Gold & Precious Metals

Dennis Gartman – Love Him or Hate Him?

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Posted by Peter Grandich

on Wednesday, 18 April 2012 12:57

In the last few days I’ve received numerous emails alerting me to the fact that Mr. Dennis Gartman has stated both gold and the junior resource stocks are basically dead. Virtually all the emailers then went on to personally add this must be the best contrarian indicator as they feel his actual track record leaves much to be desired. They also point out that his own publicly-traded fund has underperformed most benchmarks.

First, let me state that unlike the true contrarian indicator and number one clown, Jon “Tokyo Rose” Nadler, Mr. Gartman actually possesses some market forecasting skills. I would pick him in an instant over the clown if one had to manage my own money. And, because I was once Chairman, CEO and President of the “Me, Myself and I Society,” I can fully understand and appreciate Mr. Gartman’s obviously strong ego. (It’s not as hard as one may think to be a legend in one’s own mind, trust me!)

My take on Mr. Gartman is he’s a closet gold bug, but he’ also a brilliant marketer and knows he would lose any serious consideration by the media and mainstream financial arena if they think he wear tin-foil hats or worships a golden cow in his backyard, which would also be very bad for his business. He’s the Vito Spatafore (Sopranos character) of the financial world – he wants to come out of the closet but he’s smart enough to know if he does his business would be whacked.

As I noted yesterday, the junior resource market has numerous factors up against it. I also noted that one possible viewpoint could be that the end has arrived and junior resource players could be the “buggy-whip investors of the 21st century”. My own prejudiced position was we’re closer now than ever to a major bottom. The fact that Mr. Gartman has thrown in the towel is indeed a bullish contrarian signal—not so much because of his personality and personal track record, but because hard core metals and mining folks like me actually wonder if he could be right this time. If that isn’t a bottom, I don’t know what is.

Quick note on gold and silver – The hate gold mongering continues as an onslaught of bearish forecasts and media articles continue unabated. But somehow gold holds key support around $1,635 and silver actually wants to go considerable higher. As noted previously, it’s best to wait until gold has two consecutive closes above $1,700 before going from defense to offense and worse case scenario is to hold some buying power if we breakdown and head to ultimate support in the $1,550 area. But please don’t hold your breadth waiting for such an occurrence.

This entry was posted on April 18, 2012 at 10:38 AM. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.

Posted in All Posts Commentary Gold by Peter Grandich

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Gold & Precious Metals

Tap Profits in the Growing Graphite Market: Simon Moores

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Posted by Brian Sylvester of The Critical Metals Report

on Tuesday, 17 April 2012 17:45

Source: Brian Sylvester of The Critical Metals Report

Simon Moores Graphite is the Next Big Thing for resource investors, but as in any sector, due diligence is a prerequisite for success. Enter Simon Moores, graphite market specialist with Industrial Minerals in London. In this exclusive interview with The Critical Metals Report, he explains why graphite is "the perfect mineral," why we're still going to be talking about it years from now and which companies to watch in this emerging industry.

Companies Mentioned: Archer Exploration Ltd. - Focus Metals Inc. - Imerys - Northern Graphite Corporation - Strategic Energy Resources Ltd. - Zimtu Capital Corp.

The Critical Metals Report: You once called graphite the perfect mineral. Why?

Simon Moores: It's conductive; it's a lubricant; it's resistant to high temperatures and it's a strong mineral. This means it doesn't have just one major market; it has an abundance of markets and uses. It's key to existing technologies that have been around for 100 years as well as new technologies, like lithium-ion batteries.

But despite what many think, it's not a niche industry. Rare earths and lithium are niche industries. Each year, 1.1 million tons (Mt) of graphite is produced. It's bigger by volume than molybdenum, vanadium, cobalt, tungsten, rare earths and lithium combined.

Graphite miners operate all around the world in Canada, Brazil, Europe, India and, of course, China, which accounts for 80% of production. That's a new figure that our research at Industrial Minerals has just uncovered for the new Natural Graphite Report 2012. China's grip on graphite production is greater than people thought previously.

TCMR: What is China's next move in the graphite market? Do you think there will be more quotas and export restrictions?

