development of this Web site.
10.
How can I become a SEDAR filer?
To become a SEDAR Filer, click here, or contact the SEDAR help desk at 1-800-219-5381 1-800-219-5381 .
11.
How can I become a SEDAR data republisher or reseller?
If you would like to republish or resell SEDAR data, contact CDS Innovations.
12.
What are the current CDS filing fees?
CDS charges an annual continuous disclosure fee to each issuer. This fee is paid by a reporting issuer upon receipt of a pro-rated invoice issued by CDS following the filing of its initial filer profile and in each subsequent calendar year, by electronic payment at the time the issuer's annual financial statements are filed with the securities commissions. All issuers are subject to GST and some provincial taxes may also apply (QST or HST). The filing fees charged are determined by issuer type:
Single Jurisdiction Issuers
$705
Multi Jurisdiction Issuer
$1,595
Investment Fund Issuers
$495
In addition to the annual continuous disclosure fee, certain filings made with the securities commissions are also subject to CDS fees. Click here for a complete listing.
13.
How do I update my company profile?
Your company's profile is stored on the SEDAR filing application server and can be accessed by any company that has purchased the SEDAR software. If your company subscribes to the SEDAR software, you can modify your profile using the Update function in the Profile Management module. If your company utilizes a SEDAR filing agent to undertake your SEDAR filings to the securities commissions, please advise your agent to make the necessary changes to the profile. The updates made to the profile appear on the SEDAR Web site the following day.
For example, a profile update made through SEDAR on a Friday will appear on the Web site as of the Saturday.
1.
What is SEDAR?
SEDAR is the System for Electronic Document Analysis and Retrieval, the electronic filing system for the disclosure documents of public companies and investment funds across Canada.
2.
Who files documents on SEDAR?
All Canadian public companies and investment funds are generally required to file their documents in the SEDAR system. In addition, some third parties who are involved in public company transactions such as take-over bids or proxy contests may be required to file.
3.
What documents are included?
Most of the documents which are legally required to be filed with the Canadian Securities Administrators and many documents which may be filed with the Canadian exchanges (market centres) are included in the SEDAR system. For insider reports, please refer to www.sedi.ca. A complete list of all documents which are included is contained in the SEDAR Filer Manual. Click here to learn more about the SEDAR Filer Manual.
4.
What is a SEDAR profile?
The SEDAR profile contains basic information about public companies, investment funds and investment fund groups, such as their addresses, contact information, stock exchange listings.
5.
What information is available on this Web site?
This Web site contains copies of all documents filed in the SEDAR system that have become available to the public as of the most recently completed business day, as well as profiles of all SEDAR public company and investment fund filers. Documents filed only with Canadian exchanges are not available on the Web site.
6.
When are documents filed on SEDAR publicly accessible?
When a public company or investment fund files securities documents with the Canadian securities regulatory authorities through SEDAR, the documents are initially private and confidential. The securities commissions then make the appropriate documents publicly available after a review process. These documents are made accessible to SEDAR Data Resellers, and may appear within their systems, from the moment they are made “public”. Continuous disclosure documents such as news releases, financial statements, notice of meeting date and annual reports do not require the securities commissions' review and are immediately available to SEDAR Data Resellers. For information on SEDAR data resellers, click here.
7.
When are the documents made available on this Web site?
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CONGO MINING BRC-DIAMONDS
http://www.brc-diamondcore.com
Dr Michiel (Mike) de Wit
President & CEO
Mike de Wit, President of BRC DiamondCore, has extensive experience in the diamond industry, having begun his career as an exploration geologist for the Geological Survey in South Africa prior to joining De Beers, where he worked for 29 years. Dr de Wit managed various exploration programs for De Beers in Africa which led to a number of kimberlite discoveries. Prior to his most recent appointment as general manager for De Beers in the DRC, Dr de Wit was responsible for all exploration programs for De Beers in Africa. In addition to MSc degrees in geophysics and sedimentology from the Universities of Pretoria and Reading (UK) respectively, Dr de Wit holds a PhD degree from the University of Cape Town. He brings some 31 years of exploration experience to the Company. Dr De Wit is based in Kinshasa, DRC
Arnold T. Kondrat
Director
The principal founder of BRC Diamond, Mr. Kondrat is also the founder and Executive Vice President of Banro Corporation, a gold exploration company based in the DRC, and Director and President of privately-held Sterling Portfolio Securities Inc., a Toronto-based venture capital company. He has been involved in corporate finance activities for more than 20 years
Brian Scallan
Vice President Finance
Mr Brian Scallan, BSc (Chem Eng) BCom (Economics) MBA, is a Director and Vice President Finance of BRC DiamondCore Limited. His career started as a chemical engineer at the Council for Scientific and Industrial Research in South Africa. After completing a degree in economics and an MBA he practiced as a management consultant for a period of 7 years concentrating on marketing and strategy work. He joined Standard Merchant Bank to design and implement its marketing strategy and was a member of the Bank's senior management committee. He transferred to operations becoming Head of Structured Trade and Commodity Finance. He was also involved with major mining project finance activities in Uganda and the Democratic Republic of Congo. After 15 years with the Standard Bank Group he consulted in project finance, primarily mining projects in Africa. More recently he was Head of Funding for Nikanor PLC prior to its takeover by Katanga Mining Ltd. He has consulted to Banro Corporation in respect to its funding requirements
Danie van der Merwe
Group Operating Manager
Mr van der Merwe has extensive experience in the diamond mining sector in the areas of metallurgy, engineering and mining production. He previously managed Saxendrift on the Middle Orange River for Trans Hex and the Koidu Kimberlite Project in Sierra Leone. Mr. van der Merwe holds a National Technical Diploma in Mechanical Engineering and has completed numerous supplementary courses including courses in metallurgy, diamond recovery systems, as well as safety and management. He is based on site in the Northern Cape Province of South Africa
Martin Jones
Vice President, Corporate Development
Mr Jones has over 25 years experience in corporate and investor communications. Prior to joining the Company, he was a partner with Advance Planning/MS&L, where he consulted to a number of Canada's leading corporations. For a number of years, he worked in the public affairs department of Imperial Oil. He holds a similar position with Banro Corporation.
Donat K. Madilo
Treasurer
Mr. Madilo has over 17 years experience in finance and administration. He holds a Bachelor of Commerce (Honors) from Institut Supérieur de Commerce de Kinshasa, a B.Sc. (Licence) in Applied Economics from University of Kinshasa and a Master's of Science in Accounting (Honors) from Roosevelt University in Chicago. He is also the Chief Financial Officer of Banro Corporation
Edmond Thorose
Geology, alluvial
Mr. Thorose graduated from the University of Toronto with a BSc. (hons) degree in geology and also holds an MBA from York University in Toronto. Edmond has nine years of exploration experience in gold and diamonds and has worked in the DRC for the last two years. He is based in the DRC.
Fabrice Matheys
Geology, kimberlite
Mr Matheys holds an MSc in exploration geology from Rhodes University in South Africa and has 16 years of field experience, mainly with De Beers. He has an intimate knowledge of the DRC, having worked for the last three years in that country. He is based in the DRC.
Corporate Office:
Address: 1 First Canadian Place
100 King St. West Suite 7070, P.O. Box 419
Toronto, ON
Canada M5X 1E3
Telephone: 416-366-2221 416-366-2221
Fax: 416-366-7722
Toll Free: 1-800-714-7938 1-800-714-7938
Johannesburg Office:
Address: Ruimsig Office Estate Building 6, Unit 4
193 Hole in One St (Cnr Peter Road)
Ruimsig, Johannesburg
Telephone: +27 11 9582885 +27 11 9582885
Fax: +27 110582617
Postal Address: Postnet Suite 585,
private bag X09
Weltevreden Park
1715 South Africa
Kinshasa Office:
Address: Boulevard du 30 juin
Immeuble SN Bruxelles (Ex-SABENA)
quatrième (4ème) étage, Appartement n°4, Commune de la Gombe
Kinshasa
Telephone: +243 819971037 +243 819971037
Fax: 416-352-1484
Bankers: TD Canada Trust
Address: 141 Adelaide St. West
Toronto, ON
Canada M5H 3V1
Transfer Agent: Equity Transfer & Trust Company
Address: 200 University Avenue
Suite 400
Toronto, ON
Canada M5H 4H1
Auditors: Deloitte & Touche LLP
Address: Suite 1400 BCE Place
181 Bay Street
Toronto, ON
Canada M5J 2V1
Legal Counsel: MacLeod Dixon LLP
Address: TD Centre, CN Tower
100 Wellington Street West P.O. Box 128
Toronto, ON
Canada M5K 1H1
Dr Michiel (Mike) de Wit
President & CEO
Mike de Wit, President of BRC DiamondCore, has extensive experience in the diamond industry, having begun his career as an exploration geologist for the Geological Survey in South Africa prior to joining De Beers, where he worked for 29 years. Dr de Wit managed various exploration programs for De Beers in Africa which led to a number of kimberlite discoveries. Prior to his most recent appointment as general manager for De Beers in the DRC, Dr de Wit was responsible for all exploration programs for De Beers in Africa. In addition to MSc degrees in geophysics and sedimentology from the Universities of Pretoria and Reading (UK) respectively, Dr de Wit holds a PhD degree from the University of Cape Town. He brings some 31 years of exploration experience to the Company. Dr De Wit is based in Kinshasa, DRC
Arnold T. Kondrat
Director
The principal founder of BRC Diamond, Mr. Kondrat is also the founder and Executive Vice President of Banro Corporation, a gold exploration company based in the DRC, and Director and President of privately-held Sterling Portfolio Securities Inc., a Toronto-based venture capital company. He has been involved in corporate finance activities for more than 20 years
Brian Scallan
Vice President Finance
Mr Brian Scallan, BSc (Chem Eng) BCom (Economics) MBA, is a Director and Vice President Finance of BRC DiamondCore Limited. His career started as a chemical engineer at the Council for Scientific and Industrial Research in South Africa. After completing a degree in economics and an MBA he practiced as a management consultant for a period of 7 years concentrating on marketing and strategy work. He joined Standard Merchant Bank to design and implement its marketing strategy and was a member of the Bank's senior management committee. He transferred to operations becoming Head of Structured Trade and Commodity Finance. He was also involved with major mining project finance activities in Uganda and the Democratic Republic of Congo. After 15 years with the Standard Bank Group he consulted in project finance, primarily mining projects in Africa. More recently he was Head of Funding for Nikanor PLC prior to its takeover by Katanga Mining Ltd. He has consulted to Banro Corporation in respect to its funding requirements
Danie van der Merwe
Group Operating Manager
Mr van der Merwe has extensive experience in the diamond mining sector in the areas of metallurgy, engineering and mining production. He previously managed Saxendrift on the Middle Orange River for Trans Hex and the Koidu Kimberlite Project in Sierra Leone. Mr. van der Merwe holds a National Technical Diploma in Mechanical Engineering and has completed numerous supplementary courses including courses in metallurgy, diamond recovery systems, as well as safety and management. He is based on site in the Northern Cape Province of South Africa
Martin Jones
Vice President, Corporate Development
Mr Jones has over 25 years experience in corporate and investor communications. Prior to joining the Company, he was a partner with Advance Planning/MS&L, where he consulted to a number of Canada's leading corporations. For a number of years, he worked in the public affairs department of Imperial Oil. He holds a similar position with Banro Corporation.
