Timing & trends

Ugly charts and more ...

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Posted by Larry Edelson - Uncommon Wisdom

on Monday, 16 July 2012 07:32

I’d love to tell you that all is well in the world. That Europe has solved its sovereign-debt and currency problems. That the U.S. economy is looking better than most believe. And that Asia is about to soar again.

But the fact of the matter is that none of that is true.

Europe’s in deep doo-doo. Spanish and Italian debt yields are soaring again. Moody’s has now downgraded Italy. Finland is threatening to pull out of the euro. The euro is tanking; it’s at a fresh multi-year low and threatening to plunge even more.

Here in the United States, corporate earnings are starting to disappoint. The U.S. budget deficit hit $904 billion in June and is on track to hit $1.17 trillion by the end of the year.

Our national debt is approaching $16 TRILLION, more than $51,000 for every man, woman and child.

Plus, our country is quickly heading toward a fiscal cliff of gigantic proportions ― uncertainty in just about everything, from tax policy ... to fiscal policy ... to monetary policy and more.

Also thrown into the mix: Underlying tones of class warfare, rising social unrest, stubbornly high unemployment, and more.

In Asia, China’s economy has slowed more than I expected. Though the region can bounce back quite quickly, there’s no doubt the added worries about Asia are also weighing on the global economy.

Bottom line: The short- and intermediate-term fundamental forces driving the markets are looking ugly.

That’s also precisely why the technical picture for most markets is also looking bad.

Consider this chart of gold: Many see some sort of bullish formation forming, all because gold has managed to hold the $1,522 to $1,545 level on at least five occasions.


But anyone who has truly studied the market knows that the more times a market tests a particular level, the greater the odds are that it will eventually break that level and plummet right through.

All my system signals remain bearish gold in the short to intermediate term. Once $1,545 is taken out, look for support levels at $1,495.50 ... $1,446.80 ... $1,400.80, followed by $1,373.10 and $1,346.80.

ONLY a close above $1,723 in gold would reverse the downtrend. Short of that, I strongly believe gold is headed lower.

Also consider this chart of Silver. Similiar to Gold, Silver has repeatedly tested — and worn down — the support level at the $26 area. The next time through it, and silver should plummet.


Look for support at $23.61 followed by $20.27 and $16.89.

Only a weekly close above $31.49 would reverse silver’s short- to intermediate-term downtrend.

Hard to believe silver could fall to $20 or lower. I know. But that’s what my systems are telling me. And the rout could come soon. So stay alert.

Also consider this chart of crude oil. It’s one of the ugliest charts I’ve seen in a while.


While oil is trying hard to hold the $80 level, it will soon fail to do so. Instead, a shocking decline lies ahead for oil, one that will see it plunge to below $60 a barrel.

Keep your eyes on the $77.33 level. Once that gives way, oil will spin a lot of heads as it tumbles hard. Only a weekly closing above $92.87 would turn the immediate trend around for oil.

As for U.S. stocks, don’t expect much upside there either. While the broader U.S. stock markets are in a new long-term bull market, they remain vulnerable to the downside in the short term.

There’s simply too much global uncertainty right now, and I see the Dow falling to at least 11,500 and possibly 10,500 — before any sustainable rally develops.

My view:

  1. Continue to keep most of your liquid funds in cash, ready to be deployed on a moment’s notice, but as safe as can be right now. The best way: A short-term Treasury-only fund in the U.S., or equivalent.
  2. Despite gold’s weakness, hold on to all long-term gold holdings. You do not want to let go of those. Long term, gold is heading to well over $5,000 an ounce. Short term, gold is heading lower. Consider inverse gold ETFs, such as the ProShares UltraShort Gold (GLL), to hedge your long-term holdings. 
  3. Consider prudent speculative positions to grow your wealth. Like those I have recommended in myReal Wealth Report, which are doing great right now as silver falls, as the euro struggles, and more.

Most of all, don’t let the pundits on Wall Street kid you. The Fed will not prop up the markets for the elections ... Europe will not be able to solve its sovereign-debt crisis ... corporate earnings have seen their best for the current cycle ... and there are more dangers to your wealth right now than there have been in the recent past, since at least 2008.

So stay cautious, but ready to pounce on new opportunities as they unfold.

Best wishes,


P.S. My Real Wealth Report subscribers have side-stepped the crash in gold and silver mining shares ... have hedged up most of their gold holdings from much-higher levels ... and they are also enjoying pretty nifty gains in their speculative positions, including inverse ETFs on silver and the euro.

