Expect A Try For A New Gold Record By Year-End

Transcription

Monthly Analysis of Gold Stocks and Precious Metals Trends
Precious Metals
Bull Market
Remains on Track
Expect A Try For A New
Gold Record By Year-End
Natixis Commodity Markets
Ltd., London, England, recently
released its Q2 Base & Precious Metals Review which
includes price forecasts for Gold,
Silver, Platinum Group Metals,
Aluminum, Copper, Lead, Nickel,
Tin and Zinc. Here is an excerpt
from the Metals Review.
By John Embry
Dollar weakness could remain a feature as the US fiscal
and trade deficits have yet to
be resolved. In addition to the
generally high levels of indebtedness, there is now the problem
associated with sub-prime loans.
On a global level there has been
little or no reduction in tensions
in the world’s trouble spots, and
there is still the potential for
a further hike in energy prices
with its implications for inflationary pressures. All in all, the
backdrop to the precious metals
sector remains favourable.
GOLD: The gold market
in recent years has seen a
phenomenon whereby successive
increases in the price have been
fairly quickly followed by a readjustment of ideas, particularly
in the price-sensitive physical
markets, as to what constitutes
a fair and sustainable price.
Continued on page 2
The fundamentals for gold
are strengthening on an almost
daily basis and are inexorably
underwriting a sharp upward move
in the price in the very near future.
The fact that the price explosion
has not occurred as rapidly as logic
would dictate is a testament to the
power of the central banks and
their accomplices, the large bullion
banks. However, the price is moving
higher despite their best efforts, and
a multi-year high, exceeding the
peak in May, 2006 could be expected
shortly, to be followed by an assault
on the all-time highs (US$850 an
ounce) before year-end.
An inevitable fall in the U.S.
dollar would be the lynch pin for
the gold price move, and it will be
driven by the unfolding economic
and financial problems in the U.S.
At the epicenter of the U.S. financial
woes is the virtual collapse of the
subprime lending market, which
threatens the entire U.S. housing
industry, the collateralized debt
obligations (CDO) market and,
ultimately, consumer spending,
the last bastion of strength south
of the border.
Various government spokesmen and mainstream financial
commentators are going to great
lengths to assure the public that
there will be no contagion from
the subprime lending fiasco.
The obvious response is: “Why
should we believe them?”
Exactly two years ago, in a
speech to the Federal Reserve’s
Annual Community Affairs
Conference, former Fed chairman Alan Greenspan extolled
the sub-prime lending phenomenon, observing that, “Where
once more marginal applicants
would simply have been denied
credit, lenders are now able to
quite efficiently judge the risk
posed by individual applicants
and to price that risk appropriately.”
He concluded by proudly
stating that, “innovation and
structural change in the financial
services industry have been
critical in providing expanded
access to credit for the vast
majority of consumers, including
those of limited means.”
What an utter crock that was!
What was really happening was
an orgy of lending to people who
couldn’t possibly service their
debts for any period of time, let
alone ever repay it.
It spawned innovations in
mortgage lending whereby the
lenders made numerous upfront
fees, then packaged the loans in
Continued on page 13
Page Precious Metals Bull Market
Remains On Track
Continued from page 1
This ratcheting up of the ‘floor’ price at which
jewellery demand kicks back in and scrap supply
fades away has created confidence amongst the
investor community and has minimised risks from
investor profit taking/stop loss selling.
The rationale for the forecast ongoing upward drift
in the price floor rests upon two key assumptions
– investor interest remaining at sustained levels and
decent levels of GDP growth in the developing world,
and in particular China and India, as this would
allow for greater price resilience in their jewellery
markets. Natixis Commodity Markets believes that
both features will remain in place
Even if physical demand were to prove disappointing,
gold does not seem to face a supply threat. The supply
from scrap should fall in 2007 (unless prices rally
dramatically) as much of the loosely held or aged
retail stocks were shaken out during the rally in April/
May 2006. Net official sector sales are also expected
to fall as European sellers remain well under their
annual quota and further occasional extra-European
purchases occur. The final key area of supply, mine
production, in contrast, is expected to grow, if only
modestly, though this will be reinforced by projected
lower levels of producer de-hedging.
As for what this means in terms of actual prices,
given expectations of high levels of volatility, we would
not expect the above suggestions of price strength to
translate into anything approaching a straight line
progression for gold. Recent years have seen periods
of marked weakness despite the underlying uptrend
and this is expected to be witnessed again in 2007. As
a result, the average for the year could well come in
at a seemingly uninspiring figure around $670. The
general uptrend in prices and progressive raising of
the floor is expected to continue for some time into
2008. As a result, this could generate an average for
that year modestly above the $700 mark.
SILVER: Silver supply is forecast little changed
in 2007. Mine production is expected to register only
modest growth, while producer hedging is expected to
recede further on the already limited volumes recorded
in 2006. Sales by the official sector may fall, largely as a
result of limited (if any) sales by the Indian authorities.
However, overall sales should remain significant, with
Russian and Chinese selling still a feature. Scrap too
should also stay sizeable, though growth may be very
limited as photographic scrap continues to decline in
the face of that sector’s ongoing demise at the hands of
digital technology. Overall physical demand could also
weaken, but only marginally with the on-going loss of
the photographic market being offset by the positive
impact steady world GDP growth.
To conclude, with silver’s own fundamentals
comparatively neutral, there is room for investment to
play a decisive role and with that forecast to continue,
prices should stay firm. However, it has been common in
recent years that prices have shown some weakness over
the summer months before posting a rally in the fourth
quarter. This could again feature in 2007, with gains
carrying on into 2008. In such an event, the average price
for 2007 should end up notably higher than 2006’s $11.55,
perhaps approaching the $14 mark, whilst the average
for 2008 could well end up slightly over this level.
PLATINUM GROUP METALS: A number of
different trends were in place, which led to the
relatively modest advance in consumption of 2%.
On the plus side was the greater use in diesel
autocatalysts and the general buoyancy of the diesel
market (particularly outside the USA). This together
with higher use in other industries, more than offset
platinum’s declining use in gasoline autocatalysts and
a further reduction in jewellery fabrication.
Demand for palladium increased by a similar 2%
to a total of 7.9m oz. Within this total, autocatalyst
Continued on next page
PRECIOUS metal price outlook 2005 to 2008
2005
Cash price $/oz
2006
2007
2008
% Change
07/06
08/07
Au
445
604
670
710
10.9%
6.0%
Ag
7.31
11.55
13.75
14.25
19.9%
3.6%
Pt
897
1143
1265
1340
10.7%
5.9%
Pd201
320
355
375
10.9%
5.6%
Published by The Bull & Bear Financial Report • © • June 2007 • www.TheBullandBear.com
Page Continued from previous page
demand gained 8% as palladium benefited from
higher use in gasoline systems and rising vehicle
production in Asia. This was palladium’s first gain
in autocatalyst use since 2000 and countered falls in
jewellery and dental demand.
Global platinum and palladium mine output rose
by around 6% and 5% last year to new records of
just over 7m oz and 7.2m oz respectively. We expect
that South African output will continue to advance
in 2007. Amplats has suggested its output should
increase by 5%. In addition, continuing ramp ups
and an increased contribution from the Mototolo
joint venture (Amplats and Xstrata) should provide
significant additional volumes in the current year.
Norilsk’s platinum output was flat at 752,000 oz,
while palladium edged up by 31,000 oz to 3.164m oz.
Norilsk Nickel has suggested that may dip in 2007,
with output from the company’s Polar Division and
Kola mining and metallurgical combine forecast to
total 3.00-3.0m oz of palladium and approximately
710,000 oz of platinum.
Scrap supplies continued to increase last year with
a particularly strong surge in palladium supplies
(up around 20% as against a 7% rise for platinum).
On a regional basis North America is the dominant
source of secondary supply, reflecting its massive car
population and its early adoption of autocatalysts. The
source of spent catalyst is also growing sharply from
a lower base in Europe and Japan, and strong growth
in secondary supply looks set to remain a feature of
the industry going forward.
The key price driver for platinum and palladium in
the short term however, rests with investor sentiment
to these metals and to the commodities sector as a
whole. Perhaps somewhat surprisingly, given the
price advances and continued volatility in the pgms,
we are leaving our price forecasts unchanged. In the
previous Natixis Commodity Markets Metals Review,
we had taken a bullish stance projecting an average
platinum price of $1,265 per oz in 2006, which was
well above the price at the beginning of the year of
$1,136. Given the strong price performance so far this
year our forecast implies an average of around $1,295
for the rest of the 2007. It is likely that the range seen
so far this year may widen with short-lived moves over
$1,400 per oz not out of the question, while bouts of
profit-taking could see prices return towards the early
January levels. Nevertheless our average forecast
implies that the uptrend in price should continue, as
does our 2008 average forecast of $1,340 per oz.
Palladium prices should also benefit from what is
likely to be sustained interest from the investment
community; however there will be less support from
the fundamentals. Although the two metals have posted
similar gains since the beginning of the year (+13%),
we believe that palladium may underperform its sister
metal given the higher level of above ground stocks for
palladium. Natixis Commodity Markets is forecasting
an average annual price of $355 for 2007. Prices up
to late April averaged $346 per oz, which suggests an
average for the rest of the year of around $359. As this
is below prices in late April, this implies that palladium
prices should level off and trade in a band based on $325375 for much of the second half of the year.
Editor’s Note: Natixis Commodity Markets Metals Review is
published by Natixis Commodity Markets Limited, Capital House, 85
King William Street, London EC4N 7BL, United Kingdom. Natixis
Commodity Markets is a ring-dealer member of the London Metal
Exchange and an associate of the London Bullion Market Association and
the London Platinum and Palladium Market. www.natixiscm.com.
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Page Canarc Resource Corp. Accelerates New Polaris
High-Grade Gold Mine Project Towards Production
High-Grade New Polaris Gold Mine on Road to Production by 2009
The core asset of Canarc Resource Corp. (OTC
BB: CRCUF; TSX: CCM) is its 100% owned, pastproducing, high-grade New Polaris Gold Project
located in northwestern B.C. Between 1988 and
1997, Canarc conducted extensive exploration drill
programs to discover major new high-grade gold
zones below and beyond the old mine workings.
Resource studies at that time estimated 1.2 million oz.
contained gold, still open along strike and to depth.
In February 2007, an updated, independent, NI
43-101 compliant resource estimate was announced,
Bradford Cooke, Chairman and CEO, commented, “This
updated NI 43-101 resource estimate was a key first step
in advancing the New Polaris gold project towards the
feasibility stage. We are thrilled to beat our minimum
resource target, even though we only infill drilled the
C vein system to a depth of just 500 m and did not drill
any of the other historic resource areas in the Y and AB
veins, which are mostly at shallower depths.”
An aggressive feasibility and mine development
program is now underway in order to bring New
Polaris into production by 2009.
Diverse Portfolio Includes Large Gold
Exploration Property in Suriname
Canarc has accumulated an impressive portfolio of
gold properties – one that is already producing royalty
revenues; the advanced-stage former producing high-
Canarc Resource’s infill drilling program at New
Polaris Gold Project in British Columbia has defined
a continuous high-grade gold zone.
grade mine slated to resume production by 2009;
an intriguing early-stage project in South America
the company says has extensive gold potential and
recently announced attractive gold-silver acquisitions
in Mexico with a promise of more to come. This
growth-oriented, gold exploration company is also
looking for an advanced-stage project suitable for
near-term gold production.
Canarc plans to initially use the estimated $500,000
annual royalty revenues from the Bellavista open-pit,
heap leach gold deposit in Costa Rica to help finance
development of its high-grade New Polaris Mine in
British Columbia and exploration at its Benzdorp
Project in Suriname. Long-term, the company plans to
sell the Bellavista interest, to accelerate development
of the other projects.
Largest Undeveloped High-Grade
Gold Mine Project in Western Canada
Canarc Resource’s flagship New Polaris gold
project encompasses about 3000 acres, located in
British Columbia about 60 km north-east of Juneau,
Alaska. Gold was discovered at the mine site in 1929.
Historically, 232,000 oz. gold averaging 0.35 oz/t was
produced by the mine between 1938 and 1951.
