European Gold Buying “Remarkable”

Here’s National Numismatics’ Tom Cloud with a quick dealer-level view of gold and silver:

DollarCollapse: Hey Tom, it’s been an eventful few weeks. Precious metals pierced your worse-case downside targets and then bounced a bit. What’s going on out there?

Tom Cloud: Once gold broke the $1,320 it didn’t stop till $1,180, which I did not think it would do. It went all the way down to our long-term support line. Looking forward, July is usually a neutral month and August is when things pick up. Gold and silver usually make about 2/3 of their profits during the last four months of the year, but this time gold should start moving in July because the correction was so severe. The worst-case scenario is that it bounces off of $1,180 again, but it looks very oversold at these levels; the charts have turned extremely bullish.

DC: How tight are supplies?

TC: For gold, there’s pretty good availability right now. We’ve got some gold coins that can lock in and ship today.

DC: Silver premiums remain high though. What’s different about that market?

TC: When silver goes down the costs of buying and producing it make the premium go up in percentage terms. They usually change the premiums every two or three months. So the high premiums can be explained in part by the continued shortage of popular coins and in part by unchanging production costs.

DC: So silver supplies remain tight?

TC: May broke all records for silver eagle sales, and you’re still looking at 2-4 week delays for eagles, maple leafs and even buffaloes. Comex silver bars are really hard to get. Johnson Matthey is six weeks behind. In normal times, it would take 3-5 days for delivery. The Royal Canadian Mint is keeping up, though, so we can get those bars.

DC: What about the recent central bank gold buying?

TC: The bounce was facilitated by a 580-ton purchase by European central banks on Friday. The rumor is that they’re going to buy another 500 next week. There’s only 2200 tons a year mined on average, so that would be remarkable.


How To Play Nevada’s Gold Rush

On my recent gold mine trip to northern Nevada, it’s clear that the state is enjoying a resurgence of gold-mining activity.

Sure, the gold isn’t falling out of the hills in boulder-sized nuggets. But like we recently discussed, it’s very minable…for a profit.

Today I’d like to cover the story from the ground floor. Showing you a few of the players in the area along with an outside way to play Nevada’s gold boom. Let’s dig in…

According to the U.S. Geological Survey Nevada mined over 5.4 million ounces (Moz)of gold in 2012. That accounts for 75% of domestic production.

And although the production is down, compared to a decade ago, mine production has rebounded from a low in 2009. Indeed, with more physical demand for the metal worldwide, Nevada’s mining district is worth a look. I’m expecting a continued boom in the area for years to come — after all, it is the world’s second largest gold field!

That said, let’s dive into some of the players in Nevada’s gold rush…

The big boys on the block are Newmont (NEM) and Barrick (ABX). As you’d expect, Nevada operations are only part of these “big goldminers’ portfolios – so naturally neither is a pure-play on the Nevada gold rush.

But it is important to note that both Barrick and Newmont are seeing a real resurgence in the area and with a few more years of positive gold strikes via their deposits or a neighbor’s, each company could enjoy a little Nevada-based bump in share price.

Just for house-keeping purposes let’s cover each company’s Nevada exposure.

Barrick is the largest producer in the state. In North America the company produced 3.4 Moz last year, over 3 million of which were produced in Nevada. Barrick’s two premiere mines are Cortez (1.37 Moz produced in 2012) and Goldstrike (1.17 Moz produced in 2012.)

Newmont is the state’s second largest producers with over 1.7 Moz produced in 2012.

Here’s how Newmont describes its Nevada operations:

[We’ve] been pouring gold in Nevada for nearly 50 years along a 100-mile stretch of highway in the north section of the state. Our Nevada properties operate as an integrated unit, and together, they boast the widest variety of processing methods of any gold mining complex in the world. This allows us to maximize economic recovery of gold from a wide range of ore types and grades. Operations include 14 open-pit and four underground mines and 14 processing facilities. In addition to gold, our operations produce silver and copper.

It’s safe to say that a lot of the mining traffic in northern Nevada can be racked up to these two behemoths. In fact, according to one of the folks I talked to on my trip, Newmont and Barrick are “runners of gold processing facilities” – so besides mining they’ve got a lot of logistics and operations under their belt. Heh, and if you want to use one of their processing facilities get ready to pay out the wazoo!

