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ANO/ARQ
Anooraq Resources – One of a Kind?
http://www.kitcocasey.com/displayArticlePrint.php?id=99
By Dave Forest
May 6, 2005
www.caseyresearch.com
"What if someone said to you, I will give you an option to buy part of an operating mine in the world's greatest platinum production region?" Ron Thiessen, President and CEO of Hunter Dickinson Group -- and a KitcoCasey Explorers' League honoree -- recently asked us in a late-night e-mail. "You would leap at the opportunity," he concluded.
The situation he was referring to would hardly be called an "opportunity" by most mining executives. The event in question was the 2003 South African government's passing of Black Economic Empowerment (BEE) legislation governing ownership of industry in the country.
While the aim of this initiative--namely, giving historically disadvantaged South Africans a stake in business ventures--is understandable given decades of repression and inequality in the country, the terms the legislation set out were daunting. Major industrial operations--including mines--would be forced to surrender 15 percent of operating assets to black-owned companies, with the share afterward increasing to 26 percent.
At the time when BEE laws were coming into effect, Ron was working in South Africa with his Anooraq Resources (V.ARQ). One of the company's major joint venture partners was the world's largest platinum producer, Anglo Plats. Coping with BEE laws, he told us, was "making Anglo crazy." Not only were they having to surrender a sizable chunk of their operations, but they were also finding that newfound black empowerment partners were plagued by a serious difficulty: lack of cash.
Most BEE firms were private corporations, and the ones that did go public were only listed in South Africa. The bottom line was that Anglo ended up providing money to float their partners--in effect, paying someone to take a share of their profits.
This less-than-ideal arrangement stalled one of Anglo's major projects--the Eastern Limb expansion in the Bushveld Complex. Their partner on the venture, Pelawan Investments, had considerable expertise but no money to finance development.
This gave Ron an idea: "What if Anooraq was the BEE instead of Pelawan, and Pelawan were shareholders?"
But why would Pelawan give up a 50-percent stake in one of the world's choicest platinum plays? Ron gave them two immediate reasons. First, cash; Anooraq offered Pelawan a market value of $250 million in exchange for their interest. Second, capital; as a North American-listed firm, Anooraq gave both Pelawan and Anglo the ability to tap significant pools of overseas investment monies.
And proving his reputation as a master financier, Ron added an additional and innovative sweetener to the deal. Not only would Anooraq issue 91.2 million of its shares to Pelawan--effectively making Anooraq a black empowerment entity--but they would also facilitate Pelawan selling C$10 million worth of the stock and distributing the money to local communities, educational groups, tribal associations and women's groups. Such cash flow, Ron noted, is "very important to people who have not had such a receipt and are not contemplating liquidity for many years" on their mining interests.
Only because of this unique arrangement did Pelawan agree to transfer a guaranteed interest in one of the world's biggest mining districts to a Canadian junior firm.
But getting their partner onside was only the first challenge that Anooraq faced in their quest to become a BEE company. "It was no easy matter," Ron said, "as South Africa has exchange controls, and residents are not allowed to sell South African assets (interest in the mineral project) for foreign assets (ARQ shares). Absolutely everyone we met with said it will never be done."
"But," he continued, "if there is one thing you can assure yourself about Hunter Dickinson, it's that if they say it can't be done, but it should be done, we will do it."
Because of confidentiality considerations, Ron couldn't tell us exactly what political, economic and social hoops Anooraq had to jump through to seal the deal. But it's a matter of public record that in June of last year, the South African Reserve Bank approved the "reverse takeover" of Anooraq by Pelawan, thus creating a previously unknown entity: an internationally traded Black Empowerment company.
What does this mean to investors? According to Ron, the innovative deal makes Anooraq the "partner of choice" for the numerous major mining firms in South Africa looking to satisfy their legal BEE obligations. Putting it more colorfully, he noted, "We are getting an invitation to come to dinner, and it's not BYOB."
Will Anooraq truly become the go-to junior in one of the world's richest mining districts? That remains to be seen. But, judging from the financial footwork that was required to obtain BEE status, it seems likely that they will have few peers in the South African sector, which could well give them a business advantage.
It's true that many analysts are today discounting South Africa as too politically risky, precisely because of measures like BEE. There's certainly a case to be made in that regard. But, as resource investors are well aware, risk can create opportunities for big rewards. And if there is money to be made in this part of the world, it looks as if Anooraq is uniquely positioned to take a shot at the profits.
As a tantalizing finale, Ron summed up, "What Hunter Dickinson has been saying for months is that once South African mining companies got wind of the opportunities/advantages of having Anooraq as a partner, they would break down the doors to give us invitations. This has happened, and we are picking... stay tuned."
We certainly will.
Chasm Lake purchases 1.271M more shares RNC
These shares purchased between March 24 to May 6
Chasm Lake now holds 5.271M shares=17.21% of outstanding shares
Believe all the Octagon buying is likely Chasm Lake
(1.016M shares Octagon vs. 1.271M shares)
http://www.sedar.com/csfsprod/data56/filings/00778471/00000001/e%3A%5CChasm%5C62-103%5CRNCMay05.pdf
Martin M
http://www.victoradair.com/pdf/gold.pdf
whoops posted this last week...