Canarc, started drilling in 1988 and soon discovered
major gold zones below and beyond the historic mine
workings. High-grade gold with a high degree of
continuity and uniformity was found in three major
shear zones. Gold mineralization averages about 10
feet thick but ranges up to 100 feet in thickness and
the average grade is 0.4 oz per ton or better!
By the mid-1990s, Canarc was well on its way to
proving up sufficient resources to consider reopening
its 100%-owned New Polaris Mine. Work halted when
the gold market collapsed in 1997. Now that the gold
sector has significantly rebounded, New Polaris is
once again the company’s main focus.
Canarc has spent over C$18 million to date
evaluating New Polaris as a new producing mine.
It should take only three years to bring the mine to
production of about 65,000 oz. a year of high-grade
ore. Historically, gold recoveries averaged 90% with
concentrate grades ranging from 3.5 to 5.0 oz/t gold.
New Polaris hosts refractory gold that historically
was mined and processed year-round. Gold concentrates
were barged seasonally to a smelter in Tacoma,
Washington. Canarc will also consider utilizing barges,
and is considering autoclaving concentrates either
at its own site or shipping concentrates to existing
processing facilities in Nevada.
Existing buildings, including sleeping quarters, a
kitchen facility, warehouse, dry and machine shop,
have been refurbished and are capable of supporting
Page 35 people. A dewatering program to open up the mine’s
lower levels has begun to allow construction of a 2500foot decline into a large vein deposit outlined in recent
exploration. The deposit remains open down dip.
Once in production, Canarc plans to first mine
the upper portion of the deposit to provide cash
flow to continue development deeper underground
where there appears to be the greatest potential for
additional high-grade ore.
Benzdorp Project Located in
Prolific Suriname Gold Belt
and Noranda Mines. He operated his own geological
consulting firm discovering and developing several
high-grade gold vein deposits for clients in British
Columbia. Cooke has raised over C$200 million in
equity and joint venture financings.
Canarc’s President and COO Bruce Bried is
a professional mining engineer with over 28
years experience in the engineering, development,
operation, reclamation and management of producing
mines. He specializes in underground vein gold/silver
mines, having worked for many years with Dickinson
Mines (now Goldcorp) in Red Lake, ON and New
Denver, BC, and then with Homestake Mining, where
he was Mine Superintendent at the Hemlo and Eskay
Creek gold mines and General Manager of the Snip
and Lead gold mines.
Canarc’s Board of Directors and other officers have
equally broad backgrounds in exploration for precious
metals, metallurgy, mine engineering and operations,
mining law, finance and management.
The company’s 80% optioned Benzdorp property in
Suriname, South America, encompasses 1,390 square
kilometers and is located in one of the largest gold
belts in the region – over 1 million ounces of gold have
been produced by artisanal miners.
Gold production at Benzdorp began in the late
1800s. The Jungle Queen dredge operated in the mid1900’s and introduced modern mining to the region.
Canarc has identified multiple surface gold
Investment Considerations
prospects including a large, low-grade zone of gold
Canarc
is well positioned to take advantage of the
porphyry mineralization. Drill intercepts include 0.48
continuing positive outlook for gold. Merrill Lynch
gpt over 400 m (0.014 opt over 1312 ft) and 1.14 gpt
recently forecast spot gold will average $675/oz in
over 120 m (0.033 opt over 394 ft). High-grade gold
2007. The favorable outlook for gold was based on
zones have also been discovered, such as 12 oz per
anticipated “declining global gold output, lower net
ton over 6.6 feet in one deep auger hole.
central bank sales, a rebound in fabrication demand,
Canarc has explored only a fraction of the Benzdorp
and still-strong investment demand.”
property, which is accessible by charter aircraft, boat
Much of the coming year will be spent dewatering,
and ATV. From 2003 to 2005, the company drilled 51
and deepening the mine shaft and then developing
holes into the gold porphyry zone with several holes
a decline into the gold mineralized zones in order
yielding an average grade of 0.6 g/t gold. In 2006, an
to estimate proven and probable reserves, conduct
extensive grid-based soil-sampling program, and a
test mining and take a bulk sample for final
high-resolution airborne magnetic and radiometric
metallurgical testing. If there
survey identified several new gold
are 1.2 million ounces in the top
prospect areas on the property. A
1500 feet at New Polaris, there is
more aggressive, Phase 1, 2007
strong potential for substantially
work program of ground geophysics,
more ounces within 5000 feet of
bulldozer trenching, additional soil
surface.
geochemistry and poknokker pit
Canarc also hopes to acquire
mapping and sampling is already
a large late-stage gold project
underway in order to define targets
Canarc
somewhere in the Americas. Two
for drilling in a Phase 2 work
Resource Corp.
new gold opportunities have
program starting later this year. To
recently been acquired in Mexico
OTC BB: CRCUF
date, Canarc has spent about US$5
and several more are of sufficient
TSX: CCM
million on exploration.
interest to justify continued due
Contact:
Canarc Management
diligence and discussions with the
Gregg Wilson, Investor Relations
Highly Qualified
owners.
#800 - 850 West Hastings Street
2008 activities will focus on
Canarc is led by a highly qualified,
Vancouver, BC Canada V6C 1E1
permitting, financing and building
diverse team of exploration and
Toll Free: 877-684-9700
an operating mine in preparation for
mining professionals dedicated to
Phone: 604-685-9700
the commencement of production in
the company’s strategic goal – to
Fax: 604-685-9744
2009 at New Polaris.
become a significant gold producer.
“The upside for gold in general
E-Mail: [email protected]
CEO Brad Cooke is a geologist
and
Canarc in particular is very
by trade who has more than 32
Web Site: www.canarc.net
attractive,”
says Canarc CEO Brad
years of experience in the mining
Shares Outstanding: 68.5 million
Cooke. “We believe the New Polaris
sector. He has broad expertise in
52 Week Trading Range:
Gold Project has the potential to be
project management and financing
U.S.
Hi: $0.817 • Low: $0.51
the next producing high grade gold
and has worked for such majors as
Hi: C$0.93 • Low: C$0.59
mine in British Columbia.”
Shell Minerals, Chevron Minerals,
Page Has The Battle For The Survival
Of The U.S. Dollar Begun?
Where the Pros Think The Price of Gold Is Headed
By Patrick Heller
Liberty’s Outlook
In last month’s issue of Liberty’s
Outlook, I warned you that the
U.S. dollar was sinking and that
the trend was likely to continue.
That has happened.
In the past month, the U.S.
dollar has fallen another 2%
against the Australian dollar, 4%
to the Canadian dollar and India
rupee, over 2% versus the Euro and British pound,
and almost 3% against the New Zealand dollar. It even
fell almost 1/2% versus the Chinese yuan.
It rose about 0.7% against the Japanese yen, about
the only major currency against which the U.S. dollar
appreciated in April.
Last month, I warned that the value of the U.S.
dollar might fall far enough in the month of April to
trigger massive intervention by the U.S. government
to try to support it.
In April, the prices of gold and silver reached 11month highs while platinum hit a new all-time high.
Gold closed over $690 twice and tested $700 during
the day. Silver settled above $14.00 in U.S. markets
three times. Platinum soared all the way to a close of
$1,320.00. Even palladium was up almost 5% in April.
Over the past week and a half, precious metals
prices slid. Several major analysts have tried to
explain the decline as simply another technical sell-off
of a market that has risen too quickly.
I don’t agree with them.
I also think that at least some of them know that
this information is incorrect, but they have other
agendas for hiding what has really happened.
Six months ago, the top central bankers in Western
Europe were all making statements that they had
no plans to sell their nation’s gold reserves, nor was
it likely that the European Central Bank would sell
any of its gold.
In fact the amount of central bank gold likely to be
released onto the market was so limited that it would
fall far short of the quotas allotted under the current
Central Bank Gold Agreement.
Starting in March, with no announcement or explanation, the European Central Bank began selling
sizeable quantities of gold reserves.
Apparently, it accelerated its sales program during
the month of April. It is selling gold at such high levels
that, if it continues at this rate, it will reach its annual
limit well before the end of the
fiscal year on September 30.
This massive amount of sales,
and I have not been able to obtain
details as to the exact volume of gold
that has appeared, has been enough
to bring a pause to the run up in the
price of gold.
Also during April, a new round
of rumors appeared about how
the International Monetary Fund
(IMF) was preparing a new plan to
sell some of its gold holdings. As the IMF is holding
over 100 million ounces of gold, more than any
government or central bank other than the United
States, this rumor can intimidate those thinking that
the price of gold is only going to go up.
As far as I can tell, there is no particular reason why
the European Central Bank or any of the individual
European central banks need to be selling gold,
though the Netherlands has been selling significant
quantities of gold over the past couple of years.
Also, previous claims that the IMF was going to
sell its gold to provide welfare to highly indebted
countries brought howls from several African nations
that depend on gold exports for a significant part of
their economy. The gold mines account for about 1/3
of the Zimbabwe Gross Domestic Product (GDP), for
instance. When these countries pointed out to the IMF
that lowering the gold price through release of any
gold would hurt poor nations as much as it might help
them, the gold sales plans were quietly dropped.
So, for the purposes of Western Europe or for the
IMF, there really isn’t any reason for any rush to sell
gold reserves.
What Might
Really Be Happening?
However, there is one nation whose currency is
being clobbered by inflation and rising gold prices and
that has a huge incentive to do just about whatever
it takes to hold down gold.
The United States of America.
To prop up the value of the dollar, the Federal
Reserve would have to disgorge its reserves to buy
back dollars and dollar-denominated debt.
The U.S. doesn’t have too many options when it
comes to releasing reserves, however. The Federal
reserve continues to report that the U.S. is holding 261.5
million ounces of gold (about $175 billion at current
gold prices), but barely $40 billion in foreign exchange
currency. According to the Statistical Supplement to
the March 2007 Federal Reserve Bulletin, the U.S. also
has another $16 billion in reserves at the IMF and in
Special Drawing Rights. Basically, about 76% of U.S.
government reserves are in gold.
(This distribution of reserves is far different to
that of nations that have accumulated the bulk of
their reserves in the past 50 years. Of China’s $1.2
trillion in reserves, perhaps as low as 1% of it is held
in gold, for example.)
So, if the U.S. Government were to try to distribute
its reserves, that basically means getting rid of its gold.
However, the vaults in Fort Knox are being watched
closely. Any caravan of trucks that might leave there
would create a storm of speculation that the U.S. had
unloaded part of its gold. That would quickly shake
confidence in the strength of the dollar, causing all
sorts of economic mayhem in the process.
As a result, physically taking gold out of U.S. vaults is
not a practical idea. However, it really would not be that
hard to work a swap with a cooperating central bank,
such as those in Europe. The U.S. government could
say that it wanted to sell 14 million ounces of gold, as
it was suspected of doing last summer, and arrange for
another central bank to do it for them. Then the U.S.
would simply change title to an equal amount of gold
sitting in Fort Knox to that of the other central bank.
A few years ago, U.S. government reports on its
gold holdings stated flat out that the gold was owned
by the U.S. government. Then, for no apparent
reason, the description was changed to simply say the
quantity of gold in the vaults with no representation
that it was all owned by the U.S. government.
U.S. government officials refused to discuss or
explain the reason for the change in terminology, even in
response to an inquiry from U.S. Senator Jim Bunning
(R-KY). An inquiry from a member of Congress is
tantamount to a royal command to a federal employee,
so the refusal to answer Sen. Bunning is a major breach
of protocol that is not done for trivial reasons.
I have no hard direct evidence for my suspicions, but
there is a decent amount of circumstantial clues pointing
to the possibility the gold that has been unloaded by
the European Central Bank over the past two months
is really coming out of the U.S. gold reserves.
One major clue to this came from an interview in
Paris on October 5, 2006 of German Central Bank
president Axel Weber when asked if that bank
planned to sell any of its gold reserves.
He said, “We are not envisaging gold sales for
their third year [of the current agreement with other
central banks]. We have been asked to negotiate
with other central banks” about potential swap deals
involving gold.
The only other central banks that would need to
discuss such a swap would be ones that had a lot
of gold reserves that could not be moved without
attracting attention. That points to the U.S. as
the prime and perhaps only suspect who might be
negotiating a gold swap of enough magnitude to be
worth mentioning in an interview.
