Liu Han Gets Death Sentence; Midway Scores Money for Pan

McCoy Ridge, Eureka, Nevada

*** Local Mining News ***

Former Chinese Mining Tycoon Gets Death Sentence -- 2nd Update (James Areddy, WSJ May 23, 2014, 1:37 a.m. ET)

MIDWAY EXECUTES COMMITMENT LETTER FOR US$55 MILLION PROJECT FINANCE FACILITY WITH COMMONWEALTH BANK OF AUSTRALIA PAN PROJECT, NEVADA (Press Release, May 22, 2014)


MIDWAY FORECASTS CAPITAL REDUCTIONS PAN PROJECT (Press Release, April 24, 2014)

Latest Nevada Gas Prices (click this link)

My latest Kitco commentary:

Gold's Wild Ride - Up and Away? (Kitco News, Apr. 14, 2014)

My latest column in the Mining Quarterly:

Major McCoy and the Rebellious Ores of Eureka (p. 83-87 online, MQ Spring Edition 2014)


Or in the Elko Daily Free Press: Major McCoy and the rebellious ores of Eureka: How one man helped a small Nevada mining town boom (March 18)

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

Mariana's fine art prints are featured in Fine Art America: Mariana Titus

Friday's AM prices used for this morning's early analysis: 

COMEX Gold price = $1,293.8/oz (June contract most active)
COMEX Silver = $19.430/oz (July)
COMEX Copper = $3.1650/lb (July)



NYMEX WTI crude = $103.98/bbl (July)
ICE Brent crude = $110.39/bbl (July)


Eureka Miner’s Gold Value Index© (GVI) = 87.48 (gold value relative to a basket of commodities that include oil, copper and silver; 100 is a high gold value)
Value Adjusted Gold Price© (VAGP) = $1,235.8/oz
COMEX - VAGP = +58.04/oz; gold is trading at a declining premium to key commodities

As of 8:51AM PDT:

Barrick Gold (ABX) = $16.59 (unchanged)
Newmont Mining (NEM) = $23.39 up 0.13%
Midway Gold (MDW) = $0.9365 down 0.74%
General Moly (GMO) = $1.02 up 0.99% 
Timberline Resources (TLR) = $0.09 down 24.37%

S&P 500 = 1,898.81 up 0.33%

Morning Miners!

It's good to be back! A very eventful Friday before the long holiday weekend - infamous mining tycoon Liu Han faces the gallows and Midway Gold is on a roll to secure additional funding for their Pan Gold Mine in White Pine County. Liu Han, founder of the Hanlong Group, was arrested last year for corruption which upset Hanlong's funding plan of $790 million for construction of General Moly's Mt. Hope molybdenum mine. The General Moly management team has since been seeking alternative financing for the project.

Former Chinese Mining Tycoon Gets Death Sentence -- 2nd Update (James Areddy, WSJ May 23, 2014, 1:37 a.m. ET) 

General Moly (GMO) stock reacted positively to the early morning news trading up 1.0% at $1.02 at the time of this report. Although the original  funding plan was abandoned, Hanlong remains a 13% shareholder in General Moly. Some investors believe resolution of the Liu Han affair will simplify the Hanlong relation and thereby facilitate new funding options.

Yesterday, Midway Gold (MDW) announced they had signed a binding commitment letter with Commonwealth Bank of Australia for a $55M senior secured project finance facility for the development of the Pan Gold Mine. 

MIDWAY EXECUTES COMMITMENT LETTER FOR US$55 MILLION PROJECT FINANCE FACILITY WITH COMMONWEALTH BANK OF AUSTRALIA PAN PROJECT, NEVADA (Press Release, May 22, 2014)

An uptick in General Moly stock and money for Midway are positive ways to start the holiday!

