Jul 31

Avrupa Minerals Provides an Update on Slivovo Joint Venture

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Avrupa Minerals Ltd. (TSXV:AVU,FWB:8AM) provided an update on the progress and status of exploration on the Slivovo JV project in Kosovo. 1,615 meters of trenching has been completed, and a 2,000 meter drill program is set to start in mid-September.

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Jul 31

Richmont Mines Announces Conference Call for Second Quarter Results

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Richmont Mines Inc. (TSX:RIC,NYSEMKT:RIC) announced a conference call to discuss its second quarter 2014 operating and financial results. The call will be held on August 5, 2014 at 11:00AM EST: 1 866 222-0265 (North America toll free), or 416 640-5942 (local and International).

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Jul 31

Crocodile Gold Achieves Positive Cash Flow, Hits Q2 Production Targets

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Crocodile Gold Corp. (TSX:CRK,OTCQX:CROCF) announced its results for the three- and six-month periods ended June 30, 2014, commenting that during Q2 it recorded revenue of $69.2 million from the sale of 53,612 ounces of gold.

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Jul 31

GoGold Drills 21 Meters of 2.22 g/t Gold at Mexico-based Santa Gertrudis

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GoGold Resources Inc. (TSX:GGD) announced drill results from its Mexico-based Santa Gertrudis gold mine, commenting that the results are from outside the current resource and will be incorporated into an upcoming preliminary economic assessment.

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Jul 31

Lake Shore Gold Corp. Nets $13.1 Million for Second Quarter, Reports Record Gold Production and Sales

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Lake Shore Gold Corp. (TSX:LSG,NYSE MKT:LSG) announced its second quarter financial and operating results today. The company also discussed results for the six months ended June 2014. Highlights included record production of 52,300 ounces, a 70 percent increase from Q2 of 2013, nearly doubled gold sales year over year, and recorded net earnings of $13.1 million.

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Jul 31

Sabina Gold & Silver Provides Results from Drilling at Echo Deposit, Nunavut

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Sabina Gold & Silver Corp. (TSX:SBB) announced the results of an infill definition and expansion drilling program recently completed at the Echo deposit, located at its Nunavut-based Back River gold project.

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Jul 31

Why Bretton Woods Failed

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Where the last global monetary plan went wrong, cutting the link to gold…
 

TODAY is a period when we are building the foundation for the monetary systems of the future – what former Fed chief Paul Volcker recently called “the need to develop an international monetary system worthy of our time,” writes Nathan Lewis at New World Economics.
 
This “foundation” consists mainly of ideas – the ideas that are later implemented in real-world systems. Without the ideas, you can’t make the system. It’s as simple as that.
 
I think there is a lot of trauma remaining today regarding the last “system” we had, the Bretton Woods arrangement of 1944-1971. This was a prosperous time worldwide – the best era, I would say, of the last century since 1914. Not the sort of thing that anyone would want to come to an end.
 
So, you can see why its accidental and premature death was a bit traumatic. I think we need to review this today, and get over it.
 
Bretton Woods blew up, in the midst of peace and prosperity, for two basic reasons as I see it: first, because governments wanted to fool around with Mercantilist money-jiggering notions; and second, because they really had no idea how to manage the system that existed, or even what it was for.
 
The proximate cause for the demise of Bretton Woods was that president Richard Nixon installed his good buddy Arthur Burns as the head of the Federal Reserve in February 1970. Burns, along with the other Nixonites, advised Nixon that the minor recession of the time could be resolved with a certain amount of money-printing. Their target was an increase in nominal GDP of 9% in 1972, putting everyone in a good mood for Nixon’s re-election that year. They called this the “game plan”.
 
Well, you can’t just go print money woohoo and also maintain the Dollar’s Bretton Woods gold parity at $35 per ounce. To do that correctly requires currency-board-like techniques, as establishment economists have finally learned after a few decades of blowing up countries right and left. Currency-board-like techniques require the abandonment of a “discretionary, domestic monetary policy” aimed at Mercantilist economic management.
 