If my suspicion turns out to be correct, then it
looks like the U.S. government has already started
to go all out to defend the survival, and not merely
the value, of the U.S. dollar. I told you last month
that it looked like a U.S. Dollar of 80.5 was the line
drawn the U.S. government’s Plunge Protection Team
to unleash major support of the dollar. During April
the Index fell close to 81.
What has been happening since March may be the
opening salvos of the ultimate defense of the U.S.
dollar. When even the Comptroller of the U.S. and the
head of the Congressional Budget Office go on record,
as both did in 2006, to say that the actuarial present
value of the U.S. government’s liabilities roughly
match the entire wealth of planet Earth, that means
the U.S. Government is bankrupt.
The U.S. government has a tremendous amount of
assets, primarily gold, with which to support the dollar.
In theory, the destruction of the U.S. dollar could take
several years. But I get more afraid as the months go
by that we have passed the point where it might have
been possible to avoid the collapse of the U.S. Dollar.
Of course, it might not take that long for the U.S.
to lose the battle over the dollar. I remember that the
U.S. had a massive hoard of more than two billion
ounces of silver in the mid-1960s that was used to
try to hold down silver prices. By the end of the
late 1960s, this hoard was mostly wiped out. Today,
the U.S. government does not hold any significant
inventories of silver.
The same thing could be happening to the U.S.
government’s gold reserves.
What Should You Do?
I really am trying to discuss this subject in a calm,
non-inflammatory matter. But I am deeply concerned
that the U.S. economy as we know it will be in for
some major turmoil in the coming years.
As insurance against calamities to currencies
and paper assets like stocks or bonds, I formerly
recommended that prudent individuals put 5-10%
of their net worth into precious metals and possibly
other hard assets like rare coins.
A few years ago, I raised that allocation to 10-20%
of one’s net worth.
Just last month, I said it was time to look at
investing a minimum of 20% of one’s net worth into
tangible assets like gold, silver, and rare coins. I
emphasize that this is a minimum, which many people
should be able to arrange without totally turning their
lives upside down or inside out.
If you have not done so recently, sit down sometime
in the next few days to total your assets and liabilities.
The difference between these two is your net worth.
Multiply 20% of your net worth and compare that
figure with the value of your holdings of gold, silver,
and rare coins. If you don’t have enough hard assets,
Continued on page 9
Page How To Buy Canadian Stocks & Warrants
Dudley Pierce Baker
Precious Metals Warrants
Frequently I read comments from other analysts
regarding the difficulties of trading, i.e. buying,
the Canadian mining stocks. They usually suggest
investors seek out a broker that specializes in these
stocks and while that is not bad advice, it is not
necessary to do so.
Allow me to first provide some insight on the
mining sector and in particular the investment
conferences being held frequently in both Canada
and the United States.
The investment conferences in Canada are drawing
thousands of participants. For example, recently I
attended a conference in Vancouver, Canada and
there must have been at least 8,000 or so investors
in attendance and standing room only for all of
the speakers. As this was my first attendance at a
Canadian event, I was in awe at the excitement and
energy of those in attendance. Another conference to
be held in Toronto, Canada in March is anticipating
12,000 – 15,000 participants. The resource conferences
in the United States, i.e., Las Vegas, San Francisco
and New York, are more on the order of 1,000
participants, begging the question;
Why the great disparity?
Two reasons in my opinion; lack of education in
the United States on the natural resource sector and
the perceived difficulty of investing in the Canadian
stocks and/or warrants by U.S. investors.
Perhaps, U.S. investors are asking the question;
why should I get excited about the Canadian stocks
or warrants if I cannot buy them? Rather, most do
not know how to buy them.
Also we know the average U.S. investor is still
focused on the Dow, S&P and Nasdaq stocks and
has little or no knowledge (as yet) of the great bull
market taking place in the Canadian mining stocks
and warrants.
With this background let me proceed to explain
‘exactly’ how to trade the mining stocks or warrants
depending on your country of residence:
Canadians:
The trading of the mining stocks and warrants
will be very easy for you. The vast majority of
mining companies are based in Canada and trade
on the Toronto Exchange (TSX) or the TSX Venture
Exchange. The symbols for the shares and warrants
can be easily obtained and orders executed. The
Canadians through their local newspapers have
access to an incredible amount of news on the natural
resource sector as this is where most of the companies
are headquartered and also where a substantial
portion of the world’s resources are located.
Americans:
If you want to be included in this long-term bull
market in the natural resource sector, it is imperative
that you understand how to invest and have your
orders executed.
For U.S. citizens do not be discouraged if your
broker has previously told you they cannot execute
your orders on the Canadian mining shares or
warrants. In a few minutes of reading you will be an
expert on this subject and will probably know more
than your broker and I assure you they will execute
your orders.
As a U.S. citizen, I have purchased hundred’s of the
Canadian mining companies and warrants using my
U.S. discount broker in the last few years and I will
share with you ‘exactly’ how to place your orders, or
if necessary, ‘exactly’ what to tell your broker.
For those specific mining shares you are following,
I suggest you track your portfolio using the TSX or
Yahoo Finance using the Canadian symbols and thus
follow the Canadian prices, including the bid and ask
price for each security.
Symbols for mining shares:
In order to place orders you need a symbol, right?
Virtually all of the Canadian mining companies have
been assigned a five (5) alpha symbol by the OTC
market to facilitate these trades in the United States.
The last character is an ‘F” representing a foreign
market. You will find the symbol (s) in numerous
locations:
1. Your brokerage firm symbol search
2. Yahoo Finance symbol search
3. Nasdaq symbol search
With these OTC symbols you can now enter your
order online. Cautionary reminder: you may see a price
for the most recent trade, but this is probably not the
current price. Remember, the primary market for the
Canadian stocks is on the TSX not in the U.S. The price
you see using the OTC symbol will be the last trade (in
the U.S.) which may be days, weeks or months ago. In
other words, the stock could be actively trading on the
TSX in Canada but not in the U.S. due to a current
lack of knowledge and interest by U.S. investors as
pointed out above. Do not be discouraged. Ascertain
the current price of the shares in Canadian dollars,
decide how much you want to pay for the shares (in
U.S. Dollars) and enter your Limit Orders.
Some investors will no doubt give up saying, ‘this is
too difficult’. Let me remind you that this bull market
is taking place and will continue with or without you.
The choice is yours whether to participate and it is
essential for you to understand how to get quotes and
place your orders.
Symbols for Warrants:
Some of the warrants also have been assigned a 5
alpha symbol by the OTC market but most have not
thus requiring a little more work. In these cases, if
there is a warrant you wish to purchase you will need
the cusip number (a 9 digit legal identification) for
this warrant. The cusip number can be obtained from
the company and is but one of the many particulars
on warrants which we furnish to our subscribers.
If there is an existing OTC symbol you may enter
the order for the warrants online, otherwise, you
will need to call your broker and give them the cusip
number for the warrant.
Example:
Let’s say you want to purchase 5,000 warrants
on ABC Mining Company, the cusip number is
123456789, the warrants expire on January 5, 2010
and you want to limit the price you pay in U.S. Dollars
to $.50. Give your broker the specific instructions:
“I want to buy 5,000 ABC Mining Company
warrants, cusip number – 123456789, expiring on
January 5, 2010 at a LIMIT PRICE of $.50 U.S.
dollars”. Your broker will read the order back to you
for confirmation. Congratulations, you have just
placed your first order for warrants.
Australian & U.K. Citizens:
Depending upon your brokerage firms, I suggest
you can purchase the Canadian mining shares and
warrants using the procedures discussed above for
U.S. Citizens.
Concluding thoughts:
Commissions:
The commissions will vary depending on your
brokerage firm and whether you can place your
orders online or whether you must call your broker to
enter the trade. While the amount of the commission
should be considered, they are to me just an expense,
overhead, of doing business. The potential gains to be
derived from the mining shares and warrants over the
coming months and years should over shadow your
concern over commissions, in my opinion.
If your broker has previously refused your trades
in the Canadian mining shares or warrants, I suggest
you forward this article to them as it will be good for
their business and rewarding for you with your new
found investments.
If you would like additional information on ‘how
to trade’ and also on warrants, we encourage you to
visit our website.
Editor’s Note: Dudley Baker is the owner/editor of Precious Metals
Warrants, a market data service which provides you with the details on
all mining & energy companies with warrants trading on the U. S. and
Canadian Exchanges. As new warrants are listed for trading we alert you
via an e-mail blast. You are provided with links to the companies’ websites,
links to quotes and charts, tips for placing orders and much, much more. We
do not make any specific recommendations in our service. We do the work
for you and provide you with the knowledge, trading tips and the confidence
in placing your orders. Email: [email protected]; Website:
PreciousMetalsWarrants.com.
Disclaimer/Disclosure Statement: PreciousMetalsWarrants.com is
not an investment advisor and any reference to specific securities does not
constitute a recommendation thereof. The opinions expressed herein are the
express personal opinions of Dudley Baker. Neither the information, nor the
opinions expressed should be construed as a solicitation to buy any securities
mentioned in this Service. Examples given are only intended to make
investors aware of the potential rewards of investing in Warrants. Investors
are recommended to obtain the advice of a qualified investment advisor before
entering into any transactions involving stocks or Warrants.
Price of Gold
look at what assets you own that could be converted.
If my analysis is correct, you only have a limited
time to take action. This battle over the U.S. dollar
could drag out for years. But you could also see the
value drop 10-20% quickly without warning. In the
past I have tended to alert readers a bit on the early
side.
Where The Pros
Think The Price
of Gold Is Headed
Even is my assessment of what is happening
with the U.S. dollar is incorrect, there is a lengthy
list of indicators saying that we are still in the early
stages of the next major boom for gold, silver, and
rare coins.
So where do some of the top professionals, those
whose livelihoods depend on their accurate projection
of future gold prices, think we are headed?
Top officials of three of the world’s five largest gold
mining companies certainly have an incentive to
accurately anticipate gold price moves. They have all
come down squarely anticipating that future prices
will be higher than they are today.
To facilitate financing of new operations, mining
companies have often entered into long-term sales
contracts of future production. If prices stay steady or
decline, this works well. But, if prices increase, profits
are reduced and shareholders are unhappy.
Over two years ago, Newmont Mining Corporation
closed out all of its pre-sold gold contracts.
A few years ago, Barrick Gold Corporation had
pre-sold so much gold that it amounted to what it
could produce in three years! Since then, it has been
whittling down this obligation. Last night, Barrick
issued a news release stating that the company had
absorbed a loss of $557 million dollars in the first
quarter of 2007 to close out the last of their pre-sold
contracts. Obviously, management of this company
expects prices to rise enough higher in the future to
recoup this $557 million.
Today Gold Fields announced that it had spent
$528 million in the first quarter of 2007 to close out
the pre-sold contracts that were owed by a recently
acquired subsidiary.
I don’t have current data for Anglo Gold Ashanti
or Kinross, but Anglo Gold Ashanti officials had
previously stated they were aggressively seeking to
eliminate all pre-sold gold contracts.
Take it for what it’s worth.
Editor’s Note: Patrick Heller is editor of Liberty’s
Outlook, published by Liberty Coin Service, 300
Frandor Ave., Lansing, MI 48912, 1 year, 12 issues,
$109. Liberty Coin Service has been a dealer in rare
coins and precious metals since 1971. Visit the website
at www.libertycoinservice.com.
Page 10
Commercial Gold Production Begins at
Aurizon’s Casa Berardi Mine in Quebec
Aurizon Mines Ltd. (AMEX: AZK; TSX: ARZ)
logged a major milestone in its corporate history
earlier this year when commercial gold production
was reached at its flagship Casa Berardi property
in Quebec.
“We are now poised to deliver significant cash flow
and earnings in the years ahead,” says Aurizon David
Hall President and CEO.
More than 32,000 ounces of gold were produced
in the first quarter of 2007. That number is expected
to ramp up over the coming year to an annualized
production rate of about 175,000 ounces of gold – at
a total cash cost of between $265-$285 an ounce.
Given the recent robust
performance and contining
strong fundamentals within
the gold sector, Aurizon
appears headed for equally
robust profits and cash
flow.
