Oct 30

Brazil Minerals: Pursuing Profitable Diamond and Gold Mining

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With an impressive management team and focus on profitability, Brazil Minerals is steadily making progress at its diamond- and gold-producing project in Brazil.

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Oct 30

Infographic: NOVAGOLD Company Snapshot

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Visual Capitalist published an infographic that provides a snapshot of NOVAGOLD Resources Inc. (TSX:NG,NYSEMKT:NG). The company is currently developing the Alaska-based Donlin gold project.

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Oct 30

Like, Doh! Gold Miners Aren’t Gold

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But it bears repeating for investors wondering if the mining-stock rout is a “buy”…
 

WEDNESDAY was a serious gut check for investors in the mining sector, writes David Nadig at Hard Assets Investor, in a story first published at ETF.com.
 
Is there a knife to catch?
 
There are charts and there are charts. But there’s no way to parse this one as anything but ugly:
 
 
I’m not a big believer in technical analysis, but I know an awful lot of traders are, which means a lot of folks are looking at the line for Market Vectors Gold Miners ETF (NYSEArca:GDX) and seeing it plow through its resistance, with nothing to support it but “air” here.
 
So what are the lessons to learn here?
 
Gold miner stocks are volatile
It doesn’t take math to look at the difference between the lines on this chart and pick out the craziest one. I picked GDX as one of my ETFs to rally in 2014, and while that was still a solid call until a few days ago, it’s now looking pretty darn terrible. On a year-to-date basis, GDX is down just over 7%. Just this August, GDX was up more than 30% on the year.
 
Gold miners are still companies
Yes, there’s a significant correlation between the price of gold and the performance of gold miners. Consider this graph of the monthly correlations between GDX and the SPDR Gold Trust (NYSEArca:GLD)…
 
 
Certainly, more often than not, GDX and GLD will move in the same direction, but that relationship breaks down all the time, and it breaks down very, very quickly when it does. And because GDX is made up of companies run by human beings, there are far more things at work than just the price of gold.
 
Which brings me to…
 
Equities are ultimately about earnings
If you look at the holdings of GDX, you find, as you might expect, significant winners and losers. Detour Gold Corp., a relatively small Canadian miner, is about to turn profitable for the first time, and is up almost 100 percent on the year. That’s helping offset once-profitable Coeur Mining, which is down more than 61% on the year on rapidly declining revenues.
 
See the picture there? Gold miners, perhaps more than any small niche I can think of, are a collection of wild fortune-telling cards. That’s part of the allure of gold miners – that one might “hit it big” and all of a sudden have vastly more gold, or higher production than you might expect. Unfortunately, it cuts both ways.
 
Gold is about currency
The last point, which I think many folks forget, is that gold is a weak-Dollar play. Any time you trade in your Dollars to hold something, you’re effectively saying, “I’m shorting the Dollar to buy X.” Gold in particular lives in an odd crux between currency and commodity. But since it’s priced in Dollars, you should expect that, all else being equal, a strong Dollar means you can buy more gold per Dollar; that is, the price of gold should go down as the Dollar gets stronger.
 
This chart tracks the price of gold (XAU) relative to the U.S. Dollar Index (DXY):
 
 
It’s hardly a perfect relationship, but it’s safe to say that it’s very hard for gold to rally at the same time the Dollar is rallying. It’s the same pressure we have on oil prices, and frankly all commodities at the moment.
 
Fishing for value?
I am quite sure that there will be plenty of ETF investors who see a few terrible days in a solid ETF like GDX and are tempted to pull the trigger.
 
My only concern would simply be this: If you head to the Van Eck website and look at GDX, you see a reported price-earnings ratio for the stocks in the portfolio of 18.54. That makes it look like plain-vanilla large-cap equities – after all, the S&P 500 has a P/E right now of about 18.6.
 
