Santacruz Silver Mining: The Market Still Doesn’t Get It!

Ben Kramer-Miller, chief analyst at miningWEALTH, notes that Santacruz Silver Mining has been a top pick since March, and while shares have risen ~70%, he still believes there is substantial upside ahead.

Santacruz Silver Mining Ltd. (SCZ:TSX.V; SZSMF:OTCQX; 1SZ:FSE) is focused right now on two projects. The first is Rosario in San Luis Potosi, Mexico. The company has been operating this underground mine for a couple years now, and it is currently mining at a rate of ~1 million silver-equivalent ounces per year (mostly silver with zinc and lead as coproducts). Rosario contains a mill with capacity that exceeds the mining rate, and as a result management has acquired the right to mine on another property 40 km away—Cinco Estrellas—where it mines mostly gold with some silver.

The second is Veta Grande, which is less than 200 kilometers away from Rosario in Zacatecas. The company doesn’t own the project, but has an exclusive right to explore and mine it from owner Minera Contracuña. Santacruz receives 60% of the profits for its trouble (55% should the silver price rise above $22/oz). The company has not declared commercial production here yet, though the mine and mill are fully operational. Long term, the company is very ambitious with respect to its production targets at Veta Grande.

Management has shifted its focus to these two projects, though it still controls two interesting late-stage exploration projects—Gavilanes and San Felipe. These are “back burner” projects that provide in-ground optionality to metal prices (silver and zinc, mostly).

The company is inexpensive relative to its in-ground silver and its productive capacity, and there are likely a few reasons for this:

  • In Q1/15 there was a tailings dam rupture at Rosario, which caused a stop in production. The problem is fully resolved now.
  • In 2014 the company sold silver forward in order to finance the development of San Felipe. The project did not move forward and these forward silver payments had to come from Rosario. This happened right before the tailings dam rupture—talk about bad luck!
  • Veta Grande does not have a NI-43-101-compliant resource estimate or a mine plan, yet management expects it to generate most of the company’s production. Cinco Estrellas doesn’t have a resource estimate either, meaning most of the company’s production is from projects without resource estimates.

The first two issues are largely in the past and the fallout (e.g., unwanted dilution, punitive debt payments) has already impacted the company. However, the third issue continues to be a big deal. Not only does it add to the perceived risk (e.g., what if the company’s informal/internal projections are overly optimistic?), but due to the regulatory environment Santacruz is prohibited from discussing several of the positive aspects of its Veta Grande and Cinco Estrellas projects.

The latter concern is purely a cosmetic one, though it is a big deal because it means that the company cannot promote its story to the market in the same way as its competitors can. With respect to management’s confidence level in the project, we note a few things that make management’s knowledge of Veta Grande relatively robust:

  • The three producing Veta Grande veins are all past-producers.
  • Santacruz has processed tens of thousands of tonnes of ore from Veta Grande veins. In fact, it had processed ore from Veta Grande prior to its arrangement with Minera Contracuna. This ore was analyzed for composition and grade in the company’s lab. While the company’s work doesn’t fit the NI-43-101-compliant feasibility study mold, it is arguably more extensive than what one would expect to find for a typical project at this level of development.
  • There are similar projects in the area currently in production, notably Capstone Mining Corp.’s (CS:TSX) Cozamin Mine.

Investors should also note the amount of time and effort it takes to compile a resource estimate. Oftentimes this is worthwhile as it provides valuable information. But Santacruz already has critical pieces of this information, and the added confidence that would come from compiling an NI-43-101-compliant resource estimate or feasibility study isn’t worth the lost time.

So where does Santacruz stand now?

Santacruz is currently processing ~300 tpd at its Rosario mill. This includes production from Rosario and Cinco Estrellas. This mining rate is lower than previous expectations of 350–400 tpd, and the reduced mining rate is a function of the company reducing production at the Rosario mine and replacing it with production from Cinco Estrellas. Note that the latter project contains a wider vein that is easier to mine at a faster pace. Once the normal production rate is reached we expect annualized production from the Rosario mill to be just over 1 million silver equivalent ounces.

At Veta Grande the company has not yet declared commercial production, though based on discussions with management and my recent trip to visit the mill it appears the company is close to doing so. Upon doing so the company will be officially producing ~450 tpd (270 tpd attributable) with grades that are slightly lower than at Rosario/Cinco Estrellas. Attributable production should be ~600,000 silver equivalent ounces per year. With publicly announced plans to bring production up to 1,500 tpd (900 tpd attributable) by mid-late 2017, Santacruz is positioned to produce nearly 2 million attributable silver equivalent ounces per year at Veta Grande, making it a 3-million-ounce-per-year producer. We anticipate production costs to be ~$12-13/oz, meaning that the company can comfortably exceed $10 million in annual operating cash flow assuming a flat to slightly lower silver price. That’s pretty good considering the company’s ~$45 million valuation! And we haven’t even considered the company’s non-producing assets!

In addition to this production, we expect the company to release some more technical information to the market. For instance, management hopes to release a resource estimate on some of the veins it acquired from Golden Minerals Co. (AUM:TSX; AUMN:NYSE) earlier this year (Golden Minerals had done exploration work but did not compile it, and Santacruz is working on this now). We expect, as the company begins to generate more cash flow, that it will have the resources to compile more formal reports on its Veta Grande veins, along with those at Cinco Estrellas.

