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Feb 21, 2012

Most of you believe that a time machine is a theoretical device. You might like to be able to buy gold at $250 an ounce today, but without a time machine your dream cannot come true.
I’ve created a real time machine. It really works, and you can use it to buy gold at $250 an ounce today. To use my time machine, please click here now.
You can’t go back in time and buy gold at its point of maximum price sale, but you can look at other major markets and understand the emotional strength required to buy them during similar price sales.
Oil bottomed at $10, while the major news media told you that the oil supply glut was “here to stay”. Now they are telling you the same thing about natural gas.
When gold bottomed at $250, it didn’t feel like a bottom, to put it mildly. It felt like gold was going straight to $100-$150. Drawing arrows to infinity on the gold price charts after a $200 rally isn’t how you build real wealth. You must buy markets that are dominated by supply gluts, extremely low prices, and investors in capitulation mode.
In the natural gas market, I’d like you to look carefully at the current change in relative strength (RSI), the change in MACD, and most of all, the change in volume.
From current prices near $1740, gold needs to skyrocket to about $3100 to make you an 80% profit. Natural gas needs only to rise to $4.50 to do the same thing.
The last time gold showed any kind of serious price sale was in the $1500-$1600 price zone, and the sad truth is that most investors sold out or became terribly demoralized as those prices happened. Sadly, the great gold sale had almost no buyers amongst gold’s biggest fans.
More gold sales will occur. Have the patience to wait for them, rather than drawing arrows to zero on the Dow chart and arrows to infinity on the gold chart. Those arrows won’t build you any wealth.
You can’t know if $2.45 is the bottom for natural gas. The changes in RSI, MACD, and volume could not have been predicted to occur when they did. Carry some short positions while building a net long position in this mighty asset, so you don’t lose your sanity if a new round of lower prices is yet to come.
Wealth is built by buying assets in what I refer to as the “surprise zone”, or the “discomfort zone”. The surprise zone is the lower price area on the price grid that you “know” your asset can never touch. In contrast, most investors use prediction to buy assets. Use your own failure to predict an asset higher, to buy it lower. My largest buys of a major asset are always triggered inside of my personal surprise zone. I buy my own stupidity. Should you buy yours?
Remember when I came on the gold community scene during the October, 2008 carnage? While most investors were selling out of the stock market and shorting it, I bought Dow stocks into the tick lows, while literally holding my stomach. At the same time, I was maniacally withdrawing money from banks on a weekly basis.
It was clear that either the Dow and gold stocks were at a major bottom, or the markets were going to close down and the financial system would collapse. I had no clue which outcome would prevail. I bet on both outcomes by removing cash from the system, storing gold, and buying the Dow and gold stocks with my pyramid generator.
I was absolutely sure that General Electric was going bankrupt, yet I bought it anyways. The market turned at my point of maximum pain, not my turn call, and the same thing is likely happening now in natural gas. I have no idea whether $2.45 turns out to be the final bottom, but it is certainly a price where risk capital needs to be placed into this superb asset.
Ultimately, I expect natural gas prices to rise to $20 and higher, which is an eight-fold increase from current levels. Gold would have to rise to about $14,000 to produce a similar return. Gold may well achieve that price, but unless it is drastically on sale with investors in capitulation mode, I have no interest in adding to my gold bullion position.
Gamblers can buy gold on $50 price declines, but investors should not touch gold unless it is at least $100 on sale. Look out your gold price window this morning. Is it $100 on sale? Don’t worry, you’ll get a $100 price sale soon enough, and much more. Gold will enter your personal surprise zone, and mine. Will you take action on the buy side when it happens?
Many investors have quietly bought back into the market with some size in the $1680-$1765 area, after selling out into $1525. I call this action price chasing by stealth. Gold appeared to break out to the upside from a falling wedge or drifting rectangle. Maybe that’s what happened, or maybe it’s just a mirage painted on the chart by the banksters.
I sense substantial frustration amongst investors who bought that apparent breakout after selling out into the lows. Instead of blasting higher after the breakout, the gold price looks now more like a chuck wagon that just drove into quicksand. Embittered investors blame supposed “price manipulators” for their current problems, when 100% of the problems stem from failing to buy any gold when it goes on substantial price sale.
Don’t compound one mistake with another one. If gold falls to $1700, or even below that price, remain calm. Hold your ground, regardless of what price you paid for your gold. Never trade gold for dollars at a loss. It’s not a tiddly winks game that you bought. It’s gold.
Gold was “high” at $887 in 1980. Now that price is low. It doesn’t matter if you pay $250 or $250,000 an ounce for gold. What matters is the emotional state of your opponent, and whether you are buying during a real price sale or not.
Click this gold basics chart now. The lines I’ve drawn there are horizontal support and resistance lines (HSR), but just because HSR exists at a certain price doesn’t mean you should be acting in the market at that price, especially in size. Charts indicate potential scenarios for price, but buying a price sale is the only way to build wealth in gold. From where price sits this morning, the price range of $1650-$1665 represents a real price sale for gold, and no buying of size should be done unless price falls to that specific price area.
On the upside, $1800-$1825 represents almost $300 of price appreciation from the lows, and only gold that was bought at $1525 or lower should be sold there. Unless you are a gambler, don’t accept less than a $300 per ounce profit for any gold you purchase at this stage in the crisis. Buy sales that give you a minimum of $100 of price weakness, if you are serious about coming out of the other side of this epic crisis fully intact.
Click here now to view the junior gold stock price action, via GDXJ. Note the highs near $31.68 and $30.65. The $30 price area is significant overhead resistance. We “needed” this pullback to make a serious attempt at breaking through that resistance. The short term Stochastics indicator that I’ve circled in blue suggests that this week should be a good one for gold junior stocks, but it remains to be seen whether the low of $27.16 will hold, or whether this new rally is only a break in the downside action. The GDXJ price could still decline to the supply line of the wedge pattern in the $23-$24 area.
Investors should generally be buying GDXJ on $3-$5 price sales. I buy it every dollar down, increasing the size of my buys all the way to zero. The bottom GDXJ line is that $27 is a good place to accumulate GDXJ, $23 is even better, and $19 is best of all. Since you can’t know where the final low will be, it’s critical to have capital in place to buy GDXJ at prices that are deep inside your personal surprise zone!

Special Offer For Ozcopper Readers: Silver is an asset very dear to the hearts of many investors in the gold community, yet the silver rocket seems to be mired in quicksand. Send me an email to freereports4@gracelandupdates.com and I’ll send you my free silver market “Spark Me Up!” report. Learn three tricks I use to maintain excitement about silver on a daily basis, while most investors are becoming frustrated!

Thanks!

Cheers

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Risks, Disclaimers, Legal
Stewart Thomson is no longer an investment advisor. The information provided by Stewart and Graceland Updates is for general information purposes only. Before taking any action on any investment, it is imperative that you consult with multiple properly licensed, experienced and qualifed investment advisors and get numerous opinions before taking any action. Your minimum risk on any investment in the world is: 100% loss of all your money. You may be taking or preparing to take leveraged positions in investments and not know it, exposing yourself to unlimited risks. This is highly concerning if you are an investor in any derivatives products. There is an approx $700 trillion OTC Derivatives Iceberg with a tiny portion written off officially. The bottom line:

Are You Prepared?

Silver Eagles Soar

admin — Sat, 18 Feb 2012 04:21:03 +0000

Richard (Rick) Mills
Ahead of the Herd

As a general rule, the most successful man in life is the man who has the best information

In World War I severe material shortages played havoc with production schedules and caused lengthy delays in implementing programs. This led to development of the Harbord List – a list of 42 materials deemed critical to the military.

After World War II the United States created the National Defense Stockpile (NDS) to acquire and store critical strategic materials for national defense purposes. The Defense Logistics Agency Strategic Materials (DLA Strategic Materials) oversees operations of the NDS and their primary mission is to “protect the nation against a dangerous and costly dependence upon foreign sources of supply for critical materials in times of national emergency.”

The NDS was intended for all essential civilian and military uses in times of emergencies. In 1992, Congress directed that the bulk of these stored commodities be sold. Revenues from the sales went to the Treasury General Fund and a variety of defense programs – the Foreign Military Sales program, military personnel benefits, and the buyback of broadband frequencies for military use.

American Silver Eagle

The American Silver Eagle is the official silver bullion coin of the United States. It was first released by the United States Mint on November 24, 1986 and is struck only in the one troy ounce size.

The Bullion American Silver Eagle sales program ultimately came about because the US government wanted, during the 1970s and early 1980s, to sell off what it considered excess silver from the Defense National Stockpile.

“Several administrations had sought unsuccessfully to sell silver from the stockpile, arguing that domestic production of silver far exceeds strategic needs. But mining-state interests had opposed any sale, as had pro-military legislators who wanted assurances that the proceeds would be used to buy materials more urgently needed for the stockpile rather than merely to reduce the federal deficit.” Wall Street Journal

The authorizing legislation for the American Silver Eagle bullion sales program required that the silver used for the coins had to be from the Defense National Stockpile. By 2002 the DNS stockpile was so depleted of silver that if the American Silver Eagle bullion sales program was to continue further legislation was required.

On June 6, 2002, Senator Harry Reid (D-Nevada) introduced the Support of American Eagle Silver Bullion Program Act to “authorize the Secretary of the Treasury to purchase silver on the open market when the silver stockpile is depleted.”

2002 – 10,539,026 Bullion American Silver Eagles were sold.

2003 – 8,495,008 Bullion American Silver Eagles were sold, silver averaged $4.88 an ounce for the year.

2004 – 8,882,754 Bullion American Silver Eagles were sold. For 2004 the average cost of an ounce of silver was $6.67.

2005 – 8,891,025 Bullion American Silver Eagles were sold. Silver averaged $7.32 an ounce.

2006 – 10,676,522 Bullion American Silver Eagles were sold. Silver averaged $11.55 an ounce

2007 – 9,028,036 Bullion American Silver Eagles were sold.

2008 – 20,583,000 Bullion American Silver Eagles were sold. Silver averaged $14.99 an ounce and almost 80% more Bullion American Silver Eagles were sold then in any previous year.

The US Mint suspended sales of the silver bullion coins to its network of authorized purchasers twice during the year.

In March 2008, sales increased nine times over the month before – 200,000 to 1,855,000.

In April 2008, the United States Mint had to start an allocation program, effectively rationing Silver Eagle bullion coins to authorized dealers on a weekly basis due to “unprecedented demand.”

On June 6, 2008, the Mint announced that all incoming silver planchets were being used to produce only bullion issues of the Silver Eagle and not proof or uncirculated collectible issues.

The 2008 Proof Silver Eagle became unavailable for purchase from the United States Mint in August 2008.

2009 – 30,459,000 Bullion American Silver Eagles were sold

On March 5, 2009, the United States Mint announced that the proof and uncirculated versions of the Silver Eagle coin for that year were temporarily suspended due to continuing high demand for the bullion version.

On October 6, 2009, the Mint announced that the collectible versions of the Silver Eagle coin would not be produced for 2009.

The sale of 2009 Silver Eagle bullion coins was suspended from November 24 to December 6 and the allocation program was re-instituted on December 7.

Silver Eagle bullion coins sold out on January 12, 2010.

The average cost of an ounce of silver in 2009 was $14.67

2010

No proof Silver Eagles were released through the first ten months of the year, and there was a complete cancellation of the uncirculated Silver Eagles.

Production of the 2010 Silver Eagle bullion coins began in January instead of December as usual. The coins were distributed to authorized dealers under an allocation program until September 3.

In 2010 the US Mint sold 34,700,000 Bullion American Silver Eagle Coins.

2011

According to the USGS’s most recent Silver Mineral Industry Survey, silver production fell to 37 tonnes in October – compared to 53 tonnes year over year (yoy).

In 2011, the United States produced approximately 1,054 tonnes of silver – down from 2010’s production of 1,154 tonnes and down from 2007’s production of 1,163 tonnes.

The US imported 6,600,000 oz of silver for consumption in 2011 – up from 2007’s imports of 4,830,000 oz.

In 2011 the US Mint sold 39,868,500 Bullion American Silver Eagle Coins.

2011 was the first year in which official coin sales will surpass domestic silver production.

Jeff Clark of Casey Research writes “For the first time in history, sales of silver Eagle and Maple Leaf coins surpassed domestic production in both the US and Canada. Throw in the fact that by most estimates less than 5% of the US population owns any gold or silver and you can see how precarious the situation is. A supply squeeze is not out of the question – rather it is coming to look more and more likely with each passing month.”

The US Mint is required by law to mint the bullion Silver Eagles to meet public demand for precious metal coins as an investment option. The numismatic versions of the coin (proof and uncirculated) were added by the Mint solely for collectors.

2012

United States Mint Authorized Purchasers (AP’s) ordered 3,197,000 Bullion American Silver Eagle Coins on January 3rd, the first day they went on sale. That opening day total catapulted January Bullion Eagle sales higher than half of the monthly totals in 2011.

As of January 25th 2012, 5,547,000 Bullion American Silver Eagle Coins had been sold.

Bullion Silver Eagles are guaranteed for weight and purity by the government of the United States and because of this the US government allows bullion Silver Eagles to be added to Individual Retirement Accounts (IRAs).

Conclusion

The twin policies of zero interest rates and the continual creation of money and credit being enacted today, by all governments and central banks, means that the purchase of precious metals is the only way to protect the value of your assets.

“Mark my words, if the interest rates on U.S. government debt truly reflected both the real level of inflation in this country and the rising risk of some form of default, rates would already by sky-high and the U.S. would resemble a massive Greece.” John Embry, Chief Investment Strategist, Sprott Asset Management

Investors are currently risk adverse and mining stocks are not well understood by the general investing public, but at least one thing is going to become very apparent to most - the best way to hedge yourself against inflation could be owning silver.

Junior resource companies offer the greatest leverage to increasing demand and rising prices for silver. Junior resource companies are soon going to have their turn under the investment spotlight and should be on every investors radar screen. Are they on yours?

If not, maybe they should be.

Richard (Rick) Mills

rick@aheadoftheherd.com

If you’re interested in learning more about the junior resource sector, and several quality silver companies, please come and visit us at www.aheadoftheherd.com

Site membership is free. No credit card or personal information is asked for.

