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Gold & Precious Metals

Eric Coffin: Bonanza Discoveries That Will Drive These Gold Stocks


Posted by Eric Coffin via The Gold Report

on Thursday, 13 September 2012 07:23

New deposits and economic triggers will drive gold stocks, says Eric Coffin, the editor of HRA Journal. In this exclusive interview with The Gold Report, Coffin identifies the management characteristics of gold juniors that make money for investors. A successful gold explorer in his own right, Coffin names his picks from the Yukon to the Caribbean.

COMPANIES MENTIONED : ATAC RESOURCES LTD. :COMSTOCK METALS LTD. : EUROMAX RESOURCES LTD. : EVOLVING GOLD CORP. : GOLDQUEST MINING CORP. : KAMINAK GOLD CORP. : KINROSS GOLD CORP. : NORTHERN TIGER RESOURCES INC. : PRECIPITATE GOLD CORP. : PREMIER GOLD MINES LTD. : RESERVOIR MINERALS INC. : SILVERCREST MINES INC.RELATED COMPANIES CANGOLD LIMITED FORTUNA SILVER MINES INC. MAG SILVER CORP. MAJESCOR RESOURCES INC. PERSHING GOLD CORP. RYE PATCH GOLD CORP. UNIGOLD INC.

The Gold Report: Eric, why is there a bear market for metal mining companies in a season of bulls?

Eric Coffin: Post-recession, there was a good bounce for commodity stocks. Two problems have slowed things down during the last year. One was fear of the fiscal cliff as the politicians in Washington argued about raising the debt ceiling. Banks were blowing up in Europe. Most important, weakening numbers out of China scared off a lot of investors, particularly from the base metals. There are simply a lot of people concerned about the economy in general, and, specifically, the growth economies where metals are keys to industrial development.

On the gold and silver side, the real issue is that gold is over $1,700/ounce (oz) and silver is now over $30/oz. It sounds as if I'm being ironic, but I'm not. At the start of this major cycle, gold prices were $300/oz. It was not the price-earnings (P/E) ratio that was determining the value of a lot of mining companies, it was the P/E ratio plus a very large amount added for in-the-ground resources. Goldbugs at the start of this cycle expected gold and silver prices to go up 500%. They were as interested, if not more interested, in the leverage, the "ounces in the ground per share" that gold stocks represented.

I'm not going to assume that gold is going to $10,000/oz. I'd be really happy if it does, but I'm not expecting it. What we are seeing now is that the P/Es for the gold firms are returning to the market average. In the past, gold companies could trade at 80–90 P/E. The earnings part didn't matter very much. It was all about the amount of gold resources on hand. Now investors are taking a harder look at how much money these firms are actually making. We can't just assume that gold is going up another 400–500%. So the P/Es have normalized.

Another concern is profit margins. Costs have gone up very rapidly in the mining business. For a long time that was because there was a skills shortage. Part of the reason why we expected this to be a long secular bull market was because we knew how short the industry was on all kinds of skills, material and equipment. The mining sector was not going to turn around and suddenly start producing twice as much copper, zinc or whatever at the same cost. As the price of metals rises, so does the price of a geologist, the price of an engineer, the price of a ball mill.

The situation will improve over time as more professionals are trained and the production capacity of industry suppliers is increased, but this takes time. The final piece of the cost equation for many metals is grade. As the "low hanging fruit" is picked and the industry moves to tougher terrain with less infrastructure and deposits with lower average grade, the cost of production rises. While I'm not a big believer in things like "peak copper" (at least not any time soon), supply is very much a function of price. If the world wants ever increasing amounts of metals it will have to pay up and pay the mining industry to supply them. The days of cheap metals, in most cases, are over.

TGR: You observed recently in HRA Journal that the currently depressed junior gold explorer market is showing signs of life. Can you explain that?

EC: One reason is that the market is running out of sellers. People who wanted out of gold equities are largely gone; there is a huge amount of money on the sideline. That puts in a bottom but doesn't cause a turnaround. I think the spark that gets the juniors moving again, as it has in many past cycles, is new discoveries. We haven't seen many discoveries that grabbed the market's attention in the last couple of years.

Exciting discovery stories are critical to the junior mining sector. People need to be reminded of why they buy these high risk stocks. Investors do not buy a $0.10/share junior as a widow or an orphan stock, they buy it because they are swinging for the fences. It's hard for investors to talk themselves into swinging for the fences unless they are seeing others hitting one out of the park.