But, even though the big guys have a strong presence in the Nevada gold field – there’s room for the little guys to make some money, especially if they own their own processing plant.

The company I visited last week goes by the name of Pershing Gold Corp. (PGLC.) To be sure, this is a small junior miner, and currently sits in the pre-production phase. That said, it’s a good example of how up-and-coming miners are starting to hit the Nevada gold scene.

The company has rights to a large open pit mine – by my estimates it’s about 15 miles south of a Newmont property (so you know you’re in the right neighborhood.) From the geologist’s standpoint they know there is mineable gold there – just ask the core samples! All of the infrastructure is already in place – the pit, the crusher and the processing facility. Plus, the whole operation is close to 75% permitted.

Operations for this type of mine are chemically complex, but relatively easy to understand: mine the rock, crush the rock, “heap leach” the rock and separate the gold.

At this stage in the game, for a miner like Pershing, cash is king. The company still needs some money to get operations running – somewhere to the tune of $30 million (not an easy task in today’s capital markets, but doable.) Once things are up and running, the company expects to see costs around $800 per ounce with production around 50,000 ounces per year – it’s all very mineable considering current gold prices.

Another example of a Nevada junior company is a spinoff of Pershing Gold, which goes by the name of Valor Gold Corp. (VGLD.)

Valor is a “greenfield” company, meaning the company is still in the early stages of evaluating its assets to develop a commercial plan. If you’re looking for reliable cash-flow and gold production you won’t want to bet on this horse – indeed it’s a far cry from a Newmont or Barrick. But, much like a wildcatter in the oil biz, a greenfield play is where you could expect to see the highest growth potential – especially if they hit it big.

An Outside Way To Play Nevada’s Gold Boom

While we wait for some of these mining plays to gain momentum, there is an outside investment angle to look at…

You see, a lot of the gold that comes out of the ground in Nevada is initially processed at the mine. Each processing facility will pour its own “dore” bars. Dore is an alloy that includes both gold and silver – but it’s far from pure.

From the dore pour, the gold and silver needs to be further refined so it can be sold on the open market more easily.

That’s where a big precious metal refiner like Johnson Matthey Gold & Silver Refining comes in to play. The company is the leading refiner of newly-mined gold in the U.S. Their refiner complex is found in nearby Salt Lake City, Utah.

By no stretch of the imagination could you assume that most of the gold that’s coming out of the hills in Nevada (and the silver too) is being refined in Salt Lake City at Johnson Matthey’s facility.

From there, the gold is available to be sold on the open market – through Johnson Matthey’s accreditation they can service the London Bullion Market, the CME Group the Tokyo Exchange and the Dubai Commodities Center. At this stage there’s no more need to sell your gold at a discount to some local mom and pop shop, instead it’s on the global market!

A gold refiner is the gateway to the open ocean of gold. Better yet, it’s a great way to play Nevada’s mining resurgence.

Unfortunately Johnson Matthey Gold & Silver Refining isn’t a publicly listed company.

However, Gold & Silver Refining is a wholly-owned subsidiary of Johnson Matthey Plc. (JMPLY.) In this sense Johnson Matthey Plc. is by no means a pure play on Nevada’s gold boom, but when you take a step back and look at the company’s global presence, you’ll see there’s a lot of reason to like this play.

The parent company, Johnson Matthey, is the largest global, full service refiner of precious metals. So not only is it a good way to play Nevada’s boom, it’s a good way to play a global mining boom. All without the risks associated with boom and bust mining plays.

As a little icing on the cake, Johnson Matthey is also a big player in the platinum and palladium market. Not only do they refine the stuff, they also have massive exposure to the emission/catalyst market. So in a boom year for the platinum group metals (PGMs) Johnson Matthey could do very well. A quick look at the up-trending chart shows Johnson Matthey is up 24% year over year.

While we wait for things to shake out in the mining sector, Johnson Matthey may be a good way to tip-toe into the gold’s next leg higher. If the action I’m seeing from Nevada is any indication, things could be booming for metal refiners for years to come.