***

Richard is host of Aheadoftheherd.com and invests in the junior resource sector. His articles have been published on over 400 websites, including: Wall Street Journal, SafeHaven, Market Oracle, OzCopper, USAToday, National Post, Stockhouse, Lewrockwell, Uranium Miner, Casey Research, 24hgold, Vancouver Sun, SilverBearCafe, Infomine, Huffington Post, Mineweb, 321Gold, Kitco, Gold-Eagle, The Gold/Energy Reports, Calgary Herald, Resource Investor, Mining.com, Forbes, FNArena, Uraniumseek, and Financial Sense.

***

Legal Notice / Disclaimer

This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment.

Richard Mills has based this document on information obtained from sources he believes to be reliable but which has not been independently verified; Richard Mills makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Richard Mills only and are subject to change without notice. Richard Mills assumes no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission.

Furthermore, I, Richard Mills, assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information provided within this Report.

Graphite: Pencil It In

admin — Tue, 14 Feb 2012 23:35:57 +0000

Richard (Rick) Mills
Ahead of the Herd

As a general rule, the most successful man in life is the man who has the best information

Sometime between 1500 and 1565 a large graphite deposit was discovered in Cumbria, England. Because the graphite was extremely pure and solid it could easily be sawed into sticks. The graphite was actually thought to be a form of lead and called plumbago – Latin for lead ore.

The Borrowable Mine was soon ordered to be put under armed guard by Queen Elizabeth because the “lead” could be used to line the moulds for making her armies cannonballs. But black marketers managed to smuggle out the graphite for continued use in pencils. Artists from all over the known world quickly learned to appreciate the qualities of Cumbria’s graphite but it wasn’t until 1795 that Nicholas Conte learned to mix graphite powder with clay and fire it in a furnace to actually make something with the equivalent quality of Borrowables plumbago.

Today graphite (named for the Greek word meaning “to write”) is attracting the attention of investors, and for just as good a reason as it once attracted all those artists 500 years ago.

Carbon

By mass carbon is the fourth most abundant element in the universe (after hydrogen, helium, and oxygen) and it’s the 15th most abundant element in the Earth’s crust. Carbon is present in all known life forms and is the second (oxygen is first) most abundant element by mass – about 18.5% – in the human body.

Carbon is the stuff of life, it is the foundation, the chemical basis, of every living thing on Earth, yet because of its pervasive familiarity we all take it for granted.

As investors we might want to rethink that.

Allotropes are structural modifications of an element – the allotropes of carbon include:

Diamond – The carbon atoms are bonded together in a tetrahedral lattice arrangement
Fullerenes – The carbon atoms are bonded together in spherical, tubular, or ellipsoidal formations
Graphite – The carbon atoms are bonded together in sheets of a hexagonal lattice
Graphene – A flat two-dimensional sheet of carbon atoms

Graphite

Graphite has long been used in the aviation, automotive, sports, steel and plastic industries, as well as in the manufacture of bearings and lubricants. Graphite is an excellent conductor of heat and electricity, is corrosion and heat resistant and is also strong and light.

Currently, the automotive and steel industries are the largest consumers of graphite and demand across both industries is rising at five percent per annum.

The steel industry uses graphite as liners for ladles and crucibles, they use it in the bricks which line blast furnaces and to increase the carbon content of steel. Graphite has already replaced asbestos in automotive brake linings and pads and is used for gaskets and clutch materials. Sparks plugs are also made incorporating graphite.

But demand for graphite has been rising for other applications as well; Flexible graphite sheets, lithium-ion and vanadium batteries, fuel cells, semi conductors, nuclear, wind and solar power.

Graphoil

Graphoil is flexible graphite sheets and one of the fastest growing graphite markets. Flexible graphite is desirable for compression packing and gaskets, whose ability to seal comes from filling gaps through which fluid might flow.

Flexible graphite products have valuable properties:

Free from creep under constant load
Stable from cryogenic temperatures far below zero to temperatures well above the melting point of most ferrous and non-ferrous metals
Resists a wide range of corrosive materials
Nuclear radiation resistant even when exposed to massive doses of radiation
Fire-safe in the presence of highly volatile fluids and extremely high temperatures

Nuclear Power

Graphite plays a key role in many current, and future, nuclear reactor designs. The next generation nuclear reactor (the INL-led Next Generation Nuclear Plant (NGNP) and other proposed high-temperature, gas-cooled reactors) temperatures are expected to reach as high as 1,000 °C in their cores – graphite, having a higher melting point then steel, doesn’t burn until 3,000 degrees Celsius. Because graphite has a huge heat-absorbing capacity it’s also used to keep nuclear fuel at safe temperatures during unexpected events – as an aside graphite is also used as a heat sink in computers.

China’s Pebble bed reactors (PBR) are a graphite moderated, gas cooled nuclear reactor. The base of the PBR’s design is the spherical (billiard ball-sized) fuel elements called pebbles. In the PBR, thousands of pebbles are amassed to create a reactor core. The pebbles are made of pyrolytic graphite (a protective graphite coating which moderates the pace of nuclear reactions) and they contain thousands of micro fuel particles called TRISO particles. These TRISO fuel particles consist of a fissile material such as 235U. These reactors are cooled by non-explosive helium gas instead of depending on a steady source of water.

Substantial amounts of graphite are required to charge the reactor at startup – 3000 tons and a percentage of the balls must be replaced each year as the fuel is spent necessitating a further 600 to 1000 tons of graphite each year of operation. China has one operating prototype, is now building two commercial units and plans to have 30 Pebble Bed nuclear reactors in operation by 2020.

Fuel Cells

The two major types of fuel cells – the phosphoric acid fuel cell (PAFC) and the proton electrolyte membrane fuel cell (PEMFC) – currently under development rely heavily on graphitized carbon. PAFCs are for stationary power generation (primary or backup power for remote locations such as cell phone towers), whereas PEMFC’s have attracted widespread interest for use in transportation applications.

A fuel cell is not a battery – a battery is an energy storage device, it will stop producing electrical energy when the chemical reactants are consumed or it needs to be recharged. The fuel cell is an energy conversion device and will produce electrical energy as long as the fuel, and the oxidant, are fed to the electrodes.

More and more fuel-cell applications are in development every year and fuel cell technologies rely heavily on graphite – the proton exchange fuel cell (PEMFC) requires 80-100 pounds of graphite per vehicle.

“Large-scale fuel cell applications are being developed that could consume as much graphite as all other uses combined.” U.S. Geological Survey

Solar Thermal Collectors

The biggest limitation of Solar or Photovoltaic (PV) panels is that they can use only a fraction of the sunlight that hits them, the rest of the sunlight turns into heat which actually hurts the performance of the panels.

An alternative that can make use of all of the sunlight, including light frequencies PVs can’t use, is the solar thermal collector – they collect heat that’s used to boil the water to make the steam which drives the turbine which creates the electricity.

To further increase the efficiency of solar collectors, nanoparticles – particles a billionth of a meter in size – are added into the heat transfer oils normally used in solar thermal power plants. In laboratory tests nanoparticles increased heat collection efficiency by up to 10 percent. 100 grams of nanoparticles provides the same heat-collecting surface area as an entire football field.

Graphite nanoparticles are very efficient heat collectors.

Vanadium Redox Batteries

When the sun doesn’t shine and the wind doesn’t blow neither solar or wind plants are generating electricity, these two green energies need batteries to store the excess energy they can produce under optimal conditions. The vanadium redox battery (VRB) could be the perfect answer as they:

Have unlimited capacity simply by increasing the size of their storage tanks
Can be left completely discharged for long periods of time with no ill effects
Have low maintenance requirements
Can be recharged by simply replacing the electrolyte
Have a nominal environmental footprint

VRB’s also require almost 300 tonnes of flake graphite per 1,000 megawatts of storage capacity.

Lithium-ion Batteries

The most important application for increased graphite demand might come from the lithium-ion batteries found in electric vehicle batteries and used to power our modern consumer electronics.

While lithium is the cathode the anode is graphite and these batteries need 10 to 30 (depending on which expert you are listening to) times more graphite than lithium and the lithium-ion battery industry is growing at a 30 to 40% annual rate.

As many as six million electric vehicles might be manufactured in 2020, each of them requiring 40 pounds of graphite for its battery system – the electric motorcycle and scooter markets are growing even faster.

Lithium-ion batteries are also crucial to the consumer electronics industry – power tools, cell telephones, laptops, tablets and media players etc.

Graphene

If you took a close look, a very close look, at a graphite pencil lead you will see layer upon layer of carbon atoms, multiple two dimensional planes that are loosely bonded to their neighbors.

The reason graphite works so well as a writing material, and industrial lubricant, is because the layers of atoms slip easily over one another – the layered structure facilitates easy cleavage along the planes.

Each of those single layer of atoms is grapheme.

Separating the individual layers of graphite sets the electrons free and allows carbon to behave…differently.

Properties

Graphene has unique combinations of optical, electrical and mechanical properties:

Astonishing electrical conductivity – Graphene has the highest current density (a million times that of copper) at room temperature; the highest intrinsic mobility (100 times more than in silicon); and can carry more electricity more efficient, faster and with more precision than any other material
Graphene also beats diamond in thermal conductivity – it’s better than any other known material
It is the thinnest and strongest material known to man; 200 times stronger than steel, is almost invisible and weightless, stretches like rubber – graphene can stretch up to 20 percent of its length – and yet is the stiffest known material, even stiffer than diamond
Graphene is the most impermeable material ever discovered

Uses

Touch Screens

Graphene is transparent in infra-red and visible light, absorbing just 2.3 percent of light that lands on it. But, with your naked eye, you can see a single layer of graphene laid on a blank piece of white paper.

Indium Tin Oxide (ITO), the current touch screen material of choice, absorbs 10 percent of incident light, but it’s quite brittle, the exact opposite of graphene. Graphene is ideal for use in touch screens.

According to some reports the world has only 5-10 years of ITO reserves remaining and prices already exceed US$700,000 per tonne.

Photovoltaic (PV) Cells

Graphene has no band gap – everything is accepted.

What this means is that graphene solar panels have a huge advantage over silicon solar panels – graphene can absorb light from all over the solar spectrum, whereas silicon is confined to just certain frequencies.

That makes graphene solar panels much more efficient than any other material – instead of waiting 10-12 years for payback it might come as quickly as 5 years.

Transistors

It is possible to induce a small band gap in graphene by doping it, which means grapheme can be used a transistor – you need the band gap if you want to be able to turn the transistor off.

Spintronics

Spintronics is a technology for controlling not only individual electronics, but also their spin, this increases the amount of information that can be stored per electron – data is stored in the spin of an electron, not its presence. Since graphene has a long spin diffusion length the technology promises to increase the efficiency with which devices consume power and increase data storage capability.

Superconductivity At Room Temperature

The mean free path is the distance an electron can travel freely without bumping into something, or having its path disrupted by scattering – both cause resistance which means heat is generated.

In graphene, the mean free path is 65 microns — long enough that electronic components could be made that would operate at ambient temperatures with virtually no resistance.

We’re talking ambient temperature unimpeded conduction of electrons – superconductivity at room temperature.

Sensors

Graphene is the most impermeable material ever discovered, not even helium atoms can squeeze through. Highly sensitive gas detectors can be manufactured because the smallest quantity of a gas will get caught in its lattice producing an electrical signal that flags the presence of the chemical.

Medical imaging devices that won’t do the harm X-rays cause are possible, as are strain sensors – when you pull or push the strain can be monitored – this could be useful for buildings in earthquake prone areas or in airplane wings.

DNA sequencing

If you pass a strand of DNA through a sheet of grapheme with a small gap in it the electrical properties of graphene change on exposure to each base pair. Because graphene is 2D, it can “read” one base at a time, making it much more accurate than anything used today.

Derivatives

All the chemical derivatives of graphene are useful. You can dissolve graphene and the solutions (fluorographene, graphene oxide, hydrogenated grapheme) have applications in printable electronics that are already ten times better than current state of the art technology.

Criticality

In 2010 a European Commission included graphite among the 14 materials it considered high in both economic importance and supply risk. The British Geological Survey listed graphite as one of the materials to most likely be in short supply globally.

The US has also declared graphite a critical material. The U.S. Department of Homeland Security, and the State Department, said America could be hurt if terrorists were to disable graphite mines in China.

Market

The natural graphite market is 1-1.2 million tons per year and consists of several different forms of graphite – flake, amorphous and lump. Historical applications primarily use amorphous and lump graphite, most newly emerging technologies and applications use flake graphite. Of the up to 1.2 million tons of graphite that are processed each year just 40% is flake.

China, India and Canada are responsible for most graphite mining and processing with China producing the lion’s share at 70–80%. China’s production is 70% amorphous and lower value small flake graphite.

Currently China imports a significant amount of North Korea’s large flake graphite production raising considerable doubts in regards to China’s abilities to ramp up its graphite supply. Indeed China has already taken steps to retain its graphite resources by restricting its export quota – China imposed a 20% export duty, a 17% VAT and also closed state owned enterprises.

“The days of cheap, abundant graphite from China are over.” Industrial Minerals Magazine May, 2011

It’s thought that the increased use of lithium-ion batteries could gobble up well over 1.6 Mt of flake graphite per year by 2020 – only flake, upgraded to 99.9% purity and synthetic graphite (made from petroleum coke, a very expensive process) can be used in lithium-ion batteries.

“Annual flake graphite production will have to increase by a factor of six by 2020 to meet incremental lithium carbonate requirements for batteries.” Canaccord research report

The U.S. Geological Survey says large-scale fuel cell applications are being developed that could consume as much graphite as all other uses combined – a bold statement, but even if only half of the USGS demand is realized graphite use is going to explode just because of fuel cells, let alone other known demand drivers and new applications.

What if the current market almost doubles – new demand, between now and 2020, comes in at one million tonnes on top of the existing 1.2 million?

Today’s graphite producers, other than the ones in China, are going to have to produce more and junior companies are going to have to get busy and start to develop deposits. There will be a premium placed on mines in stable, safe areas for investment.