Small Cap Gold Stock PE Comparables - May 2005
Average is 27.0 for 2005 Projected Earnings
Average is 19.9 for 2006 Projected Earnings
link:
http://www.kitco.com/ind/Matlack/may032005.html
Gold in Central America - RNC Exploration
"Most gold deposits in Central America are associated with epithermal vein deposits, lens-shaped bodies that formed in these ancient volcanic environments when deep hot magmatic waters mixed with shallow, cool groundwater. Mineralization in this type of deposit occurs in branching fissures, vein structures or pie-shaped bodies filled with fractured rock.
The host rock has a distinct texture that geologists can use to determine where the vein lay in relation to the surface when mineralization occurred. This is the key to exploration for epithermal veins because the productive gold horizon is often associated with a “boiling zone” that occurs at a certain depth. As a result, surface samples on gold exploration prospects can often provide a sniff of richer values below that a well-targeted drill program can confirm.
Creation of an Epithermal Gold Deposit
1. A fault or fissure in the earth is created by seismic activity.
2. Water heated to extreme temperatures by nearby volcanic activity rises through the fault to surface, creating a hot spring.
3. In some cases, this water contains dissolved particles of gold and other minerals.
4. When the water hits a certain temperaturature and pressure, these minerals precipitate out, forming a vein.
5. At lower levels, elements such as copper, lead and zinc are deposited. Higher up in the system, gold is deposited.
Current Exploration
Of the seven countries that make up the isthmus, only Belize lacks major metal deposits. Current exploration is centred on the steeply dipping, epithermal veins that have provided most of the gold produced in Central America. Most of these deposits are hosted by the older, deeply eroded volcanics (e.g. Cerro Quema in Panama), but significant discoveries have also been made in the younger volcanics (e.g. Marlin in Guatemala) and, occasionally, in non-volcanic rocks (San Martin, Honduras). The margins of grabens (depressions between two faults), such as the Nicaraguan Depression that cuts northwest across Central America from the province of Limon in Costa Rica to western Nicaragua, are considered prime hunting ground for gold.
Both shallow epithermal hot-spring related deposits (e.g. Crucitas in Costa Rica) and deeper bonanza epithermal veins and vein stockworks (e.g. Limon in Nicaragua) are important targets for exploration. Many of the bonanza gold veins, which cluster around sub-volcanic intrusions in districts that mimic the spacing of active volcanoes, have yielded more than one million ounces of gold historically (e.g. San Sebastian in El Salvador, the aptly-named Bonanza and Limon in Nicaragua, and the Cana district in Panama). Sulphide content in these deposits tends to be low, avoiding the problem of acid mine drainage that plagues many high-sulphide gold operations and thus making the permitting process easier."
_____________
Below is the current RNC Gold outline on its Bonanza mine exploration:
The bulk mineable potential of the Panama Group of veins located 2.5 km to the northeast of the Bonanza processing plant was also investigated with a first phase program consisting of 6.6 linear km of surface trenching and the collection of in excess of 4,000 channel samples. Most of the trenching completed to date has been conducted on lines spaced 120 to 150 meters apart across the northeast trending Neblina, Foundling veins, and the northwest trending Tesoro mineralized structure defining a zone of surface gold mineralization 730 meters long but open along strike and 500 meters wide on average. This program confirmed the potential for widely disseminated surface gold mineralization in saprolite (clay weathered portion of the bedrock). The table of composite assays and the figures presented below were constructed using the 4,280 individual gold analyses taken from the channel samples in 12 surface trenches.
In 2005, RNC will conduct an additional 6.6 km of linear trenching and sampling. A 70 hole reverse circulation drill program totaling 7,000 meters to 10,000 meters will be initiated to evaluate the gold potential of the first 40 to 60 meters of saprolite within the area of interest illustrated above. The holes will be drilled at -45 degrees to a depth of 80 meters on a pattern of 120 x 120 meters and locally on 60 x 120 centers. The reverse circulation drill program will be contracted.
An 11,000 meter surface diamond drill program will also be conducted to outline additional underground resources from multiple veins occurring within the Capitan mine complex and along the Atlas-Comal-Tigre Negro at the surface and underground structure where potential exist for both oxidized surface and underground sulfide ore. HEMCO has purchased a Long Year 38 drill rig to complement the available HEMCO surface diamond drill and to accelerate the execution of this program. Underground development and sampling drills will be continued as well as the drilling of short diamond drill holes using the available equipment.
________________________
full article "Gold in Central America"
http://www.firstpointminerals.com/i/pdf/Gold_in_Central_America-Rev6.pdf
othere charts and comments from RNC Website or from Sedar filings.
On HL CC, go to minute 1:18.00 of prior post.
Very interesting comments by HL. GBN and HL only arguing over $3 to $4M dollars which is somewhat encouraging.
However, the problem is not the $3M or $4M, it is why is HL taking so long to get this project into production.
HL Conference Call, several references to Hollister
http://web.servicebureau.net/conf/meta?i=1112571983&c=2343&m=was&u=/w_ccbn.xsl&date_...
Louis is running a bit late on his charts, but here is Software North COT
http://www.investorshub.com/boards/read_msg.asp?message_id=6212625
thus, they will have time to create some spiffy charts for the AGM...
RNC updated technical report filed May 3rd
http://www.sedar.com/csfsprod/data56/filings/00759207/00000003/e%3A%5CData%5CShared%5CLONNIE%5CSEDAR...
quite the reversal on ANO/ARQ today...
from down 9% to up 4% in less than one hour..., last trade US$.79
would expect MFN to have this completed by annual meeting:
Date Of Meeting: June 16, 2005
http://www.sedar.com/csfsprod/data54/filings/00756991/00000001/l%3A%5CMar_30%5CMindfinders%5Cnm_mine...
