Monday, August 10, 2009
"What Makes Nevada the Premier Place To Be?"
It is 5:44 AM, grab a cup and we've got some work to do on this Monday morning. Let's start with a positive. Yesterday InfoMine highlighted a Gold Report interview with world renown geologist and investor, Brent Cook:
Of Peak Gold and Navigating the Rocky Road to Riches
When you're on break it is a good read on the global recovery, small mining operations and the future direction of gold and base metals. Of particular note is his answer to the interviewer's question, "What makes Nevada the premier place to be?" In a world of declining gold production and more challenging exploration opportunities, Mr. Cook believes that Nevada is the place to be with its Carlin style systems. I won't steal this interesting article's thunder but here is a sample of his answer:
"...The Carlin Trend alone has over 70 million ounces and individual deposits host tens of millions of ounces. If you can find one of those, it's very profitable. If you can do it in a tiny $15 million dollar market cap company, well, I'm buying the next round. When you look at Barrick Gold Corporation (NYSE:ABX) and Newmont Mining Corp. (NYSE:NEM), that's where they started. Barrick is still finding deposits in Nevada. In this decade, they've discovered of about 15 million ounces on ground they've had for 25 years. The deposits are there. They just take a lot of work. That's why I think Nevada is one of the better places to be, plus you know the politics, the infrastructure is good, and you can always get a cold beer." (Infomine/Gold Report, 8/9/2009)
I know this is singing to the Choir buckaroos but the ole Colonel still likes to hear the music! Buy Brent a cold beer.
Now for some familiar dark clouds. Mining Law reform is back in the headlines with two bills pushing through Congress to extract higher royalty payments from mining companies operating in the U.S. Senator Jeff Bingaman (D., N.M.) has proposed a 2%-5% royalty in his bill to change the 1872 Law. Even more troubling is the bill introduced by Rep. Nick Rahall (D., W.Va.) that imposes an 8% royalty on production value. He said earlier this year:
"Given our current economic crisis and the empty state of our national treasury, it is ludicrous to be allowing this outmoded law to continue..."
Great, and then there is the EPA part of this logic. As reported by the Wall Street Journal today:
"Under the bills, royalties and other fees would be used to clean up thousands of abandoned mining sites. The Environmental Protection Agency last month reported that mining has polluted 3,400 miles of streams and 440,000 acres of land and continues to release enormous quantities of toxic chemicals."
This debate has been going on for a long time but I thought Laura Skaer, executive director of the Northwest Mining Association, mounted a clever defense by pointing out that if too many costs are imposed on domestic miners, the U.S. will be importing even more of the raw materials used to make such items as wind turbines, hybrid vehicles and solar panels:
"Then we've traded our dependence on Mideast oil for a dependence on foreign minerals," Ms. Skaer said, "The zinc, molybdenum and rare-earth minerals needed for wind turbines, copper for hybrid cars and titanium and cobalt for solar panels are imported from China, Peru and elsewhere." (WSJ, 08/10/09)
Go Laura and thank you for mentioning molybdenum. On and on it goes, stay tuned.
To end on a little brighter note, the central banks of Europe have agreed to lower their yearly quota for gold sales from 500 to 400 metric tons over the next five-year period beginning in September. This reflects their concern about the declining dollar and looming inflation. The agreement reinforces the long held notion that gold is a monetary asset and should be supportive of future gold prices. The lower ceiling helps to diminish fears that the 10 largest signatories would dump gold to take advantage of its higher price. They presently hold total more than 11,000 tons, valued at $350 billion.
Enough Euro-talk, someone is selling gold today! Let's walk the walk:
Oil is down $12.8 to $71.12 (September contract); Gold is down $12.8 to $946.7 (December contract, most active); Silver is down $0.348 to $14.320 (September contract); Copper is up $0.0185 to $2.804 (September contract); Molybdenum is hanging in at $18.25.
The DOW is down 11.33 points to 9358.74; the S&P 500, down 1.88 points to 1008.60. The miners are grumpy today:
Barrick (ABX) $34.19 down 1.67%
Newmont (NEM) $41.00 down 1.30%
General Moly (Eureka Moly, LLC) (GMO) $2.83 down 0.35%
Freeport McMoran (FCX) $62.33 down 1.70% (a bellwether mining stock spanning gold, copper & molybdenum)
Steel stocks are unhappy today too, (a "tell" for General Moly):
Nucor (NUE) $48.02 down 2.26% - domestic steel manufacturing
ArcelorMittal (MT) $36.37 down 2.70% - global steel producer
POSCO (PKX) $100.79 down 1.88%- South Korean integrated steel producer
The Eureka Miner's Grubstake Portfolio is down 0.94% to $1,118,763.28