Since a large scale producer puts out 20,000 to 40,000 tons per year that’s a lot of new mines and a lot of opportunity for investors – one million tonnes divided by 40,000 could be the equivalent of up to twenty five mines worth of new production needed – and that’s a severe low-balling of the experts forecast increased usage numbers.

Consider also that most of the mines expected to come online, and the ones already in production, will not produce the highest grades of graphite – crystalline large flake – which runs between 94% and 97% carbon and starts at 80 or higher mesh size. Indeed most will produce medium, small-flake, lump and amorphous graphite.

Conclusion

The extraction of graphite and its processing is very well known in the west and western countries are the leaders in graphite and graphene application research.

China is not going to be much of a factor in the large flake graphite market, except perhaps as a future importer – the west has large flake graphite deposits, knows how to extract and refine the graphite and are the leaders in technological advancements regarding this space and demand is going to grow exponentially.

New, high-tech applications require more and more graphite production while graphene seems to be a wonder material and a lot of time, effort and money is being spent researching it – 3000 research reports were written just in 2010.

An investor needs to be doing his/her due diligence on junior resource companies with near surface, high grade large flake deposits close to all necessary infrastructure in politically safe jurisdictions.

Graphite should be on every investors radar screen. Is it on yours?

If not, maybe it should be.

Richard (Rick) Mills

rick@aheadoftheherd.com

If you’re interested in learning more about a specific graphite junior, the junior resource sector, bio-tech and technology sectors please come and visit us at www.aheadoftheherd.com

Site membership is free. No credit card or personal information is asked for.

***

Richard is host of Aheadoftheherd.com and invests in the junior resource sector. His articles have been published on over 400 websites, including: Wall Street Journal, SafeHaven, Market Oracle, USAToday, OzCopper, National Post, Stockhouse, Lewrockwell, Uranium Miner, Casey Research, 24hgold, Vancouver Sun, SilverBearCafe, Infomine, Huffington Post, Mineweb, 321Gold, Kitco, Gold-Eagle, The Gold/Energy Reports, Calgary Herald, Resource Investor, Mining.com, Forbes, FNArena, Uraniumseek, and Financial Sense.

***

Legal Notice / Disclaimer

This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment.

Graceland Updates

admin — Tue, 14 Feb 2012 23:26:49 +0000

Graceland Updates

Email:

Feb 14, 2012

Saudi Arabia’s top power brokers recently claimed they would not allow oil to trade over $100. Click here now to view the oil price trading above $100 this morning.
The power brokers have already failed. How big their failure will become remains to be seen, but things don’t look good for the oil bears.
When any major market might be about to embark on a strong rally or decline there are both bullish and bearish factors in play. The market’s direction is ultimately determined by liquidity flows.
Click here now to view the seasonal trend for the oil price at this time of year. At www.seasonalcharts.com you can view similar charts for all the major commodity markets.
The bottom line is that oil could rise strongly because of a new MACD buy signal, a large head and shoulders pattern, tension between Iran and Israel/America, and because it seasonally tends to do so about now.
An oil price shock to the upside could cause major problems for the stock market at a time when the European financial crisis is still strongly on the “liquidity flow minds” of institutional investors.
Click this stock market liquidity flows chart from www.sentimentrader.com. The picture painted by the liquidity flows on this chart is truly frightening.
You can see that the commercial group of traders are piling on short positions by aggressively shorting the Dow, the Nasdaq, and the Russell indexes.
9. My concern is not that they are shorting the broad stock market, but that they are shorting with this kind of size in such a short period of time. The current short position of the commercial traders is now larger than at any point in the last ten years.
Do they know that something very bad is coming your way? Are they simply shorting to profit from an over-extended stock market rally that has seen the Dow rally about 2500 points without any kind of serious correction?
You can’t know the answer, but you can be as professional as they are with your liquidity flows. High oil prices and a falling stocks are ultimately very positive for the price of gold, but there can be a substantial adjustment period before gold begins to rise.
When stocks fall hard the central banks tend to print money. Then they loan that money to commercial banks. They urge the banks to lend that money to institutions to buy stocks. That action is very positive for the price of gold.
I also have a concern about what the commercial traders are doing in the less transparent OTC derivatives marketplace right now. Are they placing giant short-side bets there too? Are those bets fully reportable, or are they “non-reportable”?
Click this Dow wedge chart now. I would call that wedging action, rather than an actual wedge pattern, because of the lack of definition in the upper part of the pattern. Still, the wedge-like action is a concern.
HSR (horizontal support and resistance) sits at about 12,300 and at about 11,700. I have little interest in naked-shorting the Dow. There is what I term a maniacal obsession in the gold community with “getting the Dow”. Somehow, the Dow is view as a person who must be “made to pay”.
I have great interest in accumulating the Dow asset about every 1000 points down that it goes on sale, and the HSR at 12,300 and 11,700 make decent first entry points. Sadly, an obsession with naked-shorting the Dow could define you as a dollar bug rather than as a gold king or queen.
Gamblers should buy at the 12,300 area, if it happens, and investors should wait for 11,700. Operate in this crisis like Sylvester the cat, rather than like Tweety the bird. Take from the weak, in their moment of greatest weakness. The greater the price sale, the stronger the buying hands are.
If you have not made money in the Dow by shorting it over your lifetime, you should throw in the towel on further attempts to build dollars of wealth by shorting it again. If you are long the stock market now, you should be adding some strategic short positions into this enormous price strength.
The dollar will not beat the Dow in a fight to the finish. The Fed will adopt money printing as official policy long before the Dow goes off the board. The Fed will destroy those who get carried away with making dollars by shorting the Dow.
The gold community is heavily invested in gold stocks, and most investors don’t have the emotional strength to endure “another 2008”, let alone a long series of “2008 again” events. Prepare yourself mentally to endure much greater discomfort, or you’ll never make it to the end of the crisis rainbow. If your personal fear levels are beginning to overwhelm reasonable thought and action, you may need to consider purchasing put options on either the Dow and/or the GDX/GDXJ.
Click here now to view the gold chart. Gold is entering the weak season. It is trading in the “quicksand zone” right now. After basting about $200 higher and out of a wedge formation a lot of weak investors got renewed interest in the gold market. Since that “breakout occurred, the price has stagnated. I highlighted the Stochastics sell signal and the HSR in the 1670 area. Now the MACD indicator has joined the “sell-side party” with a crossover sell signal. A breakout from a large pattern like this bullish wedge is normally followed by a pullback towards the supply line, but anything can happen. Remain professional in your actions and don’t waste your time trying to flip-trade your way through this crisis by buying microscopic weakness with size. There’s nothing out of the ordinary going on in the gold market as it enters the weak season.
I’d prefer that you view this time of year as “gold on sale” season rather than “crash season” or “it’s all over, so everything now!” season. Try to take a balanced view of both the gold market and dollar markets. View a declining price of gold as a tool to get more gold, and a rising price as a tool to get more dollars. If you are over-concerned about a declining gold price the simple fact is that you don’t hold enough dollars as an asset to break the addiction to the view that a higher gold price makes you richer.
You get richer in gold when you buy more ounces, and you get richer in dollars when you buy more dollars. Staring at the gold price as it falls won’t make you any richer. My suggestion is to buy both dollars and gold on sale, and hold the amount of dollars required to kill the terror that springs to life when the price of gold declines.
Click here now to view the GDX chart. GDX never broke out of the wedge pattern upside. The GDX price is now approaching HSR at $53.70. If you are starting to “flail”, then you probably need to own more dollars as an asset. I’m a buyer at $53.70 and at $52, if those prices happen. On the sell side, the intense negative sentiment that has returned in the gold markets could see GDX spike to $56 or $58 and I’ll be a very light seller there, if it happens!

Special Offer For OzCopper Readers: Send me an email to freereports4@gracelandupdates.com and I’ll send you my “GDXJ Put Option Protection” report. I’ll show you how to use put options to manage your fears and finances, and to use them to leverage your upside too!

Thanks!

Cheers

Written between 4am-7am. 5-6 issues per week. Emailed at aprox 9am daily.

Mail to:

Stewart Thomson / 1276 Lakeview Drive / Oakville, Ontario L6H 2M8 Canada

Are You Prepared?

Of Jobs, Debts and Budgets

admin — Fri, 10 Feb 2012 22:40:44 +0000

Richard (Rick) Mills

Ahead of the Herd

As a general rule, the most successful man in life is the man who has the best information

Consumer confidence spiked last December. Gas prices were lower for the third straight month, a mild early winter meant that many consumers paid less to heat their houses, the auto sector posted another strong month, consumers spent more on recreation and demand for student loans increased.

Consumers seemed inclined to spend and get deeper into debt.

November 2011 was a bad month for consumers: evolving debt went up more than eight percent (the largest month-to-month percentage increase since 2008) and this dubious accomplishment was accompanied by the biggest month to month growth in overall consumer debt since 2001. December’s consumer credit debt increased $19.3 billion to $2.5 trillion. This rise in credit card debt was the fourth month in a row card balances grew.

U.S. Consumer Credit: June 2010 to Present

Trang Nguyen www.dailyfx.com

“In a long-awaited surge of hiring, companies added 243,000 jobs in January – across the economy, up and down the pay scale and far more than just about anyone expected. Unemployment fell to 8.3 percent, the lowest in three years. At the same time, the proportion of the population working or looking for work is its lowest in almost three decades.” Christopher S. Rugaber, AP Economics Writer

Why did consumers start taking on more debt since August 11th 2011? Was it because an improving job market is giving people the courage to take on more debt?

Maybe the increasing dependence on borrowing is an indication consumers are relying on their credit cards to make ends meet? There were almost four unemployed Americans vying for each job vacancy in December, year over year (yoy) January’s hourly wage increase was only 1.9 percent – the smallest yoy gain since April 2011. Production workers fared worse, their 1.5 percent increase was the smallest on record going back to 1965. Food cost more in December, so did medical care.

The Labor Force Participation Rate (LFPR) is a key economic statistic and it
just hit a new record low.

“The plain fact is that we are warehousing a larger and larger population of adults who are one way or another living off transfer payments, relatives, sub-prime credit, and the black market. My suspicion is that this negative trend and many others like it get buried by the monthly change chatter from mainstream economists and on bubble vision, and that these monthly deltas are so heavily manipulated as to be almost a made-up reality. Call it the economists’ Truman Show.” David Stockman, Former Reagan budget director talking about the BLS jobs reports

Consumers aren’t the only ones going into debt at record rates.

US debt increased by $1 trillion in 2008, $1.9 trillion in 2009, and $1.7 trillion in 2010. As of August 3, 2011, the country’s debt was $14.33 trillion dollars.

The federal government recorded a budget deficit of $349 billion through the first four months of fiscal 2012. The Congressional Budget Office (CBO) said it expects the fiscal 2012 deficit to narrow to $1.1 trillion from $1.3 trillion in fiscal 2011. Deficits are the difference between revenue and expenditures, every time the US deficit is above zero – expenditures are greater than revenue – money must be borrowed and the debt is increased.

Below is today’s debt breakdown:

United States National Debt: $15,348,967,446,234.75

United States National Debt Per Person: $49,015.94

United States National Debt Per Household: $126,951.29

Total US Unfunded Liabilities: $123,260,918,052,258.50

Total US Unfunded Liabilities Per Person: $393,625.84

Total US Unfunded Liabilities Per Household: $1,019,490.95

Late in 2011 the world’s population reached 7,000,000,000 people. That means the US debt would take $2,192.70 dollars out of each and every persons pocket to pay off.

The CBO has estimated the US deficit will reach $1.5 trillion by 2022. US debt has increased, just since August 2011, by over one trillion dollars.

Conclusion

Lawrence Summers, the former Treasury secretary under Bill Clinton and President Barack Obama’s former top economic adviser says the U.S. is not only in the midst of a debt crisis, but also a jobs crisis and that the US needs to take advantage of low interest rates to finance a massive infrastructure retrofit and build program to put people back to work – cutting spending is not the answer.

John Taylor, Taylor Rule discoverer says “We could get into a situation like Greece, quite frankly. People have to realize it is a precarious situation. The debt is going to explode if we don’t make some changes. What seems to be more important is that people can get back on track, the country can get back on track, with just some sensible adjustments. I argue just bring spending back to where it was in 2007. That’s not so long ago. We’ve had an enormous spending binge in the last few years. If we undo that binge, shouldn’t be that hard, we can get back to some sensible pro-growth policies.”

Carmen Reinhart and Kenneth Rogoff co-authors of “This Time is Different: Eight Centuries of Financial Folly” are sceptical of any fix and think we should get use to present conditions because nothing is going to change for the good anytime soon.

President Obama’s budget for fiscal year 2012 would have increased the country’s debt by nine trillion over ten years – even Democrats rejected it. Obama will deliver his budget this Monday, last year he claimed one trillion dollars in deficit reductions from winding down the wars in Afghanistan and Iraq but that money hadn’t even been approved.

The truth regarding the true status of US employment, debt and budget chicanery should be on everyone’s radar screen. Is it on yours?

If not, maybe it should be.

Richard (Rick) Mills

rick@aheadoftheherd.com

www.gold-eagle.com/editorials_08/krauth102411.html

If you’re interested in learning more about the junior resource sector, bio-tech and technology sectors please come and visit us at www.aheadoftheherd.com

Site membership is free. No credit card or personal information is asked for.

***

Richard is host of Aheadoftheherd.com and invests in the junior resource sector. His articles have been published on over 300 websites, including: Wall Street Journal, SafeHaven, Market Oracle, Ozcopper, USAToday, National Post, Stockhouse, Lewrockwell, Uranium Miner, Casey Research, 24hgold, Vancouver Sun, SilverBearCafe, Infomine, Huffington Post, Mineweb, 321Gold, Kitco, Gold-Eagle, The Gold/Energy Reports, Calgary Herald, Resource Investor, Mining.com, Forbes, FNArena, Uraniumseek, and Financial Sense.

***

Legal Notice / Disclaimer

This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment.

SILVER: The Bastard Child Of The Commodities Family

admin — Wed, 08 Feb 2012 23:02:21 +0000

Vronsky

Since January 1980 the values of US Commodities have been affected by growing demand and the price increasing effects of inflation. All commodities have enjoyed price increases…ALL EXCEPT SILVER, which is virtually flat…even though the demand for the white metal has been explosive in recent years.