But that belies the fact that a huge portion of GDX holdings are actually losing money. From companies like Newcrest Mining (5 percent of the portfolio) to Royal Gold (4 percent) to little Silver Standard Resources (0.35 percent), all those losses add up, making the true P/E – not magically forgiving the losses – negative 12. Far from value, gold miners are looking like a wildly speculative bet at the moment.
 
So just be careful when you’re reading those fact sheets on your value hunt.
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Oct 30

Great Panther Reports Gold, Silver Intercepts from San Ignacio

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Great Panther Silver Ltd. (TSX:GPR,NYSEMKT:GPL) announced high-grade gold and silver intercepts from six holes completed at its San Ignacio satellite mine. They are the first holes completed for the current program.

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Oct 30

Dalradian Releases New PEA for Curraghinalt Gold Deposit

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Dalradian Resources Inc. (TSX:DNA) announced that it has completed a new preliminary economic assessment (PEA) for its Ireland-based Curraghinalt deposit. It is based on a May 2014 resource update.

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Oct 30

Peak Oil? How About Peak Oil Storage?

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Here’s how cheap US energy promises an ‘epic’ turnaround in the US economy…
 

MATT BADIALI is editor of the S&A Resource Report, a monthly investment advisory focusing on natural resources from Stansberry & Associates.
 
A regular contributor to Growth Stock Wire, Badiali has experience as a hydrologist, geologist and consultant to the oil industry, and holds a master’s degree in geology from Florida Atlantic University.
 
Here he tells The Gold Report‘s sister title The Mining Report that cheap oil prices and the economic prosperity they bring can make politicians and investors look smarter than they are. Hence Badiali’s forecast that Hillary Clinton…if elected in 2016…could go become one of America’s most popular presidents. Yes, really.
 
The Mining Report: You have said that Hillary Clinton could go down in history as one of the best presidents ever. Why?
 
Matt Badiali: Before we get your readership in an uproar, let me clarify that the oddsmakers say that Hillary Clinton is probably going to take the White House in the next election. Even Berkshire Hathaway CEO Warren Buffet said she is a slam dunk. I’m not personally a huge fan of Hillary Clinton, but I believe whoever the next president is will ride a wave of economic benefits that will cast a rosy glow on the administration.
 
Her husband benefitted from the same lucky timing. In the 1980s, people had money and felt secure. It wasn’t because of anything Bill Clinton did. He just happened to step onto the train as the economy started humming. Hillary is going to do the same thing. In this case, an abundance of affordable energy will fuel that glow. The fact is things are about to get really good in the United States.
 
TMR: Are you saying shale oil and gas production can overcome all the other problems in the country?
 
Matt Badiali: Cheap natural gas is already impacting the economy. In 2008, we were paying $14 per thousand cubic feet. Then, in March 2012, the price bottomed below $2 because we had found so much of it. We quit drilling the shale that only produces dry gas because it wasn’t economic. You can’t really export natural gas without spending billions to reverse the natural gas importing infrastructure that was put in place before the resource became a domestic boom. The result is that natural gas is so cheap that European and Asian manufacturing companies are moving here. Cheap energy trumps cheap labor any day.
 
The same thing is happening in tight crude oil. We are producing more oil today than we have in decades. We are filling up every tank, reservoir and teacup because we need more pipelines. And it is just getting started. Companies are ramping up production and hiring lots of people. By 2016, the US will have manufacturing, jobs and a healthy export trade. It will be an economic resurgence of epic proportions.
 
TMR: The economist and The Prize author Daniel Yergin forecasted US oil production of 14 million barrels a day by 2035. What are the implications for that both in terms of infrastructure and price?
 
Matt Badiali: Let’s start with the infrastructure. The US produces over 8.5 million barrels a day right now; a jump to 14 would be a 65% increase. That would require an additional 5.5 million barrels a day.
 
To put this in perspective, the growth of oil production from 2005 to today is faster than at any other time in American history, including the oil boom of the 1920s and 1930s. And we’re adding it in bizarre places like North Dakota, places that have never produced large volumes of oil in the past.
 