You might assume that, at some point, the Nixonites got together, and had a careful discussion about whether to stick with the Bretton Woods gold standard arrangement, or to have a little adventure with the printing press in service to political expediency, with floating fiat currencies the inevitable outcome.
 
But, that didn’t happen. As John Butler recalls in his recent book The Golden Revolution, the Nixonites got together a few days before Nixon publicly ended the US Dollar-gold parity policy on August 15, 1971. Paul Volcker, then Under-Secretary for the Treasury for International Affairs, was there. Arthur Burns, then head of the Fed, was there.
 
Apparently, the biggest advocate at that meeting for maintaining the Bretton Woods Dollar/gold parity at $35 per ounce. (i.e., the gold standard policy) was: Arthur Burns!
 
The head of the Fed, and lifelong monetary economist, had no idea – no idea! – that his money-printing strategy was having a head-on collision with the existing gold standard policy.
 
No idea. The degree of ignorance implied, among the world’s supposed top experts, is even now difficult to fully grasp.
 
Wow.
 
I’ve called it the “mind-bending ignorance of the Bretton Woods years“. My mind bends even today.
 
Oddly enough, the little narrative I just presented is actually completely different than what you might hear from mainstream academics today, who are actually repeating the view that was conventional during the 1960s as well.
 
They tell a story something like this:
“The US Dollar’s reserve currency status, in the Bretton Woods system, caused a persistent US current account deficit. This current account deficit was exacerbated by heavy deficit spending by the US government, to fund both president Johnson’s Great Society welfare programs, and the Vietnam War. The huge Balance of Payments imbalances eventually led to the demise of the system.”
Here’s a version of that story, from the IMF’s own website. Another typical mainstream account can be found at Wikipedia, similar to what you’d find in college textbooks.
 
I want to emphasize that this was not one guy’s idiosyncratic notion, but a widely-held, mainstream view, and remains so today.
 
I’m not going to get into the nitty-gritty details of these issues in a short op-ed. But, we should at least be able to see whether this description had any relation to reality.
 
First: The US supposedly had a chronic current-account deficit of world-monetary-system-destroying proportions. Did this exist?
 
 
No, it did not. The US ran a current account surplus every single year of the 1960s, averaging about 0.5% of GDP.
 
A surplus. Not a deficit. A surplus – with an “S”.
 
Second: Did the US Federal government have a large deficit, supposedly funded by the “exorbitant privilege” of selling Treasury bonds to foreign central banks for use as reserve assets?
 
 
Nope. During the entire decade of the 1960s, the average Federal deficit was -0.7% of GDP. Less than 1%. Which doesn’t seem all that disastrous to me. The largest deficit was -2.7% of GDP in 1968.
 
As you might imagine, if deficits are small and GDP was growing smartly, debt/GDP ratios were steadily coming down to very manageable levels.
 
 
Nothing very disastrous there either. When the Bretton Woods era ended in 1971, US Federal debt/GDP was about 35%.
 
How about the yield on the ten-year Treasury bond? Was there any evidence of some “exorbitant privilege” enjoyed by the reserve-currency issuer, such as unusually low interest rates?
 
 
Treasury yields were rather high during the 1960s, among the highest in US history up to that point.
 
Let’s take a big-picture look at the Bretton Woods era as a whole. Is there evidence of major “balance of payments imbalances” worldwide that suggests some kind of impending catastrophe?
 
 
Actually, the entire Bretton Woods period had some of the lowest “balance of payments imbalances” of the last 150 years. (This was due in part to capital controls common at that time.) Not only that, the very large “balance of payments imbalances” of the pre-1914 era actually were no problem at all. The “Classical Gold Standard” era ended due to printing-press finance related to World War I, not because of any issue related to international capital flows.
 