Wouldn’t you like to join them? All you have to do is click here to start your risk-free Real Wealth Report trial today!


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Timing & trends

Exclusive Grandich on The Resource Mkt, European Crisis & Shorting Bonds

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Posted by Peter Grandich via Bull Market Thinking

on Friday, 13 July 2012 04:47

via Bull Market Thinking: For those who don’t know, over the last 25 years Peter is one of a few people in the world to have correctly called major market tops and bottoms—warning investors of the 1987 top, the 2007 top, and the 2009 bottom—within days of their actual nominal peaks and bottoms. During the interview, when asked about the most impactful item in the marketplace for investors to be aware of right now, Peter said, “The onoing crisis in Europe grips the markets on a day to day and almost on an hour to hour basis…there’s still somewhat of an expectation…that there will be a QE3 in earnest…We’re seeing just a dramatic slowdown in all areas of the world now, places like China that was once seemingly insulated from the world slowdown, is no longer the case.”

When asked about his thoughts on the mining share market, Peter said, “The further you go down into the food chain of the resource market, the uglier it’s been…it’s hard to imagine it, because unlike other declines…the metal prices are pretty much where they’ve been on average the last year, the general equity markets have not sold off in a big way—there’s nothing unusual happening in the metals and mining industry…yet as we go down that food chain from major producers to explorers, we see the damage acute.”

In regards to his extensive background and experience in the junior resource market, and whether or not this is just another “typical” down cycle he’s become accustomed too, Peter responded that, “The lack of sleep and the aggravation that has come with the territory, as someone who makes a livelihood in working with the juniors—it’s not fun to almost every day read hate-mail—I like to joke and say that’s from my family, let alone my readers! But the bottom line is…since the venture exchange was created about ten years ago, it’s gone through something like 7 or 8, or 9 boom and bust cycles. One thing that is familiar is when we’re at this bust side of it, we have a feeling or a sense of hopelessness, that’s [it's]never going to reboundagain, and ‘How are these $.20 cent stocks ever going back to a dollar?’ [type of attitude]. But during the last ones [cycles] it did—[but] it took several years.”

He further added that, “This one is a little bit different, because it really came out of left field. It really wasn’t part of something that we can point to in the past as I noted earlier and said, ‘Ah-ha, now you can see why the market has come off in the way that it did’, and I think the shock of it has left people dazed.”

On the concept of the coming American debt crisis, and the idea of shorting 10 year US government bonds ahead of rising interest rates, Peter said,“Europe has been a few years ahead of us in the debt crisis. No matter what anybody wants to think, America is no better off from a debt level [perspective], than most of the European countries that are going through the crisis…Once the European position looks like it’s past it’s worse, the focus I believe will come to the United States, and the realization will be, ‘We’re as every bit as bad as Greece, Italy, and the others’,  and then the bond market no matter how slow the economy is, no matter how much the fed is printing, will get hit, and get hit very hard and interest rates will actually rise dramatically—something that people just can’t see happening with such a slow economy.”



Timing & trends

A Rare "Buy" Signal on Gold

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Posted by Dr. Steve Sjuggerud's Daily Wealth

on Thursday, 12 July 2012 08:10

The bull is back…

Now is the perfect moment to own gold… Sentiment is still negative. And we have a hint of an uptrend.

This is exactly what we wait for.

In short, things are getting "less bad" in gold. And our True Wealth Systems computers tell us it's time to buy. Based on history, we could see enormous gains over the next few months. Let me explain…

Our computers recently started flashing a rare "buy" signal on gold…

As my True Wealth Systems readers know, we track gold two ways. Our first "Gold in Currencies" system tests gold versus four of the major world currencies.

The idea is simple… We want to own gold in a bull market. But what is a gold bull market? 

You might hear people say, "It's not a bull market in gold… It's simply a bear market in the dollar." 

You see, if the U.S. dollar is crashing against other currencies, it's likely also going down in terms of gold. So it looks like gold is in a bull market. But what if gold is falling in terms of the euro or yen while it's rising against the dollar? That's not a gold bull market.

So what is a bull market in gold? 

One simple definition is: When gold is going up in terms of all the world's most important currencies, it's a bull market in gold. 

