Tag Archives: mining stocks

What’s In Store For The Precious Metals Sector in 2019?

The Newmont/Goldcorp merger is the second mega-deal in the industry after Barrick acquired RandGold in September. Without question, the two deals reflect the growing need for large gold and silver mining companies to replace reserves, which are being depleted at these two companies more quickly than they are being replenished. The deal will give Newmont access to Goldcorp’s portfolio of developing and exploration projects acquired by Goldcorp over the last several years.

While this deal and the Barrick/Randgold deal will help cover-up the managerial, operational and financial warts on Barrick and Newmont, it will also likely stimulate an increase in M&A activity in the industry. I believe that the other largest gold mining companies – Kinross, Yamana, AngloGold Ashanti, Gold Fields, Eldorado, and Agnico-Eagle – will look closely at each other and at mid-cap gold producers to see if they can create “synergistic” merger deals

The same “impulse” holds true for silver companies, the largest of which are diversifying into gold or acquiring competitors (Pan American acquires Tahoe Resources and SRM Mining buys 9.9% of Silvercrest Metals, which will likely block First Majestic from going after Silvercrest, and Americas Silver buys Pershing Gold). Similarly, we could see mid-cap producers merging with each other or acquiring the junior producers.

Phil Kennedy – Kennedy Financial – invited me along with Craig Hempke – TF Metals Report – to discuss the implications of the two gold mega-deals, our outlook for the precious metals sector and a some other timely topics affecting the financial markets:

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In my latest issue of the Mining Stock Journal, I provided a list of gold and silver stocks that I believe could become acquisition targets this year, as well as an in-depth update on one of my top gold exploration stock ideas. You can learn more about this newsletter here: Mining Stock Journal

Unprecedented Manipulation And Trading The Precious Metals Ratios

Anyone who denies that Governments and Central Banks manipulate the gold and silver markets using paper derivatives and deceptive physical metal custodial operations is ignorant of history and facts.  Currently the gold and silver price capping is as oppressive as I’ve witnessed in 18 years.

As of Tuesday, January 15th, the open interest in gold had soared by 89,120 contracts to  501,605. 89,120 contracts is 8.9 million ozs of paper gold, or 278.5 tons – about 30 tons  more than the amount of gold produced by mines in the U.S. in one year.

But artificial market intervention creates information inefficiencies. This in turn generates exploitable profit opportunities for traders who know how to identify the set-ups from official manipulation.

With unprecedented manipulation continuing to occur in the precious metals market, some tradeable anomalies have appeared in the gold /silver and platinum / palladium ratios. My friend and colleague, Chris Marcus (former options trader at Susquehanna International), got together with Andy Schectman and Mickey Fulp to discuss strategies you can use to take advantage of the market anomalies which have been created by official intervention in these markets in the video below. You can see more of Chris’ at his website, Arcadia Economics:

Vista Gold: Overlooked And Undervalued

Vista Gold (VGZ) has a storied history as a junior gold miner.  In 2012 new management, led by CEO, Fred Earnest, took control of the operations and has been advancing the Mt. Todd gold project, which is the largest undeveloped gold project in Australia.

Mt. Todd contains nearly 6 million ounces of gold reserve (proven/probable).  A Preliminary Feasibility Study updated in 2018 shows a project with 381,000 ozs of annual production over a 13-yr mine life (479,000 ozs/yr for first 5 years), an after-tax IRR of 20% and after-tax NPV of $679 million.  The current market cap of the stock is $57 million (100 million shares outstanding).  As an operating mine, it would be the fourth largest gold mine in Australia and one of the largest new gold mines in the world over the last several years.

I’m not sure why VGZ trades at a huge discount to its peers and to its “intrinsic value.”  To be sure, the Mt. Todd Project has a checkered history.  But this is primarily attributable to inept management by previous owners.  On the surface the resource grade may appear low (.82 grams per tonne). But VGZ has successfully tested and implemented high-tech ore sorting technology which has improved the throughput grade by as much as 50% (1.2 grams per tonne) and has taken heap leach recovery rates north of 90%.

The Mt Todd Project will be converted eventually to a mine.  I suspect that, as the price of gold rises, a large mining company will either invest in the Project and take over operational control or acquire Vista outright.  The Company has signed recent non-disclosure agreements with mining companies interested in the Project. Until an “exit strategy” event unfolds, this stock is an easy double from its current price.

The Mining Stock Daily’s Trevor Hall interviewed Vista’s CEO to discuss the Mt. Todd Project (click on the graphic below to stream the interview or stream it on your favorite app here – Mining Stock Daily):

The Mining Stock Daily is produced by Clear Creek Digital and the Mining Stock Journal. MSD is now sponsored by Mineral Alamos, which has a portfolio of high quality gold and gold-silver-copper polymetallic assets in Mexico.