In short, the common narrative is hooey. A fairy tale!
 
What actually happened is so simple, Adam Smith had it figured out in 1776:
 “Should the circulating paper at any time exceed [the appropriate amount within the context of the gold parity system], it must return immediately upon the banks to be exchanged for gold and silver.”
Or, to summarize in three words: too many Dollars. That’s all it was.
 
I want you to try to imagine the world’s top monetary experts traipsing from one five-star hotel to another, having Weighty Discussions about the implications of a fairy tale which did not actually exist. For ten years, roughly 1960-1971. It’s kinda funny, in a vaguely sickening way.
 
If you want to know why we don’t have a gold standard system today…that’s why.
 
If we are going to become able to build great monetary systems in the future, we need to be able to correctly diagnose past errors – especially when those errors can be summarized in three words. Otherwise, how would we avoid doing the same stupid thing again? Sometimes I wonder if the human species is capable of this; and yet, in the past, it did happen. Adam Smith figured it out. So did David Ricardo, John Stuart Mill and others.
 
We are fortunate that the process of deterioration of the present monetary arrangements, though well underway, has been moderated recently. There is still a lot of foundation-building to do, in the realm of ideas, before we are ready to actually create new real-world institutions with the capability of lasting for centuries.
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Jul 31

Last Man Standing in Gold Mining Sector?

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At least the Vancouver mining conference went ahead…
 

“The SITUATION is in place for a dramatic recovery,” Rick Rule told the audience, writes Brett Eversole in Steve Sjuggerud’s Daily Wealth.
 
I’m here in Vancouver – the heart of the resource-mining industry – attending the Sprott Natural Resource Symposium. It’s a collection of the “best of the best” in the small-cap resource space.
 
I’m here for a simple reason… while major stock markets around the world have soared over the past few years, small resource companies have absolutely crashed. Falling well more than 50% as a whole.
 
But today, that means opportunity. Many of the brightest minds here expect the bottom is in, and prices have nowhere to go but higher.
 
Rick Rule leads a pack of smart industry pros in Vancouver. Rick’s a multi-decade investor in the small-cap mining sector and the Chairman of Sprott US Holdings – an arm of Sprott Inc., which manages $7.6 billion.
 
During his keynote presentation, he explained why he’s excited about today’s opportunity…
“A market down 75% is precisely 75% more valuable and 75% less risky.”
What surprised me is that Rick wasn’t a cheerleader. He simply explained the rational opportunity in the resource sector today. His big theme was simple… 
“A bull market is coming. Don’t waste it.”
Of course, Rick takes a contrarian approach to investing. And right now, things are bad. Folks just aren’t interested in resource investing.
 
Attendance at this year’s Vancouver conference is at its lowest in years. And it has been in steady decline since the glut began in 2011. But at least they’re still in business…
“The current challenged metals market has led us to make the difficult decision to suspend our events…”
That’s from the Metals and Minerals Investment Conference website. Metals and Minerals is one of the largest resource-based conference groups, with events in New York and San Francisco.
 
The cause of all of this bad sentiment is simple. Small-cap mining stocks have crashed… If we take a look at the S&P/TSX Venture Index – where most small resource companies reside – the opportunity becomes obvious…
 
 
As you can see, this index of small resource companies has crashed over the past three years. It’s now sitting near 2002 and 2008 lows… where the last two great bull markets began.
 
Importantly, the index has been rising over the last year. The index is up 17% since last June and 9% so far this year.
 
In short, no one is interested in small-cap resources. Major conference circuits have been canceled and the overall market is down 50%-plus over the last few years. Yet, the market is UP recently.
 
According to Rick Rule, today’s opportunity is enormous. According to him, “expectations are so low that we can’t help but succeed.”
 
Yes, it’ll likely be a bumpy ride. But if you have the stomach for it, small-cap resources seem to be poised to move higher.
 
