L'or de france: octobre 2015

samedi 31 octobre 2015

Le tyrannosaure pris en flagrant délit de cannibalisme

Aux États-Unis, des traces de dentition sur des os de Tyrannosaurus rex ne semblent laisser aucun doute : c’est un autre animal de la même espèce qui a dévoré sa viande. Ce n’est pas la première observation de ce genre, y compris pour un tyrannosaure.

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Cassini a de nouveau plongé dans les panaches d'Encelade

La Nasa a annoncé que Cassini était passée sans dommage, le 28 octobre 2015, à travers les panaches de vapeur d’eau et de particules de glaces qui s’élèvent au pôle sud d’Encelade, une lune de Saturne. Le survol s’est effectué à une altitude de 49 kilomètres. Les premières images...

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Nissan IDS, un concept-car autonome des plus prometteurs

Le constructeur automobile Nissan a dévoilé l'IDS, un concept-car de voiture autonome qui pousse très loin l’exploration technologique. Le plus enthousiasmant est sans conteste l’habitacle qui se transforme complètement en fonction du mode de conduite.

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vendredi 30 octobre 2015

China's new 5-year plan brilliant news for mining

Image: Thierry Ehrmann

The end of China's one-child policy has grabbed all the headlines, but the Fifth Plenary Session of the 18th Central Committee of the Communist Party of China (to give its full designation) also outlined the direction of the world's second largest economy over the next five years.

China's 13th five-year plan running from 2016 – 2020 is the first one approved by Xi Jinping and was expected to focus on strengthening economic and market reforms first mooted in 2013.

Xi appointed himself head of a new "leading group on comprehensively deepening reforms" to overhaul China's investment-led economy into one driven by services and consumption two years ago.

The communique issued yesterday provides only the basic frameworks of programs and policies with a more detailed plan only made public in March.

But already it gives some indication that Xi and company, unnerved by slowing economic growth, may be throttling some of those free-market reforms to put their money again on investment to re-energize the sagging economy.

Wording from 2013 that mentions the establishment of "a unified, open competitive and orderly market system" which would play a "decisive role in allocating resources" is gone from the latest communique.

For the next five years government plans to "encourage better allocation of resources" and the country will "prioritize quality and efficient development," but tellingly it's no longer (only) up to market forces to accomplish this.

Continuing to "raise consumption's contribution to growth" is still an important plank and there is also a promise that "government will intervene less in price formation," a clear reference to its botched stock market meddling earlier this year.

But Beijing's decision let urbanization happen at a faster pace and to stick to its target of "medium-high economic growth"and to double-down on a long-stated commitment to "double 2010 GDP by 2020" is the real kicker.

That 2020 GDP goal would require annual growth rates of 6.5% to go from a nominal $10 trillion last year to over $12 trillion in 2020. That's the equivalent of adding an economy the size of Switzerland's every year.

With the changes in messaging from 2013 the party leaders seem to suggest that such a Herculean task cannot be left to the market or services or consumption.

When growth inevitably begins to flag the Chinese government would likely respond like they always do: incentivize local governments to undertake large projects, mobilize state-owned enterprises for infrastructure investment and inject cash into the economy.

From already elevated levels in 2008, China's consumption of metals have only grown. What this chart will look like in 2020 is an open question and no-one is predicting another China-induced supercycle. But today's doom and gloom about China's supposed loss of appetite for commodities is certainly overblown too.

Source: Moody's

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Why tunnel boring machines are named after women

Why are the eight tunnel boring machines (TBMs) used in London's mega Crossrail project all named after women (Phyllis, Ada, Elizabeth, Victoria, Jessica, Ellie, Sophia and Mary)? Why is the infamous TBM stuck underneath Seattle for the last two years called (Big) Bertha and why is Alice tunneling Vancouver's new Evergreen Line?

Gizmodo's Factually picks up on a Los Angeles Times article, about a competition to name the new machine digging the city's new Crenshaw rail line to explain why these diggers are named after famous women or have female names.

It's a tradition dating back to the 1500s when miners – and anyone working with explosives such as armourers and military engineers – prayed to Saint Barbara to protect them from the dangers underground.

The Great Martyr Barbara lived in present day Turkey or Lebanon during the the third century and was locked up in a tower and executed by her father Dioscorus because she secretly converted to Christianity.

According to Catholic lore God struck her father with a blast of lightning as punishment, hence the association with explosives and flashes of light in underground darkness.

Why tunnel boring machines are named after women

Image of shrine to Barbara in Germany's Schacht Konrad mine by Wusel007

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Aussie miner to open Guyana’s second largest gold mine

Processing plant at the Karouni gold project in Guyana. (Image courtesy of Troy Resources)

Australia's Troy Resources (ASX, TSX: TRY) will begin gold extraction at its Karouni gold project, located in the disputed Essequibo region, administered by Guyana but claimed by Venezuela.

In it quarterly report for the period ended in September, published Friday, the company said the mine is expected to produce up to 100,000 ounces of the precious metal a year.

Troy Resources has invested about $100 million in the project, which will be the second-largest gold mine operating in western Guyana after the Aurora mine began operations in September.

Despite the positive news, investors were not moved to bid up Troy's stock price. The company closed down on Friday on the ASX, slipping almost 4.5% to 32 cents a share, at a market cap of about A$97million.

Gold is Guyana's main export and generated nearly $1 billion in revenue in 2013. But earnings have dropped recently because of weaker gold prices.

