Suriname Gold Mine Opens Opportunities For Frontier Market Investors

By Savita Iyer-Ahrestani
Think Advisor

suri180For investors keeping tabs on frontier markets, the development of the new Merian gold mine, by Newmont Mining Corporation in Suriname, may signal the start of yet another potential investment opportunity.

Not only does the mine bode well for Suriname’s economy in the medium-term (the $1 billion investment is likely to double the country’s industrial gold output by 2016, at a time when production is expected to tail off as existing mines reportedly reach maturity), it’s also likely that the South American nation’s government will finance the 25% stake it can take in Merian through a potential $200 million syndicated loan.

The issue would be Suriname’s first commercial sovereign borrowing and would be backed by revenue streams from the mine.

Details for the potential syndicated loan are not yet finalized but the issue could prove interesting to frontier market investors looking for new opportunities, particularly since the political commitment to the Merian project is strong and significant preparatory work has been undertaken by Newmont to ensure that the mining project takes off, said Cesar Arias, associate director for Latin America at Fitch Ratings.

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A Look at Gold Mining in Mexico

Gold Investing News

mex160When it comes to mining, Mexico has been associated predominantly with silver. However, gold has been mined in Mexico for at least 500 years. The country has a history of both commercial production and artisanal production. Mexico is now a major destination for resource companies seeking gold and silver. Despite its very long history of precious metal production, there are still untouched deposits to be discovered in Mexico, many of which have become accessible due to recent improvements in mining technology. Gold exploration and development activity in the state of Zacatecas has increased recently for precisely this reason.

Mexico’s political climate is friendly to mining activity, and there is a ready supply of workers of various skill levels. Costs also tend to be favorable in comparison to other North American countries. All of these factors make Mexico a natural choice for resource exploration companies. Here are four working in the country on exploring, developing and producing gold properties:

GoGold Resources has several gold and silver properties in Mexico. Its Parral tailings project has 35 million ounces of silver equivalent, and the first bar has been poured. Commercial production is expected to begin in the fourth quarter of this year. The Parral Tailings project is in Hidalgo del Parral, Chihuahua, Mexico.

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Nevada mining industry’s fate to be decided by vote on taxation

Laura Martin, a spokesperson for the Progressive Leadership Alliance of Nevada, speaks at a rally for fair mining taxes in front of the Legislative Building on Feb. 14, 2013, in Carson City, Nev. (AP Photo/Cathleen Allison)

Laura Martin, a spokesperson for the Progressive Leadership Alliance of Nevada, speaks at a rally for fair mining taxes in front of the Legislative Building in Carson City, Nev. (AP Photo/Cathleen Allison)

By Elaine Bassier
Elko Daily Free Press

When it comes to mining in Nevada, how much a person knows about the industry and the part of the state they live in seem to have the most influence on their opinions about the industry.

Senate Joint Resolution 15, passed by the Legislature, proposes to repeal a constitutional mining industry tax rate of five percent. Voters will decide in November if lawmakers should be able to adjust the tax rate without amending the Nevada Constitution.

Proponents of SJR15 claim the mines have profited in billions of dollars without paying a fair share of taxes. Progressive Leadership Alliance of Nevada says that “every year the industry takes billions in gold and other hardrock minerals without compensating taxpayers as a whole.”

PLAN also uses SJR15 as a platform to address other concerns about mining, especially the effect on environment.

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Corporations Join Droves Renouncing US Citizenship

By Nick Giambruno
Senior Editor,

money160Don’t be surprised to lose if you don’t make an effort at being competitive.

And if you go out of your way to make yourself less competitive, expect to lose.

If that sounds like simple common sense, that’s because it is.

But it’s also exactly what the US has been doing for years — enacting tax policies that sabotage its global economic competitiveness.

It’s like trying to get in shape for a marathon by going on an all-McDonald’s diet. (Speaking of McDonalds, check out this funny video spoof of what their commercials should really look like.)

Here are two major reasons why the US is lagging in the global economic marathon:

  1. The US has the highest effective corporate income tax rate in the developed world (see chart below).
  1. Unlike most other countries, which only tax domestic profits, the US taxes the earnings of foreign subsidiaries of US companies when the money is transferred back to the US. This has had the effect of US corporations keeping over $1.9 trillion in retained earnings offshore to avoid the crippling US corporate income tax.

These “worst in the developed world” tax policies are clearly hurting the global competitiveness of American companies.