SM: There are no rare-earth style quotas at the moment. China doesn't say, "We are only allowing 400,000 tons (t) of graphite to be exported every year." But the country is doing things that could restrict the raw materials supply. The government doesn't like exporting raw materials that other people make money from. It is trying to build a value chain to unlock the value in its natural resources.

For example, China exports flake graphite to Japan. Japan turns it into battery-grade graphite, which is then used to make anodes, which is then used to make batteries, which Japan then ships for a much higher cost than the raw graphite. Now China is trying to build those finished products domestically. As a result, less raw material will come out of the country. In addition, China is trying to control its sprawling mining industry by forcing consolidation. Graphite is a perfect example of a sprawling Chinese mining industry.

TCMR: China is already encouraging foreign companies who depend on rare earth elements (REEs) to set up shop in the country. Do you see the same story unfolding in the graphite industry?

SM: The difference with rare earths is that China is the only place you can get good supply. It operates the world's only mine in Inner Mongolia until Molycorp and Lynas truly get underway.

China is aware that companies can get graphite elsewhere. It is also aware that at the moment it makes good business sense to sell quality raw material at high prices for the short term. Longer term, the story is different.

TCMR: China's had environmental problems with some of its rare earth operations. You visited some graphite mines in China. Are the graphite mines environmentally problematic?

SM: No, it's basic mining that has been around for centuries—extracting from the ground, crushing and grinding. You then put it in a floatation tank with reagents. This part of the process requires chemicals, but these are well known chemicals used in many other industries. Finally, graphite processors dry it and bag it. Graphite is an inert mineral, so it's not harmful. There are no underlying environmental problems in graphite mining.

The only area that holds some controversy is processing into spherical graphite, which requires additional chemical and physical treatment. Acid treatment is quite intensive and there could be future controversy surrounding the disposal of acids used.

TCMR: Are the Chinese mines primarily producing large-flake graphite or a lower-end product?

SM: It's almost a 50-50 split. Flake graphite mining exists all the way down the country's spine. This is good-quality material suitable for both domestic and international refractory and battery markets.

The Hunan province, in the south, is home to amorphous graphite, the old-style graphite people first started mining around the world. Amorphous is more common because the graphitization is lower and closer to coal, whereas flake graphite is closer to diamonds. Amorphous graphite supplies lower-end markets that produce products like pencils and lubricants.

TCMR: You describe the graphite market as having "layers" of demand. What does that mean?

SM: When graphite first came into use, it was mainly employed in lubricants and pencils. Those were the primary demands until after World War II, when the steel industry, driven by construction, became an additional end user, forming a second layer that boosted demand by about 30%. In the 1960s, the auto boom and car construction, especially in North America and Europe, formed yet another layer. Throughout graphite's industrial history, new technologies keep emerging while demand from traditional industries hasn't dropped off. This has built graphite into the 1.1 Mt industry it is today.

TCMR: Are there any graphite substitutes for these new technologies?

SM: Synthetic graphite is a substitute. Cost is still prohibitive, and people prefer flake graphite's properties. Batteries, for example, require a good porosity and surface area so the lithium ions can flow through the anode and generate the charge. Man-made graphite doesn't really provide that.

TCMR: What are some characteristics of an economic graphite deposit?

SM: The carbon content throughout the deposit is very important. A lot of companies are reporting the top range of carbon content, but because mining needs to stretch over many years, carbon content needs to be consistent throughout and not just good for three months.

The type of graphite is critical—flake and vein graphite are the best. Flake is the good stuff. Vein graphite is even better—it is found in lumps in the ground and is "cooked" by long geological processes. It is the form closest to diamond mineralization, and for this reason is much rarer, only found in Sri Lanka today.

A third key factor is infrastructure. Transportation makes up a large portion of the costs of large-scale graphite production. Currently, graphite is going through a high price peak, so existing producers are enjoying themselves. Producers have to prepare for the worst: If the price comes back down to perhaps half of its current market value, a producer's logistics are critical because that's where it either spends a lot of money or saves a lot of money.

TCMR: We didn't hear much about graphite even a year ago, certainly not from publicly listed companies. Are we still going to be talking about graphite in three years?