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Junior miners: Doom, gloom or boom?

If it wasn’t already clear, the junior companies that explore, develop, and mine the world’s metals are struggling. PwC recently recapped the malaise of these companies in its latest Junior Mine 2015 report, along with highlighting some success stories of those that have been able to bypass the onslaught.

The report, which looks at the Top 100 junior mining companies traded on the TSX Venture exchange, had findings that makes junior mining executives want to bury their heads in the sand. The average market caps of exploration companies is down -51.2% from 2014 to 2015. The amount of money raised in equity and debt markets for exploration companies is down -33.4% over the same timeframe.

Furthermore, the average company on the Top 100 list has $7 million cash, which is down from $10 million last year. In 2011 the average cash in the bank was $22.7 million.

Remember, these are the results of the “best” companies in the space. This doesn’t include the zombies or any of the other hurting companies.

Sings of Life?

Every coin has two sides, and here’s the other side to this one. Over the last two months, data shows that things aren’tgetting worse. In fact, it could even be argued that things are getting better.

Since the end of the “flash crash” that hit markets on August 24th, when the Dow dropped 1,100 points in the first five minutes of trading, miners have been up.

The TSX Venture is up 4.1%, the GDXJ (Junior Gold Miners ETF) is up 3.9%, and the HUI (Basket of Unhedged Gold Stocks) is up 8.0%. Even more spectacular is the GLDX (Global X Gold Explorers ETF), which is up a solid 17.0% since the August lows.

This is obviously not anything definitive. However, seeing all four of these major indices up at the same time is a good sign.

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Future of BHP coal mines in Indonesia hinging on mining rules revision

Coal mining in Central Kalimantan, Indonesia (Image from archives)

Mining giant BHP Billiton (ASX:BHP) may reconsidering its push into coal mining in Borneo, depending on the what comes out of the Indonesian government ongoing review of the sector’s regulations.

Such revisions, Reuters reports, include mandatory divestment and contract extensions, which could either support or discourage BHP’s future investment decisions in the country.

BHP began mining at the Haju coking coal mine during the September quarter, in the first step toward what is expected to be a wider presence in the region, under the company’s IndoMet Coal project, in the Central Kalimantan province.

The project has already raised concerns among environmentalists, some of which were addressed by BHP executives at the company's annual meeting of shareholders in London earlier this month.

Opponents claim that IndoMet is too close to a significant orangutan population in the Upper Barito Basin. According to World Wild Life (WWF) that population has declined by over 50% in the past 60 years, and its habitat has been halved over the past two decades.

While BHP have said that no orangutans have been found on its leases, it helped relocate 280 orangutans found nearby to other parts of Kalimantan.

Haju will initially produce about 1 million tonnes of coal a year, while the larger IndoMet complex is believed to have potential to produce around 5 million tonnes of coal per year.

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Le vieillissement ne serait pas le même pour tous

Pour étudier les variations individuelles du vieillissement, des chercheurs ont employé une méthode originale : ils ont étudié des collemboles, petits arthropodes vivant dans le sol qui ont la particularité de pouvoir se cloner naturellement. Deux lignées d'individus identiques ont ainsi pu être...

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Projet Loon : les ballons Google vont diffuser Internet en Indonésie

Google a passé un accord avec trois opérateurs indonésiens en vue de tester son projet Loon, un service de diffusion d’accès Internet relayé par des ballons stratosphériques. L’objectif est de connecter les deux tiers des 250 millions d’habitants qui n’ont pas accès au Web.

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This interactive timeline will teach you all about diamond mining

Weaning demand for diamonds in China, the second largest consumer of precious gems after the U.S., has dragged the seemingly immune-to-the-commodities-rout sector down the slippery slope.

Despite the current weak market, diamonds continue to be considered precious, and thanks to the diligent marketing efforts of producers and jewellers alike, the ultimate gift for a loved one.

According to this interactive timeline, provided by Toronto-based Design by Sevan, it all began about 900 million years ago.

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Japan tightens grip on Kazakhstan’s emerging rare earths sector

Kazakhstan is believed to hold important reserves of rare earths, used in a variety of industries including green technology, defence systems and consumer electronics. (Image: Charyn Grand Canyon, Kazakhstan. By Pikoso.kz |Shutterstock.com)

Japan is tightening the grip on Kazakhstan’s promising rare earth market as the Nipponese Oil, Gas and Metals National Corporation (JOGMEC) signed this week a deal with local authorities to jointly explore for rare earths in the Karaganda and Kostanay regions.

The Kazakh Investments and Development Ministry said prospecting will begin during the second quarter of next year, adding they may also consider other joint developments, Akipress reported.

In May, Japanese Trade and Industry Minister Yukio Edano closed another key deal with the Central Asian country to build a major rare earths production factory in the north of Kazakhstan.

The giant Sumitomo Corp, Japan Oil, Gas and Metals National Corp and Kazatoprom are the three partners in the venture, which will provide Japan with more than 10% of its annual dysprosium requirements, according to EdgeKz.

China currently produces 90% of the global rare earth supply, while consuming 80%. But according to Chen Zhanheng, vice-secretary general of the Association of China Rare Earth Industry, local demand for the coveted elements, critical to the manufacture of many high-tech items, will increase 50% in the next five years, BNN.ca reported.