Producing Casa
Berardi Mine
Has Considerable
Upside Potential
for Growth
Aurizon’s 100%-owned
Casa Berardi Mine is
located in northwestern
Quebec – an area Hall
says is “one of the better
places to be in the world.”
When you consider that
the company controls more
than 37 square kilometers of
“highly prospective geology
surrounding Casa Berardi,
the present projected sixyear mine life could expand
significantly.
Aurizon devoted much
of 2006 developing underground infrastructure
and above-ground buildings and rehabilitating the
processing facilities. Since the initial gold pour in
December 2006, the processing facility has achieved
a 93.8% recovery rate, well exceeding original estimates. Mill throughput will gradually increase to
about 2,200 tonnes per day over the coming year.
Meanwhile, Aurizon continues to explore its
massive property with the goal of further increasing
Casa Berardi’s reserves and resource – currently
standing at 1.2 million ounces of gold reserves, as well
as an additional measured and indicted resource of
over 500,000 ounces and an inferred resource of 1.18
million ounces.
The vein-type deposits
extend for some 6 kilometers along the Casa Berardi
fault system. Last year,
Aurizon discovered two
new high grade zones,
both within easy haulage
distance of the new shaft
infrastructure. On the
South fault, two drill holes
returned intersections of
32.7 gpt gold over 13.8 meters and 13.1 gpt gold over
11.6 meters, both approximately 650 meters below
surface. The new mineralized zone of wide quartz is
believed to dip steeply to
the south, remains open
at depth and along strike,
and is similar to the type of
mineralization in the current Casa Berardi reserves.
Aurizon is planning to
utilize two underground
and two surface drill
rigs this year to upgrade
existing mineral resources
First Gold Pour
at Casa Berardi Gold Mine
Aurizon Mines to produce 175,000
oz. of gold annually and an
estimated 1.1 million oz. of gold
over the initial six-year mine life.
Page 11
and add new resources to
the project. The company
has also designed a
three-year exploration
program to further test
the exploration potential
between the West and
East mines particularly
at depth.
“Casa Berardi has a lot
of upside potential,” says
Hall.
In addition, previously
drilled holes are being
re-assayed to confirm
reported mineralization
grades. Best results from
22 holes returned 2.2
gpt gold over 43 meters
and 1.8 gpt gold over 43
meters. Additional exploration is planned, as well,
on adjacent properties
along the gold-bearing
system which are curExploration
rently under option.
Underway at
The company plans to
Joanna Gold and
“fast-track” the Joanna
Kipawa
Property by issuing an
Gold-Uranium
updated mineral resource
estimate by this summer,
Properties
as well as a preliminary
Aurizon also holds an
economic assessment by
option to acquire a 100%
the end of the year.
interest in the Joanna
A u r i z o n ’s K i p a w a
Property, which is located
gold-uranium
project is
along the Cadillac Break
located
about
halfway
20 kilometers from Rouynbetween
the
Elliot
Lake
Noranda, with easy
uranium camp and the
access to a highway and
Abitibi gold belt camp.
railroad.
The company acquired
The property was
the property on the
mined in the late 1940s
urging of its geologists
underground to a depth
who were intrigued by
of about 200 meters.
a government regional
Efforts concentrated
Aurizon’s controls over 300 square miles of prospective
stream sediment survey
on a stacking of high
geology in the prolific Abitibi Gold Belt where more than
showing gold anomalies
grade veins close to a
160
million
ounces
of
gold
has
been
produced.
in the area.
brittle fault. Those veins,
Following an initially
however, are part of a
“encouraging” exploration program, Aurizon quickly
wide, lower grade halo of up to 1 gpt gold. Goldincreased its land position to about 75,000 hectares.
bearing mineralization has been traced along an
Last summer, the company conducted a combined
2,200 meter trend and down to a depth of 400
magnetic, electromagnetic and radiometric survey
meters.
plus a til sampling program. The result was the
Aurizon believes the Joanna project has the
discovery of four continuous gold dispersion trains
potential for a significant high tonnage, open-pittable
along a 30 kilometer trend. Each area produced heavy
deposit with the added possibility for a higher grade
mineral concentrate gold assays of up to 7.2 gpt. A
extension to depth.
follow-up till sampling program confirmed the high
According to a new mineral resource estimate,
gold assays and extended the gold trains. One till
based on 381 historic drill holes, the Joanna project
sample returned a value of 100 gpt gold.
contains about 5.4 million tonnes averaging 1.8 grams
“This is an extremely high value. The exploration
of gold per tonne – or 309,000 ounces indicated, and
results
have far exceeded our expectations,” says
an additional 21.8 million tonnes averaging 1.6 gpt
Hall. “Kipawa is a very early stage, pure grass roots
gold for an inferred resource of 1.1 million ounces of
project, but is very exciting. We will spend about $1
gold.
million exploring there this year.”
Aurizon currently has two drill rigs on site as part
That exploration program will include airborne
of a program to further increase Joanna’s mineral
magnetic
and electromagnetic surveys at Kipawa, as
resources. So far, drilling has returned values of up
well
as
overburden
and diamond drilling.
to 2.2 gpt gold over 32 meters and 1.5 gpt gold over
And
although
Aurizon’s
focus is primarily on the
34 meters. Most of the mineralization appears to
Abitibi
region
of
northwestern
Quebec, one of the
be metamorphosed, sediment-hosted disseminated
world’s most prolific gold and base metal regions, the
sulphide. Narrow and widely-spaced higher grade
company is actively looking for yet more development
quartz veins have also been found.
stage projects in North America.
Page 12
Casa Berardi Gold Mine, Quebec
Below: Gold Bars Produced
at Casa Berardi
Above:
Sag and Ball Mill Grinding Circuits
Above:
Casa Berardi Processing Plant
Investment
Considerations
Aurizon is now unquestionably
a full-fledged member of the elite
ranks of gold producers. That status
received notable market recognition
in December when it was added to
the S&P/TSX Global Gold Index – a
dynamic international benchmark
that tracks the world’s leading gold
companies and offers investors
broad exposure to the world’s gold
markets.
“Aurizon’s inclusion on the Index
is a clear recognition of Aurizon’s
growth and should increase our
liquidity as investors buy Index
listed companies,” says Hall.
During the past year, Aurizon
secured a $75 million project
loan, completed a $15.1 million
flow-through share financing,
successfully fought off an unsolicited
takeover bid, completed mine
facility construction within 1% of
budget, and began gold production at
its Casa Berardi Mine. Meanwhile,
the company’s exploration arm
discovered two new high-grade gold
zones nearby. Aurizon’s property
AURIZON MINES LTD.
AMEX: AZK
TSX: ARZ
Contact: David Hall, CEO
Suite 900, 510 Burrard St.
Vancouver, BC Canada V6C 3A8
Toll Free: 888-411-GOLD (4653)
Phone: 604-687-6600
Fax: 604-687-3932
E-Mail: [email protected] or
[email protected]
Web Site: www.aurizon.com
Active Float: 50 million
52 Week Trading Range:
AMEX: Hi: $4.02 Low: $1.65
TSX: Hi: C$4.53 Low: C$1.84
portfolio was further increased
with the optioning of the Joanna
property on the Cadillac gold
break, as well as acquiring the
Kipawa gold-uranium project, also
in Quebec’s Abitibi region.
Aurizon presently has C$29
million in the bank and expects
to generate some C$40 million
annually from production at Casa
Berardi – more than enough for
an early pay back of its project
debt and to fund an ambitious
exploration program.
Significantly, the company
does not have any fixed price gold
contracts, allowing it to sell its gold
production at spot market prices
up to an average price of $813 an
ounce in 2007 rising to $908 an
ounce in 2010. Under the terms of
its project loan, if gold prices rise
even further Aurizon can sell 74%
of its planned production at those
higher prices.
“2006 was a milestone year for
Aurizon,” says President and CEO
David Hall. “Looking to the future,
the company is well positioned to
capitalize on rising gold prices.”
Disclaimer: This material is for distribution only under such circumstances as may be permitted by applicable law. It has no regard
to the specific investment objectives, financial situation or particular needs of any recipient. It is published solely for informational
purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. References made to third parties are based on information obtained from sources believed to be reliable but are not guaranteed as being
accurate. Recipients should not regard it as a substitute for the exercise of their own judgement. The opinions and recommendations
are those of the writers and are not necessary endorsed by The Bull & Bear Financial Report. Any opinions expressed in this material
are subject to change without notice and The Bull and Bear Financial Report is not under any obligation to update or keep current the
information contained herein. All information is correct at the time of publication, additional information may be available upon request.
The companies featured in this newsletter have paid The Bull & Bear Financial Report a fee for their investor awareness program. The
directors and employees of The Bull & Bear Financial Report do not own any stock in the securities referred to in this report. The Bull
& Bear Financial Report is not affiliated with any brokerage or financial company.
Page 13
Expect A Try For A New Gold Record By Year-End
CDOs and passed the risk onto yield-hungry
investors, while saddling the borrowers with an
impossible debt burden.
It reached the stage where one wag on the West
Coast cogently observed that if an individual could
“fog a window” (i.e., he was breathing) he could get
a mortgage with virtually nothing down and with
absolutely no documentation of his income.
The fact that this has morphed into an intractable
problem shouldn’t come as a surprise to anyone; the
real issue is how was all this permitted to happen
and what was the Federal Reserve chairman doing
endorsing the process. Perhaps we shouldn’t be
surprised because it was the same Alan Greenspan
who encouraged mortgage borrowers to take out
adjustable-rate mortgages (ARMs) just before he
embarked on a course of raising administered interest
rates 17 consecutive times.
In any case, this has fostered a problem that is not
going away, and even if the most dire consequences
can be avoided, it ensures that U.S. interest rates
will be heading lower. This will knock the props from
under the U.S. dollar and those that have maintained
the faith on gold will be richly rewarded as a result.
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Coated paper
The dollar’s demise will be further aided and
abetted by festering geopolitical issues and the ongoing
misadventures of the present U.S. administration.
However, what may turn out to be the straw
that finally breaks the camel’s back is the U.S.
government’s recent decision to unilaterally impose
a tariff on Chinese coated paper, a rather innocuous
undertaking that nevertheless elicited a very negative
response from the Chinese.
While politically expedient, it seems foolhardily to
offend a country that has over $1 trillion in reserves,
the vast majority of which are denominated in U.S.
dollars. The Chinese could cause trouble for the U.S.
in very short order, and when one studies the very
tenuous technical condition of the greenback (a 10 to
15 per cent correction from current levels seems almost
preordained) the risk in the decision is apparent.
The suppression of the gold price has been an
irritant to anyone who has followed the subject
closely for the past few years, but it has been nearly
catastrophic for a number of gold companies whose
costs have sharply outrun the rise in the gold price.
You would naturally think that an executive heading
an organization that allegedly represents the best
interests of gold producers would be indignant and
would vocally protest what is occurring. Unfortunately,
you would be wrong.
James Burton, the CEO of the World Gold Council
(WGC), which is lavishly funded by the world’s gold
producers to be an advocate for the yellow metal, was
recently thrown a softball query in a Financial Times
question-and-answer session as to whether the gold
price was being manipulated.
He responded by saying that the WGC had not
found any evidence that the gold price was being kept
artificially low and, to add insult to injury, cited the
work of GFMS Ltd. And Virtual Metals in support of
his position. James Turk, an astute observer of the
gold scene, correctly noted that, “the position of the
two companies (i.e., GFMS and Virtual Metals) may be
explained because they appear conflicted, as some for
their clients participate in the gold fixing scheme.”
In my opinion, Burton is not conflicted and by
not pressing this issue her has failed to adequately
represent the best interests of the gold industry. In
addition, the WGC has employed its substantial
budget in promoting gold’s jewelry uses while treading
very lightly on the monetary side, which is ultimately
gold’s real utility and value. All in all, I think the
World Gold Council has been a real disappointment
and I don’t think the companies that fund it are
getting their money’s worth.
Editor’s Note: John Embry is chief investment strategist
at Sprott Asset Management and contributor to Investor’s
Digest of Canada, 133 Richmond St W., Toronto, ON M5H
3M8, 1 year, 24 issues, $137. The opinions expressed in this
article are those solely of the author.