We used this definition to come up with a simple system for gold. We tested the idea on four major currencies… the U.S. dollar, euro, British pound, and Japanese yen.

If the average price of gold is up in all four currencies versus the previous month… buy gold. Repeat the next month. That's it.

I know, it sounds too simple, but it works… We want to own gold when this system says "buy." We've tested the idea on 40-plus years of data. The results are astonishing. Take a look at this chart from the most recent True Wealth Systems

dw712a 3

Based on history, buying a double-long gold fund when this system says "buy" is good for 41.4% annualized returns. 

Yes, that's right. This system returns over 41% a year when it flashes "buy." 

Importantly, these signals are somewhat rare… Our computers say "buy" less than one-third of the time… Meaning, on average, we'll only get about four buy signals every year.

And right now, the True Wealth Systems computers tell us now is the time to buy gold and ride it higher.

The thing is… We still don't have the uptrend, based on our "Gold Uptrend" system. I'm not concerned, though… this system is a bit slow to signal. Our "Gold in Currencies" signal can be a great "early sign" of a new uptrend in gold.

In short, based on our historical testing, we could be at the brink of a major breakout in gold… without a confirmed uptrend.

I pored over the data and found an incredible result…

In 40-plus years of testing, we've seen six MAJOR gold bull trades. (That doesn't sound like many. But remember… gold went down, consistently, between 1980 and 2000.) Our "Gold in Currencies" system said "buy" before our "Gold Uptrend" system did at the beginning of every trade except one. (In that case, they signaled at the same time.) 

In these five cases, our "Gold in Currencies" system signaled "buy" one to three months before the "official" uptrend kicked off. However, being a few months early can "juice" our long-term gains…

The average return on our five gold uptrend trades was 110%. That's an incredible return. However, by following our "Gold in Currencies" system into the trade a few months early, we're able to increase our average return to 133%.

Importantly, every one of these trades was MORE successful because of following the currency system in early.

Today, we could be on the verge of another major move in gold. Of course, we can't know if this is the case. But simply based on history, we want to own the yellow metal when our "Gold in Currencies" system says "buy." Historically, it's good for 41.4% annualized returns, regardless of predicting a new uptrend.

You get the idea – right now is a great time to buy gold. It is still a bit hated, and we could be on the brink of a major uptrend.

Good investing, 


Further Reading:

The cost of producing an ounce of gold is soaring, but one group of gold companies couldn't care less. Earlier this week, resource expert Matt Badiali told DailyWealth readers about one of his favorite ways to play gold. "These companies are largely immune to the rising cost of mining gold," he writes. Get the full story here: The World's Best Gold Companies.

And catch up on another one of Steve's favorite "cheap, hated, and in an uptrend" ideashere.


Timing & trends

Jim Rogers: Shorting Stocks & Waiting on Gold's Sidelines

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Posted by JIm Rogers via Hard Assets Investor

on Wednesday, 11 July 2012 10:22

0610-jim-rogers-dollars full_600

The commodities investment legend says he’s ready to buy more gold once its correction runs its course, but for now he’s shorting Europe.

Jim Rogers, the natural-resources investing guru, says the bull market in commodities he described in his 2004 book “Hot Commodities” is far from over. Speaking on the telephone with IndexUniverse.com Managing Editor Olly Ludwig, Rogers said the bull run in materials is perhaps in the bottom of the fifth inning or the top of the sixth.

Stressing that any bull run will have its setbacks, Rogers said China’s development is likely to re-accelerate, and that gold will resume its more than decade-long climb upward as central banks around the world continue their easy money policies. Rogers said he just hopes he’s smart enough to buy more gold—and a lot of it—when the yellow metal’s current correction is over.

Ludwig: What did you think of the recent central bank actions?

Rogers: I find it absurd. It’s the wrong thing to do. They are just adding to the inflationary pressures that are here, and we’re all going to have more problems down the road.

Ludwig: China’s announcement of a 25 basis point cut is decidedly different than the European central bank cutting by 25 basis points, no?

Rogers: I don’t think either one of them should have cut by 25 basis points–neither the Chinese nor the Europeans.

Ludwig: So how do you contrast the Chinese cutting rates with the excesses you perceive with the loose-money policies of the Federal Reserve or the ECB?

Rogers: China doesn’t have the excesses that we have in the U.S. or even in Europe. China has huge reserves of currency, while America is the largest debtor nation in the history of the world. They are not comparable situations.

