Miners’ increasing focus on smart growth good – US Global

Smart companies are beginning to ignore analysts' insistence that production growth is always good, says US Global’s Brian Hicks and Ralph Aldis, An interview with The Gold Report.

The Gold Report: The Nov. 1 edition of Frank Talk suggested that gold equities generally perform poorly in a U.S. election year but rebound strongly the following year. Do you expect a better year for gold and gold equities in 2013?

Ralph Aldis: This year has not been a stellar year for gold equities. Most of the gold equity funds have negative returns for the year.

Brian Hicks: We believe gold equities will do well next year, largely due to macroeconomic factors that have been in place for some time, but which will become even more pronounced in 2013. Those factors include central banks expanding their balance sheets and increased concern over deficit spending here in the U.S. Looking at how cheap gold equities are relative to the bullion price, that spread will continue to be arbitraged in 2013.

TGR: Every media outlet in the country is talking about the fiscal cliff. If the U.S. goes over the fiscal cliff, what effect would that have on the gold price and on gold equities?

RA: No one has the stomach to let the country fall off the cliff. A compromise will be reached. The most likely scenario is that the government will have to print money in flight. That will be a very clear signal to own gold bullion, and gold equities will be handed their marching papers to go higher.

BH: Whether we get a compromise or go over the cliff, which is the less likely event, gold will do well. Either way, there will be a lot of uncertainty and concern about financial assets. That will prompt people to see gold as a hedge.

TGR: Gold equity investors have seen more volatility than gains in recent years. Should they expect more of the same over the next four to five years?

BH: The volatility has held true for the markets in general; it has not been specific to gold equities. On a relative basis, gold equities have outperformed the broader market since 2008.

To prepare for volatility, investors should be balanced, not overweight in any particular sector. You want to be able to capitalize on the volatility—to the upside or the downside. Gold equities are somewhat countercyclical; they can diversify a portfolio and be additive to overall risk-adjusted returns.

RA: When silver was hitting close to $50/ounce (oz), the regulators raised margin requirements something like five times in five days. That knocked silver for probably its biggest correction ever in a single week. If you live through that type of correction once, you become gun shy about going long on equities when the metal prices are going up.

More generally, the tech bubble, the credit crisis, the real estate crash and the large number of baby boomers approaching retirement are all causing people to sell equities. They are turning to fixed-income or structured interest-rate products. That provides a great buying opportunity for equities.

BH: Generalists talk about gold being in a bubble, but I agree with Warren Buffett that the real bubble is government bonds. At some point, that money will have to come out. When it does, it will be looking for returns and for yield. Gold stocks will be poised to capitalize on that.

TGR: How should gold equity investors handle common market corrections?

RA: One strategy, if you are certain that you are in a bull market, is to stay long the entire time.

I would say you stick with it.

However, in managing our funds, we always keep some cash on hand so we can buy stocks on these dips. For example, a company releases a good news story and the stock starts moving twice as much as any other stock that day. It is probably prudent to sell perhaps 1% of your position because you will be able to replace it later at a cheaper price.

TGR: Another edition of Frank Talk discussed how companies' margins are being compromised and growing thinner. What must gold companies do to boost investor confidence?

RA: The industry's mantra has been "grow production." That is what the analysts look for and what companies are trying to do, but it is difficult to grow production.

You can grow production through your own organic discovery or through acquisition. Too often, companies overpay or size up a marginal project from say, 30,000 tons (30 Kt)/day to 60 Kt/day. They have tried to grow production at the expense of lowering margins. If they lower their margins, they can no longer pay a dividend. If the gold price corrects, the project may no longer be economic.

Management needs to focus on return on capital, on making a sound investment in something that you can make money on.

TGR: What will drive up the value of gold equities over the next five years?

RA: Gold prices will go higher. Central banks around the world are hedging by buying gold in lieu of currency for their reserve holdings. Also, investor demand will push values higher.

Companies need to focus on growing their returns and not on growing the company or the production profile. Focusing on returns will allow them to pay a dividend.

TGR: Do you own any companies with a market cap over $300 million (M) that do not pay a dividend?

RA: Yes. There are companies in the growth phase, in the capital phase where they are not cash-flow positive in the sense of having sufficient free cash flow to start writing checks to shareholders.

While some companies are paying modest dividends of 1–2%, paying a dividend is more the exception than the rule. The only high-price dividend payers are companies whose share price has been knocked down.

TGR: Given gold companies' heavy capital expense (capex) demands, do you see the major players getting to dividends in the 4–5% range?

RA: Rather than increasing dividends, companies have been upsizing their projects to grow their production profile. The only people making money are the consultants earning fees by telling the mining companies what to do with their project and the companies building the actual mines.

Gold companies are making profits but they are not yielding exceptional returns. The majors are all trying to push upside of the project in the false belief that if they move all the cash flow forward, they will get a higher multiple.

TGR: If the companies in your funds are making less money than their consultants, why are you in this sector?

RA: Our funds are weighted differently from indexes that focus on the big four.

As active managers, we are trying to scope out the companies that are doing the right things to achieve the top returns we want for our shareholders.

TGR: What is your investment thesis?

BH: Our view is that gold stocks have been derated since the introduction of the SPDR Gold Trust exchange-traded fund. That derating is reflected in lower multiples to cash flow and earnings, because returns on capital have not been sufficiently higher than their cost of capital. However, lower oil prices and fuel costs, as well as the delay or outright cancellation of many capital projects, could provide some relief in the cost of labor and raw materials. From that standpoint, over the intermediate term, margins could start to expand. That would be good for gold equities.