Page 14
GSN: I nvestment N ewsletter A dvisors
GROWTH STOCK OUTLOOK
P.O. Box 15381, Chevy Chase, MD 20825.
1 year, 24 issues, $235.
Newmont reports record profits
Charles Allmon: “Newmont Mining (NYSE:
NEM; $44) reports record profits. The world’s second
largest gold miner, Newmont operates in the U.S.,
Mexico, Peru, Bolivia, Ghana, Indonesia, Australia,
and New Zealand. Newmont has five different mining
operations in Australia. Gold reserves increased for
the fifth straight year.
Wayne W. Murdy, chairman and CEO, reporting to
shareholders, said Newmont completed 2006 on an
optimistic comment: “We finished 2006 on a high note,
generating record earnings of $791 million ($1.76 per
share) versus $322 million ($0.72 per share) in 2005,
a 146% increase in our bottom line compared with
a 15% increase in revenue. Our leverage to the gold
price resulted in a 45% increase in our cash operating
margin from the prior year. We also grew our reserves
for a fifth straight year to 93.9 million ounces.”
“We also commenced construction of the Boddington
project in Australia, which will allow us to begin
mining over 9 million equity ounces of reserves in
this highly prospective gold belt in 2009.”
“Although we had a record financial year, we
continued to be challenged by declining grades at
our mature operations, and experienced significant
increases in energy, commodity and labor costs.
We also felt the impact of increasing political risk
that translated into the expropriation of our 50%
interest in the Zarafshan-Newmont Joint Venture in
Uzbekistan during 2006.”
“Our first challenge is to arrest the decline in our
gold reserve grade, a key long-term cost predictor. In
2003, our reserve grade was 0.039 ounces per ton,
which declined to 0.034 ounces per ton by the end of
2005. In 2006, we stopped that trend, with our average
reserve grade stabilizing at 0.034 ounces per ton.”
“In North America, we added approximately
3.6 million ounces of reserves through near-mine
exploration in Nevada and Mexico. In South America,
Yanacocha converted 0.2 million ounces and Kori
Kollo added another 0.2 million ounces of reserves.
In Australia, we added 2.3 million equity ounces
of reserve additions from Boddington, KCGM and
Jundee and an additional 2.6 million equity ounces
through our increased equity interest in Boddington.
In Ghana, we added 1.1 million equity ounces
through our increased equity interest at Akyem,
and an additional 0.7 million ounces from near-mine
exploration in the Ahafo district.”
“In Nevada, we have a new team in place, built
around our One Nevada management structure. The
new management team is using the One Nevada
approach to coordinate all maintenance and operating
functions through a direct reporting structure across
the state.”
“We are also building a 200 megawatt power plant
that we anticipate will improve our operating cost
profile by up to $25 per once upon completion in late
2008. Simultaneously, we continue to optimize cost
and production at our Leeville and Phoenix mines,
which achieved commercial production late in 2006.
“In Peru, Yanacocha has carefully evaluated the
social issues and dynamics of the communities in and
around our mining areas. As an example, Yanacocha
has engaged in extensive community and external
affairs efforts during the early evaluation and
optimization stages of the Conga project.”
“In Australia, construction continues on the
Boddington project. Upon completion in late 2008 or
early 2009, Boddington will replace some of the higher
cost production coming from our older operations in
the region. The completion of the Boddington project
will also enhance our reserve growth potential while
expanding our operational base in this politically
stable part of the world.”
“Our focus on hiring and developing local talent
provides us with a workforce that is committed
to our long-term success, while simultaneously
developing the technical skills and capacity of our
host communities.
“In 2006, parallel with our focus on the safety
and development of our employees, we continued to
lead in our commitment to sustainable development,
stewardship of the environment and partnership with
our host communities.”
“Reflecting our commitment to value-enhancing
transactions, our royalty portfolio generated $120
million in royalty and dividend income in 2006,
while the market value of our equity portfolio grew
to approximately $1.4 billion at the end of the year.
Noteworthy within our portfolio, our investment in
the Canadian Oil Sands trust generated almost $30
million in distributions during 2006.”
“During the third quarter, we also purchased a 40%
interest in the Fort a la Corne JV (FALC) diamond
project from Shore Gold Inc. for approximately $152
million. The FALC property, located in Saskatchewan,
Canada, is one of the largest kimberlite fields in the
world. In 2007, we expect to spend approximately $18
million on development drilling at FALC to further
define the prospects for this promising investment.”
On 12-31-06 total assets were $15,601,000,000,
current assets $2,642,000,000, current liabilities
$1,739,000,000, cash and short term investments
$1,275,000,000 long term debt $1,752,000,000,
shares outstanding 449,754,000, shareholder
equity $9,337,000,000 ($20.76 per share), return
on shareholder equity 8.5%, negative cash flow.
[Company address: 1700 Lincoln St., Denver, CO
80203. (303) 863-7414.]”
Allmon’ s Comments: Management earlier had
forecast lower gold sales in 2007. However, this
does not necessarily imply lower profits in 2007. We
Page 15
might see a substantially higher gold price. Newmont
is the only gold miner included in the S&P 500.
Trading market is broad. One institution holds 12%
of outstanding shares.
At the present price, I urge all investors to use this
lull to lay away NEM shares, for a 5–10 year hold. I’ll
alert you when to sell or better still, follow closely the
Supervised Portfolio, which has boosted net assets
for 32 consecutive years. As I have stated before, in
extreme financial chaos, it would surprise me not at
all if gold again crossed the Dow.
***************
THE KONLIN LETTER
5 Water Rd., Rocky Point, NY 11778.
Monthly, 1 year, $95.
Northern Orion Resources:
Undervalued copper/gold/moly play
Konrad Kuhn: “Northern Orion Resources Inc.
(AMEX: NTO, 4.83) is engaged in the development
of precious and base metals worldwide and is one of
the world’s lowest cost copper and gold producers,
producing 50 mil. lbs of copper and 75,000 ounces
of gold a year. Based in Vancouver, Canada and led
by an astute management team, NTO completed a
successful restructuring/development program and
is financially solid with a strong balance sheet and
healthy cash position. With its superior profitability,
compared to the industry as a whole, and an operating
margin of approx. 45% compared to 14% of its average
competitor, NTO is well-positioned for significant
future growth. NTO’s principle cash flow producing
asset is a 12.5% interest in a high grade Alumbrera
(one of the world’s largest copper/gold mining
operations and among the world’s lowest cash cost
copper producers). Also, with proven and probable
reserves (Dec. ’05) of 3.8 bil. Lbs. of copper and 6 mil.
ounces of gold, the Alumbrera expansion completed
last year, projects an increase in mineral reserves of
40 mil. tonnes per annum, raising contained metal
reserves by 10%, equating to an additional 260 mil.
lbs. of copper and 400,000 ounces of gold.
Management aggressively intends to use part of
Alumbrera’s reserve to develop its wholly-owned
Agua Rica deposit, containing an estimated mine life
of 23 years, and producing 21.8 bil. lbs. of copper, 13.3
mil. ounces of gold, and 1.7 bil. lbs. of molybdenum,
as well as silver. At current metal prices, the value
of this deposit is enormous. The project’s large metal
inventory sits on the surface and has the potential
to dramatically reduce development costs. NTO
is currently investigating the development of this
100%-owned, copper-gold-molybdenum project for the
construction of a 90,000 tonne-per-day mine/ processing
facility that would produce approx. 150,000 tonnes of
copper annually, plus associated gold and molybdenum
by-products, generating substantial cash flow for NTO,
especially with a 2.9-yr. capital payback.
Revenues for FY’06 were $93.2 mil. while earning
.48 per diluted share vs. .27 for the prior year. The
company is financially sound with a cash position
(March 8, ’07) of approx. $230 mil. and of the
153,970,118 mil. shares outstanding, approx. 50%
are closely held. NTO’s strategy is to leverage current
assets and acquire other properties or companies
(or interest in them) that have high-grade, low-cost
copper/gold deposits.
Since our recommendation in Feb.’06, the stock
surged 145%; traders who sold were advised not to
reenter unless under 3. The stock did find support
at the 61.8% Fibonacci retracement area and has
established an uptrend, but must close above 5.60 in
order to vault to 7.50. There has not been a major new
copper mine discovery in nearly 100 yrs. Due to rapid
growth in emerging countries, especially China and
India, worldwide copper demand increased.
Since ’98, worldwide copper consumption has been
greater than the total amount produced. Copper
supply/stockpiles have decreased significantly,
resulting in copper prices rocketing from .75 a lb. To
a high of nearly $4. With no LT debt (Dec. 31, ’06),
NTO’s annual flow is projected to continue for the next
10-yrs. And will be able to fund a substantial part of
the development of its 100% owned Aqua Rica project
into a profitable mine with a life of 23-yrs. Agua Rica’s
estimated rock value makes it one of the world’s most
significant underdeveloped copper/gold/molybdenum
deposits know today. Ultimate target 9-11.”
****************
The Peter Dag PORTFOLIO STRATEGY &
MANAGEMENT, 65 Lakefront Dr., Akron, OH
44319. 1 year, 24 issues, $389.
Commodities are strong
Gold remains firm
George Dagnino: “Commodities are strong, but
are still below the highs of last year. They reflect the
weakness of the dollar (they have hardly risen into
the Euro terms in the past 3 years). The slowdown
in the global economy, however, will keep them from
rising much further.
Inflation. Consumer inflation is up 2.8% y/y and
2.3% less food and energy. In the past three months it
rose 4.7% at annual rate, food and beverages rose 7.4%,
medical care 5.6%, and transportation 8.3%. Producer
prices rose 3.1% y/y. Inflation is alive and well.
Gold and the dollar. The trend of the dollar is
down. The greenback broke important support levels
to reflect US inflationary pressures. Gold, the other
side of the coin, will remain firm. I sincerely hope
not for long, otherwise we will have to face major
economic and financial adjustments. A weak currency
has never been good news for the economy and the
stock market.”
Page 16
ECONOMIC ADVICE, 3910 N.E. 26 th Ave.,
Lighthouse Point, FL 33064. Monthly, 1 year,
$149.
Keep your eyes peeled on the Euro
James Rapholz: “One of the strongest indicators
for gold and the other precious metal is strength – or
weakness – in the great US Dollar! One of the most
effective means of measuring that strength is to keep
your eye balls peeled on a currency unit that has
become the preferred alternative to our greenback,
the Euro. As the Euro strengthens, it implies growing
weakness in our Great American Dollar, and vice
versa – of course.
After declining steadily since its inception from
an original figure of $1.08 per greenback, to less
than $0.84, the Euro set in a triple bottom from mid2000 until the end of 2001. Then, from that strong
bottoming formation, the Euro started rising very
steadily, exceeding the previous peak of $1.08 by the
early part of 2003 and eventually reaching its all time
high of $1.37 in late 2004.
From that point, pronounced weakness took over
and the Euro declined to $1.30. The major resistance
level to it is the all time high of $1.37.
If the Euro continues to rise above its trend line
and succeeds in breaking out into new all time high
territory, the outlook for the US Dollar could be very
grim – indeed!
Many of the thinking people that I communicate
with believe that this is going to be the case and that
it will take place in the late part of this year. They
also expect the price of gold to break into a new alltime high of approximately $900.00 per ounce at the
same time.”
***************
THE GRANVILLE MARKET LETTER
P.O. Drawer 413006, Kansas City, MO 64141.
Gold on sell signal
Joseph Granville: “I see gold as having two
functions. The first is to warn you that the general
market is too high and is soon to crash and the second
is to make you money. Of these two functions I believe
its primary function is to provide a market warning
and to get people out of the market before a crash and
the second is to protect against a rising inflation. The
conflict here is that gold will go down with the general
market in a crash but in a world where paper assets
will crash gold will go up. Now being on a sell signal
for gold, there is no conflict as to which function gold
currently has. It is a warning, simply one of many. In
a crash everything will go down including gold.
I got followers out of gold last year at 733. Rally
this year peaked at 695.90 on April 20th. This was
a declining top. All declining tops are a sell signal
because they record a loss of upside momentum. Since
then we have seen a steady series of declining tops
with no rising bottoms. Until we see a series of rising
bottoms my outlook on gold is bearish. At this writing
June gold is at 655.30.