But as far as inflation goes, China has inflation and this is just going to make its inflation worse. If I were China—and I’m not, and there’s no reason for it to listen to me—it should keep monetary policy tight until inflation is killed. It’s not killed yet, and this is not going to help kill it.

Ludwig: Let’s talk about China for a moment. There’s a fair amount of talk that the China juggernaut is at a crossroads, that what Deng Xiaoping achieved in the past generation was the easy part, and achieving steady growth is going to be a lot harder going forward. What’s your take on that view?

Rogers: There’s no question that the first 30 years are the easiest 30 years when you’re doing something like Deng Xiaoping did. And, secondly, there will certainly always be setbacks. Any country, any company, any family, any individual that rises has setbacks along the way. That’s the way the world works. It’s normal.

And, as we just discussed, China has been trying to slow its economy for the past three years. Anyone who doesn’t understand that China is slowing down should read the newspapers. And, I as I was just saying, they’re trying to loosen up too soon. But this is part of a plan. They have been successful so far, but whether they will continue to be successful, who knows?

In America, in the 19th century, we had a horrible Civil War; we had many Depressions; we had very little rule of law; we had periodic massacres in the streets; and we had few human rights. And yet we became an extremely successful country in the 20th century.

China is going to have plenty of problems as we go along. What they’re going to be and when and why, I don’t know. But I do know there are going to be plenty of problems.

.....read next page HERE


Timing & trends

James West's Secrets for Finding Tenbaggers

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Posted by James West via The Gold Report

on Tuesday, 10 July 2012 10:35


Despite some rotten apples in the past, good, ethical promoters are "essential to the life cycle of public companies," according to James West, author and publisher of theMidas Letter. The best of them tell a credible story about the company's structure, finances and deposit. When promoters do their jobs and investors do their homework, everyone stands to benefit from the legendary "tenbaggers," such as those that West shares in this exclusive Gold Report interview.


The Gold Report: Not so long ago, mining promoters—larger-than-life personalities who revved up retail investors about stocks—were an essential part of the junior mining business. But the NI 43-101 limits how much company presidents and CEOs can tout their stocks. Do promoters still have a role or have they disappeared from the scene?

James West: Promoters have not disappeared from the scene. Yes, the NI 43-101 puts a filter on how public companies communicate with the market, but promoters are essential to the life cycle of public companies.

There was a time when promoters were infiltrated by a larcenous element that would create and promote deals that could at best be described as very optimistic. Back then, these misleading statements could be distributed almost clandestinely. Thanks to the Internet and the NI 43-101, that larcenous element has largely been unable to operate as freely. People hear "promoter" and they immediately think "con artist," which is wrong-headed and a throwback to the pre-Internet era. Promoters now are legally responsible for the statements they make on behalf of a company. As a result, promotion is a lot more respectable.

Today, because the level of sophistication has gone up with the proliferation of chat rooms and discussion groups, information considered "overly promotional" is discounted by the audience. People are a lot more savvy about promoters and promotional language than they used to be.

"A great stock promoter can credibly and convincingly convey the technical aspects of a project and the merits of the management team, and can honestly indicate who the other investors are and what the exit strategy is to as broad an audience as possible. He also needs a great Rolodex."


Promoters are still there, they are just more transparent. Today, promoters are part of the management team. They go to the meetings, presentations and trade shows. Excellent promoters attract capital and investors. A company without a good promoter on the management team is a company with few investors, that nobody has heard about and that can't raise money.

TGR: Given the transparency and availability of information, would investors be better off if the NI 43-101 rules regarding resource disclosure were relaxed to allow greater promotion?

JW: No. It is thanks to the NI 43-101 that the Toronto Stock Exchange (TSX) and the Toronto Venture Exchange (TSX.V) are the No. 1 destination exchanges for resource stocks. Those rules create a level of investor trust such that investors expect that any legitimate resource-oriented public company raising money must have an exit strategy that involves the TSX or TSX.V.

However, I believe NI 43-101 enforcement should be undertaken more carefully. For example, look at what happened to Orbite Aluminae Inc. (ORT:TSX) last year. Orbite extrapolated a rare earth estimate between holes two kilometers apart. The geologist at the Ontario Securities Commission took exception to that and halted the stock. Later, the Autorité des Marchés Financiers in Québec did the same thing on the same grounds. Additional NI 43-101 reports were ordered by both agencies. Eventually, 11 independent geologists concluded that Orbite's approach to the assumption was sound and that the estimate was accurate. While it was halted, the stock built up a short position of 11 million (M) shares. When it was finally unhalted, it got hammered, and is now trading at nowhere near where it should be trading.

