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XMFSinchiruna (26.55)

The Ultimate Reality Check for Gold and Silver



November 25, 2011 – Comments (14) | RELATED TICKERS: PPP

Any and all commodity investors will want to pay very close attention to this surprisingly quiet development from earlier this week:

"Importantly, China's response to a deteriorating outlook for the global economy may include a massive $1.7 trillion stimulus program to eclipse the scale of its game-changing 2008 intervention. I believe China's prior round of stimulus spending resulted in the most overlooked story for investors in 2009, drawing an impenetrable line of baseline demand beneath the outlooks for multiple key commodities from copper to metallurgical coal. If stimulus No. 1 sufficed to propel an incredible rally for the previously impaired stocks of commodity producers, I urge Fools to consider what a follow-up stimulus of more than twice its scale might achieve over its stated five-year timeframe. Don't let this become the most overlooked story of 2012! I'll look more closely at the implications of China's announcement for industrial commodities in a forthcoming article (bookmark this link), but for today I wish to highlight what I consider a remarkable opportunity to invest in precious metals in the wake of this week's selloff."

Here's the article, which I encourage you to read in full:

Here is one of the more unfortunate myths concerning gold that continues to keep may people away from the metals ... the notion that economic contraction will be bearish for gold and silver:

"Zooming out further to take in the whole of the Western financial system, one is confronted with the interconnected nature of counterparty risk, which connects major U.S. financial institutions to Europe's fate like so much trans-Atlantic telephone cable. I believe that counterparty exposure helps to explain the Federal Reserve's move to require another round of stress tests. Legislative reforms, in my view, have badly missed the mark, permitting U.S. financial institutions to continue carrying derivative exposures at fanciful model-derived valuations rather than market-based reality. Aside from renewed systemic risk that could be triggered by Europe's woes, the U.S. economy remains vulnerable to contraction as a likely European recession unfolds. While many mistakenly view such a threat as bearish for gold and silver, that is an incorrect perspective. U.S. policymakers have already made it perfectly clear, both through substantial precedent and explicit promises, that additional quantitative easing and other interventions will come into play to combat any threat of contraction. The playbook has been etched in stone." 

My macroeconomic perspective, if it had to be condensed to fit inside a nutshell:

"In a nutshell, I have concluded that the financial crisis of 2008, the accelerating emergency in Europe, and the unrelenting threats to sustainable economic recovery in the United States are all interconnected chapters of one giant global financial crisis. They are not, as commonly perceived, an amalgamation of unrelated events. Attempts to bury an unimaginably massive mountain of toxic leveraged assets beneath a veil of debt creation are, in my opinion, misguided and destined to fail. Because I have no confidence that this global crisis will be sustainably resolved through intervention, I place my confidence in the continued price appreciation of gold and silver."

14 Comments – Post Your Own

#1) On November 25, 2011 at 9:14 AM, XMFSinchiruna (26.55) wrote:

I hope everyone enjoyed a terrific Thanksgiving!

A reminder, I am putting together an informal e-mail mailing list that I intend to use to send out quick thoughts or timely developments directly to those who wish to receive them.

Acknowledging the anonymity many enjoy here, I will construct the e-mails in such a way as to not show your name or e-mail address (maybe some of you more tech-savvy Fools can advise whether the "bcc" field of an e-mail offers adequate masking of contacts and e-mail addresses).

I am thrilled by the response so far ... I never realized how many "lurkers" were out there until my last post. :) So a reminder to those who have not already done so, if you wish to be on my e-mail list, please send an e-mail to that indicates your TMF username so I can keep folks straight.

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#2) On November 25, 2011 at 9:20 AM, XMFSinchiruna (26.55) wrote:

When asked about the German bond auction, Sprott responded, “The results were that they (Germany) only sold about 65% of the issue on offer. Rates went up a little, but the fact that the Germans, who would have been regarded as the number one credit in Europe, couldn’t sell, I think it was a $5 billion euro issue, and they couldn’t sell it, I mean it’s truly shocking.”

"When asked how this portion of the financial crisis will compare to that of 2008 and 2009, Sprott replied, “I think it’s going to be a lot worse because it took a certain amount of money to bail out Lehman and all of the counterparties to Lehman. But when you have governments and sovereigns and major banks that have these issues, I just can’t imagine there is enough money to bail it out." 

"Of course day by day people are losing confidence in these various currencies. So I don’t think it can be solved. I don’t think there is enough money to bail it out and of course if they try we are going to end up with some kind of hyperinflation or (massive) depreciation of currencies. It’s not going to work, I just don’t think there is a solution to the problem.”"

