December 5, 2019
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Even though it’s on rate-cutting hold, the Fed nonetheless keeps engaging in aggressive oversubscribed repo ops, or as we like to call the process, “QE4R.”
QE4R involves offering money to banks in return for short-term U.S. Treasury and mortgage bonds, in shades of 2009.
The fact that the Fed is expanding its balance sheet through these repo operations allows it to pretend it is merely auctioning “adjustment-based” policy moves, rather than problem-based ones, to keep rates from rising and money becoming too expensive for banks.
This provides the Fed a kind of cover during which it can hold off on rate cuts until it deems that data clearly suggest they do otherwise.
Regardless of the reasons for QE4R, this new flow of dark money has the ability to stimulate the stock and bond markets — along with gold. Although gold prices have rallied on the back of the Fed’s recent balance sheet growing exercise, gold has been rising less quickly than it did during the initial phases of QE in the post-financial crisis period from 2009 through 2011.
However, the stock market has been rising steadily (with some bumps along the way) since the start of the Fed’s QE4R operations. There are several reasons for this phenomenon.
Computer algorithms, ETF-related trading and asset managers for pensions and other forms of retirement funds seeking yields above those of bonds have pushed the market up. So have corporate stock buybacks. There is also the steadfast (and proven true) belief that the Fed will step in whenever it “has to,” as would other central banks around the world.
There’s a reality behind the dark money-infused market euphoria, though. It’s that U.S. economic growth, as well as that of the global economy, has been slowing down and will likely continue to slow.
Shrinking corporate profits in conjunction with lower rates and increased debt loads is not a classic recipe for a prolonged bull market. The fact that bulls continue to run is a mark of just how much dark money can keep markets elevated.
In the past, slowing profits along with more debt and cheap money has more closely reflected a bear market (consider the U.S. stock market in 2000–02, 2007–09 and the Japanese stock market since 1989). Japan’s stock market would be even lower were it not for various QE and ZIRP moves by the Bank of Japan.
U.S. corporate margins may well have already hit a multiyear peak. As we head toward the 2020 U.S. election, it’s hard to see many corporations diverting their debt loads into R&D or investment programs. This could hold true after the elections regardless of which political party wins.
Another reason that the Fed began QE4R is the global shortage of U.S. dollars in money markets. This also happened at the start of the financial crisis in 2008.
The last thing Fed Chairman Jerome Powell wants under his stewardship is a repeat performance. Repo lending rates spiked in September because of this shortage and liquidity problems at the big banks. This continues to this day, as evidenced by the Fed’s term repo lending facilities being often oversubscribed by the largest Wall Street players.
Since Monday, the Fed has pumped $97.9 billion into the market in two parts. One was through overnight repurchase agreements of $72.9 billion. The other was through 42-day repos. The result is that the Fed’s balance sheet has topped the $4 trillion mark and looks to rise from there.
Also, the Fed again increased the amount of short-term cash loans it plans to offer banks to ensure rates remain stable. It now plans to offer $25 billion in cash loans for the 28-day period ended Jan. 6, up from $15 billion previously.
Last week, it increased the size of its 42-day facility for the period ended Jan. 13 by $10 billion, too. This was also based on its recent bank supervisory findings that 45% of U.S. banks holding more than $100 billion in assets have supervisory ratings that are less than satisfactory.
All of this means that the Fed’s easing this year was very much a defensive maneuver. And it continues to act pre-emptively against the potential for a dollar funding squeeze as derivative-trading banks close their books into year-end 2019 through its repo operations.
Though different from the longer-term QE operations the Fed actioned between 2009–2014 that inflated stock, government and corporate bond prices, the result is the same. An artificial stock market rally. And more debt.
The big difference is all of this money manufacturing is now occurring against a backdrop of economic weakness and trade-war and geopolitical uncertainty.
For now, and heading into 2020, there remain six key economic trouble spots in the U.S. alone:
- Trade Wars. China trade talks are still going nowhere specific. President Trump has threatened to “raise the tariffs even higher” on Chinese imports if a trade deal cannot be reached by Dec. 15 and went so far as to indicate that he’d be fine if a deal didn’t occur until after the 2020 election. So “phase one,” which was announced over a month ago, has made no real progress…keeping markets knee-jerking on any positive or negative rumors.
- U.S. household debt at a high of $14 trillion — $1.3 trillion higher than its prior peak in Q3 2008. This could eventually hurt consumer appetites and dampen U.S. GDP.
- U.S. GDP is growing but decelerating. In this 11th year of expansion and easy monetary policy, the expansion may be longer, but it’s also shallower that past expansions.