The combination of growing production and cash flow along with this additional information should generate market enthusiasm for the shares, and we expect them to trade substantially higher long-term.

Ben Kramer-Miller is the chief analyst at miningWEALTH. He is well respected for his unique ability to find under-the-radar precious metals opportunities, as well as for his extensive research into rare earth elements and other critical materials. His research has been featured by Nasdaq, Kitco, Mining.com, The Financial Post, The Globe and Mail, Investing News Network and RealClearDefense, among others.

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Disclosure:
1) Ben Kramer-Miller: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: None. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: None. My company has a financial relationship with the following companies mentioned in this article: None. I determined which companies would be included in this article based on my research and understanding of the sector.
2) The following companies mentioned in this article are sponsors of Streetwise Reports: None. The companies mentioned in this article were not involved in any aspect of the article preparation. Streetwise Reports does not accept stock in exchange for its services. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article.
4) This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their families are prohibited from making purchases and/or sales of those securities in the open market or otherwise during the up-to-four-week interval from the time of the interview/article until after it publishes.

( Companies Mentioned: SCZ:TSX.V; SZSMF:OTCQX; 1SZ:FSE,
)

New PEA for Seabridge’s KSM Is a Game-Changer

Calling the new preliminary economic assessment for Seabridge Gold Inc.’s (SEA:TSX; SA:NYSE.MKT) KSM “a big improvement for a unique massive Au-Cu project,” Paradigm Capital believes the company will continue to build value for investors.

“We believe Seabridge provides investors with ownership in one of the most strategically compelling and prolific copper‐gold projects in the world, the KSM project in BC, at one of the lowest market caps per ounce to the investor,” analyst Don MacLean wrote in an Oct. 26 research report.

Seabridge announced the new PEA for KSM in an Oct. 6 press release. The company also announced discovery of “a previously unknown deposit with initial gold and copper grades among the best found to date on the KSM Project” in an Oct. 18 press release, and on Oct. 26 announced it has identified “a prospective new porphyry copper-gold system with a potentially intact epithermal precious metals zone at its top” at its wholly owned Iskut project, also in British Columbia.

Following release of the new PEA on KSM, Paradigm did a “full model rebuild” of its investment thesis for Seabridge, according to MacLean, noting, “Over the past 3 years, Seabridge has continuously improved its massive KSM project in Northwestern B.C., finding deeper and higher-grade mineralization, derisking it with permitting and operational redesign.”

The new PEA, MacLean wrote, “outlines further game-changing improvements.”

Among improvements in the economics of the KSM project, as outlined in the Paradigm report, is a boost in the “after-tax IRR from 8.0% to 10.0%. . .a substantial uplift for a mega project.” MacLean also noted that KSM’s “life-of-mine total cash costs dropped sharply to $179/oz from $277/oz, mostly because Deep Kerr’s higher proportion of copper boosts project copper credits to $1,328/oz from $795/oz.”

In addition, MacLean wrote that, “the shift from 70% open-pit mining (tonnes) to 78% underground block caving [is] transformational.”

Arguing that investors should consider owning Seabridge “sooner rather than later,” the Paradigm analyst cited the “current gold price setback” as a “buying opportunity,” a shortage of “large new undeveloped gold and copper project in safe jurisdictions with attractive economics,” and an expectation that 2017 will “offer potentially exciting exploration into a new higher-grade target at KSM.”

MacLean also commented on developments at Iskut, stating, “We like the exploration thesis underlying the investment.”

Read what other experts are saying about:

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Disclosure:
1) Tracy Salcedo compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She owns, or members of her immediate household or family own, shares of the following companies mentioned in this article: None. She is, or members of her immediate household or family are, paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are sponsors of Streetwise Reports: Seabridge Gold Inc. The companies mentioned in this article were not involved in any aspect of the article preparation. Streetwise Reports does not accept stock in exchange for its services. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their families are prohibited from making purchases and/or sales of those securities in the open market or otherwise during the up-to-four-week interval from the time of the interview or article until after it publishes.

Additional Disclosures for this Content

( Companies Mentioned: SEA:TSX; SA:NYSE.MKT,
)

Alkane Signs MOU with Siemens to Advance Dubbo Zirconium Project

Alkane Resource’s flagship Dubbo Zirconium Project moved closer to production after the company announced a Memorandum of Understanding (MOU) between its wholly owned subsidiary Australian Zirconia Ltd. and German engineering and technology giant Siemens AG.

The MOU, a nonbinding and nonexclusive agreement for three years, “details Alkane’s and Siemens’ joint intention to enter into separate agreements for the purpose of progressing and implementing business opportunities such as offtake agreements for DZP product (e.g., rare earth products, specifically those related to the production of NdFeB permanent magnets, as well as the rare metals niobium, zirconium, and hafnium in oxide, alloy or finished form),” stated Tom Hayes in an Oct. 25 research report on Alkane Resources Ltd. (ALK:ASX; ANLKY:OTCQX) for Edison Investment Research.