TGR: Do the recent poor performances of resource equities and the difficulties companies have raising money make a good promoter more valuable?

JW: Absolutely. Some promoters are raising millions of dollars. That is the result of a combination of good projects and good management, which includes a good promoter.

TGR: What makes a good stock promoter?

JW: A great stock promoter can credibly and convincingly convey the technical aspects of a project and the merits of the management team, and can honestly indicate who the other investors are and what the exit strategy is to as broad an audience as possible. He also needs a great Rolodex.

TGR: How do today's promoters differ from your dad's junior mining promoters?

JW: They do not drink or smoke nearly as much, and they probably do not make as much money. Back in the day, you could promote 10 or 15 deals. If just one took off, you would be off to the races financially.

Today, if you are on more than one management team, your attention is assumed to be divided and your effectiveness is perceived to be limited as a result. Promoters cannot have as many balls in the air as they used to. Promoters are a visible part of management and are accountable.

TGR: Who would you consider to be a good, or even great, promoter active today?

JW: A great promoter, without saying too much, gets you so excited about the deal that you buy stock in the market or you participate in a private placement. Without being promotional, he paints the picture and leaves you to read between the lines if it's a truly remarkable project.

I would put Richard Whittall from Newstrike Capital Inc. (NES:TSX.V) in that category. He does not shout from the rooftops. He diligently goes about the business of credibly articulating the structure and financial condition of the company and the deposit. The fact that Newstrike's share price is holding where it is in this market is testimony both to the quality of the deposit and to Whittall's effectiveness as a president and promoter.

TGR: Some might consider you a stock promoter. How do you straddle the line between being a promoter and remaining credible?

JW: Arguably, anybody who speaks positively about a public company is promoting it. In our newsletter, we are happy to promote the stocks we invest in because we own them in our fund, and we think they have value. When we write about these companies, we try to articulate a company's merits in terms of structure, financing, projects and management without being too promotional. The idea is to say, "This company is good enough for me to invest in it, and here's why I like it." It is third-party endorsement in its most sincere form.

TGR: But you also try to create a story and use language that people can easily understand and relate to.

JW: The role of a newsletter writer in mining is to convey complex technical concepts in simple terms that a layperson can understand and use to decide whether an investment is appropriate for them. We aid in the function of promoting the stock, but we are not promoters.

"The best time to participate in a high-risk venture is before a junior makes a discovery."


Increasingly, I have been invited into deals as a founding shareholder. In that instance, I do become more a part of the promoting function, and in most of those cases, I'm proud to be a promoter because I believe in the deal, the project and the team. But you rarely see a newsletter writer on a management team or a board of directors.

There are exceptions, like John Lee, who was a fund manager and newsletter writer with Prophecy Coal Corp. (PCY:TSX; PRPCF:OTCQX; 1P2:FSE) and Prophecy Platinum Corp. (NKL:TSX.V; PNIKD:OTCPK; P94P:FSE); Victor Goncalves, who stopped writing to become president of Threegold Resources Inc. (THG:TSX.V); and Jim Sinclair, who has a huge audience and is the president of Tanzanian Royalty Exploration Corp. (TRX:NYSE.A).

TGR: Institutional investors and investment banks are quite active in the junior mining space today. Do you think the space will be reclaimed by retail investors?

JW: First, the sheer size of the investment banks gives them an advantage over individual investors. Second, because the investment bank's business model relies on transaction volume, they are only in it for the structure, not the story.

So, yes, retail investors are reluctant to participate, especially in this kind of market and because of the mercenary nature of the investment-banking model. That being said, the earliest stage of the public company lifecycle is exclusively the domain of retail investors.

TGR: The best times to get into an equity position are at the seed capital stage and at an IPO. But many of our readers do not have those opportunities. What is the next best time in a company's life cycle to invest?

JW: I will start by saying that for the average investor whose portfolio is less than $100,000, the high-risk portion is the only portion that should be allocated to investing in junior mining.

"The best thing you can do in this market is look for companies that have made discoveries but whose share prices do not reflect the value of the deposit."