North Dakota now produces over 1.1 million barrels a day, but doesn’t have the pipeline capacity to move the oil to the refineries and the people who use it. There also aren’t enough places to store it. The bottlenecks are knocking as much as $10 per barrel off the price to producers and resulting in lots of oil tankers on trains.
 
And it isn’t just happening in North Dakota. Oil and gas production in Colorado, Ohio, Pennsylvania and even parts of Texas is overwhelming our existing infrastructure. That is why major pipeline and transportation companies have exploded in value. They already have some infrastructure in place and they have the ability to invest in new pipelines.
 
The problem we are facing in refining is that a few decades ago we thought we were running out of the good stuff, the light sweet crude oil. So refiners invested $100 billion to retool for the heavier, sour crudes from Canada, Venezuela and Mexico. That leaves little capacity for the new sources of high-quality oil being discovered in our backyard. That limited capacity results in lower prices for what should be premium grades.
 
One solution would be to lift the restriction on crude oil exports that dates back to the 1970s, when we were feeling protectionist. It is illegal for us to export crude oil. And because all the new oil is light sweet crude, the refiners can only use so much. That means the crude oil is piling up.
 
Peak oil is no longer a problem, but peak storage is. If we could ship the excess overseas, producers would get a fair price for the quality of their products. That would lead them to invest in more discovery. However, if they continue to get less money for their products, investment will slow. 
 
TMR: Is everything on sale, as Rick Rule likes to say?
 
Matt Badiali: Everything is on sale. But the great thing about oil is it is not like metals. It is cyclical, but it’s critical. If you want your boats to cross oceans, your airplanes to fly, your cars to drive and your military to move, you have to have oil. You don’t have to buy a new ship today, which would take metals. But if you want that sucker to go from point A to point B, you have to have oil. That’s really important. There have been five cycles in oil prices in the last few years.
 
Oil prices rise and then fall. That’s what we call a cycle. Each cycle impacts both the oil price and the stock prices of oil companies. These cycles are like clockwork. Their periods vary, but it’s been an annual event since 2009. Shale, especially if we can export it, could change all of that.
 
The rest of the world’s economy stinks. Russia and Europe are flirting with recession. China is a black box, but it is not as robust as we thought it was. Extra supply in the US combined with less demand than expected is leading to temporary low oil prices. But strategically and economically, oil is too important for the price to get too low for too long.
 
I was recently at a conference in Washington DC where International Energy Agency Executive Director Maria van der Hoeven predicted that without significant investment in the oil fields in the Middle East, we can expect a $15 per barrel increase in the price of oil globally by 2025.
 
I don’t foresee a lot of people investing in those places right now. A shooting war is not the best place to be invested. I was in Iraq last year and met the Kurds, and they’re wonderful people. This is just a nightmare for them. And for the rest of the world it means a $15 increase in oil.
 
For investors, the prospect of oil back at $100 per barrel is not the end of the world. With oil prices down 20% from recent highs and the best companies down over 30% in value, it is a buying opportunity. It means the entire oil sector has just gone on sale, including the companies building the infrastructure.
 
As oil prices climb back to $100, companies will continue to invest in producing more oil. And that will turn Hillary Clinton’s eight-year presidency into an economic wonderland.
 
TMR: The last time you and I chatted, you explained that different shales have different geology with different implications for cracking it, drilling it and transporting it. Are there parts of the country where it’s cheaper to produce and companies will get higher prices?
 
Matt Badiali: The producers in the Bakken are paying about twice as much to ship their oil by rail as the ones in the Permian or in Texas are paying to put it in a pipeline. The Eagle Ford is still my favorite quality shale and it is close to existing pipelines and export infrastructure, if that becomes a viable option. There are farmers being transformed into millionaires in Ohio as we speak, thanks to the Utica Shale.
 