Donat K. Madilo
Treasurer
Mr. Madilo has over 17 years experience in finance and administration. He holds a Bachelor of Commerce (Honors) from Institut Supérieur de Commerce de Kinshasa, a B.Sc. (Licence) in Applied Economics from University of Kinshasa and a Master's of Science in Accounting (Honors) from Roosevelt University in Chicago. He is also the Chief Financial Officer of Banro Corporation
Edmond Thorose
Geology, alluvial
Mr. Thorose graduated from the University of Toronto with a BSc. (hons) degree in geology and also holds an MBA from York University in Toronto. Edmond has nine years of exploration experience in gold and diamonds and has worked in the DRC for the last two years. He is based in the DRC.
Fabrice Matheys
Geology, kimberlite
Mr Matheys holds an MSc in exploration geology from Rhodes University in South Africa and has 16 years of field experience, mainly with De Beers. He has an intimate knowledge of the DRC, having worked for the last three years in that country. He is based in the DRC.
Corporate Office:
Address: 1 First Canadian Place
100 King St. West Suite 7070, P.O. Box 419
Toronto, ON
Canada M5X 1E3
Telephone: 416-366-2221 416-366-2221
Fax: 416-366-7722
Toll Free: 1-800-714-7938 1-800-714-7938
Johannesburg Office:
Address: Ruimsig Office Estate Building 6, Unit 4
193 Hole in One St (Cnr Peter Road)
Ruimsig, Johannesburg
Telephone: +27 11 9582885 +27 11 9582885
Fax: +27 110582617
Postal Address: Postnet Suite 585,
private bag X09
Weltevreden Park
1715 South Africa
Kinshasa Office:
Address: Boulevard du 30 juin
Immeuble SN Bruxelles (Ex-SABENA)
quatrième (4ème) étage, Appartement n°4, Commune de la Gombe
Kinshasa
Telephone: +243 819971037 +243 819971037
Fax: 416-352-1484
Bankers: TD Canada Trust
Address: 141 Adelaide St. West
Toronto, ON
Canada M5H 3V1
Transfer Agent: Equity Transfer & Trust Company
Address: 200 University Avenue
Suite 400
Toronto, ON
Canada M5H 4H1
Auditors: Deloitte & Touche LLP
Address: Suite 1400 BCE Place
181 Bay Street
Toronto, ON
Canada M5J 2V1
Legal Counsel: MacLeod Dixon LLP
Address: TD Centre, CN Tower
100 Wellington Street West P.O. Box 128
Toronto, ON
Canada M5K 1H1
Congo could turn out to be a gold mine
It's still chancy, but this Central African nation has monstrous unexploited mineral deposits and finally, after years of dictatorship and civil war, may be stable enough to draw investors.
Bummed by all the gray-haired killjoys telling you that all the fun is gone from investing, that small caps are dead, emerging markets are over, commodities are a bust and cash is king?
Then step right up to Jon's little House of Crazy Joy, because have I got a thrill-ride stock for you. It's an idea for these stressed-out times so ridiculous that no one in their right mind would consider it. So, you know, it just might work.
Don't call your financial adviser, in other words. She'll never go for it. Instead, put down your granny glasses, twirl a globe to equatorial Africa and put your finger smack in the middle on the fat patch of country the size of Western Europe. It's probably labeled Zaire, but after decades of civil war, dictatorship, corruption and name-changing, this minerals-blessed nation with fewer than 400 miles of paved roads prefers to be known as the Democratic Republic of the Congo.
Hey, you know: Tomato, to-mah-to. If a United Nations-sponsored election in three weeks works out as expected, you could call this place the Democratic Republic of Buried Treasure because political stability will lead world credit-rating agencies to upgrade its sovereign rating -- an important step toward unlocking its incredible resources. For hidden beneath the DRC's dense mountain jungles are tens of billions of dollars worth of unexploited gold, diamonds, uranium, cobalt, tin and tungsten that have escaped major miners' grasp because the countryside has been far too dangerous to deploy modern equipment and workers.
The smart and sane way to play a new era of peace and prosperity in the DRC would be the shares of large international diggers such as BHP Billiton (BHP, news, msgs). But if you want to get all Jack Sparrow about it, then you'll want to know that the really big commercial winners will be a handful of small Canadian public companies with untapped claims that rank with the richest in the world.
One of the most compelling investment opportunities of the bunch may lie with tiny Banro (BAA, news, msgs), a Toronto-based company that has substantial U.S. and British capital backing, a strong management team and, most importantly, four 100%-owned properties in the heart of the country's key 130-mile-long gold belt. If geological testing continues to pan out as it has so far, the company's annual gold production is expected to start as soon as 2009, at around 50,000 ounces a year, and run up to 500,000 ounces annually by 2012, at an average cost of less than $250 an ounce.
Raymond James and RBC Capital Markets analysts who have studied the company believe Banro has access to at least 12 million ounces of gold, and probably much more. At current prices, that would make the company, which now sports a $400 million market cap, worth well over $1 billion in the next couple of years.
High risk, high reward
Before your eyes get too big, keep in mind that there are many significant physical and psychological hurdles for both the country, once known as the Belgian Congo, to leap. Four million people have died from war, disease and famine in the past decade, and the election -- which is costing the United Nations around $400 million as part of an effort to stabilize all of central Africa -- may fail. The interim government, led by soft-spoken Joseph Kabila, has won surprising kudos from Western civil rights organizations and is ahead in the running to form the country's first freely elected leadership. But it has also imprisoned journalists to muffle dissent, so its acceptance on the world stage is not a slam dunk. Still, almost anything would be better than the outrageous thievery of brutal dictator Mobutu Sese Seko, ousted in 1997, or the vicious ethnic strife that followed.
And also note that several other small Canadian developmental miners with significant stakes in the Congo, including Moto Goldmines (CA:MGL, news, msgs) and First Quantum Minerals (CA:FM, news, msgs), may do better than Banro. So might larger, and thus more diversified, miners with claims in the area, such as South Africa-based AngloGold Ashanti (AU, news, msgs) and Gold Fields (GFI, news, msgs), or BHP Billiton, the Aussie.
Of the so-called "junior golds" in the DRC, Banro appears to be special in the quality of its executives, its remarkable focus on providing jobs and scientific development opportunity for native Congolese, and the potential for its properties. After so many stormy years of death and frustration, a Raymond James analyst calls Banro "the gold at the end of the rainbow."
Companies with major mining claims in the Democratic Republic of Congo Precious Metals 7/11 Close Mkt. Cap. Home
Banro (BAA, news, msgs)
$9.52
$322 M
Canada
Moto Goldmines (CA:MGL, news, msgs)
$4.95
$276 M
Canada
BHP Billiton (BHP, news, msgs)
$43.07
$77 B
Australia
AngloGold Ashanti (AU, news, msgs)
$48.25
$12 B
South Africa
Gold Fields (GFI, news, msgs)
$23.58
$11.6 B
South Africa
Base Metals
Adastra Minerals (CA:AAA, news, msgs)
$3.54
$288 M
Canada
Anvil Mining (CA:AVM, news, msgs)
$7.35
$388 M
Canada
African Copper (CA:ACU, news, msgs)
$1.40
$72 MM
Canada
Phelps Dodge (PD, news, msgs)
$80.37
$16.3 B
USA
Equinox Minerals (CA:EQN, news, msgs)
$1.29
$204 M
Canada
First Quantum Min (CA:FM, news, msgs)
$52.50
$3.2 B
Canada
Tenke Mining (CA:TNK, news, msgs)
$12.11
$708 M
Canada
Diamonds
BRC Diamond (CA:BRC, news, msgs)
$4.25
$52 M
Canada
Source: RBC Capital Markets
Banro's projects were cobbled together out of stakes owned by European investors in a series of deals in the mid-1990s hammered out by Arnold T. Kondrat, a Toronto venture capitalist with a history of taking on risky efforts. He put together a management team that includes former leaders of Ashanti, Nevsun Resources (NSU, news, msgs) and BHP Billiton with more than 150 years of experience in directing exploration programs in the Congo, Ghana, Tanzania and South Africa.
In 1998, DRC leaders expropriated Banro's projects a few months before a civil war between the nation's 200 ethnic groups exploded into a regional war that drew in Rwanda, Uganda, Chad and Tanzania. Kondrat sued the government for hundreds of millions of dollars, which naturally meant nothing until peace was brokered by the United Nations four years later. Banro then dropped its claims against the DRC in return for a return of ownership of its stakes, though it lost many millions of dollars worth of looted equipment and stolen gold.
By 2004, Kondrat saw the prospect for material improvement, as the United Nations installed its largest peacekeeping force in the world -- now numbering 19,000 soldiers. Last year, Banro managed to meet all the requirements to launch an initial public offering of shares on the American Stock Exchange and Toronto Stock Exchange. Among its investors now are Los Angeles-based mutual fund giant Capital Research & Management, with a 14% stake through March 31, and the Boston-based value mavens at Wellington Management, with a 2.2% stake.
Won't get fooled again
One reason to mention the company's major backers is that they perform a lot more due diligence than you or I are capable of doing. They're keen to get this one right after so many lost millions in the mid-1990s on a seemingly gold-plated developmental Canadian company called Bre-X, which claimed to have found a mine totaling 200 million ounces in the jungles of Borneo. After Bre-X's stock soared on the wings of Internet chat-room fervor and the company received sizable takeover offers, further investigation by a potential acquirer revealed it was all a scam. No gold was ever discovered, and the company's chief geologist threw himself out of an airborne helicopter.
With that in mind, you can understand why Raymond James analyst Eric Zaunscherb braved a visit to the still-dangerous DRC in February to check out Banro's Twangiza, Namoya and Lugushwa projects and the company's main office and management. Banro paid for the trip, but I'll note anyway that he came away impressed with its staff, exploration camps, sample-preparation laboratory, documentation, communication with government and religious groups, and balance sheet.
Perhaps the most remarkable effort he found under way was Banro's effort to use geologists from established African countries such as Ghana and Tanzania and educate promising young Congolese geologists. While many foreign-based miners in Africa use a lot of mechanical digging equipment and shoo away local laborers and "artisanal," or freelance miners, Zaunscherb found that Banro was employing more than 1,000 locals at substantial wages as part of its effort to improve the country and build trust. He found that a company foundation was also active in the community, building bridges and hospitals.
