How THIS Is Making the Housing Crisis Worse

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It’s happened several times in the last couple of months – someone approaches me, clipboard in hand, and asks if I’m a California voter. Then, barely waiting for my response, they start asking me to sign a petition related to rent control.

The first time it happened, at my local organic market in Santa Barbara, I just politely said “no thanks.”

The most recent time, at a professional women’s surfing contest in San Diego last week, I couldn’t hold back and ended up saying a bit more to the solicitor.

And now, after hearing Bernie Sanders mention the idea during last Tuesday’s primary debate, I want to tell you a more expanded version of where I stand on the topic (and why)…

My Grandparent’s Experience

Let me first say that, like Bernie Sanders and other proponents of rent control, I’m very familiar with the plight of poor families that rent all of their lives …

My mom’s parents rented the same apartment in downtown Wilkes-Barre, Pennsylvania for more than 50 years.

Her father grew up in such poverty that he had to drop out of high school to go work in the coal mines.

Her mother graduated from high school but stayed home to take care of the kids.

They were Depression-era people, conservative with what little money they had, and they never made the leap to home ownership.

After leaving the mines, my grandfather made his living doing all kinds of odd jobs – car mechanic, electrical work, etc. – including helping out his landlord whenever needed. His rent still went up on a regular basis. Even when my grandmother was living in the apartment alone in her early 90s, the landlord was talking about another increase.

Would it have been nice if their rent, established in the 1950s, could have only gone up 3% or 4% a year so long as they stayed in that apartment? Absolutely.

Still, they never complained. They knew prices for things went up over time. They cited a few times in the past when they might have been able to buy a house in the neighborhood but just couldn’t mentally commit to the idea. Nor did they like borrowing large sums from banks.

My grandmother died in that small apartment, with not very much to her name.

Now, let me tell you another story…

Where Rent Control Goes Bad

As my grandmother was into her 80s, I was moving into New York City and looking for apartments.

I was working for Standard & Poor’s and making a good salary, but hardly anything exorbitant. My one-bedroom apartment just off Wall Street was $2,300 and was subject to market rate increases going forward.

My boss, perhaps 30 years older than me, lived a couple neighborhoods away. He obviously made more than me but he’d been in New York for a long time and his apartment – twice the size of mine – was under rent control. I don’t know exactly how much he paid but I would guess a third of my rent for twice as many bedrooms. He also owned a vacation home outside the city.

Meanwhile, there were plenty of rent-controlled people charging large amounts of money to let someone move into a vacant bedroom while their landlord received nothing.

I also knew someone who lived in another state almost all of the year but maintained a rent-controlled NYC apartment as a little getaway (lying about residency in the process).

This is just a little taste of what I saw, but the big-picture was pretty easy to see – rent control largely rewarded people who got there first, regardless of their financial status … it was easily abused … and it did very little to help newcomers or anyone looking to move from one place to another.

There is also no doubt that many landlords do everything in their power to screw over tenants, especially in a place like New York City. And from what I saw, rent control didn’t help that situation either … it merely discouraged building owners from improving their rent-controlled properties any more than was absolutely necessary.

Indeed, New York City just changed a bunch of rules related to rent control and we’re already hearing about landlords bailing on big capital investments.

But you don’t have to accept my personal experience or anecdotal evidence.

The academic research is pretty decisive that rent control doesn’t work, whether you’re talking about New York or Paris.

As Reason noted in a recent article:

“Brookings Institute associate professor of economics Rebecca Diamond did a recent review of the literature on rent control, finding that ‘Rent control appears to help affordability in the short run for current tenants, but in the long-run decreases affordability, fuels gentrification, and creates negative externalities on the surrounding neighborhood.’ The reason is simple and boils down to the law of supply and demand. While some of the people renting may benefit from rent control by removing some of their risk, it also gives landlords an incentive to alter their supply of rental property.

“They have several options based on the circumstances. First, they may withdraw their properties from the rental market to sell them as condos. Former George Mason University Chairman of the Department of Economics Donald Boudreaux summed it up nicely in a 2006 letter to the editor of The New York Times: ‘By decreasing the profitability of supplying units occupied by renters, these controls spawn condo conversions and prompt builders to construct fewer rental units and more units for sale to owner-occupiers. People who can’t afford to buy housing are unnecessarily disadvantaged.’ Landlords may also stop investing in maintenance, which, over time, may lead to neighborhoods with many run-down properties. The bottom line is that rent control never increases the supply of affordable rented housing.”