- U.S. $20 trillion national debt is at 104–105% of GDP, having passed 100% in Q3 2012. Though Jerome Powell has stressed to Congress that it must find a way to fix this, the Fed continues to be the largest buyer of U.S. Treasuries, thereby pushing the problem forward of debt growing faster than the economy.
- Money supply (M2) has grown since the 1980s, but money velocity (VM2) has declined since 1997, particularly since the financial crisis. That means that local businesses aren’t working together enough to stimulate the foundation of the U.S. economy.
- Ongoing quest for risky assets could backfire. These problems were created by central banks. The longer rates are low, the more risk asset managers — i.e., investment funds, pensions funds and long-term insurance companies — take on to meet liabilities. This is exacerbated by slowing economies and means more global exposure to credit and liquidity risk. This increases the underlying instability in the international markets.
Given all of this backdrop, I believe that markets will continue to rally on the back of dark-money operations with volatile periods. However, gold is increasingly an attractive safe-haven investment.
Thus, it’s only a matter of time before gold has a catch-up rally.
for The Daily Reckoning
Taseko Mines Ltd. [TKO-TSX; TGB-NYSE American] on Friday December 6 released an update related to its New Prosperity copper-gold project near Williams Lake, British Columbia.
The company said the Tsilhqot’in Nation as represented by the Tsilhqot’in national government and Taseko Mines have entered into a dialogue, facilitated by the Province of British Columbia, to try and obtain a long-term solution to the conflict regarding the proposed New Prosperity mine, acknowledging Taseko’s commercial interests and the opposition of the Tsilhqot’in Nation to the project.
While Taseko said the details of the process are confidential, in order to facilitate a dialogue, the parties have agreed to a standstill on certain outstanding litigation and regulatory matters, which relate to Taseko’s tenures and the area in the vicinity of the Teztan Biny (Fish Lake).
Taseko shares rallied on the news, rising 5.8% or $0.03 to 55 cents. The shares trade in a 52-week range of 50 cents and $1.05.
Taseko is a Vancouver-based company with a portfolio that includes the Gibraltar copper-molybdenum mine in B.C. and the Florence Copper Project in Arizona. Gibraltar is expected to produce 130 million pounds of copper this year.
It says New Prosperity is one of Canada’s largest undeveloped copper-gold projects. The deposit is a gold-copper porphyry with a one billion tonne Measured and Indicated resource, containing 5.3 billion pounds of copper and 13.3 million ounces of gold.
If the project was developed, Taseko envisages average annual production of 110 million pounds of copper and 234,000 ounces of gold. The projected mine life is estimated at 33 years.
The $1.5 billion project was approved by the B.C. government. But Ottawa rejected it twice in 2010 and 2014, on the advice of the Environmental Assessment Agency. The first rejection was based on Taseko’s plan to drain Fish Lake and use it as a tailings impoundment. The company later revised the mine plan to avoid using the lake, but it was again rejected on environmental concerns.
However, in June, 2019, Taseko announced that the Supreme Court of Canada had cleared the way for it to undertake geotechnical work at the New Prosperity Project. The Supreme Court of Canada dismissed the Tsilhqot’in First Nation’s (TNG) application to appeal an earlier judgement by the B.C. Supreme Court and the British Columbia Court of Appeal.
Taseko said the court decision has confirmed the resilience of B.C.’s current mine permitting process.
The TNG previously launched a legal bid to stop exploration drilling in the Teztan Biny (Fish Lake) area, after it alleged that the provincial government breached its duty to consult and accommodate the TNG in approving contentious plans for further exploration in the region.
However, that bid was unsuccessful after the Supreme Court of B.C.’s August 23, 2018 decision allowed Taseko to proceed with investigative work.
“Getting permission to mine in British Columbia may be difficult, but it’s not impossible. It just takes patience,” said the company’s CEO Russell Hallbauer.
Hallbauer said the New Prosperity deposit is rare. He said it ranks as the largest undeveloped copper-gold deposit in Canada and is easily among the top 15 in the world. “It can be a powerhouse for economic change in B.C.’s central interior,” he said. “It can be a positive game changer for First Nations as well.’’
Hallbauer went on to say that with B.C. lumber manufacturers closing mills and curtailing operations, potential mines like New Prosperity offer renewed hope and opportunity, especially for the people of the interior. “People should never give up on its potential, nor the value and opportunity it can deliver to all the people of B.C.,” he said.