A couple of recent home runs have generated a bit more liquidity in the market, but not as much as I'd like to see. The summer is always slow. The real test is going to come in the next month or two. However, we are starting to see financings close again. And companies that have done well off of drill discoveries are getting big increases in stocks prices and, critically, we are seeing more of these companies maintaining higher prices; that generates money that gets redeployed.

TGR: Let's talk about the discoveries.

EC: GoldQuest Mining Corp. (GQC:TSX.V) is a big win for me. David and I had specifically advised people to buy GoldQuest for its drill program and then it made an amazing blind discovery in the Dominican Republic. The best drill hole at this new zone, Romero, is on the order of 235 meters (m) of almost 8 grams/ton (g/t) gold and 1.5% copper. It has reported seven holes in a small area, but doesn't understand the geometry yet. It started out with small stepouts in an area measuring about 100x100m and is now starting larger stepouts. Not only are the grades strong, but also the zone is thick. GoldQuest is looking at 200–250m+ intercepts, and all of the holes have bottomed in the zone. The small area drilled should contain over a million ounces and it’s still wide open. That is a pretty impressive discovery, and GoldQuest stock reacted accordingly. It was $0.07/share when it announced the first drill hole. It's about $1.60/share now. It has raised $20 million in the last month and a half, most of that at $1.25/share.

GoldQuest will drill the heck out of this. It has two drill rigs going. There's a third one in customs, which should be onsite in a week, and a fourth rig on the way. And, the success of this target increases the value of its other targets. For instance, it has 40 kilometers (km) of contiguous holdings covering a rock formation called the Tireo Volcanics. With cash from the new discovery in hand, GoldQuest can and will up its exploration budget on that set of properties that have several other early stage discoveries in addition to Romero.

TGR: Are you following any particular gold miners in North America?

EC: In the Yukon, ATAC Resources Ltd. (ATC:TSX.V) is putting out really good holes. Kaminak Gold Corp. (KAM:TSX.V) is also putting out good holes, although it is not putting them out as often as I would like. It has obviously gone to the whole batching idea.

I also really like the look of Comstock Metals Ltd. (CSL:TSX.V). It is operating on the other side of the Yukon River from the Golden Saddle discovery. Golden Saddle was discovered by Underworld Resources Inc. (UW:TSX) four years ago, which kicked off the whole Yukon area play. It was subsequently taken out by Kinross Gold Corp. (K:TSX; KGC:NYSE). Kinross hasn't published a new formal gold resource number, but the jungle telegraph says it's between 2.25–2.5 Moz.

Comstock has the same rocks and very similar mineralization on the other side of the Yukon River, the north side. It is about 15 km away. It put out a very strong 75m trench about a month and a half ago, averaging 3.75 g/t. Last week, Comstock put out another set of trench results, extending the zone to almost 400m of strike length on surface. The average thickness is probably 70–80m. It compares quite favorably to Underworld's discovery. That was followed a few days later by the announcement of a drill start. This is in the far North. Just how much drilling gets completed this fall is weather dependent but based on those trenches, it's a strong-looking target.

TGR: Are there other explorers in northern Canada that have your eye?

EC: On the opposite corner of the Yukon, there are really high-grade numbers—up to hundreds of grams per tonne gold—coming from Northern Tiger Resources Inc.'s (NTR:TSX.V) 3Ace project this year. The company drilled several short holes in this new one but hasn't released results yet. The main question is how big is this thing? The deposit will have to be thick to get the market excited, but the grades are high enough that the tonnage could be small and yet still prove to be profitable.

TGR: What about in the U.S.? Any names there?

EC: I have liked Premier Gold Mines Ltd. (PG:TSX) for several years. It has developed nice land positions in Nevada and in Ontario. It's a good story at many levels, and it has one of the best management groups in the junior sector. Premier has several very good advanced projects in Ontario and Nevada where it's growing resources with ongoing exploration. It's a very solid stock with a wide following.

Evolving Gold Corp. (EVG:TSX; EVOGF:OTCQX; EV7:FSE) is drilling a project in the same area of Nevada as Premier. It has put out some good holes and some not-so-good holes. It needs to drill a range of deep holes to figure out the geometry. But it definitely has a Carlin zone. And in the Carlin mineralization, the gold tends to be very fine grained. It requires a lab assay. But there's no real shortcut for getting the wedge holes done in order to figure out which direction to chase the zone and determine if the one is large enough to justify larger drill programs.

TGR: How does a smart investor in gold juniors separate the wheat from the chaff?