What about this legislation they’re trying to pass in California?

Well, after I explained that I recently purchased a million-dollar home and would never want to cap my own future rental potential, the solicitor at the competition assured me that it would only apply to landlords who own three or more properties.

At that point, I didn’t bother to explain that I also recommend investing in companies like Real Estate Investment Trusts (REITS) that are essentially corporate landlords.

It was clear we simply had different ideas about capitalism and free markets.

If Rent Control Doesn’t Work, What Will?

From my perspective, the person who took a chance on New York City back in the 1970s – when it was a far cry from its current look and feel – deserves to get market rates for that money invested and risk undertaken.

As did my grandparents’ landlord…

As do I for working hard, and saving enough to buy a house in Santa Barbara.

Can you imagine what it would be like if we suddenly capped the amount of dividends that stocks could pay to their investors?

Well, that’s exactly what rent control does with real estate.

Perhaps the biggest irony is that some of the same people here in California who cry for more affordable housing are the very same people who don’t want garages converted into auxiliary dwelling units, Airbnb listings allowed in residential neighborhoods, or high-rise buildings in land-constrained areas.

Look, housing affordability is a complicated issue. In highly desirable locations with little room for further development, it’s doubly complicated.

But I would much rather see solutions that start with increasing supply, even if it’s something small like simply allowing existing homes to be partitioned into several micro houses. At least it’s a start to fixing a long term problem and not a band-aid that will fester given enough time.

Thinking we can wave a magic wand and keep prices in check through artificial rent controls isn’t going to cut it.

To a richer life,

Nilus Mattive

— Nilus Mattive
Editor, The Rich Life Roadmap

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Kore inks $4 million deal to develop California gold project

Vancouver-based Kore Mining (TSXV: KORE) this week received a $4 million investment by Macquarie Bank to advance permitting of the Imperial gold project in California.  

Kore owns a 100% interest in the development project in the mining district of Imperial County. The property is about 17km south east of the operating Mesquite Mine recently acquired by Equinox Gold for $158 million.  

Macquarie will subscribe for 6 million common shares of Kore and acquire a 1% NSR royalty on the Imperial Project. Newmont Goldcorp also holds a 1% NSR royalty on the Imperial project. 

200,000 feet of historical drilling has been completed at Imperial, and the property contains 879,000 gold ounces in the measured and indicated category and 1.29 million ounces in the inferred category, grading at 0.60 g/t. Imperial is in an advanced stage in the permitting process with the Bureau of Land Management

“Imperial is a project that is very robust economically. Although we don't have a current feasibility study on it, it is being really well studied. It had a feasibility study completed on it previously by Newmont Goldcorp  and we bought the project from them," Adrian Rothwell, Kore president and CEO told MINING.com.  

 "One of the reasons why we were interested in the Imperial project was because it's in Imperial county, about 10 miles away from the Mesquite operation, which is a mature end-of-mine-life operation now owned by Equinox,” Rothwell said.  Rothwell said Imperial is in an advanced stage in the permitting process with the Bureau of Land Management (BLM).  

"There's a historic environmental impact statement report that's being prepared on the project that was done by a predecessor of Goldcorp in 2001, and Kore is planning to supplement that.  The good news is that not a great deal needs to be done from scratch. We'll be doing some update on engineering to arrive at a plan of operations, an updated environmental report that can be done over the next 15 months, Rothwell said. We're at a point where we will resubmit a plan of operations with the BLM in the coming months.” 

 Rothwell said he aims to have Imperial in production within the three years, before Mesquite gets to the end of its mine life.  

 “I think that's entirely feasible. With the right money, which we now have, and the right heart from the county and from the BLM, [its] obviously a good time to be doing this federally.”  

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Equinox increases gold resources at Aurizona and Mesquite

Equinox Gold has boosted resources at its Aurizona gold mine in northeastern California and reserves and resources at its Mesquite gold mine in California. Since the end of 2017 the company has increased its reserves 470% to 5.5 million oz. gold.