The most important current supply of yttrium —one of the most sought-after rare earths – in the world is found in the ion adsorption clay ores of Southern China. Kazakhstan is also believed to hold important reserves.

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Canada’s Eldorado Gold swings to loss in Q3

Construction at Eldorado's Skouries mine and processing plant.

Canada's Eldorado Gold (TSX:ELD) (NYSE:EGO) logged Friday a third-quarter loss of $96.1 million, after reporting a profit in the same period a year earlier.

The Vancouver, British Columbia-based miner said it lost 13 cents per share, and that total losses, adjusted for non-recurring costs, were 1 cent per share. Revenue for the period was of $211.5 million.

While the results missed Wall Street expectations, the company upgraded its 2015 production guidance to be 710,000 ounces of gold, at average cash costs of $565 per ounce.

The outlook change comes as Greece decided earlier this month to let the company resume mining and construction work at Skouries, in northern Greece, which Eldorado’s flagship project.

“Our employees and contractors are now back at work on the Skouries and Olympias projects, and mining operations have resumed at Stratoni,” chief executive officer Paul Wright said in a statement.

The $3.4-billion market cap company also has presence in Romania, Turkey and China.

Shares in closed in Toronto at Cdn$4.85 Thursday, almost 5% down compared to Wednesday session. The stock has lost over 30% of its value so far this year.

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La Nasa esquisse sa mission humaine vers sur Mars

Alors que les programmes d’exploration robotique de Mars et de développement d’un nouveau système de transport spatial habité battent leur plein, la Nasa travaille aussi, plus discrètement, à son grand objectif d’envoyer des Hommes sur la Planète rouge. Un rapport récemment rendu public précise,...

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RF Capture : voir à travers les murs avec du Wi-Fi, c’est possible !

En se servant de l’équivalent d’un routeur Wi-Fi et de plusieurs algorithmes très performants, des chercheurs du MIT sont capables de voir la silhouette d’une personne à travers les murs et même d'en distinguer plusieurs. Cette technologie appelée RF Capture utilise les ondes radio. Elle a déjà...

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L'habitat du futur se montre au Mondial du bâtiment

Au Mondial du bâtiment, les innovations sont nombreuses et largement tournées vers les économies d'énergie. Pour stocker l'eau ou l'électricté solaire, pour réduire le bruit ou la température, de nouveaux procédés vont être présentés. En voici un avant-goût.

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Voir à travers les murs avec du Wi-Fi, c’est possible !

jeudi 29 octobre 2015

Bad News Is Good News. For Now.

Eric Coffin's new video presentation from the Vancouver Subscriber Investment Summit 2015, Is a Bad Market Good for Gold Stocks?, can be viewed below:
Click here to watch the video now

Since the last issue the “optimistic scenario” has been the clear winner. Traders continue to expect the Fed to hold off. That has been enough to keep NY trending higher though the trajectory is flattening out. Economic readings haven’t improved. It will take plenty of upside surprises through earning season to keep the trend alive.

The trend has been more evident in Europe, Japan and China. All released weak readings and all have traders that expect their respective central bankers to refill the punchbowl. Let’s hope they do.

The optimistic scenario has helped gold but not other metals or energy which have all weakened as lower demand going forward is expected. That may happen but we’re also starting to see supply response in some base metals at least which should help cushion the fall.

Offshore economic readings have been weak enough that the USD has been able to hold its recent price range. The increase in the gold price is welcome but it looks like stronger offshore readings or more hawkish than expected messaging from the ECB and/or BoJ will be required to generate a break in the Dollar. We want to see gold on the other side of $1200 and the Dollar Index may have to fall below 94 for that to happen. NY markets really falling apart would work too but the process would be a lot messier.

***

The saga continues. Since the last issue the markets have been trading higher and generally following the “optimistic” fork in the road that I laid out in Journal issue 240. That scenario also held for commodities and gold though with less impressive moves than equities. More on that later.

As you’ll recall, the “optimistic” scenario is based on the market coming to the conclusion that the Fed will not raise rates for a very long time. Of course, a week can be a very long time on Wall St. For our purposes traders would have to view a 2015 rate increase as off the table and any increase classified as highly unlikely well into 2016.

That is pretty much where we are now. Mainstream financial media is busy explaining how Janet Yellen doesn’t want to play the Grinch to Wall St’s Whoville come December. (Well, unless it’s the ending. Who doesn’t love huge bags of gifts and mutts with fake reindeer antlers? That’s the straight-to-DVD “QE4” version.) As usual, bond traders are even more cynical, assuming less than 50/50 odds of a rate increase before April 2016. I side with the bond traders but it’s important not to forget that the majority of Fed governors want to raise rates. They just don’t want a market crash blamed on them.

As you can see from the chart on page 1 the markets like the no Fed hike message. A lot. The S&P has rallied 7-8% in the past two weeks. This didn’t come on the back of strengthening economic readings. Most of those have continued to worsen.

Perhaps earnings season is the reason the market is so bubbly? We’ve only really started reporting Q3. According to Factset.com, 112 large companies have reported and, (surprise!) 83% have beaten estimates. Of course, those estimates were lowered based on recent guidance from the companies so beating them isn’t that amazing.

My comment from the last issue about earnings beats headlines leaving me rolling my eyes hasn’t changed. The standard MO for large company analysts is to slightly under-promise and have the company slightly over-deliver. Same, same. Nothing to see here, move along.