Nice AGM Presentation
http://www.novagold.net/presentation_apr2005_AGM/slide1.HTM
nicaragua politics
Daniel Ortega rides again —Carlos F Chamorro
Ortega resembles a shoddy imitation of Fidel Castro without the oil wealth of Hugo Chávez. Lewites — like Vázquez, Lagos, Kirchner, and Lula — offers the possibility of a modern and democratic left, socially committed and at the same time capable of orchestrating national solutions while recognising and negotiating profound differences with the US and the IMF
With the left on the march in much of Latin America, it is no surprise that Nicaragua’s Sandinista leader Daniel Ortega is trying to make a comeback. But Ortega is creating a state of emergency in his party as he tries to diminish the threat posed by Herty Lewites, the former mayor of Managua and the country’s most popular politician. With one demarche, Ortega dismissed the need for a party primary and designated himself as the Sandinistas’ candidate for next year’s presidential election.
What’s striking about Ortega’s move is that he is ready to risk so much political capital, not only expelling Lewites from the party but cancelling his challenger’s permits to hold political rallies and forbidding him to use Sandinista party symbols. Yet, despite all this, Ortega has yet to diminish Lewites’s ability to rally the masses. Ortega’s display of raw power is thus merely a reminder of his autocratic ways.
This will be Ortega’s fifth run for the presidency, having lost his last three attempts. It plays handily into the Bush administration’s recall to office of veterans of the anti-Sandinista “Contra War” of the 1980s, including Elliot Abrams, John Negroponte, Roger Noriega, Dan Fisk, and Otto Reich. In a reminder of that confrontation, Ortega accused his old enemies in the United States of drafting a plan to assassinate him. US Undersecretary of State for Latin America Roger Noriega responded by calling Ortega a “hoodlum”.
Ortega is wagering that attacking Bush will resonate with the Sandinistas and provoke them to close ranks, thereby stifling internal party dissent. But in an already polarised environment, an Ortega-Bush standoff is nothing more than a self-fulfilling prophecy.
In arguing for his candidacy, Ortega wants supporters to believe that his presidential campaign is part of the wave of recent victories won by the Latin American left. But this is only half right.
A new Latin American left is developing, but Ortega is not part of it. In the context of the new Latin American left, Ortega resembles a shoddy imitation of Fidel Castro without the oil wealth of Hugo Chávez.
The standard bearer of Nicaragua’s new left is Lewites. Like Vázquez, Lagos, Kirchner, and Lula elsewhere in the region, Lewites offers the possibility of a modern and democratic left, socially committed and at the same time capable of orchestrating national solutions while recognising and negotiating profound differences with the US and the IMF.
These new leaders seek to deal with the US in a manner that avoids alienating a superpower and isolating their countries. To Ortega, such a posture reeks of betrayal, social democratic aberrations and imperialist tendencies.
But despite Ortega’s anachronistic politics, he has a good chance of winning the election in November 2006. He has only to keep his party united and the anti-Sandinista vote divided. Ironically, his principal ally in this adventure will be his old enemy, former president Arnoldo Alemán, who is under house arrest for corruption. Between them, the two caudillos control 90 percent of the parliament, the Supreme Court, and the Electoral Commission. Together, they can keep Nicaragua’s current president, Enrique Bolaños, in check indefinitely.
Alemán, too, faces a rebellion in his Liberal Constitutional Party (PLC), led by former treasury minister Eduardo Montealegre, a presidential hopeful popular in the party’s liberal wing. If Alemán blocks Montealegre’s candidacy in the PLC and pushes him to form another political party, Ortega’s chances for winning the presidency increase sharply. The business interests that finance political campaigns face a difficult dilemma: Is it preferable to align with a PLC dominated by a corrupt Alemán or support a new democratic force and risk helping Ortega win?
Although a three-way race is pure speculation at this point, it’s clear that it offers Ortega the best of all electoral worlds. It’s so tempting that Ortega is likely to help rehabilitate Arnoldo Alemán, betting that freeing him will serve his political interests. The main glitch in this scenario, however, is Lewites.
Polls show that an overwhelming majority of Sandinista voters prefers the former Managua mayor – 72 percent versus 18 percent for Ortega. If Lewites is able to organise nationally and maintain a presence in the streets, he could quickly become unbeatable. A poll conducted in January projected that in a four-way race, Lewites would come in first, followed by Montealegre. Ortega would manage only a third-place finish. Alemán, or his candidate, would run dead last.
If voters continue to lean toward Lewites and Montealegre, the two candidates could elect more deputies to the National Assembly than the Sandinistas and the PLC combined. Such an outcome would be a welcome end to the dominance of Alemán and Ortega, who have served Nicaraguans poorly.
