Gold Breaks $1,320; Gold Miners Rock; Timberline Blues

Big Sky, Big Clouds

*** Local Mining News ***

Barrick Reports Fourth Quarter and Full Year 2013 Results (Press Release, 2/13/2014)

Barrick Gold's CEO Discusses Q4 2013 Results - Earnings Call Transcript (Seeking Alpha, 2/13/2014)

Timberline could potentially be de-listed by the NYSE and has cut the cord with RockStar Resources:

COEUR D'ALENE, IDAHO--(Marketwired - Feb. 8, 2014) - Timberline Resources Corporation(TLR) (TSX VENTURE:TBR) ("Timberline" or the "Company") announced today that it has received notice from the NYSE MKT LLC (the "Exchange") that the Company is not in compliance with one of the Exchange's continued listing standards as set forth in Part 10 of the NYSE MKT Company Guide (the "Company Guide"). Specifically, the Company is not in compliance with Section 1003(a)(iv) of that Company Guide in that it has sustained losses which are substantial in relation to its overall operations or its existing financial resources, or its financial condition has become impaired such that it appears questionable, in the opinion of the Exchange, as to whether the Company will be able to continue operations and/or meet its obligations as they mature.

Form 8-K Timberline Resources For: Feb 05

Latest Nevada Gas Prices (click this link)

My latest Kitco commentary:

From Gold Bear to Gold Bull (Kitco News, Feb.18,2014)

My latest column in the Mining Quarterly:

Copper & Gold - The Long Ride from Lehman Brothers (p. 90-91 online, p. 84-85 printed copy, MQ Winter Edition 2013)


Paintings by Mariana Titus, The Three Anas & The Three Moon Anas, are presently at Lafitte Guest House & Gallery, New Orleans

Monday's AM prices used for this morning's analysis: 

COMEX Gold price = $1,318.9/oz (April contract most active)
COMEX Silver = $21.225/oz (March)
COMEX Copper = $3.2640/lb (March)
NYMEX WTI crude = $99.52/bbl (March)
ICE Brent crude = $107.91/bbl (April)


Eureka Miner’s Gold Value Index© (GVI) = 86.05 (gold value relative to a basket of commodities that include oil, copper and silver; 100 is a high value)
Value Adjusted Gold Price© (VAGP) = $1,280.7/oz
COMEX - VAGP = +38.15/oz; gold is trading at an increasing premium to key commodities (bullish implication - bottom is in for gold)

As of 9:12 AM:

Barrick Gold (ABX) = $20.20 up 0.50%
Newmont Mining (NEM) = $23.43 down 0.42%
Midway Gold (MDW) = 1.38 up 3.67%
General Moly (GMO) = $1.27 up 3.25%
Timberline Resources (TLR) = $0.145 up 11.45%
S&P 500 = 1,834.21 down 0.24%

Morning Miners!

The ole Colonel has been AWOL for several weeks with travel and preparing an article on Eureka's Major W.W. McCoy for the upcoming Spring 2014 Edition of the Mining Quarterly. It includes recent field work that sheds new light on this most remarkable mining entrepreneur from Eureka's booming lead-silver days. Don't miss it!

Major W.W. McCoy

On January 14, I predicted the lows were in for gold and the yellow metal was heading for higher ground (Gold’s Wild Ride Down May Soon Be Up). Comex gold was around $1,240 per ounce then and this morning it briefly topped $1,320. Although the Lustrous One settled back to trade at $1,318.9 when I did my morning analysis, there is enough shine left for Valentine's! Read my full gold report below for reasons to be bullish.

Local gold miners have a lot to be happy about too. There is buzz that Barrick's Ruby Hill may re-open as soon as May. The giant gold miner is putting emphasis on North America and especially Nevada targeting a low-ball gold price of $1,100 for planning. As reported yesterday:

Barrick calculated its reserves for 2013 using a conservative gold price assumption of $1,100 per ounce, compared to $1,500 per ounce in 2012. While this is well below the company's outlook for the gold price and below current spot prices, it reflects Barrick's focus on producing profitable ounces with a solid rate of return and the ability to generate free cash flow. Gold reserves declined to 104.1 million ounces(4) at the end of 2013 from 140.2 million ounces at the end of 2012. Excluding ounces mined and processed in 2013 and divestitures, all of these ounces have transferred to resources, preserving the option to access them in the future at higher gold prices (Barrick Reports Fourth Quarter and Full Year 2013 Results, 2/13/214)


After a dismal 2013, Barrick's share price is up 31% from its December low presently trading at $20.20. Midway (MDW) is faring well too up 89% from its low, now a respectable $1.38 per share.