With US stocks reaching all-time highs, the best opportunities are in beaten and forgotten places. Resources fit that mold perfectly today. Don’t miss the opportunity.
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Jul 31

Spot the Sheeple

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Gold bug stereotypes vs. inflation-obsessed naysayers…
 

TAKE A LOOK around the gold bull landscape and tell me how many of them are featuring a chart like this, says Gary Tanashian in his Notes from the Rabbit Hole.
 
It shows the US Dollar in a bullish short-term stance (to go with the weekly bullish stance we have noted for so long in the ‘Currencies’ segment of NFTRH)…
 
 
This is not to say that the US Dollar has real value. How can it when it is hopelessly dragged down by a national debt-for-growth obsession?
 
But as with gold, value is one thing and price is quite another. It is just that one (USD) receives a price bid due to a ‘nowhere else to hide’ sort of mentality by the majority when asset market liquidity becomes constrained. The other (gold) receives a more solid value bid, over time.
 
We saw what happened when gold got the price bid as the panicked ‘Knee Jerks’ flooded in during the acute phase of the Euro crisis in 2011. That was the exclamation point on the first major phase of the gold bull market and the dawn of a cyclical bear market.
 
We continue to await economic contraction, in which the price of the USD can benefit for a while as capital comes out of assets and into what it thinks is a safe haven. Gold remember, has been soundly discredited as a store of value and that has been the bear market’s job…well done I might add.
 
That is why with gold you either have a long (and I mean loooonnnggg) term outlook or you become distracted (at best) and lost (at worst) in the game of currency Whack-a-Mole (where global policy makers compete in trying to hammer down their own currencies in the name of politically expedient asset market appreciation) and the rolling asset market speculations that result.
 
The obsession with inflation is a Red Herring where gold is concerned. On the anti-gold side you have Harvey and Erb, by way of this intro from the National Bureau of Economic Research, and their inflation obsessive, CPI-centric view:
“While gold objects have existed for thousands of years, gold’s role in diversified portfolios is not well understood. We critically examine popular stories such as ‘gold is an inflation hedge’. We show that gold may be an effective hedge if the investment horizon is measured in centuries. Over practical investment horizons, gold is an unreliable inflation hedge. We also explore valuation. The real price of gold is currently high compared to history. In the past, when the real price of gold was above average, subsequent real gold returns have been below average consistent with mean reversion. On the demand side, we focus on the official gold holdings of many countries. If prominent emerging markets increase their gold holdings to average per capita or per GDP holdings of developed countries, the real price of gold may rise even further from today’s elevated levels. In the end, investors face a golden dilemma: 1) embrace a view that ‘those who cannot remember the past are condemned to repeat it’ and the purchasing power of gold is likely to revert to its mean or 2) embrace a view that the emergence of new markets represent a structural change and ‘this time is different’.”
On the pro-gold side you have legions of gold bugs also obsessing on the effects of inflation, wondering why the US Dollar just will not go down despite all the pins already stuck into their Uncle Buck voodoo dolls over the last 10 years.
 
Both sides of the debate are confused, confusing and either through agenda or naiveté, totally out to lunch. The word “inflation” has been sanitized and simplified to mean ‘rising prices’ to a majority of people. But in the age of ‘Inflation onDemand’ ©, inflation is the thing that is officially promoted with its effects often resulting in rising prices on an interim basis, yes, but ultimately in asset market liquidations.
 
Don’t let academics like Harvey and Erb over simplify this to a cartoon-like analysis that even an intellectual can understand; and don’t let the gold ‘community’ over simplify it to cartoons, caricatures and promotions that even the most narrow viewed of its followers (the ones calling non-gold bugs “sheeple”, for instance) can understand.
 
It is not simple! It is very complicated, but in its complication there is simplicity as well. In the modern casino we have lost the idea and the ideal of value. We are crack whores and casino patrons gaming at the hot tables unable to tune down the noise of all those promoters in there pitching, playing and trying to be heard above the noise.
 