For its part, Alkane will have access to Siemens’ “advanced infrastructure management systems, process automation solutions, power solutions, mechanical plant and services and product lifecycle management (including asset management, service and maintenance of systems supplied),” Hayes wrote.

According to an Alkane press release issued Oct. 25, “This agreement presents another substantial step forward in the development of the world-class Dubbo Zirconia Project, which can become a significant non-Chinese supplier of several critical metals.”

Alkane is working in the Central West region of New South Wales, Australia, where it has two projects, the Tomingley gold project and the Dubbo project. According to the company’s release, “financing is in progress [for Dubbo] and this project will make Alkane a strategic and significant world producer of zirconium, hafnium and rare earth products when it commences production in 2018.”

Read what other experts are saying about:

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Disclosure:
1) Tracy Salcedo compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She owns, or members of her immediate household or family own, shares of the following companies mentioned in this article: None. She is, or members of her immediate household or family are, paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are sponsors of Streetwise Reports: Alkane Resources Ltd. The companies mentioned in this article were not involved in any aspect of the article preparation. Streetwise Reports does not accept stock in exchange for its services. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their families are prohibited from making purchases and/or sales of those securities in the open market or otherwise during the up-to-four-week interval from the time of the interview or article until after it publishes.

Additional Disclosures for this Content

( Companies Mentioned: ALK:ASX; ANLKY:OTCQX,
)

Canadian Zeolite Announces National Distribution Deal with Bella Turf for their Artificial Turf Installation and Product Line

cnz0
October 25, 2016
Vancouver, British Columbia (FSCwire)Canadian Zeolite Corp. (the “Company”) (TSX.V: CNZ) (OTCQB: CNZCF) (FSE: ZEON) is proud to announce an exclusive national distribution deal with Bella Turf, Canada’s leading distributor of Artificial Turf Landscape Grasses. The Company has agreed to supply its zeolite to Bella Turf for the Synthetic Turf Industry. Bella Turf has established distribution channels and dealers throughout Canada and will now have the ability to distribute the Company’s zeolite to their established customers.

Bella Turf states, “the Artificial Turf industry has been growing by 20% per year globally for the last decade. It is a 1.71 billion dollar industry while North America makes up 28% of the market. This growth is fueled primarily by environment conscious consumers who are aware of what watering, mowing, and chemicals are doing to our environment.“ For more information please visit www.bellaturf.ca

Mr. Ray Paquette CEO adds “We’re very pleased to announce this new national distribution deal with Bella Turf. We have worked with Bella Turf and Absorbent Products Ltd. to test, process and size our natural zeolite to address their specific industry requirements. Bella Turf incorporates 1.5 – 2 lbs of zeolite per square foot in their installations of Artificial Turf and will be launching their own infill product nationally this quarter. Bella Turf is an ideal fit with Canadian Zeolite as we strive to develop “green-tech” products and relationships. These relationships are instrumental in expanding our national sales presence and increasing awareness around the multiple uses of natural zeolite in “green-tech” industries. It is an exciting time for the Company and its shareholders as we are now commercializing our natural zeolite. We anticipate 2017 will be a major year of growth and accomplishment. This is the first of many expected agreements as our markets expand and we introduce our natural zeolite into the composting and animal feed industries, agriculture, water treatment and aquaculture markets.”

Canadian Zeolite has a competitive advantage in the world of zeolites given our product has been tested, applied and meets the standards of specific end-users. We are currently working on certifications and creating new technologies such as zeoponics and zeolitic substrates for greenhouse and outdoor growing mediums.

On behalf of the Board of Directors

“Ray Paquette”

President & CEO

604.684.3301

www.canadianzeolite.com

 

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

 

Some statements in this news release contain forward-looking information. These statements include, but are not limited to, statements with respect to future expenditures. These statements address future events and conditions and, as such, involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the statements. Such factors include, among others, the ability to complete contemplated work programs and the timing and amount of expenditures. Canadian Zeolite does not assume the obligation to update any forward-looking statement.

 

To view this press release as a PDF file, click onto the following link:
public://news_release_pdf/CanZeoliteOct252016.pdf

Source: Canadian Zeolite Corp. (TSX Venture:CNZ, OTCQB:CNZCF, FWB:ZEON)

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Maximum News Dissemination by FSCwire. http://www.fscwire.com

 

Copyright © 2016 Filing Services Canada Inc.

Cycle of Low Crude Prices Nearing an End, Says Saudi Oil Minister

Saudi Arabia’s Oil Minister Khalid al-Falih declared the cycle of low crude prices is nearing an end as the oil market strengthens in recent weeks.

“Market fundamentals, in terms of supply and demand, have begun to improve,” Falih stated on Sunday at a press conference with Russian Energy Minister Alexander Novak, adding: “We are optimistic that oil prices will continue to improve in the future.”

Novak was meeting with OPEC ministers to discuss closer cooperation between Russia and OPEC to support the market.

Last week WTI Crude was trading at nearly $52/barrel, a 15-month high. It has slipped somewhat since, to about $50.50, after comments from Iraq’s Oil Minister Jabar Ali al-Luaibi indicating his country wanted to be exempt from any output cuts that OPEC might impose, saying Iraq needed the revenue to fight the Islamic State.

