Gold & Precious Metals
As a general rule, the most successful man in life is the man who has the best information
The current investment market for junior gold companies is arguably one of the worst since the United States went off the Gold Standard in 1971.
Despite the current high price of gold (and many other commodities), investors have almost abandoned the junior gold mining sector to invest in physical bullion, ETF’s, and producing companies. The value of the TSX-Venture Composite Index, shown below, is similar to what it was in the early 2000’s when the price of gold was below US$300 per ounce.
In 2013 I expect to see the equity market in the junior gold sector begin to correct itself and investors should currently be taking advantage of the investment opportunities resulting from the severely beat up junior sector. There presently exists a great opportunity for those investors who are “ahead of the herd” and want to invest in the market at or near the bottom.
TSX-V Composite Index 10 Year Chart
The Venture exchange is down over 50 percent from its March 2011 high.
The questions become – How does an investor take advantage of the dislocation in the junior markets? What might be a good junior to have on our radar screens?
Investing in junior gold miners is a speculative business at best, with risk on the downside but the potential for significant reward on the upside.
Two ways to mitigate risk for investors is to buy at market bottoms and have a long-term view of their investments to take advantage of a company’s increasing value as its projects move through exploration and development while markets recover. Ideally, the pay off comes when a project is brought into production, gets joint ventured, or is sold by the junior.
So in this environment, companies should have the following key attributes:
- Established track record
- Experienced and competent management teams
- Established mineral resources
- Projects in safe and stable jurisdictions of the world
- Strategically located properties – existing infrastructure
- Significant upside potential
One junior to consider when looking at the many juniors available to investors is Emgold Mining Corporation (TSX-V: EMR). Emgold has been in existence since 1989 and has survived numerous equity and mining cycles. It has an experienced management team with background in all facets of the mining industry, including exploration, permitting, project development, and mine operation.
The Company has a solid resource base in its Idaho-Maryland Project in California. And this resource has grade – something operating companies are looking for as mining costs continue to rise (higher grades typically equate to lower cost per ounce production). Emgold’s Idaho-Maryland Deposit was listed as the 9th top undeveloped deposit by grade in the Global Gold Mines and Deposits2012 Ranking, for deposits over one million ounces of gold, by Natural Resource Holdings.
“Another data point we found fascinating was that out of 439 mines or deposits, 189 are in fact producing mines owned by companies with an average market capitalization of $1.8 Billion. This leaves us with a universe of undeveloped deposits over 1 million ounces of just 250. Of course some of these 250 deposits are owned by miners (84) while just 166 are owned by independent junior companies, private companies, or government sponsored enterprises. Investors seeking leverage to gold should focus on these companies as they provide the best exposure to a rising gold price environment…In the United States we found only 33 deposits owned by 26 companies (23 Independents).” Global Gold Mines and Deposits 2012 Ranking
In emerging markets, political strife and resource nationalism have triggered increased taxation, social unrest and changing regulations which is hindering resource development and scaring away investment. Emgold works solely in North America with its transparent and structured regulatory regime. Its properties are located in California, British Columbia, and Nevada, some of the most attractive mining regions in the world being internationally known as safe and stable mining jurisdictions.
The Idaho-Maryland Project is in the historic Grass Valley District which produced over 17 million ounces of gold historically. The Stewart and Rozan Properties are in the historic Nelson Mining District of British Columbia, which hosted many small gold and silver mines. The Company also has the Buckskin Rawhide East, Buckskin Rawhide West, and Koegel Rawhide Properties all located in the historic Rawhide District in Nevada.
What is strategic about these locations? Obviously the Idaho-Maryland deposit in California represents grade. The mine historically produced 2.4 million ounces of gold at a recovered grade of 0.43 ounce per ton gold and holds a measured and indicated resource of 472,000 ounces gold (1.7 million tons at 0.28 opt gold) and an inferred resource totaling 1,002,000 ounces gold (2.6 million tons at 0.39 opt gold). The potential exists to delineate a 3-5 million ounce resource at Idaho-Maryland, subject to additional exploration.
In California, we are seeing a resurgence of mining activity with New Gold Inc.(NYSE:NGD, TSX:NGD) operating the Mesquite Mine, ATNA Resources Ltd. (TSX:ATN) operating the Briggs Mine, and Sutter Gold Mining Inc. (TSX-V:SGM) reopening the Lincoln Mine. Emgold is arguably undervalued because their main property is in California. While the state is sometimes viewed negatively by the mining investment community for its stringent environmental standards (not a bad thing), regulations for mine development and operation are clear and straightforward. A misunderstanding of California’s regulatory environment presents a significant opportunity for investors to capitalize on mispriced equities.
While historically there has been a lot of focus Emgold’s substantial Idaho-Maryland Project, many investors have failed to realize that the Companies other projects provide considerable opportunity as well. For example, the Rozan Property (Nelson Mining District, South West British Columbia, Canada) is adjacent to Altair Gold Inc.’s (TXV-V:AVX) Kena Property.