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Watch ‘Real’ Interest Rates for a Clue

By Jay Taylor
Jay Taylor Media

Jay Taylor

Jay Taylor

As I was driving back from a visit to my family in Ohio, one market pro was voicing concerns on Bloomberg Radio that the Fed is in danger of “falling behind the curve,” as happened in the 1970s when the inflation rate began to rise dramatically and when the price of gold shot up to a climactic $850 by January 1980 from a little over $100 in 1978.

At that time I was a young man who was very interested in what was going to happen after Nixon caused the U.S. to default on its promise to convert dollars into gold, and it was at that time that I declared myself an unapologetic “gold bug.” To me this looks like “déjà vu all over again!” I recall how hard-money advocates were concerned about inflation but the likes Fed chairmen Arthur Burns and G. William Miller and other Wall Street thieves were putting out propaganda up until late 1979, saying that inflation was well contained as they continued to create more fraudulent dollars out of nothing at a faster and faster pace.

priceFinally interest rates began to rise and pick up steam at an exponential rate of speed. But rising even faster than nominal interest rates were was the CPI, which meant that real interest rates were actually declining. As people began to realize that their dollar’s purchasing power was declining big time, they began to look for ways to protect their wealth by trashing dollars and buying tangible assets, most logical of which were gold and silver. Gold rose to $850 from $35 at the start of the decade and silver rose from around $2 to $50. The evidence of the correlation of higher gold prices with a decline in “real” interest rates is shown on the chart above, again thanks to Dan Oliver, with whom I will be talking on my radio show next week.

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Gold Jewelry Demand in India Improves

By Frank Holmes
U.S. Global Investors

Pankaj Parakh, an Indian businessman, wearing his gold shirt, valued at $210,600.

Pankaj Parakh, an Indian businessman, wearing his gold shirt, valued at $210,600.

Those who root for gold root for India. Despite a welcome June rally, it’s been a rocky second quarter for the world’s second-largest consumer of the metal, with demand down 18 percent compared to last year. But consumer appetite seems to be on the upswing following a tepid July. Gold premiums rose to between $10 and $13 a troy ounce this month, compared to zero last month. Such premiums are good indicators that buyers are willing to spend more on gold jewelry and other forms of bullion.

That premiums have risen also suggests that Indians are making their gold purchases ahead of Diwali, or the Festival of Lights, a traditional time to participate in what I call the Love Trade. This year Diwali begins on October 23.

Other global celebrations and events that trigger the Love Trade include the Indian wedding season, the Chinese New Year, Ramadan and, of course, Christmas.

Challenges Affecting Demand Continue reading

Alasdair Macleod

: The three biggest reasons to invest in gold

In this interview conducted for Matterhorn Asset Management, Lars Schall has a conversation with Alasdair Macleod. Together they talked about, inter alia: the challenges for the London Bullion Market Association (LBMA); China’s appetite for gold; the Shanghai Cooperation Organization as the player in the gold market in the future; and the problems related to Germany’s gold at the New York Fed.

Macleod started his career as a stockbroker in 1970 on the London Stock Exchange, and learned through experience about things as diverse as mining shares and general economics. Within nine years Macleod had risen to become a senior partner at his firm. He subsequently held positions at director level in investment management, fund management and banking.

For most of his 40 years in the finance industry, Macleod has been de-mystifying macro-economic events for his investing clients. The accumulation of this experience has convinced him that unsound monetary policies are the most destructive weapons that governments can use against the people. Accordingly, his mission is to educate and inform the public, in layman’s terms, what governments do with money and how to protect themselves from the consequences.

Peter Hug: There’s Still An Underlying Bid For Gold

In this interview with Kitco’s Daniela Cambone, Peter Hug talks about gold, geopolitics and PGMs on this edition of “For Pete’s Sake”. He tells Kitco News that global unrest is still providing a floor for gold. “I still think that there’s an underlying bid to the gold market coming out of the Ukraine and, to some extent, coming out of the Israeli-Hamas situation.”

Hug adds that the metal is also getting support from President Obama’s recent announcement allowing surveillance over Syria. He also comments on US durable goods orders that came out better-than-expected this morning, as well as whether or not he thinks the Fed will start to raise rates. Finally, Hug shares his thoughts on the record-breaking S&P 500 as well as the PGMs

Comex Gold Warehouse Stocks Swell As Physical Demand Slumps

By Debbie Carlson
Kitco News

gold22Light physical gold demand has been a common theme in the gold market for the past few months, with gold forward rates and Shanghai Gold Exchange premiums low or sometimes negative.