Energy trader Mark Fisher is advising investors to buy crude oil and natural gas on dips. “In my opinion, the most likely course is for the market to gradually establish a new base someplace in the $55 to $65 range barring some kind of geopolitical problem,” he told CNBC.

“It used to be that in natgas, every time the market rallied you could just close your eyes and sell it. I think those days are long over. I think now the time has come that you can basically buy every dip,” he said.

Want to read more Energy Report articles like this? Sign up for our free e-newsletter, and you’ll learn when new articles have been published. To see recent articles and interviews with industry analysts and commentators, visit our Streetwise Interviews page.

Disclosure:
1) Patrice Fusillo compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee.
2) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.

Former Goldman Insider Says Price of Gold Could Double

Former Goldman Insider Says Price of Gold Could Double By Justin Spittler The price of gold should be a lot higher… At least, that’s what Raoul Pal thinks. Pal is one of the world’s top “big-picture” investors. He used to work at Goldman Sachs and run a giant hedge fund, until he made so much money that he retired. Today, Pal writes The Global Macro Investor, a research letter read by some of the world’s biggest money managers. Recently, Pal came out in defense of gold. You see, gold has cooled off after climbing 25% over the first six months of the year. It’s down 8.5% since August. And it’s coming off seven straight down days, its worst losing streak since 2013. Gold’s recent selloff has many investors worried. But not Pal. He thinks investors could soon take shelter in gold…which could cause the price to double from current levels. Today, we’ll explain … Continue reading

A Conversation With Louis James – The International Speculator

juniorstockreview

 

 

louis-james

This past week, I had the opportunity to exchange emails with one of the best in the business, Louis James, Senior Investment Strategist for Casey Research. Louis travels the world putting boots on the ground, investigating opportunities for those who subscribe toThe International Speculator. His boots-on-the-ground approach and detailed analysis of the companies that he investigates set him apart from the crowd. Not to mention, he has the ear of one of the legends of junior mining stock speculation, Doug Casey!

Before getting to the interview, I just wanted to share with you a rich source of information that I guarantee you won’t find anywhere else. I’m referring to the books, Totally Incorrect, and Right on the Money, which are collections of past conversations between Louis and Doug.

I can remember waiting eagerly for the Wednesday release of Conversations with Casey, where Louis and Doug discussed speculation, philosophy, and really, just about everything. I found the conversations extremely insightful and learned a lot from their exchanges. In fact, even though I had already read most of them for free in Conversations with Casey, I purchased both books when they were released.

My outlook on the world was influenced by these two men and I’m very grateful for the wisdom that they impart.

Now, without further ado, a conversation with Louis James:

Brian: “Turmoil seems to be the norm at this point in history, so how do you navigate the politicized economy and position The International Speculator portfolio to profit?”

Louis: “Turmoil and the politicized economy are related, but not the same things… There are many sources of turmoil, but whatever the source, it’s generally a bad thing for most investors—and a good thing for speculators. Quick reminder: a speculator is not simply a gambler who throws darts at a stock chart and hopes to get lucky, but a rational observer of the trends in the world, who pits his or her wit against the momentum-chasing masses. That means buying valuable assets that are oversold, and selling assets that are overbought. It’s rational contrarianism (as opposed to ornery contrarianism). So, we watch for ‘turmoil’ to create divergences between price and value, and then act accordingly.

As for the politicized economy, it is both a source of turmoil, and often highly predictable. As Doug Casey likes to say, the one thing you can usually count on governments to do, it’s the wrong thing—not just the wrong thing, but the exact opposite of the right thing. Like taking interest rates negative, punishing the savers who would otherwise accumulate the capital needed for a real renaissance. These actions are bad, in and of themselves, in the sense of being destructive to economies and civilization itself. But they are predictable, and that enables speculators to position themselves for the trends to be their friends.

This is how we choose which commodities and other resources to invest in. As for picking specific stocks, that comes down to due diligence, which is my area. I’ve flown more than a million miles on just the major carriers as I’ve travelled the world to evaluate specific speculative opportunities for our readers.”

Brian: “From the gold price high in 2011 to the end of 2015, the gold market was hit with a historical bear market, dropping the gold stocks from their highs by roughly 90%, in nominal terms. For me, personally, buying companies during this time period felt like catching a falling knife, but I knew I needed to buy what wasn’t popular yet still had value. Now in October, well into the gold market turn around, how does one know when and what to buy, considering some companies are up multiple times from their lows?”

Louis: “I know the feeling. But you did the right thing, especially in 2015 — as everyone can now see. Contrarian investing indeed. As for what to do now that all of the best gold stocks are up strongly, I have two answers. The first is that our old friend turmoil—volatility—has put many of these stocks back on sale again. Not as low as at the bottom in late 2015, but still, there are excellent entry points to many of the clear winners in our space right now, thanks to some entirely normal (after such a rapid rise) consolidation in the gold space.