While it’s premature to make definitive predictions, the Lewites and Montealegre rebellions have already done more in eight weeks to change the country’s political landscape than anything else in the last two years. As a result, Nicaragua’s people, not its strongmen, may yet choose the next president. —DT-PS
Carlos Chamorro is director of the Nicaraguan television programme ‘Esta Semana’, an editor of the weekly ‘Confidencial’ and former director of the Sandinista newspaper ‘Barricada’
274,000 new jobs less 257,000 from birth/death model
equals 14,000 real jobs created...
hmmm, that chart will not post, here's the link, scroll to last chart
http://www.bls.gov/web/cesbd.htm
Supersector Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Natural Resources & Mining
-5 0 0 0
Construction
-60 9 31 34
Manufacturing
-38 3 6 1
Trade, Transportation, & Utilities
-50 9 25 18
Information
1 3 -1 11
Financial Activities
-7 9 9 13
Professional & Business Services
-115 21 56 64
Education & Health Services
7 14 8 21
Leisure & Hospitality
-6 28 37 90
Other Services
-7 4 8 5
Total
-280 100 179 257
thanks for posting this OF...
The issues are interesting. Something HL failed to mention which I recollect is that Exhibit E was prepared using HL's numbers. If my recollection is accurate, then seems HL conveniently left this out...
The BLM's delay and HL's claim for 6 months more appears to have nothing to do with the contract terms. The BLM delay and the extra 6 months on NEM/GBG/HL site access may well be irrelevant and this possibility was not even contemplated. The Earn In Agreement clearly states that it expires Aug 2006, period.
But the real bottom line, as I previously stated, is that HL voluntarily decided to delay Hollister because it had other mining projects with higher IRR returns than Hollister. HL desired to use its existing manpower and equipment on its other projects, IMO. This was the result of the price of silver going from $4.70 when the Earn In Agreement was signed to over $6.00 when Hollister approval given by BLM.
HL is still delaying. Only excavating 200 feet per month is a joke. The excavation should have begun in Sept/Oct 04 at the latest and not in Dec 04, no reason HL could not build the surface facilities while starting the decline, IMO. Surface facilities were to be finished within 2 months per EA/FONSI.
EA/FONSI states decline will take 12 months to excavate and that 40 people including 28 operating/excavation personnel will be employed. HL has just 19 employees total at Hollister per their annual report comments. Where are the 40 employees if HL so committed to this project.
HL is delaying, period. HL is devoting its manpower and equipment to its other mining projects with higher returns. All the issues HL is raising are just smoke and mirrors, i.e. NEM delay/reclamation, bonding, acid rock, fresh water, etc.
Now just because I say smoke and mirrors does not imply that GBN will be successful and prevail, HL has some good legal points and some nice smoke and mirrors.
But what I am saying is if the price of silver was still at $4.70, then HL would have started work at Hollister on May 7th 2004 and had 50 employees on site by June 7th!!
HL would not have waited on NEM/bonding/reclamation,fresh water etc. issues if silver was still at $4.70 and gold at $430, it would still have underemployed people and equipment it needed to get to work, just like in Aug 2002 when this Earn In Agreement was signed.
just my opinion...
virtual metals march 2005
http://www.virtualmetals.co.uk/Pages/other/GMonMar05.pdf
Feb 2005
http://www.virtualmetals.co.uk/Pages/other/GMonFeb05.pdf
thanks for your comments...
Guess my real question/comment was on:
"The EU is like a lobster trap -- once in, it's hard to get out. What is a country going to do, announce they can't abide by the discipline of the euro and opt out? Who would buy their new currency?"
Above comment seems to be an accurate fact. So if France votes NO, the Euro goes down expecting the NO vote and getting the NO vote, then may be a great time as a contrarian to start BUYING the Euro while everyone else is panic selling...
Because no EU country is going to be opting out of the Euro regardless of whether France votes yes or no, who would buy their new currency...
Any opinion here, Louis, and Frank are you listening... you have any thoughts on this subject...?
RNC in the top 3 de-hedging per Virtual Metals/Resource Investor
http://www.resourceinvestor.com/pebble.asp?relid=9546
this would imply that La Libertad production was 16,383 for the quarter or that some of the PP cash was used to de-hedge...
RNC must have used PP cash to dehedge...? Total production was forecast at 16,000 ounces (as I recollect) for the quarter which includes both La Libertad and Bonanza... RNC did have an extra 2000 ounces in inventory at end of 4Q04.
think the problem of slow download was caused by windows media player...? there is no speed transfer rate on the windows media player, so have no idea.
actually, forgot that I was downloading the file and about 2 hours later, start hearing sound so I switched back to the windows media player and low and behold see kids skiing...
DSL @ 1736.00 kbps
http://www.abeltronica.com/velocimetro/pt/?idioma=uk&newlang=uk
or from this site: http://speed.cyberonic.com/
Your Speed (414kbps up, 2507kbps down)
well, it only took me 2 hours to download this file...
then felt compelled to watch most of it...
par schmarr...!!
Euro-French NO Vote
What do you have to say about this my good Belgian friend...
http://knowledge.wharton.upenn.edu/article/1197.cfm
Could something like this happen today as a result of a possible No vote in France? "I believe the answer is No," Marston says. "The EU is like a lobster trap -- once in, it's hard to get out. What is a country going to do, announce they can't abide by the discipline of the euro and opt out? Who would buy their new currency?"
Well, I am just speculating... Interesting CSH trade today at the close with non existent market maker/broker #100.
The plot thickens, a large CSH Trade at C$.78 by a non-existent broker #100
today's trade
Time Price Shares $ Chng Buyer Seller
15:00..0.780..82,350.. CSH..100..Jones, Gable
CSH - Cash or Mandatory Cash Trade
Refers to a trade that required payment up-front for execution, rather than observing the standard 3-day settlement terms that are applied to most brokerage trades.