Unfortunately, Timberline Resources (TLR) hasn't joined the bullion party and is on shaky timbers with the NYSE (see Local Mining News above).

Don't forget to treat your sweetheart on Valentine's Day - an ounce of Nevada gold will do nicely!

Kitco Gold Survey 

Here is my input for the weekly Kitco Gold Survey:

02/14/2014 (10:27 AM CT)

Q. Where do you see gold’s price headed next week, up, down or unchanged?

A. Down. My target price is $1,310 per ounce.

Q. Why?

On Jan. 14, I changed sides from bear to bull on gold price going forward as explained in my last Kitco commentary, Gold’s Wild Ride Down May Soon Be Up (Kitco News, 1/21/2014).

Technically, the discounting process relative to oil and copper appears to have bottomed in December and gold is now regaining value on both. At the time of the commentary, the key trend remaining was the yellow metal's descending relation with equities. There was a decisive breakout to the upside in late-January which has continued into February (see chart below).

The GLD ETF has recorded inflows for 2014 and broke its 200-day average to the upside this morning – the GLD has not been above this longer term average since Feb. 8, 2013.

Presently the April Comex contract is trading at $1,318.9 just below the intraday high of $1,321.5 per ounce. Given the sharpness of the rise and a shortened week for U.S. markets, some consolidation below these levels is likely.

My gold target for next week is therefore $1,310 per ounce:

For $1,310 per ounce gold we can expect to see silver in a statistically bounded range* of $20.0-$21.4 per ounce; and copper in a range of $3.20-$3.57 per pound. Silver is expected to have a positive bias with respect to a range mean of $20.664 per ounce; copper, a negative bias with respect to a range mean of $3.3822 per pound.

(* +/- 2-standard deviations, 1-month basis: prices that fall outside this range likely signal a market-changing event. Bias from mean infers expected market direction from a 1-month gold ratio average)

This morning, the S&P 500 is up a respectable 2.0% for the week and gold has gained 2.4% on the S&P. The relation between the two is illustrated by a plot of the gold-to-S&P 500 ratio, or AUSP:

The ratio slid into a descending channel mid-November 2012 as money rotated away from gold assets into the U.S. stock market. This trend transitioned to a sideways channel July 5, 2013 (dashed blue lines, AUSP=0.7431). The AUSP then broke decisively below the lower boundary for a second leg of descent (dashed red lines). This channel was bullishly broken to the upside in late-January. This morning’s gold trading represents a loss of 43.2% of value relative to the November peak (AUSP=1.2710). However, today’s ratio is approaching the lower boundary of the sideways channel - a very bullish indication for the yellow metal.

This week, Comex gold is up for the week 4.4% in U.S. dollar terms and 8.0% below August’s high ($1,434.0). The yellow metal gained relative to copper and oil for the week; oil lost value relative to the red metal. The chart below is a week-over-week valuation matrix. The first row is the current commodity price in the given currency. For all other rows, read “1 unit of row A buys X units of column B”; for example, “1 ounce of gold buys 404.1 pounds of copper.” Percentages are deltas over one week.

Since November 2012, gold has experienced bearish value destruction not only in U.S. dollar terms but value relative to oil and copper.

As measured by the Eureka Miner’s Gold Value Index (GVI, Ref 1), the value of gold relative to global commodities copper and oil and companion metal silver is 86.05, below the key-100 level but above the 1-month moving average of 84.96. The 2012 high was 103.73 on Nov. 13. The value adjusted price of gold is $1,280.7 per ounce or $38.15 discount to actual gold price (i.e. gold is trading again at a premium to a basket of key commodities).

Cheers,

Colonel Possum

Photos by Mariana Titus

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Paintings by Mariana Titus, The Three Anas, are presently at Lafitte Guest House & Gallery, New Orleans
 
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