Gold Bubbles

Chris Vermeulen has cooled on gold for the past few years but is suggesting the bull resumes later this year. Clearly if both the charts below spanned the same period, the 2011 peak was it.
Taking Steve Saville's analysis of the "1970s" gold bull however he would show the real move in the miners starting in the 1960s even while the metal price was fixed.

Drill Baby Drill

You thought 2ft concrete walls would protect your valuables?
Details of Easter Robbery of safety deposit boxes in Hatton Garden, London

Aussie Gold Mines for Sale - Newcrest's Telfer and Barrick's Cowal

More Aussie Gold assets look to be hitting the market with Newcrest named as both potential buyer and seller.

• Newcrest and Hecla amongst bidders for Barrick's Cowal, 1.5m oz P&P, 270k oz production @ $740-$775 AISC
• Bank of America Merrill Lynch seeking bids for Newcrest's Telfer mine, >500k oz gold production 2014

Gold Miner M&A - Evolution Mining bid for La Mancha Australia Assets

Evolution will grow to 530-600k oz pa -
La Mancha will own ~30% and provide $100m cash for more growth.
Presentation

Sprott launch Junior Gold Mining ETF - SGDJ

Sprott have followed the launch if their Gold Miners ETF - SGDM with a Junior Gold Miners version - SGDJ.

There are a couple of conflicting messages

• "Why invest in junior miners? -"High-value discoveries and mine development can create enormous upside potential" ..........But......."The Index methodology tends to favor junior and intermediate producers versus early stage exploration companies whose historical success rate is low." 

Very junior discovery activity seems out of bounds (similarly even "GLDX explorers ETF holdings" are mainly developers of well explored and defined deposits, so really just taking the producing aspect out of GDXJ).
What are the SGDJ holdings? Are they different from GDXJ Holdings or BMO's ZJG Holdings?
Sprott have less royalty here, B2 and Centerra are much more significant and the x3 silver miners stand out, though I recall GDXJ started out with a high % of silver miners. 

COMPANY	TICKER	Weight %
B2Gold Corp	BTO CN	7.71%
Centerra Gold Inc	CG CN	6.46%
First Majestic Silver Corp	AG US	6.08%
Hecla Mining Co	HL US	5.63%
Pan American Silver Corp	PAAS US	5.60%
Alamos Gold Inc	AGI CN	5.23%
Harmony Gold Mng-Spon ADR	HMY US	4.23%
IAMGOLD Corp	IAG US	4.16%
Primero Mining Corp	PPP US	3.72%
OceanaGold Corp	OGC CN	3.47%
Sandstorm Gold Ltd	SAND US	3.41%
Aurico Gold Inc	AUQ US	3.17%
Detour Gold Corp	DGC CN	3.00%
Rio Alto Mining Ltd	RIO CN	2.74%
China Gold International Res	CGG CN	2.69%
Nevsun Resources Ltd	NSU CN	2.65%
Alacer Gold Corp	ASR CN	2.59%
Kirkland Lake Gold Inc	KGI CN	2.57%
Lake Shore Gold Corp	LSG CN	2.47%
Novagold Resources Inc	NG US	2.26%
Argonaut Gold Inc	AR CN	2.22%
Semafo Inc	SMF CN	2.05%
Fortuna Silver Mines Inc	FSM US	1.87%
Silver Standard Resources	SSRI US	1.67%
Endeavour Silver Corp	EXK US	1.55%
Dundee Precious Metals Inc	DPM CN	1.47%
Torex Gold Resources Inc	TXG CN	1.46%
Gold Resource Corp	GORO US	1.37%
Pretium Resources Inc	PVG US	1.22%
Rubicon Minerals Corp	RBY US	1.04%
Premier Gold Mines Ltd	PG CN	0.97%
Mag Silver Corp	MAG CN	0.78%
Seabridge Gold Inc	SA US	0.71%
Guyana Goldfields Inc	GUY CN	0.66%
Asanko Gold Inc	AKG CN	0.59%
Continental Gold Ltd	CNL CN	0.53%

So how has Sprott's senior Gold Miner ETF - SGDM fared since launch against GDX Holdings?
Not so good.
Here they have a policy of high exposure to "stronger balance sheets" in particular Randgold and Franco Nevada, which did not suffer to the degree Barrick, Goldcorp and Newmont did and have not seen the same rebounds.