Here is the only other trade by non-existent broker #100 from 4/1/05 for 29,280 shares:
15:00..1.03..29,280..4/1/2005..100.. Jones, Gable
Good progress at Aguablanca:
http://www.marketwatch.com/tools/quotes/newsarticle.asp?guid={A7433D6C-5E4F-41E3-8EB1-8EFA03EE302D}&....
http://www2.ccnmatthews.com/database/fax/2000/rionarcea.pdf
"Engineering Performance Tests to be implemented by the Engineering/Construction contractor, Fluor Corporation, that are necessary for acceptance by the Company of the turn key plant, have not yet been undertaken. In order to complete these, the plant must run at approximately 90% of the design criteria used in the bankable feasibility study. The feasibility study provides for plant throughput of 125,000 tonnes per month or 195 tonnes per hour, recoveries of 82% nickel and 85% copper and concentrate grades of 8% to 9% nickel and 4% to 5% copper. Nickel concentrate grade and recoveries, while improving, are below design specifications but within saleable limits. Management remains confident design criteria as outlined in the feasibility study are achievable. "
Appears April production of 108 tonnes getting close to 125 tonnes per month feasibility acceptance rate.
"recoveries averaged 60% and 87% for nickel and copper, respectively, while concentrate grades averaged 6.0% nickel and 7.9% copper."
both April copper recovery % (87% vs 85%) and copper concentrate % (4.5% vs 7.9%) exceed the feasibility study.
nickel recovery % and concentrate % still need to be met to meet feasibility study acceptance rate:
feasibility = 82% recovery vs. April recovery of 60%
feasibility = 8.5% nickel concentrate vs. 6.0% April concentrate %
From HL news release:
-- Underground ramp excavation has advanced approximately 1,000 feet at the Hollister Development Block
(Per the FONSI, decline ramp = 5,000 ft; per HL 2002 10-K the decline ramp = 6,500 ft)
"At the Hollister Development Block project in northern Nevada, Hecla continues advancing the exploration decline ramp. Current advance is estimated at approximately 1,000 feet, with another 2,000 feet to go before exploration drilling can begin. A total of 5,600 feet of exploration development is planned for phase one of the project. Although Hecla has asked for a court opinion clarifying certain items in the earn-in agreement with its project participant, Great Basin Gold, Hecla is moving full speed ahead with the development and exploration of the Hollister property."
FWIW, 1,000 feet in one year (on May 7, 2004 HL given notice to proceed) will hopefully take some explaining to the court... Moving full speed ahead seems a bit inaccurate.
Since HL was 200 ft down at 12/31/04, in past 4 months HL has only gotten another 800 feet or 200 ft per month. Again this is certainly not full speed ahead, IMO.
Let's use 5,000 foot ramp decline per FONSI, at 200 ft/month, we are looking at 25 months at this pace or Jan 2007... Full speed ahead per HL's President's comments, you be the judge.
Time for HL to commit to full speed ahead in actions and not words, which is 450+ feet per month, IMO.
Hussman on Gold shares:
http://www.hussmanfunds.com/wmc/wmc050502.htm
Precious metals stocks appear increasingly attractive
One of the areas in which we've observed price weakness recently has been among precious metals stocks. Indeed, weakness in this group has been the main source of the modest -3.36% decline in the Strategic Total Return Fund since its most recent high on November 22, 2004. Though a periodic sideways lack of progress is neither unexpected nor of concern, it's a little bit tedious – particularly when it emerges as a result of a single group. Why not just sell the gold stocks and be rid of them?
The short answer is that there's a good possibility that precious metals shares may produce stellar returns over the coming year. Last week, I added modestly to our precious metals positions in the Strategic Total Return Fund, to just short of 20% of net assets. In the Strategic Growth Fund, I increased our exposure to nearly 5% of net assets, which I view as a sufficient overweight relative to the market for a diversified stock fund.
Probably the simplest way to emphasize conditions in the precious metals shares is to examine a simple valuation indicator that is, surprisingly, nearly as useful as much more sophisticated indicators: the ratio of the spot price of gold to the Philadelphia XAU Index. On Friday, spot gold closed at 434.39, while the XAU closed at 83.51. That put the Gold/XAU ratio at 5.20.
To put some historical context on this measure, since 1974, the Gold/XAU ratio has been greater than 5.0 about 15% of the time. When the ratio has been this high, the XAU has followed with annualized gains of 89.6%, on average – a figure that remains high even if the data is split into multiple samples. When the ratio has been greater than 4.0, the XAU has followed with average annualized gains of 27.4% (though the finer profile of returns has been sensitive to other conditions such as interest rates, economic trends, and inflation). In contrast, when the ratio has been less than 3.0 (meaning that the gold stocks are very elevated relative to the actual metal), the XAU has declined at an annualized rate of -36.6%, on average.
Importantly, the return/risk profile for precious metals shares is strengthened further if the economy is experiencing weakness. For example, when the Gold/XAU ratio has been greater than 5.0 and the ISM Purchasing Managers Index has been less than 50 (indicating a contracting U.S. manufacturing sector), gold shares have appreciated at an average annualized rate of 125.6%. In contrast, when the Gold/XAU ratio has been less than 3.0 and the Purchasing Managers Index has been greater than 50, precious metals shares have plunged at an average annualized rate of -49.9%.