The second answer is that the 2001 – 2011 bull run was one for the record books, so it’s not surprising that we got a record correction as well. If the current super-cycle were to prove analogous to the great bull market of the 1970s, then 2011 – 2015 would be like the mid-‘70s correction, in which gold retraced 50% and the stocks cratered, just as we’ve seen in the last few years. In this scenario, we’re now heading into the second phase of the bull, which will rise for a number of years, and then go vertical into a true market mania, the likes of which we’ve never seen.

Now, I’m not claiming to know the future. No promises here. But if you think this is what’s coming, then any correction like the one we’re having at present has to be seen as a gift, a great buying opportunity ahead of the mania, even if prices are not as low as at the end of 2015.

But it’s not all or nothing. Gold is a ‘safe haven asset.’ Our world is awash in turmoil, as you say. That means that demand for safe haven assets may fluctuate, but it’s not going away any time soon. And that’s as solid a trend as any today. So I’m a buyer on market weakness, whether or not we get the gold mania Doug Casey has predicted.”

Brian: “Warren Buffet says, ‘you must learn from mistakes, but they don’t have to be your own.’ Generally speaking, when investors or speculators lose money in the junior market, do you think there’s a commonality in their approach? If so, where are they going wrong?”

Louis: “I could write a book on this. The short version would be that most investors are too emotional to buy low and sell high. They buy because everyone else is buying—the asset is in the news, it’s exciting—and pay way too much. Then the market turns, and panic, selling because prices are falling drastically, which means they get terrible exit prices and lock in losses. They end up buying high and selling low.

You can’t just buy something because it’s cheap, of course. Buying ‘pet rocks’ after the market for them crashed in the 1970s was a bad idea. But if some necessary good, like copper, say, and it’s selling for less than the cost of production, you know that prices will rise, sooner or later, no matter how hated copper might be as a commodity. That was the case 15 years ago. It’s the case for uranium today, by the way. It’s not the case for gold, but all the fundamentals that Buffet doesn’t understand (because he sees gold only as a regular commodity, like pork bellies or coffee, and doesn’t see its function as a financial asset) point towards higher gold prices for years to come.

But I digress. The point is that successful speculation takes a great deal of courage. Frankly, most people just don’t have it. And that’s a good thing. If it were easy, everyone would do it and there would be no profit in it, no such thing as a contrarian opportunity, in fact. So the biggest mistake is actually to fail to get a good measure of one’s self. One must know one’s tolerance for risk and one’s ability to stay a difficult course. Ignorance or misjudgment in this area is fatal.”

Brian: “Generally speaking, what can speculators do to set themselves up for success in the junior resource sector?”

Louis: “Readers may not like it, but the best answer is self-education. I’ve just argued that speculation takes a great deal of courage. Where does one find such courage? Well, apart from one’s character to begin with, courage comes from condition—from knowledge. The more one studies and understands the sector one is speculating in, the more confident one can be of one’s reasoning and speculations. Great speculators like Doug Casey and Rick Rule never stop learning.”

Brian: “Personally, I feel that investors need to pick financial products that fit with their investing personas. Meaning, you have to match your risk appetite to the type of product you’re purchasing. In your opinion, what type of persona is well suited for The International Speculator? For those with a lower than average risk appetite, does Casey Research offer any products that would be beneficial? What about a higher than average risk appetite?”

Louis: “Yes indeed. There are as many personalities as there are people, so it’s hard to answer. In general, people who are bullish on precious metals, but can’t afford to risk much on wealth generation and are therefore more focused on wealth preservation (with exposure to the upside in gold) would likely be better off subscribing to the Casey Resource Investor. CRI focuses on the bigger, more stable companies in our sector. The typical International Speculator reader is more interested in wealth generation than protection, and is willing to take risks to do so.

Oddly enough, the ‘higher risk’ International Speculator delivers high average gains, but only for those who have the courage to see the trades through. Those who panic and sell during the fluctuations can lose a lot more than if they went with the safer companies in CRI.”

Brian: “Finally, I’m an avid reader and often have several books on the go at any given time. Right now, I’m reading The Black Swan, by Nassim Nicholas Taleb, and Titan: The Life of John D. Rockefeller Sr., by Ron Chernow. Do you have any favourite titles that you’d like to share, or maybe some that you’re reading now while travelling?”

Louis: “Right now, I’m reading Red Notice by Bill Browder. It’s a fascinating and very well written account of very Casey-like contrarian investing in Russia, after the fall of communism. And speaking of Casey, I have to say that Doug’s new novel, Speculator came out (frankly) much better than I expected. It’s a great page-turner, but based on Doug’s experiences as a speculator, and as educational as it is entertaining. For those of a more philosophical bent, Neal Stephenson’s Anathem is the best book I’ve read in decades.”

NOTE: Red Notice, Anathem and Speculator are available on our Amazon affiliated book store right now, check them out here

blackcsw2-01

Jack Chan: This Past Week in Gold

chanhui10-22

Technical analyst Jack Chan charts recent movements in the gold and silver markets. With COT data showing signs of a bottom, Chan is waiting for price action to confirm.

Our proprietary cycle indicator is down but can be bottoming.

The gold sector is on a long-term buy signal. Long-term signals can last for months and years and are more suitable for investors holding for long term.

chanhui210-22
The gold sector is on a short-term buy signal. Short-term signals can last for days and weeks, and are more suitable for traders.

chanspec10-22
Speculation has reached the level of the previous bottom.

chanGDX10-22
GDX is testing resistance.