Minera Alamos Inc. [MAI-TSXV; MAIFF-OTC] shares rallied Friday December 6 after the company said it has arranged a $14 million combined equity and royalty financing package with Osisko Gold Royalties Ltd. [OR-TSX, NYSE]. The funds will be used for construction of Minera’s 100%-owned Santana gold mine in Sonora, Mexico.
Minera Alamos is an advanced stage exploration and development company with a portfolio of Mexican development assets, including the La Fortuna open-pit gold project in Durango and the Santana open-pit heap leach development project in Sonora.
Under the terms of the financing, Osisko will purchase 30 million Minera Alamos common shares on a non-brokered private placement basis at 20 cents per share for aggregate proceeds of $6 million.
Osisko will acquire a perpetual 3% net smelter return royalty on the Santana property for a cash payment of $5 million.
Minera Alamos will be granted the right to draw down up to an additional $3 million in financing from Osisko to provide additional funding flexibility, if needed, during construction and start-up of the proposed Santana gold mine.
All common shares issued under the offering will be subject to a four-month hold period from the closing date. Completion of the offering will increase Osisko’s stake in Minera Alamos to 18.7% from 12.3%.
After trading in the shares resumed on Friday, Minera Alamos rose 8.3% or $0.02 to 26 cents. The shares are currently trading in a 52-week range of $0.085 and 24 cents.
“We appreciate the ongoing support and backing that our operating team has received from Osisko Gold Royalties,” said Minera Alamos CEO Darren Koningen. “This financing package allows the company to begin its transition from gold project developer to gold producer. Today’s news sets the stage for an extremely busy and exciting 2020 as our team executes our business plan to the benefit of all our shareholders.”
The 8,500-hectare Santana Project is accessible by pave highway and will be an open pit heap leach operation.
Minera Alamos has elected to move ahead with construction at Santana even though it has not completed a feasibility study of mineral reserves demonstrating the economic and technical viability of the project.
The company said it believes it is reasonable to make this decision without a feasibility study or technical report because of positive results received during the test mining phase completed in 2018-2019, where a 50,000 tonne bulk heap-leach test was performed.
Minera Alamos said the decision to proceed with construction is also based on the operating team’s previous success in putting similar operations into production over the last 12 months.
Construction is expected to take roughly six to eight months and will likely cost approximately $10 million. That amount is expected to cover construction of the carbon plant, pads, ponds and various earthworks at the mine site.
White Gold Corp. [TSX.V: WGO, OTC – Nasdaq Intl: WHGOF, FRA: 29W] is pleased to announce it has staked three strategic claim blocks (Kodiak, Kirkman & Tea) totaling 689 mining claims (the “Claims”) contiguous to the Company’s White Gold property, Newmont Goldcorp Inc.’s (TSX: NGT, NYSE: NEM, “Newmont”) Coffee project and Western Copper & Gold’s (TSXV: WRN, NYSE: WRN) Casino project, all located in the prolific White Gold District, Yukon, Canada. The claims further extend the Company’s land package to the south, with Kodiak & Kirkman claim blocks located approximately 10km south of the Company’s White Gold deposit and 10km to the north of Newmont’s Coffee deposit, and the Tea claim block located contiguous to the Coffee project to the south. These properties each display similar geological characteristics to the nearby properties which host significant gold deposits. The Claims bring the Company’s expansive land package to 21,207 quartz claims across 33 properties, totalling over 422,730 hectares, representing over 40% of the White Gold District. White Gold Corp’s fully-funded $13 million 2019 exploration program backed by partners Agnico Eagle Mines Limited (TSX: AEM, NYSE: AEM) and Kinross Gold Corp (TSX: K, NYSE: KGC) includes diamond drilling on the Vertigo target (JP Ross property), Golden Saddle & Arc deposits (White Gold property) as well as soil sampling, prospecting, GT Probe, trenching and RAB/RC drilling on various other properties across the Company’s expansive land package located in the prolific White Gold District, Yukon, Canada.
- New claims staked:
- KODIAK: 111 claims contiguous to the White Gold property and 10km north of Newmont’s Coffee deposit
- KIRKMAN: 272 claims extending south of Kodiak, also north of Newmont’s Coffee and south of the White Gold property.
- TEA: 306 claims contiguous to Newmont’s Coffee project on the south.
- These properties are historically underexplored and display similar geological characteristics to the Coffee project and White Gold properties.
- Shawn Ryan, Chief Technical Advisor will be presenting today Thursday December 5, 2019 at 4PM EST, a live webinar corporate update focusing on the Company’s recent high-grade gold discovery the Titan; Registration details are provided below, and a recording will also be available subsequent to the webinar.