Given increasing evidence of a potential economic slowdown, there's a good likelihood that precious metals may remain in a very favorable set of conditions for perhaps a year or more, first by reason of unusually favorable valuation measures, and subsequently by the combination of moderately favorable valuation measures combined with economic weakness.
Unfortunately, against the favorable profile of expected returns, it's important to emphasize that precious metals are among the most volatile industry groups in the market. For that reason, any given expectation for potential returns has to be tempered by risk considerations. It would be one thing to have an expected return potential of say, 50% for the S&P 500, which in context of typical market volatility, might warrant a leveraged investment position. It's another thing entirely to have that expected return potential in an industry with several times the volatility as the general market.
As usual, the size of our investment position is aligned not simply with the expected return, but with the expected return per unit of risk. In that context, I am very comfortable with a 20% exposure to precious metals shares in the Strategic Total Return Fund, and about 5% in Strategic Growth. If we observe some combination of better valuation and/or economic weakness, those exposures might increase by a few percent.
That said, these comments are intended only to articulate part of my thought process in establishing our moderate positions in precious metals shares, and should absolutely not be used as investment advice, or as any suggestion that investors should establish additional or aggressive investment positions in precious metals elsewhere.
how convenient... lest those traders forget the Fed's inflation fighting prowess...
NOT!!
nicaragua politics
NED will not repeat mistakes made in Venezuela with Sumate exit poll
VHeadline.com guest commentarist Arthur Shaw writes: There is no finer or more winning gentleman than Daniel Ortega, secretary general of the Sandinista National Liberation Front (FSLN) of Nicaragua, who happened to be in Havana Sunday to help the Cubans celebrate ... in the most glorious manner ... May Day.
Mr. Ortega shared a few observations with the press:
"The current situation in Nicaragua is even more explosive than in Ecuador, where people´s pressure ousted President Lucio Gutierrez last month, warned the secretary general of the Sandinista National Liberation Front (FSLN) of Nicaragua, Daniel Ortega.
The Sandinista leader attended a massive May Day gathering here, and told Prensa Latina his organization has played an essential role in helping avoid a chaotic situation in the Central American country.
"We want this resistance against neoliberal policies implemented by Enrique Bolaños´ government to be pursued in a way that will lead us to victory in the elections scheduled for November, 2006, and re-take power with the greatest legitimacy, he said.
Prensa Latina May 2, 2005
Nicaragua is definitely winnable.
But there may have be changes in the Sandinista electoral apparatus before a win happens. The US National Endowment "for" Democracy (NED) is still there, itching for a good fight.
There seems to be three main parts of a win:
(1) Getting the most votes
(2) Blocking the theft of the election, and
(3) Keeping the international monitors honest.
GETTING THE MOST VOTES
NED, as everybody knows, uses millions of dollars to buy support. But NED also uses millions of dollars to train ... in its notorious "Institutes" ... it supporters to wage electoral struggle.
This time NED will have thousands of well-trained operatives in each of the standard electoral specialties -- planning and budgeting, local fundraising, targeting, voter contact, free media, paid media, candidate activity, opposition research, "volunteers," and get-the-vote operations.
During the last election, the Nicaraguan bourgeoisie and the imperialists did quite a number on Sandinista candidate Daniel Ortega with regard to "opposition research."
A law -- like the US law -- that makes it a felony to take money or anything else of value from a foreign national (individual, company, partnership, government, etc) in connection with a Nicaraguan election would sure be useful.
But that may be difficult to get under the present circumstances.
As everybody knows, the presence and proliferation of micro -- but vigorous -- political campaign committees which know what the are doing and do what they know is the key to a win.
The vigor of a micro-campaign committee is often enfeebled by the inclusion of anarchistic elements that suffer from a distaste for "bourgeois politics" and believe that virtue lies in either full-blown or closet abstention from the electoral struggle.
So, the democratic forces, this time, may want to organizationally separate robust electoral workers from pure and unadulterated "do gooders" who display a bovine sluggishness after they are dragged into an electoral struggle ... however well-trained they may be.
To be sure, NED will try to dispatch a good number of the bovines to the democratic forces.
BLOCKING THE THEFT OF ELECTION
Stealing elections used to be the back-up plan of the GOPs who run the United States.
Now, it's their main plan. And the old-fashioned "getting the most votes" is conspicuously secondary. Some believe ... and argue ... that stealing the election is the only plan of the GOPs. The GOPs are sure to impart this fresh, brand new, and triumphant understanding to the electoral process to NED, the pimp of imperialism. And NED, naturally, will pass on these "discoveries" to its Nicaraguan operatives.
Don't be surprised if Nicaragua in the coming months is overrun by Cuban-Americans connected with the Miami mafia. These ladies and gentlemen truly excel all others in the art of stealing elections.
If this type of Cuban-American doesn't come to Nicaragua ... in large numbers, then NED, the panderer, will likely ship its Nicaraguan operatives to Miami for an "education" on how to steal ... cutting-edge style.
The gist of the GOP school of election fraud is cover all bases.
Every phase of the process will be defiled -- registration, documents, polling, polling place operation, and all levels of the vote counting will turned into a farce. Or, more correctly, in the words of Lenin, into a pigsty.
KEEPING THE INTERNATIONAL MONITORS HONEST
This will be hard to do.