TMR: What about the sands providers? Is that another way to play the service companies?
 
Matt Badiali: Absolutely. The single most important factor in cracking the shale code is sand. If the pages of a book are the thin layers of rocks in the shale, pumping water is how the producers pop the rock layers apart and sand is the placeholder that props them open despite the enormous pressure from above. Today, for every vertical hole, drillers create long horizontals and divide them into 30+ sections with as much as 1,500 pounds of sand per section. A single pad in the Eagle Ford could anchor four vertical holes with four horizontal legs requiring the equivalent of 200 train car loads of sand.
 
Investors need to distinguish between companies that provide highly refined sand for oil services and companies that bag sand for school playgrounds. Fracking sand is filtered and graded for consistency to ensure the most oil is recovered. Investors have to be careful about the type of company they are buying.
 
TMR: Coal still fuels a big chunk of the electricity in the US Can a commodity be politically incorrect and a good investment?
 
Matt Badiali: Coal has a serious headwind, and it’s not just that it’s politically incorrect. It competes with natural gas as an electrical fuel so you would expect the two commodities would trade for roughly the same price for the amount of electricity they can generate, but they don’t. The Environmental Protection Agency is enacting emission standards that are effectively closing down coal-fired power plants. And because it is baseload power, you can’t easily shut it off and turn it back on; it has to be maintained. That means it doesn’t augment variable power like solar, as well as natural gas, which can be turned on and off like a jet engine turbine. So coal has two strikes against it. It is dirty and it isn’t flexible.
 
Some coal companies could survive this transition, however. Metallurgical coal (met coal) companies, which produce a clean coal for making steel, have better prospects than steam coal. Along with steam coal, met coal prices are at a six-year low. 
 
Generally, I want to own coal that can be exported to India or China, where they really need it. Japan has replaced a lot of its nuclear power with coal and Germany restarted all the coal-fired power plants it had closed because of carbon emissions goals. We are already seeing deindustrialization there due to high energy prices. Cheap energy sources, including coal, will be embraced. I just don’t know when.
 
TMR: Thank you for your time, Matt.
 
Matt Badiali: Thank you.
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Oct 30

Unigold Announces Metallurgical Results: 89% Gold Recovery at 16% Mass Pull

Gold Price Comments Off on Unigold Announces Metallurgical Results: 89% Gold Recovery at 16% Mass Pull

Unigold Inc. (TSXV:UGD) released metallurgical test results from its Neita Project in the Dominican Republic. Highlighta include confirmation of 89% gold recovery and 88% copper recovery at 16% mass pull, as well as multiple final processing solutions to produce either gold doré at site or to pursue in-country concentrate processing remain open to the Company.

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Oct 29

Canamex Completes Technical Report for Aranka North

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Canamex Resources Corp. (TSXV:CSQ) has completed a national instrument 43-101 technical report for its Aranka North gold project in Guyana.

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Oct 29

QE Finished, Gold Fans Clearly Crackpots

Gold Price Comments Off on QE Finished, Gold Fans Clearly Crackpots
The US Fed just ended quantitative easing. Anyone thinking history or gold worth a look must be a crackpot for worrying…
 

TIME WAS the Gold Standard simply existed…like rain or snooker tables, writes Adrian Ash at BullionVault
 
Zero rates and quantitative easing are the monetary equivalents today. Doing anything else puts a cental bank into the “hall of shame” according to Bloomberg. The Financial Times gasps that today the US Fed’s “grand experiment is drawing to a close…”
 
Oh yeah? The world hasn’t yet seen the last of US quantitative easing, we think. Not by a long chalk. QE is getting new life after 15 years in Japan, the world’s fourth largest economy, and it has barely begun in the single largest, the Eurozone. 
 
Only China to go, and the QE Standard will be truly global. But financial markets and pricing mechanisms the world over are already through the looking glass. After $3 trillion of US Fed asset purchases, climbing back to the other side will take more than a month’s rest from extra money printing. 
 