EC: It's wise to focus on a geographic area that's already generated a lot of good news. If a company is looking for a bulk tonnage open-pit-type deposit, I look at the target size to be sure there is enough scale potential. I don't have a problem with the high-grade ore. Good high grade deposits can be very profitable even though the market tends to focus on the big low grade systems. But to get the market's attention for an underground operation, there needs to be a minimum of 6–8 g/t and, ideally, more than 10 g/t in intercepts.

In many areas you can make money on lower grades than that if there is good thickness but the market tends to ignore grades below 10 grams unless they are at least several meters thick. With bulk tonnage, you can get away with 1 g/t or 1.5 g/t, but for drilling at those grades, you want to see 60, 80, 100m drill intercepts. The property has to look strong from the outset, because the company has to keep raising money. That being the case, one looks for a management group with a strong brand and a track record of success—both in market terms and in technical terms.

Things can get difficult even when a discovery has been made if management isn't able to get the market to take notice. Having access to capital is huge for a junior. It's even more critical when the market is weak as it has been the past 18 months. When the market's great, everybody's happy, people will say "yes" to anything and it's much easier to raise money. But when the market is weak, management must be able to convince people to write a check. Of the 1,500 or so junior companies, there may be 100 that can do that in this type of market on non-dilutive terms and no more.

TGR: How's it going with Precipitate Gold Corp. (PRG:TSX.V), which is in both the Dominican Republic and the Yukon?

EC: I'm pretty happy with it. By way of disclosure, as you know, Precipitate was founded by my late brother, David, and me and our friend Scott Gibson. We were very fortunate to be joined from the start by such a strong board and management team. Adrian Fleming is the chairman; he ran Underworld before it was taken out and has huge business credibility. The board includes Quinton Hennigh, a good friend and one of the smartest geologists I've ever met. Both Adrian and Quinton know how to talk to the market. Our friend Gary Freeman is also on the board. Gary is a great financier. David and I had been involved with him in the early development of Pediment Gold Corp. (PEZ:TSX; PEZGF:OTCBB;P5E:FSE), which was taken out by Argonaut Gold Inc. (AR:TSX). Darryl Cardey, who was the chairman of Underworld, is also on the Precipitate board of directors. Darcy Krohman, another longtime friend who has the unusual combination of dual professional standings both as a P. Geo geologist and a CA, is the president.

Due to its very credible management team, Precipitate was able to do a $0.40/share initial public offering on early-stage, Yukon properties in May with no warrants. Believe me, that wasn't a piece of cake. People bought the stock as a bet on management. Though we like the Yukon projects, it was no secret everyone involved with the company was, and still is, on constant lookout for projects that would be accretive and add value to the company.

As it happens, just before Precipitate listed, GoldQuest made its discovery in the Dominican Republic. I'm very good friends with Bill Fisher and Julio Espaillat, who run it. I've always liked that belt of rocks. And it is not an exaggeration to say that GoldQuest and Gold Fields Ltd. (GFI:NYSE) invented the Tireo as an exploration destination. They did the regional work that focused on those rocks and the belt has generated several discoveries in its short 10 year exploration history. If Precipitate had said six months ago, "Hey, we have a property next to GoldQuest," most people would have said, "Who the hell is GoldQuest?" Now, it's a different story.

As soon as its first drill hole was announced, I was trying to find projects in the right rocks for Precipitate. That is not easy to do because the belt was largely tied up even before the Romero discovery, but we were lucky to get a large concession that has the right geology along its eastern side bordering Goldquest. This is early stage exploration but it's a great address and Romero is already looking as if it could be a world class discovery after only seven drill holes.

TGR: Let's pull out and look at the macroeconomic level for a minute. What kinds of economic triggers are likely to affect gold equities positively or otherwise in the foreseeable future?

EC: For the next three months, it's central banks, central banks and central banks. Everybody is expecting Federal Reserve Chairman Ben Bernanke to kick in Qualitative Easing 3 (QE3). I'm slightly less convinced, but I'm not going to complain if he turns on the printing press. The latest monthly employment report in the U.S. was quite weak so that may be the trigger for a QE announcement. What Bernanke said at Jackson Hole brought the gold price back up through $1,700/oz. We are seeing similar indications out of the European Central Bank (ECB). Mario Draghi is telling the European countries that are anti-stimulus, "I'm going to do it with you, or without you!" And Germany's Chancellor Angela Merkel, who hasn't exactly been a proponent of bond buying, is now saying they have to stimulate. It looks like we could have stereo printing presses humming along on both sides of the Atlantic before long.