Exit pollsters and representatives of international organizations are the worse. The big ado about the next general secretary of the OAS has a lot to do with the 2006 election in Nicaragua.
I hope that Jose Miguel Insulza didn't cut a deal with the "ET" lookalike, Condoleezza Rice, to get the job.
NED will not repeat the mistakes it made in Venezuela with the Sumate exit poll. There are specialists out there who are skilled in countering each one of these tricks. Needless to say, the outcome will depend on the skill and vigor of the democratic forces of Nicaragua.
Arthur Shaw
belial4444@aol.com
Declining gold stocks-Paul van Eeden
April 30, 2005
If you own gold stocks and follow the gold market at all, then you are aware that the stocks declined by almost twenty percent since the middle of March, while the gold price itself has remained relatively unchanged. Why?
One possibility is that investors anticipate a decline in the gold price. Gold stocks don't always correctly indicate coming changes in the gold price, but they are right more often than they are wrong.
Another possibility is that gold stocks have simply declined along with all the other stocks: the Dow Jones Industrial Average is down nine percent since the beginning of March.
Yet another possibility is that gold stocks are down because investors are disillusioned by the earnings from the sector. Take Newmont, the largest gold mining company in the world, as an example: it had marginally lower first quarter earnings than last year, despite a ten percent rise in the dollar gold price. Why own gold stocks if a ten percent increase in the gold price does nothing to their earnings? Given the leverage that gold mining stocks should have to the gold price, a ten percent increase should result in a substantial increase in earnings.
The reason why many gold mining companies are hardly making any more money now than they were a year ago is that the gold price has been rising in US dollars because the US dollar has been falling on foreign currency markets. That means if a company is mining gold outside the United States (and not in any area where the US dollar is the de facto currency), it may not have had any benefit from the rise in the US dollar gold price. The gold price in many other currencies has not risen at all.
Having said that, let me add that I don't know of any gold mining companies with projects exclusively in the US that are worth owning. I own a few gold exploration companies working in Alaska and Nevada, but no gold producers. The problem is that the big names, like Newmont, Barrick and Placer Dome, are so geographically diversified that they cannot be called US gold mining companies. They may be listed on US stock exchanges, but because their operations are scattered all over the world, the increase in the US dollar gold price has had a marginal, if any, impact on their bottom line earnings.
Does this mean that gold stocks will continue to under-whelm us when the US dollar gold price strengthens?
If the market were rational the answer would be yes. Only the stock of those gold mining companies that have direct leverage to the falling US dollar (in other words, gold mines in the US) should see their share prices increase as the dollar falls.
However, a falling dollar not only means more dollar revenue for gold production, it will ultimately also lead to higher production costs. But the operating margins of gold mining companies with direct leverage to the falling US dollar should continue to expand for two reasons. Firstly, assuming the mine is cash flow positive, the increase in cost is on a lower base than the increase in revenues. Say the production cost is $300 an ounce and the gold price is $400 an ounce. The operating margin is therefore $100 an ounce. A ten percent increase in both revenue and cost would also result in a ten percent increase in operating margin: 440 - 330 = 110. Secondly, the increase in revenue from a decline in the dollar is instantaneous while the increase in costs will come more gradually. Therefore, as long as the dollar falls faster than the rate of inflation (the most likely scenario) the operating margins of a US based gold mining company should increase much more rapidly than the example above.
But the market is not rational. Most investors still look at the US dollar gold price as "the" gold price and when gold increases in US dollars they buy gold stocks almost indiscriminately. Once enough investors figure out that an increase in the US dollar gold price does not necessarily benefit all gold mining companies, then the gold stocks as a sector could very well under-perform the US dollar gold price.
Is this already happening? I do not think enough investors are paying attention to the geographical location of mining operations and the impact of currency exchange rates yet. So I suspect that the lackluster performance of gold stocks at the moment has more to do with the general malaise in the market.
We are at a precarious point in the economy and the financial markets. I have written much about where I think the dollar, the gold price and the economy is going. I don't see anything to change that view. Rather, I see current events as confirming that we are on track to see a major decline in US economic growth, further weakening of the dollar and, as a result, much higher US dollar gold prices.
Paul van Eeden
The Federal Open Market Committee decided today to raise its target for the federal funds rate by 25 basis points to 3 percent.
The Committee believes that, even after this action, the stance of monetary policy remains accommodative and, coupled with robust underlying growth in productivity, is providing ongoing support to economic activity. Recent data suggest that the solid pace of spending growth has slowed somewhat, partly in response to the earlier increases in energy prices. Labor market conditions, however, apparently continue to improve gradually. Pressures on inflation have picked up in recent months and pricing power is more evident.
The Committee perceives that, with appropriate monetary policy action, the upside and downside risks to the attainment of both sustainable growth and price stability should be kept roughly equal. With underlying inflation expected to be contained, the Committee believes that policy accommodation can be removed at a pace that is likely to be measured. Nonetheless, the Committee will respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability.
Voting for the FOMC monetary policy action were: Alan Greenspan, Chairman; Timothy F. Geithner, Vice Chairman; Susan S. Bies; Roger W. Ferguson, Jr.; Richard W. Fisher; Edward M. Gramlich; Donald L. Kohn; Michael H. Moskow; Mark W. Olson; Anthony M. Santomero; and Gary H. Stern.