You can learn more about Vista Gold and other highly undervalued junior mining stock in the Mining Stock Journal: Mining Stock Journal information.

In the latest issue, I discuss my outlook for the precious metals and mining stocks in my latest Mining Stock Journal. I also present a list of large and mid-cap mining stocks that should outperform the market for at least a few months, including ideas for using call options.

Welcome To 2019: Declining Stocks, A Falling Dollar And Rising Gold / Silver Prices

The stock market has become the United States’ “sacred cow.” For some reason stock prices have become synonymous with economic growth and prosperity. In truth, the stock market is nothing more than a reflection of the inflation/currency devaluation caused by the Fed’s money printing and lascivious enablement of rampant credit creation. 99% of all households have not experienced the rising prosperity and wealth of the upper 1%. The Fed’s own wealth distribution statistics support this assertion.

It’s been amusing to watch Trump transition from tagging the previous Administration with creating a “big fat ugly stock bubble” – with the Dow at 17,000 – to threats of firing the Fed Chairman for “allowing” the stock market to decline, with the Dow falling from 26,000 to 23,000. If the stock market was big fat ugly bubble in 2016, what is it now?

If the Fed pulls back from its interest rate “nudges” and liquidity tightening policy, the dollar will sell-off, gold will elevate in price rapidly and the Trump Government will find it significantly more difficult to finance its massive deficit-spending fiscal policy. Welcome to 2019…

SBTV, produced by Silver Bullion in Singapore, invited me onto their podcast to discuss the Fed, the economy and, of course, gold and silver:

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If you are interested in ideas for taking advantage of the inevitable systemic reset that  will hit the U.S. financial and economic system, check out either of these newsletters:   Short Seller’s Journal  information and more about the Mining Stock Journal here:   Mining Stock Journal information.

A Quiet Bull Move In Gold, Silver And Mining Stocks

Silver is up 12.4% since November 11th, gold is up 9.3% since August 15th.  But the GDX mining stock ETF is up 21.4 % since September 11th.  GDX is actually up 71% since mid- January 2016.  By comparison, the SPX is up just 34% over the same time period (Jan 19th, 2016).

There’s a quiet bull market unfolding in the precious metals sector.  But don’t expect to hear about it on CNBC, Bloomberg TV or Fox Business – or the NY Times, Wall Street Journal and Barron’s, for that matter.

My colleague Trevor Hall interviewed precious metals analyst and newsletter purveyor,  David Erfle to get his take on what to expect in 2019 for the sector and  a couple of his favorite stocks (download this on your favorite app here: Mining Stock Daily):

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I discuss my outlook for the precious metals and mining stocks in my latest Mining Stock Journal, released to subscribers last night. I also present a list of large and mid-cap mining stocks that should outperform the market for at least a few months, including ideas for using call options. You can learn more about the Mining Stock Journal here:   Mining Stock Journal information.

Mining Stock Daily’s 2019 Outlook For Precious Metals

A quiet bull market in mining stocks is underway. The GDX ETF closed trading on New Year’s Eve up 2.37%. Through Monday, the GDX has risen 20% since hitting a 52-week low close of $17.57 on September 11, 2018. In popular parlance, GDX is now in a “bull market.”

We expect that a significant bull move will occur and a significant amount of capital will pull out of “risk assets” and move into physical gold and silver for wealth preservation/flight-to-safety.

Click on the image below to hear the short and sweet 2019 inaugural Mining Stock Daily Podcast:

Mining Stock Daily is produced by Clear Creek Digital and the Mining Stock Journal.

Mining Stock Daily: Western Copper & Gold Is Undervalued

The Mining Stock Daily, a collaboration between ClearCreekDigital and Investment Research Dynamics, interviewed the CEO, Paul West-Sells, to learn more about Western Copper & Gold (WRN on both the NYSE and TSX). But first, here’s background on WRN:

Western Copper & Gold is advancing the Casino Project, a world-class copper-gold porphyry deposit, in the Yukon. The deposit contains 4.5 billion lbs of copper and 8.9 million ounces of gold reserve and 5.4 billion lbs and 9 million ozs of inferred resource.

Western Copper was a spin-off from Western Silver after Glamis Gold acquired Western Silver in May 2006 (three months later Goldcorp acquired Glamis). WRN acquired the old Lumina Resources in September 2006 for Lumina’s three copper properties, one of which was Casino. WRN spun-off the other two properties.

WRN only has 106.4 million fully-diluted shares outstanding (including options/warrants), which is remarkable for company that has been developing a massive copper-gold project for 11 years. Insiders own 8% of the stock. A small group of high net worth private investors who have made a lot of money on companies run by WRN Executive Chairman, Dale Corman, own 48% of the stock and institutional/retail own the remaining 44%.

