The Bubble in Financial Assets Continues

Source: Rudi Fronk and Jim Anthony for Streetwise Reports 07/13/2017 Rudi Fronk and Jim Anthony explore the connection between market bubbles and the price of gold. We thought that when the gold price broke above its five-year downtrend in early June, it would establish an upward trend. We were wrong. Another false start, it seems. The bubble in financial assets continues. We think understanding bubbles is the key to discerning the big moves in the gold price. The west has documented seven financial manias or bubbles in the last 250 years. These bubbles peaked and then collapsed in 1720, 1772, 1825, 1873, 1929, 2000 and 2008. In every case, gold performed relatively less well in the expansion years of the bubble and outperformed every other asset class in real terms in the contraction phase. In the recent manias, we also know that gold stocks substantially outperform gold during the contraction phase because operating costs fall. Let’s look at the recent examples. In 2001, the dot.com mania collapsed and gold soared to new highs. In 2008 a bubble in housing led to a collapse of the financial system and once again gold took off to new highs. In 2012, the Fed succeeded in creating yet another bubble in stocks and bonds after dropping rates to zero and flooding the system with liquidity via an alphabet of programs, chief among them QE (quantitative easing). Gold performance has since fallen well behind stocks and bonds in the expansion phase of the current mania. … Continue reading

Steady Progress Pushes Canadian Explorer to Dig Deeper and Expand in Mexico

Source: Streetwise Reports 07/13/2017 An updated resource estimate and PEA in Q3/17 by a large exploration company will include plans for expansion after steady progress and a recent high-grade discovery at its Mexico project. Progress and steady results has been the mantra for MAG Silver Corp.’s (MAG:TSX; MAG:NYSE.MKT) “world class silver-gold-lead-zinc” JV Juanicipio project (56% owned by Fresnillo Plc) in Mexico, according to Canaccord Genuity analyst Kevin MacKenzie. In a recent report, Mackenzie looked back at the history of the Juanicipio project, explaining that over the last two to three years the underground exploration has made steady advances leading to the discovery of the high-grade Dilatant Zone. Due to this discovery, “the joint venture is now contemplating expanding the project’s designed throughput to 4,000tpd (previously 2,650tpd), as well as sinking an internal shaft to allow for earlier access to wider zones of mineralization at depth,” MacKenzie wrote. Mackenzie pointed out that the updated technical PEA will most likely “capture the impact of the materially larger resource base” and include costing similar to the Saucito Mine owned by Fresnillo Plc (FRES:LSE). Viewing MAG Silver “to be one of the premier investments within the silver developer space,” MacKenzie noted that another near-term rerating may be necessary due to “the potential discovery of another high-grade vein.” Currently MacKenzie rates MAG Silver as a speculative Buy with a target price of $24 per share. MAG shares are currently trading at around $16. Rodman & Renshaw analyst Heiko Ihle also has a positive outlook on … Continue reading

Has Novo Discovered the Wits West?

Source: Bob Moriarty for Streetwise Reports 07/13/2017 Bob Moriarty of 321 Gold discusses the potential for Novo Resources to have a Witwatersrand-style deposit and the recent run-up in the explorer’s stock. Novo Resources Corp. (NVO:TSX.V; NSRPF:OTCQX) put out a press release on July 12th that lit the stock on fire with the stock up 55.2% with 1.7 million shares trading and the price up to $1.49, up $.53 on the day. The press release was interesting in that for the first time to my knowledge the TSX has allowed a YouTube video to be attached to a press release. The first video shows someone using a metal detector to find the signal of a nugget in the first test pit and the second shows someone using an air chisel to actually pry out a rock containing several gold nuggets. It’s funny that the stock goes up 55% just now because Novo press releases have been talking about the style of mineralization and people using metal detectors to find gold since May 26, 2017. The company’s web page discussing the style of gold and showing samples of nuggets in rock and a close up picture of the gold has been up for a month without anyone taking notice. I don’t pay much attention to bulletin boards but a poster named TexasT has been posting on the Novo Resources Stockhouse Bullboard since June 12, 2017, talking about how rich is Comet Well and the area that Novo did a deal on in … Continue reading