We also think money will continue to flow into the sector because we are bullish on gold. Historically, if you pick the right stocks, you get 2:1 leverage by owning the stock versus the commodity. Our job as active money managers is to sift through the large universe of companies and pick stocks that will exhibit that leverage in a rising gold market.

RA: George Topping, an analyst at Stifel Nicolaus, caught the gist of what needs to happen in his report, "Don't Build It and They Will Come." Since that report, companies have started looking at how to downsize projects. That may be the catalyst that will take some of the pressure off the margins.

The other thing that has hurt gold companies in this cycle is understating their cash costs. Only government officials really believe a cash cost of $700 to produce an ounce of gold. Governments look at those numbers and say, you guys are making windfall profits, so we need to raise your taxes. To combat that, companies need to talk about the cost to produce an ounce of gold in total cost terms.

That is beginning to happen. The World Gold Council met at the Denver Gold Show to talk about how to transition from a cash-cost definition to a total-cost definition. This would make the industry more transparent and the companies more accountable.

We will see a trend of companies taking the foot off the pedal and thinking about what makes sense. If you can develop a project at a higher margin, that is the smarter choice.

TGR: What equities are you bullish on?

RA: You have to give the royalty companies some serious thought. They are insulated from capital cost increases, at least on the cost-structure side. Companies have to be careful about buying a royalty on a project that has margins that may be too thin and getting in too deep. The royalty company may not be on the hook for more capital, but it has a lot of costs if that project is not built.

BH: Several silver companies look interesting. The price of silver is high enough for some of the lower-cost silver companies to generate free cash flow and superior returns on capital compared to their precious metal peers.

TGR: Are you buying companies now in the expectation of more merger and acquisition (M&A) activity as the gold price rises?

RA: Not really. I think M&A activity is on hold as companies figure out how to optimize their existing projects and increase their margins. Stupid acquisitions are one of the best ways to destroy capital. I do not believe M&A is the way to go right now.

TGR: You place a premium on communication. Why is that?

RA: We try to keep the lines of shareholder communication open because that signals to people how engaged we are in what we are trying to do. Shareholder education builds shareholder loyalty.

We cover a lot of topics. Frank Holmes travels the world and talks to thousands of people. Brian and I visit projects and have regularly scheduled calls with analysts three and four times a week. We try to synthesize our view and share it. The overall market seems to be highly depressed, and everybody just wants to talk about the negatives, but there is opportunity.

BH: As analysts and portfolio managers, summarizing what happened over a week's time, help us put events in perspective. When you have to write about it, you have to think clearly about the issues. It's a good tool for us as welTGR: What is a good rule of thumb for precious metals equities investors?

RA: On the gold and precious metals side, at a minimum they should keep 5–10% of their overall portfolio in gold and gold stocks and rebalance it annually.

The good thing about gold and gold stocks is that they are not as positively correlated to the overall market. When your gold equities are down, your other stocks tend to be up; if other stocks are down, the gold equities are probably making up the losses. We find that to be a great portfolio diversifier over time. If you do the efficient frontiers, gold equities not only lower the overall volatility, they also raise the average return.

TGR: And you, Brian?

BH: The precious metals market is surprisingly inefficient. There are opportunities to trade around core positions when you have dislocations in the market, whether it is a geopolitical event or a change in government policy.

On an individual basis, it can be daunting to navigate that on your own. We add value by having the resources and the time to be active managers and to capitalize on these dislocations and inefficiencies. I would say let professionals manage your gold portfolio for optimal risk-adjusted returns.

TGR: Brian and Ralph, thanks for your time and insights.

Ralph Aldis, CFA, rejoined U.S. Global Investors as senior mining analyst in November 2001. He is responsible for analyzing gold and precious metals stocks for the World Precious Minerals Fund (UNWPX) and the Gold and Precious Metals Fund (USERX). Aldis also works with the portfolio management team of the Global Resources Fund (PSPFX) to provide tactical analyses of base metal, paper, chemical, steel and non-ferrous industries. Previously, Aldis worked for Eisner Securities, where he was an investment analyst for its high net worth group and oversaw its mutual fund operations. Before joining Eisner Securities, Aldis worked for 10 years as director of research for U.S. Global Investors, where he applied quantitative skills toward stocks, portfolio tilting, cash optimization and performance attribution analysis. Aldis received a master's degree in energy and mineral resources from the University of Texas at Austin in 1988 and a Bachelor of Science in geology, cum laude, in 1981, from Stephen F. Austin University. Aldis is a member of the CFA Society of San Antonio.

Brian Hicks joined U.S. Global Investors Inc. in 2004 as a co-manager of the company's Global Resources Fund (PSPFX). He is responsible for portfolio allocation, stock selection and research coverage for the energy and basic materials sectors. Prior to joining U.S. Global Investors, Hicks was an associate oil and gas analyst for A.G. Edwards Inc. He also worked previously as an institutional equity/options trader and liaison to the foreign equity desk at Charles Schwab & Co., and at Invesco Funds Group, Inc. as an industry research and product development analyst. Hicks holds a Master of Science degree in finance and a bachelor's degree in business administration from the University of Colorado.