I would also require a stock like Newmont Mining
to break out above 45.00.
Newmont Mining (NEM: 39.28) I had to rapidly
reverse my position on this stock after turning bearish
on gold on April 24th. The chart of Newmont has
caused many analysts and goldbugs to be at a loss
to call the turn here. At one time it was considered
to be the top gold stock for quality. It topped out at
56.00 in July 2006 and down it went. It fell to a longterm double bottom at 40.00 in early May of 2007.
Now it has broken that double bottom falling to at
this writing. The stock has moved under 39.00 in its
yearly range chart. That chart now shows no support
until it falls to the 25.00 level.”
***************
Steven Halpern’s TheStockAdvisors.com
Editor Steven Halpern has developed the first
interactive forum for newsletter advisors and
individual investors. Here are a few excerpts by
leading investment advisors posted on www.The
StockAdvisors.com.
Fabian: Golden buy signal
“Buy gold,” says Doug Fabian in Successful
Investing, www.fabianssuccessfulinvesting.com.
“We’ve witnessed another week of the ‘same old thing’
for the major markets – of course, that was another
round of all-time highs.”
“The Dow and S&P 500 both continue defying the
odds by pushing ever higher. Right now I am currently
watching, and waiting, for a low risk entry point to get
back into stocks. And despite the continuous string
of all-time highs – or perhaps because of it – I feel an
allocation right here is just too risky.
“One sector that isn’t too risky right now is gold. Gold and gold stocks, as measured by the Gold Fund
Composite, pushed above their 125-day moving
average, triggering a new BUY signal in gold.
“As a result, I am recommending you buy the
streetTRACKS Gold (NYSE: GLD), an exchangetraded fund which follows the spot price of gold.
If you do not have access to ETFs, or if you would
prefer a gold mutual fund, you can use one of
the following alternatives: American Century
Global Gold (BGEIX), Fidelity Select Gold
(FSAGX), RS Global Natural Resources (RSNRX),
Rydex Precious Metals (RYPMX), US Global
Investors Global Resources (PSPFX) “Gold
is always a solid hedge against inflation, so it’s
Continued on page 20
Page 17
Report from Guyana
Gold Port Resources Ltd.
Drilling Confirms Gold Zone at the Akaiwong Gold Project
Gold Port Resources (TSX.V: GPO) is an operating
exploration company with advanced stage projects
located in Guyana, South America. The Company
is drilling one project now, and processing samples
from a second. A third project is now being prepared
for drilling.
prolific gold region which has similar geology to goldrich West Africa. It is believed that the shield is a
broken-off extension of the West African Shield which
hosts the Birimian gold belt in Ghana where some 100
million ounces of gold have been identified.
The Guiana Shield includes parts of Guyana,
Venezuela, Suriname and French Guiana. Crystallex’
13.6 million ounce Las Cristinas deposit is located in
nearby Venezuela. Cambior owns the 3.2 million ounce
Rosebel Mine in Suriname, as well as the 1.2 million
ounce Camp Caiman Project in French Guiana. In
the early 1990s, Cambior built the Omai Gold Mine
in Guyana, the largest gold mine in the region. The
Omai produced 3.7 million ounces of gold.
Guyana Exploration 2007
• Akaiwong Gold Project – 3,430 acres several
kilometers south of Guyana Goldfields’ Aurora
deposit. Previous exploration has identified gold
values in several locations. Recent drilling has
confirmed the presence of gold in surface saprolite
and underlying rock to depths of 150 meters.
• Groete Creek Gold Project – 3,801 acres
containing a copper gold zone identified by past work
which includes 9,000 meters of drilling.
• Five Stars Gold Project – 20-squaremile property located 40 km west of StrataGold’s
Tassawini Gold Project. Three broad gold zones have
been identified by airborne geophysical surveying,
surface and pit sampling and trenching.
The Akaiwong
Gold Project
Gold was first discovered at Gold Port’s 100%owned Akaiwong Gold Project in 1957. The area has
a history of artisanal placer mining, as the topmost
layers are mostly saprolite. The property was explored
extensively by Homestake Mining in the 1990s. Out of
a total of 32 holes drilled in the 1990s, 20 holes were
drilled to less than 75 meters in depth. Mapped as
a dioritic intrusive into greenstone belt rocks, a gold
mineralized zone is associated with a shear zone
Gold Properties located
on Prolific Guiana Shield
Guyana lies at the nexus of the Guiana Shield, a
Left:
Akaiwong Gold
Project Office in
Guyana
Right:
Gold Port President
& CEO Adrian
Hobkirk (far right)
and geologic team
prepare Akaiwong
Gold Project site for
drilling and ground
survey program.
Page 18
across the intrusive.
A test drilling program
that commenced in December
confirmed the presence of gold.
The site selected was on Line
16 S, a location of drilling by
a prior owner. The main test
hole AK06-33A was drilled to
a depth of 150 meters. The
best intercept was from 10 to
42 meters giving an average
of 1.4 grams per tonne gold.
Hole AK06-33B was drilled to
28 meters with an average of
1.8 grams per tonne gold from
0 to 10 meters. AK06-33C
was drilled to a depth of 20
meters and was terminated
due to poor recovery. This
hole averaged 1.27 grams
per tonne gold from 0 to 13
meters.
These initial reconnaissance
drilling results confirm the
presence of a gold bearing
system with significant nearsurface gold mineralization.
Gold Port is now planning to
drill a grid of 20 holes to depths
of about 70 meters across the
project. The Company has
established a road and bridge
network for supply, and built
a permanent camp facility.
Current exploration will seek
to confirm historical results
and to potentially expand the
known gold zone. Concurrent
with the drill program, a
ground exploration program
is underway and will include
a sampling and magnetometer
survey program.
Left: Gold Port’s
gold projects
in Guyana are
located in the
prolific Guiana
Gold Belt, also
home to the
Tassawini, Million
Mountain, Aurora,
Aranka, and Omai
and Peters Mine
projects.
Right: Gold Port’s
President & CEO Adrian
Hobkirk examines drill
cores.
Drilling At Groete
Creek, Sampling at
Five Stars
to Test Historic
Gold Discoveries
Gold Port’s Groete Creek
project is located about 43
miles southwest of Georgetown,
Guyana’s capital city. In the
1960s a unit of the United
Nations, working with the
Guyana government, identified
a large area of gold-copper
mineralization. The property was again explored in
the 1990s, expanding the known mineralized zone. In
it’s 1993 S-3 filing, Coeur d’Alene Mines provided an
internal calculation for the gold potential of Groete
Left:
Akaiwong mine crew prepares
project site.
Creek based on wide space drilling. Using a 0.3 gpt
cutoff, 57.5 million tons grading approximately 1
gpt gold was calculated. This calculation gives a
conceptual quantity of 1,700,000 ounces of gold.
Page 19
Gold Port treats the work completed by Coeur
He has extensive experience in managing remotely
d’Alene Mines as a historical estimate only, which
located exploration projects, and nine years of prooutlines a conceptual quantity of gold of a potential
duction management experience. The Manager of
mineral deposit. Gold Port did not complete the work
Exploration is Mr. Brian Sucre, the former Commisoutlined at Groete Creek, and therefore, can not be
sioner of the GGMC. A Canadian educated Geologist,
certain as to it’s accuracy. Work completed to date
Mr. Sucre was one of the original geologists to work
is insufficient to categorize the conceptual quantity
on the Groete Creek Project.
of gold as a resource or reserve as per National
Gold Port President & CEO Adrian Hobkirk has
Instrument Policy 43-101, and there is no guarantee
more than 17 years experience in the gold resource
that further exploration will establish a resource or
exploration sector, working in the U.S., Canada,
reserve. Accordingly, Gold Port does not interpret
Latin America and South America. He previously
the historical Groete Creek results as constituting
worked with Norgold Resources, which was later
a resource or reserve estimate. This will be the
purchased by Bema Gold, and was a founding
objective on future exploration.
director of Can-Pro Development Ltd. which
Mineralization remains open in three directions
conducted the initial exploration of the Dublin Gulch
and to depth. Future exploration drilling will attempt
Project, a 2 million ounce gold deposit now owned
to better define and expand the known gold zone to
by StrataGold. . In 1995 Hobkirk began exploring
enable a resource or reserve to be calculated to N.I.
in Guyana’s Groete Creek area and has developed
43-101 standards. A magnetometer survey is planned
strong relationships and an extensive knowledge of
for early 2007, followed by an initial 15-hole, 2,500
the country’s operations.
meter drilling program on the main zone. Results will
The company’s board of directors includes Allen
determine further work.
Ambrose, President of Minera Andes, a near term gold
The Company’s Five Stars project is a twenty
producer in Argentina, and Dr. A. Darryl Drummond,
square mile project with several known historical
a Ph.D., P. Eng. with 46 years of exploration
gold bearing zones. It is strategically located 40
experience.
kilometers to the west of StrataGold’s Tassawini
Doing Business in Guyana
Gold Project. A Newmont/StrataGold joint venture
In
recent
years, Guyana’s democratic government
completely surrounds the Five Stars Project
has succeeded in improving its business environment
area.
and in particular economics
An airborne geophysical
for the mining sector –
survey in 1994 and later
one of the country’s most
surface and pit sampling
important industries and
and trenching identified
a key provider of foreign
three broad gold zones
investment and tax revenue.
R E S O U R C E S L T D.
through elevated gold-inThe English-speaking
soil anomalies. The Guyana
country operates under
Geology and Mines ComBritish Common Law. Gold
Gold Port Resources ltd.
mission recently completed
Port has registered as an
a surface sampling program
TSX.V: GPO
“Internal Company” with
at the Five Stars Project.
Contact: Adrian F.C. Hobkirk
the right to take formal
Subject to a “ MemoranPresident and Chief Executive Officer
title to its mining projects,
dum of Understanding ”
800 West Pender Street, Suite 1500
which it has done with the
with the GGMC, Gold Port
Vancouver,
BC
Canada
V6C
2V6
Akaiwong Gold Project.
is now analyzing over 900
Recent exploration sucToll Free: 888-898-4788
samples as a result of this
cess in Guyana includes
Phone: 604-684-1782 • Fax: 604-408-9473
work. Results will be used
Guyana Goldfields (market
to define a phase one exE-Mail: [email protected]
cap C$500 million), Aranka
ploration program at this
Web Site: www.resourceexploration.com
Gold (market cap C$60 millocation.
lion, StrataGold (market
52 Week Trading Range: Hi: C$0.80 • Low: C$0.365
cap $100 million) and SacreManagement Team
Coeur Minerals (market cap
This
material
is
not
a
solicitation
or
offer
to
buy
or
sell
securities.
It
is
a
report
prepared
Experienced in
for the management of Gold Port Resources Ltd. on exploration activities in Guyana, South
$40 million).
America, and is therefore, paid advertising. This material is for distribution only under such
Guyana
The technical information
circumstances as may be permitted by applicable law. References made to third parties are
Gold Port has developed based on information obtained from sources believed to be reliable but are not guaranteed c o n t a i n e d w i t h i n t h i s
an experienced manage- as being accurate. The content of this advertisement is not endorsed by the Bull & Bear advertisement has been
Financial Report. Any information in this material is subject to change without notice and the
ment team in Guyana. The publisher is not under any obligation to update or keep current the information contained reviewed by Mr. Paul Pelke,
country manager is Mr. herein. All information is correct at the time of publication, additional information may be a Qualified Person under
upon request. All results reported are historical in nature, have not been confirmed
David Bacchus, former available
National Policy instrument
by Gold Port Resources Ltd., and therefore should not be relied upon by the reader. Gold Port
Chairman of the GGMC. Resources Ltd. paid the publisher a fee for this advertisement. The directors and employees 43-101, and a consultant to
of the publisher do not hold a position in the securities referred to in this report.
the Company.
GOLD PORT
Page 20
a good bet when you receive strong economic news
such as we received this week. Healthy employment
numbers and robust manufacturing data are the two
prime examples of this strength.
“Another reason I like gold here has to do with the
yellow metal becoming way too oversold. It was just
due for a nice move higher, and capturing it now for
our portfolio is a way to ride gold’s new uptrend.”