The Gold Standard, meantime, now exists only to fill space when financial hacks run out of other silly things to talk about. 
 
Take this classic Phil Space nonsense, for instance, from the Washington Post.
 
To recap… 
 
Over a week ago, billionaire tech-stock investor and former PayPal boss Peter Thiel appeared on right-wing shock jock Glenn Beck’s TV show. He mumbled something about the value of money…reality…and the virtual world of monetary politics we’ve all lived in since 1971. 
 
Nothing to see or hear in that. Even the laziest gold bug can see US president Nixon’s decision to end the Dollar’s gold link changed nothing and everything all at once. Metaphysical mumblings are the best anyone’s since managed in trying to understand how humanity got beyond itself in that moment.
 
Yet on Friday, Thiel’s comments were picked up by a right-leaning think tank blogger…and finally last night, this “unthink” piece appeared at the Washington Post online. 
 
So what? Well, George Selgin, new Cato Institute director, said earlier this month that anyone challenging the way money currently works must do better if they want to be taken seriously. Amateur bug-o-sphere stuff only makes things worse.
 
But Selgin underplayed the task ahead, I fear. QE, zero rates and unlimited money-supply growth are big, important issues. Today’s US Fed meeting proved that once again. 
 
On the other side of the debate however, even the most qualified and serious economist daring to doubt the sanity of printing money to buy up government debt, mortgages, stocks or other nation’s currencies now looks like a “crackpot” to most politicians, financiers and reporters today.
 
Because, hey! Nothing bad has happened. No inflation, currency destruction or financial apocalypse fuelled by money-from-nowhere. 
 
Not yet. And now the Fed is turning off the taps. For now.
 
What could possibly go wrong? We must be crazy to bother owning gold as financial insurance, never mind worrying about how money itself…as basic to civilization as the written word…is being bent and remade in the latest central-bank experiments.
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Oct 29

Don’t Get Bullish on Gold Below $1350

Gold Price Comments Off on Don’t Get Bullish on Gold Below $1350
This month’s “triple bottom” is not, repeat NOT, confirmed says this technical analyst…
 

WAYNE KAUFMAN is chief market analyst at Phoenix Financial in New York.
 
Regularly quoted in the media and interviewed on Fox, CNBC and the BBC, Kaufman produces a daily report for Phoenix, is a member of the Market Technicians Association, and has taught level 3 of the MTA’s three-level online course for Chartered Market Technician candidates.
 
Here Kaufman speaks to Mike Norman on behalf of Hard Assets Investor about how he sees the big picture right now…
 
Hard Assets Investor: We’ve seen some crazy gyrations in gold, in the Dollar, in oil, even in stocks. Summarize how it looks to you.
 
Wayne Kaufman: In terms of US equities, we’ve been watching a deterioration of underlying market breadth, that hasn’t shown up, or had not shown up in the major indexes until the last couple of weeks. But for the last three or four months, we’ve been watching small-caps get decimated. And then the midcaps followed. And then the large-caps, S&P 500, had a peak recently. But the breadth was terrible.
 
And now the stocks have rolled over. It’s to the point where you’ve only got about 18% of S&P 1500 stocks over their own 50-day moving average, less than one in five. About one in three are still over their 200-day moving average. So that underlying deterioration came through and pulled down the majors.
 
HAI: Now with small stocks weak like that, wouldn’t that suggest general economic weakness, or at least a tipoff to that effect, that we’re seeing basically small, medium-sized businesses not doing very well?
 
Kaufman: Definitely. You’re right. You’re talking about changes taking place. The question in the mind of investors right now is, we’re seeing the weakness in China, in Europe, in Germany suddenly rolling over. You’ve got the price of oil. It’s all of these things that are turning dramatically. Is this a long-term trend change? Or is this just going to be short term? Is it just typical October stuff, in the case of equities? That’s what we’re going to find out over the next few weeks.
 