Peruvian gold producer bulks up Colombia-focused junior exposure

Another South American miner takes an interest in Canadian juniors operating in Colombia following recent takeovers by AUX

Author: Kip Keen

As it pursues growth beyond Peru, Consorcio Minera Horizonte, a leading Peruvian gold producer, is bulking up on Canadian juniors with Colombian gold assets. After recently announced financings Consorcio Minera Horizonte (CMH) will own a majority of Antioquia Gold's outstanding shares and is set to buy a controlling stake in Batero Gold.

CMH started investing in Canadian juniors with a Colombia focus back in 2010. It began by striking a strategic alliance with Antioquia Gold, which owns the high-grade gold Cisneros project, as part of an initial private placement for 16.2 million shares @ C$0.20.

Since then, through notably lean times for junior financings, CMH's appetite for Antioquia Gold shares has remained strong. In subsequent private placements - the most recent in late October - CMH's position in Antioquia Gold has grown to 66.2 million common shares or 81.5 million shares outstanding, which represents a 54-percent interest in Antioquia Gold.

Now it has a second junior in its sights. Within a couple days of taking a majority stake in Antioquia Gold, it and Batero Gold inked a strategic alliance along with a C$20 million financing. In two private placements, subject to shareholder approval, CMH is to buy a 35-percent stake in Batero, giving it a controlling interest in a junior that owns the La Cumbre gold project.

"It's good for the company," said one analyst, familiar with Batero. The analyst echoed Batero's rationale for the deal, that the junior is getting a knowledgeable miner as a partner to help it push its La Cumbre gold project forward. La Cumbre is a multimillion ounce gold deposit that Batero has outlined as a low-grade bulk tonnage project with potential for heap-leaching.

The analyst, who preferred not to be named, also noted it was a "tough time for financings right now" and agreed with the notion Batero would have been hard pressed to do a better financing than the one it has put together with CMH. The financing with CMH, @ C$0.65, comes at a premium to Batero's average shareprice in October, though still falls far short of the shareprice heights Batero reached earlier this year before it released a multimillion ounce resource estimate in February.

After the resource came out, which disappointed analysts on grade, Batero's shareprice cratered from over C$2.50 to the C$0.50 range where it has traded ever since.

But clearly CMH sees potential in La Cumbre. Likely it, as Batero, has its eye on the possibilities for higher grade gold within La Cumbre's six million ounces in global resources. In the La Cumbre deposit, one of several comprising the wider resource, Batero has shown strong recoveries in oxide and low-sulfur transitional ore. (@ La Cumbre deposit Batero counts 1.5 million ounces gold @ 0.73 g/t gold at a 0.5 g/t Au cutoff in indicated resources and a further 2.3 million ounces @ 0.56 g/t Au in inferred resources.) Further, as previously noted in these pages, the deposit looks to have a nice shape for mining, were that day to come, with a strip ratio possibly in the 0.75:1 range.

Such points will not, of course, have escaped CMH.

And this point should not escape Colombia watchers. CMH's increasing interest in Canadian juniors follows recent takeovers of two Canadian juniors with a Colombia focus by Eike Batista's AUX, a Brazilian miner. Thus mergers and acquisitions of juniors in Colombia are for being driven not by Western firms, but South American miners looking to grow gold production.

Source: Mineweb

High gold prices mask difficult future for miners-S&P

Although gold prices have nearly tripled over the past four years, gold miners are not able to capitalize on their good fortune, says Standard & Poor's.

With the current capacity in the mining pipeline and the hefty position in gold ETFs, Standard & Poor's warns that gold miners' profits and free cash flow are at risk "from an abrupt downward correction in the gold price as occurred in the late 1990s following years of production increases and healthy prices."

In an analysis made public Tuesday, S&P suggested such a correction could "lead to the closure of high-cost mines and reduced investments to stem negative free cash flow, even though gold miners have adequate liquidity to withstand low gold prices over an 18-month period." Long-term credit facilities, loose financing covenants, multiple projects at different stages, and generally low leverage give miners this financial flexibility.

S&P analysts Elad Jelasko and Karl Nietvelt noted that, although the price of gold has almost tripled over the past four years, "gold miners' struggles have prevented them from capitalizing on good fortune."

For example, Newmont saw its gold production decline to 5.9 million ounces last year from 6.2 million ounces in 2007 as operating costs jumped 50% during the same period. "In other words, Newmont generated only $24 per ounce sold," said the analysts.

"Overall, we estimated that cost inflation has doubled the miners' total cash cost (cash operating costs plus all capital expenditures) over the past five years to $1,100 per ounce on average."

S&P rates a number og investment-grade gold mining companies globally, whose ratings have broadly remained unchanged. They include Barrick, Newmont, Goldcorp, Newcrest, AngloGold Ashanti, Gold Fields, Kinross and New Gold. The ratings agency maintains a stable outlook for the industry.

In their analysis, Standard & Poor's observed the amount of gold backing ETFs is almost equal to the annual production in gold. However, the situation could change if Europe's sovereign debt crisis is resolved, or if signs of recovery in the U.S. and the global economy prompt investors to move to riskier investments.

PRODUCTION/PRODUCTION COSTS

At first glance, the gold mining industry looks robust as world gold production reached 88 million ounces last year. However, S&P believes production will only increase by single digits and then start to decline in the next two or three years as mining tries to overcome the challenges of deteriorating quality of mined ore; taking longer to initiate new projects; and few new reserve discoveries.