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#3) On November 25, 2011 at 9:25 AM, XMFSinchiruna (26.55) wrote:

Drilling at Serra Intersects 7m @ 6.10g/t Gold at Coringa Project, Brazil

November 24, 2011

Vancouver, BC, November 24, 2011 - Magellan Minerals Ltd. (TSX-V: MNM) (“Magellan”) is pleased to report results from thirteen additional drill holes from the Serra, Meio and Domingo zones at the Coringa project, Brazil. As with previous holes reported from the 2011 diamond drill program, these are all step-out and exploration holes aimed at expanding the existing resources of 269,450oz of gold in the measured and indicated categories (982,291t @ 8.53 g/t), and 98,224oz of gold in the inferred category (327,054t @ 9.34 g/t).

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#4) On November 25, 2011 at 10:12 AM, silverminer (30.03) wrote:

The Dollar is on course to end this week on a very strong note barring any changes in the fundamental picture in Europe. That will lead to further weakness in commodities in general. Now that the failed German bund action has sent shock waves through the markets in general and chatter continues to grow that France is next on the downgrade list, the US Dollar is seeing strong inflows as money comes out of Europe. One has to wonder if the Asians are dumping Euro-based debt and gravitating towards Treasuries.

At some point in this crisis, gold is going to stop following the general commodity sector lower and will trade as a safe haven but it is going to continue to experience computer selling from hedge funds and index funds which benchmark against the various commodity indices. It should be noted however that gold is holding much better than silver or the CCI in general. This is due to its function as a safe haven. Were it not for that, it would be getting sold down more severely due to the mad rush for cash currently underway.

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#5) On November 25, 2011 at 10:10 PM, skypilot2005 (< 20) wrote:

see #3



Business Summary


Magellan Minerals Ltd. engages in the exploration and development of gold properties primarily in Brazil. The companys principal properties consist of Cuiu Cuiu project that covers approximately 47,000 hectares and is located to the southwest of Itaituba city, northern Brazil; and Coringa gold project, which covers 19,093 hectares and is located in the state of Para. It also has various gold exploration properties in the states of Para and Mato Grosso in Brazil, as well as an interest in a gold exploration property in Nevada. The company was incorporated in 2004 and is based in Vancouver, Canada.

Magellan, Barrick Gold & Rye Patch:


TORONTO, Canada -  The recently announced announcement joint venture agreement by Rye Patch Gold Corp with Barrick Gold Corp (TSX: ABX) (NYSE: ABX), US Gold Corp (NYSE: UXG) (TSX: UXG) and Magellan Minerals (TSXV: MNM) to earn a 60% interest in the Patty Project (53.1 sq km) at the prolific Cortez trend in Nevada.

 The project, its proximity and relation to new gold discoveries by Barrick Gold, its exploration prospects and the investment potential it presents to investors interested in Rye Patch Gold.

The Patty Project is located immediately south of Rye Patch’s 100% owned Garden Gate Pass project; 10 kilometres south-southeast of Barrick Gold’s recently announced Red Hill and Goldrush discoveries; and east and adjacent to US Gold’s Tonkin Springs project along the western margin of the Northern Nevada Rift (NNR).

With this joint venture Rye Patch now controls 63 square kilometres in the prolific Cortez gold trend in Nevada. Nevada gold junior Rye Patch Gold’s 100% owned Garden Gate Pass (GGP) project covers 1,300 hectares and is located just two kilometres south of Goldrush discovery of Barrick and near Barrick’s Cortez Hills mine. Rye Patch Gold is currently undertaking a 5,000 metres phase-one drilling program at this project. Rye Patch's geologic fieldwork shows that the eastern gold trend from Red Hill and Goldrush deposits extends on to Rye Patch’s Garden Gate Pass claims.

Rye Patch Gold Corp (TSX VENTURE: RPM) (CVE: RPM) (OTCQX: RPMGF) is an advanced stage exploration company which has NI 43-101 compliant estimate of 3.9 million ounces of gold and gold equivalent resources.




Rye Patch Expands Cortez Gold Trend Holdings; Acquires Joint Venture Option in the Patty Project



“Upon completion of the earn-in amount by Rye Patch, the Patty Joint Venture will have the right to back in to a 60% interest by expending US$15 million over a five year period, of which amount one-third will be paid in cash to Rye Patch. The Patty Joint Venture must exercise its back-in right within 90 days of Rye Patch completing its earn in. If the Patty Joint Venture completes its back-in, Rye Patch will control 40% undivided interest, with Barrick Gold, US Gold and Chapleau Resources having 36%, 18%, and 6% respectively.”


The company acquired the Coringa project in 2009 when it purchased Chapleau Resources, now a wholly-owned subsidiary. Magellan Minerals also owns a bauxite project -- a raw material used in the production of aluminum -- in an area of Brazil where aluminum giants such as Alcoa, BHP Billiton, and Rio Tinto are already exploring for the mineral.