The company updated Aurizona’s resource with 13,635 metres of infill and step out drilling on the western end of the Piaba deposit completed since July 2017. While the project’s reserves remain unchanged, the company increased its measured and indicated resource 50% to 12.7 million tonnes grading 1.68 grams gold for 691,776 oz. gold and its inferred resource 115% to 16.9 million tonnes at 1.98 grams gold for 1.07 million oz. gold, 50% and 115% increases respectively.

After acquiring Mesquite in October 2018, the company had to complete an updated reserve and resource estimate and National Instrument 43-101 report for the project.

Equinox increased the project’s measured and indicated resources by 61% to 127.9 million lb. grading 0.46 gram gold for 1.89 million oz. gold. At the same time the company decreased the project’s reserves to 54.6 million proven and probable tonnes at 0.57 gram gold for 1 million oz. gold.

Its new report says Mequite will produce 682,800 oz. gold from current reserves over 3.25 years of mining and three more years of residual leach. It assigns the project a $203 million after-tax net present value at a 5% discount rate.

(This article first appeared in The Northern Miner.)

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Equinox Gold attracts $130m investment from Abu Dhabi

Equinox Gold (CVE: EQX) has attracted a $130-million investment from Abu Dhabi’s state-owned Mubadala Investment Co. in the form of convertible notes.

The notes are for five years with a 5% interest rate convertible at $1.05 per share, a 25% premium to the 10-day volume weighted average Equinox share price. Mubadala will be granted a seat on Equinox’s board and standard anti-dilution rights.

Equinox plans to use the funds to move the Castle Mountain gold project forward in California, refinance a portion of existing debt, and for general and working capital expenses.

Equinox is moving the Castle Mountain heap leach gold mine in California towards phase one production in 2020. This historic mine will start its next life as a 200,000 oz. gold per year producer. Measured and indicated resources are 242.2 million tonnes at 0.63 g/t gold for 4.3 million contained ounces. The inferred resource is 171.4 million tonnes at 0.40 g/t gold for 2.2 million contained ounces.

At market close Tuesday, shares in Equinox were up 2%.

This article first appeared in Canadian Mining Journal.

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Crown Mining preps Moonlight for next copper rally

Earlier this year, Crown Mining (TSXV: CWM) bought 100% of the Moonlight-Superior property in northeastern California for $375,000 in cash and 2.75 million shares.

The land package is best known for its Superior and Engels deposits, which produced over 161 million lb. copper as underground mining operations between 1915 and 1930.

But the property, 200 km northeast of Sacramento and 145 km northwest of Reno, also has a third deposit called Moonlight that wasn’t discovered until the 1960s, and was never developed. Moonlight has 252 million indicated tonnes grading 0.25% copper for 1.3 billion lb. contained copper, and 109 million inferred tonnes averaging 0.24% copper for 534 million lb. copper.

Moonlight, about 2.5 km from Superior and Engels, has nearly 1.5 billion lb. copper, the company says.

According to a resource estimate Crown completed in December 2017, which was based on 202 historic drill holes, Moonlight has 252 million indicated tonnes grading 0.25% copper for 1.3 billion lb. contained copper, and 109 million inferred tonnes averaging 0.24% copper for 534 million lb. copper.

Of the historic drill holes, 189 were drilled by American Exploration between 1966 and 1970, and the other 13 were undertaken by Sheffield Resources between 2005 and 2006.

In March, Crown completed a preliminary economic assessment (PEA) on Moonlight that concluded an open-pit mine would produce an average of 85 million lb. copper, or 163,000 tons copper concentrate a year, over a 17-year mine life.

The early-stage study did not take into account any mineralization from the Superior deposit, which, according to an inferred resource estimate from 128 historic drill holes Crown completed in 2014, has another 54.4 million inferred tonnes grading 0.41% copper for 487 million lb. contained copper.

Using a base case copper price of $3.15 per lb., the PEA forecast a 16.4% internal rate of return, $179-million net present value and $708-million operating cash flow, all post-tax.

Initial capital costs were forecast to reach $513 million, including a $71-million contingency, and the study estimated a pre-tax payback period of just under five years.

Crown Mining’s Moonlight-Superior property in northeastern California. Credit: Crown Mining.

“The bottom line is the PEA helps us to talk to people about the merits of the property,” Crown’s president and CEO Stephen Dunn says. “The PEA shows people that this thing can be economic at $3.15 per lb. copper, so it makes it a lot easier to talk to people about the pros and cons.”