SM: We will. Lithium is a perfect comparison, because, in 2009, it had the same boom graphite is now having. In 2010, it reached a peak. Lots of juniors entered the industry. Everyone got excited about it. In 2011, nearly all of the juniors fell away, and the remaining players were focusing on their projects and not making as much noise. This year, we're seeing consolidation in the industry. Graphite will follow the same pattern.

TCMR: Has the boom in the price of high-quality graphite over the last year or so surprised you?

SM: Not really, because you have to look at the fundamentals. Graphite supply has been neglected for a generation yet it's still used in a lot of growing markets. Graphite's demand security is in its diversity: when one market drops off, another steps up.

When you only have this situation with a handful of active mines and no new operations planned, then there's only really one outcome: Eventually prices are going to rise, because there's going to be a supply squeeze. China adds a huge element of future supply uncertainty as well.

TCMR: The last graphite boom was in the 1990s. But then prices fell, and a number of mines were mothballed. Who's to say that won't happen again?

SM: It could happen again. That's always the risk, when you have so many potential mines coming online.

China caused the bust in the 1990s. New producers flooded the world market and put a lot of people out of business with low-cost production. Today, in a twist of fate, China could now be the cause for making these mines viable again. We have to look at how much production China controls, and its long-term goals, what it wants to do with its economy and its raw materials. Any new bust, however, is not going to be as drastic as the one in the early 1990s.

TCMR: One of the graphite derivatives that is very misunderstood is graphene, which is a single layer of graphite that is created in labs. How close is the industry to commercial-scale graphene production?

SM: The industry is some way off. A Google search will throw up many companies claiming they can produce graphene. But I wouldn't call it graphene—I'd call it nano-graphite. There may be three, four, five layers of graphene in their products.

Graphene is used in intelligent inks, for example, which are used for security systems on bank cards. That's its first market, and others may emerge in the next few years. But I believe the production of true graphene is many years away—commercially producing true graphene one-molecule thick—is extremely challenging, one of the biggest materials scientists will face. But if they crack it, the possibilities for its use are almost endless and it would revolutionize they way we live our lives. But to get graphene's super properties we all read about, you need to peel away and isolate a one-molecule layer. It's almost impossible to do that on a commercial scale. In terms of serious large-scale commercial use, it's at least 15 years away, and predicting 15 years into the future is like trying to predict 1,500 years into the future.

TCMR: Will the steel and battery industry end users drive another layer of graphite's growth?

SM: Yes. The steel industry uses refractories, which are protective layers for vessels that hold molten steel. If you pour molten steel into metal, it's going to melt through. So refractories are lined with bricks that can handle extreme temperatures. A big component of brick is graphite—up to 15% per brick. The steel, cement, petrochemical, glass and ceramics industries all use graphite in this way.

TCMR: What about lithium-ion batteries for electric cars—that's a significant amount of graphite in those products, too, correct?

SM: Electric vehicles are not a big demand driver today. But that's where the potential lies. In an electric car battery 1.8 kilograms (kg) graphite is used per kilowatt hour (KWh). Then take a battery pack equating to 24 KWh (like Nissan's LEAF), that's 38kg natural graphite per battery. It's a long way off, but if a manufacturer were to sell a million of these cars, that amounts to 3.8 Mt natural graphite. The natural graphite market is 1.1 Mt a year at the moment. So you can see why people are excited about it.

TCMR: What are some companies with graphite projects that could fill the supply gap for natural graphite, especially large-flake graphite?

SM: I'd look first at the companies that are actually producing graphite now. There's Timcal Ltd., which is publicly traded by Imerys (NK:PA), based in Paris. Imerys is a big minerals company; graphite is just one small area of its business. But its mine in Quebec is the only major active mine in North America. In December, Imerys announced plans for three new mines in the area, which shows that existing companies have the ability to do it straightaway.

TCMR: Canada in general seems to have a lot of potential for economic graphite deposits.

SM: Exactly. It's got a handful of leading juniors: Focus Metals Inc. (FMS:TSX.V), Northern Graphite Corporation (NGC:TSX; NGPHF:OTCQX), Ontario Graphite Ltd. (private) and Mega Graphite Inc. (IPO expected by the end of Q112).