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The Canadian gold stock ETF is also testing resistance.

chansilver10-22
Silver is on a long-term buy signal.

chanSLV10-22
SLV is on a short-term sell signal as the buy signal has failed, and short-term signals can last for days to weeks, more suitable for traders.

Summary
A bull market in gold and silver has been confirmed. The cycle is down and the trend is down, but that can change very soon. COT data is showing the first sign of a bottom; let’s wait for price action to confirm.

Jack Chan is the editor of simply profits at www.simplyprofits.org, established in 2006. Chan bought his first mining stock, Hoko Exploration, in 1979, and has been active in the markets for the past 37 years. Technical analysis has helped him filter out the noise and focus on the when, and leave the why to the fundamental analysts. His proprietary trading models have enabled him to identify the NASDAQ top in 2000, the new gold bull market in 2001, the stock market top in 2007, and the U.S. dollar bottom in 2011.

Want to read more Gold Report articles like this? Sign up for our free e-newsletter, and you’ll learn when new articles have been published. To see a list of recent articles and interviews with industry analysts and commentators, visit our Streetwise Interviews page.

Disclosure:
1) Statements and opinions expressed are the opinions of Jack Chan and not of Streetwise Reports or its officers. Jack Chan is wholly responsible for the validity of the statements. Streetwise Reports was not involved in any aspect of the article preparation or editing so the author could speak independently about the sector. The author was not paid by Streetwise Reports LLC for this article. Streetwise Reports was not paid by the author to publish or syndicate this article.
2) Jack Chan: We do not offer predictions or forecasts for the markets. What you see here is our simple trading model, which provides us the signals and set-ups to be either long, short, or in cash at any given time. Entry points and stops are provided in real time to subscribers, therefore, this update may not reflect our current positions in the markets. Trade at your own discretion. We also provide coverage to the major indexes and oil sector.
3) This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
4) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their families are prohibited from making purchases and/or sales of those securities in the open market or otherwise during the up-to-four-week interval from the time of the interview until after it publishes.

Charts courtesy of Jack Chan

Three Resource Equities That Are Worth a Closer Look

Money manager Adrian Day looks at three resource companies with recent developments and examines how those developments affect the companies and whether the stocks are good buys.

Nevsun Resources Ltd. (NSU.NY, 2.90) has good and not-so-good news. Bisha, its mine in Eritrea, has achieved commercial zinc production, with completion of the zinc expansion, like the original mine and the copper circuit, completed within time and under budget. This is a strong record for any mining company. The bad news, however, are metallurgical problems that have reduced the value of the ore. Nevsun hopes to solve the problem by the end of the year, and in the meantime is also mining some gold from its stockpile to partially make up for the revenue shortfall. But the uncertainty has weighed on the stock price.

The company also announced continued very strong drill results from the Cukaru Peki deposit in Serbia, recently acquired with the purchase of Resource Minerals. Nevsun has strong cash flow, solid balance sheet and pays a market-beating dividend. The Reservoir addition provides diversification away from Eritrea and excellent potential. The metallurgical problems, while important, will likely be resolved with trial and error. If we did not own Nevsun, we’d be looking at buying, at least on further pullbacks.

New CEO outlines company strategy
Goldcorp Inc. (GG.NY, 15.38) said that the Eleonore deposit, acquired from Virginia, is now outperforming expectations, following its start-up issues. After several acquisitions, of which Eleonore was just one, Goldcorp is now “in harvest mode,” according to new CEO David Garofalo in a recent meeting I had with him.

His goal is to maximize the value of operations and increase profitability, and is less concerned with production growth. The company no longer has a grassroots exploration team, with a focus on its operations and “brownfields” (around existing operations). He believes the company has an adequate pipeline for now and aims to improve the balance sheet, “though we would also be looking to populate the pipeline.”

In the past, Goldcorp—because of its strong assets and politically secure profile, traded at a premium to its peers. The stock has underperformed over the past year—partly, I believe, on uncertainty about the new CEO’s direction—but could well regain some of its previous luster in the next leg-up in the gold market.

Will spin-off pay well?
Yamana Gold Inc. (AUY.NY, 3.86) has announced a new plan for its non-core Brazilian assets in the Brio unit. Almost exactly a year ago, Yamana said it would spin off the assets in an IPO, but abandoned that plan for lack of interest. Now it intends selling the unit to its shareholders, through the issuance of “purchase rights” whereby shareholders can purchase shares in the new company, which will then trade independently.

Yamana will raise cash from the sale, which it plans to use to pay down debt, and will retain an interest in Brio. Shareholders, however, will have to pay for something they already own. Final details have not been released, but based on the press release, it appears that Yamana does not intend for the shareholder purchase price to be at a discount. It is not clear if the rights can be sold, nor whether U.S. shareholders will be able to participate. Details, along with the purchase price, will be available within a couple of weeks. In any event, we suspect many shareholders will forego the opportunity. This is one more example, unfortunately, of Yamana getting it wrong.