"There is no consensus among gold miners about the likely direction for gold production," S&P advised.

"If our assumption of a single-digit rise in output over the years is conservative, and the industry majors and junior miners increase production by 5.7 million ounces and 1 million to 3 million ounces, respectively, we doubt the current price would remain sustainable."

In their analysis, S&P warns that "cost inflation is an ever-present threat" for gold miners. "The commodities boom has...created inflation across the mining industry, pushing costs up by 10%-15% a year." The main factors behind this inflation are crude oil and subsequent electricity prices; competition for skilled labor; general country inflation; and equipment costs.

When comparing the cash costs of low- and high-cost producers over the past five years, S&P found that the gap between them increased from about $100/oz in 2007 to almost $400/oz this year.

In a lower price environment, S&P believes mining companies will become "far more selective in their mining plans", thereby decreasing cash costs somewhat.

"Moreover, the healthy price of copper, which is found in some mines as a by-product, supports a lower cash cost structure, thereby improving competitiveness," said the analysts. "For example in 2011 Goldcorp reported a cash cost after by-products credit of $223 per ounce, compared with a cash cost of $535 per ounce before the by-products credit."

"In this respect, any improvements in the copper price should increase the cash cost structure. The main beneficiaries of such a move include Barrick, Newmont, Goldcorp and Kinross. The South African miners, by contrast, have insignificant by-products," the analysts advised.

Standard and Poor's views total cash cost as an indication of the floor level for the price of gold. "In our view, the investment needed to support existing production lies within a range of $150-$200 per ounce per year on top of the industry's median cash cost ($600-$650 per ounce)."

"However, gold miners are in a middle of ambitious capex programs at present, translating to actual capex of $400-$450 per ounce and pushing the total cash cost for the average gold miner to $1,000 to $1,100 per ounce," said the analysts. "As a result, under current conditions, a decline in the gold price below $1,200 per ounce would create a material pressure on FOCF [Free Operating Cash Flow] across the industry," as well as resulting in negative FOCF for some miners.

"Hence, a price drop of this magnitude would be unsustainable," the analysts asserted.

If gold prices decline substantially, S&P advised it would assess a mining company's credit profile for its financial flexibility including its ability and willingness to execute a change in mine plan to focus on gold seams; limit exploration costs; cut dividends; curtail capex programs in pre-feasibility/feasibility studies; and shut down expensive shafts.

RISKS

Other risks constraining the gold mining industry include country risk, safety regulation, introduction of new tax regimes, and shareholders pressures on dividends, said S&P, adding these factors would limit the industry's growth prospects "and therefore support healthy prices over the next three to five years."

Under country risks, S&P factors in changes in mining licenses; a lack of infrastructure (water, electricity and logistics), and a country's ability to nationalize assets as has occurred recently in Argentina and Zimbabwe. "At this stage, the risk of nationalization in South Africa seems to us to have reduced."

Although mine safety has substantially improved over the years, S&P said ultra-deep underground mining "stretching the industry's engineering capabilities and exposes miners to extremely conditions, increasing fatalities."

"Safety regulations force mining companies to slow down the mining process, resulting in lower efficiency," said the analysts. "Production also suffers from regulatory investigations into fatalities. AngloGold, for example, lost production totaling 76,000 ounces in the first quarter of 2012 due to safety breaches."

As gold prices increase, there is a risk that governments will seek a higher portion of mining companies' income, observed S&P. Profit sharing can include higher royalties, a super tax (an additional tax on top of the regular corporate tax), and partial ownership in the assets.

"In this respect, we see royalties concealing a larger issue because expenses are calculated on revenues and not profit. By contrast, we see taxation levied as a percentage of free cash flow as being far less credit negative," the analysts advised.

However, they added, "We believe that negotiations over new tax regimes taking place in several countries (such as South Africa) push miners to defer capex and to adopt a ‘wait and see' strategy until they gain better visibility on the likely changes."

Gold miners are under increasing pressure by shareholders to up dividends. But, S&P observed "shifting cash flow from operations to the shareholders pushes back new mine development and constrains supply. In this respect, we take a positive view of Newmont's recent intention to link its dividends to the gold price."

Tanzania minister wants established gold miners to pay 30% tax - no excuses

Gold miners who have been operating for five years or more should pay 30% corporate tax regardless of losses or shut down and leave the country says Tanzania's energy and mines minister.

Tanzania, Africa's fourth largest gold producer, has told mining companies operating for more than five years to start paying a corporate tax of 30 percent, citing rising prices of precious metals at the world market.

Tanzania's gold export earnings rose 31 percent last year to $1.879 billion from $1.436 billion a year before on higher world prices for the commodity, Sospeter Muhongo, energy and minerals minister, told parliament on Friday.

The minister said the government wants to earn higher revenues from mining companies due to the rising gold price and added the government had ordered audits of all large-scale gold mines in the country to ensure they started paying corporate taxes after recovering their costs of production.

"I am instructing all mining companies that have been in operation for more than five years to start paying corporate tax without any excuses," he said.

"If they claim they are still making losses and can't contribute to the national economy through taxes, they should shut down their mines and leave because minerals do not rot."

Major gold mining companies in Tanzania include African Barrick Gold Plc, which has four gold-producing mines, AngloGold Ashanti Ltd and Resolute Mining Ltd.