The chart below shows the nominal (actual) price increases during the past 32 years (since January 1980 to close of February 3, 2012):

Commodities Appreciation since 1980:

To put this anomaly into even more perspective, compare the following Prices, Adjusted for 32 years of inflation (all prices in US$):

Without question, SILVER at a mere $34 (February 2, 2012) is grossly under-valued vis-à-vis other commodity prices and compared to its Inflation Adjusted value of $141/oz. Indeed SILVER is the Bastard Child of the Commodities Family…at least until NOW.

THIS WILL CHANGE STARTING IN 2012

There are a number of factors, which will contribute to SILVER’s accelerated price rise in 2012 and for years to come.

Growing Consumption

Demand for SILVER is increasing tremendously through industrial usage, medical applications and especially speculative investments.

Increasing Media Attention

Heretofore SILVER has not enjoyed the media hoopla that blesses gold or crude oil. That is about to change as investors discover that SILVER’s value has increased 150% during the past three years (well above gold’s and CCI performance in the same time frame). See Performance chart below.

SILVER Demand Exceeds Mine Production

The growing Demand/Production Deficits will indubitably fuel SILVER to ever record highs in 2012 and beyond per SILVER DEMAND EXCEEDS MINE OUTPUT chart:

How China Will Drive Silver To $250/oz

A Basket of other factors Propelling SILVER to record all-time highs

- US Fed keeping near ZERO interest rates until late 2014…HIGHLY INFLATIONARY

- US Fed implementing QE3 to stimulate the economy…HIGHLY INFLATIONARY (look at 2009 rocketing prices due primarily to the deployment of QE1, which started in early March 2009)

- Global currency devaluations contagion…HIGHLY INFLATIONARY

- Slow devaluation of the US greenback as CHINA, INDIA et al start buying crude oil…and paying in GOLD

- The current GOLD/SILVER ratio of about 50 will slowly fall to the long-term historic ratio of 17:1

- Millions of international investors discovering gold and silver have been the most profitable investment classes since 2001

- US Pension Programs, Insurance Companies and Bank Trust Depts piling into precious metals. See analysis: “Pension Plans, Insurance Companies & Retirement Programs (IRAs)” www.gold-eagle.com/gold_digest_08/vronsky020310.html

SILVER FORECAST

The Bastard Child of the Commodities Family will gain phenomenal prominence beginning in 2012 – as SILVER’s relative performance soars well above the rest. Here is SILVER’s Forecast by one of the world’s best Technical Analysts, Alf Field:

“NEW EW SILVER DISCOVERY”

Analyst Field concludes, “Thus the gain in wave 3 of Major THREE should be larger than +464%. It should be a gain of at least 500%. Starting from the $26.39 low, a gain of 500% would produce a target price of $158.34 for silver. That is the number which equates with the $4500 price forecast for gold and produces a gold to silver ratio of 28.4 ($4500 divided by 158.34).”

The link below shows Alf Field’s entire TA on SILVER:

www.gold-eagle.com/editorials_12/field013112.html

To be sure SILVER’ s price trajectory going forward will be characterized by high volatility. But for those who can hang on, unimaginable profits will be their just and well earned reward.

In light of the above, the once Bastard Child will soon become the Elite Silver Star and Pride of the Commodities Family.

DISCLOSURE:

I own shares in select SILVER companies – and plan to accumulate more as the price of the white metal moves inexorably higher in the coming months and years.

I. M. Vronsky
Editor & Partner – Gold-Eagle
http://www.gold-eagle.com

Graceland Updates

admin — Wed, 08 Feb 2012 00:02:10 +0000

Graceland Updates 4am-7am

Email:

Feb 7, 2012

While I may have a few minor concerns about the current emotional state of some gold market investors, I have absolutely no concerns about what I see on the gold chart. It’s a bullish work of art.
Still, if you want to drive from Los Angeles to New York, I think we can all agree that you should consider stopping for gas, correct?
Well, the gold price needs to stop for financial gas on its trip across “dollar country”, particularly when it has “driven” $240 uphill on the dollar price grid, and is preparing to blast above significant technical resistance.
Click here now to view the key daily gold chart. It’s a picture of bullish beauty, and I have highlighted the enormous wedge formation with two black trend lines.
It is normal, healthy, and desirable for price to pull back to the supply line of a wedge formation after the initial breakout to the upside, and that is happening now.
After rising about $240 an ounce without a fuel stop, your gold automobile has simply pulled into the financial gas station. The attendant is filling your car with gas, checking the oil, and even cleaning your golden windshield.
Sadly, many of you may be cursing the attendant this week, as he does his job. In the gold world, there are great gas stations. The service is impeccable, as shown by the gold chart.
Screaming at the attendant that you don’t need any gas to drive all the way across the country is perhaps not the smartest move, but it’s your call.
You don’t need to panic here at the gas station. Soon your gold car will be happily on its way across dollar country once again.
Liquidating juniors stocks at huge losses into $1525 and then rebuying them as gold soars into $1700-$1750 is the best way to get a lifetime membership card in the price chasing country club. It’s also an action that could impoverish you.
If the gold market is manipulated then it is all the more important not to engage in the action of chasing price. The banks likely are manipulating gold, and manipulating it higher, with central bank buy programs.
The question of why some gold investors have felt significant discomfort over the past few days is perhaps one that is better answered in front of the mirror than by trying to see who can reach the loudest decibel level while screaming that Friday’s jobs report is a fake one.
Silver fans should click here now. You can see that price has charged from about $26 to $34, and has now pulled into the financial gas station for a rest and a fill-up, alongside the lead gold car.
I’d like to make a tiny suggestion at this point in time and price. Try stretching your legs and grabbing a snack here at the gas station, rather than screaming that you’re being manipulated to death.
For silver, HSR (horizontal support and resistance) sits on the buy side at about $30, and it would be very healthy for silver to “fuel up” at $30 or lower, before launching a run at the downtrend line in the $36-$37 price area.
I would caution those who take chart patterns too literally that this March silver contract has what could be technically construed as a descending triangle formation, with an ultimate and horrifying target of 3 dollars an ounce.
While a fall from $26 to $3 seems totally impossible, you need to be mentally and emotionally prepared to endure all price points on the grid, if rather than a silver bug, you want to be known as Prince Silver.
This is an epic crisis, and neither asset deflation nor asset inflation is the theme. The theme of this crisis is surprise, and therefore mental and emotional strength are your main tools for survival and prosperity. The good ship “prediction” is a sinking one, and the only question is, are you still on it?
The descending triangle pattern on silver does not suggest that silver might fall down. It suggests that silver might go on sale. I don’t think you will get the serious price sale suggested by the triangle formation, even though gold and silver are now entering what is seasonally the weakest time of the year.
Click here now to view the scenario I think is more likely. The weekly chart for silver doesn’t exhibit any kind of descending triangle action, but instead shows a large drifting rectangle, with a breakout to the upside as the likely outcome of the current $26-$50 range trade.
Click here now for a shorter term view of the silver market, covering about a month of trading. There have been four touchings of the $33 HSR support on this chart, and a breach of that price point could see silver go on sale at a price of about $30-31.
The bottom line is that you need silver to move lower after an $8 move to the upside, so that it can launch a serious assault on much higher prices.
Running your silver car with limited fuel and maintenance is not going to see you arrive at your targeted dollar destination. Hang out with your gold buddies at the fuel station, but let the attendant do his job, or he might just call the men in the white suits for you.
What is the scenario for gold stocks? Click here now to let the GDX fuel attendant do his job. There’s a number of wedge formations apparent in the metals markets, including this one for GDX. To blast over the downtrend line, price needs to “fuel up” after the recent rally, and then rip upwards through the supply line. All is fine. Grab a snack, then come back with your seat belt fastened!

Special Offer For Ozcopper Readers: Send me an email to freereports4@gracelandupdates.com and I’ll send you my free “jobs reports 101” report! Learn what the big institutions really care about in these reports, and how to make their liquidity flows work for you!

Thanks!

Cheers

Written between 4am-7am. 5-6 issues per week. Emailed at aprox 9am daily.

Mail to:

Stewart Thomson / 1276 Lakeview Drive / Oakville, Ontario L6H 2M8 Canada

Are You Prepared?

Hudson’s Neodymium Magnet Mine

admin — Wed, 08 Feb 2012 00:00:16 +0000

Richard (Rick) Mills
Ahead of the Herd

As a general rule, the most successful man in life is the man who has the best information

Sarfartoq Carbonatite Complex

The Sarfartoq Carbonatite Complex, in west Greenland, is 100% controlled by Hudson Resources TSX.V – HUD and is one of the worlds largest carbonatite complexes having approximate dimensions of 13km X 8 km.

The minerals of economic interest are:

Pyrochlore – a niobium and tantalum oxide. In the core of the complex there are high uranium levels corresponding with exceptionally high concentrations of niobium and tantalum, concentrations which are unusually high in comparison to other such deposits throughout the world – the Sarfartoq Project has produced some of the highest known niobium intercepts.

Uranium is directly associated with the niobium in the pyrochlore and is an effective prospecting tool used to identify other pyrochlore occurrences on the project.

Red Ankerite – the bulk material containing bastnaesite and monazite which are host to the rare earth elements. The Sarfartoq Carbonatite’s rare earth elements (REE) are generally found along the outer margins of the carbonatite.

The distribution of individual rare earth oxides, as a percentage of the total rare earth oxides, demonstrate a high proportion of neodymium oxide to total rare earth oxides.

The high grade rare earth oxides on the Sarfartoq Project are associated with low levels of thorium. As a result, the thorium radiometric signature is an effective prospecting tool for identifying additional REE occurrences.

A 2002 radiometric survey identified over 30 targets on the Sarfartoq Project but a significant portion of the area is covered by disaggregated material which may be masking additional radiometric anomalies.

Sarfartoq Project Historical Work

The Sarfartoq Carbonatite Complex was the focus of limited exploration activity after its discovery by Greenland government geologists in 1976.

Hecla Mining completed a small initial drill program in 1989 which was followed by New Millennium Resources spending in excess of five million dollars on exploration from 2000 to 2002.

Non-compliant NI 43-101 historical results include a trench sample grading 14.4% Nb2O5 over 200 meters and a diamond drill hole averaging 12.13% Nb2O5 over 20 meters starting from near surface.

Bench-scale metallurgical test work carried out on the pyrochlore material from 2000-2003 demonstrated that recoveries of over 95% for niobium and uranium are achievable utilizing solvent extraction.

No follow up work was ever done on some highly anomalous REE results in a number of areas within the outer ring structure of the carbonatite – the north area, despite the average combined lanthanum, cerium and neodymium oxides samples averaging 1.1% (a number of samples exceeded 4.0%), saw little advanced exploration.

Infrastructure

The Sarfartoq Complex is 20 minutes by helicopter from a major airport, is located near tidewater – in a year round ice free area of Greenland – and is adjacent to very good potential hydroelectric (run of river) sites.

Alcoa is currently evaluating a hydroelectric site within 15 km of the Sarfartoq project to support an aluminum smelter to be built on the coast. The hydroelectric facility would have an installed capacity of 600 to 750 megawatts. Civil infrastructure, including harbors, camps, roads and heliports would be developed to support construction of the project.

Hudson has had preliminary discussions with the Greenland government and Alcoa to ensure access to this clean, cost effective power source should it be constructed.

Moratorium On Uranium Exploration

The Government of Greenland amended the Standard Terms for Exploration Licenses and will permit – subject to their approval – the exploitation of minerals that co-exist with radioactive elements above normal background concentrations. There has been no change to the moratorium on uranium exploration and the government retains all rights to radioactive elements.

Because of the current controversy surrounding uranium mining in Greenland, and the exceptional grades of uranium – consistently hitting one percent – Hudson is not, despite average niobium grades of five percent, committing itself to working in the core of the Sarfartoq Carbonatite Complex at the present time. Instead, it is Hudson’s intention to focus on development of its rare earth prospects, in particular the REE(s) associated with the manufacture of today’s powerful miniaturized magnets.

Todays Sarfartoq Carbonatite Neodymium Mine Project

Hudson has recently released the results of a Preliminary Economic Assessment (PEA) for its Neodymium Mine Project.

The Study shows a Net Present Value of $616M and an Internal Rate of Return of 31.2 % with a 2.7 year pay-back period. The Study was based on the Company’s 43-101 compliant inferred resource of 14.1Mt at 1.5% TREO at the ST1 Zone.

A total of 16,514 meters in 71 holes were drilled in 2011 and these results have not yet been incorporated into the resource estimate or the PEA.

“We are very pleased with the results of the PEA which demonstrate the robust economics of the project. Having the project located adjacent to tidewater provides significant economic benefits in both capital and operating costs. Looking ahead, we expect to have an updated resource estimate completed in early 2012, which will incorporate all of the 2011 drill results which includes dozens of high-grade sections from 2.0% to 6.5% TREO.

We plan to update the PEA with the results of the updated resource estimate in early 2012. As the project economics are quite sensitive to grade, we are optimistic that higher project valuations will be reported in the updated PEA.” James Tuer, Hudson’s President

Assays from a five tonne bulk metallurgical sample, collected on surface at the ST1 Zone, graded 2.5% Total Rare Earth Oxides (TREO). Neodymium oxide averaged 20% of total REO’s.

“The extraction of the five tonne metallurgical sample is very exciting for several reasons. Firstly, it confirms the presence of a significant amount of high-grade rare earth material at surface. Secondly, and possibly more importantly, it provides a sufficient quantity of material for us to take the metallurgy through to pilot scale testing. This sample will be incorporated into our updated resource model which we expect to have out in the first quarter of 2012.” James Tuer, Hudson’s President

Recent metallurgical test work from SRC has demonstrated successful extraction of rare earths utilizing acid baking and leaching. Test work showed that two hours of baking, at 220°C and approximately one tonne of acid per tonne of mineralized feed (concentrate) recovers 94% of the TREO.