Keep your boots muddy,

Matt Insley


Palladium’s Prospects Look Great

While the mainstream business news has been obsessing about the recent highs in the stock market, and while gold bugs have been lamenting about the flat performance of gold, a lesser known commodity has been manifesting excellent gains as well as stability over the past few months. That commodity is platinum’s little sister, palladium. Yesterday, palladium traded as high as $755, its strongest level since September 2011.
Pamp Suisse Palladium Bar 10 Ounce

Pamp Suisse Palladium Bar 10 Ounce

“The fundamentals of the market have always been pretty solid and have gained the attention of investors/speculators as of late,” said Robin Bhar, metals analyst with Societe Generale.

The supply-demand equation for palladium is the tightest of all the precious metals and top analysts such as Bhar and Bart Melek, a head commodities trader with TD Securities, believe this trend will continue into the foreseeable future. Said Bhar, “I’m very positive on the metal. I think this is just the beginning… On an annual basis, we expect palladium to be one of the best performing metals, if not the best performing commodity.”

Over the last quarter, palladium has gained 10%, contrasted with retreats in platinum, gold, silver, and commodities in general. The Standard & Poor’s GSCI Index of 24 raw materials declined 2.9% over the same period. Treasuries were down also, nearly .01%. The forces driving palladium’s recent rise hit both sides of the supply-demand paradigm.

On the supply side there are two principle factors involving the world’s two largest exporting countries, South Africa and Russia. Nearly 80% of all the palladium in the world is mined in these two countries.

The extended mining strikes that have hit South African mines full force last summer continue and have spilled over into the palladium sector, cutting into production. This labor dispute has been intense and with casualties, and analysts predict no quick solution on the immediate horizon. Furthermore, Anglo-American Platinum, the world’s largest primary producer of platinum, earlier this month proposed cutting back some output of platinum group metals so as to improve its profitability. Analysts believe that this could result in well over 100,000 fewer ounces of palladium being available in the marketplace.

The situation in Russia, which accounts for 43% of the world’s palladium mining, is much more grim. Last Friday, Johnson Matthey announced that Russian palladium inventory had dropped 68% in 2012, to 250,000, down from 775,000 ounces in 2011. Peter Duncan, General Manager of Market Research at Johnson Matthey, told reporters that Russian may be only able to supply 90,000 to 100,000 troy ounces this year. Said Duncan, “Russian state stockpiles have been dwindling and are now pretty much exhausted.”

On the demand side, several forces are propelling palladium’s recent appreciation. The US Commodities Futures Trading Commission (CFTC) shows that hedge funds and other large speculators have almost tripled their wagers on higher prices since the beginning of November. Their long positions are at their highest since the end of 2009. This renewed investment interest should be bullish for 2013.

In addition, worldwide auto sales moved up nicely in 2012. Why this is important is that palladium, rhodium, or platinum are utilized in all catalytic converters. Johnson Matthey estimates that, of the total world palladium consumption of 9.725 million ounces for 2012, 6.84 million ounces – over two-thirds – was used for catalytic converters. The record car sales of 2012 should extend palladium’s shortages. Global car sales in 2012 exceeded 80 million for the first time ever and are predicted to increase to about 83 million this year. LMC Automotive, a research company in England, predicts that Americans will buy more for a fourth consecutive year, equaling the longest run increases since the 1940s.

China’s demand for autos continues to surge as well. China’s economy rebounded from a slump in 2012 and along with it, the demand for autos by its ever growing middle and upper classes. Chinese sales figures for passenger vehicles in November were the highest in almost two years, the Chinese Association of Automobile Manufacturers reported last month. That agency is also calling for another 10% increase in 2013. All in all, palladium consumption will beat production by an estimated 500,000 ounces plus in 2013, about what the worldwide car industry devours every seven weeks, according to Barclays. This trend in palladium demand and consumption is forecast by Morgan Stanley to extend to 2017.

To learn more about the rewards of precious metals investing, including how to fund your existing IRA with gold or silver, call Liberty Gold and Silver seven days a week at 888.751.3330. To learn about the most generous referral program in the precious metals industry, please visit the Liberty Gold and Silver Referral Program.
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