Rick Rule: Long rant, but you asked for it

By Tommy Humphreys

Rick Rule

Rick Rule rules the junior resource world with his checkbook. The acclaimed speculator has been financing mining and energy companies for nearly forty years and has the big scores and scars to prove it. From his perch as chairman of Sprott USA, the world’s best known natural resources & precious metals focused investment firm, Rule possesses exceptional insights into the global natural resources space. We were able to connect with Rick for an hour on Friday to get his perspective on gold, the macroeconomic backdrop, the TSX-Venture Exchange, Sprott Inc., and success in natural resources. In his words, “This is a long rant, but you asked for it.”

Sprott and Rule are very public proponents of precious metals ownership. In light of gold’s recent near-$300 crash, it was the natural place to begin our conversation. “If my memory serves me correct, we’re in the 8th or 9th cyclical decline in what I think’s a secular bull market. This correction is perfectly normal and healthy. It may or may not be pleasant — but how you look at it is your problem.”

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Mainland Chinese buy billions in gold

Drop in gold price in Hong Kong sparks investor sell-off but attracts buyers from mainland

By Tiffany Ap
South China Morning Post 

The scene in Hong Kong at each of the four Chow Tai Fook stores dotting Causeway Bay’s Hennessy Road was the same: a rush of buyers snapping up jewellery, coins and other gold items.

Gold investors elsewhere around the world were dumping the precious metal last week as it dropped to its lowest price in three decades. However, buyers in Hong Kong, particularly those from the mainland see value – they have been swooping on Hong Kong jewellery shops to buy at what they perceive are bargain prices.

A woman from Zhejiang braved the rain to scurry between several jewellery chain stores within a stone’s throw of each other. She was in the market for gold necklaces and bracelets, which she plans to give to her daughter when she marries.

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Unintended consequences in gold demand

By Chris Martenson
Peak Prosperity

With the financial experts claiming, some gleefully, that gold has “lost its safe haven status” in the aftermath of its biggest tumble in 30 years, many commentators thought (hoped?) that the dramatic price drop would steer people away from gold ownership. To my eyes, the past week has all the earmarks of a high-gloss propaganda campaign complete with well-placed anti-gold stories in the media and the careful use of language aimed at sowing doubt about gold’s ability to be a store of wealth.

But for those who consider gold a store of value, the recent gold slam is a gift: an invitation to purchase more sound money with fewer units of paper currency. In other words, a sweet deal. Gold and silver on sale and the world is taking advantage.

I predicted this last Friday, when I wrote, “[k]nowing the lower prices will only exacerbate this West-to-East flow [of gold], I therefore thought that the bullion banks and central banks would not have dared push that dynamic any further.”

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Kyrgyzstan gold mine auction stumbles

By David Trilling

Kyrgyzstan’s efforts to attract investors by auctioning off mining licenses, starting with the country’s second-largest gold deposit, have run into problems — both self-inflicted and beyond authorities’ control.

The ailing Kyrgyz economy is desperate for investment, with the country’s leaders eager to put years of social unrest behind them. But would-be investors have plenty of reasons to fear: in February, the government voted to scrap the existing agreement with the country’s largest investor, a Canadian gold miner. A number of foreign exploration projects have faced violent attacks in recent years by locals feeling they do not benefit from the country’s mineral wealth. And this week gold suffered its worst two-day slide in 30 years, sending convulsions through the industry. Market analysts had predicted declining gold prices, but the plunge beat even the gloomiest forecasts.

Jerooy, with an estimated 84 metric tons of gold, is supposed to be a fresh start, signaling that Kyrgyzstan is open for business. It is also a test case, one that potentially sets an example for other gold and marble mines that possibly could come up for auction later this year, according to officials at the State Geology Agency. A tender starting at $300 million opened on April 5; bidding closes on May 10.

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Mongolia reassures mining investors

By Clara Ferreira-Marques

Mongolia, hoping to arrest a slide in foreign investment into its critical mining sector, is planning a new law that it says will increase stability by reassuring investors their money will be protected from future rule changes.

Foreign direct investment into Mongolia dropped 17 percent to $3.9 billion in 2012, coinciding with a string of moves by the government that deterred investments in copper and coal.

Regulatory concerns peaked earlier this year when Rio Tinto threatened to delay the start-up of the $6.2 billion Oyu Tolgoi copper and gold mine until it resolves differences with the government over their investment agreement.