We won’t have meaningful comparables to work with until earning season is done but one potentially significant statistic seems to be forming up. Earnings beats as a percentage of those reported are high at 80% but revenue beats are lower than average at 50%. Both earnings and revenue estimates were ratcheted down dramatically so the beats are no surprise but it’s interesting that top line revenues seem to be underperforming earnings so much. More cost cutting?

That brings me to the chart below that was derived from US Census Bureau business revenue estimates. It’s not a comforting chart, like many others I’ve displayed in the past few months. Before I go into it I want to reiterate for those who are not long term HRA readers that I’m not some doomer permabear. On the contrary, I get accused of being too bullish more often than not. My concerns about the potential for a severe market correction and possible recession are data, not ideologically, driven.

You can see from the Total Business Sales chart that the downtrend is not new. Sales topped out early in this expansion. That itself is unusual. Pullbacks during expansions do occur as the pre-2008 portion of the chart shows but a long decline in revenue growth for the past four years is yet another example of how odd an expansion this is.

Bulls will point out that much of the recent dive can be pinned on low oil prices. That’s true, but non-energy revenue growth has dropped too. It’s expected to come in at 1.7% for Q3. That sort of number is usually only seen when the economy is heading for recession. It’s not a recessionary reading per se and could still turn up but it’s close.

The S&P chart looks pretty bullish though it feels like the easy gains might be over. We’re not definitively back in a major uptrend but it looks a lot less scary. There will be some strong resistance to overcome just above current levels. I still think we’ll need a better than expected earnings season to get full recovery.

I’ve updated the Value Line Geometric Index chart on this page to show how the broader market is faring. It looks better too but is not out of its downtrend. XVG still hasn’t exceeded its “Fed day” high, remains in correction territory and is hitting resistance. The divergence stems from continued weakness in market breadth in the headline indices. They are still being carried by a small number of hot names.

If we don’t see further weakening of US economic conditions we may squeak through and have a continuation of the bull market. I don’t expect a lot of strength but an uptrend is possible.

Zero interest rates keep traders calm but they aren’t news. ZIRP can’t carry the market by itself forever. If valuations were low it could maintain the party on its own but overseas shocks this year have traders questioning the Fed’s lack of nerve.

For now, traders are just happy the Fed is standing pat. At some point though, they will worry about why unless they see the US economy improving for themselves. It’s been an awfully long wait for “liftoff”. Whatever its reasons, the Fed has to stand pat for the optimistic scenario to continue playing out. If rates are raised we’re back to depending on follow through in earnings and economic strength. I’m not convinced there will be enough of that to levitate the indices in NY.

The Fed must play along for this to work. Even if traders view a rate increase as a vote of confidence initially it will put the bear market scenario back in play unless there is significant improvement in US economic readings first. There is no evidence of that yet.

China “Beats” (!)

The latest “earnings beat” was from a country, not a company, namely China. China reported an initial estimate of Q3 GDP growth of 6.9%. That was higher than the consensus estimate of 6.8%. That’s good right? Well, no, apparently. The announcement caused some positive movement on Asian exchanges but by the time NY opened it was being viewed as a negative.

There were two parts to the negatively. The first was China missing the 7% growth target Beijing had set for itself. That couldn’t have been much of a surprise. No one has believed that target for months, at least.

Of course there is also continued concern about how accurate the 6.9% number really is. Several private tracking services estimate current growth rates in China are anywhere from 4% to 6.5%. The weaker numbers come from services that weight industrial readings like power consumption and rail traffic heavily. That could be understating things with the economy transitioning to a more serviced based model but, still, few take the 6.9% reading at face value.

I think that coming in right between the consensus estimates and 7% looks awfully convenient too. The true growth rate is probably lower but the more important message is that there is no “hard landing” in sight for China, something many fear.

The second issue was the composition of the growth reported. That was actually good news for China, just not so good for outside markets. Industrial Production and Fixed Asset (read: real estate) investment both came in below consensus but both retail sales and lending came in higher. This is evidence that Beijing is having some success rebalancing the economy. That’s not the best news for commodity producers though a good growth rate in China helps, even if it’s skewed towards consumers and services.

News of China’s weaker growth helped put at least a short term bottom under the US Dollar. As you can see from the chart on this page the 94 level has been strong support for the past year. There are plenty of bulls in the USD market. It’s one of the most crowded trades around. If my optimistic scenario is to play out in metals and EM markets we need to see the dollar index fall below that level.

News on the Chinese economy is also directly impacting base metals trading, particularly copper. There are some strange things going on in the copper market. Most traders are quite bearish on base metals due to concerns about China but there is evidence that Chinese traders may be suppressing the copper price.

Metals trading volumes in Shanghai surged after regulators made it nearly impossible to place bearish bets on the Shanghai stock index.

Copper and apparently zinc have been used as proxies to bet on lower growth in China. This makes it much more difficult to read price signals from these exchanges, a situation gold traders are all too familiar with.

Copper has seen a number of supply cutbacks and shelving of projects in the supply pipeline. Though I’m not sold on these cuts being large enough yet in the face of lower demand from China it is strange that copper isn’t trading better with worldwide warehouse inventories below one week’s supply. Generalist traders worry about supply growth. That’s valid but remember that copper miners overestimate future production. Not occasionally. Every year. No reason to think that isn’t happening again.

The situation is similar in the zinc market. Glencore, the world’s biggest metal trader and one of the largest zinc producers is in financial trouble. The company makes a lot of money trading and its operations are something of a black box. That has fed trader skepticism about GLEN but the company has been making some dramatic moves to restore confidence.