Growth ahead
Otherwise, things are looking up for the company. With an improved balance sheet, the growth profile is quite strong, with a 22% increase in production through 2019 from four projects already underway. More projects are in the pipeline. Yamana was one of the very top performers in the first half of the year, though it fell back in recent months. It has strong leverage to the price of gold, and at the current price is a buy.

Adrian Day, London-born and a graduate of the London School of Economics, heads the money management firm Adrian Day Asset Management, where he manages discretionary accounts in both global and resource areas. Day is also sub-adviser to the EuroPacific Gold Fund (EPGFX). His latest book is “Investing in Resources: How to Profit from the Outsized Potential and Avoid the Risks.”

Want to read more Gold Report articles like this? Sign up for our free e-newsletter, and you’ll learn when new articles have been published. To see recent articles and interviews with industry analysts and commentators, visit our Streetwise Interviews page.

Disclosure:

1) Adrian Day: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: None. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: None. My company has a financial relationship with the following companies mentioned in this article: None. Funds controlled by Adrian Day Asset Management hold shares of the following companies mentioned in this article: Nevsun Resources, Goldcorp Inc. and Yamana Gold. I determined which companies would be included in this article based on my research and understanding of the sector.
2) The following companies mentioned in this article are sponsors of Streetwise Reports: None. The companies mentioned in this article were not involved in any aspect of the article preparation. Streetwise Reports does not accept stock in exchange for its services. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article.
4) This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their families are prohibited from making purchases and/or sales of those securities in the open market or otherwise during the up-to-four-week interval from the time of the interview/article until after it publishes.

( Companies Mentioned: G:TSX; GG:NYSE,
NSU:TSX; NSU:NYSE.MKT,
YRI:TSX; AUY:NYSE; YAU:LSE,
)

It’s Rally Time for Gold and Silver Equities

HUI Gold BUGS Index

Precious metals expert Michael Ballanger discusses the Deutsche Bank gold bullion settlement and the uptick in gold and silver miners.

One of the more striking developments in the bizarro world of gold and silver trading has to be yesterday’s settlement between Deutsche Bank and a class-action group that alleged that the bullion banks (DB, Scotia and HSBC) were manipulating the physical and Comex silver futures market since 2007; what is laughable and disgusting is the size of the settlement—$38 million. It’s like Lee Harvey Oswald being charged with “Assault with a Deadly Weapon” and winding up with a misdemeanor. Then again, it is really no different than Libor-rigging or the sub-prime mortgage fraud or more recently the Wells Fargo scam.

At the end of the day, if you had told me back in 1977 when I got first got hired by a old, venerable Bay Street investment firm (McLeod Young and Weir Limited) that multinational banks would be facing multibillion dollar fines for committing FRAUD and then being allowed to continue to do business, well, I would have laughed you out of the room. Furthermore, if an insignificant little retail salesman—also known as “registered representative” or “stockbroker” or “investment executive”—is caught taking client money or even recommending an “unsuitable investment,” he is offered up by his firm as a sacrificial lamb to be raped and pilloried in the Town Hall square and usually is fined far higher than he can afford (non-negotiable) and is usually banned from the industry. In fact, you can search far and wide over the past fifty years to find one senior executive of any financial services company that ever got fined or banned. Ex-Goldman CEO John Corzine stole a great deal of money from client accounts when MF Global went under and he is still living “the good life” with nary a worry in the world.

So we may now confirm that Deutsche Bank will be warbling like an amorous songbird as it gives up its co-conspirators in the upcoming London (U.K.) trial as the wagons get circled and the markers and bribes are all dialed in. Scotiabank will have its operatives in Ottawa and at the Bank of Canada crying “poor” while HSBC is in London trying its best to avoid embarrassment and inviting Members of Parliament to “tea”—all at once and behind closed doors, limos packed with all sorts of gentlemanly “favors” and bags full of cash. The more things change, the more…

Anyhow, I digress, and as I have been lecturing for what seems like a lifetime (it has), the gold and silver miners predictably made the turn to the upside around the 11th of October when they began to miraculously outperform gold and silver. As you can see in the chart below, the HUI (NYSE Arca Gold BUGS Index) decoupled from the physical metals prompting me to pen the piece “Tiptoeing Back into the Miners” on Oct. 16, and it was that last Thursday that I bought a 25% position in my beloved VanEck Vectors Junior Miners ETF (GDXJ) and subsequently added the remaining 75% the following day. I now have officially bought back the entire GDXJ position which was agonizingly jettisoned by way of a stop-loss on October 3rd at the grand price of $41.43. Until that day, sleep had been fitful, irritability rampant, and neither woman nor beast had been safe in my company. Once the GDXJ showed up in my account that afternoon, a magical calm descended upon my psyche. Howling winds and rain turned to gentle breezes and warm sunlight. My net worth is once again on the line and all is well and right with the world.

I laid out the five reasons thought the downside was limited and of course the major technical reason was the RSI (Relative Strength Index), which was dancing around the magic 30 number for most of that week but seemed to be rejecting further downside probes. The low trade for the GDXJ came on Oct. 4 at $36.96 with RSI touching 30 that day. Since then, RSI has slowly and grindingly inched higher while the GDXJ thrashed around in a tight range. What we needed to see was the physical metals pay heed to the predictive power of the miners the failure of which would be a very nasty false bottom. Predictably, luckily, wonderfully the RSI for the GDXJ has now risen to 46.39 with gold having only just scrambled back above $1,270.