- Additional regional exploration activity & drill results from the White Gold and JP Ross properties to be released in due course.
Maps showing the location of the Claims can be found at http://whitegoldcorp.ca/investors/exploration-highlights/.
“Our recent high-grade, near surface Titan discovery and last year’s Vertigo, Ryan’s Surprise and other discoveries continue to demonstrate the success of our proprietary, methodical data-based exploration strategy and the prospectively of our extensive land package in the prolific White Gold District. The Kodiak, Kirkman and Tea properties have similar geological characteristics to our White Gold property and/or the Coffee project and are strategic additions to our land package,” stated David D’Onofrio, Chief Executive Officer.
Kodiak & Kirkman Properties:
Kodiak is comprised of 111 claims located south and adjacent to the Company’s White Gold property and approximately 15km north Newmont’s Coffee deposit. Kirkman is comprised of 272 claims extending south of the Kodiak Property, in close vicinity to the Company’s White Gold property and approximately 10km north of Newmont’s Coffee project and 2 km north of Arcus Development Group Inc.’s Dan Man property.
The Kirkman claims were previously held by Kaminak Gold, who originally discovered the Coffee deposit and was subsequently acquired by Goldcorp for $530M. Historically the properties have only had limited exploration work completed, comprised primarily of soil sampling, geophysical surveys, and minor trenching activity.
The strong soil anomalies and favourable geology, combined with the proximity to the neighboring gold deposits warrant follow up exploration. The anomalies are also alongside the Kirkman Creek which is currently actively mined for placer gold.
The Tea is comprised of 306 claims on a new target area and is located immediately south of Newmont’s Coffee project, and adjacent to Western Copper & Gold’s Casino project to the east. The Tea property claims were staked based on geologic and geophysical interpretation of the area with the claims covering a previously unexplored regional scale, E-W oriented, structural corridor and receptive host rocks. Placer gold is known to occur within streams draining the area and the geologic and structural framework is similar to that which hosts mineralization on the adjacent Coffee property, and the Company’s Betty property approximately 25km to the east.
Live Corporate Update Webinar: Titan Discovery – Thurs Dec 5, 2019 4PM EST
Shawn Ryan, Chief Technical Advisor, will present a live webcast corporate update with a focus on the Company’s Titan discovery.
The recent and first ever drilling on the Titan intercepted 72.81 g/t Au over 6.09m from 10.67m depth, including 136.36 g/t Au over 3.05m, within a 32m zone of mineralization and remains open in all directions(1). The Titan is located on the road-accessible Hen property and consists of a 650m x 650m gold in soil anomaly with multiple other prospective targets that show similar geophysical characteristics to the mineralization encountered in these drill holes. Titan surface exploration results include grab samples of 605 g/t Au, 497 g/t Au, and 113 g/t Au with fine grained visible gold observed, and soil samples of up to 113 g/t Au, the highest ever in the Company’s 400,000+ soil sample database(2).
Register for Live Webinar at Link Below: A recording of the webinar will become available after the Webinar using the same link:
- See White Gold Corp News Release dated November 26, 2019, available on SEDAR.
- See White Gold Corp News Release dated September 5, 2019, available on SEDAR.
The Company also announces that Robert Carpenter has stepped down from the Board of Directors to pursue other interests. The Company would like to thank Rob for his valuable contributions to the Company and wish him the best of luck in his future endeavours.
The analytical work for the 2019 drilling program will be performed by ALS Canada Ltd. an internationally recognized analytical services provider, at its Vancouver, British Columbia laboratory. Sample preparation was carried out at its Whitehorse, Yukon facility. All RC chip and diamond core samples will be prepared using procedure PREP-31H (crush 90% less than 2mm, riffle split off 500g, pulverize split to better than 85% passing 75 microns) and analyzed by method Au-AA23 (30g fire assay with AAS finish) and ME-ICP41 (0.5g, aqua regia digestion and ICP-AES analysis). Samples containing >10 g/t Au will be reanalyzed using method Au-GRAV21 (30g Fire Assay with gravimetric finish).
The reported work will be completed using industry standard procedures, including a quality assurance/quality control (“QA/QC”) program consisting of the insertion of certified standard, blanks and duplicates into the sample stream.
About White Gold Corp.