Skeptics should also keep in mind that gold projects in the Congo are not like ventures in Mongolia and elsewhere that are almost purely speculative. Substantial mining before the civil war that made the Congo too dangerous to explore has shown conclusively that the Central African copper belt holds at least 5 billion tons of copper and as much as 40% of the world's cobalt reserves.
Gold is always found in similar mineralization zones. In this case, it is in equatorial areas where large cratons –- blocks of the Earth's crust -- have contracted and formed rich mountainous belts. Banro is focused on an area wedged among the Congo Craton to the west, the Tanzania Craton to the east and the Zimbabwe Craton to the south. Gold, tin, tungsten, tantalum and other ores fill gaps in the cracks of smashed-up sedimentary and granite layers.
Place your bets
Analysts point out that Banro's 25-year permits to explore 1,014 square miles of the Twangiza-Nomoya gold belt -- and applications to explore in another 2,636-square-mile area -- are of a size more commonly associated with much larger companies. And indeed, just as young biotech companies may sell off stakes in promising molecules to large pharmaceutical makers, Banro might peel off pieces of its projects to senior gold producers to keep operations funded without diluting shareholders.
Independent Canadian researchers at the Fraser Institute have concluded that the gap between the current level of mineral production in the DRC and what it is capable of producing is the largest of any region in the world. Certainly no area with comparable potential wealth has yet to be exploited with modern mining techniques.
But before it can all be monetized, the elections have to run without a major hitch. Nearly half of Congo's 60 million people have reportedly registered to vote for one of 33 presidential candidates and 500 of 9,000 people running for seats in a new legislature. The United Nations has trained 300,000 election workers. Optimism, for the moment, has replaced rampant cynicism in both the public and commercial spheres over whether the vote -- which will conclude with a September run-off -- will work for citizens and investors alike.
Chester Crocker, a former assistant U.S. secretary of state for African affairs, told Bloomberg last week that he was happy to see companies "jockeying for position, trying to be part of a success story" in this "treasure-trove country."
It may be nuts, but if you want to have some fun with the sliver of your portfolio devoted to well-informed speculation, it's time to place your bets. To capitalize on the potential for commodities in a rebounding DRC, consider the basket of international mining stocks listed in the chart above.
Fine Print
To learn more about Banro, visit its Web site. This page provides links to the company's presentations to mining conferences and shareholders. … Read all about the Congo at the CIA's World Factbook, or in Wikipedia, or at the African Studies Center page of the University of Pennsylvania, or in a BBC profile, or in a UN profile. If you read French, check out Congo Online. And if you'd like to travel there, check out the Lonely Planet Guide, which advises "Congo's security situation is at best 'unstable', its infrastructure is in shambles and many of its citizens are in fear for their lives. As for travelers, the DRC remains a no-go zone." … To learn more about the Fraser Institute's work on mining companies, visit this page. .. To read a popular book about the Belgian king who brutally colonized the Congo, check out "King Leopold's Ghost" at Amazon.com. Of course, the classic novel about the Congo is "Heart of Darkness" by Josef Conrad. And finally the Jack Sparrow reference vis a vis buried treasure hails from this popular movie. Yo, ho, yo, ho.
Jon D. Markman is editor of the independent investment newsletters Strategic Advantage and Trader's Advantage. While he cannot provide personalized investment advice or recommendations, he welcomes column critiques and comments at jon.markman@gmail.com; put COMMENT in the subject line. At the time of publication, Jon Markman did not own any stocks mentioned in this column.
Bummed by all the gray-haired killjoys telling you that all the fun is gone from investing, that small caps are dead, emerging markets are over, commodities are a bust and cash is king?
Then step right up to Jon's little House of Crazy Joy, because have I got a thrill-ride stock for you. It's an idea for these stressed-out times so ridiculous that no one in their right mind would consider it. So, you know, it just might work.
Don't call your financial adviser, in other words. She'll never go for it. Instead, put down your granny glasses, twirl a globe to equatorial Africa and put your finger smack in the middle on the fat patch of country the size of Western Europe. It's probably labeled Zaire, but after decades of civil war, dictatorship, corruption and name-changing, this minerals-blessed nation with fewer than 400 miles of paved roads prefers to be known as the Democratic Republic of the Congo.
Hey, you know: Tomato, to-mah-to. If a United Nations-sponsored election in three weeks works out as expected, you could call this place the Democratic Republic of Buried Treasure because political stability will lead world credit-rating agencies to upgrade its sovereign rating -- an important step toward unlocking its incredible resources. For hidden beneath the DRC's dense mountain jungles are tens of billions of dollars worth of unexploited gold, diamonds, uranium, cobalt, tin and tungsten that have escaped major miners' grasp because the countryside has been far too dangerous to deploy modern equipment and workers.
The smart and sane way to play a new era of peace and prosperity in the DRC would be the shares of large international diggers such as BHP Billiton (BHP, news, msgs). But if you want to get all Jack Sparrow about it, then you'll want to know that the really big commercial winners will be a handful of small Canadian public companies with untapped claims that rank with the richest in the world.
One of the most compelling investment opportunities of the bunch may lie with tiny Banro (BAA, news, msgs), a Toronto-based company that has substantial U.S. and British capital backing, a strong management team and, most importantly, four 100%-owned properties in the heart of the country's key 130-mile-long gold belt. If geological testing continues to pan out as it has so far, the company's annual gold production is expected to start as soon as 2009, at around 50,000 ounces a year, and run up to 500,000 ounces annually by 2012, at an average cost of less than $250 an ounce.
Raymond James and RBC Capital Markets analysts who have studied the company believe Banro has access to at least 12 million ounces of gold, and probably much more. At current prices, that would make the company, which now sports a $400 million market cap, worth well over $1 billion in the next couple of years.
High risk, high reward
Before your eyes get too big, keep in mind that there are many significant physical and psychological hurdles for both the country, once known as the Belgian Congo, to leap. Four million people have died from war, disease and famine in the past decade, and the election -- which is costing the United Nations around $400 million as part of an effort to stabilize all of central Africa -- may fail. The interim government, led by soft-spoken Joseph Kabila, has won surprising kudos from Western civil rights organizations and is ahead in the running to form the country's first freely elected leadership. But it has also imprisoned journalists to muffle dissent, so its acceptance on the world stage is not a slam dunk. Still, almost anything would be better than the outrageous thievery of brutal dictator Mobutu Sese Seko, ousted in 1997, or the vicious ethnic strife that followed.
And also note that several other small Canadian developmental miners with significant stakes in the Congo, including Moto Goldmines (CA:MGL, news, msgs) and First Quantum Minerals (CA:FM, news, msgs), may do better than Banro. So might larger, and thus more diversified, miners with claims in the area, such as South Africa-based AngloGold Ashanti (AU, news, msgs) and Gold Fields (GFI, news, msgs), or BHP Billiton, the Aussie.
Of the so-called "junior golds" in the DRC, Banro appears to be special in the quality of its executives, its remarkable focus on providing jobs and scientific development opportunity for native Congolese, and the potential for its properties. After so many stormy years of death and frustration, a Raymond James analyst calls Banro "the gold at the end of the rainbow."
Companies with major mining claims in the Democratic Republic of Congo Precious Metals 7/11 Close Mkt. Cap. Home
Banro (BAA, news, msgs)
$9.52
$322 M
Canada
Moto Goldmines (CA:MGL, news, msgs)
$4.95
$276 M
Canada
BHP Billiton (BHP, news, msgs)
$43.07
$77 B
Australia
AngloGold Ashanti (AU, news, msgs)
$48.25
$12 B
South Africa
Gold Fields (GFI, news, msgs)
$23.58
$11.6 B
South Africa
Base Metals
Adastra Minerals (CA:AAA, news, msgs)
$3.54
$288 M
Canada
Anvil Mining (CA:AVM, news, msgs)
$7.35
$388 M
Canada
African Copper (CA:ACU, news, msgs)
$1.40
$72 MM
Canada
Phelps Dodge (PD, news, msgs)
$80.37
$16.3 B
USA
Equinox Minerals (CA:EQN, news, msgs)
$1.29
$204 M
Canada
First Quantum Min (CA:FM, news, msgs)
$52.50
$3.2 B
Canada
Tenke Mining (CA:TNK, news, msgs)
$12.11
$708 M
Canada
Diamonds
BRC Diamond (CA:BRC, news, msgs)
$4.25
$52 M
Canada
Source: RBC Capital Markets
Banro's projects were cobbled together out of stakes owned by European investors in a series of deals in the mid-1990s hammered out by Arnold T. Kondrat, a Toronto venture capitalist with a history of taking on risky efforts. He put together a management team that includes former leaders of Ashanti, Nevsun Resources (NSU, news, msgs) and BHP Billiton with more than 150 years of experience in directing exploration programs in the Congo, Ghana, Tanzania and South Africa.
In 1998, DRC leaders expropriated Banro's projects a few months before a civil war between the nation's 200 ethnic groups exploded into a regional war that drew in Rwanda, Uganda, Chad and Tanzania. Kondrat sued the government for hundreds of millions of dollars, which naturally meant nothing until peace was brokered by the United Nations four years later. Banro then dropped its claims against the DRC in return for a return of ownership of its stakes, though it lost many millions of dollars worth of looted equipment and stolen gold.
By 2004, Kondrat saw the prospect for material improvement, as the United Nations installed its largest peacekeeping force in the world -- now numbering 19,000 soldiers. Last year, Banro managed to meet all the requirements to launch an initial public offering of shares on the American Stock Exchange and Toronto Stock Exchange. Among its investors now are Los Angeles-based mutual fund giant Capital Research & Management, with a 14% stake through March 31, and the Boston-based value mavens at Wellington Management, with a 2.2% stake.
Won't get fooled again
One reason to mention the company's major backers is that they perform a lot more due diligence than you or I are capable of doing. They're keen to get this one right after so many lost millions in the mid-1990s on a seemingly gold-plated developmental Canadian company called Bre-X, which claimed to have found a mine totaling 200 million ounces in the jungles of Borneo. After Bre-X's stock soared on the wings of Internet chat-room fervor and the company received sizable takeover offers, further investigation by a potential acquirer revealed it was all a scam. No gold was ever discovered, and the company's chief geologist threw himself out of an airborne helicopter.
With that in mind, you can understand why Raymond James analyst Eric Zaunscherb braved a visit to the still-dangerous DRC in February to check out Banro's Twangiza, Namoya and Lugushwa projects and the company's main office and management. Banro paid for the trip, but I'll note anyway that he came away impressed with its staff, exploration camps, sample-preparation laboratory, documentation, communication with government and religious groups, and balance sheet.