He did not say which of these mines were affected, but said Geita Gold Mine owned by AngloGold Ashanti and the Golden Pride mine owned by Resolute had already paid a total of 228.5 billion shillings in corporate taxes.

He said Tanzania was also evaluating 11 bids from investors for a stake in the state-run Buhemba gold mine. The government regained ownership of the mine this year after reversing its 2005 privatisation to a local company amid allegations of graft in the previous sale of the mine.

It is much smaller than mines run by the big companies.

The country has also invited bids for a joint venture project to develop a state-run coal mine with 35.5 million tonnes of reserves, the country's energy and minerals minister said Friday.

The government said the project would also involve construction of a 200-megawatt coal-fired power plant at a cost of $400 million.

"By June 2012, the State Mining Corp received bids from 16 foreign and local companies to enter into joint venture to develop this project," Muhongo said.

He said Tanzania has 136.5 million pounds of uranium oxide, with Australia-based miner Mantra Resources given a go-ahead to build a $450 uranium mine at a world heritage park after the project received approval from UNESCO, the U.N. cultural agency.

Gold Forecast Triple bottom? A Base or a Trap?

The pain in Spain falls mainly on it's credit rating, which is to blame.

As the sovereign debt crisis in the European Union accelerates, today we witnessed another nation of the E.U. have its credit rating lowered. This action put substantial pressure on the euro, which traded close to a two-year low, spurring the U.S. dollar to continue its rally. Eagan-Jones downgraded Spain's credit rating and one of Spain's largest banks, Bankia, was in such immediate peril that it was given a significant infusion of cash over the weekend in order to keep it solvent. These new developments come on the heels of heated concerns as to whether Greece will remain part of the E.U., or exit the union, dumping its financial obligations and the euro in one fell swoop.

There was an abundance of safe haven buying, but the focus was in U.S. dollar backed investments and not traditional safe haven vehicles such as the precious metals. The dollar is currently trading at a 21-month high, and continues to strengthen as uncertainty in the EU grows.

Reports surfaced last night that China may in fact introduce new monetary stimulus measures in order to boost their economy. However, it needs to be noted that the Chinese economy has been running in overdrive and even in its current slowdown still maintains a vigorous pace. Any monetary stimulus measures, whether implemented by the United States, the E.U., or China, could very well have a strong bullish effect on the precious metals markets.

See Video:

Source: The Gold Forecast.com

Yukon juniors with cash to burn

With almost C$300 million set to go into mineral exploration in the Yukon in 2012

Despite a rocky junior market, exploration continues apace in the Yukon, which is set to have near record exploration expenditures this year. Natural Resources Canada recently estimated nearly C$300 million would go into mineral exploration in the Yukon during 2012, just a little bit less than last year's C$307 million.

Who is spending the money? Below is an overview of the exploration plans of some of the most prominent Yukon explorers. No favouritism. The list is in alphabetic order. It shows a slew of junior explorers and miners are cashed up and either already drilling or planning to start drilling soon on sizeable exploration programs:

Atac Resources (TSX-V: ATC)
C$20 million in cash.
Focusing on the Rackla Gold project and recently started a 15,000-metre drilling campaign mostly on the Conrad, Osiris, Isis and Isis East targets.
Recent drilling included high-grade gold intercepts over notable strike length with as much as 44 metres @ 4.41 g/t gold at Osiris late last year.

Ethos Gold (TSX-V: ECC)
C$14 million in cash.
To spend C$7.3 million mostly on the Betty gold project.
To drill 16,000 metres following up on extensive surface anomalies, with as much 7.3 g/t gold over 50 metres in a trench last year.

Golden Predator (TSX: GPD)
C$14 million in cash.
Budgets C$10 million for the Brewery Creek project, with drilling ongoing.
Expanding on and defining the Brewery Creek resource: 20 million @ 0.89 g/t gold, indicated, about half of which is in oxide.

Kaminak Gold (TSX-V: KAM)
C$21 million in cash at the end of December and then in May it raised C$5 million.
It plans 50,000 metres of drilling to move toward a first - and much anticipated - resource on the Coffee gold project.
It is drilling gaps and extensions to several structures hosting high-grade gold, as recently reported in these pages.

Monster Mining (TSX-V: MAN)
C$2.4 million in cash.
To drill 2,000 or so metres on the Caribou Hill target on its Keno-Lightning project near Alexco's Bellekeno silver mine.
Last year it hit high grade silver in the Caribou Hill area with 11 of 14 drillholes showing plus 1,000 g/t silver and silver mineralization over 300-metre strike length so far.

Northern Freegold (TSX-V: NFR)
C$4 million in cash at the end of December and it subsequently raised about C$7 million, mostly in flow-through shares.
This year it plans 25,000 metres of drilling, largely to expand on resources.
For example: it plans on testing extensions to the Revenue deposit beyond long gold/copper intercepts that included 305 metres @ 0.47 g/t gold, 3.68 g/t silver, 0.12 percent copper and 0.02 percent moly.

Northern Tiger (TSX-V: NTR)
C$2 million in cash, end of January.
To do follow-up drilling at the 3Ace project, where it recently hit as much as 2.58 g/t gold over 53 metres.