The Kena Property has a measured and indicated resource of 549,000 ounces of gold and an inferred resource of 513,000 of gold. Altair is well on its way to potentially delineating a plus one million ounce bulk disseminated resource which is sure to attract the attention of the majors. The Stewart Property is adjacent to the historic Yankee Dundee Mine that is owned byDuncastle Gold Corp.(TSX-V:DUN). Duncastle has just signed a production agreement with a private company called Armex Mining Corp. who appear to be looking to advance the property into production.
Emgold’s Nevada properties also represent substantial unrecognized potential. Over the past several years, Emgold quietly acquired a number of properties adjacent to or near the historic Denton Rawhide Mine in Nevada’s share of the prolific Walker Lane Gold Belt.
The Walker Lane shear zone straddles the border between Nevada and California and has a long history of exploration and mining, dating back to the discovery of the world famous Comstock Lode in the 1850s. The Walker Lane is notable for its numerous occurrences of volcanic-hosted epithermal gold and silver deposits.
The majority of gold deposits occur in the Walker Lane shear zone, which is a 100-km wide, NW-trending structural corridor extending southeast from Reno towards Las Vegas. The Walker Lane gold belt has historically produced over 50 million ounces of gold and 400 million ounces of silver.
The Denton-Rawhide Mine was owned and operated by Kennecott Minerals Company from 1988 to 2010. From 1990 through 2010, the Denton-Rawhide Mine produced 1.5 million ounces of gold and 12.7 million ounces of silver, according to Muntean (in Nevada Bureau of Mines and Geology Special Publication MI-2010, 2011). In 2010, the Denton Rawhide Mine was acquired by Rawhide Mining Company LLC (“RMC”) a private company, who continued to produce gold from historic heap leach pads. In late 2012, Rawhide Mining Company re-commenced production from the mine.
In late 2012, Emgold announced a deal whereby RMC is doing a CDN$1 million private placement into Emgold. Emgold will use part of the proceeds to buy out the underlying property interests in the Buckskin Rawhide East Property, which it will subsequently lease to RMC. RMC is now acquiring a second property, the Regent Property, from Pilot Gold Corporation (TSX: PLG), as per Pilot’s January 15, 2013 press release. Emgold’s Buckskin Rawhide East Property is surrounded by Denton Rawhide Mine on the east and south, and by the Regent Property on the west and north. Emgold’s Buckskin Rawhide West Property is adjacent and to the west of Regent and its Koegel Rawhide Property is just three miles south of Denton Rawhide Mine.
Conclusion
If you are looking for a junior gold company to put on your radar screen, one with an existing substantial resource and many paths to significant potential upside, Emgold definitely qualifies to be there. Is Emgold on your screen?
If not, maybe it should be.
Richard (Rick) Mills
Richard is the owner of Aheadoftheherd.com and invests in the junior resource/bio-tech sectors. His articles have been published on over 400 websites, including:
WallStreetJournal, USAToday, NationalPost, Lewrockwell, MontrealGazette, VancouverSun, CBSnews, HuffingtonPost, Londonthenews, Wealthwire, CalgaryHerald, Forbes, Dallasnews, SGTReport, Vantagewire, Indiatimes, ninemsn, ibtimes and the Association of Mining Analysts.
If you’re interested in learning more about the junior resource and bio-med sectors, and quality individual company’s within these sectors, please come and visit us atwww.aheadoftheherd.com
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Legal Notice / Disclaimer
This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment.
Richard Mills has based this document on information obtained from sources he believes to be reliable but which has not been independently verified.
Richard Mills makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Richard Mills only and are subject to change without notice. Richard Mills assumes no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission.
Furthermore, I, Richard Mills, assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information provided within this Report.
Richard does not own shares of Emgold Mining Corporation (TSX-V: EMR).
Most analysts and traders say you should never try to pick a bottom in any market. Most of the time I agree. It can be like trying to catch a falling knife. You’re likely to get hurt, and possibly quite badly.
But in gold, it’s second nature for me. I cut my teeth in the gold market way back in 1978.
I called the top in gold in 1980 and the ensuing 20-year bear market.
I nailed the bottom in 1999, putting out my first buy recommendation in 20 years and within $5 of the bottom.
I nailed the financial-crisis bottom in October 2008 when gold plunged over 33 percent, and I told everyone: “Don’t worry, increase your holdings. Gold’s next move will be to over $1,400.”
I then called the top in gold in September 2011, just days after the top.
And as you know, I have been bearish on the yellow metal since then, looking for a final low to occur either in 2013 or 2014.
Gold had a couple of chances at a final low in 2013, namely in June and October, but it didn’t precisely touch major support at those times. So I then told you to expect a January 2014 low.
Here we are today, mere days before the new year and gold has plunged yet again … it’s below $1,200 as I pen this column … and it’s making a beeline for a major low next month.
Moreover, everything I told you that gold indicated to me — based on all of my systems and 35 years of trading the metal — has come to pass.