Perversely, weak employment numbers and weak purchasing manager index numbers help precious metals. Weak economic indicators convince traders that Bernanke and the ECB are going to have to pull the trigger. On the base metals side, the easing could have the opposite impact, with one exception. If we continue to see weak numbers out of Beijing, the traders will think that Beijing is going to stimulate, too. But not with bond buying. The Chinese can simply loosen reserve requirements for the banks. They hold trillions of dollars in foreign reserves. Unlike Washington and most of the debtor countries in Europe, China can simply start writing checks. It, too, has been putting out weaker numbers and making more noise about stimulating. China does have slightly higher inflation, which makes things trickier, but I expect it to step up stimulus toward year-end as the next generation of Communist Party leadership is sworn in.

TGR: What effect would QE3 have on mining interests, generally?

EC: It will help. QE3 will weaken the U.S. dollar. It will cause traders to buy treasuries all the way up and down the yield curve, thereby lowering the yields. In the last couple of weeks, the U.S. dollar index has dropped a couple of points, which is a fairly big move. As it moves lower, gold and silver prices in U.S. dollars will strengthen. Then we will see better numbers in the U.S. as businesses gain confidence and start hiring. Those hiring decisions are being held back right now because managers aren't comfortable with the slow growth rate. Virtually all traded commodities are priced in U.S. dollars, so it should help them all, though precious metals will get the biggest, quickest boost.

TGR: How will monetary easing affect mining in Mexico?

EC: In Mexico, the peso is relatively weak by historic standards, which helps with mining costs. It has good mining infrastructure and good mining legislation. It doesn't have any real royalties to speak of. You don't get a lot of surprises there. However, areas of the country are bloody dangerous; that's the one thing that has held Mexico back recently. The drug cartels have scared people out of some areas. Nobody really knows who is calling the shots. You certainly don't get the impression that it is the Federales; the drug cartels do whatever they want. But people more or less know where the growing is and where the drug routes are, so they stay out of those areas. I'd like to think that crime is not going to be a long-term problem. There are still plenty of areas in Mexico that work out fine for miners.

You must have agreements with the local ejitos, however. Although the ejitos don't own the mineral rights, they do have surface rights and they have local political power. So you need to sit down, talk to the locals and make sure that everybody is happy, because an angry ejito can really make your life miserable. There are some ejitos who just don't want development. And when the locals don't want you, there's just no point in bothering. All that said, it's a good country with lots of good geology and plenty of recent discoveries. If the government can get the crime issue under control, I don't doubt the high level of mining investment would continue and probably grow again.

TGR: Are there any other companies that you think are hot?

EC: I'd keep an eye on Reservoir Minerals Inc. (RMC:TSX.V). Its joint venture with Freeport-McMoRan Copper & Gold Inc. (FCX:NYSE) is pulling some amazing drill holes in Serbia. It just put out the second one today—the copper equivalent was almost 10% through 160m. That's a heck of a drill intersection. Freeport is not fooling around. It is doing big stepouts. It wants to know right away if it's the real thing and already has four drill rigs at work.

At a more advanced level, I like EurOmax Resources Ltd. (EOX:TSX.V). It is in several countries in Eastern Europe, including Serbia. It has a new management group that came directly out of European Goldfields Ltd. (EGU:TSX; EGU:AIM), which was taken out about a year ago for about $1.5 billion. These guys have huge credibility, especially with European institutions. Euromax is drilling to expand Ilovitza, a copper-gold porphyry in Macedonia. It has a couple of nice projects that have gold resources on them, but there is room for some more gain simply by the current management group going around and telling the story. Management views the asset set as very comparable to that of European Goldfields Ltd. (EGU:TSX; EGU:LSE) but with one tenth the current market value.

Speaking of Mexico, if you're interested in a production level story we like SilverCrest Mines Inc. (SVL:TSX.V; SVLC:NYSE.MKT). We have followed the company since inception. I have a very high regard for the management team, which has been delivering on time and on budget for years. SilverCrest is generating nice profits from its Santa Elena gold-silver mine in Sonora and plans are in the works to add a mill to this heap-leach operation and start mining deeper parts of the system and double the production rate by 2014. SilverCrest is also drilling its La Joya bulk tonnage silver-base metal project in Durango. There should be an updated resource estimate by the end of the year and it looks like it's going to be big, probably close to 200 Moz silver equivalent. SilverCrest has gotten a lot of traction as gold and silver prices jumped recently but if they keep going up, the company should too.