Neodymium

The U.S. Department of Energy, in its Dec. 2011 report Critical Materials Strategy examined the role that rare earth metals and other key materials play in clean energy technologies such as wind turbines, electric vehicles, solar cells and energy-efficient lighting.

Five rare earth metals – dysprosium, neodymium, terbium, europium and yttrium are considered to be the most critical of the elements considered in the report.

Neodymium is the key to making the highest coercivity rare earth permanent magnets – the superior high strength permanent magnets used for many energy related applications, such as wind turbines (the most efficient turbines require approximately 1,000 kg of neodymium for each megawatt of electricity to be produced) and hybrid automobiles. The shift away from electromagnetic systems towards permanent magnetic-based direct drive systems is increasing demand for these high powered magnets.

Neodymium is in short supply in the global marketplace causing prices to remain robust with neodymium oxide currently quoted at US$200/kg, FOB China, and at US$100/kg, within China, according to metal-pages.com

Neodymium Mine

The distribution of individual rare earth oxides, as a percentage of the total rare earth oxides, from the Phase Two program at HUD’s Sarfartoq Carbonatite’s ST1 Zone are documented in the table below. The results are consistent with previous assay results and demonstrate a high proportion of neodymium oxide to total rare earth oxides at 19% – based on the present inferred resource the ST1 Zone at Sarfartoq represents one of the industry’s highest ratios of neodymium to total rare earth oxide (TREO).

Note that the gross amount of neodymium (Nd203, 40 Mkg in total) oxide is approximately the same at each of three locations, this is important for development of the project as a neodymium mine.

Also note; Hudson’s ST1 Zone represents one of the industry’s highest ratios of neodymium and praseodymium to TREO, totaling 25%, and that drilling at ST40 continues to intersect a very high ratio of neodymium oxide to TREO at 46%.

Management & Board

James Tuer – President & Director;

MBA, Mechanical Engineer. CEO of Hudson since 2000. Public company & corporate finance background (TD Securities)

Jim Cambon – VP Project Development;

B.Sc. Geology. Over 20 years international mining/engineering project experience (AMEC, Bateman) including specific arctic project experience (Ekati, Snap Lake)

John McConnell – Director

Professional Mining Engineer with an extensive background developing and operating mining projects, particularly in arctic regions. President of Victoria Gold

Flemming Knudsen – Director;

Retired CEO of Royal Greenland A/s, Greenland’s largest company. Extensive world-wide business experience. Strong connections in the EU.

John Hick – Director;

Has served in a senior capacity and/or on the board of directors of major mining companies (Placer Dome, TVX Gold, Rio Narcea) .

Dr. John A. McDonald – Director;

He and his technical team were directly responsible for the discovery and development of the Snap Lake diamond deposit, acquired by De Beers for $480 million in 2000.

Dr. Peter Le Couteur – Consulting Mineralogist;

A mineralogist with significant experience working with carbonatites. Ex-Cominco.

Dr. Mike Druecker – Consulting Geologist:

Ex-Hecla, professional geologist, one of the pioneers in rare earth exploration dating back to the 1970’s.

John Goode– Consulting Metallurgist:

48 years experience with numerous rare earth projects in China, Canada and the USA.

2012

Hudson’s plans for 2012 include the commencement of a prefeasibility study (PFS) and an extensive drill program which will further delineate the high grade zones encountered in 2011 as well as other prospective targets that have been identified around the 32 km circumference of the Sarfartoq Carbonatite Complex. With current working capital of $12.5M, the entire 2012 program could be accomplished with the current treasury.

Conclusion

There currently exists a formidable demand for Hudson’s primary target, neodymium and its other potential by-product credits ie praseodymium. Neodymium is in a supply deficit, both in China and in the west – the magnet industry demand for neodymium is expected to grow by about 10% per year.

Hudson’s Neodymium Mine Project should be on everyone’s radar screen. Is it on yours?

If not, maybe it should be.

Richard (Rick) Mills

rick@aheadoftheherd.com

If you’re interested in learning more about the junior resource sector, bio-tech and technology sectors please come and visit us at www.aheadoftheherd.com

Site membership is free. No credit card or personal information is asked for.

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Richard is host of Aheadoftheherd.com and invests in the junior resource sector. His articles have been published on over 300 websites, including: Wall Street Journal, SafeHaven, Ozcopper, Market Oracle, USAToday, National Post, Stockhouse, Lewrockwell, Uranium Miner, Casey Research, 24hgold, Vancouver Sun, SilverBearCafe, Infomine, Huffington Post, Mineweb, 321Gold, Kitco, Gold-Eagle, The Gold/Energy Reports, Calgary Herald, Resource Investor, Mining.com, Forbes, FNArena, Uraniumseek, and Financial Sense.

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Legal Notice / Disclaimer

This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment.

Richard does not own shares of Hudson Resources TSX.V – HUD

Hudson Resources TSX.V – HUD is a sponsor of Richards site Aheadoftheherd.com

Magnequench Has Left the Building

admin — Sat, 04 Feb 2012 03:09:06 +0000

Richard (Rick) Mills
Ahead of the Herd

As a general rule, the most successful man in life is the man who has the best information

Critical materials have been described in various ways, with perhaps the clearest being the following two definitions:

A critical or strategic material is a commodity whose lack of availability during a national emergency would seriously affect the economic, industrial, and defensive capability of a country.

The critical materials are natural resources that have a threatened supply availability and are a necessity for technology that is experiencing growing demand.

The French Bureau de Recherches Géologiques et Minières rates high tech metals as critical, or not, based on three criteria:

Possibility (or not) of substitution
Irreplaceable functionality
Potential supply risks

What are the Critical Materials?

In its first Critical Materials Strategy Report, the U.S. Department of Energy (DOE) focused on materials used in four clean energy technologies:

wind turbines – permanent magnets
electric vehicles – permanent magnets & advanced batteries
solar cells – thin film semi conductors
energy efficient lighting – phosphors

The DOE says they selected these particular components for two reasons:

Deployment of the clean energy technologies that use them is projected to increase, perhaps significantly, in the short, medium and long term
Each uses significant quantities of rare earth metals or other key materials

The DOE defines “criticality” as a measure that combines importance to the clean energy economy and risk of supply disruption.

A Report by the APS Panel on Public Affairs and the Materials Research Society coined the term “energy-critical element” (ECE) to describe a class of chemical elements that currently appear critical to one or more new, energy related technologies.

This report was limited to elements that have the potential for major impact on energy systems and for which a significantly increased demand might strain supply, causing price increases or unavailability, thereby discouraging the use of some new technologies.

The focus of the report was on energy technologies with the potential for large-scale deployment so the elements they listed are energy critical

Critical Raw Materials for the EU listed 14 raw materials which are deemed critical to the European Union (EU).

“Raw materials are an essential part of both high tech products and every-day consumer products, such as mobile phones, thin layer photovoltaics, Lithium-ion batteries, fibre optic cable, synthetic fuels, among others. But their availability is increasingly under pressure.”

Taking all the metals, from all three lists, gives us:

Antimony

beryllium

Cerium

Cobalt

Dysprosium

Europium

fluorspar

Gadolinium

Gallium

Germanium

Graphite

Helium

Indium

Lanthanum

Lithium

Magnesium

Neodymium

Niobium

Palladium

Platinum

Praseodymium

Rhenium

Samarium

Selenium

Silver

Tantalum

Tellurium

Terbium

tungsten

Yttrium

The U.S. Department of Energy, in its Dec. 2011 report entitled Critical Materials Strategy examined the role that rare earth metals and other key materials play in clean energy technologies such as wind turbines, electric vehicles, solar cells and energy-efficient lighting.

Five rare earth metals –dysprosium, neodymium, terbium, europium and yttrium are considered to be the most critical of the elements considered in the report.

The key issues in regards to Critical Metals are:

1. Finite resources

2. Many of these metals are sourced only as a byproduct of other metal production, which renders them supply inelastic. Mine production of many metals is showing a number of similarities:

Slowing production and dwindling reserves at many of the world’s largest mines
The pace of new elephant-sized discoveries has decreased in the mining industry
All the oz’s or pounds are never recovered from a mine – they simply becomes too expensive to recover
Mining is cyclical

3. Chinese market dominance in many sectors. For many of the critical raw materials, their high supply risk is mainly due to the fact that a high share of the worldwide production mainly comes from a handful of countries, for example:

China – Rare Earths Elements (REE)
Russia, South Africa – Platinum Group Elements (PGE)
Democratic Republic of Congo – Cobalt

4. Long lead times for mine development

5. The majority of these metals cannot be hedged as they are not traded on an exchange, this makes financing for mining more difficult to arrange

6. Resource nationalism/country risk

7. High project development cost

8. Relentless demand for high tech consumer products. Critical Materials demand is driven by several specific global macroeconomic trends:

Miniaturization
Environmental protection
Increasing demand for energy, power and fuel efficiency

9. Growing global middleclass

10. Shifting global trade patterns

11. Rapid technological advances shrink a device’s operational lifespan

12. Ongoing material use research – Specialty metal demand trajectory is discovery driven rather than directly correlated with a country’s GDP

13. Low substitutability – Substitution of certain metals or elements with those in the same group is sometimes possible, unfortunately such substitution frequently results in the price of the substitute itself increasing. Substitutes used from outside of a group tend to require more of and usually always results in a bulkier, heavier device with worse performance characteristics

14. Such trace amounts (such as the amount in a cell phone) are used prices are usually inelastic.

15. Environmental crackdowns

16. Low recycling rates – Most high tech devices end up in a landfill

17. Lack of intellectual knowledge and operational expertise in the west

18. Mineralogy is mineral composition, metallurgy the process of extraction. Complicated mineralogy, as is often the case with these critical metals, can mean complex, expensive, power intensive, time consuming metallurgy

The Myth:

Its often said that each of these metals represent a market of less than a few billion dollars in a $50 trillion economy so they don’t matter, they are inconsequential and are not really investable.

Let’s look at why they matter and give an example using Rare Earth Elements (REE), and in particular Neodymium.

The current size of the rare earth sector is estimated at US$10-15 billion annually. Global production is about 120,000-130,000 tonnes of rare-earth oxides per year.

China provides 97% of the world’s REE production but, according to the USGS Mineral Commodity Summaries 2011 China only has 48% of the world’s known reserves of rare earths. Demand inside China is growing at a faster rate than outside of the country as a consequence China has been imposing export quotas on rare earths which has created two separate rare earth markets – an internal Chinese market and globally, pretty much everyone else. The Chinese export quota for the year sets the global supply and price of REEs.

Demand forecasts indicate steady growth. In the next five years Chinese demand for REEs is expected to grow between 7-12%. In the magnet industry demand for neodymium is expected to grow by about 10% per year. The shift away from electromagnetic systems towards permanent magnetic-based direct drive systems is increasing demand for these high powered magnets. The continuing miniaturization of electronic devices – such as disk drives and micro motors – is possible because of the ability of rare earth magnets to combine high magnetic strength with a small size and weight.

Rare earth oxides are the beginning building blocks used to produce magnetic powders, these powders are the primary material used in the manufacture of rare earth permanent magnets – processing specific combinations of elements results in distinct magnetic and physical characteristics. The main REE oxides consumed in the manufacture of Neo and samarium-cobalt permanent magnets are; neodymium, samarium, some dysprosium and praseodymium.

Neodymium is the key to making the highest-coercivity rare earth permanent magnets – the superior high strength permanent magnets used for many energy related applications, such as wind turbines (the most efficient turbines require approximately 1,000 kg of neodymium for each megawatt of electricity to be produced) and hybrid automobiles.

The flow of electrical signals on every printed wiring board used in electronic devices is regulated and controlled by the use of dielectric chips known as multi layer ceramic capacitors (“MLCC’s”). Many use rare earth formulas containing lanthanum and neodymium.

“Magnetic technology rates as the most important use of REEs due to its many uses in green technologies and military applications. The two primary rare earth magnets are the samarium-cobalt (SmCo) magnet and the neodymium-iron-boron (NdFeB) magnet. The SmCo magnet is able to retain its magnetic strength at elevated temperatures. Because of its thermo-stability, this type of magnet is ideal for special military technologies. These technologies include precision guided munitions—missiles and “smart” bombs and aircraft.

The NdFeB magnet came about in the 1983 when scientists from General Motors and Hitachi each found that NdFeB had superior permanent magnetic properties, and submitted applications for patents. A battle ensued and both companies came to an agreement that split the rights to the discovery.

GM needed the magnets for its vehicles and in 1986 the company established a new division to produce the NdFeB magnets. They called the division Magnequench. In 1995 two Chinese groups, the Beijing San Huan New Materials High-Tech Inc. and China National Non-Ferrous Metals Import & Export Corporation, joined forces with Sextant Group Inc, an American investment firm founded by Archibold Cox, Jr., and tried to acquire Magnequench. The purchase was reviewed by the U.S. government and finally went through after China agreed to keep Magnequench in the United States for at least five years. Magnequench was located in Anderson, Indiana.

The day after China’s deal to keep Magnaquench in the United States expired in 2002, the entire operation, along with all the equipment, disappeared. All employees were laid off and the company moved to China.

In less than one decade, the permanent magnet market experienced a complete shift in leadership. Whereas in 1998, 90 percent of the world’s magnet production was in the United States, Europe, and Japan, today, rare earth magnets are sold almost exclusively by China or using Chinese rare earth oxides.” The Rare Earth Dilemma: China’s Market Dominance, Cindy Hurst thecuttingedgenews.com

“Magnequench began its corporate life back in 1986 as a subsidiary of General Motors. Using Pentagon grants, GM had developed a new kind of permanent magnet material in the early 1980s. It began manufacturing the magnets in 1987 at the Magnequench factory in Anderson, Indiana.

In 1995, Magnequench was purchased from GM by Sextant Group, an investment company headed by Archibald Cox, Jr – the son of the Watergate prosecutor. After the takeover, Cox was named CEO. What few knew at the time was that Sextant was largely a front for two Chinese companies, San Huan New Material and the China National Non-Ferrous Metals Import and Export Corporation. Both of these companies have close ties to the Chinese government. Indeed, the ties were so intimate that the heads of both companies were in-laws of the late Chinese premier Deng Xiaopeng.