Alan Carter



Dr. Carter has over 18 years of experience in the minerals exploration industry. He spent seven years working for Rio Tinto Corp. in South America and the U.K., most recently as Exploration Manager in Bolivia. In 1996, he became President and CEO of Balaclava Mines where he oversaw the acquisition and exploration of a number of gold projects in Peru and Ecuador. Dr. Carter joined Billiton plc in 1998 and moved from Peru to Vancouver in 2000 and was instrumental in the development of an aggressive strategy aimed at developing partnerships with junior exploration companies. Following the merger with BHP, Dr. Carter assumed the role of Manager, Business Development for BHP Billiton Diamonds where he was responsible for the commercial aspects of BHP Billiton's global portfolio of nickel and diamond exploration projects. Currently, Dr. Carter is the President of Electrum Capital Inc. a position he has held since February 2006. As well, he holds the position of CEO and Director at Magellan Minerals Ltd. and Director at Peregrine Diamonds Ltd. He has a B.Sc. degree in Geology from the University of Nottingham, U.K. and a Ph.D. degree from the University of Southampton, U.K.


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#6) On November 25, 2011 at 10:16 PM, skypilot2005 (< 20) wrote:

Almost forgot:

Sky Pilot

Official Web Link Assistant to Sinch

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#7) On November 27, 2011 at 9:40 AM, silverminer (30.03) wrote:

If the region's population is alert to the waterborne impacts of a nearby operation the scale of Yanacocha / Conga, I would consider it likely that they have some first-hand experience of historical contamination from those or related mining activities. I have only visited smaller operations to date; I have a feeling that witnessing a large-scale operation could present a significant moral dilemma for me between my investment-retaled stance on precious metals and my environmental conscience. It is an internal conflict of interests that I live with every day.

LIMA, Peru (AP) — Peru's biggest mining investment is under threat and government social welfare programs with it as highlands peasants step up protests against a gold-and-copper mine they fear could taint and diminish their water supply.

About 400 protesters tried to enter the mine's grounds Friday and some hurled rocks at police, who responded with tear gas and shotgun blasts, wounding one protester in the leg, Interior Minister Oscar Valdes told a Lima TV station.

Opposition to the $4.8 billion project, an extension of the Yanacocha open-pit gold mine that is Latin America's largest, poses the first major challenge to President Ollanta Humala's leadership.

He won office in June after promising the very people now mobilizing against Conga, whose 51 percent owner is Denver-based Newmont Mining Corp., that he would put clean water above mineral extraction.Thanks Sturm

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#8) On November 28, 2011 at 3:30 PM, AirForceFool (99.85) wrote:

Prior to the current global crisis, I had a hard time understanding the fundamentals of gold... as a store for value sure... but not a lot of industrial uses compared to silver... originally I had all my precious metals loot (roughly 15% of portfolio) tied up in silver miners (SLW and GPL) and physical silver (old Morgan and Peace). With the recent downturn I've traded out some other stocks for some BRD and PPP.

But if the global economy goes south as many predict, where does that leave silver with it being much more tied to manufacturing? My thoughts are that the markets are going to get so beat up, that in spite of lower silver production ounce numbers for goods, the flight from currencies will more than make up for the decreased industiral use... not to mention the already limited supply of above ground silver...


Long silver... and now gold...


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#9) On November 28, 2011 at 6:31 PM, FleaBagger (27.54) wrote:

I have a feeling that witnessing a large-scale operation could present a significant moral dilemma for me between my investment-retaled stance on precious metals and my environmental conscience.

I think an important consideration is what would be the impact of not investing. Withholding your capital is like voting: it doesn't really help anyone (except an unscrupulous investor). Maybe if your capital meant the difference between the mine operating there and not operating there, it would be fruitful to withhold your dollars, but it's far more likely that the only difference you make will be between you doing very well in the economic crisis and you doing pretty well in the economic crisis. 

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#10) On November 28, 2011 at 9:32 PM, skypilot2005 (< 20) wrote:




Sky Pilot

Official Web Link Assistant to Sinch

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#11) On November 29, 2011 at 9:21 AM, skypilot2005 (< 20) wrote:

 context for #10, above.




Sky Pilot

 Official Web Link Assistant to Sinch




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#12) On November 29, 2011 at 9:50 AM, skypilot2005 (< 20) wrote:



Brigus Reports Additional High-Grade Gold Assays

Sky Pilot

Official Web Link Assistant to Sinch

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#13) On November 29, 2011 at 10:20 AM, DJDynamicNC (42.44) wrote:

Gold and silver are only worth what people will pay you for them.

Dollars are only worth what people will pay you for them.

It pays to keep this in mind.

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#14) On November 29, 2011 at 9:39 PM, skypilot2005 (< 20) wrote:

If you own Yukon-Nevada, interesting read:

Yukon-Nevada Gold Corp – The Drama Is About to End

Nov. 28, 2011

Sky Pilot

Official Web Link Assistant to Sinch


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