HAI: But is there really a downside, when people know the central banks are going to be there, push comes to shove?
 
Kaufman: There, at a point, is only going to be so much that the central banks can do. I was recently asked by a news outlet to give my projections for the S&P, and my reasoning. My No. 1 reason for being bullish is central banks around the world will do everything possible to prevent a global recession. Are they really able to do much more? We know they’ll try. Are they going to wait too long before they do? How effective can they be?
 
HAI: Last time you were here, you were negative on gold. And that play worked out pretty well. How do you see things panning out from this point?
 
Kaufman: I see short-term, over-sold and over-bearish sentiment. So a bounce is definitely in the cards, especially if there’s some short covering by people who are short the futures. But when I was here last time, I said I couldn’t get bullish unless gold broke $1400 or so. Now that number is a little lower.
 
HAI: Where is it?
 
Kaufman: $1300. I need to see $1350 at least, because you do have a potential triple bottom. A lot of people say, “Oh, triple bottom.” It’s a potential triple bottom that doesn’t get confirmed until you break unimportant resistance. Unless we can get above $1350, I’m not going to start thinking about getting bullish, except for oversold, over-bearish bounces.
 
HAI: We had a guest recently talking about the death of gold. Reminds me of the death of equities back on the infamous 1979 Business Weekcover. What do you make of that?
 
Kaufman: I agree. That’s why I’m saying I could see a bounce here, because it’s oversold, and it’s over-pessimistic. Levels of pessimism are extreme. And when you see that, that’s a good time to take the other side of that trade. The question is, how much staying power? You’re talking about commodities going down. The Dollar has been strong, which is a little too much bullishness in the Dollar. That certainly can be capped here.
 
But oil is just amazing. For years, you always said that the Saudis controlled the price of oil. You were 100% right. Because they’re the only country that really has significant excess capacity. Right now, are the Saudis purposely trying to drive the price of oil down, so that they can try and put a cap on fracking and energy exploration and production here in the States?
 
HAI: The shale guys, the shale producers.
 
Kaufman: Potentially an amazing tactical war going on between the Saudis and the US, in terms of oil production.
 
HAI: I saw an example of that back in the ’80s, when I was an oil trader on the floor of this very exchange, when they crashed the price down. That was a message sent to the non-Opec producers, the North Sea guys in particular. So I think you’re absolutely right. 
 
You mentioned the Dollar. That was a surprise to most people, because we had this narrative, for a long time, about money printing, and central banks, and quantitative easing, and hyperinflation and the Fed doing all this. Yet, look at the Dollar.
 
Kaufman: I don’t want to seem like I’m complimenting you because you’re the host, but you said this a long time ago.
 
HAI: Don’t hold back…
 
Kaufman: You said a long time ago, all the inflation guys, that they were wrong, they were going to be wrong. You were 100% right. So it was a big surprise. Now, as a technician, I called the Dollar going up at a point when I saw it giving me buy signals. I don’t do it the intuitive or the economist way. It’s extremely overbought. And it’s extremely over-bullish. It has been taking a pause. I think it’ll continue to pause here. It’s just too many people on that side of the trade at this point.
 
HAI: We heard comments recently from New York Fed President William Dudley, to the effect that a Dollar that’s too strong might hinder our ability to achieve our goals. Hint, hint, a little bit of code words there…
 
Kaufman: You’re right. But the problem they have is that the strong Dollar is going to hurt exports, obviously. But you’ve got S&P 500 companies due in the neighborhood of 40% of revenues, 50% of profits overseas. So, whether it’s from the strong Dollar or just because the economies overseas are very weak right now, no matter how you go on that, it’s going to be a problem. And the world economy needs to clear up. We’re not an island unto ourselves; it will affect us. And I think that’s what equities are starting to show.
 
HAI: Good points. Wayne, always great to have you here. Thanks very much.
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