Perhaps the most remarkable effort he found under way was Banro's effort to use geologists from established African countries such as Ghana and Tanzania and educate promising young Congolese geologists. While many foreign-based miners in Africa use a lot of mechanical digging equipment and shoo away local laborers and "artisanal," or freelance miners, Zaunscherb found that Banro was employing more than 1,000 locals at substantial wages as part of its effort to improve the country and build trust. He found that a company foundation was also active in the community, building bridges and hospitals.
Skeptics should also keep in mind that gold projects in the Congo are not like ventures in Mongolia and elsewhere that are almost purely speculative. Substantial mining before the civil war that made the Congo too dangerous to explore has shown conclusively that the Central African copper belt holds at least 5 billion tons of copper and as much as 40% of the world's cobalt reserves.
Gold is always found in similar mineralization zones. In this case, it is in equatorial areas where large cratons –- blocks of the Earth's crust -- have contracted and formed rich mountainous belts. Banro is focused on an area wedged among the Congo Craton to the west, the Tanzania Craton to the east and the Zimbabwe Craton to the south. Gold, tin, tungsten, tantalum and other ores fill gaps in the cracks of smashed-up sedimentary and granite layers.
Place your bets
Analysts point out that Banro's 25-year permits to explore 1,014 square miles of the Twangiza-Nomoya gold belt -- and applications to explore in another 2,636-square-mile area -- are of a size more commonly associated with much larger companies. And indeed, just as young biotech companies may sell off stakes in promising molecules to large pharmaceutical makers, Banro might peel off pieces of its projects to senior gold producers to keep operations funded without diluting shareholders.
Independent Canadian researchers at the Fraser Institute have concluded that the gap between the current level of mineral production in the DRC and what it is capable of producing is the largest of any region in the world. Certainly no area with comparable potential wealth has yet to be exploited with modern mining techniques.
But before it can all be monetized, the elections have to run without a major hitch. Nearly half of Congo's 60 million people have reportedly registered to vote for one of 33 presidential candidates and 500 of 9,000 people running for seats in a new legislature. The United Nations has trained 300,000 election workers. Optimism, for the moment, has replaced rampant cynicism in both the public and commercial spheres over whether the vote -- which will conclude with a September run-off -- will work for citizens and investors alike.
Chester Crocker, a former assistant U.S. secretary of state for African affairs, told Bloomberg last week that he was happy to see companies "jockeying for position, trying to be part of a success story" in this "treasure-trove country."
It may be nuts, but if you want to have some fun with the sliver of your portfolio devoted to well-informed speculation, it's time to place your bets. To capitalize on the potential for commodities in a rebounding DRC, consider the basket of international mining stocks listed in the chart above.
Fine Print
To learn more about Banro, visit its Web site. This page provides links to the company's presentations to mining conferences and shareholders. … Read all about the Congo at the CIA's World Factbook, or in Wikipedia, or at the African Studies Center page of the University of Pennsylvania, or in a BBC profile, or in a UN profile. If you read French, check out Congo Online. And if you'd like to travel there, check out the Lonely Planet Guide, which advises "Congo's security situation is at best 'unstable', its infrastructure is in shambles and many of its citizens are in fear for their lives. As for travelers, the DRC remains a no-go zone." … To learn more about the Fraser Institute's work on mining companies, visit this page. .. To read a popular book about the Belgian king who brutally colonized the Congo, check out "King Leopold's Ghost" at Amazon.com. Of course, the classic novel about the Congo is "Heart of Darkness" by Josef Conrad. And finally the Jack Sparrow reference vis a vis buried treasure hails from this popular movie. Yo, ho, yo, ho.
Jon D. Markman is editor of the independent investment newsletters Strategic Advantage and Trader's Advantage. While he cannot provide personalized investment advice or recommendations, he welcomes column critiques and comments at jon.markman@gmail.com; put COMMENT in the subject line. At the time of publication, Jon Markman did not own any stocks mentioned in this column.
Mugabe’s Vice-President sells $90 million worth of DR Congo gold
The Vice-President of Zimbabwe has been accused of trying to sell millions of dollars in gold nuggets and diamonds in defiance of international sanctions.
Joyce Mujuru used her daughter as a go-between to seek a deal for the gold, according to Firstar, a commodities trader based in Britain, which says that it was approached in November.
Mrs Mujuru, appointed by Robert Mugabe five years ago, is among the 200 Zimbabweans under European Union and United States sanctions for alleged human rights abuses.
Firstar claims that Mrs Mujuru’s daughter and Spanish son-in-law, Nyasha and Pedro del Campo, offered to sell 3,700kg of gold for $90 million to Firstar Europe Ltd, a precious metal dealer. At the present market rate, one kilo of gold sells for $30,700 (£21,500).
Mr del Campo allegedly e-mailed Firstar offering 3.7 tonnes of gold nuggets with a certificate of origin from the Democratic Republic of Congo and $15 million of diamonds without certification. He claimed to represent two commodities companies, Onesafara International and Berline Equities Corp. But over the course of the correspondence, it allegedly came to light that the real seller was Mrs Mujuru.
Bernd Hagamann, the president of Firstar, told The Times: “Our investigations showed who was really involved in the deal — Mrs Mujuru — who is on our blacklist. So we refused.”
Mr Hagamann said that when he told Mrs del Campo that he would not buy “blood gold” she offered to change the certificate of origin to Kenya.
“We have no interest in buying gold from people running a country where people are dying of cholera or from Congo, where the money from any deal would be used to buy arms to kill more people,” he said. “This is bloody gold. These people are criminals.”
Mr Hagamann said that after refusing to go ahead with the deal and telling the couple that he was reporting them to the authorities he received a telephone call from Mrs Mujuru.
“She said, ‘Some people will visit your house. You and your daughter will have problems’. But I was not afraid. It was funny. I told her she would have problems coming to Europe.”
Firstar posted the e-mail correspondence and documents concerning the deal on its website, saying that it wished to deter other blacklisted buyers. The documents included photographs of the gold nuggets and one of 13 diamonds ranging from one to five carats. E-mails between Mrs del Campo and Firstar detailed how the gold would be transported from Nairobi to Zurich once Firstar had paid $100,000 for transportation costs. A certificate of origin stated that the gold was from Lubumbashi, an area of the Democratic Republic of Congo with links to Zimbabwean officials.
The case raises concerns about attempts by members of unsavoury regimes to break sanctions. Mrs Mujuru and her husband, Solomon, a former head of the national army, are among the wealthiest and most powerful people in Zimbabwe, with extensive mining interests, including the River Ranch Diamond Mines. The World Diamond Council has accused the company of trafficking blood diamonds by mixing them with Zimbabwean stones and smuggling them to South Africa.
The United Nations has documented how leading members of the Mugabe regime benefited from mining concessions granted by the former Congolese leader Laurent Kabila in return for the help of Zimbabwean troops during the 1998-2002 war.
The United Nations reported in December that 53 tonnes of munitions were flown to Harare from Lubumbashi in August. As the Democratic Republic of Congo does not manufacture ammunition, it must have arrived from another country.
Mrs del Campo declined to comment but said that she was speaking to her lawyers.
Dirty commodities
— During the civil war in Sierra Leone in the 1990s, 4 per cent of the world's diamond production came from areas controlled by the country's warlords
— Profits from the trade in blood diamonds were used by warlords to buy arms for wars in Angola and the Democratic Republic of Congo
— Illicit rough diamonds have been used by rebels to fund conflicts in Liberia, Ivory Coast and the Republic of Congo
— In 2008 the Swiss gold refiner Metalor launched a campaign in Colombia to prevent gold being used for tax evasion
— Turkey is reported to be the main supplier of smuggled gold to Europe
— The FDLR, a Hutu force waging civil war in the Democratic Republic of Congo, funds itself by illegally trading minerals including the gold that is mined there
Sources: UN, Amnesty International, Times archives
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CONGO GOLD It is time to address the killing fields of the Congo
Here is one tonne of gold ,times this by 40
About 40 tons of gold is smuggled annually out of the Democratic Republic of Congo (DRC). Most is shipped to Dubai via its neighbor, Uganda, according to a UN official in charge of the arms embargo.The official, Dino Mahtani, told the BBC that most of the gold was controlled by rebel groups who buy weapons with the proceeds.
Mahtani, who is due to report to a UN Security Council meeting this week, said that the money helps sustain armed groups in the field. Mahtani quoted from a report of the DRC senate. This talked of roughly $1.24 b worth of gold, or 40 tonnes, smuggled out every year “without any customs declaration.”
“A lot of this gold,” he said, “is controlled by armed group networks, in particular the FDLR, a Rwandan-based rebel group partly made up of members involved in the 1994 genocide, and who continue to operate in eastern Congo”. This trade, he added, is one of the most significant avenues of direct finance for the armed groups.
Uganda is a key conduit from DRC to the world market in Dubai, in the United Arab Emirates. Once the gold leaves Dubai it is virtually untraceable. Between 1995 and 2006, gold was among Uganda’s top three exports; and according to the Uganda Export Promotion Board, the country exported a total of $342 worth of gold between 2003 and 2008. In 2006 alone a record $122.6m worth of gold and gold compounds were exported. Yet, statistics from the energy and mineral ministry says that Ugandan mines produce a negligible amount of gold per year. A Human Rights Watch report in 2005 revealed that gold that arrived in the country with no documentation left as a legitimate export, and linked Ugandan businessmen to rebel groups in the DRC.
The UN has had an arms embargo in place in the DRC for six years following the peace accord between the government and the rebels.
Sanctions were applied to two gold-trading companies that operated out of Uganda, but UN investigators say it would be “quite easy” for people to evade the sanctions, because they apply only to the companies and not to individuals.
This week Mahtani will present evidence from travel documents, phone records and customs certificates to the Security Council, outlining how Congolese gold is traded.
“When you place companies on a sanctions list”, he said, “and you don’t sanction directors of those companies, then it’s easy for them to simply change behaviour, set up new front companies and carry on operating.”
The Security Council will have to decide whether to impose further sanctions.
The minerals of eastern Congo have kept this part of Central Africa unstable for many decades. When the Rwandan genocidaires and refugees fled there in 1994 their conflict continued in this mineral-rich area. In 1996-7 when Rwandan and Ugandan forces attempted to oust former president Mobutu, and install Laurent Kabila, eastern Congo was the scene of operations, where it is estimated some 4 million people died, mainly from hunger and disease. While the killing was going on, army officers were suspected of being involved in the smuggling of gold and other minerals, and mahogany, across the DRC’s eastern borders.
Now there is greater peace in the region, and the DRC government seems to be getting its act together, it is high time these and many other abuses in these African “killing fields” were exposed.
Martyn Drakard is a writer and analyst based in Kenya and Uganda.
Wednesday, November 18, 2009
Martyn Drakard
Native Americans Launch the "Free Lakota Bank"
http://freelakotabank.com/
With the launch of the Free Lakota Bank, The Free & Independent Nation of Lakota has launched a frontal assault on Wall Street, The Fed, and International Bankers.