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Gold miners offer one safe place to hide

By James Brumley

To say it’s been a bad past few days for gold would be an understatement. It’s been a horrifying past few days for gold, with the precious metal’s prices falling 12% since just last Thursday. Almost needless to say, owners of SPDR Gold Shares are still a little shell-shocked.

Gold’s slump has also hit the gold miners, though harder. Since last Thursday, the Market Vectors Gold Miners ETF has given up over 19% of its value, while the Market Vectors Junior Gold Miners ETF is off by nearly 24% for that same span.

The reason miners have been under more pressure than gold itself has? Because at under $1,400 per ounce, gold prices are getting dangerously close to — if not already below — the costs incurred by some miners to dig the stuff up in the first place.

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Goldrock reports costs of $703 an ounce

By Deborah Bacal
Proactive Investors

Lindero project is located 250 km due west of the city of Salta, northwestern Argentina

Goldrock Mines Corp. has moved one step closer to its goal of becoming a gold producer by unveiling results of a feasibility study for its Lindero project in Argentina, which the company says boast “modest capital requirements” and attractive cash costs.

The study, completed by a trio of consulting firms, shows an after-tax net present value, at a 5 per cent discount rate, of US$215 million, and an after-tax internal rate of return (IRR) of 33.4 per cent, using a gold price of $1,400 an ounce. The financials indicate average annual after tax operating cash flow of $57.4 million.

Capital costs were pegged at US$155.4 million, inclusive of 3 months of working capital, with additional sustaining capital of $2.67 million. The payback period was projected at just two years.

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Gold collapse and American gold exports

The Goodman Letter

Leveraged gold speculators panic whenever someone decides to sell large numbers of transient short positions into the market. That isn’t anything unusual. It is because they are gamblers who, like their soul-mates in Las Vegas, ignore common sense and think they can win against the House. But, the House always wins. It is no different with the world’s derivative players who play at derivatives casinos. The only difference is that while casinos in Las Vegas admit that the odds are rigged in their favor, derivatives casinos are more deceitful, and don’t.

The derivatives casino gamblers always set automatic points, where their positions will be automatically sold if the price dips low enough. This is supposed to show that they are “investing” rather than gambling. But, the stop positions are well known, because they cluster around technical “resistance” and “support” levels. The gamblers virtually all believe that they can foresee the future through non-living psychics, known as “charts”. Coordinated short selling, therefore, will ALWAYS be devastating. It will be targeted to trip those automatic stop-loss orders, to result in the dominoes falling, and a deep decline in paper prices.

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Miners in Philippines face court battle

By Rey E. Requejo
Manila Standard Today 

Mining companies have asked the Supreme Court of the Philippines to dismiss petitions seeking to strike down Republic Act 7942 or the Philippine Mining Act of 1995 over constitutional issues that the high tribunal has already resolved with finality in a landmark ruling in 2004. They said “there is a price to pay in changing the rules in the middle of the game.”

Interviewed before the oral arguments held at the court’s summer session hall in Baguio City on Tuesday, lawyer Tito Lopez, counsel of Australian mining firm Oceana Gold that operates in Nueva Vizcaya, warned of massive repercussions to the national economy should the high court nullify the law and cancel all Financial and Technical Assistance Agreements and Mineral Production Sharing Agreements.

“Can you imagine the possible impact of canceling the FTAA or MPSA? These foreign companies have already invested a lot in their explorations and actual operations and you will cancel their permits. Will that not discourage foreign investments?” he stressed.

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Gold bears won’t have the last laugh

By Matt Insley
The Daily Reckoning

Sometimes I wish charts could lie. Sadly, they don’t.

Gold fell through recent support at $1,550 last Friday and continued dropping yesterday — hitting a fresh two-year low below $1,350. Last time we saw prices this low was early 2011.

So, in order for us to save face next time we see the stereotypical, gold-hating jerk that we all have in our lives — and more importantly see how to gear our investment strategy going forward — let’s have a look at the recent action in metals…

Since Thursday, gold is off 12%, platinum is down 8% and silver had the worst 4-day stretch, off 15%. To put gold’s recent move in perspective, it still takes a back seat to 2011’s correction (-17%) and isn’t nearly as bad as the downdraft action we saw in 2008 (-25%.)

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