 
TIP (inflation protected) vs. TLT (unprotected long-term T bonds) AKA our ‘inflation anxiety’ monitor is breaking down, not up. We have noted that Goldilocks has lived quite comfortably (porridge is ‘just right’) within the green and red dotted support and resistance lines. Above the red, public anxiety about inflation would be indicated to be getting too hot and below it, too cold. Well, last week it hinted a break down. This bears watching.
 
In combination with the USD chart above, the average gold booster (a different flavor of casino patron) must be wondering ‘what the…?!?’ But this is in keeping with our favored view of a positive fundamental backdrop for gold because with inflation expectations potentially becoming ‘too cold’ we might anticipate a difficult time for Goldilocks and by extension the stock market (and commodities).
 
That would mean that the “real price of gold” so inaccurately described by Harvey and Erb as gold vs. the CPI, would be due to rise.
 
I do not disagree with the statement underlined above, but I do disagree with their CPI-centric view and also would note that the real ‘real price of gold’ as adjusted by commodities [ref: Bob Hoye’s work over the years and cycles], has been declining throughout the cyclical bear market and indeed looks like it may be resetting for the next cyclical up turn.
 
Here once again is the view of gold’s real [commodity adjusted] price, still in a bear market over the span of point 3 to point 4, but making a potential bottom at 4’s higher low to point 2. Gold’s Euro crisis distorted real price has been very nicely adjusted over the last 2+ years.
 
 
If gold were to resume its long-term rise vs. commodities it would very likely be against a deflationary backdrop, which would feature economic contraction. In other words, it would come against the failure of policy makers’ most recent operations that were enacted in response to the last crises, namely the ‘Financial Crisis’ that people in the US now speak of in the past tense and the ‘Euro Crisis’ that I assume (with Spanish 10 year bond yields are at an incredible low of 2.54%) an increasing number of Europeans came to consider a thing of the past.
 
If the recent up turn in Gold vs. Commodities is real and if history repeats, the US stock market has a clock ticking on a coming high. But if we have learned one thing over the recent cycle (stocks up, way up and gold down, way down) it is to give the Devil his due and not make too many assumptions and never make predictions. Just do the work in workman-like fashion week to week and we’ll let this epic play out.
 
In what is becoming an unintended long-winded segment, let’s finish by noting that even if Harvey and Erb are correct to call Gold vs. CPI the real ‘real’ price of gold, the correction has been brutal. Odds are coming back in gold’s favor vs. holding other (inflated) assets in an attempt to counteract the CPI’s negative effects on our every day lives.
 
Could the ratio drop from the current 5.5 to 4? Sure it could. Could nominal gold go to Harvey and Erb’s target of 800? Gold is about value not price, so yes it is possible.
 
But if that is a bottoming pattern in gold vs. CPI, then monetary value seekers would be glad to have not nickel-dimed gold as a price (as opposed to value) play.
 
 
The inflation has rooted in a stock bubble on this cycle. Policy has worked toward its goals thus far. That ‘inflation trade’ is long in the tooth and due to be liquidated at some point. At the every least the gold vs. CPI ratio is much less at risk than the SPX vs. CPI ratio…
 
 
The stock market has been the new defense mechanism against the long-term damaging effects of inflation, i.e. rising prices. Since the ‘Financial Crisis’ our heroes at Policy Central have managed to blow a stock bubble*, finally getting it right after previous such inflationary operations have yielded bubbles in everything from Uranium to Crude Oil to Copper to Silver. Even gold caught a mini bubble in 2011.
 
* Look, he’s calling stocks a bubble! A Perma-Bear!! Well not really; for most of the intense phase of this bull market we have simply noted that the bubble was in policy, not stock prices as gauged by conventional market analysts. But recently, valuations have well exceeded even the metrics used in conventional analysis. It’s a bubble, to one degree or another and like previous bubbles, it will pop eventually.
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Jul 31

Why Always So Gloomy?