Frank Giustra Builds Another Gold Producer

Source: The Critical Investor for Streetwise Reports 07/13/2017 The Critical Investor discusses a proposed business combination that would transform an explorer into a developing producer with major assets in Nevada. 1. Introduction In December 2016, I introduced Fiore Exploration Ltd. (F:TSX.V; FIORF:OTCQB), a new company backed by Frank Giustra, and it has been a relatively quiet six months. Fiore completed some drilling on the Pampas El Peñon project in Chile and an IP survey on the newly acquired Cerro Tostado. But behind the scenes, things were in motion. Earlier this year, Fiore began exploring the idea of merging with GRP Minerals, a private company ramping up the Pan heap leach operation in Nevada. GRP bought Pan and other Midway Gold assets for US$5.5 million and spent another US$18 million on upgrading and restarting the operation. Midway had spent more than US$100 million constructing the Pan mine but in the end failed to execute. The demise of Midway Gold is a whole other story, one I will touch on later. The new entity will be named Fiore Gold, and Fiore Exploration CEO Tim Warman will stay on as CEO. I spoke extensively with Warman while preparing this article. The agreement to combine with GRP Minerals has transformed Fiore from a quiet explorer into a developing producer with exploration assets. Now, however, those earlier-stage projects in Chile will be underpinned by development and production from the new Nevada assets. Strong and experienced heap leach management has been brought on by advisor Paul … Continue reading

Energy Company Announces Sale of Assets and Debt Reduction

Source: John M. White, ROTH Capital Partners 07/12/2017 The Williston Basin assets of this energy company have been sold for $1.4 billion. John M. White, analyst with ROTH Capital Partners, commented in a July 11 company update on Halcón Resources Corp.’s (HK:NASDAQ) sale of its operated Williston Basin assets for $1.4 billion to Bruin E&P Partners and on its plans to reduce its debt by $1.2 billion. White noted that current production associated with the assets being sold is about “29,000 BOE per day. The sale is conditioned upon the receipt of consent from greater than 50.0% of the holders of HK’s 6.75% unsecured notes due 2025 to amend certain provisions of the indenture governing the 6.75% Notes. On July 10, 2017 HK obtained commitments to provide the Consent from greater than 50% of the 6.75% Noteholders.” White also noted that the sale requires shareholder approval and on July 11, “HK received commitments to support the asset sale from holders of greater than 50% of its common stock.” Part of the proceeds will be used to purchase up to 50% of Halcon’s 6.5% notes at 103% of par. White also stated that Halcón will use part of the proceeds to “redeem all outstanding 12.0% Second Lien Notes due 2022.” According to White, Halcón plans to “run two rigs in the Delaware Basin for the remainder of 2017 and currently expects to exit 2017 with production in excess of 13,000 BOE per day.” ROTH’s valuation of Halcón is currently $14/share. The … Continue reading

Updated Resource Estimate for Nevada Gold Project Increases Overall Ounces by 162%

Source: Streetwise Reports 07/11/2017 An NI-43-101-compliant resource estimate for the Dark Star gold deposit, part of this company’s 100%-owned Railroad-Pinion Project, beat one analyst’s expectations and was called a “good start” by another. In a June 29 press release, Gold Standard Ventures Corp. (GSV:TSX.V; GSV:NYSE) reported “an Indicated Mineral Resource of 15.38 million tonnes grading 0.54 grams per tonne (g/t) gold (Au), totaling 265,100 ounces of gold, and an Inferred Resource of 17.05 million tonnes grading 1.31 g/t Au, totaling 715,800 ounces of gold, using a cut-off grade of 0.20 g Au/t.” Brian Szeto, an analyst with PI Financial, provided this assessment of the company’s news in a June 29 research report. “Total resources at Dark Star [have] increased from 375Koz (at 0.51 g/t gold) to 981Koz (at 0.94 g/t gold) which represents an 85% increase in grades and 162% increase in overall ounces. . .we highlight that this resource update includes an initial resource from the high grade North Dark Star zone which hosts a resource of 716Koz (at 1.31 g/t gold) which came in better than our expectations of 500Koz (at ~1.5 g/t gold).” Macquarie Securities Group’s Michael Gray summed it up this way in a June 29 Morning Notes brief: “Good start/initial resource for the New Dark Star oxide complex. . .the resource does not include any sulphides, was estimated at a $1250 gold price with a 0.20g/t cut off. We have modelled 1.35moz at 1g/t and expect infill/expansion drilling to grow the resource. GSV plans +12km … Continue reading