The Company owns a portfolio of 21,207 quartz claims across 33 properties covering over 422,730 hectares representing over 40% of the Yukon’s White Gold District. The Company’s flagship White Gold property has a mineral resource of 1,039,600 ounces Indicated at 2.26 g/t Au and 508,700 ounces Inferred at 1.48 g/t Au. Mineralization on the Golden Saddle and Arc is also known to extend beyond the limits of the current resource estimate. Regional exploration work has also produced several other prospective targets on the Company’s claim packages which border sizable gold discoveries including the Coffee project owned by Newmont Goldcorp Corporation with a M&I gold resource(3) of 3.4M oz and Western Copper and Gold Corporation’s Casino project which has P&P gold reserves(3) of 8.9M oz Au and 4.5B lb Cu. For more information visit www.whitegoldcorp.ca.
(3) Noted mineralization is as disclosed by the owner of each property respectively and is not necessarily indicative of the mineralization hosted on the Company’s property.
Jodie Gibson, P.Geo., a Technical Advisor for the Company, is a “qualified person” as defined under National Instrument 43-101 Standards of Disclosure for Mineral Projects, and has reviewed and approved the content of this news release.
Cautionary Note Regarding Forward Looking Information
This news release contains “forward-looking information” and “forward-looking statements” (collectively, “forward-looking statements”) within the meaning of the applicable Canadian securities legislation. All statements, other than statements of historical fact, are forward-looking statements and are based on expectations, estimates and projections as at the date of this news release. Any statement that involves discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions, future events or performance (often but not always using phrases such as “expects”, or “does not expect”, “is expected”, “anticipates” or “does not anticipate”, “plans”, “proposed”, “budget”, “scheduled”, “forecasts”, “estimates”, “believes” or “intends” or variations of such words and phrases or stating that certain actions, events or results “may” or “could”, “would”, “might” or “will” be taken to occur or be achieved) are not statements of historical fact and may be forward-looking statements. In this news release, forward-looking statements relate, among other things, the Company’s objectives, goals and exploration activities conducted and proposed to be conducted at the Company’s properties; future growth potential of the Company, including whether any proposed exploration programs at any of the Company’s properties will be successful; exploration results; and future exploration plans and costs and financing availability.
These forward-looking statements are based on reasonable assumptions and estimates of management of the Company at the time such statements were made. Actual future results may differ materially as forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to materially differ from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors, among other things, include:; expected benefits to the Company relating to exploration conducted and proposed to be conducted at the Company’s properties; failure to identify any additional mineral resources or significant mineralization; the preliminary nature of metallurgical test results; uncertainties relating to the availability and costs of financing needed in the future, including to fund any exploration programs on the Company’s properties; business integration risks; fluctuations in general macroeconomic conditions; fluctuations in securities markets; fluctuations in spot and forward prices of gold, silver, base metals or certain other commodities; fluctuations in currency markets (such as the Canadian dollar to United States dollar exchange rate); change in national and local government, legislation, taxation, controls, regulations and political or economic developments; risks and hazards associated with the business of mineral exploration, development and mining (including environmental hazards, industrial accidents, unusual or unexpected formations pressures, cave-ins and flooding); inability to obtain adequate insurance to cover risks and hazards; the presence of laws and regulations that may impose restrictions on mining and mineral exploration; employee relations; relationships with and claims by local communities and indigenous populations; availability of increasing costs associated with mining inputs and labour; the speculative nature of mineral exploration and development (including the risks of obtaining necessary licenses, permits and approvals from government authorities); the unlikelihood that properties that are explored are ultimately developed into producing mines; geological factors; actual results of current and future exploration; changes in project parameters as plans continue to be evaluated; soil sampling results being preliminary in nature and are not conclusive evidence of the likelihood of a mineral deposit; title to properties; and those factors described in the most recently filed management’s discussion and analysis of the Company. Although the forward-looking statements contained in this news release are based upon what management of the Company believes, or believed at the time, to be reasonable assumptions, the Company cannot assure shareholders that actual results will be consistent with such forward-looking statements, as there may be other factors that cause results not to be as anticipated, estimated or intended. Accordingly, readers should not place undue reliance on forward-looking statements and information. There can be no assurance that forward-looking information, or the material factors or assumptions used to develop such forward-looking information, will prove to be accurate. The Company does not undertake to release publicly any revisions for updating any voluntary forward-looking statements, except as required by applicable securities law.
Neither the TSX Venture Exchange (the “Exchange”) nor its Regulation Services Provider (as that term is defined in the policies of the Exchange) accepts responsibility for the adequacy or accuracy of this news release.
Doc joins me today to share his outlook for gold, the US dollar, and US markets. We also discuss a couple stocks that Doc has been buying in the metals space.