The best time to participate in a high-risk venture is before a junior makes a discovery. For individual investors that typically means after an investment bank has done a financing and the stock price drops below where the financing was done, and when all signs point to a discovery. At that point, you are in cheaper than the institutions and the share price is unlikely to be driven down lower. After the discovery moment, the stock price goes parabolic for a brief phase.

TGR: The discovery phase is when investors are most likely to tap into the legendary "tenbagger." Can you tell us about some names that may or may not be tenbaggers?

JW: GoldQuest Mining Corp. (GQC:TSX.V) comes immediately to mind. On May 23, 321,000 shares of its stock traded at $0.075. The company announced the Romero discovery at the Las Tres Palmas project in the Dominican Republic; drill results were 230 meters (m) grading 2.4 grams per ton (g/t) gold, which included 160m grading 2.9 g/t gold and 0.62% copper. In textbook fashion, the stock tripled, closing at $0.31 on 16M shares of volume. It touched a high on June 1 of $0.74. From $0.075 to $0.74, that is a tenbagger, a 10-times return investment if you sold it on June 1.

Apart from promising preliminary geology and geophysics, there was no way for an investor to know that GoldQuest was going to pop out a hole like that. That really speaks to one of the keys behind successful resource investing—plain luck.

TGR: Yes, but investors can reduce their odds through due diligence and listening to people like you.

JW: Yes. A good management team and a great geologist can look at a piece of ground and render an opinion about what might lie beneath it. Reinforce that with geophysical and geochemical data, and they might be able to improve on where they would drill a hole. But it is still largely a puzzle.

TGR: Shortly thereafter GoldQuest closed a $6.6M private placement. Could it have done that if it had not made that discovery hole?

JW: It might have been able to do that, but certainly not at $0.45 a share, and I doubt it would have been able to raise $5M prior to that discovery.

TGR: What is GoldQuest's next step?

JW: To keep drilling now that it has the money, and hope that hole is representative of the ground it owns at Las Tres Palmas.

TGR: What other names do you like, James?

JW: The best thing you can do in this market is look for companies that have made discoveries but whose share prices do not reflect the value of the deposit.

My first example would be Hunter Bay Minerals Plc (HBY:TSX.V; HTBNF:OTCQX). Hunter Bay completed its first drill program on the Sela Creek project in Suriname and announced 42m of 1.2 g/t gold as initial results. Artisanal miners have worked the surface of this area for 50 years. This is a discovery in the sense that modern exploration techniques have discovered the source of all that surface gold.

The nearby Rosebel mine belonging to IAMGOLD Corp. (IMG:TSX; IAG:NYSE) is at 14 million ounces (Moz). Newmont Mining Corp.'s (NEM:NYSE) Nassau deposit is 4+ Moz. Both of these discoveries were found under similar circumstances.

Yet, Hunter Bay trades at just $0.20/share. Nobody understands the implications of the initial drill results, and it is not generating the broad market appeal that GoldQuest did. But that is what makes it an opportunity for investors. Hunter Bay will continue drilling. Chances are it will continue to prove up this kind of drill intercepts, indicating the existence of a mineable deposit.

TGR: In our last interview, you talked about Tinka Resources Ltd. (TK:TSX.V; TLD:FSE; TKRFF:OTCPK)and Seafield Resources Ltd. (SFF:TSX.V). What is happening with them?

JW: Tinka already has 20 Moz silver in combined resources at its Colquipucro deposit in Peru. On May 1, it announced 20m of 86 g/t silver. That is almost 3 ounces per ton silver. There have been other positive announcements as well. This is an existing resource where drilling continues to prove out intercepts that demonstrate the potential for an economic deposit. The company has been beaten down by general market aversion. However, as an investor, if you buy into the idea that the silver price is rising incrementally, it is excellent exposure to silver at an excellent price.

TGR: There have been recent concerns about the viability of mining projects in Peru. What is your view?

JW: Peru's president, Ollanta Humala, was elected on a platform of making sure more money from Peru's resources goes to the poor people who need it most. Now that he is president, he has to deliver on that. Peru's revised tax system for mining does give the government more money.

But the problem with the specific deposit that is causing trouble for Newmont is that it is in an area where the people do not want mining at all. The local people are convinced that a mine will destroy the water they rely on for agriculture. That kind of problem can happen anywhere; it is not specific to Peru.

Now there are questions, because President Humala has been forced to side with the people, that the mine may not move forward. That has created a general sense of enhanced risk that needs to be priced into anything happening in Peru.