Focus Metals' primary graphite operation is the Lac Knife deposit in Quebec. The deposit is famous and has been on our radar for more than 20 years. It's a large, high-quality graphite deposit with about 8.1 Mt flake at 16% average carbon content, which is strong. And the company is investing in technology to make graphene, which sets it apart.

TCMR: How close is that project to production?

SM: It's at least two years from production, the same as any other new junior. Building a new mine anywhere in the world is never a quick process.

TCMR: Let's move on to Northern Graphite, the darling of the industry. It was publicly listed last year, and the trajectory has been steadily upward.

SM: Its Bissett Creek project in Ontario is great. Northern Graphite has been around for a while, under different names. Bissett Creek has also been on our radar for a long time – before others were interested in graphite, work was being conducted on the deposit which says a lot for its quality even in down times. The company has ramped up drilling and marketing activities in the last two years.

Northern Graphite's selling points with its project are the size of the flake and the purity of the carbon content. The company, like many others, still needs the funding to build the mine. That's the challenge for all these juniors in Canada. Bissett Creek is still a very good project. You can't deny that.

TCMR: Northern Graphite is also doing some research on graphene—what do you make of that?

SM: It's a new battleground for some of these juniors. They're battling not only for funding but for share of the headlines. Any company with a high-quality graphite deposit naturally lends itself to mechanical exfoliation production of graphene.

TCMR: The other junior you mentioned is Ontario Graphite, which has a project not far from Bissett Creek.

SM: Ontario Graphite is a bit different, because it's a mine-reactivation project. For that reason, I would think that it will be quicker to bring production onstream. The company will need a new plant and new equipment, which is relatively straightforward to install. It is scheduled for commissioning in September this year. I could see Ontario Graphite processing product within 2012. The resource is also a good size—43.5 Mt Measured and Indicated resources, 12.3 Mt Inferred resources.

TCMR: Are there enough metallurgists available to create the end product?

SM: Yes. It's not like the rare earth industry, in which North America lost all its intelligence and skilled workers. Graphite has been a consistent, worldwide mainstay, which means the knowledge base has been retained thanks mainly to U.S.-based companies like Asbury Carbons and Superior Graphite. The challenge may lay with higher-value graphite grades for the battery market. Spherical graphite is a key raw material for battery anodes and this is still a new process for everyone.

TCMR: You also mentioned Mega Graphite.

SM: Mega Graphite bought an Australian company called Strategic Energy Resources Ltd. (SER:ASX) and that gave it a fast track route into the graphite industry. Its Uley Mine is actually a big stockpile of processed and unprocessed material because, similar to Ontario Graphite, back in the early 1990s the mine was closed. It wasn't economical enough to compete with cheaper products from China.

Mega Graphite has upgraded the plant with modern equipment and is reprocessing the stockpiled material to make the various grades of graphite. It has the potential to produce about 20,000 tons good-quality graphite from that stockpile over the next three years. But it will need to start mining to replenish these stocks.

TCMR: Is there a significant mining industry in Australia? Will Mega Graphite and Strategic Energy face some competition?

SM: At the moment Australia has no graphite mining industry. Zimtu Capital Corp. (ZC:TSX.V) is buying up a lot of deposits there and has an impressive portfolio of assets around the world. Archer Exploration Ltd. (AXE:ASX) is another company that has a project as part of a larger portfolio of mineral assets. But Mega Graphite is far more focused on producing graphite so the company shouldn't encounter much production competition in the near term.

TCMR: What's the infrastructure like at Uley?

SM: It's fine. Australia is mining friendly. It is used to this kind of industry.

TCMR: It's not going to face any mining royalties there? Australia has implemented one on iron ore and coal.

SM: Australia will try to target its big businesses like iron ore and coal. Graphite is never going to be a comparatively big business there. If Australia heavily taxes the smaller mining companies, then it won't have much of a mining industry left. It needs to encourage these. Mining is the sole reason Australia didn't slip into recession.

TCMR: What advice would you give to investors who are interested in the graphite story?