Native Americans are historically known for their strong spirit, patience, and stealth, not to mention their very advanced war making strategies. The launch of this banking concept seems to display all of these characteristics in spades.
While The Free & Independent Nation of Lakota’s formal secession from the United States passed last year with little comment or reaction, this latest development will likely raise many eyebrows around the world. Ultimately, official reactions will be based on how individuals and markets respond to the offerings of their bank.
The Free Lakota Bank has well-baited its hook by the sheer elegance of their banking model, some features being
1. Only Gold or Silver Holdings, but with a preliminary period where they will accept Federal Reserve Notes and convert them to metal.
2. Completely Anonymous – No names or Social Security Numbers attached to accounts.
3. Two-Tiered Security – SSL Online username, using a strong keystroke encryption program; followed by an automatic phone call for the user to enter a PIN number.
4. An incredibly inexpensive monthly fee for account maintenance (0.00005 service fee or 5 cents per thousand when calculated at present silver spot).
5. A “General Investment Fund;” which allows a waiver of investors’ maintenance fees and earns a current annual rate of return for the Fund of 7.24%.
6. A lending philosophy that is a blend of classic Muslim banking and the largely unexploited market of “Micro-loans.”
Their model presents on our continent a system not unlike a numbered Swiss account, and with features and benefits that are appealing to both individual and larger, institutional investment vehicles. They offer this investment alternative precisely at the time when investors are under great pressure by economic conditions.
After some due-diligence, it would not be surprising to see large accounts divesting and shifting to The Free Lakota Bank’s “General Investment Fund.” While there may be something of a “who blinks first” dynamic involved, it is likely that once one large fund would make such a move, it would be followed rapidly by many others possibly precipitating a significant Wall Street “event.”
Therein lays the elegance of what this writer perceives to be a carefully set out plan – a well calculated and executed frontal assault, exploiting critical infrastructure vulnerability.
It would be wise to watch developments closely as there is potential of a very strong response from the U.S. Government at the prompting of the Fed and its underlying banking interests. The type and nature of such response could draw some significant lines of demarcation, and prompt decision making modes likely uncomfortable for some.
(Submitted by R. Petricci)
About Free Lakota » A New Standard of value "Money is the barometer of a society's virtue. When you see that trading is done, not by consent, but by compulsion...when you see that in order to produce, you need to obtain permission from men who produce nothing...when you see your laws don't protect you against them, but protect them against you...when you see corruption being rewarded and honesty becoming a self-sacrifice...you may know that your society is doomed." "Atlas Shrugged"
At the Free Lakota Bank, we issue, circulate and accept for deposit only AOCS-Approved silver and gold currencies. Silver & gold are a store of value, an equivalent of wealth produced. Paper is a mortgage on wealth that does not exist, backed by a gun aimed at those who are expected to produce it. Since we deal only in real money, we do not participate in any central bank looting schemes.
Money is made possible only by those who produce. Paper is not money, instead merely a promise to pay. We hope that some day the rest of the world will awaken from the American Dream: the dream that a person can sustain life by consuming more than producing. We call it the American Dream because you must be asleep to believe it. Well, that dream now has a silver lining; as people discover the dream is really a nightmare, the only solution is a return to value: value that comes from production and honest trade.
The IMF and the challenge of relevance in the international financial architecture
Economic Roundup WINTER 2003
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The IMF and the challenge of relevance in the international financial architecture
Martin Parkinson and Adam McKissack1
This paper was prepared for the International Monetary Convention held in Madrid on 13-14 May 2003, organised by the Reinventing Bretton Woods Committee and the Spanish Ministry of Finance. The paper reviews the role of the IMF since its inception in 1944 and discusses some of the challenges for the IMF, and the international community more broadly, arising from recent developments in the world economy.
Introduction
The end of the 20th century, and beginning of the 21st, has proven to be something of a watershed period for the IMF. The string of major crises of the past decade, and the associated reassessment of how to maintain international financial stability, saw significant questioning of the role of the Fund.2 The resulting soul searching - and the acknowledgment by the Fund and its shareholders of the need for change - has led to a substantial refocusing of its activities onto its core responsibilities in the last five years.
This change has not been without pain. But more change is needed still. The IMF must continue to evolve as the world changes in order to retain its relevance to the international financial system. But its evolution must be around its core responsibilities. It must avoid having its focus fragmented by straying into areas better dealt with by other parts of the international financial architecture.
This need for further change provides an opportune time to reconsider the evolution of the IMF's role since it was established in the 1940s and to ponder some of the challenges ahead. Despite criticism, the Fund retains a central role in today's international financial architecture, suggesting that the evolution to date has been broadly viewed as successful. However, the choices it makes now in response to pressures for further change will help determine whether it remains equally relevant over the next half century.
While the actions of the Fund are important, the debate about its role is not simply about what the institution should, or should not, do. It is also about what the national government shareholders of the IMF expect from the Fund as an institution and their commitment to the role they bestow upon it. The appropriate role of, and the interactions among, the various institutions within the international financial architecture also bears on the debate. The shareholders of the Fund comprise virtually all countries in the world; its future effectiveness is, therefore, the responsibility of the international community writ large.
Original role of the IMF
The IMF was established in 1944 to promote international financial stability in the post World War II reconstruction period. The Fund's purpose, as set out in its Articles of Agreement (see Box 1), is to promote international monetary cooperation, financial stability and world economic growth. This purpose remains broadly relevant to the present day, although the means of achieving this purpose have clearly changed.
Box 1: Articles of Agreement of the IMF
Article I
Purposes
The purposes of the International Monetary Fund are:
(i) To promote international monetary cooperation through a permanent institution which provides the machinery for consultation and collaboration on international monetary problems.
(ii) To facilitate the expansion and balanced growth of international trade, and to contribute thereby to the promotion and maintenance of high levels of employment and real income and to the development of the productive resources of all members as primary objectives of economic policy.
(iii) To promote exchange stability, to maintain orderly exchange arrangements among members, and to avoid competitive exchange depreciation.
(iv) To assist in the establishment of a multilateral system of payments in respect of current transactions between members and in the elimination of foreign exchange restrictions which hamper the growth of world trade.
(v) To give confidence to members by making the general resources of the Fund temporarily available to them under adequate safeguards, thus providing them with opportunity to correct maladjustments in their balance of payments without resorting to measures destructive of national or international prosperity.
(vi) In accordance with the above, to shorten the duration and lessen the degree of disequilibrium in the international balances of payments of members.
The Fund shall be guided in all its policies and decisions by the purposes set forth in this Article.
At the time the IMF was established the experience of the 1930s remained fresh in many minds. Competitive devaluations associated with 'beggar-thy-neighbour' policies were seen as a key source of instability in the international financial system. A key part of the answer to this problem, as conceived by the architects of the Bretton Woods system, was to create a system of pegged exchange rates to counter such destabilising behaviour.3 The system provided for a set of exchange rate parities between members linked to gold or the US dollar, with the value of the dollar in turn linked to the price of gold at $US35 to the ounce.
The Fund's primary function under this system was to support the maintenance of these exchange rate parities, including by lending to members facing short term balance of payments disequilibria. The Fund essentially acted as an international credit union. Members contributed to a pool of reserves from which countries facing balance of payments deficits could borrow to maintain their pegged exchange rate.4
The Articles of Agreement (Clause (V) of Article 1) arguably presume conditionality in referring to resources being made temporarily available 'under adequate safeguards'. But the nature of conditionality was not defined. Rather, it has emerged over time with the development and operation of Fund-supported programs of adjustment. The introduction of Stand By Arrangements in 1952 to provide medium term assistance saw the introduction of explicit conditionality, whereby countries were required to adopt policies to resolve balance of payments difficulties in exchange for Fund support.5 The introduction of the Extended Fund Facility in 1974 for longer term balance of payments difficulties saw the introduction of three year programs of conditionality covering structural, not just macroeconomic, policies relevant to the balance of payments6.
Changing role of the IMF
The international financial system has seen many changes since 1944. Most notably, these include abandonment of the original Bretton Woods system of pegged exchange rates in the early 1970s and the emergence of capital account crises in the 1990s on the back of rapid growth in private capital flows.
Breakdown of the Bretton Woods System
A defining change was the breakdown of the Bretton Woods system of exchange rate parities between 1968 and 1971.7 While no consensus exists on the reasons for the breakdown, some common factors are generally put forward. Among these are the breaking of the link between the US dollar and the monetary gold stock, as the Vietnam War and the growth in world output and liquidity strained the convertibility of the US dollar into gold. Increasing capital mobility also put strains on the system through facilitating speculation against fixed parities. Finally, greater price instability in the US meant that the system of fixed exchange rates increasingly ran the risk of providing a transmission mechanism for higher world inflation, in turn placing pressure on parities.
Since the collapse of the Bretton Woods system, but especially since the Asian crisis of 1997-98, there has been growing acceptance of the benefits of more flexible exchange rates. Economic orthodoxy moved from regarding floating rates as a source of instability in the 1940s, to increasingly perceiving them as a means of absorbing the impact of international shocks (although acceptance of this argument is by no means universal).8
The 'shock absorber' role of floating rates became relatively more important with the increased output and price instability seen from the early 1970s onwards. It has became increasingly accepted that the trinity of a monetary policy directed at domestic balance, a fixed exchange rate and international capital mobility was not sustainable. That is, it was recognised that it was not possible to pursue an independent monetary policy while defending a fixed exchange rate with mobile capital, and that this limited the flexibility of policy makers in addressing issues of price and output instability.
The fact that the end of the Bretton Woods system did not mean an end to the role of the IMF is itself informative of the way in which the IMF had evolved since its inception. While the system of pegged exchange rates had proved unsustainable, countries were not indifferent to exchange volatility. Exchange rates were free to move, but desirably in an 'orderly' fashion. So the need remained strong for an institution that would promote international financial stability, including through lending to countries requiring liquidity to correct for short term macroeconomic imbalances. However, the changing trends in the world economy clearly altered the way the Fund approached its role.
In particular, the beginning of the era of flexible exchange rates saw significant development in the concept of IMF surveillance. The Fund acquired a formal surveillance role following an amendment to its Articles of Agreement in 1978. Associated with this role, the IMF was charged with conducting surveillance over member policies. Equally, members were obliged to provide the information necessary for the conduct of that surveillance.
This reflected the broadening of the Fund's focus away from one of achieving balance of payments outcomes consistent with the relevant exchange rate towards considering issues of whether general macroeconomic policy settings were consistent with internal and external balance; identifying stresses before they had reached breaking point. This represented an evolution in the role for the Fund, but one which remains consistent with its overall purposes.
The introduction of the Extended Fund Facility in 1974, which focused on longer term policies affecting the balance of payments, is indicative of the associated broadening in scope of Fund programs. With the broader scope of programs came increasingly sophisticated conditionality addressing the longer term policy settings of member countries.