 

Canada's Discovery Performance - Richard Schodde - MinEx Consulting

Another interesting presentation from Richard Schodde at MinEx (many more presntations here including Pacific region)
Covering the volatility of exploration spending, the importance of juniors in discoveries and the rarity and importance to valuation of tier 1 and 2 discoveries.

$1Bn Quebec Mining Fund

Reported at Pierce Points and Bloomberg

While Finance Minister Carlos Leitao announced plans for the fund in June, Quebec’s legislature has yet to authorize its creation. Capital Mines Hydrocarbures should be able to support as many as 10 mining projects once it begins operating, Daoust said. “The raison d’etre of that fund is to make sure that at the end of the day, if the funding is complicated for the last 10 or 20 percent of a project, we will be there,” the minister said. “We can go to C$200 million, but normally we should not invest more than 10 or 15 percent of a project.”

Tommy's Mommy recommends Disclaimers

FFS - enough disclaimers ?

Adrian Day Interview with Sprott's Tekoa Da Silva

Another recent interview from Sprott, this time with Adrian Day, a long standing investor in the natural resources space. Transcript and youtube at the link.

Gold M&A - Alamos - Aurico Gold $1.5bn merger

Two equally sized mid-tier gold miners, Alamos and Aurico,  are set to merge.
John McCluskey of Alamos would be CEO of the combined company with operations in Ontario and Mexico and development in Turkey. Rival bids seem likely. TD suggest the deal is dilutive for Alamos.
Alamos stock held up very well during the earlier part of the bear market but has since slipped.
Aurico struggled as Gammon gold, disposed of key Mexican assets to Carlos Slim companies and focused on the new, and potentially very large, Young Davidson mine in Canada which was a buyout of Northgate minerals for $1.46bn in 2011.

Junior Gold M&A - Agnico to buy Soltoro in Jalisco Mexico $31.6m

Agnico follow up their Cayden purchase by consolidating in Mexico's Jalisco region, buying Soltoro.

Barron's - Newmont shares could rise 55%

Mainstream Barron's on Newmont

But Newmont, the world’s No. 2 gold producer after Barrick, is likely to emerge a winner even if gold falls further. The Greenwood Village, Colo.–based company has sold assets and cut costs, reducing its break-even production price by about $200 in the past two years, to $1,002 an ounce.

Ross Beaty Interview with Sprott's Tekoa Da Silva

Transcript  - HERE
Ross Beaty has been making significant junior investments recently - see HERE