Ryan Gold (TSX-V:RYG)
C$43 million in cash.
To spend C$10 million or so on drilling at the Ida Oro project (6,000 metres) and the Flume project (1,500 metres)
Ida Oro had numerous long intercepts last year with low-grade gold over broad widths - as much as 137 metres @ 0.56 g/t gold. Ryan Gold said it would drill to the south of last year's collars beneath more gold anomalies.

Victoria Gold (TSX-V: VIT)
C$30 million in cash.
Pushing ahead the advanced-stage Eagle Gold project with some 4.8 million ounces gold in resources.
Now in the permitting stage following a feasibility study in which it outlined a 200,000-ounce per year gold mine that would cost about C$400 million to build.
Sees 2015 production.

Exploration notes for a couple Yukon miners:

Alexco Resource (TSX: AXU)
C$37 million in cash.
To spend C$12 million in 2012 on exploration, with 29,000 metres of drilling, much of it beyond the operating Bellekeno silver mine.
Includes some 4,000 metres at Flame & Moth, which has yielded bonanza-grade silver in recent drilling as covered in these pages.

Capstone Mining (TSX: CS)
C$502 million in cash.
To spend C$5 million testing gaps between deposits at the Minto mine, for which it is considering a super-pit.

Gold: World Frenzy

In the past 10 years the price has increased 6 times and now around U.S. $ 1.600 an ounce. In September 2011 was a record U.S. $ 1.923 an ounce.

A gold bar can be 10 or 30 kg, coming from the Congo Basin, the heights of Canada or the virgin jungle of Peru. There is no difference. Gold is gold. In the world there are more than 20 million people engaged in the extraction of gold metal and according to the Organization of the United Nations Industrial Development Organization (UNIDO) at least 1.5 million are women and children. The average cost of producing an ounce of gold is U.S. $ 800 and needs to be removed, at best, 1,000 tons (MT) of mountains or sand to get a kilo of gold metal.

In 2010 world production was 2,500 tons and 30.700 tons estimated that there are still unexplored. China is the largest producer with 345 tonnes, followed by Australia (255 tonnes) and USA (230 tonnes). World reserves are estimated to be 51,000 tons. American power leads with 8.134 tons, distributed in a dozen banks.

Germany (3.401 tons) and the International Monetary Fund (2.814 tons) complete the hat trick. Peru has its own fever producing 170 tons per year and having 35 tonnes in bank reserves, second only to Venezuela (323 tons) and Argentina (55 tons) in the Latin American map. According to the Ministry of Energy and Mines, the proven reserves amount to 1,970 to explore Tm, which entered the top ten worldwide. The following five photographs global gold frenzy.
Peru is the 5th largest gold producer and is in the top ten countries with the largest untapped reserves, according to the World Gold Council

Lawless China
The Asian power, despite being the largest producer, its people buy on average 0.26 grams, well below the world average and leading consuming country, Vietnam, which takes 0.85 grams per capita per year.

The "boom" Chinese gold dates back to early 1990 when the Chinese state, with its opening to capitalism privatized gold mining concessions. The communist Chinese mines were taken over by domestic private companies. "They bought the deposits at a very low, but now they sell it to a maximum acceptable price," said Dai Xiaobing, general manager Trend Precious Metals Resources. Over the years, the rapid growth revealed a hidden deficiency state centralism. Small-scale miners and local investors were not prepared for large businesses. "Those who know the investment did not understand the business of gold and understand those who do not dominate the market," wrote journalist Huang Qiuli.

The arrival of Western entrepreneurs soon with financial jargon and encouraged the Chinese miners to do business in London and New York. But the cunning western bounds and was not buying virtual gold, which fell on speculation the price, that brought and brings more of a headache for the World Gold Council (BMC). Chinese police estimated at 7 000 Western companies, with offices in Beijing, engaged in illegal business. "Everybody talks about illegal gold speculation, but what takes shape and are points that regulators should clarify," says Liu Shan'en, a researcher at the University of Economics and Business in Beijing. That loophole spoken by Professor Liu is a characteristic portrait of the enormous market power. While some change, jewelers from all over China will continue to arrive every morning Shuibei district of Shenzhen, north of Hong Kong racing to buy gold like Chinese snack.

The New Cocaine
In 2006, then Colombian President Alvaro Uribe announced with great fanfare the plan "Mining Country Colombia 2019". It took 6 years and last February the current president, Juan Manuel Santos, had to announce the suspension of mining concessions. The massive influx of drug cartels, criminal gangs, guerrillas and paramilitary groups in the gold business alerted the Colombian authorities, who saw no other way to cut the dangerous society.

40% of Colombian territory (114 million hectares) is under concession to mining projects. The last 5 years the country known coffee almost quadrupled its gold production. From 15 tons in 2007 went to 56 tons, registered in 2011. The northern department of Antioquia is extracted more than 50% of the precious metal in that country. The militias have much to do. According to Colombian media and a report by Spanish newspaper Público, the drug lord Daniel "Loco" Barrera dominates gold and has 13 municipalities over 500 bulldozers removing land 24 hours a day. The Black Eagles criminal band, which formed the Unit Self-Defense Forces of Colombia (AUC), gets its funding from gold extracted from the Alto del Buey in the National Park of the Farallones in Cali. The Revolutionary Armed Forces of Colombia (FARC) are also in the gold business. The Colombian newspaper El Espectador in late 2010 revealed that the paramilitary group controlled 15 mines in the province of Bolivar. "The FARC uses taxation, grants permission to mine, payment rates for ore and even participating as equity partners in the purchase of machinery which is then rented to the direct exploitation of many mines," complained Alfredo Rangel, Director of Security and Democracy Foundation, told the BBC.