Lastly, HRA is offering a free report for your Gold Report readers. It's actually our latest HRA Journal,which discusses in more detail some of the companies that we have covered in this interview, such as Precipitate Gold, Comstock Metals and GoldQuest. To access the report for FREE, all you need to do is sign up through our page at HRAdvisory and you'll automatically receive a copy of the Journal via email.

TGR: Thanks, Eric.

EC: You're welcome.

Eric Coffin is the editor of the HRA (Hard Rock Analyst) family of publications. He has a degree in corporate and investment finance and extensive experience in merger and acquisitions and small-company financing and promotion. For many years, he tracked the financial performance and funding of all exchange-listed Canadian mining companies and has helped with the formation of several successful exploration ventures. Coffin was one of the first analysts to point out the disastrous effects of gold hedging and gold loan-capital financing in 1997. He also predicted the start of the current secular bull market in commodities based on the movement of the U.S. dollar in 2001 and the acceleration of growth in Asia and India. Coffin can be reached at hra@publishers-mgmt.com or the website www.hraadvisory.com.

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.

DISCLOSURE: 
1) Peter Byrne 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: Comstock Metals Ltd., Premier Gold Mines Ltd., Evolving Gold Corp., Precipitate Gold Corp., Argonaut Gold Inc. and SilverCrest Mines Inc.Streetwis Reports does not accept stock in exchange for services. Interviews are edited for clarity.
3) Eric Coffin: I personally and/or my family own shares of the following companies mentioned in this interview: Precipitate Gold Corp., Comstock Metals Ltd., Kaminak Gold Corp., Goldquest Mining Corp., EurOmax Resources Ltd., Reservoir Minerals Inc., SilverCrest Mines Inc., Northern Tiger Resources Inc. and Argonaut Gold Inc. I personally and/or my family are never paid by any of the companies followed by HRA. I was not paid by Streetwise Reports for participating in this story.

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Timing & trends

Double Down: Vladimir’s Putin' Billions Into Gold In Anticipation of Global Upheaval


Posted by Mac Slavo via Peter Grandich

on Thursday, 13 September 2012 00:00

"In the last 7 months alone the People’s Republic of China has added more gold to their reserves – over 500 tons – than the entire holdings of the European Central Bank. They aren’t alone."

"Russia’s President Vladimir Putin has been aggresively investing into the precious metal over the last five years – spending some $500 million monthly as he diversifies his country’s assets out of Dollars and Euros. Currently, 9% of Russia’s reserves are held in gold."

This, of course, begs the question: why?

putingoldlarge

According to the World Gold Council, Russia has more than doubled its gold reserves in the past five years. Putin has taken advantage of the financial crisis to build the world’s fifth-biggest gold pile in a handful of years, and is buying about half a billion dollars’ worth every month.

No one else in the world plays global power politics as ruthlessly as Russia’s chilling strongman…

Putin’s moves may matter to your finances, because there are two ways to look at gold.

On the one hand, it’s an investment that by most modern standards seems to make no sense. It generates no cash flow and serves no practical purpose. Warren Buffett has pointed out that we dig it out of one hole in the ground only to stick it in another, and anyone watching this from Mars would be very confused.

But there’s another way to look at gold: As the most liquid reserve in times of turmoil, or worse.

The big story of our era is not that the Spanish government is broke, nor is it that Paul Ryan apparently feels the need to embellish his running record.It’s that the United States, which has dominated the world’s economy for several lifetimes, is in relative decline.

We will soon be the first people in two hundred years to live in a world not dominated by either Pax Americana or Pax Britannica. This sort of changing of the guard has never been peaceful.

The declines of the Spanish, French and British empires were all accompanied by conflict. The decline of British hegemony was a leading cause of the First and Second World Wars.

What will happen as the U.S. loses its pre-eminence?

Maybe this will turn out better than similar episodes in the past. Maybe the Chinese will embrace an open society and the rule of law. If you believe that, there is probably no reason to hold any gold.

On the other hand, we may be about to enter a much more turbulent and dangerous era of power politics and international competition.

Source: Market Watch [via Ulsterman Report]

....read the entire article HERE



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Gold & Precious Metals

"Gold Investors Should Be Wary & And Have an Exit Plan


Posted by Hard Assets Investor

on Wednesday, 12 September 2012 10:03

Chief market analyst at John Thomas Financial provides technical analysis on the current state of commodities.