One of those moves was an announcement of zinc production cuts totaling 500,000 tonnes through the next year. That is a dramatic reduction that would all but wipe out current LME inventories. Zinc saw a one day 10% move in price on this news but has been fading since. LME zinc inventories grew by 200,000 tonnes from mid-August to the end of September. Was this Shanghai traders taking advantage of arbitrage between Shanghai and London or selling zinc to bet against their country’s economy? It’s still not clear but the sort of reductions Glencore announced should have a bigger impact if the Chinese economy isn’t falling off a cliff. Stay tuned.

Lower raw material input (and pork) prices continues to put downward pressure on China’s CPI. In China’s case that is good news since it isn’t suffering from deflation like so many other countries. This will give the Bank of China more room to cut interest rates and bank reserve ratios. While I agree that it’s unlikely Beijing can hit its 7% growth target anytime soon things seem to be stabilizing at least internally. Whatever the source of the growth is stability in China will be a boon to emerging markets in general and help restore some balance.

This brings us back to the gold market. It’s been one of the better performers this month. The chart on the next page shows a five year trace for the GDX gold miner’s index. Not an inspiring chart though there is some reason to be optimistic for a change. Not a real breakout yet but the heavy up volume is encouraging even if the dollar volume is less impressive. There is a lot of new interest in the space.

Gold itself has managed to climb above both the September and August highs and briefly got above its 200 day moving average for the first time in months. Whether it can hold that remains to be seen. It’s over bought short term and may consolidate. The key will be whether it can hold on near current levels or fade like it has done so many times in the past couple of years.

The 200 dma was just the minimum objective gold had to reach. The tougher climb is still ahead, getting through $1200 and ideally through the spring high near $1225.

Will it make it? I take some comfort from generalist technical analysts that I check in with occasionally. Most of them see a triangle pattern from which price broke out to the upside. Several consider that a final bottoming pattern. In other words, they think the bear market is now over. It’s hard to buy into that just yet. We’ve all seen this movie so many times it’s impossible not to be skeptical.

I agree we may have just seen “the” bottom though I’m disturbed by the rapid rise in bullishness. Commentary has gotten positive quickly and positioning in the futures market has gotten more bearish with a bigger long position and a rapid drop in short positioning.

That doesn’t mean the chart guys are wrong. Most that I check with are not gold bugs and have not particular interest in the bullion market. It’s just another chart. That’s a positive in my book since they have no reason to cheerlead.

Conversely, gold bugs are gold bugs and bound to jump on any upward price move. They’re always bullish so their positive opinion is nothing new. I don’t like this new bullishness from other sources as its coming too early. Bull markets climb a wall of worry so I want to see more negative commentary outside the gold bug space. Longer term, many investment banks are firmly bearish, which (ironically) is good. We need skeptics and pullbacks and consolidations along the way to build a lasting rally.

If we stick with my optimistic scenario, the USD will determine whether gold can hold its gains. That in turn will depend on the market’s reading of the Fed’s intentions. Any sort of strength offshore that takes some of the bid off the USD would help too.

There hasn’t been much “safety” trade in gold. If the market does roll over we could see a return of that. Not a safety trade per se but a “they’re screwing this up” vote of non-confidence in bankers, central or otherwise. That looks the less likely route now but it’s not off the table. A major pullback will remove interest rate increases from the equation. That would help metals too though the path would be a lot bumpier. Either way a true bottom for gold may finally be at hand.

Ω

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Marin Katusa: Follow the good guys in mining

The most valuable resource in a mining company is often the people. Good management can attract the right investors and add value regardless of the market. In this interview with The Gold Report, Marin Katusa, founder of Katusa Research, shares his litmus test for which mining companies are worth his hard-won dollars and which ones he is avoiding for the foreseeable future.

The Gold Report: You seem much more positive about gold right now than when we talked in June. Based on the chart you have on Katusa Research of the U.S. dollar versus gold and in the wake of the Federal Reserve's inaction at its last meeting, what's your thesis for gold for the rest of 2015?

Marin Katusa: As I said in the spring, I don't see the Fed raising rates this year. Using some simple game theory, for the Fed not to raise rates is the best decision. I still believe that. Gold has fared well compared to the price of the U.S. dollar, better than any other hard commodity. Gold is holding its own. The reality is, because the commodity markets are down, very little capital is being invested to replace the production of gold.

In the long run, I'm very bullish on gold. It's something I'm paying very close attention to through my fund. We've started writing checks on assets that I believe are very cheap and well priced in today's currency commodity markets and that I believe a major will want in its portfolio in a few years. Gold is the currency of kings and silver is the currency of gentlemen; it always has been, and always will be. When you see living legends such as Stanley Druckenmiller and well-known successful fund managers plowing hundreds of millions of dollars into gold, it's obvious gold is appealing at these prices.

TGR: Will the power of gold help the majors or the juniors more?

MK: I don't think the majority of juniors will take off until the majors take off, so watch the majors first. They will be the first ones to be repriced when gold really starts to take off. If a junior finds a world-class asset, it will rise based on its own success rather than on the strength of the market. We've seen many examples of that. But the producers will get the party started.

TGR: The majors are not all equal. What are some of the majors that you're watching that are doing a better job than the others?