The adage "Gold is better than coca" is imposed in the northern country, which was known during the Conquest as "El Dorado".

"Zama Zama," South African
In 1970 the South African gold production accounted for 70% of the world. Today, 42 years later, barely 10%. Despite the low numbers, the African country has a bright future for others. According to international estimates, the subsoil contains Johannesburg 36 000 tonnes of gold, ie one third of world reserves unexplored.

If anything characterizes the South African gold is coming from deep underground. XV Blyvoor mine, operated by DRD Gold Inc, extract the precious metal to 1.8 kilometers below the surface and temperatures that can reach 50 ° C. "The rusty cage is shaken with a bang.
Whistles that pierce the ears, while the temperature and humidity are oppressive. After endless decline, the elevator stops completely: DRD Blyvoor No. l, at 15, 783.08 feet, a sign says. There was still an hour to walk on sharp rock fragments to reach the workplace ", described in January Sharda Naidoo journalist after visiting the dreaded mine.

But amid ingots and South African caves have appeared "Zama Zama-". The Zulu language word meaning "those who take advantage of their opportunity," or simplified language "golden thieves." You do not have an exact number of how many "Zama Zama," there are in South Africa but official estimates claim that handle about 10% of gold produced. The misdeeds, mostly ex-miners, venture into the mines to extract for 6 months, hidden from the owners, the precious metal. "Fly the rocks without the necessary security measures and work without ventilation or air conditioning.

Not enough water to minimize dust clouds and operate in the midst of an atmosphere of mercury that penetrates the skin and the respiratory tract, "reported the South African newspaper Mail & Guardian. Individual can earn up to U.S. $ 13 billion a year. According to Dick Kruger, president of the Chamber of Mines of South Africa, China and India, after a stopover in Mozambique and Swaziland, are the destinations of this gold illegal. "We do not steal, use without permission" is the phrase as they present the "Zama Zama-".

Revived Dorado
Canadian northwest and temperatures reaching -30 ° C, the madness gold who portrayed Charlie Chaplin in "The Gold Rush" (1925) and Jack London in his remarkable stories, has again revived in Yukon after nearly 40 years of inactivity.

It was August 1896, an expedition led by George Carmack found alluvial gold deposits on the Klondike and Yukon rivers and low mountains over 4000 meters. Quickly the California gold rush (1848-1855) moved to the Canadian province. Although reaching the Yukon could take nearly a month, the city became cool to have 40 thousand inhabitants. Since everything starts over, the gold business died and gave way to tourism. "The Yukon Gold Trail", was called the package sold to agencies and lasted 20 days. It is estimated that 70 years of "boom" in Yukon were extracted about 12.5 million ounces of gold.

High metal prices have made gold in the last 3 years 34.022 reaperturen mining concessions, and the number is growing at an average of 15 thousand per year. "They have to do it secretly, Office of Conservation. They worry that no one to come to claim their awards, "said Janet Bell-MacDonald, Registrar mining Dawson City in The Wall Street Journal. With GPS and new technologies, the resurrected retake Yukon miners, but they have in the huge white mountains and the main obstacle. The numbers have increased avalanche dead miners and adventurers too.

Teuton Mystery
Germany, seen as the saving strength of the euro zone, has the second largest reserve of gold in the world. Are 3.401 tonnes of the precious metal contained in their official documents, but its location in a global mystery.

The miracle of the Federal Republic, developed post World War II, forced many of its exports are paid in gold. In 1968, Germany held 4,000 tons of gold reserves. For reasons of logistics and cost all that metal was never removed from its territory to the United States, where most countries kept their reserves. During the Cold War grew the mystery, especially since stores

Bundesbank in Frankfurt, according to experts, seemed too uncertain for such booty.
When the price of gold rose in 2000, uncertainty gripped the treasure hunters. In 2004 the then head of the Bundesbank, Hans-Helmut Kotz, told Stern magazine: "Most of our gold reserves are in the U.S. Federal Reserve, the Bank of England and the Bank of France, in that order ". Nobody believed him. The problem of German mystery is further fueling wild speculation of the precious metal.

Article posted by "Caretas Magazine" Lima – Peru 

Gold triple bottom & stocks oversold (short term) – Now what?

Since the original article was very long, I hereby provide an excerpt of the article “Gold Tripple Bottom & Stocks Oversold (Short Term) – Now What?” (Subscribers, click HERE to read the entire article).

On Gold:

Gold has now made a bullish reversal on a weekly basis, as price rallied sharply on Thursday and Friday.
Support held, which means Gold could be on the verge of setting a double/tripple bottom around $1,550:

Chart courtesy Prorealtime.com

On a monthly basis, we can see that the Bollinger Bands are narrowing, indicating that volatility has been low over the past couple of months (although it might not have felt like that for some traders). Volatility will not stay this low forever, so Gold is now getting ready for the next BIG MOVE. Notice that I am talking about a MONTHLY chart here, I am not talking about the day-to-day volatility (which has been quite extreme from time to time). This also means that it might take several more months before the next BIG move actually starts. However, keep an eye on the monthly Bollinger Bands, and follow the trend when the next Big Move starts.