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This US recovery has been a fraud, a sham or possibly scamola…
 

It is COOL in Paris, writes Bill Bonner in his Diary of a Rogue Economist.
 
We have put on a sweater. To bring you fully into the picture, we are sitting at a sidewalk café in the 16th arrondissement, having a café crème with our mother.
 
We have periods of real joy in our lives, but we count on our natural tendency towards gloom and depression to get us through them. Our mother lacks this essential quality.
 
A woman walks down the street, trailed by a small, white dog. The poor old girl looks sorely used, we think. As if she ran over her other dog…and got beaten up by her husband.
 
Mother: “Oh…look at that cute dog.”
 
Two gypsy women came along. “Watch your purse,” was the thought that rose to your correspondent’s lips.
 
“I love their dresses,” said his mother. “They are so colorful.”
 
A handsome, well-built man, with a full head of jet-black hair, comes ambling down the street. He looks friendly, happy, confident…
 
“Jerk…boulevardier…flâneur,” we think to ourselves.
 
“What a nice looking young man,” says mater familias.
 
We don’t know how much more of this looking on the bright side we can take.
 
“Mom, do you have any idea how many people have been driven mad by cheerfulness?”
 
“Okay…I’ll try to control it. Look…there’s a poor man with a sad look on his face,” she said, pointing to a grumpy SOB getting out of his car.
 
“No…you just don’t get it. You’re not supposed to be sympathetic. He probably deserves to be sad.”
 
But we realized it was hopeless. There is just no helping some people.
 
Later today, we’re going out to repossess a truck, used for moving horses around. Our wife, Elizabeth, loaned it to a fellow rider. Now, he won’t give it back.
 
“You can never trust anyone,” says a friend.
 
That seemed like a grim assessment of human nature. But of course it is true. So is the contrary: You can always trust everyone.
 
One of our favorite dicta: “People always come to think what they need to think when they need to think it.”
 
When they think they should be polite and helpful…they are. When they think civility no longer serves their interests…they stab you in the back.
 
In an ideal market system, civility pays. Wealth, power and status are earned in exchange for goods and services. The more you give…generally…the more you get.
 
But let him take your gun…your vote…or your vehicle…and even your best friend may turn into a monster. Especially, if he’s under pressure. You can trust him…but only to act like a normal man in his circumstances.
 
You can always trust investors, too. And the markets themselves. They always do what they ought to do. Under the circumstances. Our challenge is to understand the circumstances.
 
Volatility seems to be a little antsy. What kind of pressure is this market under? What might cause it to stop acting so sweet and cooperative? What might make it turn nasty?
 
The latest US GDP figures should have been disappointing. Because the “recovery” has been a fraud from the get-go. The economy is stuck in a low-growth…low employment…semi-depression mode, largely because of the Fed’s efforts to stimulate it.
 
Cheap money has corrupted the entire economy, twisting it away from real long-term investment and business building toward fast-buck speculations, financial engineering and zombie activities.
 
From former Reagan budget advisor David Stockman:
“Since the turn of the century, in fact, real capex growth has averaged only 0.8% annually, or hardly one-third of its prior historical rate; and the true measure of future productivity growth – net investment in real plant and equipment after capital consumption allowances – has actually declined by 20% since 1999-2000.”
Capital investment is what lies behind productivity and prosperity. Without it, the economy staggers:
  • Hourly wages are no higher than they were in 2008…
  • Real household income has declined – even for the top 5%…
  • Take out health care and interest expenses, and almost everyone’s real, disposable income has gone down…
  • Though part-time and temporary employment has risen, there are 5% fewer real, or “breadwinner” jobs than there were in 2006!
When these circumstances are more fully understood, stocks will turn sour.
 
“I grew up in the Great Depression,” says mother, with 93 years of perspective. “Things are so much better now.”
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