MK: Balance sheet and debt risk is the first place to start. Also, consider whether a company has really written down all its crappy assets that it should. I know of a few companies that still haven't written assets that they should. Pay attention to the debt covenants. Everyone compares Goldcorp Inc. (G:TSX; GG:NYSE) to Barrick Gold Corp. (ABX:TSX; ABX:NYSE). But Goldcorp is in a much better situation than Barrick when it comes to the balance sheet and debt. The chairman of Goldcorp is a friend, so I'm biased and cheering for Goldcorp, but it's completely true regardless of my own bias.

I like Goldcorp's assets better than Barrick's. Companies like Kinross Gold Corp. (K:TSX; KGC:NYSE) had a tough go because of its debt, high-risk assets and high cost to put in new production. Check the debt levels on these companies before you invest to determine if they would be able to survive the next two to three years in low commodity prices. At the end of the day, debt is the currency of slaves, so be very careful.

Investors looking at the top-tier companies also have to consider the royalty streaming companies, like Franco-Nevada Corp. (FNV:TSX; FNV:NYSE) and Silver Wheaton Corp. (SLW:TSX; SLW:NYSE). I would argue that they are in better shape than the producers themselves.

TGR: What about some of the midtier producers? Are there any you like in that category?

MK: In May, I was the first analyst to publish a research report on Newmarket Gold Inc. (NMI:TSX; NMKTF:OTCQX). That company has had a fantastic run. It has moved over 50% since then. This has been a great market for companies that are cashed up and have good assets. Similar to Canadian producers, Australian producers like Newmarket have the advantage of a devalued currency to make the selling price higher and the operating costs lower—using the currency crisis to their advantage.

TGR: Newmarket has been doing quite a bit of consolidating. Are you expecting more deals?

MK: Newmarket was an idea backed by some really good guys. CEO Doug Forster and Executive Vice President Blayne Johnson are backed by Lukas Lundin, Ian Telfer and Mike Vitton, and my fund is a big shareholder. Newmarket raised a bunch of cash and used that money to buy Crocodile Gold Corp. (CRK:TSX; CROCF:OTCQX), which was struggling. The Newmarket team took advantage of Crocodile's misfortune and increased production to over 200,000 ounces (200,000 oz) annually. In addition, Newmarket has been putting dollars into drilling and hitting very high-grade gold. It has been a nice win for all.

I think Newmarket will continue consolidating. For now, the near-term catalyst is to do more of what it's been doing. When the share price gets a bit higher, it will probably consolidate a near-term producer or a 100,000–150,000 oz annual gold producer.

TGR: What about the juniors? What are the juniors that you're watching?

MK: The first thing I look for is an excellent management team that is invested heavily in the company. Then I want to see if it owns a world-class asset. If this isn't an asset that a major would want to buy in a bad market, I avoid it. The world does not need another 400,000 oz gold deposit. A project has to be a game changer for a major.

TGR: What are some examples of the best people in the business?

MK: Ross Beaty, who after a number of successes is now focused on Alterra Power Corp. (AXY:TSX), has a great track record of delivering shareholder success, but more importantly, he's always the largest investor in his own deals. My fund and I are very large shareholders in two of Ross' companies. Alterra is an example of a stock that was significantly undervalued even though Ross Beaty and his team keep delivering great value. So I took a big position. Another one I like that Beaty is doing and nobody is paying attention to is Odin Mining & Exploration Ltd. (ODN:TSX.V). Beaty is quietly consolidating these world-class assets in Ecuador. It is super high risk but Beaty is definitely adding value, and I am a happy shareholder.

You cannot count out Robert Friedland with Ivanhoe Mines Ltd. (IVN:TSX). A lot of people are betting against him and his company. I've taken a large position in Ivanhoe in our fund. Those are two great examples of guys who are getting a discount in today's market but I believe will deliver significant success. For me, this is a dream come true market, as I can get proven management teams, such as Ross Beaty and Robert Friedland, at very low valuations.

TGR: What other companies fit the criteria?

MK: Midas Gold Corp. (MAX:TSX) is a fantastic project that I believe a major will eventually want to own. I am down on my position, but Midas has a solid management team, although they are promotionally challenged. It's suffering from two issues in this market: the permitting process—nobody cares about companies in that permitting period—and the capital cost to build the mine in this market is being frowned upon. A company like Osisko Gold Royalties Ltd. (OR:TSX) or Goldcorp will come up and buy that asset. Will it be this year or in three to four years? I don't know. But that asset is a past producer, very high grade and has over 5 million ounces of gold. That's why I've taken a large position. It has the right management team and the right project. It has the right type of geology in the right jurisdiction. That's a contrarian bet on gold. Most people are undervaluing it today, and that's when you want to buy. That doesn't mean it's not high risk. All junior resource speculations are high risk. That is why fortune favors the bold.

TGR: You also have an interesting chart comparing zinc inventories to price. How are you positioning yourself in that space?

MK: I'm just starting to focus on zinc. I'm not an expert by any means. Literally, outside of Ivanhoe, I have zero zinc exposure in our funds. So I haven't positioned myself in zinc. I just thought it was a very interesting data point to publish. Interestingly enough, many people have contacted me regarding the zinc chart, which tells me there are a lot of eyeballs on the sector.

TGR: You are one of the names along with Cambridge House putting on The Silver Summit & Resource Expo in San Francisco at the end of November. What do you hope people will come away with from this conference?