SM: The resource is everything. The larger the flake and the higher the purity of carbon the more critical it will be to high-tech applications. Also look at what the company's plans are for selling this material and if it is targeting specific markets—co-operation with Japan and South Korea will be key here. Traders from these countries are usually the most savvy of long-term investors.

The most interesting graphite plays are those that are focused on technology end uses. Producing high-tech-compatible materials for emerging markets, like spherical graphite for batteries, will add the serious value.

Industrial Minerals is working on the Natural Graphite Report 2012, which should be out in the next two months. It's an extensive world overview of production, prices and demand and should answer any more questions readers may have.

TCMR: Thank you for speaking with us today.

SM: My pleasure.

Simon Moores has been reporting on, researching and analyzing the non-metallic minerals sector since 2006, when he joined London-based publishing and research house Industrial Minerals. He has specialist knowledge in critical and strategic minerals including graphite, lithium, rare earths and titanium.

He led the research and publication of the market study, The Natural Graphite Report 2012: data, analysis and forecast for the next five years. One of the study's key findings was China's dominance of production was significantly higher than previously thought, accounting for 80% of supply. He has chaired conferences and given keynote presentations around the world. He has also been interviewed by international press including London's The Times regarding Chinese control on world graphite production, and The New York Times with regard to rare earths after breaking the story that China blocked exports to Japan in 2009.



Gold & Precious Metals


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Posted by Mark Leibovit - VR Trader

on Tuesday, 17 April 2012 07:25

Spot gold's recent low occurred on April 4 when it traded at 1611.00. It then bounced touching 1681.30 this past Thursday, a 4.3% rally in one week. Silver rallied from 30.91 to 32.71 in the same time frame We are now testing those lows.

Remember, gold has passed its normal seasonal strength period while silver, in theory, still has a shot for strength into May.

gold vs silver

Overall, however, this is not normally the time of year to own gold, except for either trading purposes or long, long-term investment purposes. What could drive gold (and silver) higher short-term? One of the main drivers of this expected price push was expected to be the resumption of acute fears over Eurozone sovereign debt, with Spain set to be the new area of concern. Moreover, it was thought that over the next few months the US recovery will begin to falter and this will force the Federal Reserve into taking additional monetary policy measures. Bearish sentiment remains quite high for precious metals this is also a plus. The Plunge Protection Team has succeeded in putting a lid on gold and they have either convinced or have been voluntarily joined by numerous bearish analysts.

JP Morgan' television appearance last week on CNBC with the head of commodities, Blythe Masters, may be a turning point in the silver suppression saga. It is widely recognized that as a result of the acquisition of Bear Stearns (arranged by Bernanke), a large short position in silver was inherited by JP Morgan. JP Morgan Chase is not in the commodities speculation business, Blythe Masters told CNBC Thursday."It's not part of our business model. It would be wrong and we don't do it," she said. The misperception, rampant in the blogosphere, comes from what JPMorgan does for clients, Masters said. "We store significant amounts of commodities, for instance silver, on behalf of customers. We operate vaults in New York City, in Singapore and in London. Often when customers have that metal stored in our facilities they hedge it on a forward basis through JPMorgan, which in turn hedges in the commodities market," she said. "If you see only the hedges and our activity in the futures market but you aren't aware of the underlying client position that we're hedging, then it would suggest inaccurately that we're running a large directional position," she added. "In fact that's not the case at all. We have offsetting positions. We have no stake in whether prices rise or decline."
What Blythe failed to us, however, is that her client is the U.S. Government who with infinite deep pockets orders the sale of silver, gold and any other futures contract in quantities big enough to force prices lower as needed or desired! This is the piece that when totally recognized and believed will be the undoing of the 'conspiracy'.

From Yale Hirsch:

My 1987 Stock Trader's Almanac was dedicated to THE NEW PROGNOSTICATORS.

Mark Leibovit was one of them. I evidently had insight as Timer Digest named Mark the

"Number One Market Timer for the 10-year period ending in 2007."

For the 10 years ending 2009, he was #2 intermediate Market Timer.

He is also their #1 Gold Market timer for 2011.

This book should be REQUIRED READING for anyone who trades.

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Gold & Precious Metals

Could Gold Rise on One Country’s Meltdown?