What IS critical is that it was only last Friday that gold very briefly retested the sub-$1,250 territory while the miners were trading higher for most of the day. GDXJ opened this morning at $41.48, a nickel higher than where my stop-loss order was filled and $2.58 higher than my new average cost base. In a nutshell, the predictive power of the gold and silver miners has once again prevailed.

VanEck Vectors Junior Gold Miners ETF

Shifting gears for a moment to the 357 Magnum portfolio, I have removed Tinka Resources Ltd. (TK:TSX.V; TLD:FSE; TKRFF:OTCPK) from the portfolio on the basis of valuation ($45M market cap), and added Canuc Resources Ltd. (CDA:TSX.V) (halted pending RTO approval) at the pre-halt average cost of $0.25, again, on the basis of valuation ($10M market cap). The restructured Canuc/Santa Rosa Silver Mining Corp. will retain the CDA.V symbol and will have approximately 43M shares issued and outstanding by time the deal gets approved. It is a silver-gold deal with positive cash flow from gas wells in Texas and will be capitalized at around $10M. I anticipate it opening at $0.50-0.75 once the deal is ratified and approvals are granted, but for purposes related to the portfolio, I’ll use the first trade after the opening to establish the adjusted cost basis for the Magnum portfolio.

Compiled at the end of April of this year, the 357 Magnum was named after the famous handgun wielded by Clint Eastwood in the Dirty Harry series, which, according to folklore, carried the ability to “substantially change lives,” Best performer to date has been Yukon gold explorer Stakeholder Gold Corp. (SRC:TSX.V), up 85% YTD while the TSX Venture Exchange is ahead “only” 49.10% YTD.

Stakeholder Gold Corp. Chart

As for my intermediate term forecast, I need to see a move through $1,400 gold in order to truly, once-and-for-all, never-again-to-be-debated dispel any belief that 2016’s gold and silver rallies were nothing but “bear market rallies.” When gold closed below $1,300 on Oct. 4, there followed a torrent of bearish commentary that has been relentless in proclaiming “the Death of the Golden Bull” and it has now become “cool” to once again talk about the resumption of the deflationary tsunami and the China banking system, but then again it is never cool to talk about gold and monetary madness and central bank experimentation. While I will never claim to be a technician, the following chart goes right back to just after the sub-prime crisis when gold was responding to all of the bailouts and money printing by Fed Chairman Ben Bernanke and Co. and what is crystal clear is the downtrend line drawn off the Q3 2011 and Q3 2012 tops that now crosses Q3 2016 right at $1,400. A weekly close above that level will not only set up a test of the 2011 peak north of $1,900, it will finally silence the fools calling for $850 gold and THAT will be ultimately more satisfying than making a few million dollars here and there.

Gold price chart

As I close out today’s missive, GDXJ has $42.00 in its crosshairs and Fido is sleeping soundly at my feet while I hear the melodic humming of a worry-free spouse in the other room. However, the pooch is sleeping with one eye open and spouse has a large ten-pound rolling pin hidden under her pinny because they both have learned how to read financial data as BNN quotes flow across the screen.

Can’t say I can blame them…

Originally trained during the inflationary 1970s, Michael Ballanger is a graduate of Saint Louis University where he earned a Bachelor of Science in finance and a Bachelor of Art in marketing before completing post-graduate work at the Wharton School of Finance. With more than 30 years of experience as a junior mining and exploration specialist, as well as a solid background in corporate finance, Ballanger’s adherence to the concept of “Hard Assets” allows him to focus the practice on selecting opportunities in the global resource sector with emphasis on the precious metals exploration and development sector. Ballanger takes great pleasure in visiting mineral properties around the globe in the never-ending hunt for early-stage opportunities.

Want to read more Gold Report articles like this? Sign up for our free e-newsletter, and you’ll learn when new articles have been published. To see a list of recent articles and interviews with industry analysts and commentators, visit our Streetwise Interviews page.

Disclosure:
1) The following companies mentioned in the article are sponsors of Streetwise Reports: None. The companies mentioned in this article were not involved in any aspect of the article preparation or editing. Streetwise Reports does not accept stock in exchange for its services. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
2) Michael Ballanger: I own, or members of my immediate household or family, directly or indirectly own shares of the following companies mentioned in this interview: Tinka Resources Ltd., Canuc Resources Ltd., Santa Rosa Silver Mining Corp. and Stakeholder Gold Corporation. My company Bonaventure Explorations Ltd. has a relationship with Stakeholder and Canuc via Santa Rosa. I determined which companies would be included in this article based on my research and understanding of the sector.
3) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article.
4) This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their families are prohibited from making purchases and/or sales of those securities in the open market or otherwise during the up-to-four-week interval from the time of the interview/article until after it publishes.

( Companies Mentioned: CDA:TSX.V,
SRC:TSX.V,
TK:TSX.V; TLD:FSE; TKRFF:OTCPK,
)