Put all that together and it’s all happening now. You know what? There are a lot of weird things that I can’t really figure how it’s going to end. But quite frankly, my salvation here, my refuge, is in precious metals. It’s in gold and silver. So I’m very bullish on gold right now. I’m particularly bullish watching what’s happening to the gold price relative to the US dollar. I’m bullish on silver because silver will follow gold. Silver has always traded with gold...........This is the end of four years of really weak markets, in the metal space and in the resources space. So a lot of investors are bruised and bloodied. We’re starting the fifth year. If the tide is going out and there is a huge macro wave -- a wave for metal prices declining, you’re probably better off to own the metal than the companies, because the companies tend to underperform the metals in a bear market. Bear markets feed on themselves. So if an investor is losing money, he’s not going to want to buy another speculative gold company or copper company. So it’s true that even in bad, bad markets, you will have some great investment successes where a company has had good exploration results or has done a really, really smart acquisition. You will have those. But typically the whole sector is going to be losing out and the best strategy then is to do what nobody does which is sell at the top. Buy at the bottom, sell at the top. That’s what you’re supposed to do. But of course nobody ever does that. It’s times like this where we’ve had four years of bear markets and I don’t know whether the bear is going to turn into a bull market in a year or two years or two days. I really don’t know when the bottom is. But I know this is not the top. We’ve had four years of terrible markets. I would say today is just a really good time to be building a portfolio of well-run junior companies. My bias is in gold because I think that gold and silver are going to outperform the other metals. But buy a portfolio of companies and really focus on a couple of things. One is the asset has to be good. You can have a genius with a crappy asset and he’s not going to make money. You can have an idiot with a phenomenal world class asset and he’s actually going to make money. The stock is going to go up. The second thing is: people are really, really important. But my first priority is to look at the asset, to look at the quality of the project that the company has............there are a lot of similarities today to what typically happens in the bottom of the bear market. There is a lot of sadness, a lot of difficulty raising money, a lot of very stressed junior companies, and very unhappy investors. That’s the nature of the beast. When things turn, the tide will come in and everybody will be happy again.

Brent Cook Interview with Sprott's Tekoa Da Silva

Interview from a couple of weeks ago - HERE with Transcript

The major mining companies are decreasing their costs, but what they’re really doing is increasing their future costs. They’re pushing costs out into the future. That has to be resolved but my sense is that we are in a bottoming process. I don’t think it’s going to get a lot worse and I think that two or three years out, these major mining companies are going to wake up to the fact that they’ve shut down exploration. They’ve shut down their development. They’ve got nothing in the pipeline and all of a sudden when they’re announcing their costs the analysts will start saying, “Yeah, but you don’t have any more ore.”

So you want to identify the properties and the people that can last through this bottoming period, as well as those companies that will come out the other end in possession of the very few quality discoveries that are out there. That’s all you’ve got to do—simple, right? Haha......There are probably six gold projects in the world right now that are being developed that I think will probably work, held by junior companies. I’m not talking about majors.

In terms of companies that are competent, we’ve got something like 1500 listed on the Vancouver exchange. I would say probably – 20% percent of them are companies that I would consider putting money into [in the right circumstance]......

Maybe 25%. But I don’t buy everything. My portfolio, I try and keep it to 20 companies or less and I think that’s something investors should do as well. If you own too many stocks, you forget why you bought them. They go up, they go down…and then you start hoping they go back up for no reason at all. That’s my philosophy anyway.

Why is Gold Mining such a Crappy Business - Saville

Steve Saville has a follow up article to an earlier one discussing why Gold Mining has seen such poor returns.
Both owe a great deal to Doug Pollitt's Denver Gold 2014 presentation which deserves a full read.

It is really quite amazing that we chucked billions and billions and got no supply response at all. What this tells us is that there is simply not a lot of gold out there. How many genuine finds were there in the last cycle? Half a dozen? A dozen? In fifteen years we might have discovered enough new material to keep the mills turning for two or three years. The raw material was just not there, even in the face of the avalanche of money to tease it out.......... To step back and re-cap: being an asset class unto itself which from time to time comes into favour generates substantial investment demand. Gold is a small sector to begin with – lots of money into a small sector drives down the cost of capital and encourages issuance. Against this there are fewer still opportunities within the small sector to invest the incoming capital

This leads to gross misallocation of capital as the financial sector chases scale, growth and leveraged returns in marginal projects. As Saville discusses elsewhere buying low value ounces in the ground was once a successful strategy, but not now. As Rick Rule has discussed this leaves a marginal industry as prices fall.
There are suggestions that some companies are becoming better allocators of capital.
It also supports Brent Cook's repeated thesis that a more rational industry will be even hungrier for quality junior projects and discoveries when the market does turn.

Larry Edelson remains Bearish on Gold and Miners

After calling for a resumption of the bull last June (with the launch of an expensive advisory service - any refunds?) Edelson quickly reverted to a bearish position and now sees a big sell off coming 14th April and likely long term lows in May, June or October - so a few options there.