Another sign, albeit less widely watched, is the rise in Comex gold warehouse stocks. As of Aug. 25, the combined total of registered and eligible warehouse stocks was 9.863 million troy ounces, the highest since March 11, 2013, when they were at 9,863,758.707 ounces, according to CME Group data. But a recent peak in the 11 million ounces level was as high in January 2013.

In 2013, Comex warehouse stocks were in a decline, said Erica Rannestad, senior analyst, precious metals demand at Thomson Reuters GFMS. This year, however, Comex warehouse stocks have been rising. In mid-April Comex warehouse stocks were around 7.9 million ounces.

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Juniors and Midtiers Poised for M&A-Fueled Breakout Once Gold Recovers

Michael Fowler

Michael Fowler

Michael Fowler, senior mining analyst with Toronto-based Loewen, Ondaatje & McCutcheon, predicts when gold breaks out, mining M&A will take off. He expects the major producers to lead the next rush of M&A. The majors want development-stage companies with high-grade, near-term production assets, and Fowler suggests some targets in this interview with The Gold Report.

Fowler has worked in the investment industry since 1987 as a base and precious metals mining analyst for numerous high-profile firms. His coverage list included the major North American gold mining companies, but is now focused on small- to mid-sized companies. Previously, Fowler worked as a geophysicist involved in mineral exploration for 10 years. He was involved in the discovery of the high-grade Cigar Lake uranium mine in Northern Saskatchewan in the early 1980s. Fowler holds a Master of Business Administration from Cranfield University, UK; a Master of Science in mineral exploration from Leicester University, UK; and a Bachelor of Science in geology with geophysics from Liverpool University, UK. He is a member of the Institution of Materials in the UK and a member of the Canadian Institute of Mining and Metallurgy.

Source: Brian Sylvester of The Gold Report

The Gold Report: A report titled “M&A and Capital Raising in Mining and Metals, 1H 2014″ from Ernest and Young (EY) says that mining and metals deal values in H1/2014 are “down 69% year-on-year, to $16.7 billion ($16.7B), from $53.8B, with deal volumes down 34% over the same period.” Why aren’t more mergers and acquisitions (M&A) happening in the precious metals space?

Michael Fowler: The first reason is that there are some big egos in the mining sector and some mining companies would prefer to go it alone or at least be in charge. But if both companies want to be in charge, someone is going to lose out. Ego is a big factor.

Pretium Resources Inc. will be looked at strongly by some larger companies.

Job entrenchment is a second reason. CEOs, for example, want to keep their jobs versus being kicked to the curb.

Third is asset quality. Miners looking at other companies believe that their own assets are of superior quality and those of targeted companies are poor. Generally, asset quality is not high.

Number four is transaction costs. It costs a lot of money to make a transaction, especially for small companies with limited cash.

TGR: Obviously, there were more transactions last year and the quality of assets couldn’t have changed a lot since. How do you define poor quality?

MF: We define that by the return to the prospective acquirer. As companies look at some of these assets, they see decreasing mining grade or reserve grade. That means cash margins will be less than what they would have been, say, 10 years ago. Grade plays a large role in determining the economics of putting a deposit into production and making a profit. I should note, too, that recently I have seen too many overly optimistic feasibility studies and scoping studies or what they now call preliminary economic assessments (PEA). Generally, asset quality isn’t that high.

TGR: Overly optimistic feasibility studies and PEAs. Are you suggesting that recoveries won’t be as high as expected? That capital numbers are generally too low? Mine life will be shorter? All of the above?

MF: All of the above and more, particularly in the case of PEAs. The stated returns in some of these reports are far too optimistic.

TGR: EY estimates that mining-focused private equity funds may have as much as $10B ready to deploy in the mining sector. What is private equity seeking?

MF: Most of the private equity firms want big assets. They are not interested in small exploration plays or tiny companies. They want assets that are in production or near production, perhaps offloaded by majors looking to trim debt; other targets could be companies with big development projects with juicy returns. Pretium Resources Inc. (PVG:TSX; PVG:NYSE) is one example. In April, Boston-based Liberty Metals & Mining Holdings bought roughly 5.78 million (5.78M) Pretium common shares at CA$6.92 apiece and received a seat on the board. Private equity wants to be involved in the decision-making.

TGR: Typically, how large are these private equity deals?

MF: Private equity generally wants to have a big chunk of a company, typically 10–20%, maybe more in some cases. It’s about having a say in what these companies do.

TGR: Why not outright takeovers? Continue reading