At the time of the takeover, Cox pledged to the workers that Magnequench was in it for the long haul, intending to invest money in the plants and committed to keeping the production line going for at least a decade.

Three years later Cox shut down the Anderson plant and shipped its assembly line to China. Now Cox is presiding over the closure of Magnequench’s last factory in the US, the Valparaiso, Indiana plant that manufactures the magnets for the JDAM bomb. Most of the workers have already been fired.

It’s clear that Cox and Sextant were acting as a front for some unsavory interests. For example, only months prior to the takeover of Magnequench San Huan New Materials was cited by US International Trade Commission for patent infringement and business espionage. The company was fined $1.5 million. Foreign investment in American high-tech and defense companies is regulated by the Committee on Foreign Investments in the United States (CFIUS). It is unlikely that CFIUS would have approved San Huan’s purchase of Magnequench had it not been for the cover provided by Cox and his Sextant Group.

One of Magnequench’s subsidiaries is a company called GA Powders, which manufactures the fine granules used in making the mini-magnets. GA Powders was originally a Department of Energy project created by scientists at the Idaho National Engineering and Environmental Lab. It was spun off to Magnequench in 1998, after Lockheed Martin took over the operations at INEEL.

In June 2000, Magnequench uprooted the production facilities for GA Powders from Idaho Falls to a newly constructed plant in Tianjin, China. This move followed the transfer to China of high-tech computer equipment from Magnequench’s shuttered Anderson plant. According to a report in Insight magazine, these computers could be used to facilitate the enrichment of uranium for nuclear warheads.

GA Powders isn’t the only business venture between a Department of Energy operation and Magnequench. According to a news letter produced by the Sandia Labs in Albuquerque, New Mexico, Sandia is working on a joint project with Magnequench involving “the development of advanced electronic controls and new magnet technology”.

Dr. Peter Leitner is an advisor to the Pentagon on matters involving trade in strategic materials. He says that the Chinese targeted Magnequench in order to advance their development of long-range Cruise missiles. China now holds a monopoly on the rare-earth minerals used in the manufacturing of the missile magnets. The only operating rare-earth mine is located in Batou, China.

“By controlling access to the magnets and the raw materials they are composed of, US industry can be held hostage to Chinese blackmail and extortion,” Leitner told Insight magazine last year. “This highly concentrated control-one country, one government-will be the sole source of something critical to the US military and industrial base.” Jeffrey St. Clair, The Saga of Magnequench

Conclusion

Each rare earth element has different end uses and applications, and is produced in different quantities – certain rare earths, including Neodymium, are already in a supply deficit, both in China and in the west.

It is not the size of an individual REEs market, or even the whole critical materials market one should consider. Rather, it’s the manufacture of value added products enabled by these materials that counts – for example green energy (wind turbines, electric vehicles, solar cells and energy-efficient lighting) and consumer products (miniature speakers, cell phones, batteries, and screens) account for a large percentage of global GDP. We’re no longer talking a billion or two, we’re talking hundreds of billions, perhaps trillions of dollars.

What value is placed on the defense of a country by its leaders and citizens?

Without the Critical Materials on our list many of these critical technologies, products, and yes gadgets and toys, would not exist.

Critical materials, and their value added markets, should be on every investors radar screen. Are they on yours?

If not, maybe they should be.

Richard (Rick) Mills

rick@aheadoftheherd.com

If you’re interested in learning more about the junior resource sector, bio-tech and technology sectors please come and visit us at www.aheadoftheherd.com

Site membership is free. No credit card or personal information is asked for.

***

Legal Notice / Disclaimer

This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment.

Graceland Updates

admin — Wed, 01 Feb 2012 04:00:22 +0000

Graceland Updates 4am-7am

Email:

Jan 31, 2012

If a tree falls in the forest, does it really make a sound if nobody hears it fall? Click here now to view a falling OTC derivatives tree being marked to “it never made a sound” model.
In the simplest terms, credit default swaps (CDS) are a financial insurance product used heavily by hedgers and speculators in the government debt arena.
A lot of investors thought that a huge deflation would occur when the OTC derivatives written on real estate blew up, but what they didn’t anticipate was that rule changes would be made by the Financial Accounting Services Board (FASB).
The FASB allowed banks to value OTC derivative products like bonds, with a maturity date. OTC derivative accounting was legally changed from “mark to market” to “mark to model”.
The deflationists were almost destroyed by the FASB move, as gold surged from about $680 to $1920. They have re-emerged since the Greek government has taken centre “default stage”. As you will see, the deflationists are likely to meet their mark to model maker once again.
Companies like MF Global thought they could make big profits by using investor monies to make bets with CDS products. Their view was that the Greek government couldn’t pay what it owed, and that failure would trigger a default event. They were wrong because they didn’t understand how far the banks have taken the concept of mark to model accounting.
In the above document provided by the International Swaps and Derivatives Association (ISDA), you can see that how the ISDA defines a credit event (CDS payout time) is open to substantial interpretation by the ISDA itself.
8. If you take the time to read the document carefully, you will realize that for all practical intents and purposes, the ISDA votes on whether any kind of payout can be made to the CDS holder, because they vote to decide if a “credit event” has occurred.
Can you imagine your situation, if at the end of the day the people who are shorting your gold stock took a vote amongst themselves to decide what the closing price for the day would be for your stock?
In the biggest picture, that is essentially the situation that the CDS holder is experiencing. Simply put, a default becomes “not a default” when the ISDA votes that default out of existence. The bottom line is that “Team ISDA” will likely put “Team Deflation” into the dustbin, and the only question that really matters is, are you onside?
If so, I’d like you to give the gold chart a kiss this morning. Keep it simple, sweetie. Click here now to view the simplest view you can have of the gold market. Note the three sell signals on the 14,7,7 series of the Stochastics indicator that I have highlighted.
Example A shows the gold price blasting three hundred dollars higher after the Stochastics crossover sell signal was given. Example B shows the gold price declining rapidly after a Stochastics sell signal flashed. What will “Example C” bring to the gold market? What will happen when the lines on that Stochastics indictor cross, as they are threatening to do now?
13. The bottom line is that you can’t know the answer. Selling huge amounts of gold because it is technically overbought can have disastrous consequences for you. You can be left standing in the train station while a gold bullet train speeds away.
Moderation brings the best wealth-building results. Selling a bit of gold into this strength is wise.
The professional investor doesn’t buy gold because, “It’s about to rally!”, and they don’t sell gold because, “It might fall down!”. If gold is falling in price, you need to buy a small amount of it. If gold is rising in price, as it is now, you need to book some light profits. End of professional investor story.
Using theories of where the price of gold may go next to buy and sell huge amounts of gold is “market madness”. All “gold is crashing!” nonsense that occurred into $1525 has now been marked to “skeleton in the closet” model. The epic loss-booking has been replaced with new nonsensical stories that gold is going to infinity any day now, so you have to buy in enormous size. The unfortunate bottom line is that primal urges continue to dominate the actions of amateur investors.
Operate on the gold price gridlines not as a sea-changing prophet, but as a capital placement machine. You understand that gold is the ultimate asset, so you place capital into it like a machine on a factory production line.
Note the four HSR (horizontal support and resistance) lines that I’ve highlighted on the above gold chart. They are created by support and resistance at the prices of $1640, $1700, $1770, and $1800.
Based on this HSR, you would place orders to buy gold in the $1700 and $1640 price area. Place orders to sell gold in the $1770 and $1800 price area. Keep it simple. I would prefer that you place no buy orders unless gold has fallen $50 to $100 from these highs, regardless of where any support is sitting.
I think the average daily range for the gold price will increase dramatically. Unfortunately, the average high speed (flip) trader lives in a world where a $100 move in the gold price is mistakenly viewed as critically important. I would suggest that the flip trader lives in a make-believe world. The only thing real about the flip trading world is the enormous size of the booked losses that are experienced by the vast majority of its citizens. If you are living life as a flip trader who is obsessed with the supposed importance of the next $100 move for the gold price, you might consider the possibility that in the gold world, you are an illegal alien.
Default and quantitative easing are not the themes of this financial crisis. Surprise is the theme, and you need to embrace surprise, rather than fight or outsmart it. Don’t try to become an expert at predicting surprise in a crisis of this magnitude, if you want to get richer. You can only embrace the theme of surprise by becoming a risk capital placement machine.
Simplicity is the fuel of the successful financial engine. Is it time for a fill-up?
Click this key silver gridlines chart now. Support sits at $28.50 and $31. Those are your simple buy points. On the profit booking side, you’re doing it now in the $33.50 area, and you’ll sell more at $35.50 and $37.
Take about 1% of your position off the table at each sell point, and add about 1% to your position at each buy point. Most investors “only” trade about 100 times too large for their financial britches!

Special Offer For Ozcopper Readers: Send me an Email to freereports4@gracelandupdates.com and I’ll send you my free “Keep It Simple, Sweetie (KISS)” report, highlighting the simple actions you need to take here and now in the GDX and GDXJ markets!

Thanks!

Cheers

Written between 4am-7am. 5-6 issues per week. Emailed at aprox 9am daily.

Mail to:

Stewart Thomson / 1276 Lakeview Drive / Oakville, Ontario L6H 2M8 Canada

Are You Prepared?

Nuclear Power, It’s No Contest

admin — Fri, 27 Jan 2012 23:58:44 +0000

Richard (Rick) Mills
Ahead of the Herd

As a general rule, the most successful man in life is the man who has the best information

The electricity needed for any country to successfully replace fossil fuels, both for transportation and everyday use, will have to come from nuclear generation.

As the world’s population and standard of living continues to climb, demand for more – and cleaner energy – grows alongside the pressures we continue to put on our environment.

Today, there is an almost global wide move to develop higher levels of nuclear energy production. This is because nuclear energy works, it’s safe and recognition is slowly dawning it’s going to be impossible to meet the global, growing demand for energy and cut carbon dioxide emissions without nuclear energy.

There is simply no other logical alternative.

Critical Mass – a point or situation at which change occurs – support for the measure has reached critical mass.

Nuclear No-Contest

By: James P. Hogan
September 19, 2009

jamesphogan.com
Before the 1950s, the future confronting the human race was bleak. With the global population increasing and becoming more dependent on energy-dense technologies to sustain its food supplies and rising living standards, there seemed no escape from the catastrophe that would come eventually when the coal and the oil ran out. But few worried unduly. It was only after an escape from the nightmare presented itself with the harnessing of nuclear processes and the prospect of unlimited energy that people began to worry. People can be very strange.

Toward Higher Energy Densities

For reasons that have mainly to do with politics and the media’s thirst for sensationalism, nuclear energy has been a subject of much disinformation and alarmism for several decades. In fact, nuclear is safer, cleaner, and potentially cheaper and more abundant than any other proven source of energy that the human race has come up with. But beyond this, it’s real significance is that it represents the next natural step in the evolutionary progression that has marked the history of energy development.

From unaided muscle power, through the use of animals, wood, wind and water, to coal, and oil, finding better ways of doing the work involved in living has reflected the harnessing of more concentrated energy sources. A lot is written about how much energy can be obtained from this source or that source. But if you really want to do things more easily and efficiently – and open up ways to doing new things that were inconceivable before – what counts is energy density. How much can be packed into a given volume. It’s easy to calculate how much energy it takes to lift three hundred people across the Atlantic, and how much wood you’d need to burn to release that much energy. Okay, now try building a wood-burning 757. It won’t work. The mountain of logs will never get itself off the ground. You need the concentration of jet fuel.

Some people argue that we don’t need nuclear power because we already have other ways to generate electricity. This misses the whole point. It would be like somebody in an earlier century telling Michael Faraday that we didn’t need electricity because we already had other ways to heat water. What made electricity so different was its ability to do things that were unachievable to any degree with existing technologies, and the whole field of electrical engineering and electronics that we take for granted today was the result. A similar distinction sets nuclear processes apart from conventional sources. All forms of hydrocarbon and other chemical combustion involve energy changes in the outer electron shells of atoms. The energies associated with transitions of the atomic nucleus are thousands of times more intense, and hence represent a breakthrough to the next regime of energy control that the growth of human populations and wealth creation require. The so-called alternatives do not.

Our present use of nuclear energy, as a replacement for conventional heat sources to generate electricity by steam turbines, is just a first, exploratory step into a qualitatively new realm of capability, opening up prospects of obsoleting most of today’s cumbersome and polluting industries in much the same way as the introduction of electricity revolutionized the coal-based methods of the nineteenth century.

The availability of cheap, high-temperature process heat opens the way to desalinating seawater inexpensively in large quantities and pumping it to where it needs to go to irrigate currently useless land. Furthermore at such temperatures, water “cracks” thermally into its constituent atoms, yielding a potentially unlimited supply of hydrogen as a base for a whole range of synthetic liquid fuels to replace gasoline. My guess is that, given the will and the vision, we could be making our own hydrocarbons more cheaply, and possibly with higher efficiency, long before the last barrel of the natural stuff is pumped out of the ground.

What About Safety?

One of the fears implanted in the public mind has been that nuclear power is inherently dangerous. Every form of human activity carries some attendant risk. The only meaningful way that society can judge the acceptability of a given risk is by weighing it against the benefits, and comparing the result with those obtained by similarly treating the alternatives.

Despite the hysterical media reactions to the accidents at Three Mile Island and Chernobyl, nuclear power remains probably the least threatening to human life of all major industrial technologies. Because the energy density of nuclear fuels is much greater, the amount needed to achieve the same result is correspondingly less. Over five thousand times as much coal has to be mined, transported, and processed as uranium to produce the same amount of energy – 200 trains a year, each consisting of 100 cars, to feed a 1,000 Megawatt plant, compared to four car loads of uranium oxide. Fatalities resulting worldwide from mining operations alone every year are numbered in thousands, but like automobile accidents they occur in ones and twos spread over time in many places, and are largely invisible. In the Western world, nuclear power generation has never killed anybody.