Edelson suggests he is close to Martin Armstrong who sees major "big bang" in bond markets in September 2015. Will gold be a refuge or initially sell off too? As miners topped at the end of 2010 well ahead of peak gold prices some better issues may see strength ahead of gold lows, some significant investors are putting capital to work, Beaty, Lundin and others.
But perhaps many more, Rick Rule for example, are looking for a final vicious capitulation bottom.

Tocqueville Gold Investor Letter - Q1 2015

Latest Letter
A range of > 50 charts putting the current bear in perspective.

Whitman Howard - Roger Bade - Mining stocks April-2014

Roger Bade was early calling the mining bear market. An out-dated report from April-14 reviews some UK listed miners. (click on link at bottom of page)

Comparisons with 1970s Gold Bull - Saville

Steve Saville highlights problems in comparing the recent gold bull against the 1970s where gold prices started out fixed. The mining stocks reflected the early 60's start of the bull.

Dollar movements before and after Fed interest rate increases

Market Anthropology shows past movements in the dollar index after interest rate rises. Of course they haven't risen yet.

Biggest Indian Jewellery Maker Looks to Spend $700m on Aussie Goldminers

A story reported by Dave Pierce, initially published at the Australian Financial Review.

Rajesh Metha of Rajesh Exports is India's largest jewellery manufacturer with a $1.2bn market cap in Bombay, vertically integrated through mining, refining, manufacturing and retailing.

The company consumes 140T of gold pa, around 15% of Indian imports, and has apparently decided gold miners are cheap enough, now looking to spend $700m in Australia where annual gold production is around 280T pa. The timing seems a little odd following a number of disposals by the majors whereby Northern Star has emerged as a significant force.
Linked are some of Australia's biggest gold miners

Mr Mehta would not name the Australian mines nor companies that he was looking at, but said talks with advisers had begun. "We have met a lot of investment bankers here and we are evaluating the best way to get in, what is the best way to do it, as we are looking at not only taking interest in the gold mining sector but we are also looking at forging a relationship with the largest gold-producing mines to buy and ensure supply from them," he said. "We can be a good consuming partner for them." The comments follow recent momentum towards a free trade agreement between Australia and India, and last year's visit to Australia by Indian Prime Minister Narendra Modi. It also comes after two years of regular deal-making in the Australian gold industry, as  several foreign gold miners have sold assets to try to reduce their exposure to Australia.

Junior Speculation - $20k to $15m to $4m

CEOca put up this discussion with Robert Hirschberg, a venture stock speculator who has made it and lost it over several decades. Hope & warning in equal measure.

Mining Costs and Innovation

Bearish metals markets should drive cost reduction and innovation.
Mish reports on Caterpillar's innovations with autonomous trucks.



An older report highlights potential energy innovation utilising solar power in remote mine sites like Sandfire's DeGrussa mine. The cost savings are perhaps less clear with low oil prices.

OT - Troubled Morrissey

TroubledMozza has some wonderful tweets to amuse those who find Smiths lyrics popping into their minds from time to time. Some classics were linked at The Poke which I have linked below a little music to accompany, but a full browse of Troubled Morrissey's Twitter is essential for the Smiths inclined.

OT - The Kaiser Chiefs on Lairy

My Own Market Narrative asks  - What is Lairy?
The Kaiser chiefs are worth turning up loud on the matter - video below

The Real Cost of Gold Mining - Adequacy Ratios

In February Mickey Fulp published analysis with Cipher Research detailing the financial failures of the gold industry and proposing a renewed focus on grade rather than growth which analysts chased companies to chase for the past decade.