Deflation rules in Europe, the result of draconian austerity measures, and the latest, European Union-wide Cyprus-style confiscation policy of innocent bank deposits should another bank go under.
Interest rates all over the world are heading higher.
And here in the U.S., the latest Fed move, tapering its bond purchases, is part and parcel of the forces driving all metals lower, into what should prove to be major lows early next year.
I’ll get to the actual support levels you should watch for bottoms in gold and silver in a moment. First, I want to answer a couple of questions that I am sure are on readers’ minds:
Q: If gold and silver are so close to making final lows in their three-year bear markets, doesn’t that imply that disinflation in the U.S. and deflation in Europe are coming to an end?
A: Yes, it does. But it doesn’t mean we are on the cusp of a major new inflation wave either.
What we are far more likely to see is severe stagflation in the U.S. and even worse stagflation in Europe. For two simple reasons:
First, economic growth is and will simply not be strong enough to cause rapid or rampant inflation, either here or in Europe.
Second, further draconian measures to grab more wealth from their citizens, in the form of further increases in taxation … austerity measures in social and entitlement programs … various confiscatory policies (the potential for a Cyprus-style bail-in policy for the U.S. banking system) … capital controls … and more …
Are now all under consideration behind closed doors in Washington. Meanwhile, Europe’s leaders are well on their way to causing further problems there as they attempt to put in place a supranational bank that will effectively insist that all EU member nations give up their sovereignty.
All of this is going to counter the forces of inflation, causing stagflation in both economic regions.
So while we should see an end to deflationary forces, don’t expect inflation to come roaring back either.
Next …
Q: Larry, you no longer expect hyperinflation. So, then, what would send gold to over $5,000 an ounce over the next few years?
A: As I have said all along in my career, gold doesn’t always need inflation to roar higher.
To the contrary, gold’s best role — historically its best performance — is as a direct hedge against government folly and collapse.
And we have that in spades today:
Patently bankrupt Western governments of Europe and the United States. Call it the death of Western-style socialist and Keynesian policies.
The resulting attacks on private-sector wealth through rising taxation, capital controls, confiscatory measures and more.
Increasingly authoritarian and fascist leadership on both sides of the Atlantic.
Polices that impinge upon the private sector, causing loss of privacy, freedom and basic liberties.
The rising amplitude of the war cycles, where government self-interest, in the name of survival, is now leading to civil strife all over the globe, even civil wars and, quite possibly, international wars in the years ahead.
These are the forces that will drive gold and other precious metals much, much higher in the months and years ahead. Not inflation. Not money-printing. Not even currency devaluation.
But revolution and rebellion. The breakdown and eventual collapse of confidence in government.
Keep all that in mind and you will profit handsomely from the coming new bull markets in the precious metals and other commodities.
Here are the levels you need to watch for major lows in gold and silver in the weeks ahead.
Right now, since gold and silver have tanked so hard, I would not be surprised to see a bit of a bounce. But a bounce is all it would be. As we head into January, look for major support in gold at:
$1,029.70
$ 987.00
One of those two levels should be hit and represent a major low.
In silver, watch $16.43 and $15.18 for major support and a final low.
Best wishes,
Larry
Canada’s federal government and the governments of its 10 provinces failed to agree on Monday on a deal to enhance the country’s public pension plan.
Some provinces, worried by studies showing Canadians are not saving enough for retirement, want to boost Canada Pension Plan (CPP) payouts by obliging workers and employers to make higher contributions.
But the federal Conservative government says asking people to pay more at a time when the world economy is still fragile makes no sense.
“Now is the time for fiscal discipline … now is not a time for CPP payroll tax increases,” Junior Finance Minister Kevin Sorenson told reporters after what he called a very frank discussion.
“There was no consensus today on expanding CPP. We will continue to look at the economy and discuss this again in the future,” he said.
The idea of enhancing the CPP has been on the provinces’ agenda for several years, with most proposals calling for higher contributions in order to double the maximum retirement benefit from the current C$12,150 ($11,460) a year.
Charles Sousa, finance minister of the influential province of Ontario, said the federal government was the main opponent of reforming the system.
“I’m very disappointed that they used stall tactics to ensure that CPP enhancement wasn’t even considered at this time,” a visibly angry Sousa told reporters, saying his province was determined to go it alone.
…..read page 2
From movies to monetary policy, sometimes spending billions – even trillions – couldn’t buy the desired results.
….all HERE
The economy expanded in the third quarter at the fastest rate in almost two years as Americans stepped up spending on services such as health care and companies invested more in software.
Gross domestic product climbed at a revised 4.1 percent annualized rate, the strongest since the final three months of 2011 and up from a previous estimate of 3.6 percent, Commerce Department data showed today inWashington. The gain exceeded the most optimistic projection in a Bloomberg survey.
Inventories accounted for a third of the increase in GDP in the third quarter, showing companies were confident about the prospects for demand. Stronger retail sales in October and November underscore the Federal Reserve’s view that the world’s largest economy is improving.
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