MK: The same thing that I'm hoping to come away with: deal flow to put my capital into the market and make money. There is no better place to meet management teams than a conference like this. You get to meet the Ross Beatys of the world, the man who built silver-producing mines through Pan American Silver Corp. (PAA:TSX; PAAS:NASDAQ). You get to ask questions of Silver Wheaton's management. These are the people who really understand the market. This will be one of the best conferences of its kind in the world with some of the most knowledgeable individuals in the resource sector present for you. All you have to do is make the effort of showing up. The beauty is that in a bear market, an average retail investor can spend time with key mining executives. I hope people at the show will walk the booths and ask questions.

One question I like to ask is, what other company would you invest in with the same type of market cap, sector and risk level as your own if you couldn't invest in your own company? That's a simple question that can really lead you to other opportunities. Plus, I will be there and you can ask me any question you want.

We have a fantastic line-up of fund managers and well-known market commentators, and you get to rub shoulders with people like Frank Curzio, Ross Beaty, Brent Cook and Grant Williams. These are fascinating, interesting people, and you get a chance to talk to them, learn from them and, hopefully, make money from the conference. That essentially is the point, to make money.

TGR: Thank you, Marin.

Marin Katusa is the author of the New York Times bestseller, "The Colder War." Over the last decade, he has become one of the most successful portfolio managers in the resource sector, such as his 2009 Fund Partnership (KC50 Fund LLC), which has outperformed the comparable index, the TSX.V by over 500% post fees. Katusa has been involved in raising more than $1 billion in financing for resource companies. He has visited over 400 resource projects in more than 100 countries. Katusa publishes his thoughts and research at http://ift.tt/1jOealH.

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Source: JT Long of The Gold Report

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DISCLOSURE:
1) JT Long conducted this interview for Streetwise Reports LLC, publisher of The Gold Report, The Energy Report and The Life Sciences Report, and provides services to Streetwise Reports as an employee. She owns, or her family owns, shares of the following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors of Streetwise Reports: Silver Wheaton Corp. and Newmarket Gold Inc. Goldcorp Inc. and Franco-Nevada Corp. are not associated with Streetwise Reports. The companies mentioned in this interview were not involved in any aspect of the interview preparation or post-interview editing so the expert could speak independently about the sector. Streetwise Reports does not accept stock in exchange for its services.
3) Marin Katusa: I own, or my family owns, or funds I am a shareholder in owns shares of the following companies mentioned in this interview: Midas Gold Corp., Ivanhoe Mines Ltd., Newmarket Gold Inc., Alterra Power Corp. and Odin Mining & Exploration Ltd. I personally am, or my family is, paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I determined and had final say over which companies would be included in the interview based on my research, understanding of the sector and interview theme. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
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Cloud Peak Energy will stop shipping coal through Delta's Westshore Terminals starting 2016

Westshore Terminals in Delta/ Surrey Now

An American coal company will no longer ship coal through Delta’s Westshore Terminals starting in 2016.

Company may resume shipments if coal prices improve in the future.

In an October 28 press release, Cloud Peak Energy announced it had entered into an amended agreement with Westshore to cease shipping coal starting in 2016 and through to 2018. Cloud Peak will make a series of payments to Westshore in lieu of its take-or-pay commitments — worth $454 million for 2016 to 2018 — to ship coal through the terminal.

Cloud Peak Energy, a large producer of thermal coal used in coal-fired electricity plants, says coal prices are currently too low to continue shipments. The company is also negotiating with Burlington Northern Santa Fe (BNSF) to change its current take-or-pay shipping contract with the railway.

Coal producers have been hit hard by plunging coal prices largely due to a glut of coal and slower global economic growth. Thermal coal producers are also facing slowing demand as countries try to switch power generation to lower-emission options like natural gas or renewables.

In Metro Vancouver, residents, activists and municipal politicians have voiced concerns about planned increases in rail shipments of thermal coal from the United States through the region, citing health concerns about coal dust and the downstream effects of high emissions levels from coal-fired electricity plants.
Despite the low prices, Cloud Peak Energy said it still believes there is “long-term opportunity for Asian exports of … coal as oversupplies of seaborne thermal coal are rationalized.” Its long-term contract with Westshore remains in place and the company may resume shipments if prices improve.

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Goldcorp shares are being decimated

Goldcorp Inc (TSE:G, NYSE: GG) on Thursday reported a bigger than expected loss despite record gold production and reduced costs.

The market punished the Vancouver-based company following the release of third quarter operational and financial results, wiping more than a billion off its market value.

Goldcorp was last trading $13.10 per share in New York, down 10.4% and near its lows for the day affording the company a market capitalization of $11.9 billion. Goldcorp is the world's most valuable gold producer, but only number four gold mining company in terms of output, behind AngloGold Ashanti.

Goldcorp said it produced 922,200 ounces in the quarter ended September from ten mines, a huge jump of 42% compared to gold production of 651,700 ounces in the third quarter of 2014.

The company stuck to its 2015 forecast for production at the high end of a range between 3.3 million and 3.6 million ounces and all-in sustaining costs of $850 to $900 an ounce. Capital expenditure for the full year should come in at between $1.2 billion and $1.4 billion, also in line with previous guidance.

Goldcorp's performance on the day was in stark contrast to its peers which released results after the bell on Wednesday. Toronto's Barrick Gold and Denver-based Newmont Mining, also managed to make strides into the teeth of a sharp drop in the price of gold on Thursday.