• Summary Report
• Interview
• Youtube    Pt1     Pt2    Pt3

Most interesting is the "Adequacy Ratio" which simply compares operating cashflows against all outflows including "capex"

Cipher Research has developed a new, simple, and powerful tool to analyze profitability, the Adequacy Ratio (AR). It is cash inflows (revenues) divided by cash outflows (OP-EX + IMP + debt repayment + dividends paid). Note it does not include equity raises or cash spent on acquisitions. If the ratio is greater than 1.0 a company is healthy; if less than 1.0, unhealthy. Of the seven companies we looked at over 11 years, none had an average ratio greater than 1.0 over the period. Only for one year, in 2011 when gold hit its all-time high, did the average adequacy ratio for the companies as a whole exceed 1.0. To compare for example, Apple has a 1.3 adequacy ratio over the past 5 years.This industry-wide failure means the major gold miners have not generated enough cash flow to meet their obligations despite the amazing 11-year run for gold. We found that companies have been going into debt to pay dividends. For example, Newmont took on an additional $5.8 billion in debt and paid out $5.2 billion in dividends over the period. We know of small-tier junior miners that have paid out dividends with equity raises… that’s unholy and in my opinion, should be illegal.

Open Pit Gold Mining Costs / Tonne

Lat-Am per Tonne ranges from Condor Gold PFS

Debt and (not much) deleveraging - McKinsey

McKinsey review of $200 Trillion Global debt 136pp Feb-15

Euro QE and Debt Restructuring

OMFIF on risks of European QE

.......It feels as if the markets are programmed to crash when the ECB's QE programme nears its end, if not before.

Pettis on Debt restructuring

As soon as Draghi made the statement to do “whatever it takes”, markets recognized that the ECB was in effect guaranteeing the bonds of EU member states whose credibility was in question, and yields immediately dropped. It is important to understand why this was effectively a kind of debt restructuring. .......Draghi’s promised immediately reduced a larger part of the uncertainty associated with the resolution of the debt. The collapse in uncertainty reversed the reflexive process in which rising uncertainty caused declining economic expectations, which caused rising uncertainty.

Global Dollar Credit: links to US monetary policy and leverage - BIS

Bank for International Settlements Paper

Ambrose Evans Pritchard discusses HERE    notes below

Franco Nevada look to deploy $1bn

Reported at Bloomberg

Franco-Nevada Corp., a Canadian company that provides financing for energy and mining projects, sees sagging commodity prices as an opportunity to complete deals worth more than $1 billion this year.  

“I’d like to deploy all my cash this year,” David Harquail, chief executive officer of the Toronto-based company, said in an interview in Vancouver Monday. “That would be my ideal.” Harquail, who put more than $900 million to work in 2014, said mining and energy companies need more financing for projects hurt by falling prices. Franco-Nevada and other buyers of royalties provide financing to developers in exchange for a discount on future output.

AME BC 2015

AME BC 2015 took place at the end of January
Companies Below .....

Greg Gibson moves to Barkerville Gold - Callaghan Out

In October 2013 we noted Greg Gibson's industry moves.
Things haven't worked out well at San Gold, Northern Gold, Temex or Kerr Mines (formerly Armistice) during this bear market.
We now see Gibson and Thomas Obradovich (formerly Aurelian) recruited, ousting promoter Frank Callaghan at Barkerville Gold.
Barkerville became notorious, and their stock was suspended, for putting out an extremely optimistic resource statement in 2012.

Premier Gold JV with Centerra Gold

Breaking the usual pattern of junior buyouts here we see Premier Gold, a significant junior with multiple projects, entering a 50:50 Joint Venture where Premier's contribution is the Trans-Canada Gold property and Centerra fund $300m of development. PEA was completed Jan-14 and Feasibility is underway. PEA indicated 19% IRR @ $1250 Gold, with Capex at $410m including an $83m contingency.
With falls in the $CAD vs $US and depressed general commodity markets mine-building costs in Canada should be favourable.