TGR: How is that likely to affect a company like Tinka?

JW: It should not affect Tinka. You have to ask yourself: Is this an economic deposit that a major will want to acquire and add to its production portfolio? If the answer yes, Newmont's problems are not relevant to Colquipucro unless it, too, is an agricultural community. The indications are that the people of Colquipucro are open to a mine for economic reasons.

TGR: What about Seafield?

JW: This is a story with great geology. It has continuous excellent intercepts since its announcement of 449m of 1.25 g/t in December 2010. The stock took off. But Seafield had been financed at very low levels after the 2008 crisis, so there was a lot of stock out there. Insiders ended up killing the momentum in the share price because they had been starving for so long.

TGR: But then management changed, did it not?

JW: Yes. The new management team is led by Cesar Lopez, who was somewhat successful with Apoquindo Minerals Inc. (AQM:TSX.V), now AQM Copper Inc. Seafield has an NI 43-101 coming and the drill results are great. But the sentiment is so negative that is very hard for the stock to move forward.

TGR: This is Seafield's Miraflores property in Colombia. The company just put out a preliminary economic assessment that demonstrated a 50% internal rate of return and a net present value of $249M. What did you think of those numbers?

JW: The proof is in the pudding. If a reputable engineering firm could draw that conclusion, it demonstrates viability.

TGR: You are moving more into the energy space. What oil and gas plays do you have positions in?

JW: My top oil and gas position is in Terra Nova Minerals Inc. (TGC:TSX.V) in Australia's Cooper Basin. It will start drilling in October. The Cooper Basin is a rich hydrocarbon field, so the chances are that at least one of the four holes Terra Nova plans to drill will lead to an oil well.

Africa Oil Corp. (AOI:TSX.V) is the poster child for the tenbagger in the oil and gas space. The company had a low share price; investors did not care about it or were selling it.

Then it discovered a major oil find at its Ngamia-1 well in Kenya. The stock went from below $2/share up over $10/share and today is still trading around $8/share.

Then there is EFL Overseas Inc. (EFLO:OTCBB), a big gas play in the north of Canada.

TGR: Is it publicly traded?

JW: It is on the OTC right now, at $2.50/share. It has a land position in the Liard Basin in the Yukon. This is a huge field that could be larger than Papua New Guinea. The company will be listed on the TSX within three months if it succeeds in this undertaking.

TGR: James, you are by-and-large a positive person. Why should retail investors be optimistic today?

JW: Arguably, we are in a continuation of the 2008 crisis, which was offset temporarily by a massive injection of quantitative easing and easy fiscal policies.

A crisis is an opportunity. This is a great time to accumulate as long as you do not put a timeframe on your exit. In many cases, the high-quality juniors have been pulled down along with the lesser quality companies. That is the opportunity and the reason for optimism.

Midas Letter is the journal of investment strategy of the Midas Letter Opportunity Fund, a Luxembourg-based special investment fund that specializes in Canada-listed emerging companies in the resource sector with a focus on precious metals explorers and miners, and the Midas Letter Securitisation Fund, also Luxembourg-based, which provides secured capital to advanced development projects across all commodities and energy. James West is the portfolio and investment advisor to the fund. Every month, West's Midas Letter Premium Edition deconstructs the economic and political events of the past and upcoming week, and identifies risks and opportunities to investors seeking to profit while the majority of investors are losing money.

Want to read more exclusive Gold Report interviews like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Exclusive Interviews page.

1) Brian Sylvester of The Gold Report conducted this interview. He personally and/or his family own shares of the following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors of The Gold Report: Orbite Aluminae Inc., Newstrike Capital Inc., Prophecy Coal Corp., Prophecy Platinum Corp., Hunter Bay Minerals Plc, Tinka Resources Ltd. and Seafield Resources Ltd. Streetwise Reports does not accept stock in exchange for services. This interview was edited for clarity.
3) James West: I personally and/or my family own shares of the following companies mentioned in this interview: Orbite Aluminae Inc., Newstrike Capital Inc., Prophecy Coal Corp., Prophecy Platinum Corp., Hunter Bay Minerals Plc, Tinka Resources Ltd., Seafield Resources Ltd., EFL Overseas Inc., Terra Nova Minerals Inc., IAMGOLD Corp., Newmont Mining Corp., and GoldQuest Mining Corp. I personally and/or my family am paid by the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this interview.


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