Chart courtesy Prorealtime.com

On Silver:

Shorter term, we can see that the Commercials have reduced their Net Short positions in Silver to 15,980 contracts, a level not seen since late 2011, a time when Silver set a bottom at roughly the same price level as where it is trading today:

On Gold Miners:

The chart below illustrates the fact that Sentiment in Gold Mining Stocks is extremely low (illustrated by the Bullish Percent Index, which shows the % of stocks with a Buy signal on the Point & Figure Chart) . The green vertical lines show that almost every time sentiment is depressed, the HUI index is about to turn UP. The only 2 times it didn’t mark a bottom was in late 2008 and more recently, a couple of weeks ago.

Chart courtesy stockcharts.com

Not only is sentiment in Gold stocks depressed, it is also depressed relative to sentiment in the SP500, as illustrated by the chart below, which plots the ratio of $BPGDM by $BPSPX (the % of stocks in the SP500 with a Buy signal on the Point & Figure chart).

We can see that whenever sentiment in Gold miners (lower part) was depressed, it was not just “depressed”, but it was also depressed relative to sentiment in the SP500, and soon sentiment turned up in favor of Gold mining stocks

Chart courtesy stockcharts.com

On Equity markets:

The SP500 has now reached the 61.80% Retracement Level from the bottom in October 2011 to the top in April 2012.
Bollinger Bands are still widening, indicating that the Bottom is still not in sight. We haven’t seen real capitulation yet, although the SP500 was down 11 out of 13 trading days, with a maximum 0.25% rally on May 10th.
Next support comes in at 1,250-1,260 (50% Retracement Level & previous resistance line).

Chart courtesy Prorealtime.com

…

52.40% of the stocks in the SP500 are trading at the lowest level in 50 days, which is 5 standard deviations from the mean, which doesn’t occur that often:

Chart courtesy indexindicators.com

The following chart shows that the best times to buy stocks was in 1949 and 1982, and the best time to sell stocks was in the mid-60′s and in 2000. If history is any guide, then we should wait to buy stocks until this cycle is finished. This means it could take another 8-10 years before the next big Bull market starts:

Chart courtesy thechartstore.com

I then checked out the SP500 Inflation-Adjusted Total Return Index itself. We can clearly see that the index has been in a consolidation phase since 2000, just like from 1929 to 1949 (20 years) and from 1962 to 1982 (20 years). If this cycle (consolidation phase) also lasts 20 years, it means we have to wait until 2020 before the next bull market starts, which is in line with the statement above:

Chart courtesy thechartstore.com

On Bonds:

TLT is trading at 24.98% above its 150 weeks Exponential Moving Average and 29.82% above its 200 weeks Exponential Moving Average, which is quite stretched:

Chart courtesy stockcharts.com

Gold miners need $3 000/oz price in five years - gold council

Sharp increases in mining costs mean gold will need to reach $3 000/oz in five years for the industry to stay profitable, World Gold Council CE Aram Shishmanian said on Monday.

Miners currently needed a gold price of $1 300/oz to survive, Shishmanian said, but faced steep rises in mining costs, along with the cost of dividends and host nation taxes.

"If this continues for the next five years the gold price needs to be at least $3 000/oz just to stay in the business," he said.

However, he was optimistic sustained demand would drive prices higher over the long term.

Spot gold fell to a four-and-a-half month low of $1 549/oz on Wednesday on concerns over the European debt crisis. Normally a refuge for investors in times of economic turmoil, gold has recently traded in line with risk assets like base metals and stocks.

Future demand would come from emerging markets, central banks and investors, Shishmanian said, noting that China and India now represent 55% of the world gold market.

"Emerging markets are going to hold increasing amounts of gold reserves," Shishmanian said. "Holding billions of dollars doesn't help them. The alternative potentially is gold."

Exchange traded funds backed by gold currently hold $120-billion, he said.

"This is the tip of the iceberg," he said. "US pension funds do not hold substantial amounts of gold but we see that changing over the next 20 years."

Gold miners will need prices at $3,000 in 5 years - WGC

World Gold Council CEO, Aram Shishmanian, says miners currently need a gold price of $1,300 to survive, but reckons if the trend continues in the next five years, it will need to be at least $3,000 for them to stay in business.

Sharp increases in mining costs mean gold will need to reach $3,000 an ounce in five years for the industry to stay profitable, World Gold Council chief executive Aram Shishmanian said on Monday.

Miners currently needed a gold price of $1,300 to survive, Shishmanian said, but faced steep rises in mining costs, along with the cost of dividends and host nation taxes.

"If this continues for the next five years the gold price needs to be at least $3,000 just to stay in the business," he said. However, he was optimistic sustained demand would drive prices higher over the long term.

Spot gold fell to a four-and-a-half month low of $1,556.5 an ounce on Monday on concerns over the European debt crisis. Normally a refuge for investors in times of economic turmoil, gold has recently traded in line with risk assets like base metals and stocks.

Future demand would come from emerging markets, central banks and investors, Shishmanian said, noting that China and India now represent 55 percent of the world gold market.

"Emerging markets are going to hold increasing amounts of gold reserves," Shishmanian said. "Holding billions of dollars doesn't help them. The alternative potentially is gold."

Exchange traded funds backed by gold currently hold $120 billion, he said.

"This is the tip of the iceberg," he said. "U.S. pension funds do not hold substantial amounts of gold but we see that changing over the next 20 years."