Ed Note: If you prefer to watch this interview on a 13.23 minute video click HERE

Mike Norman, Hard Assets Investor (Norman): Hello everybody, and welcome to HardAssetsInvestor.com. I’m Mike Norman, your host. Today my guest is Wayne Kaufman, chief market analyst at John Thomas Financial. Wayne, thanks very much for coming on the show.

Wayne Kaufman, chief market analyst, John Thomas Financial (Kaufman): Thanks for inviting me.

Norman: You're welcome. Now, you’re a technician. You look at the markets through the lens of technical analysis. Give us your outlook now on the commodity markets, based on your technical analysis.

Kaufman: Right now, in commodity markets, there's some very, very interesting things going on. I do classic charting analysis, looking at different timeframes daily, weekly, monthly. In addition, I look at other aspects of commodities, like there's something called the Commitment of Traders report. And that’s put out every week by the CFTC, the Commodity Futures Trading Commission. And they break down the positions of three groups. You have what are called the commercials—these are the people or companies that actually own the underlying asset.

Norman: Right, that transact in the actual business of that commodity.

Kaufman: Correct. And they're considered the “smart money.” Then they have what are called the large speculators. Those are big hedge funds. They're just speculating. And then you have the third group, which is the small speculators. That’s the average guy who might decide to trade some futures. They are considered the “dumb money.”

Norman: So are we really looking more at the commercials, the smart money, and the small speculators—the dumb money? Or how much now of a factor have the big hedge funds and speculators become? Because in the past, it’s more or less been, What are the hedgers doing? And, What are the small speculators doing? And you’d like to be on the side of the hedgers.

Kaufman: That’s correct. I would say most of the time, we’re looking at what the commercials, what the smart money is doing. But when you see the other guys at extreme levels, you want to go the other way.

Norman: So they're a good contrarian indicator.

Kaufman: That was a great question. And that’s exactly right.

Norman: So looking at the landscape now, in some markets—for example, metals or oil—what are the commercials doing? Are they giving us any signals right now as to maybe upcoming market moves?

Kaufman: Well right now, the most interesting area that I'm watching is gold, because gold has made, on the charts, a nice move. It’s broken back above its 200-day moving average for the first time in a while. It really had a nice breakout on the charts. Commercials are usually short. So the thing you want to do is see the degree of short.

Norman: Right.

Kaufman: So, for a multimonth period, they had a very small short position, which meant they were bullish on gold. Well, now that gold's actually broken out, they are very rapidly going short, or a much greater degree short. So that’s a conflict.

.....read page 2 HERE Full Article HERE



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Energy & Commodities

Uranium Sector Review: Exploration, Development & Production Companies


Posted by John Wilson - Resource Capital Research

on Wednesday, 12 September 2012 08:12

Highlights:

  • Sector fundamentals remain positive in the mid and long term.
  • The Merrill Lynch Uranium Equity Index is up 2% in the past month and 12% in the past 3 months, broadly in line with global equity markets.
  • The spot uranium price is US$48.00/lb, having breached the US$50/lb support level in July.
  • Price weakness is resulting primarily from the protracted delay in Japanese reactor restarts.
  • Partially offsetting the impact of reduced demand from Japan and Germany has been Chinese inventory purchases where 26 reactors are due to enter operation by 2015.
  • The contract price is US$60.25/lb (Aug 31).
  • Over 80 new nuclear power reactors are expected to be commissioned by 2018.
  • Demand for uranium is expected to increase from around 164mlbspa U3O8 in 2011 to 226mlbspa by 2020 and 280mlbspa by 2030 (WNA

.....download & read the entire 25 page .pdf report HERE which includes the following topics below,  or continue reading the more detailed Overview beginning with Equity Market Performance:

 

  • Reserves, Resources and Historic Mineralisation
  • Valuation and Performance Data
  • Uranium Price Fundamentals
  • Selected Uranium Sector Performance Charts

 

Exploration, Development and Production Companies

 

  • Aura Energy Limited
  • Black Range Minerals Limited
  • Energy Resources of Australia Limited
  • [Laramide Resources Limited
  • Paladin Energy Limited
  • Peninsula Energy Limited
  • Toro Energy Limited

 

Equity market performance

The Merrill Lynch Uranium Equity Index (a global basket of uranium equities) is up 2% in the past month and 12% in the past 3 months, broadly in line with global equity market performance. We expect neutral uranium equity market performance over the next 6 months with downside risk to surplus utility uranium disposals and uncertainty around the anticipated release of the Japanese energy policy to 2030.