WRN raised $32 million in 2012 selling a Net Smelter Return royalty to Orion Capital. That NSR was sold to Osisko in June 2017 when Osisko acquired a portfolio of royalty assets from Orion.

With a market cap of US$70 million (fully-diluted basis), WRN is extraordinarily undervalued on a risk-return basis. This is especially true considering the recent wave of copper-gold porphyry project M&A activity. Recall that Newcrest invested approximately US$14 million for a 19.9% stake in Azucar’s El Cobre, which valued that early-stage copper-gold project at US$74 million. In 2017, Goldcorp paid US$185 million for Exeter’s Caspice copper-gold project high up in the Chilean Andes.

There have been several other transactions in the copper-gold space, including Zijin’s (Chinese company) acquisition of Nevsun for $1.41 billion (September 2018) for the Timok copper-gold project in Serbia and the recently closed sale of the Malmyzh copper-gold project (Freeport, EMX Royalty) to Russian Copper Company for US$200 million.

WRN’s project is not as large or as high-quality as Malmyzh, but it’s several years closer to being converted into an operating mine. At this juncture, with the current price of copper and gold, the “asset value” of WRN, based on the roster of comparable transactions, is at least US$140 million. I would not be surprised to see one of the companies with projects near Casino make bid a for WRN at some point in next 6-12 months. There’s also a list of other potential acquirers, including RioTinto, BHP and Freeport.

Click on the graphic below to hear Trevor Hall’s interview with WRN’s Paul West-Sells (you can also download the interview on your favorite app by clicking here: MSD platforms):

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The analysis above on WRN is from the November 8th issue of the Mining Stock Journal. To learn more about this newsletter, click here: Mining Stock Journal information

Mining Stocks Have Not Been Cheaper In The Last 78 Years

It’s important to keep in mind that the mining stocks have been sold to levels well-below their intrinsic value – in the case of larger-cap producing miners. Or their “optionality” value – in the case of junior mining companies with projects that have a good chance eventually of converting their deposits into mines. “Optionality” value is based on the idea that junior exploration companies with projects that have strong mineralization or a compliant resource have an implied value based on the varying degrees of probability that their projects will eventually be developed into a producing mine.

In relation to the price of gold and silver, the mining stocks generically (i.e. the various mining stock indices like the HUI or GDX) have rarely traded at cheaper levels than where they are trading now:

The chart above, sourced from Incrementum (the October 2018 chartbook update to the “In Gold We Trust” 2018 report), shows the ratio of Barron’s Gold Mining Stock Index (BGMI) to the price of gold (gold line) and the S&P 500 (blue line) going back to 1950. As you can see, gold mining stocks are trading at their lowest level relative to gold and the broad stock market in 78 years. The two dotted lines show the median level for each ratio since 1950.

As you can see, mining stocks do not spend much time below the median ratio. I strongly believe that the chart reflects a high probability of a major move higher in precious metals and mining stocks that is percolating, if not imminent. Certainly the global economic, financial and geo-political risk fundamentals support this assertion.

Unless the precious metals mining business is going away, that chart implies that now is one of the best times since World War Two to buy mining shares. Not surprisingly, industry insiders must agree with that assertion, as mining stock acquisition deal-flow has picked up considerably in the last few months. Most of the deals have been concentrated in the junior mining stocks.  But Barrick’s acquisition of Randgold, announced September 24th, is the largest precious metals merger in history. I strongly believe Barrick bought Randgold out of desperation to replace its rapidly depleting gold reserves.

Fundamentals aside, I believe gold is technically set-up to make a big move:

The chart above shows GLD (used a proxy for the price of gold) from late 2004 to the present on a weekly basis. I’ve sketched a trendline that goes back to 2004. 2004 is when gold finally pushed through $400 for good. It was right before that event that Robert Prechter, of Elliot Wave fame, predicted that gold would fall to $50. While I’m not a big fan of analysis based on lines drawn on charts, this particular tend-line has held intact since gold bottomed in December 2015.

Notwithstanding chart analysis, the COT technicals have never been more bullish. This assertion assumes, of course, that the track record of hedge funds being wrong when positioned long or short at an extreme level remains intact.

Precious Metals, Mining Stocks, Housing Market – What’s Next?

“The housing market is 100% a function of the Fed’s money printing.  Half the money the Fed printed, $2.2 trillion, went directly into the housing market.”

Analysts and financial media meatheads look at the $4.5 trillion created by the Fed and truly believe that it wasn’t money printing because it’s “backed” by Treasury bonds and mortgages.  But this is pure ignorance.  Not taken into consideration is the amount of credit and debt issuance enabled by using the $4.5 trillion as the “reserve capital.”  It’s fractional banking on steroids.