In retrospect, the IMF's role up to the end of the 1970's evolved in a broadly sensible fashion. The overarching purpose of ensuring international financial stability remained the same, but the assessment of the problem moved from one of exchange rate management, narrowly defined, to the compatibility of broader macroeconomic settings with orderly exchange rate behaviour, and the IMF's approach moved in step with this change.
More recent trends
More recently, an important development has been the rapid expansion of private capital flows between countries and closer integration of global capital markets. While potentially beneficial for the growth of recipient countries, these developments have had a number of less benign consequences.
First, countries have become more exposed to the risk of capital account crises. The presence of large amounts of mobile private capital has increased the risk of sharp market reactions in the face of emerging economic imbalances. This has meant that the loss of confidence in domestic policies can be quite sudden and can result in dramatic reversals in capital flows with consequent disorderly and damaging adjustment.
A second consequence has been that crises have increasingly been triggered by, and have exposed, serious structural policy weaknesses, particularly in relation to the financial sector. This has seen a distinction drawn between financial crises and 'traditional' balance of payments crises. While it would be overly simplistic to seek to draw a strict dichotomy between the two, it is clear that the strains on domestic financial systems posed by the increasing scale of capital flows have introduced a new element into modern crises. This has dragged the focus of Fund surveillance further beyond that of macroeconomic stabilisation and into areas of prudential and regulatory reform in the financial sector.
An additional feature of modern crises has been the presence of contagion effects arising from the closer integration of global capital flows. This has seen the loss of confidence in one country trigger similar losses of confidence in other countries. The transmission of crises from one country to another has posed new threats to the stability of the international financial system as a whole.
The changing nature and increased severity of crises has had a number of implications for the Fund's role. It has seen a further evolution in the role of Fund surveillance. The scope of surveillance has been broadened. First, to address structural issues which pose a threat to macroeconomic stability. Second, to better and earlier detect emerging vulnerabilities, which has led to a
focus on issues such as the size, maturity and currency composition of external debt.9 The widened scope of individual country monitoring has been complemented by an increased emphasis on multilateral and regional surveillance to identify interactions and linkages that might facilitate the spread of crises.
There has also been an increased focus on the stability of domestic financial systems, particularly following the Asian financial crisis of the late 1990s. This has seen the development and broadening of a role for bodies which complement the role of the Fund. Included amongst these is the Financial Stability Forum (FSF), which promotes discussion amongst members on appropriate regulatory and prudential practices. The FSF is not alone, however, with the work of the various standard setting bodies gaining greater attention in recent years.10
Increases in the size of private capital flows have also introduced a new element to crisis resolution. In 'traditional' current account crises, the challenge was to provide finance to support countries in making the appropriate domestic policy adjustments to correct the imbalance. While this role remains, the build up of large amounts of privately held debt has meant that IMF lending and domestic policy adjustment may not be sufficient to achieve macroeconomic stability. That is, countries increasingly appear to find themselves in situations where there may be no set of domestic policies that can place them onto a sustainable path without some restructuring of their debts. This has led to calls for mechanisms to better coordinate the restructuring of privately held sovereign debt in crisis situations.
The relatively reduced importance of official sector capital flows has produced a situation in which the credibility and success of Fund-supported programs, Fund lending and conditionality are at a premium. In recent years the Fund has tried to stem crises with finance that is small relative to volatile private capital flows, notwithstanding a period in which the scale of Fund interventions has grown very large by its own historical benchmarks. Consensus also exists that, even were they large enough to do so, official sector resources cannot be used to 'bail-out' the private sector. The need for Fund involvement in crisis prevention to be catalytic - to be confidence inspiring and to 'bail-in' the private sector - has therefore become all the more important.
Chart 1: Emerging market economies -
cumulation of capital flows11
The recent period has also seen increased debate about the effectiveness of the Fund's policies in terms of crisis prevention and crisis resolution. Following the Asian financial crisis, some criticised the Fund for 'missing the signs' of the emerging crisis and for relying too much on 'old' solutions in seeking to resolve 'new' problems, for example through relying on macroeconomic stabilisation policies when many of the underlying problems were essentially structural in nature. Still others argued that the macroeconomic policy settings appropriate to the avoidance of a crisis were not those that should be pursued in the aftermath of a capital account crisis.12 Some critics also argued that the pursuit of structural reforms as part of crisis management was inappropriate, while others believed the Fund had no role in structural issues at all. This debate has intensified with the emergence of crises in countries that have been subject to ongoing and extensive Fund support. This has reduced the credibility of the Fund in the eyes of some commentators and raised questions about its effectiveness in both preventing and resolving modern day crises.
Recent developments have also led to increased public scrutiny of the IMF's role and questions about its legitimacy. The Fund is considered to have experienced 'mission creep', moving into areas beyond its original mandate and areas of expertise.
At one level, these criticisms are unfair.
First, there is still no consensus on how best to identify, prevent, and resolve capital account crises. Even if such a consensus had by now emerged, hindsight is blessed with 20:20 vision - it may still be too much to expect the Fund to have known this in the mid-1990s.
Second, the Fund has experienced mission creep at the behest of its shareholders, and in response to broader international opinion (for example, as represented by some NGOs), who have demanded attention move to include structural policies in a wide range of areas only loosely related to the original purpose of the institution. These include military expenditures and environmental and gender issues. But mission creep has also arisen as the nature of the membership has changed. The membership of the transition economies in the early 1990s brought with it new sets of issues; different from those the Fund had previously to deal with, especially related to structural policy and its interaction with growth and macroeconomic stability.
Similarly, the increased emphasis placed on growth and poverty reduction - at the behest of the international community - has thrown up new and different issues upon which the Fund is expected to advise. Indeed, a checklist would indicate that Fund missions should now address perhaps as many as 40 separate issues in every Article IV surveillance report. The wider the range of responsibilities placed on the Fund, the greater the risk that its focus becomes fragmented, a risk that needs to be recognised explicitly by its shareholders.
That said, there is also a legitimate basis for criticism.
It is only in recent years that the Fund has begun to engage with its critics, and to become more transparent and accountable for its surveillance and policy advice. By exposing its judgements to public gaze, the Fund can help educate the broader community and make it easier for outsiders to see and assess the types of 'on balance' judgements it is required to make - this has been a good discipline for national policymakers and there is no reason to believe it will not be equally valuable for the Fund.
The progressive redefinition of the problem of how to maintain international financial stability has taken the Fund into a widening range of structural, financial and institutional issues. Having embarked on this path the challenge is knowing when to stop, since virtually every aspect of an economy can be said to be macroeconomically relevant to at least some degree. Despite the success of recent efforts to refocus the Fund on its core responsibilities, the need to avoid excessive mission creep will remain an ongoing challenge.
Almost six years after the start of the Asian crisis, it needs to be recognised that there has been considerable evolution in the Fund's focus and modus operandi. This evolution must continue in response to the changing nature of the international economic and financial system. All institutions need to evolve if they are to remain effective. The question is how to get the right balance.
Future role
General considerations
Notwithstanding recent criticisms, the Fund has an on-going and important role to play in the international financial architecture. Its purposes as set out in its Articles of Agreement remain relevant to addressing the challenges confronting the global economy today and those likely to arise in the decades ahead. However, given the changes in the world economy of the last decade it is clear that there is a need to continue to re-evaluate the nature of its role going forward.
This is a critical point. As discussed above, the Fund's role is not, and has never been, static.
It was initially established to support a system of pegged exchange rates and had to adapt when this system broke down. It was established at a time of limited international capital mobility and has had to adapt to a world of large and rapid private capital flows.
While the trend toward increased capital market integration is unlikely to be reversed, appropriate exchange rate regimes have been a matter of debate for over a century. With proposals for target zones and currency unions continuing to be discussed as a means of promoting regional stability, it cannot be ruled out that fixed exchange rates will again become a more important feature of the global financial system in the future. Further, it is unclear what additional pressures the forces of globalisation will place on domestic policy settings. The Fund needs to be flexible enough to continue to adapt to these, and other, trends as they develop.
The Fund's future role is, in many ways, endogenous. The role will evolve based on how it performs; specifically to how well it adapts to changes in the international environment. The Fund is likely to still exist in one form or another in the decades ahead, but whether it remains a relevant institution is a function of the decisions made now and in the future. It is one thing to survive as an institution - all national policy makers can attest to the difficulty of closing institutions and fora that have outlived their usefulness - but another to survive as a credible institution.
Credibility therefore emerges as a key issue that will shape the Fund's direction in the future. What do we mean by credibility? There are two key aspects to the concept. The first is the issue of effectiveness. Recent crises have highlighted the tension between providing funds to help 'bail-out' countries in crisis and encouraging countries, whether before, during or after a crisis, to make difficult, but necessary, domestic policy adjustments. The Fund has been seen in some quarters as too ready to dole out financial assistance without sufficient policy adjustment. Critics in the 'effectiveness camp' argue that the Fund is not doing enough to push the reforms necessary for domestic adjustment but is in some cases deferring (or even exacerbating) the necessary adjustment through its financing packages.13
In contrast, others argue that the Fund goes too far in seeking to impose changes to domestic policies and question the Fund's legitimacy in undertaking such a role. Critics in the 'legitimacy camp' argue that the Fund is not sufficiently accountable to its members and, as evidence, point to the lack of country ownership of the types of policies endorsed by the Fund. They would argue that a lack of legitimacy leads to an inability to achieve reform, in turn creating problems of low Fund credibility.
This would appear to place the Fund between the proverbial 'rock and a hard place'. For example, Feldstein (1998) has argued, 'A nation's desperate need for short-term financial help does not give the IMF the moral right to substitute its technical judgments for the outcomes of the nation's political process.' Equally, though, we would suggest that a nation has no automatic right to be bailed out by the rest of the international community if it persistently pursues inappropriate policies.
There are no easy answers to this dilemma, but it is clear that the Fund needs to address issues of both effectiveness and legitimacy if it is to have credibility. In fact, the two concepts can be mutually supporting - for example, greater country ownership and broader support for the Fund among the international community may increase country and communal support acceptance of programs that recommend difficult policy choices. A fundamental challenge for the international community moving forward is to find an appropriate balance between measures that increase the Fund's effectiveness and measures to address its legitimacy.
Streamlining conditionality and promoting country ownership
The task of promoting ownership of policy adjustments is often more difficult the greater is the needed adjustment, which may explain perceptions of low ownership of Fund-supported programs in recent crises. Often a lack of country ownership of policy failures makes ownership of policy adjustments difficult to achieve. Indeed, it is hard to recall any government saying that its policies led to crisis, although many are happy to attribute blame to the IMF for the failure to recover from crisis.14
Discontent with its policy advice has led to pressures for the Fund to adopt a role more like that of an international central bank, providing swift access to finance without applying excessive policy conditionality.15 The idea would be to play down the Fund's role of policy adviser in favour of its role as a provider of liquidity.