DRD: Penny play in gold
“Caveat emptor,” emphasizes Ivan Martchev in
discussing DRD Gold (Nasdaq: DROOY). In his Vital
Resource Investor, www.vitalresourceinvestor.com,
he looks at this very high risk gold stock trading below
$1 a share.
“DRD Gold, previously called Durban Rooodeport
Deep, is a very high risk special situation. DRD may
be South Africa’s fourth-largest gold miner, but the
share price hit 54 cents March 14, a level it last saw in
late 2000 when the precious metals boom started.
“Of course, as is the case with all ‘serial diluters,’
DRD had 105.4 million shares that year; the company
currently has 370.3 million shares outstanding, so it’s
not even an apples-to-oranges comparison.
”Can DRD make it? My answer has been yes, even
though the brilliant managerial talent DRD possesses
is starting to wear me out. Indeed, management needs
to come to its senses, which is still a work in progress.
”Now, if the gold price heads toward $800, the fire
under DRD’s shares will be difficult to put out given
the high-cost nature of production. Because I’m bullish
on the gold price and precious metals in general, I
think that this remains a great speculation.
”This is a highly speculative idea, because it doesn’t
have an obvious catalyst, other than the fact that a
sharp rally in gold can make miracles happen.”
Edelson’s new gold plays
Resources expert Larry Edelson has just
completed a six week tour of Asia; from his final stop
in Dubai, he writes, “Gold is being gobbled up like it’s
going out of style.”
The editor of Real Wealth Report, www.larryedelson.
com, 1 year, $99, notes, “In my 30 years in the gold market
I have never seen the volume of gold trading and the lust
for the precious yellow metal like I saw in Dubai.” Here
are his latest buys in the sector.
“The major fundamental forces behind high gold
prices haven’t changed. The U.S. dollar is very weak
in the knees and inflation is rampant, despite what
the government’s numbers say.
“Since early March, the U.S. dollar has lost another
1.9% of its value against other major currencies. It’s
no wonder. The United States is plagued with debt
problems, both public and private. The real estate
market is imploding, and political infighting is
making foreign investors think twice about parking
their money here in the U.S.
“The dollar’s dive is bound to continue. When that
happens, inflation tends to surge. And if you believe
the Washington spiel that inflation is running at
about a 3% annualized rate, think again.
“The fact is, inflation is running near 10% per year.
All you have to do is look at your monthly bills and
regular purchases. One of the best ways to protect
yourself remains gold.
“Golden Star Resources Ltd. (ASE: GSS)
conducts mining and exploration activities at the
Ashanti Gold Belt in Ghana. GSS has 4.15 million
ounces of gold reserves, and last year, the company
produced 201,417 ounces of the yellow metal.
“This year, GSS expects to increase production 94%
to 390,000 ounces. Sales and profits are soaring. In the
past year, GSS pulled its EPS up to 31 cents a share
vs. an 11 cent loss the previous year. Buy at $4.65 or
better with a protective sell stop at $3.89.
“Yamana Gold Inc. (NYSE: AUY) is an intermediate gold miner with production, development and
exploration properties in Brazil and Argentina. In
2006, the company’s sales rocketed 270% higher to
$169.2 million while operating earnings jumped 300%
to $35.1 million.
“AUY is sitting on a treasure trove of up to 6.8 million
ounces of gold and 2.3 billion pounds of copper. Last
year, it produced 359,272 ounces of the yellow metal.
And this company has zero debt! That’s rare for a mining
company. Buy with a protective sell stop at $13.45.”
China’s shift: Putting gold in reserve
“The great Chinese investment fund has been
established, and it is a whopper; they have announced
that they will hold $650 billion of their reserves at
ready,” notes Curtis Hesler.
Adds the editor of The Professional Timing
Service, www.newsletters.forbes.com, 1 year, Esubscription, $195. “They will also invest another
$200 billion to $250 billion a year after. That is a
lot of money!” What will they buy? According to the
advisor, one item on the list is gold.
“This money will likely be the engine that will fuel
the next major leg in the commodity bull market.
China has every intention of being a significant player
on the global scene; and to do that, they will need to
increase their gold reserves.
“Some experts estimate they will need to accumulate
2,000 to 3,000 tons of gold toward this goal. They will
do this both directly and indirectly, with a little help
from the population; they have already legalized the
ownership of gold for their citizens.
“Among junior mining stocks, we own Gammon
Lake (ASE: GRS) and Yamana (NYSE: AUY).
Another solid core metal investment is Gabelli
Global (ASE: GGN). It sports a decent dividend; and
Page 21
being a closed-end fund, it gives you a broad-based
investment in metals.
“The downside is that because it is a portfolio of stocks,
it will not be as volatile or promise the appreciation
potential you will find in individual issues.
“Silver has also done well recently. Our last silver
recommendation was Silver Standard (Nasdaq:
SSRI) and Silver Wheaton (NYSE: SLW). The key
is patience. Wait for the market to sell off and then
accumulate during weakness.
“I firmly expect to see gold eventually hit $1,600
and silver to triple from today’s price. That will put
the mining stocks through the roof. As the commodity
market improves, gold and silver will lead the way.”
Roseman’s precious metals trio
“Get ready for central banks to ‘talk down’ gold,”
cautions resource expert Eric Roseman in his
Commodity Trend Alert, www.commoditytrendalert.
com – who nevertheless remains bullish and offers a
trio of favorites.
“Gold prices, in a secular long-term bull market
since 2001, continue to impress even the greatest of
skeptics You’ve got to be impressed with this price
action lately, even as major economy central banks
continue to sell their hoard.
“As the latter group sell, the emerging market
central banks are buying. That’s the case with Russia,
China, and several other countries over the last three
years. If I was running a central bank, you can bet your
last fiat dollar I’d be selling paper money for gold!
“The next big resistance level for gold is $700 and
thereafter, we’ve got to close above $730 an ounce. It’s
going to get bumpy. I think we’ll close above $700 an
ounce this year and probably over $850 by December
2008, if not sooner.
“However, central banks are going to start talking
down bullion very soon. That’s what happened last
June as gold prices blasted past $700 an ounce.
Pretty soon, we’ll hear statements like ‘inflation is too
high, rates have to rise,’ or ‘wage inflation threatens
growth.’ Whatever it is, central banks will try to
smash the gold price lower once again.
“Sometimes, you have to make big bets on great
companies that are selling at major discounts to peers
in the same industry; that’s how I feel about Goldcorp
(NYSE: GG), Newmont Mining (NYSE: NEM) and
Silver Wheaton (NYSE: SLW) right now.
“These stocks are in a bear market. And now is the
time to build on price weakness when the market is giving
you these stocks, literally, for almost nothing. Based
on assets, cash-flow and growing reserves, these three
mining stocks are trading at a major discount to other
premium-priced companies in the same industry.
“We’ve got some monumental gains coming our way
for the precious metals. Make sure you own some of
the best and largest names in the business at these
distressed prices ahead of next historical rally.”
Kitcommentary from Kitco.com
Summer doldrums
Jon Nadler: “Gold markets gyrated mainly around
interest rate-linked events today. Bullion first
awaited the ECB rate decision with the certainty
that a hike to 4% would dent the dollar and help the
bullion market continue its upward trek. Well, the
rate increase came and went, the Euro then traded at
a three-week high against the US dollar, and gold...
fell by more than $2.00 per ounce on the open. Spot
prices then oscillated back and forth during the New
York session, at one point gaining nearly $2.00, then
losing as much as $5, and once again back up, to
nearly unchanged. The choppy session finally closed
down $0.90 at $668.80 per ounce. Sliver lost 7 cents at
$13.67 and platinum also fell, coming down by $3 to
$1296.00 per ounce.
European equity markets lost an average of more
than 1% this morning (June 6, 2007), as interest rate
jitters were seen deterring stock investors. The US
market fared no better, as a second day of declines
wiped another 120 points off the Dow. Yes, interest
rate jitters again. The reshuffling of asset baskets
and mixed expectations of interest rate directions
(June in the US, September in Euroland) had gold
traders seemingly trying to test both ends of the
current trading range, almost simultaneously. News
writers had a difficult time posting a “gold is up” story
before the market was already down, and vice-versa.
The only clear cause-effect story today was the rise
in crude oil precipitated by the alleged incursion into
Iraq by Turkish troops.
To be sure, the bullion market also went into erratic
directions yesterday, after Fed Chairman Bernanke’s
words put pressure on the dollar, stocks, and bonds.
What should have been beneficial to gold under
most conventional scenarios, turned out to have the
opposite effect. Could the gold market be telling us
something more than just validating Mark Hulbert’s
market timer warnings today (which conclude that
based on contrarian analysis, stocks have much better
odds of a near-term rally than gold does)?
Forbes reports that “The Euro has remained
firm against the dollar recently despite strong US
data. Yesterday’s non-manufacturing ISM index
surprised on the upside and a speech from the US
Federal Reserve chairman Ben Bernanke was seen
as implying that rates were not going to be cut
anytime soon given continued concerns over inflation.
However, with the US housing market still struggling
there is little expectation the key Fed funds rate will
rise from its current 5.25 pct. Today’s US data did
little to alter that prospect.” Thus, we have the Euro
not only competing against the greenback, but in
effect vying for the attention of would-be gold owners
as well. As we know, gold pays no interest and yields
no dividends.
Page 22
Expect, once more, to also hear from the permabull crowd, telling us that the ECB is masking money
supply growth, that the central banks are trying to
make the Euro more attractive in order to undermine
gold, and that the day of paper money’s reckoning is...
near. Of course, it has been near for almost a year
now, yet nothing happened. In fact, it has become a
struggle for the messengers of doom to come up with
new excuses and promises that would finally induce
their flock to rush out and buy the shiny stuff. We
would (obviously) love nothing more than for individual
investors to do so, but we feel their uncertainty in a
very immediate manner. And now, we get accused of
making the few bulls left jump the ship (!) by reporting
the facts. That has to be good for a laugh.
At the end of the day, bear in mind that for the
past 30 days, gold did not manage to vault over
the $687.50 NY closing level and has now (for the
second time) failed to take out even the $675 area of
overhead resistance. These two targets simply must
be overcome for gold’s chances to remain viable at
trying for the $695 mark. Conversely, the looming
$665 and $655 support zones must also hold firm in
order for the selling not to snowball into a liquidation
mania. Surely, we will clear this congestion zone as
well – and soon. Just don’t be too certain that you
know the direction just yet.
We would not pin hopes on the June Fed meeting
and any resulting rate decisions to be the decisive
factors on the direction gold first adopts. We would
have to remain happy if the current range were simply
maintained somehow. These summer doldrums are
characterized by unusual nervousness. Thus, once
again, it may well take an external event (take your
pick of: China’s markets, Iran, Putin, Iraq, oil, or some
astounding domestic economic statistic) to break the
range and make a decisive move in one direction or
another. In the meantime, the prayers continue for the
return of the individual investor to this market.
Editor’s Note: Jon Nadler's gold market
commentaries are frequently quoted by the U.S.
Canadian and global financial media. Jon is an
analyst for Kitco.com
***************
THE SILVER VALLEY MINING JOURNAL
414 6th St., Wallace, Idaho
www.SilverMiners.com.
Zurich Redux, & A Gold Price Forecast
David Bond: “Martin Murenbeeld, who hangs his
hat in Victoria, B.C. and pens prognostications for
Dundee, is a bit like a Swiss train. If by one’s watch
the Swiss train is a bit late, then you had better take
your Patek Philippe into the jeweler for a tune-up,
because Swiss trains are never late and they are never
early. Neither is Dr. Murenbeeld.
Well, Martin was a tad apologetic in Zurich last
week for having missed the 2006 gold price when
he called it in March of 2005 by, um, 23 cents, give
or take a tuppence, at $604. What lies ahead?: Try a
2007 average price of $680, a year-end closer of $730,
and a 2008 average price of $765 – give or take a
half-penny or so.
We pestered Murenbeeld after his screed at the
Baur au Lac for a silver price forecast, but he does
not specialize in the poor man’s gold: “Silver will do
whatever gold does, but with a much higher Beta
factor,” he told us, meaning that silver’s bungee cords
are extremely taught (aren’t they always?) and the
whiplash is gonna getcha.