As the U.S. financial system reaches its limit on the amount of debt that can be serviced from the current level of wealth output, what happens next?  We’re already seeing what happens in the housing market per the fact that the homebuilder  stocks are in an “official” bear market, with some of them down over 30% since late January.

Then what?  The Fed will have to print multiples of the original amount it printed or face systemic collapse. At that point the precious metals sector will soar beyond anyone’s imagination at this point in time.

Phil Kennedy (Kennedy Financial) invited me to discuss these issues on his podcast.  Phil’s podcasts blend truthseeking, facts, humor, humility and sarcasm.  It’s  well-worth the time spent to listen:

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If you are interested in ideas for taking advantage of the inevitable systemic reset that  will hit the U.S. financial and economic system, check out either of these newsletters:  Short Seller’s Journal information and more about the Mining Stock Journal here:  Mining Stock Journal information.

Gold And Silver Are Set-Up To Soar

Per the latest COT report (note: this references the August 21st COT Report), the hedge fund (Managed Money) net short position in Comex paper gold was 90,000 contracts – by far a record short position for the hedge fund trader category. Conversely, the bank net long position (Swap Dealers) in Comex paper gold was close to an all-time high. It’s not quite as high it was in December 2015.

The hedge fund long position in US dollar futures is also at an extreme right now, with the banks taking the other side. Unless there’s something devious going on behind the scenes in the reporting of this data (possible but not probable), the banks are positioned for a huge move higher in gold and a sell-off in the dollar. The only question is timing. The commercial category of the COT Report (banks + producers/merchants/processors/users) is net long silver futures for the first time in at least 25 years. In combination with the gold COT Report structure, this is the most bullish set-up for the precious metals in history.

Note: Per the latest COT Report, positions as of August 28th, the hedge funds reduced their net short by 16,000 contracts and the banks reduced their net long by 2,700 contracts. The hedge fund covering explains why the price of gold rose roughly $20 between August 21st and August 28th.

The chart below illustrates the extreme positioning by speculators in gold, interest rates and the stock market:

The graphic shows the net short position of non-commercials (managed money, other institutional pools of investment money and retail traders) in gold futures, 10yr Treasury futures and VIX futures. It’s the largest bet in history by speculators that gold and 10yr Treasury bonds will go a lot lower and the stock market will go a lot higher (volatility declines as stocks rise so a short-VIX bet is a bet stocks go higher).

When positioned at an extreme like this, speculators are always wrong.  It may not seem like it right now, but I would also suggest some type of development is percolating that will trigger an unexpected and substantial sell-off in the dollar.

Based on looking at the increase in the hedge fund net short position in the gold futures COT report between the end of June and the latest report as of August 21st, it would appear as if most hedge fund short-interest contracts were sold short between July 31st and August 21st. During that stretch, the price of gold dropped from $1224 to $1170. I’m guesstimating that the average price on the hedge fund net short position is between $1215-$1220. The is a rough estimate but I would bet it’s pretty close.

This is important because it tells us the price-level at which we might see a big short-cover move higher begin. Last Friday gold shot up from $1194 to $1212. From this past Monday (August 27th) through Tuesday just before the Comex floor opened, gold ran up close to $1221. About an hour into the Comex floor hours, gold fell off a cliff quickly down to $1207. This price-hit occurred in the absence of any news or events that would have triggered a selloff. In fact, the yuan rose sharply vs the dollar on Tuesday, which throws cold water on the theory that the Chinese have pinned gold to the yuan.

The point here is that the hedge funds will be motivated to defend the $1220 price level. Above that price the hedge funds will start to lose a lot of money on their net short position. This is the only way I can explain the waterfall hit on the price of gold on Tuesday. If the price of gold can climb over $1220 toward $1230, it will likely trigger a short-cover move. But keep in mind that, as the price momentum heads higher, the hedge fund position will swing from net short to net long.

This is likely what will the drive start of the next move higher in gold. A move that will be reinforced by the start of the big seasonal buying season in India and China. Based on the numbers I see on a daily basis, the Indians and the Chinese are taking advantage of the lower price of gold and have already ramped-up their gold buying. When the Fed is forced by the economy to fold on rate hikes, gold will really begin move.

The junior mining stocks are trading at one the lowest valuation levels over the last 18 years in relation to the price of gold. US Gold Corp (USAU) traded briefly below $1 last week in the absence of any news or events that might have affected the stock price. The market cap is close to 50% below the intrinsic value of its Copper King Project. The stock jumped 14% on Friday and Mining Stock Journal subscribers had an opportunity to buy shares ahead of this move. You can learn more about this newsletter and why USAU is absurdly undervalued here: Mining Stock Journal information.