In a related action, the Board of Governors unanimously approved a 25-basis-point increase in the discount rate to 4 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco.
thanks for that article...
Gold - good Tim Wood article
http://www.resourceinvestor.com/pebble.asp?relid=9492
"The latest quarter-on-quarter inflation in total cash costs for the senior producers has risen 10%, which is the fastest pace in two years. If you strip out the anomalous data from two years ago, then the first quarter of 2005 was the worst cost inflation we have seen in the past 25 quarters. Worse yet, year-on-year inflation is running at 17%, whilst the gold price has risen only 6% in the same period. In the past 13 quarters production costs have declined only twice compared with the immediately preceding quarter."
Software North COT
My speculation watching the trades...
TD Securities in the process of covering its short. Using start date of 4/7/05, TD Sec sell position got as high as 607,400 shares (sold 607,400 more shares sold than bought). As of today, TD Securities net sold position has decreased to 337,900.
Believe TD Securities has been working largely in conjunction with Canaccord to take RNC down. Canaccord is the real villain under my speculation. Canaccord has both the broker shares and warrants that likely gives them the ability to be "legally short" from the original C$1.20 PP which was lowered to C$1.00 when Canaccord forced RNC to reprice. Canaccord has done quite nicely playing its RNC short transaction, IMO.
This is my PP conspiracy theory. We are now seeing Canaccord sell and allowing its cohort TD Securities to buy so that TD Securities closes out of its sold position. By ping-ponging large trades between TD Securities and Canaccord they have both worked the share price of RNC down. Just the same shares being bounced back and forth between the two at lower prices, getting real shareholders to puke up their shares. That would be my conspiracy theory, but I or no one else has any evidence to back it up, total speculation on my part, thinking like a criminal on how Canaccord makes extra income off this PP deal.
Canaccord has now driven the RNC share price down quite nicely and will likely begin to cover its net short position. Canaccord has increased its net sold position to 546,800 shares since 4/7/05. It has been a large seller with TD Securities as the buyer on most recent trades. Canaccord will then hope to cover this net short position at much lower prices than the C$1.00 offer price as soon as cohort TD Sec is out of its position. Canaccord will likely succeed, IMO, but between the broker shares and warrants issued to it via the PP, it really cannot lose on the deal. Many RNC shareholder will be so happy that the RNC share price recovers to C$.85 or C$.95 that they will happily puke up their shares to Canaccord's buying, IMO.
What will really be interesting is to see whether Octagon is a real buyer, having purchased now 1,016,000 shares since 4/7/05, or not. That is, is Octagon part of my conspiracy theory... If we see large block share "crosses" between Octagon and Canaccord with Canaccord the buyer, then Octagon is likely part of game.
This is all pure speculation on my part. Just thinking out loud how Canaccord may "legally" make extra income on its PP deals. My comments may be totally off-base and inaccurate and Bay Street really is just a bunch of choir boys, and I am simply a stupid investor...
As has been often mentioned, when you see Canaccord as a large net buyer after one of its PP deals, then it will be time to be increasing your RNC position, IMO. Right now, Canaccord is NOT a buyer but it appears we may be getting close to that time. Be on the look out for large Canaccord buying as it begins to cover its net short position...
can i get that in writing...
Gold average cash cost for 2004=$253/oz
"Cash costs in dollar terms increased in all of the major producing countries last year, with the notable exception of Canada. Global weighted average cash costs were up by $29/ounce to US$253/ounce. Rises in South Africa and Australia (by 15% and 12% respectively) were exacerbated by increases in the domestic currencies against the US dollar and further compounded by rising fuel, water and energy charges."
http://www.gfms.co.uk/Press%20Releases/GS05_overview.pdf
Alamos excerpt relevant to RNC..., IMO
from McFarlane reseach report dated Apr 05
"In our view, the recent share price weakness is short term and provides a good buying opportunity. We reiterate our Speculative Buy recommendation with a C$5.25 per share target. Our target is derived from a weighted average of various valuation metrics typically applied to gold exploration and development companies. AGI is currently trading at a discount (0.77x) to our C$4.76 per share NAV (5% discount rate, and $425 per ounce long term gold price). Typical market multiples for small gold producers range from 1.25x to 1.5x NAV which would suggest a possible future valuation of between C$5.95 and C$9.52 per share, should the company get re-rated.
Well, RNC is already a "small gold producer", albeit with a higher cash cost than AGI. Nonetheless, it certainly would be nice to see RNC just rated at 1x NAV, much less 1.25x to 1.5x... For that matter, .77x NAV like Alamos would be nice...
see slide 13 of 30:
http://www.rncgold.com/downloads/March2005Presentation.pdf
NAV per share (discounted at 0%) –C$/sh
Basic
Fully diluted
Inc. San
Andres
$5.31
3.92
Ex. San
Andres
4.70
2.99
Per above w/o San Andres, NAV is US$2.99 fully diluted so at .77x NAV using Alamos current multiple yields RNC stock price of US$2.30 ($2.99*.77), last time I looked RNC trading a bit below this price...
That said, slide 13 seems overly favorable in its presentation/assumptions calculating NAV, but even using my worst case assumptions (short of outright expropriation by the Sandanistas tomorrow) believe RNC NAV exceeds US$1.25 at .77x at present. Need to do more thorough calcs in this regard, but US$1.25 (US$1.62 @ .77) is my back of envelope estimate.
Here's hoping for a RNC re-rating...