Against this background, the Fund has taken a number of steps to streamline conditionality and promote better ownership of Fund-supported programs. Following reviews of conditionality beginning in 2000, revised conditionality guidelines were agreed in 2002. The revised guidelines aim to ensure that policy conditions in IMF programs enhance the prospects of program success by including only those conditions that are 'critical' or 'relevant' to achieving the goals of the program. The guidelines also aim to provide greater emphasis on national ownership of IMF-supported programs.
These efforts are to be welcomed, but they are unlikely to be sufficient.
We would venture that they need to be married to a focussed and effective communication strategy within countries with Fund-supported programs if support for IMF policy advice is to be maximised.
But is this the role of the Fund?
Governments adopt Fund-supported programs, meaning that governments should be the ones to engage with their citizens on these issues. This highlights an intractable dilemma - the very existence of the Fund may provide 'cover' for governments to pursue policies that are necessary but for which support is lacking. While we believe that governments ultimately expend scarce political capital whether they educate their populace on the need for given policies or argue 'the Fund made us do it', it has to be conceded the IMF may be a convenient whipping boy at times. If this is the case, perhaps a lack of 'in-country' legitimacy is to be expected.
But if this is the case, it makes it even more imperative that the Fund have 'global' legitimacy. That is, when it provides policy advice it does so from a position of strength - with a good track record of effective advice and with the clearly recognised support of its membership behind the policy recommendations being made. That is, the 'they' in 'they made us do it' becomes the international community and not the Fund in isolation.
This suggests two critical issues. First, that the advice must be recognised as of high quality and appropriate for the country. Second, that the Fund be seen to receive 'direction' and 'guidance' on its policies from a broadly representative group of members. If it is seen to dance to the tune of a small group of like-minded countries to the exclusion of others this global 'legitimacy' will always be under threat.
Improved surveillance
We argue that the role of the Fund revolves around providing sound policy advice to members to promote macroeconomic stability and prevent the emergence of crises. Macroeconomic stability is crucial as it is a pre-requisite for ensuring the effective operation of the international financial and trading systems and meeting the ultimate goals of economic growth and development. Consistent with this, the IMF should also only provide members with access to its resources where demonstrably necessary, and likely, to assist in achieving stability.
Central to the effectiveness of the Fund's policy advice is the strength of its surveillance, where surveillance encompasses both the identification of necessary policy adjustments and, equally importantly, the effective implementation of policy advice by member countries.
The current and future shape of Fund surveillance is a topic that merits detailed consideration in its own right and we will not cover it here. The important point to note is that as the nature of problems facing countries has evolved, so has Fund surveillance. Indeed, a commentator from 1993 would be astounded by the change in surveillance over the last decade. We hope to be equally astounded by the change in the shape of surveillance between now and 2013.
The formal surveillance function was introduced when the move away from the pegged exchange rate system saw more of a focus on broader macroeconomic stabilisation policies. With more recent crises raising issues of longer term solvency, this has created a need to extend surveillance to examine underlying structural problems, particularly in the financial sector. This has stretched the Fund's traditional areas of expertise and made the task of surveillance more challenging.
Since the Asian financial crisis the Fund has introduced a range of measures to strengthen its surveillance function. These include measures to increase transparency and accountability through the voluntary publication of Article IV staff reports and program documentation, and through the publication of all policy papers. The promulgation of standards and codes has helped promote sound policies in member countries, particularly in the critical area of financial sector stability. The rapid development of the Reports on the Observance of Standards and Codes (ROSCs) and the Financial Sector Assessment Program (FSAP) - both introduced at the end of the 1990s - has been impressive. Enhanced data dissemination standards have improved the consistency and comparability of data available to the Fund while supporting the monitoring of developments within member countries. Improvements to debt sustainability assessment methodologies and to multilateral and regional surveillance, including monitoring of capital market developments, and the development of early warning systems, are all designed to assist the Fund to identify vulnerabilities in the international financial system at an earlier stage.16
The list of measures adopted by the Fund is long and represents a constructive response to the changing international landscape17. While it might be desirable for all the new initiatives to be a mandatory part of surveillance, the Fund has made a pragmatic decision to move slowly to overcome opposition among some members to the broadened scope of surveillance. It is evident that the Fund is continuing to evolve to the changing circumstances of the world economy, just as it did in the 1970s following the breakdown of the Bretton Woods system of pegged exchange rates. That said, there is more that needs to be done to enhance the Fund's surveillance function.
The relationship between the Fund's surveillance function and its role in providing policy advice is central to the effectiveness of the Fund in preventing crises. Unfortunately, poor surveillance appears to have resulted in an excessive level of optimism by the Fund in relation to many members, particularly program countries. While a reluctance to make candid and critical assessments of economies may be understandable - perhaps in the hope of engendering confidence in the policies of the program country - such an approach is short-sighted and ultimately damaging to both the Fund and the member.
It is for this reason that we have championed the application of a 'fresh pair of eyes' to surveillance in program countries. The introduction of a fresh perspective will in many cases be necessary to ensure that surveillance remains objective and supports robust policy advice.
That said, we would not go as far as advocating a strict separation of surveillance from the Fund's program function. Put simply, the creation of parallel institutional edifices comprising something called 'surveillance' and something called 'programs' would, in our view, be a retrograde step. This would be more so the more 'surveillance' looked like the activities of rating agencies.
The Fund's judgements carry weight because they are, in principle, the voice of the international community, placing it in a powerful position as policy adviser. To be effective, it is important that the Fund engage in open and honest dialogue with its members. If the Fund fragments its focus by attempting to become both an entirely independent and open observer and a candid and confidential policy adviser, then it risks the breakdown of its relationship with its members.
Instead, we would argue that the 'fresh pair of eyes' should be approached pragmatically. We could support the development of a specialist 'programs department' if that would more effectively bring cross-country experience to bear on emerging problems. But the IMF would need to establish internal arrangements to effectively ensure the advice of that department, the relevant area department and the Fund's surveillance watchdog - the Policy Development and Review Department - were confronted. A simpler model still would see management facilitate the development of an evaluation culture in the organisation by periodically augmenting country teams with 'outsiders' tasked with reviewing and evaluating the approaches being pursued.
The need for a 'fresh pair of eyes' highlights what is the single most striking problem in the operation of the IMF - the capacity of the Executive Board and Management to take hard decisions.
Clearly, the IMF must respect national sovereignty and it is recognised that there can be legitimate differences in approach to addressing particular economic problems. However, it is incumbent on the Board and Management to tell governments when risks are emerging18, to be rigorous in assessing requests for assistance and to refuse requests for assistance when they do not believe that the policies being pursued will contribute to achieving macroeconomic stability. Major shareholders should encourage the Board to make such clear-eyed assessments and should support hard decisions rather than pursue short-term political objectives. This issue is taken up further below.
Another challenge thrown up by the evolution of surveillance is how to improve the 'traction' of policy advice. In short, how can Fund advice be made more compelling to national governments?
It is striking that the Fund has singularly failed over the last decade to encourage faster corporate and financial restructuring in Japan, to move Europe to address persistent constraints to product and labour market flexibility and, more recently, to address emerging financial sector weakness, or to convince the United States of the dangers of disorderly current account adjustment. These failures constitute a set of serious structural weaknesses that now constrain global growth, yet they have been apparent for five, and in some cases, 10 or more years. This raises a question - has the failure been with the message, or simply that countries that believe they will never be borrowers feel comfortable in ignoring advice? While the Fund may have had no discernible impact on economic management in the major advanced economies, it is hard to believe that developing economies would have been able to avoid responding to Fund advice for anything like this length of time.
If Fund advice is to be legitimate, there needs to be a presumption that it will be given appropriate consideration by developed, emerging market, and developing economies. What constitutes 'appropriate' may differ among countries and may require the Fund to develop a better appreciation of the political constraints operating in member countries at any point in time. At the least, the Fund may need to begin to think about how it can best help governments persuade their citizens of the desirability of particular policy reforms.
Financial support
While the Fund's approach to surveillance has evolved since the Asian crisis, its lending activities have changed in a more radical fashion.
The Fund currently has resources outstanding on the General Resources Account of around SDR 65 billion. However, a substantial proportion of this amount - SDR 45 billion - is accounted for by just three countries, Argentina, Brazil and Turkey. Moreover, Brazil has the capacity to draw down a further SDR 15 billion.
In contrast to the way in which it would caution financial supervisors to avoid concentrated lending, the IMF has more of its resources concentrated in a small group of countries than at any time in its history. This concentration of risk is striking. In the event that the Fund were to find itself faced with substantial arrears this could constitute a true watershed, with profound consequences for the operation of the institution.
This concentration of resources is a consequence of the way in which the Fund has responded to capital account crises - through large packages involving exceptional access. But exceptional access carries with it risks that magnify the risks inherent in these types of crises. While such an approach may be inevitable given the changing nature of crises, it again places a premium on rigorous assessment of the likelihood of success, and the capacity to take, and stick to, hard decisions - to learn how to 'just say no'.
Governance issues
As noted earlier, bolstering the IMF's role as a policy adviser is not only about the advice and actions of its Executive Board, Management or staff. The IMF is a creature of its member governments. It is difficult, if not impossible, for the Fund to make hard decisions with respect to individual member countries without the backing of its other members. This suggests that the responsibility for ensuring that Fund surveillance and programs are effective is shared by all member countries.
The backing of national governments is key to ensuring the legitimacy of the Fund. Unless the Fund's membership has collective ownership of the types of policies it pursues, the legitimacy of these policies will always be questioned. But this need not involve the Fund stepping back from its role of policy adviser. Rather, it involves national governments, through their representation on the IMF Board, supporting the Fund in giving robust policy advice and making rigorous assessments of requests for resources by the Fund. Importantly, it means governments accepting some ownership of that advice. It means not pursuing short term 'fixes' for individual countries that undermine the future and effectiveness of the Fund. It also means being willing to operate bilaterally to reinforce Fund advice to other members.
This is admittedly not easy to achieve in practice. The desire of individual governments to use the Fund to achieve such short-term political aims is a sign of the relevance of the institution. There will always be political pressures on the Board to provide assistance to countries in crisis and there is the risk of these immediate pressures forcing decisions that go against the aim of implementing sound policies in the medium term. This is a difficult tension for the Board to address, but it is important that member countries avoid sacrificing Fund credibility in pursuit of short-term goals.
In this light, it is also important for the Fund to address voice and representation issues. While this means different things to different players, we believe that Fund representation should better reflect developments in global economic weight, subject to some minimum and effective representation of all members. In the current economic environment, this requires greater representation for some Asian economies, especially Korea, at the expense of reduced representation of older developed economies.