The Trans-Canada property is in Ontario's Geraldton Beardmore camp which saw a great deal of speculative investment after Kodiak Gold made spectacular drillholes in 2007 and raised substantial funds but never pulled together a successful deposit. Goldstream Minerals now hold the properties they call Hardrock East, with Kodiak's Brian Maher involved.

Kodiak merged with Golden Goose to form Prodigy Gold and developed the Magino deposit bought out by Argonaut, but needing higher gold prices for development.

Meanwhile Roxmark and Ontex developed old mines, Brookbank and Bankfield amongst others in the region and merged to form Goldstone Resources subsequently bought out by Premier Gold. 

Baker Steel & EMR Capital raising over $600m for Mining Investments

EMR Capital raising $450m for mining investment fund.

EMR Chief Executive Jason Chang said the fund will focus on copper, gold, coking coal and the fertiliser potash, and had attracted a mix of institutions, endowments and private investors....."We think now is a good time to deploy capital into these markets," Chang told Reuters in an interview. "We're looking at the medium to long term and not worried about the day-to-day fluctuations."

Baker Steel (additional link HERE)   looking to increase assets 6 fold by $180m

The Baker Steel Resources Trust – which has lost nearly three quarters of investors’ money – is asking for clients to pile in millions more in an audacious call that the commodity slump will soon be over.The investment trust, managed by David Baker and Trevor Steel, has lost investors 72.3 per cent in the past three years, according to FE Analytics.Investors have been fleeing from anything related to commodities in the belief that the ‘super cycle’ sparked by China’s rapid growth had come to an end.The £31.4m trust is planning to increase its assets sixfold through a £79m share issuance and a further £100m capital raising to be outlined at an extraordinary general meeting later this month.

While he admitted it was impossible to call the exact bottom, he said with valuations as low as had been seen in many years, much of the “smart money” in the private equity space was also poised. “We are at or somewhere near the bottom,” he said. “Whether we have actually seen it or whether we will in another six or 12 months, I don’t know. But the risk-reward of the potential upside looks positive.” He thought the current conditions would not “last forever”. “The sector is on its knees and we would like more capital to take advantage of that. Mr Steel said with the new money he would be interested in adding a handful of development-oriented stocks, of which he had already identified a pipeline of potential names.

“There is very little competition in our space and it gives us an opportunity to do attractive deals,” he said. “It might be companies that need the last bit of capital to get their projects into production, or if they have a lot of debt. We can get involved in refinancing that debt – effectively exploiting that weakness – and getting in at a good entry point for our investors.” He said that while the sector could continue to fall, he wanted to raise the money now because the risk of waiting to get the deals done at a better price was too great.

Top Holdings   - currently including private company holdings include deeply out of favour iron and coal aswell as silver, gold, platinum and copper

Martin Armstrong's Writings & Presentations

Martin Armstrong's forecasts and cycles work foresees a key turn point in September 2015, "Big Bang", and currently points to a problem in the bond markets, a strong dollar and US stock market.
He currently sees gold weak but later gains as the bond markets weaken.
Most recent interview HERE (part 3 discusses the September-15 turn)

• Seeing beginnings at the periphery now in Greece, China.
• Only US strong, pushing up US$. If US stockmarket chops then initial sell off then take off to upside in 2017. Phase transition as capital flees bonds to stock markets.
• Current concentration of capital in bond markets. Sitting on money because don't know what to do.
• If Stock market increases then Fed will raise interest rates, then higher dollar.

Armstrong Papers and you-tube links below.....

Mickey Fulp on Buying the Best Junior Miners

Interview from VRIC at Small Cap Power. Stock picks are sponsors.

Gold Long Term Turning Point - Second Time Lucky ?

Chart from Jeff Clark's monthly chart showing long term turning points at MACD crosses.
We narrowly missed a crossover last year, but have now.

World Economic Forum - Davos 2015 - On Mining

Mining Papers from Davos
Also summaries of many other presentations from other industries and regions.

Big Data in Mining - SAP-Mining Journal

76pp HERE