Any more, forecasting the gold (or silver, or platinum
or palladium or rhodium) price is just a polite way of
stepping around the fact that the United Snakes Dollar,
i.e. the Federal Reserve Note and whatever other
Monopoly crap passes for US money these days, is just
a pile of paper, increasingly suspect in an increasingly
savvy world economy. “Trust us” just does not cut it any
more when that phrase issues forth from the Treasury
or Helicopter Ben. The world would rather have
what we refuse anymore to produce: oil, gas, metals,
concrete, or competent foreign policy, than our damned
promissory interest-bearing dollar notes.
So let’s get technical.
Here is what Murenbeeld said:
“Current account surpluses held in American
dollars by oil-producing nations, an explosion of US
dollar reserves in Asia and elsewhere, and a continued
softening of the dollar all point to a higher average gold
price in 2007 and 2008. The US dollar is over-valued
by between 15% and 35%, and it has further to fall. At
$2.7 trillion, Asian dollar reserves are excessive. OPEC
nations as well have dollar surpluses. Over the long
term, gold is still very cheap in terms of dollars and
in terms of oil. You could see a $300 to $400 blow-out
(above current prices) in gold in the next few years.”
Murenbeeld said a better predictor of gold price bull
markets than the oil-to-gold ratio is the quantity of US
dollars held in surplus by oil producers. OPEC’s current
account surplus 3 years ago surpassed the $100-billion
level that helped trigger the 1980 gold-price run-up and
is forecast to reach $300-billion this year.
Were Asia to follow the European ratio of gold
to reserves, Murenbeeld said, Japan would need to
purchase 7,200 tonnes of gold and China, 9,100 tonnes
– 4,000 tonnes more than now held by all signatories
of the Central Bank Gold Agreement. “Obviously,
that’s not going to happen in my lifetime, but it might
not be unreasonable to expect Asian purchases of 500
tonnes per annum,” he said. New factors not present
in previous gold bull markets include exchange-traded
funds, trading in gold as a “paper asset class” and
deregulation of gold ownership and sales in China.
“The shortest previous up-cycle in gold was 10 years,
between 1970 and 1980, and we are in just the sixth year
of this bull market,” he said. Bull markets in commodities
typically see one counter-cyclical year in their midst, and
Page 23
that hasn’t happened yet in this market, he said.
Any number of geopolitical factors could trigger a
blow-out in metals prices. What would happen if Bush
went back on the wagon, f ’rinstance? Or fell off?
We would add more quotes, but you already have
the picture and already are suicidal, having only that
wallet full of Brownspan and Helicopter Ben notes and
no physical metal at hand, yes? And we do not wish to
contribute to your demise and to a lower hit-count on
our website. Must we, even to the faithful, repeat this?
Gold’s price is constant. It is fixed in the cosmos. It is
only the value of the United Snakes Fednote, in terms
of gold, that goes up and down. America’s Founding
Fathers had a stellar idea: fix the US dollar in terms
of a weight of silver or gold. But that grand notion died
with Andrew Jackson, and the sleazeball bankers have
had the run of this place ever since.
What Martin Murenbeeld is politely trying to say
is this: That the ounce of gold you could buy for $604
last year is going to cost you $765 next year. There is
nothing about this ounce of gold (or silver) that has
changed. It is the same element, the same weight.
Let’s take Martin’s analysis a step further. That gallon
of gasoline you bought last year for $3 is going to cost
you almost $4 next year; apply the same math to a
gallon of milk, a loaf of bread, a cube of butter . . . It
means that if there is a benign boss out there who
gives you a $2-an-hour raise over your current salary
of $10 an hour, you’re just breaking even.
Hell of a way to run a country. But here we are.
***************
THE SPEAR REPORT
45 Wintonbury Ave., Ste. 301, Bloomfield, CT 06002.
Goldcorp: Lowest-cost producer
represents an attractive opportunity
Gregory Spear: “Goldcorp (GG) is a Vancouverbased operation that merged with Glamis Gold in
November, 2006 to form a very substantial “senior”
gold mining company with operations throughout
North America, Mexico, Central and South America
and Australia. After the merger, Goldcorp became
the third largest pure play on gold, after Barrick
(ABX) and Newmont (NEW). Moreover, as roughly
70% of Goldcorp’s proven reserves are located in the
northern hemisphere, there is some legal protection
for the company’s property rights from nationalization
trends in the south.
Goldcorp is unique among large producers in having
the lowest cost per ounce for extraction…less than
half compared to its competition. In the most recent
quarter the cash cost of an ounce of gold at Goldcorp
was $181, while gold production nearly doubled
to 558,000 ounces (due to the Glamis acquisition).
Production is 100% unhedged, which means GG’s
revenues fluctuate directly in proportion to the sport
price of gold. In a rising market, this will give the
company an advantage. Goldcorp brought 18 cents a
share to the bottom line in the most recent quarter
and the company’s long-term debt is…zero.
Meanwhile, Goldcorp has extremely rich deposits
of ore at its Red Lake mine in Ontario and similarly
spectacular deposits on neighboring properties that
it is just starting to develop. The company is also an
aggressive acquirer of smaller mines. In 2006, mostly
due to acquisitions, Goldcorp increased gold reserves
by 157%, and silver reserves by 1,500%.
Gold stocks have been languishing lately as the
dollar has been rising and inflation is “well contained.”
Leading economic indicators in the U.S., which look
ahead a few quarters, suggest that inflation in the
U.S., which look ahead a few quarters, suggest that
inflation is in a mild downtrend and at a two-year low.
Gold is often considered a hedge against inflation and
geopolitical unrest, but peace efforts in the Middle
East may make some progress this year. These factors
account for the lackluster performance of the precious
metals in 2006-2007. So why own gold now?
Gold stocks reached a frenzied peak in May of 2006
and have been in a substantial decline for a year. The
fluff and the fuzz have been expunged. GG shares
have fallen from $41 to $24 during that time. That
lowers risk. In addition, we are in the 4th year of a
synchronized global expansion and the minutes of the
most recent FOMC meeting show that the Federal
Reserve is now concerned about globally-generated
inflation. We think the recent pullback in Goldcorp
represents an attractive opportunity to add some
shares for a long-term hold or a short-term trade.”
***************
THE MONEYCHANGER
P.O. Box 178, Westpoint, TN 38486.
Monthly, 1 year, $149.
www.the-moneychanger.com.
IMF gold sales: a threat to gold?
Franklin Sanders: “In a perverse way, the IMF’s
rattling its gold-sales-sabre in fact bodes well for the
gold market. Think. The IMF never sells any gold, they
only make announcements – well-timed to knock down
the gold price – that they are thinking about selling
gold. In other words, the IMF is the stalking horse for
central banks, trotted out to talk gold down.
But wait a minute – if gold is so weak. Why does the
IMF need to jawbone down the price (using Sampson’s
weapon, of course)? That’s where things up go upside
down. If gold is falling and the IMF is gurgling about
selling, what can it mean but that central banks are
afraid gold is about to run away?
Need further proof? Well, there’s gold bleeding
body on the ground, and a smoking gun in the central
banks’ hand. On 22 May Resource Investor reported
that in the week ending 18 May two European central
Page 24
banks sold 17.7 tonnes (569,069 oz) of gold, bringing
sales to a total of nearly 120 tonnes (3,858,096 oz.)
in the last 10 weeks alone. Compare that to the 150
tonnes (4,822.620 oz.) sold in the first six months of
the Central Bank Gold Agreement year that began
in October 2006.
At http://www.resourceinvestor.com/pebble.
asp?relid=32123 you’ll find a chart which paints
an even plainer picture. From October through
December, central banks sold about half what they’ve
sold from 16 March through 18 May. Sales from 22
December through 9 March are negligible.
Now, let us pause to consider what a rational
seller might do, that is, any reasonable person who
wanted to maximize his profit. Wouldn’t he wait for
the market to begin rising, and then feed small sales
regularly onto the market? Wouldn’t he be wary of
crashing the market by making massive sales?
But what do the central banks do? They begin
massive selling just as the market hit its lowest price
since 6 January 2007, and continued that massive
selling as the price rose. Then they ramped up sales
after last week’s price break.
Profit maximizing behaviour? Hardly. Just the
opposite in fact. They sell as if they wanted to drive
the market down.
Besides the smoking gun in their hands, do the
central banks have any motive to suppress gold’s
price? None, except that confidence in their rotten
product, fiat money, falls when gold rises too fast, and
by falling threatens their whole corrupt scheme.
Okay, let’s check where we are: motive, means, and
opportunity. Central banks had all three criminal
reasons to shoot gold, plus a smoking gun in their
hands. Guilty as charged.
Any more questions about why gold has been
languishing?”
**************
L o u i s P a q u e t t e ’s E M E R G I N G G R O W T H
STOCKS, 102 – 2020 Comox St., Vancouver,
BC V6G 1R9. 1 year, 8-10 issues, $119. www.
EmergingGrowthStocks.ca
Gold: Strong conflicting signals
Louis Paquette: ‘Gold is at a key juncture of the
seasonal calendar, when strength should turn to
weakness anytime now and lasting until August. “I
certainly wouldn’t rule it out” said super gold bull
John Embry of Sprott Asset Management when I
asked him if there was anything stopping us from
being hit in the back of the head with a two by four,
like what happened after gold peaked this time last
year. He felt the outside down side risk was $600 – but
it would be the last time we ever see it there again.
His answer for the large swings was to try to use
them to one’s advantage (we agree wholeheartedly)
and for investors to hold an appropriate portion of
their holdings in gold assets, i.e.: 10% (not 50% like
he does, do as I say, not as I do).
Technical analyst Bob Hoy on Market Matters
Radio recently, pointed out that when the price
action was so far in line with the normal seasonal
pattern, then we can expect the pattern to continue.
I agree with that too. An object in motion, stays in
motion.
I have a couple problems with this. One is Donald
Coxe. He just keeps making bullish comments about
gold, week after week. He talks about how it will break
over $700 and “not look back.” He raves about inflation
– it’s coming from the metals and energy, from food
and labour. Unemployment is virtually zero, says Mr.
Coxe. Long bonds are Bad – real bad! The US Dollar
is going to keep heading down. Gold is good!
Now, the last time that I can recall hearing Don so
bullish about anything was right before base metal
prices really started going ballistic a couple of years
ago. So I have a hard time aggressively selling out
of gold stocks when he’s so consistently bullish week
after week!
A second item would be the shape of the twoyear gold chart. Not to rule out one more year of
consolidation and the completion of a big double top
any time now. But it has also taken on the shape of a
large ascending triangle. Which can be bullish indeed.
I would hate to not have a decent sized position and
look back to see a major break-out from this ascending
triangle after the fact.
So with such strong but diametrically opposed
signals, it’s difficult to make any large bets right
now. Getting leveraged to any commodity just ahead
of seasonal weakness is the equivalent of walking
into moving traffic. Short term technicals have all
turned decidedly negative as I go to print. Then
again, what if this were the year that Central Banks
or other investors decide not to fill the 400 odd ton a
year supply/demand deficit from mines? Like when
the Uranium market finally ran out of supply from
decommissioned nukes? We certainly wouldn’t want
to be chasing that tiger by the tail, but prefer far more
to be positioned in advance.
So it’s steady as she goes then, we should be
psychologically prepared for some lower gold prices.”
***************
THE DINES LETTER
P.O. Box 12, Belvedere, CA 94920.
1 year, 17 issues, $195. www.dinesletter.com.
June: Bearish for Gold
James Dines: “The Dines Gold Stock Average
(DIGSA) in the last 39 Junes has risen 15 times and
declined 24 times, so seasonal percentages are 62%
bearish for gold shares this month. The Dines Silver
Stock Average (DISSA) is also bearish (58%); up 15
and down 21 times in the past 36 years.”
Bull & Bear’s
Web Sites for Investors
The Bull & Bear Financial Report • P.O. Box 917179, Longwood, FL 32791 • 1-800-336-BULL
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Global Minerals Ltd.
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Expect A Try For A New Gold Record By Year-End

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The EPA Says, “We`ve Only Just Begun” A-6

Round One