In the past month, ERA is down 8% and PDN is up 2%. Paladin reported record production for FY2012 (6.9mlbs U3O8, +21% yoy), and is continuing to make good progress on operational cost reductions at LHM and KM and strengthening its balance sheet, though overall performance remains leveraged to the low uranium price.

 Uranium price and market outlook

The spot uranium price is US$48.00/lb (10 Sep), down US$2.75/lb from US$50.75/lb in June, having breached the US$50/lb support level in July. Price weakness is resulting from the protracted delay in Japanese reactor restarts with 48 of the 50 operable reactors offline nearly 18 months after the Fukushima accident. These offline reactors account for estimated foregone uranium demand of around 18mlbspa, equivalent to around 11% of 2011 global demand (164mlbs U3O8).

Japan restarted the first 2 nuclear reactors in July 2012 (one on July 1, the other July 24). Despite the initial restarts, the spot price is expected to remain under pressure into 2013, reflecting the ongoing impact of reactor shutdowns and closures in Japan and Germany with potential utility surplus dispositions. The spot market is also impacted by Japanese renegotiation of ongoing delivery contracts for surplus supply.

 Additional reactor restarts are expected to occur over a 2 year timeframe - from 2012 to 2014. Market expectations are for 10 to 15 reactors to restart by late 2013 comprising the newest reactors in the most secure locations. Restarts are slower than initially expected, in part reflecting an increasingly vocal domestic opposition to nuclear power in Japan.

Partially offsetting the impact of reduced uranium demand from Japan and Germany has been Chinese inventory build where 26 reactors are due to enter operation by 2015.

The long term contract uranium price is US$60.25/lb (August 31) a modest pullback from US$61.25/lb (May-July), and has increased from a recent low of US$60/lb in Feb-Mar ‘12.Market participants suggest the August price pullback reflects slow seasonal summer trading. Nonetheless, it is surprising given the significant project deferrals and delays recently announced accounting for 40m-45mlbspa U3 O8  and which support potential for market tightness midterm, viz: Olympic Dam, Kintyre and Yeelirrie.

Strong growth in nuclear reactors is expected to continue, particularly in Asia, post Fukushima, with Chinese expansion expected to continue to lead the pack. China’s official installed nuclear capacity projections are 70-80 GWe by 2020, 200 GWe by 2030 and 400-500 GWe by 2050. This compares with a 12 GWe capacity today (15 reactors).

Demand for uranium is expected to increase from around 164mlbspa U3 O8  in 2011 to 226mlbspa by 2020 and 280mlbspa by 2030 (WNA).

As at 1 September 2012, there were 483 nuclear power reactors planned or proposed globally; up 1 unit from March 2011 (pre Fukushima). 171 units are planned or proposed in China, 56 in India, 41 in Russia, 26 in the USA, and 13 in Ukraine. Globally, 65 reactors are currently under construction and over 80 new reactors are expected to be commissioned by 2018.

There is potential for a supply gap to open up in the uranium market midterm due to declining supply from existing mines, deferral of new mining projects, the anticipated reduction in secondary supply with the termination of HEU at the end of 2013, and ongoing demand growth.

Kazakhstan production growth:  Kazakhstan affirmed in July that it intends to lift uranium production by around 15mlbspa to 65mlbspa U3 O8  by 2015, up 28% over 2011 production (50.6mlbs). Reported production 2Q12 was 13.1mlbs, up 9% over 1Q12. Kazak production in 2012 is expected to reach 55mlbs (+9% yoy). The 2015 production target is contrary to earlier official Kazak statements that production would remain capped at ~50mlbspa till market conditions improved.

.....download & read the entire 25 page .pdf report HERE which includes:

  • Reserves, Resources and Historic Mineralisation
  • Valuation and Performance Data
  • Uranium Price Fundamentals
  • Selected Uranium Sector Performance Charts

Exploration, Development and Production Companies

  • Aura Energy Limited
  • Black Range Minerals Limited
  • Energy Resources of Australia Limited
  • [Laramide Resources Limited
  • Paladin Energy Limited
  • Peninsula Energy Limited
  • Toro Energy Limited

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Stocks & Equities

The Little Guy Has an Advantage


Posted by Tyler Bollhorn of StockScores

on Wednesday, 12 September 2012 07:25

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perspectives commentary

The Canadian market is likely to start catching up to the US market which has outperformed year to date, This week's Market Minutes video highlights shows how. Check it out by clicking here. (Ed Note: The Outlook for Canadian Stocks, US Stocks, Gold & Oil is are in Tyler's Sept. 10th Market Minutes video)

I wrote a new book over the summer, it will be available in a pre-release version to Stockscores users before the end of the year. Over the next few weeks I will share excerpts from the book, The Mindless Investor - Make Money in the Market by Overcoming Your Common Sense. Here is a piece from the chapter, The Little Guy Has an Advantage.