At Three Mile Island no one was killed, no one was hurt, and no member of the public was ever in any danger. We were not at the brink of a major catastrophe. A bizarre set of circumstances coupled with inappropriate operator responses led to a loss of coolant and damage to the reactor core that included the melting of some fuel. The safety systems responded the way they were supposed to by shutting the system down. The outer layers of containment were never challenged, let alone breached, putting conditions well within the worst-case scenario that the plant had been designed to withstand. At one point there was speculation that an accumulation of hydrogen gas might explode. Had it done so, there would have been simply a chemical detonation – certainly nothing of a thermonuclear nature as was suggested by the headline H-BLAST IMMINENT that appeared in some newspapers. It was established later that an explosion couldn’t have happened since there was no oxygen present; but even if it had, the shock would have been comparable to that imparted by a sledge hammer, which would hardly damage a reactor vessel with steel walls twelve inches thick. The engine block of a car absorbs more stress thousands of times every minute. Even if the vessel had cracked, any dangerous material would still have had to get through a four-foot concrete shield and an outer steel containment shell to reach the environment. Yes, some radioactive gas accumulated in the containment building and was subsequently vented to the outside. But the predictions of tens of thousands of cancer deaths as a consequence were absurd. The maximum increase in radiation dose measured immediately above the plant was in the order of eight millirems over the course of several days. A routine dental X-ray delivers three times as much in seconds. When a dam bursts, a drilling platform collapses, or a gas storage tank explodes, you don’t have days for the luxury of holding press conferences and talking about evacuating.

Chernobyl didn’t say anything about nuclear engineering. It did say something about priorities under a militarist totalitarian system in which public safety doesn’t figure highly in policymaking. What happened was that the reactor’s graphite core caught fire after the safety systems had been turned off for experimental work to be conducted, and the resultant explosion ejected radioactive material due to the lack of a comprehensive containment structure. Reduced containment suggests a design intended primarily to serve military needs, where the fuel has to be removed frequently to avoid the contamination by fission products that would prevent purification to the level that weapons-grade material requires. In civilian power reactors the fuel rods are changed typically every three years, and the obstruction caused by containment structures becomes less of a hassle. So what the circumstances point to is a facility built primarily for defense purposes being used to supplement the power grid at a time of low political tension and reduced military demand.

It’s difficult to see how anything comparable could happen with Western nuclear plants in the way that some critics have claimed. Besides operating inside multi-layer containment to ensure defense in depth, Western reactors don’t possess graphite cores – such a basis for design was expressly rejected by the U.S. in 1950, precisely because of the risk of one igniting in the way that happened. Two features are essential for a nuclear power reactor to function: a “moderator” substance, which surrounds the fuel and in effect keeps the nuclear chain reaction running; and a coolant to carry away the heat produced and deliver it to the steam generator that drives the turbines. The Chernobyl design used graphite as the moderator and water as the coolant. This means that if the coolant flow fails the reactor will continue to produce heat at full power (because of the presence of the moderator), with consequent rapid escalation to an emergency – as in fact occurred. Western designs, by contrast, use water as both the moderator and the coolant. So if the coolant should fail, the moderator is automatically lost also, and the chain reaction ceases, leaving only the residual fission products as sources of heat to be disposed of, which represents typically five percent of the normal power output.

The actual attributed deaths at Chernobyl numbered thirty-eight, from immediate effects and acute radiation poisoning among firefighters and rescue workers. The figure of hundreds of thousands of long-term cancers that was bandied around came not from any physical diagnoses but from statistical computer exercises using theoretical assumptions that have been shown to be wrong. Studies twenty years later show nothing to support these predictions.

But What If? . . .

More people seem to be realizing that a nuclear power plant cannot explode like an atom bomb. The detonating mechanism for a bomb has to be built with extreme precision for the bomb to work at all, and a power plant contains nothing like it. Besides that, the materials used are completely different. Natural uranium contains about 0.7 percent of the fissionable U-235 isotope, which has to be enriched to more than 90 percent for bomb-grade material. For the slow release of energy required in power reactors, the fuel is enriched to only 3.5 percent. It simply isn’t an explosive.

So what about a meltdown? Even if TMI wasn’t one, mightn’t the next accident be?

Yes, it might. The chance has been estimated – using the same methods that work well in other areas of engineering where there have been enough actual events to verify the calculations – as being about the same as that of a major city being hit by a meteorite one mile across. Even if it happened, simulations and studies indicate that it wouldn’t be the calamity that most people imagine. If the fuel did melt its way out of the reactor vessel, it would be far more likely to sputter about and solidify around the massive supporting structure than continue reacting and burrow its way down through the floor. The British tested an experimental reactor in an artificial cave in Scotland for over twenty years, subjecting it to every conceivable failure of the coolant and safety systems. In the end they switched everything off and sat back to see what happened. Nothing very dramatic did. The core quietly cooled itself down, and that was that.

But what if the studies and simulations are flawed and the British experience turns out to be a fluke? Then, mightn’t the core turn into a molten mass and go down through the floor?

Yes, it might.

And then what would happen?

Nothing much. We’d have a lot of mess down a hole in the ground, which would probably be the best place for it.

But what if there was a water table near the surface?

In that case we’d create a lot of radioactive steam that would blow back up into the containment building, which again would be the best place for it.

But what if some kind of geological or structural failure caused it to come up outside the containment building?

It would most likely expand high into the sky and dissipate.

But what if . . .

Now we’re beginning to see the kinds of improbability chains that have to be dreamed up to create disaster scenarios for scaring the public. Remembering the odds against any major core disintegration in the first place, what if there happened to be an atmospheric inversion that held the cloud down near the ground, and if there was a wind blowing toward an urban area that was strong enough to move the cloud but not enough to disrupt the inversion layer? . . . Then yes, you could end up killing a lot of people. The statistical predictions work out at about 400 fatalities per meltdown. Perhaps not as bad as you’d think. And that’s if we’re talking about deaths that couldn’t be attributed directly to the accident as such, but which would materialize as a slight increase in the cancer rate of a large population over many years, increasing an individual’s risk from something like 20.5 percent to 21 percent. Since air pollution from coal burning is estimated to cause 10,000 deaths annually in the U.S., for nuclear power to be as dangerous as coal is now would require a meltdown somewhere or other every two weeks.

But if we’re talking about directly detectable deaths within a couple of months from acute radiation sickness, it would take 500 meltdowns to kill 100 people. On this basis, even having 25 meltdowns every year for 10,000 years would cause fewer deaths than automobiles do in one year.

What About The Radiation, Then?

It’s true that even an un-melted down nuke under normal operation and in proper working order releases some radiation into the environment. But then, so does a shovelful of dirt from your back yard, the air you breathe, everything you eat, the water you drink, and even your body tissues. There’s hardly anything that doesn’t emit some radiation from trace elements that it contains, all of which adds up to a natural background thousands of times stronger than anything contributed by the nuclear industry. The emission from the granite that Grand Central Station is built from exceeds the permissible limit set for industry. Grand Central Station wouldn’t get a license as a nuclear plant.

This is not meant to suggest that large doses of radiation aren’t harmful. Napalm bombs and blast furnaces are not very healthy either, but it doesn’t follow that heat in any amount is therefore hazardous. You wouldn’t last long at the no-dose temperature of absolute zero.

The science of toxicology has long recognized the phenomenon of “hormesis,” in which substances that are lethal in high doses, turn out to be beneficial, if not actually essential to health, in small doses, as a result of stimulating the body’s immune and repair mechanisms. In the last few decades it has become increasingly clear that this applies to ionizing radiation as well. By just about every measure that biologists use to assess the well-being of living things – vitality; longevity; number of offspring; the number of them that survive; healing of injuries; susceptibility to disease and speed of recovery – everything from bacteria through plants, bugs, invertebrates, to mammals and people fares better when the environmental radiation is moderately increased. Depending on the type of organism, the optimum seems to be around ten times the natural background; beyond that the effects become less benign, then harmful, and eventually lethal. And this makes intuitive sense. When it comes to temperature, pressure, humidity, light, internal and external chemical concentrations, and just about everything else that makes up their environments, living things are designed, created, evolved – whatever you subscribe to – to exist within a distinct comfort zone, beyond which too little can be as bad as too much. It would seem odd if the same didn’t apply to radiation too.

Nevertheless, we are constantly being told that any level of radiation is harmful, however small. A simple prediction from this would be that cancer in areas with higher background levels ought to be greater. But the fact is, they’re not. The cancer rate in Colorado, for example, with twice the nation’s average radiation, due to the cosmic rays at that altitude and the high radioactivity of the rocks that occur there, when corrected for such factors as age and occupation, is only 68 percent of the average. The relationship remains negative – i.e. the higher the radiation background, the lower the cancer rate – across the country as a whole, with a spectacular correlation coefficient of minus 39 percent. That’s about the same as the correlation of lung cancer with cigarette smoking – but the other way around.

What About The Waste?

Well, after the foregoing heresies, would it come as a complete surprise if I were to suggest that the ease of getting rid of the waste is one of nuclear power’s major benefits? Because the amount of fuel needed for the same amount of energy is much smaller, so is the amount of waste produced. And the waste that is produced isn’t as hazardous as people are led to believe. It’s considerably less dangerous than many other substances that are handled routinely in far greater quantities with far less care, which the world accepts as a matter of course.

Around 95 percent of the spent fuel that comes out of a power reactor can be reprocessed into new fuel and put back in – saving in a typical plant’s 40-year lifetime the equivalent of eight billion dollars’ worth of oil. Burning it up in this way is the sensible thing to do, and the industry was designed on the assumption that this would be the case. What’s left after reprocessing constitutes the “high level” waste that needs to be disposed of. A large, 1,000-MW plant produces about a cubic yard of it in a year – small enough to fit under a dining-room table. A coal plant of equal capacity produces ten tons of waste every minute. A facility to reprocess spent nuclear fuel in the U.S. was commenced as a joint venture by government and industry at Barnwell, South Carolina. But work was halted in early 1977 essentially for political reasons, while at the same time the utilities were cut off from the military reprocessing facilities that had been handling domestic wastes safely for twenty years. Thus, 100 percent of what comes out of reactors is having to be treated as if it were high-level waste, to be stored in ways that were never intended, and this is what gets the publicity. It’s a needlessly manufactured political problem, not a technical one. The rest of the world continues to reprocess its spent fuel regardless.

But isn’t it true that the high-level waste remains radioactive for tens of thousands of years? So what do you do with that?

Yes, the high-level waste contains fission products that have long half-lives. But these are not what constitute a possible biological hazard. They just provide big numbers that get the public’s attention. For obviously, if the energy release is spread out over that long a time, its intensity can’t be very great. Rusting iron has a long half-life; TNT has a short one. The principal danger is from the short-lived isotopes, such as iodine 131, with a half-life of eight days. To allow these to decay to levels that can be safely handled, the spent fuel is put into cooling ponds at the reactor site for six months before being shipped for reprocessing.

So what do you do with what’s left?

Current proposals are to reduce it to a powder, vitrify the powder into a highly stable glass, seal the glass into steel canisters, and bury them in a concrete repository two thousand feet underground – although some scientists have urged that the repository be made accessible, since the “wastes” contain many rare isotopes that could be invaluable after the current phobias have abated. Beyond this somewhat mundane approach, more recent theoretical and research developments point to the feasibility of artificially stimulating these long-life fission products to decay instead in ways that will take only minutes, using low-cost equipment that can be operated on-site, without need for costly transportation and long-term bulk storage. By definition these are unstable nuclei, after all, like rocks balanced on the edge of a precipice, waiting for a nudge to send them in a direction that they’re already set to go. Such a solution has a feeling of “appropriateness” about it – using nuclear technology to resolve an issue that is of an inherently nuclear nature.

Let’s make no bones about it. We are talking here about a significant concentration of radiation that would have to be confined and handled with great care. If all the electricity used in the United States were produced by nuclear power, the high-level waste produced each year would be enough to kill ten billion people – more than the present population of the planet. Sounds scary, doesn’t it? But the U.S. also produces enough barium to kill a hundred billion people, enough ammonia and cyanide to kill six trillion, enough phosgene to kill twenty trillion, and enough chlorine to kill four hundred trillion. There’s no doubt enough gasoline around, too, in cars, garages, storage refineries, and under filling stations to kill us all several times over, and enough pills in hospitals, pharmacies, and family medicine closets. But we don’t worry about it, because there’s no way in which the population is going to line up to be administered their dose or otherwise be evenly exposed to any of these substances. This is even more true of nuclear waste sealed deep underground.

Every foot of overlying rock reduces the radiation by a factor of ten, which means there’s no hazard to anyone above ground from the buried material. What danger there is comes from the risk of some of it finding its way out of the repository and into a person through being ingested or inhaled. Unlike chemical toxins, which remain lethal forever, radiation from nuclear waste decays with time. After ten years of burial, it would be about as toxic as barium if ingested; if inhaled, a tenth as toxic as ammonia and a thousandth as toxic as chlorine. After a hundred years these figures fall to one ten-thousandth, one hundred-thousandth, and one ten-millionth respectively. Nature’s biological waste-disposal program puts a thousand million tons of ammonia into the atmosphere every year, and we use chlorine liberally to clean our bathtubs and swimming pools.

For comparison, a year’s operation of a 1,000-MW coal plant produces 1.5 million tons of ash – 30,000 truck loads, or enough to cover one and a half square miles to a depth of 40 feet – that contains large amounts of carcinogens and toxins, and which can be highly acidic or alkaline depending on the sulfur content of the coal. Also, ironically, more unused energy is thrown away in the form of trace uranium in the ash than was obtained from burning the coal. Getting rid of it is a stupendous task, and it ends up being dumped in shallow landfills that are easily leached out by groundwater, or simply piled up in mountains on any convenient site. And that’s only the solid waste. In addition there is the waste that’s disposed of up the smokestack, which includes 600 pounds of carbon dioxide and ten pounds of sulfur dioxide every second, and the same quantity of nitrogen oxides as 200,000 automobiles. So in answer to questions about the “unsolved problem” of nuclear waste, is this supposed to be a solved one?

An equivalent-size nuke, by contrast, produces nothing in addition to its cubic yard of high-level waste, because there isn’t any chemical combustion. No ash, no gases, no smokestack, and no need for elaborate engineering to generate and control enormous air flows. Because of its compactness, nuclear power is the first major industrial technology for which it is actually possible to talk about containing all the wastes and isolating them from the biosphere. A study of the consequences of the U.S. going to all-nuclear electricity concluded that the total additional health risk that the average citizen would be exposed to, covering everything from uranium mining through transportation, power generation, to final disposal of the wastes, would be equivalent to that of raising the speed limit by six thousandths of one mile per hour. The risks eliminated, of course, would be far greater.