In the interest of operational effectiveness, it would be undesirable to further increase the size of the Executive Board although a strong case can be made for measures to assist the capacity of smaller, multi-country or constituency, based chairs, and especially those representing developing countries predominantly or wholly. Our own experience points to the benefit of mixed constituencies - comprising both developed and developing economies - for reasons of voice, representation and importantly, enhanced recognition of different perspectives. It is recognised, though, that this experience will not be compelling for others.
The IMF's role in the overall financial architecture
The legitimacy of the Fund depends not only on its internal governance and the support provided by its members, but also on 'external governance' arrangements i.e. where it is seen to sit in the overall financial architecture. Many of the challenges it faces raise issues not just of how the IMF operates but are equally relevant for the other fora and institutions that provide direction and/or assistance to the Fund.
Our premise is that the IMF should retain a central role in the international financial architecture. It should fill this role, first, because it has near universal representation.19 Second, the IMF's mandate to promote international financial stability forms a foundation stone for the work of the other international financial institutions, and has done so since the Bretton Woods institutions were established.
In addition, the IMF also has the resources to back up its decisions, which sets it apart from other, more consultative, forums such as the G-7, G-20, G-24, FSF, the standard setting bodies, and so on. However, an effective relationship with these representative fora is critical in maintaining and enhancing the IMF's effectiveness and legitimacy.
Groups such as the G-20 will not replace the Fund - they are fora, not institutions, and lack a mandate or the resources to intervene in the international financial system in the manner of the IMF. However, they can play an important role in bringing together IMF member countries to consult on issues that are both relevant for, and go beyond, the IMF.
Notwithstanding the Fund's advantages, it cannot always easily play a consultative role, in part because issues fall outside its mandate but also because its membership is large and its processes for coordinating the views of such a broad membership are inherently unwieldy. The Fund should not expect, or try, to be expert on all issues or represent all the needs of regional groups. The emergence of bodies such as the G-20 and FSF reflect an understanding in the international community that the Fund cannot do all these things and that its governance mechanisms are relatively unwieldy and unrepresentative. Pressures for regional bodies have arisen for similar reasons. A key challenge for the Fund moving forward is to ensure that these bodies help to reinforce its role rather than seek to supplant it.
Groups such as the G-20 and the OECD would appear better suited to facilitating the exchange of views between member countries than the IMF with its diffuse membership and rigid institutional structures. Similarly, the FSF and other specialist bodies are able to harness technical expertise on a range of issues outside the Fund's traditional areas of expertise. In recent times, such bodies have made an important contribution to developing accepted practices for strengthening domestic financial systems. The presence of such consultative and technical support mechanisms can reinforce the IMF's role by shoring up support for, promoting ownership of, and enhancing the technical basis of, the types of policies it pursues. They can also help constrain the development of 'mission creep', whereby the Fund's resources are continually stretched outside its traditional areas of expertise and ensure that issues do not
'fall between the cracks' of the mandates of the Fund and other international financial institutions.20
But to maximise the benefits of a larger and more diverse group of players in the international financial architecture, these other fora need the support, not hostility, of the IMF. With respect to the relationship among the G-20, IMF and the World Bank, it would seem that the Bank has been the quicker of the two institutions to recognise the potential synergies and influence to be gained from extensive interaction with the G-20.
Despite this, as Germain (2003) has noted, the current international architecture is perhaps more consensual than previously, in part because of this specialised division of labour (see Chart 2). There is also arguably greater public and academic appreciation of the issues confronting the international financial system than a decade ago. This enhanced appreciation has led to a more sophisticated dialogue regarding IMF policies - that is, the IMF's own enhanced transparency is leading to more widely shared expertise and resulting in strengthened accountability.
The issue is how to 'optimise' the guidance provided to the Fund by other groupings while ensuring appropriate accountability for all.
The G-7 has played the most important 'guidance' role for the Fund to date. However, the G-7 cannot provide the Fund with great legitimacy as it only represents the interests of larger developed economies. In fact, it has been argued that guidance from the G-7 has detracted from the Fund's legitimacy as its members have been seen to be pursuing their own agendas through the Fund (Meltzer, 2000). Downplaying the G-7 role in favour of a more representative grouping could, therefore, be an important step towards ensuring greater legitimacy and enhanced effectiveness of the IMF.
The G-20 may be an effective consultative grouping able to offer valuable guidance to the Fund. G-20 members account for around 2/3 of the world's population, nearly 90 per cent of world GDP and almost 60 per cent of the world's poor (Martin, 2001). The G-20 therefore represents a reasonable approximation of the IMF's membership, bringing in both developed and emerging market views and capturing well the growing influence of the fast-developing economies. As such, is a potentially powerful tool for facilitating a dialogue between a representative group of member governments, for achieving agreement among key economies on issues of common interest, and for getting emerging concerns of these key economies (especially the non G-7 members) onto the IMF's radar. This has been shown by the G-20's work in recent years identifying policy lessons for member countries in the areas of globalisation, economic growth and poverty, much of which has the potential to be directly relevant to the activities of the Fund.21
Consequently, guidance from the G-20 can support the legitimacy of Fund policies.
Chart 2: The IMF and the international financial architecture
Conclusion
It is a major achievement of the IMF, and the architects of the Bretton Woods system, that the Fund remains relevant today despite the momentous changes in the global economy since it was first established in 1944. The challenge for the Fund moving forward is to maintain that relevance in the face of significant changes to the underlying 'problems' which the institution was established to address.
There are, today, important tensions underlying the IMF's role. How does the Fund maximise its effectiveness in crisis prevention and resolution? How can it continue to improve its surveillance when so many of the recent initiatives are voluntary? Is there a case for a 'fresh pair of eyes'? How does it best catalyse the actions of debtor countries and their creditors through sound policy advice? Does it have a role in helping members better communicate the desirability of particular policy choices? Is it possible to strengthen the capacity of the Executive Board to make hard decisions? Is it excessively exposed to individual countries? How can the right balance be struck between ensuring legitimacy (through measures to improve the overall architecture and governance) and improving effectiveness (through stronger surveillance and programs)? How can it ensure appropriate voice and effective representation of all members? What role can other groups, such as the G-20, play in helping the Fund confront these issues?
The Fund's role has evolved. The challenges it faces going forward call for further evolution. The question is whether the international community - the Fund's shareholders - is up to the challenge.
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1 The authors are, respectively, Executive Director of Macroeconomic Group and Manager, IMF Unit, Australian Treasury. The views expressed in this article are those of the authors and are not necessarily those of the Commonwealth Treasury. The authors would like to thank Michael Callaghan, Gordon de Brouwer, Ted Evans, Ken Henry, Neil Hyden, Maryanne Mrakovcic, Terry O'Brien and Alice Peterson, for helpful input and comments.
2 See, for example, Feldstein (1998) and Meltzer (2000).
3 The response goes beyond the creation of exchange parities per se to include the other matters set out in Box 1 above.
4 For an interesting description how this lending occurred during the Fund's first major financial crisis, see Boughton (2000).
5 However, as noted by Boughton (2000), while the first SBA 'in which drawings were made conditional on the country adhering to specified policies was for Peru in 1954', this did not become standard practice until the 1960s.
6 See IMF Annual Report (2002).
7 The abandonment of the pegged exchange rate system was, however, a symptom of a broader problem manifest in recurring current account crises among the developed economies and successively weakening political will in favour of seeking IMF support.
8 This view is perhaps more widely held in Australia than in some other countries given our experimentation in the period after World War II with a wide range of exchange rate regimes. The $A was pegged to the pound sterling to November 1971, then to the $US to September 1974. It was subsequently pegged to the trade weighted exchange rate - a basket peg - to November 1976, which became a crawling peg until December 1983, at which point the currency was allowed to float freely.
9 While the Fund's focus on structural issues expanded dramatically in the 1980s, it has been recognised that Fund conditionality with respect to structural issues may have 'overreached' in the 1990s. As a result, the Fund has recently emphasised that structural conditions should only be imposed in areas where an absence of structural reform will pose a threat to efforts to achieve macro stabilisation.
10 See, for example, http://www.imf.org/external/standards/agency.htm.
11 Based on data from International Monetary Fund, World Economic Outlook, September 2002.
12 See, for example, Stiglitz (2002). On whether the crises are really new, Boughton (2000) draws interesting parallels between the pressures on Sterling associated with the 1956 Suez crisis and the experiences in Asia in 1997-98.
13 These criticisms have been made most recently in the case of the current IMF-supported program for Argentina.
14 This is particularly the case in the Asian crisis where, as noted in Parkinson et al (2002), legitimate criticisms of the Fund's actions have not been matched by a willingness to acknowledge that some crisis affected countries rejected warnings and refused repeated offers of assistance from the IMF until the crisis was in full flight.
15 This is by no means a new development. The IMF envisaged by Keynes was more along the lines of a global central bank, as are the lender of last resort models put forward since by Fischer (1999) and others.
16 While not established for the direct purpose of improving surveillance, the existence of the new Independent Evaluation Office is a critical step in creating a culture which learns from experience and, as such, is likely to enhance the effectiveness of surveillance, albeit indirectly. As evidence of this, the IEO is soon to produce an evaluation of the Fund's actions during some of the early capital account crises. Not only should this help to throw some light on the validity of the 'old solutions for new problems' claim cited earlier, it may provide pointers to early signs of crisis and hence contribute to better surveillance.
17 It is somewhat ironic that the scope of surveillance - the keystone of crisis prevention - has been broadened at the same time that conditionality - the foundation of crisis resolution - has been narrowed.
18 While there is much to be gained from making such assessments public, this needs to be balanced against the likelihood of the Fund precipitating the very crisis it is attempting to prevent.
19 That said, it is worth noting that the IMF (with 184 members), and the United Nations (191), are both less representative than FIFA - the International Federation of Football Associations - which has 204 members!
20 There has also been pressure in recent years for the development of regional institutions, particularly in the Asia-Pacific region. The appeal of such institutions is that they provide the scope to give regions a greater sense of ownership of outcomes in international crisis management and to fill gaps in the representativeness of the Fund, which may not be well placed to handle region-specific issues. Consequently, a regional body that plays a complementary role to the IMF can improve the credibility of the overall financial architecture and thus help reinforce the Fund's role. However, there is a danger that the development of regional institutions - particularly regional monetary funds - may have the opposite effect. If they lead to a situation of competing crisis managers or are seen as a soft alternative to the IMF, they risk undermining the credibility of the international financial architecture. (see Parkinson et al, 2002). The extent to which regional funds seek to replace, rather than complement the Fund, will reflect perceptions of the Fund's effectiveness and legitimacy.
21 See, for example, the results of the workshop on Globalisation, Living Standards and Inequality held in Sydney in May 2002. A series of case studies on members experiences with globalisation are currently in preparation, while Mexico, the current G-20 chair, is coordinating further work on globalisation and the role of institution building in the financial sector, to be discussed by G-20 Finance Ministers later in the year.
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