Newmont, the world's number two gold producer in terms of ounces mined after Barrick, jumped nearly 4% for a market cap of $10.1 billion, while Barrick gained 2% and is now worth $8.8 billion in New York. The two majors and Canada's Agnico Eagle were the only stocks in positive territory among gold's top tier after a more than 2% drop in the price of gold to $1,145 an ounce, a three-week low.

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Callaghan settles with BCSC to not ‘drag it out’

Frank Callaghan, the colourful founder and former CEO of Barkerville Gold Mines Ltd. (TSX-V:BGM), has agreed to a $30,000 fine and one-year suspension from being a director or engaging in investor relations in a publicly traded company.

Callaghan says the one-year suspension will have no impact on any of the companies he still holds shares in because he’s no longer a director of any of those companies.

In an October 27 press release, the BC Securities Commission (BCSC) announced Callaghan had agreed to the $30,000 fine and one-year suspension on being a director.

The penalties were the result of a BCSC investigation into resource estimates Callaghan announced in 2012 for Barkerville Gold’s Cow Mountain property.

His estimate of 10.6 million ounces of indicated gold was quickly called into questioned by geologists and analysts, and the BCSC ordered a technical report to back up the estimates.

The commission found Callaghan had breached the National Instrument 43-101 Standards of Disclosure for Mineral Projects (NI 43-101). Barkerville was forced to issue a press release stating its earlier claims, based on a draft technical report, were “inadequately supported” and therefore potentially misleading.

Even after a revised technical report reduced the resource estimates, Callaghan continued to justify his original claims, according to the BCSC.

“Two-and-a-half-months after Barkerville adopted the revised estimates and retracted the initial estimates, Callaghan publicly repeated, and attempted to justify, the initial estimates in an online article, and at an investor presentation,” the BCSC states.

Callaghan said his mistake was in combining referred and indicated resources in his estimates, contrary to 43-101 regulations.

As detailed by Business in Vancouver in a two-part series on Barkerville Gold and Callaghan, the BCSC halted trading in Barkerville’s stock for more than a year, while the company went back to the drawing board to have a new technical report completed.

When trading resumed on October 9, 2013, the company’s stock dropped from $1.22 to $0.57 per share, and later sank below $0.20 per share.

The company was bailed out by Eric Sprott with a $19 million debt-to-share conversion that gave Sprott a 41% share in the company.

Callaghan is still the third largest shareholder in Barkerville, but is no longer a director. He resigned as CEO last year and as director earlier this year.

One other company Callaghan founded is Starr Peak Exploration Ltd. (TSX-V:STE) – formerly Lions Gate Energy – which is focused on the El Toro copper-molybdenum-silver property in the Smithers, B.C., region.

Earlier this year, when the name change and a six-to-one share consolidation was announced, Callaghan did not stand for re-election to Starr Peak’s board of directors.

While he’s not happy with the fine, Callaghan said, “I agreed to it. How long do you want to drag it out for?”

In addition to the fine, Callaghan also agreed to complete a weekend course on 43-101 reporting, which seems to suggest he may not be done with the junior exploration game just yet.

Asked what his plans are when the one-year suspensions expires, Callaghan said: “What am I doing next year? I don’t have a freaking clue.”

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Liquidation time for Venezuela (and its gold)

Crisis-hit Venezuela has $3.5 billion in debt payments due within 10 days (and $12 billion in 2016) and really only its gold bullion reserves to pay for it

Venezuela's economy has been devastated by the drop in oil prices which came on the back of years of financial mismanagement by the socialist government of the Latin American nation.

It's crunch time for Venezuela with $3.5 billion in maturing debt and interest payments due this week and next and another $1.5 billion before the end of the year.

Venezuela's foreign exchange reserves are at a 12-year low as hard currency becomes scarcer, and shortages of basic goods and inflation in triple digits stir up anger inside the country.

Venezuela has the world's 16th largest hoard of gold. At 361 tonnes as of the start of October the bullion represents 67.3% of the country's reserves.

Bloomberg reports Venezuela has been selling these reserves at a steady clip with the latest available data up to May this year showing a 28% drop in the value of the country's forex reserves over the preceding year (taking into account a 12% drop in the dollar price of gold over the same period):

"The figures, while reflecting transactions that took place five months ago, underscore the efforts the government is taking to raise the cash to repay creditors and fund imports."

While reserves and other off-budget assets total $42 billion, only around a third of those are easily off-loadable according to analysis by investment bank Barclays. That means Venezuela could find itself down to its last $8 billion in liquid assets including gold by the end of the year.

The remaining gold holdings will look very tempting considering the country and its state oil company have another $12 billion in bond payments coming due next year according to Bloomberg.

The country has monetized its bullion in innovative ways before.

President Nicolas Maduro on behalf of the country's central bank signed a deal with US bank Citigroup to swap $1 billion in cash for about 1.4 million ounces at the end of April when gold was changing hands for $1,200 an ounce.

While details of the agreement were not disclosed a simple calculation shows Caracas may have received only around $800–$850 per ounce.

How much the remaining 12.7 million ounces will fetch is an open question. And after late president Hugo Chavez repatriated the country's gold holdings in 2011, who'd want to buy gold held in Caracas vaults is another.

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Callaghan settles with BCSC to not ‘drag it out’

Frank Callaghan agrees to $30,000 fine for misleading claims about gold resource estimates.