Dunn notes that the study did not factor in any gold credits, and points out that previous owners of Moonlight did not assay the first 15 metres of oxide, which so far has been categorized as waste.

“It is actually mineralized and can be mined,” he says, “so we need to do more work and drilling to be able to delineate the oxide, and that will help the economics.”

Dunn says it would cost $500,000 to punch 20 holes into Moonlight’s upper oxide layers, but with the current market as poor as it is for juniors with early-stage projects, the timing just doesn’t seem to be right.

“When the markets get better and it wants juniors, we will do that, but my market cap is only $5 million, so we really don’t get any appreciation for what we have,” he says. “If we tried to raise $2 million right now it would dilute my shareholders too much, so I’m waiting for markets to get better.”

Dunn, who founded the company, is the largest shareholder, with 20% of Crown’s 40 million common shares outstanding. Five other investors (most of them high school and university friends) own another 30%.

“Whenever we need money we just pass the hat,” Dunn says. “We put in $100,000 a month ago, and I did half of that.”

The company has 40 million common shares outstanding and has traded within a 52-week range of 6.5¢ (October 2018) to 28¢ (March 2018).

Dunn doesn’t kid himself about the prospects of putting Moonlight into production any time soon.

“No one is going to build this mine unless copper is over $3.50 per lb.,” he says. “Because of the last cycle, producers don’t want to start building huge new mines unless they’re almost assured of making profits in the first few years.”

But Dunn is bullish on the market fundamentals for the metal, and likes to quote mining guru Robert Friedland of Ivanhoe Mines (TSX: IVN), who predicted earlier this year that “you will need a telescope to see copper prices in 2019.”

Dunn says copper is setting itself up for “a pretty big rally” next year and could hit $5 per lb. “very soon.”

“Everyone is pointing fingers at trade wars, but the thing is, the global economy is still growing,” he says. “There’s still positive growth and demand everywhere … the reality is, there’s a copper deficit, and one of these days prices are going to reflect that.”

He also dismisses arguments that copper demand from China — which he calculates consumes almost half the global market for the metal — can’t continue at the same pace.

“A lot of people who don’t understand economics say, ‘that can’t last,’ but of course it can,” he exclaims. “They are building out their grid. They are building new office buildings and electric trains and will continue to use the same amount of copper.”

Meanwhile, he reasons, “India is looking over China’s shoulder and wants the same things.”

Like most copper bulls, Dunn points to declining copper grades around the world, a shortage of new mines coming on stream, and what he calls the looming “pinch point,” where demand will suddenly exceed supply.

“When that happens prices explode, because buyers need that pound of copper for the refrigerator or the car they’re making,” he says. “People are going to make a lot of money in copper and the market is ignoring that right now.”

This article originally appeared in The Northern Miner. 

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Renewed interest in California gold mines

Dan Ashley
KGO-TV, San Francisco

More than half a century after the state’s big mining operations closed there is renewed interest in California gold. Its value has shot through the roof and so has the momentum to bring back mining operations. The first of them is about ready to start up. In this Assignment 7 report, we take you inside a genuine gold mine.

In the Sierra foothills, there are still reminders of California’s golden past. A stretch of Amador County was called “the mother lode” for a reason — more than 7.5 million ounces of gold were mined there. But by the 1950s gold prices dropped and the last of the big mining operations closed. Towns built by prospectors catered mostly to tourists. Now the miners are coming back.

Continue reading . . .

Sutter Gold’s first pour at old mines

By Simon Rees
MiningWeekly.com

John Sutter, 1803-1880, the central figure in the California Gold Rush.

California’s glory days as a world-leading gold-producing region are long gone. Or are they? With the gold upside still very much in play, mines long thought played out or considered uneconomic are being reassessed.

But unlike the stampede of the mid-nineteenth century, this is not a mad rush of all-comers. Instead, only a handful of companies are involved and many of their projects have been years in the planning, waiting for the support of higher gold prices to awaken their potential. This includes Sutter Gold’s Lincoln underground project in Amador County, 45 miles south-east of Sacramento.

The property comprises three main zones: Lincoln, Comet and Keystone. All lie on a 3.6-mile stretch of the 120-mile-long Mother Lode goldbelt and contain eight old mines, including the original Lincoln mine that came into play in 1851.

Read the entire article . . .