Undervalued Companies for the Precious Metal Portfolio

Source: Streetwise Reports 07/11/2017 The rebalancing of the GDXJ and other factors offer buying opportunities in the precious metals space, says Ralph Aldis, portfolio manager at U.S. Global Investors, who discusses a number of companies he believes offer good value in today’s marketplace. The Gold Report: Ralph, thank you for joining us today. Let’s talk about royalty and streaming companies. What factors are making them attractive investment vehicles right now? Ralph Aldis: There are several aspects. We look at factors like return on invested capital. It doesn’t necessarily have to be extremely high; we just want to see that there’s low volatility in those returns. The royalty companies do that very well. The royalty companies are highly diversified, and thus, the geologic risk of any particular deposit really has been diversified away. Additionally, royalty companies essentially get paid off the revenue line of other mining companies. They’re getting paid first, and those cash flows have a high certainty to them because they’re coming off the topline versus coming off the bottom line. TGR: What royalty and streaming companies are at the top of your list? RA: The three biggest and most successful ones have been Franco-Nevada Corp. (FNV:TSX; FNV:NYSE), what’s now called Wheaton Precious Metals Corp. (WPM:TSX; WPM:NYSE) and used to be Silver Wheaton, and Royal Gold Inc. (RGLD:NASDAQ; RGL:TSX). The last three to five years, Franco has outperformed the other two companies by a pretty good margin. That’s because the other two names have had some minor issues. But … Continue reading

Gold and Silver: Your Stomach Is Probably Wrenching Right Now

Source: Lior Gantz for Streetwise Reports 07/11/2017 Wall Street’s largest firm, Goldman Sachs, is throwing in the towel on commodities, which reminds Lior Gantz, Wealth Research Group’s founder, of 1998, when Merrill Lynch closed its commodities desk very close to the end of a cyclical bottom. Gold is up for the year, but silver just made a 52-week-low. This is a highly unique situation—it rarely happens. Silver ended 2016 priced at $15.91, and it is now priced at $15.61. Gold, on the other hand, ended 2016 priced at $1,151.94 and is now priced at $1,212.46. This puts the gold/silver ratio at 77.65, which is unusually high, but it might reach 84 before reverting back to the 65:1 range. Historically, when silver outperforms gold, the mining shares rally, and when the latter is true, the miners are weak. We are close to an extreme right now. What’s even more unique is that for only the third time since 2000, when the commodities supercycle began, we have a brief timespan I call “The Millionaire Window,” and you’ll see what this is all about is our weekend article. It’s part of why I’ve been considering taking profits on my favorite cryptocurrencies. Realize this: Goldman Sachs, the world’s No. 1 commodities trader, is doing a nuts and bolts review of the trading desk! Remember that CEO of Goldman, Lloyd Blankfein, started his career in the commodities business, but he is drawing closer to the industry’s prevailing consensus. Morgan Stanley, JPMorgan Chase & Co., Barclays … Continue reading

Blockchain the End of Gold Price Suppression

Source: Tom Beck for Streetwise Reports 07/11/2017 With so many rumors and complaints over the years about flash crashes, overleveraging, taking advantage of clients and overcharging, blockchain could signal the end of big banks having their way on the Comex and paper metals markets, says Tom Beck, founder of Portfolio Wealth Global. I bought my first gold and silver coins in 2003. I was 21, and well on my way to becoming a proponent of free markets and commodity-based money. John Williams, of Shadowstats.com, and the brilliant analyst Jeff Clark, of GoldSilver.com, have published this important chart that, if you understand it correctly, would mean to never sell one ounce of your gold. Today, the metal only covers 6% of the global currency supply, and that is a century low. Not since the Federal Reserve was created has that much of our global payment system been based on credit, without any tangible commodity backing it. I’m personally not of the opinion that the gold standard is coming back soon, but Portfolio Wealth Global does see gold covering more than 15% of the currency supply, which translates to $3,000 per ounce using today’s prices. Since I bought my coins, I’ve been hearing about manipulation by big banks, to which I always reply that all markets are rigged in some way or another, but what JP Morgan and Barclays have done with the silver market is shameful, and there’s now a way to truly stop it. Silver might be the world’s cheapest … Continue reading

Silver Expected to Rally

Source: Clive Maund for Streetwise Reports 07/10/2017 This could be an optimum time to buy silver and high-quality silver stocks, says technical analyst Clive Maund, as he expects a sizeable silver rally to ensue. June is silver’s worst month of the year by far, on a seasonal basis, and its price dropped significantly this June. However, we are now well into July, and July is seasonally silver’s 2nd best month of the year, and as the month got off to a bad start, it is reasonable to expect things to look up, especially as silver put in what looks like a high-volume Reversal Day on Friday, when it broke down below support but then got back above it later in the day. We can see silver’s dive into what looks like a capitulative high volume Reversal Day on Friday to advantage on its 6-month chart, and the chance of its having hit bottom is increased by the fact that there was a full moon at the weekend. The origins of the support underpinning the silver price here can be seen on its 20-month chart. It derives from the December low which formed at support above a trading range that developed from February through April last year. We may be seeing a Double Bottom form with that low. Like gold, silver’s long-term 8-year chart appears to show a large Head-and-Shoulders bottom completing, which is downsloping in silver’s case because silver traditionally underperforms gold towards the end of bear markets (and early … Continue reading