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Going for goal, losing oil and the dangers of derivatives – Khmer Times

2021 was the year in which Cambodia saw its first offshore oil project produce black gold and then lost the lot when the tanker storing it sailed to Indonesia. The first drop of oil from the Apsara oil field was extracted in December 2020 but this was supposed to be the year when production bore fruit. The government expected to earn $185 million a year in pre-tax cashflow from its 5 percent stake in the KrisEnergy project, with $40 million from royalties and taxes transferred to the national budget. The Singapore oil explorer promised to pump as much as 7,500 barrels a day but by March the output was just 2,493 barrels. In June the company went bankrupt and the MT Strovolos, which was carrying around 300,000 barrels of crude, later headed out of Cambodian waters, only for the captain and crew to be arrested in Indonesia. The government is still trying to get the oil back but Prime Minister Hun Sen declared Cambodia’s first foray into oil production a failure.

Gold mining proved more successful with the start of Cambodia’s first commercial project. After 14 years of exploration Australian miner Renaissance Minerals began extracting ore from the Okvau project in Mondulkiri province. Local subsidiary Renaissance Minerals Cambodia Limited has now extracted and refined more than 1,000 kilogrammes of gold ore from the mine, generating $1 million in royalties for the government.  It plans to refine an estimated three tonnes of gold ore every year for the first eight years of the mine’s operation, which is about 250 kg per month.

The old adage ‘all that glitters is not gold’ proved true for investors in Goldfx. As many as 30,000 accounts were believed to be compromised in March, leading to investors losing as much as $27 million. Hundreds of protestors demonstrated outside GFX’s offices for months demanding their money back. In June GFX offered them between 20 and 30 percent of the principal invested. The company asked investors to drop plans for legal action, saying it was also the victim of a fraud carried out by two foreigners. Many investors have now accepted the company’s offer with only a few hundred holding out for more.

The GFX scandal prompted the Cambodia Securities Exchange to educate investors about the risks of derivatives trading and advise them to stick with the stocks and bonds traded on the CSX.

“Derivative, a type of security in which the values are based on the value of the underlying securities, such as precious metals, currencies, interest rates, stocks and indices, etc., is not traded at the CSX,” it said. “Investors cannot trade stocks and bonds with securities brokerage firms that are not registered at the CSX. In this sense, CSX investors are encouraged to specifically ask for the types of financial products that can be traded before opening a trading account with any brokerage firm. All trades on the CSX are conducted in a transparent manner in accordance with the procedures and regulations set out in the trading rules and regulations in force, and all daily trading information is made public on the CSX website and many other media sources,” it said.

Traders in CSX-listed stocks may have been secure in knowing their savings were not being spirited away, but they haven’t been getting rich either. The growth board only saw one company listing this year, DBD Engineering. JS Land also got approval to list but won’t make its debut on the growth board until January.

The exchange says potential investors are staying away because they lack financial education. They may also have been dissuaded from putting their money in an index which has been nearing three-year lows in the past month.

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