Performance Is Easier with Less Capital
Assuming you don't have hundreds of millions of dollars or more in your trading account, you have an advantage over any fund manager. It's a lot easier to double $100,000 than to make a 100% return with $100 million, $1 billion or $10 billion. With a method that is appropriate for the amount of capital you have to invest, you can beat the market, and doing so is easier with a relatively small amount of capital.

The key, of course, is having a good method for trading the market-one that gives you the ability to beat the market. With that and a relatively small pool of capital, you can outperform even the most successful big money managers.

As an individual investor you can choose strategies that require you to move in and out of stocks quickly, to hold them only when they are trending and to get out when the trend is losing momentum. Since the size of your positions will be relatively small, you can buy and sell quickly and without a significant impact on the price you pay when you buy or the price you receive when you sell.

You can trade opportunities that can only be taken advantage of if the trade size is small. One of my strategies requires that I buy stocks as close to the open of the trading day as possible. This strategy works well, but there are few stocks that trade actively enough to absorb a trade of more than half a million dollars in the short time this strategy requires. A large investor could never make these trades and have an impact on the performance of the fund.

The Right Approach for the Capital You Have
The less capital you have to trade with, the less your ability to do in-depth analysis of the companies you buy. Analyzing a company's business properly takes time, knowledge and costly resources. When you try to compete with large investment funds on this level, it's unlikely that you can produce better results than a fund that has industry experts and millions of dollars to devote to research.

But you can be on a level playing field with the big investment funds if you use stock charts and trading data to make your decisions. This information is easily available and comes at a low cost. Whether you're a large or small investor, you look at the same stock chart.

There are advantages to being small. As an individual investor, you can probably enter and exit any trade in just seconds. You have a greater opportunity to beat the market because the market-beating opportunities you find can have a dramatic effect on the overall value of your portfolio. Provided you have the knowledge and discipline to trade well, it is better to manage your own money than to leave it to someone who has a large amount of capital to invest on behalf of many people. Not because the person running an investment fund lacks skill, but simply because the challenge of beating the market increases as the capital under management goes up. With an approach that matches your capital base, you can beat the big funds.

perspectives strategy

The US markets have moved up in anticipation of stimulus from the ECB and US Fed. We have already learned of Europe's plan to lower interest rates through the purchase of short term bonds and this week we will hear if the US Fed will do anything stimulative.

The market has been speculating that there will be action by the US Fed, causing stocks to go higher and the US Dollar to go lower. We are now seeing money rotate in to the commodity and financial sectors.

If the Fed does take stimulative action this week, expect that the Canadian market will benefit the most. The TSX has underperformed the US market this year and has a lot of catching up to do. A rotation in to commodity stocks will help the TSX improve its performance.

This week, I did my Market Scan for Canadian stocks with good charts. Here are a few names to consider:

perspectives stocksthatmeet

1. V.MEI

Breaking out from a long term cup and handle pattern with strong volume today, looks likely to continue the strength it has shown over the past couple of months. Support at $1.80.

chart 1

2. T.JAG

I featured this in my daily newsletter (available at www.tradescores.com) on Monday, the stock appears to be in the early stages of a turnaround. Support at $1.09.

chart 2

References

  • Get the Stockscore on any of over 20,000 North American stocks.
  • Background on the theories used by Stockscores.
  • Strategies that can help you find new opportunities.
  • Scan the market using extensive filter criteria.
  • Build a portfolio of stocks and view a slide show of their charts.
  • See which sectors are leading the market, and their components.

    Disclaimer
    This is not an investment advisory, and should not be used to make investment decisions. Information in Stockscores Perspectives is often opinionated and should be considered for information purposes only. No stock exchange anywhere has approved or disapproved of the information contained herein. There is no express or implied solicitation to buy or sell securities. The writers and editors of Perspectives may have positions in the stocks discussed above and may trade in the stocks mentioned. Don't consider buying or selling any stock without conducting your own due diligence.



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