Market Anxiety Low

As the U.S. stock markets attempt to break all-time highs, market anxiety is approaching new lows. The Eureka Market Anxiety Index is derived from S&P 500 and its volatility index (aka VIX) together with the Comex price of gold and copper, U.S. dollar index and 10-year U.S. Treasury note. It is a measure of fear in the marketplace with a threshold value of 100 as shown in the following plot from mid-2011 (click on image for larger view):

During the 2011 U.S. debt debacle and resulting debt downgrade, the Anxiety Index peaked at 271 (i.e high anxiety) and then fell to a complacent  low of  39.3 last May. Fortunately since 2012, anxiety has remained below threshold (100) except for the flurry of uncertainty that followed the Federal Reserve's announcement that their bond buying program, or QE3, would taper from its $85B per month pace. The Index touched 100.9 on June 24, 2013 on what was then described as a "taper tantrum."

Interestingly, the Index is again approaching a low  in the month of May scoring 45.4 in morning trading (green arrow). Will history repeat with a June surprise? Stay tuned, pardner - pretty quiet out there in the sage. Looks like a bump up to $1,300 next week may be in the cards for our lustrous friend....

Kitco Gold Survey

Here is my input to the Weekly Kitco Gold Survey:

05/23/2014 (10:23 AM CDT)

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

A. Up. My target price is $1,300 per ounce.

Q. Why?

After the long holiday weekend, the outcome of Ukraine presidential elections should restore some air to the slowly leaking tire of gold price in U.S. dollars. Consensus suggests that any result will bring more tension to the region which should be short-term bullish for the yellow metal.

Longer term, I remain bearish with gold prices headed to $1,100 to 1,180 per ounce territory by year-end. Lacking any geo-political lift, gold’s fortunes are likely grim until inflation expectations rise and real interest rates fall.

My gold target for next week is an uptick to the familiar $1,300 per ounce-level:

For $1,300 gold we can expect to see silver in a statistically bounded range* of $19.3-$19.8 per ounce. Silver is expected to have a neutral bias with respect to a range mean of $19.516 per ounce. Volatility in the gold-to-copper ratio has subsided substantially. Future copper price is thereby in a narrower statistical range* of $3.01-$3.21 per ounce. Copper is expected to have a positive bias with respect to a range mean of $3.1131 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)

The S&P 500 at 1,895.30 is 0.9% for the week in morning trading and within striking distance of all-time highs. Comex gold is virtually unchanged for the week losing more value to the S&P at $1,293.8 per ounce. 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 rising above the lower boundary of the sideways channel (blue dashed line). However, this advance has now bearishly retreated below the lower boundary into a second sideways channel bearishly lower than the first. This morning’s gold price represents a loss of 46.3% of value relative to the November peak (AUSP=1.2710).

The yellow metal lost considerable value to oil and some to copper; oil also gained on 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 408.8 pounds of copper.” Percentages are deltas over one week.

On Jan. 14, I changed sides from bear to bull on gold price as explained in my Kitco commentaries: From Gold Bear to Gold Bull (Kitco News, 2/18/2014), Gold’s Wild Ride Down May Soon Be Up (Kitco News, 1/21/2014). However, there are some troubling signs in the ether as explained in my March column, Oil, Copper & Gold Transmit a Distress Signal (Kitco news, 3/17/2014). Bearish trends have re-surfaced for the yellow metal and the light in the mineshaft (as explained in my latest commentary, Gold's Wild Ride - Up and Away?  Kitco News, 4/14/2014) is now growing very dim.

Since November 2012, gold has experienced bearish value destruction not only in U.S. dollar terms but value relative to oil. However, its value relation with respect to copper has recovered ground in 2014.

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 87.48, below the key-100 level and the 1-month moving average of 88.77. The 2012 high was 103.73 on Nov. 13. The value adjusted price of gold is $1,235.8 per ounce or $58.04 discount to actual gold price (i.e. gold is trading at a premium to a basket of key commodities).

Cheers,

Colonel Possum

Photos by Mariana Titus

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Mariana's fine art prints are featured in Fine Art America: Mariana Titus

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