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Posted by Dave Gonigam

on Monday, 16 April 2012 08:45

By Dave Gonigam

Gold is ending the week doing a little more backing and filling. After yesterday’s run-up, the spot price has pulled back to $1,665.

$2,000 looks far off in the distance. To say nothing of last September’s $1,900 high.

Then again, it could happen with the snap of a finger.

“A push on toward $2,000 is definitely on the cards before the year is out,” says Philip Klapwijk, “although a clear breach of that mark is arguably a more likely event for the first half of next year.”

Mr. Klapwijk is global head of metals analytics at the consultancy Thomson Reuters GFMS. The catalyst for $2,000 might well be, in his estimation, Spain. A meltdown there — coupled with continuing strong demand from China — could give gold a whole new “safe haven” glow.

That said, he also sees a short-term dip to the year-end 2011 level of $1,550 within a couple of months. You’ve been warned.

“U.S. investors might sleep better at night with an allocation to gold in the face of continued negative real interest rates,” says U.S. Global Investors chief and Vancouver stalwart Frank Holmes.

“The chart below shows how gold has historically climbed when interest rates fell below 0%, with a ‘strong correlation from 1977-84, and again recently when rates turned negative in early 2008,’ according to Desjardins Capital Markets.”

Read More HERE



Gold & Precious Metals

The Who, How & Why of Silver Price Manipulation

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Posted by Peter Krauth via Resource Investor

on Thursday, 12 April 2012 03:45

No one knows the machinations of the day-to-day silver price better than Ted Butler.

Ted publishes bi-weekly commentary at www.butlerresearch.com, with a special focus on the silver market, which he's been closely following for over 30 years. Ted is an expert's expert.

So naturally, that's whom I turned to for an in-depth perspective on what's really going on with the silver price. As usual, Ted tells it like it is.

I think you'll be fascinated by Ted's tremendous insights...

Ted Butler on Silver Price Manipulation

Peter Krauth: Ted, you're widely recognized as the foremost expert on manipulation in the silver futures market. How do you define manipulation, and how are the main players benefiting from that?

Ted Butler: Manipulation is another way of saying someone controls and dominates the market by means of an excessively large position. So, just by holding such a large concentrated position, the manipulation is largely explained. In real terms, whenever a single entity or a few entities come to dominate a market, all sorts of alarms should be sounded. This is at the heart of US antitrust law. It is no different under commodity law.

Price manipulation is the most serious market crime possible under commodity law. In fact, there is a simple and effective and time-proven antidote to manipulation that has existed for almost a century, and that solution is speculative position limits. Currently, the Commodities Futures Trading Commission (CFTC) is attempting to institute position limits in silver, but the big banks are fighting it tooth and nail.

As far as any benefits the manipulators may reap, it varies with each entity. But if you dominate and control a market by means of a large concentrated position, you can put the price wherever you desire at times, and that's exactly what the silver manipulators do regularly. This explains why we have such wicked sell-offs in silver; because the big shorts pull all sorts of dirty market tricks to send the price lower.

PK: Could you tell us when and how you got started researching this matter?

TB: It started around 1985, when a brokerage client asked me to explain how silver could remain so low in price (in the single digits) when the world was consuming more metal than was being produced. I accepted the intellectual challenge, and it took me more than a year to figure out that the paper short positions on the Comex were so large as to constitute an almost unlimited supply. It was this paper supply that was depressing the price.

PK: Who are the main players in this manipulation scheme? On average, what percentage of Comex silver contracts are "controlled" by these main players?

TB: Under US commodity law, the names of individual traders are kept confidential. However, it is no secret that the commercial traders are the big shorts. It is also no secret that these big commercial shorts are mostly money center banks and financial institutions. Based upon government data and correspondence, the largest such short almost certainly is JPMorgan Chase & Co. (NYSE: JPM), who inherited their big silver short position from Bear Stearns when JPM took over that firm in 2008.

Together, the eight largest commercial silver shorts on the Comex generally account for 50% to 60% of the entire net Comex silver market, with JPMorgan alone holding around 25% or more of the entire market. I would hold that those percentages of concentration and control constitute manipulation, in and of themselves. By the way, there is no comparable concentration on the long side; only the short side of silver.

....read more HERE



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