What About Terrorists?

Fears are expressed that the spread of nuclear power would make available the resources and materials for politically unstable nations and terrorists to make bombs. To whatever degree such possibilities may exist in today’s world, domestic nuclear power is pretty much irrelevant. Any group that has the determination and funds to make a bomb can do so in any of at least a half-dozen ways that are cheaper, simpler, faster, and less hazardous than going through the complications of using new or used power plant fuel, and require no access to civilian generating technology. Expertise is available that can be bought for a price, and with laser isotope separation techniques the materials to produce bomb-grade materials exist in rocks everywhere. Slowing the introduction of nuclear power to developing nations does nothing to reduce potential weapons threats. It does, however, retard their economic development and thus help perpetuate the differences in health and living standards that perhaps make resorting to such threats more likely.

Solar Dreaming

If the way forward into the future calls for higher energy densities, the notion that we can depend on solar or wind (which is another form of solar) represents a move backward. To get an idea of just how dilute a source solar is compared even to coal, consider a lump of coal capable of yielding a kilowatt-hour of electricity, which would weigh about a pound, and ask how long the Sun would have to shine on it to deposit the same amount of energy that the coal will release when burned. The area of its shadow, which measures the sunlight intercepted, would be about fifteen square inches. In Arizona in July, with a 24-hour annualized average insolation of 240 watts per square meter, it would take 435 hours, or almost three weeks , for this amount of surface to receive a kilowatt-hour of sunshine. For the average location in the U.S., allowing for bad weather and cloud cover, a reasonable estimate would be twice that. But to obtain a kilowatt-hour of electricity, at the ten to twenty percent efficiency attainable today, which appears to be approaching its limit, we’d be talking somewhere between thirteen and seven months.

The Sun shining on forests for tens or hundreds of years affords an enormous concentration of energy over time that Nature performs for free. Subsequent geological compaction into coal adds another dimension of concentration in space, which humans carry further by their activities of mining and transportation. Hydroelectric power is another form of highly concentrated solar. The Sun evaporates billions of tons of water off the oceans, which fall on wide areas of land and drain through river systems to strategic points suitable for building dams. Once again, most of the work involving the concentration of energy in time and space on enormous scales is done for nothing by Nature.

I wonder if the people who talk glibly about attempting to match such feats artificially really comprehend the scale of the engineering that they’re proposing. A 1,000-MW solar conversion plant, for example – the same size as I’ve been using for the comparisons of coal and nuclear – would cover 50 to 100 square miles with 35,000 tons of aluminum, two million tons of concrete, 7,500 tons of copper, 600,000 tons of steel, 75,000 tons of glass, and 1,500 tons of other metals such as chromium and titanium – a thousand times the material needed to construct a nuclear plant of the same capacity. These materials are not cheap, and real estate doesn’t come for nothing. Moreover, these materials are all products of heavy, energy-hungry industries in their own right that produce large amounts of waste, much of it toxic. So much for “free” and “clean” solar power.

The comparison doesn’t end there. When a power engineer talks about a one-thousand-megawatt plant, he means one that can deliver a thousand megawatts on demand, anytime, day or night. A nuclear plant can do this; so can a conventional fossil-fuel plant. But a solar plant can only operate when the Sun is shining, which straightaway gives it a maximum availability of 50 percent – low enough to be considered prohibitively uneconomic for any other type of power plant. To ensure supply when the demand is there, some kind of regular supply would have to be available as a backup anyway, making the whole idea of solar as a replacement unrealistic.

The only other way would be to provide some kind of storage system that the solar plant would be able to charge up during its operating period, and then draw on when demand exceeds supply. At present there isn’t any really satisfactory way of storing large amounts of electrical energy. What’s usually proposed instead is to convert it to potential energy by pumping water up to a high reservoir, and letting the water flow back down through turbines in the nonproductive periods. A sleight-of-word commonly slipped in by solar advocates when pushing for this kind of option is to continue referring to the facility as a “thousand megawatt” solar plant. However, the power industry’s normal criterion expects a practicable storage system to be capable of recharging at five times the nominal rating. This means that for “thousand megawatt” to mean the same as it does for every other kind of plant, the solar facility would have to have a peak capacity of six thousand megawatts, adding vastly to the size, complexity, cost, and environmental effects implied by the figures above.

Decentralizing by putting solar panels on everyone’s roofs wouldn’t reduce the cost or the amount of materials, but simply spread them around. In fact things would get worse, for the same reason that McDonalds use less oil to cook two tons of fries than eight thousand households that make a half a pound each. The storage problem wouldn’t go away either, but would become each homeowner’s responsibility. In a battery just big enough to start a car, gases can accumulate that one spark can cause to explode – sometimes with lethal consequences, as some unfortunates have demonstrated when using jumper cables carelessly. Imagine the hazard that a basement full of batteries the size of grand pianos would present, which a genuinely all-solar home would need to get through a bad spell in, say, Minnesota in January. And who would do the maintenance and keep the acid levels topped up?

Then we have the problem of keeping the roof panels clean and free from snow and wet leaves, not in the summer months, but when the roofs are slippery and frozen. Even today, the biggest cause of accidental deaths in the country, after automobiles, is falls. If we build all those houses with bombs in the basements and skating rinks on the roofs, it seems to me we’d better add in a lot more hospitals and emergency rooms too, while we’re at it.

As a science-fiction writer, I’m certainly enthusiastic about the thought of our expanding into space – for the right reasons. Solar power satellites has never struck me as one of them. The intensity of solar radiation outside the atmosphere is about six times that on the surface, which isn’t a lot really. I don’t see how it could justify the expense of putting huge amounts of technology into orbit to re-concentrate energy diluted by ninety-three million miles’ worth of the inverse square law, when we can generate it at the Sun’s original density right here. One study that I read estimated 10,000 shuttle launches to build a satellite capable of powering New York City – and on top of that would be the cost of ground equipment to receive the beamed power.

Similar considerations apply equally to wind power, which seems to be the current fad of the political savants who would lead us into the twenty-first century. The picture above shows the South Korean nuclear park at Yongwang, which has six one-thousand-megawatt reactors. Matching that capacity with wind generators would require a wind farm 175 miles wide extending from San Francisco to Los Angeles. Direct solar would require somewhere around 20 square miles of collector area alone, i.e. without allowing any spacing for steerable geometry or the maintenance access that would be necessary for a practical plant design.

This isn’t to say that solar doesn’t have its uses. It can be beneficial in remote places far from a supply grid, such as isolated farms or weather stations, and if somebody who lives in the right place finds it worthwhile to shave something off his electricity bill, there’s nothing wrong with that. But the problem that matters isn’t simply a domestic one of keeping the living room at 75 degrees and heating the bath water. The real issue is that of running the aluminum smelters, steel mills, fertilizer plants, cement works, factories, and transportation systems that keep a modern industrial society functioning. Solar and its variants can never make a significant contribution. And that is precisely the reason why those who don’t want a modern industrial society are so much in favor of it and would like to see everything else forcibly shut down.

All of the world’s peoples would like to think that a century from now their children will be living that way. They could be, too. The human race possesses the knowledge and the ability to ensure that every child born on the planet could look forward to a healthy and well-fed body, an educated mind, and the opportunity to become the best that he or she is capable of. But when the demand is translated into energy needs – providing a globally stabilized population of, say, ten billion with energy per person probably greater than that of the U.S. today – the amount is utterly beyond any approaches that are merely variations of what we have. Only continued evolution into the next logical realm of energy control can do it.

So, can we make nuclear energy work, safely, cleanly, and efficiently? Sure we can. When we take a long, hard look at the alternatives, we see that we have to. Fortunately for all of us, the Neanderthals who first learned how to tame fire thought the same way.

James P. Hogan, a former digital systems engineer and computer sales executive, has been a full-time writer since 1980. He was born in London, moved to the USA for many years, and now lives in the Republic of Ireland. His web site is at jamesphogan.com

Richard (Rick) Mills

rick@aheadoftheherd.com

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Richard is host of Aheadoftheherd.com and invests in the junior resource sector. His articles have been published on over 300 websites, including: Wall Street Journal, SafeHaven, Market Oracle, USAToday, National Post, Stockhouse, Ozcopper, Lewrockwell, Uranium Miner, Casey Research, 24hgold, Vancouver Sun, SilverBearCafe, Infomine, Huffington Post, Mineweb, 321Gold, Kitco, Gold-Eagle, The Gold/Energy Reports, Calgary Herald, Resource Investor, Mining.com, Forbes, FNArena, Uraniumseek, and Financial Sense.

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North American Nickel’s In Greenland

admin — Fri, 27 Jan 2012 14:56:06 +0000

Richard (Rick) Mills

Ahead of the Herd

As a general rule, the most successful man in life is the man who has the best information

North American Nickel TSX.V – NAN has acquired a Mineral Exploration License on the southwest coast of Greenland that grants exclusive exploration rights to a 4,841 sq km area.

NAN’s Maniitsoq property hosts numerous high-grade drill indicated and surface outcrop exposures of nickel – copper sulphide mineralization associated with mafic-ultramafic intrusions. Given its vast size and the abundance of nickel-copper sulphide occurrences, the Maniitsoq area has seen very little exploration activity.

The only drilling for nickel on the property was done between 1965 and 1972 by Kryolitselskabet Øresund (A/S-KØ). KØ drilled 119 holes totaling 6,287 meters – average depth 53 meters. The drilling tested exposed sulphide mineralization and shallow electromagnetic (EM) anomalies directly associated with the exposed mineralization.

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Results:

9.85 meters averaging 2.67 per cent nickel and 0.60 per cent copper at Imiak Hill
12.89 meters averaging 2.24 per cent Ni and 0.63 per cent Cu at Fossilik
4.95 meters @ 1.97% Ni, 0.43% Cu at Quagssuk

The Greenland Norite Belt (GNB) is a 15 km wide by 75 km long “J” shaped belt that rims the Finnefjeld gneiss complex.

Cominco Ltd, in conjunction with the Geological Survey’s of Denmark and Greenland (GEUS), flew a large portion of the GNB with an airborne fixed wing GeoTEM EM system in 1995, data acquisition was poor with relatively few EM anomalies detected reflecting the technology of the day.

Follow up prospecting and limited surface geophysical surveys by Cominco in 1995 and 1996, and by Falconbridge in 2000, did not lead to any new drilling. But retesting of KØ’s drill core and surface showings, by both Cominco and Falconbridge, confirmed the generally high nickel content of the sulphides – Falconbridge showed 8% nickel in 100% sulphide.

The Greenland Geological Survey (GEUS) is currently investigating the possibility that the Finnefjeld gneiss complex lies at the centre of an extremely large, deeply eroded meteor impact structure and that the Maniitsoq norites may have been emplaced as a result of the impact. If so the Maniitsoq norites would be the only other known nickeliferous norites associated with an impact outside of the Sudbury Basin.

John Ferguson, a world expert in meteorite impacts, and John Rowntree of Hunter Minerals Pty Limited (“Hunter”) investigated the relevant geo-data base and concluded that the Maniitsoq structure is compatible with a large deeply eroded impact site. Hunter approached NAN with the opportunity to acquire the intellectual property and data developed by them and offered their assistance in connection with the acquisition of the Mineral License.

Adam Garde, a Danish Geological Survey geologist, also argues that the Maniitsoq area is an impact structure much like the Sudbury Basin in Ontario, Canada.

Most of the nickel discovered to date on NAN’s Maniitsoq property is associated with norite intrusions that are concentrated in the GNB.

North American Nickel conducted a summer 2011 field campaign to confirm and sample known showings, locate significant historical drill holes and check targets identified from compilation of historical data. Electromagnetic anomalies – identified from a re-interpretation of the 1995 GeoTEM fixed wing survey – and other areas of interest derived from compilation of previous work and satellite imagery were also ground checked. NAN then integrated the results from the field program with its existing database of historical work to optimize the helicopter borne TEM survey carried out in September and October of 2011.

NAN’s strategy is to select specific areas for detailed, high resolution, deep penetrating, helicopter EM surveys. By concentrating on smaller target areas, flight lines can be tweaked to ensure surveying is done perpendicular to local strike.

The helicopter SkyTEM system has a much higher signal to noise ratio than the 1995 fixed wing survey and a helicopter can better maintain the required altitude above the ground to maximize the detection of geophysical signals. The 1995 fixed wing GeoTEM system was often forced to fly at a low angle to strike and well above (sometimes double or more) the necessary ground clearance due to the rugged terrain – a helicopter system is able to hug the terrain and survey perpendicular to strike. All this makes the modern helicopter TEM system better suited to locating the anomalies associated with the irregularly shaped nickel-copper sulphide bodies in the Maniitsoq project.

The Survey

Two flight blocks (1&2), totaling 373 sq km, were selected. Helicopter surveying commenced in mid September and finished in early October with 2,217 line-kilometers of SkyTEM helicopter time domain EM (TEM) completed.

Block 1 hosts the largest of the known nickel bearing norite bodies and strongest nickel occurrences discovered to date. It is situated at the northern end of the GNB.

Block 2 covers a four kilometer long norite body northwest of the GNB.

“The 1995 GeoTEM fixed-wing survey was the only large scale, airborne Time Domain EM survey ever performed in the Maniitsoq nickel belt prior to our SkyTEM survey. The SkyTEM system has identified new EM targets. It is clear to us that we now have a powerful exploration tool that provides us new opportunities for the discovery of nickel-copper-platinium group metal deposits in an underexplored area of the world, adjacent to year round, ice free tide water.” NAN Chief Geologist John Pattison

Examination of the preliminary data indicated it is of good quality and that the helicopter was able to hug the terrain despite, at times, rugged topography. A final, leveled dataset and initial interpretation was received from SkyTEM. It was merged with NAN’s existing exploration database for Maniitsoq and thoroughly analyzed for conductive nickel sulphide targets.

Block 1 – A re-interpretation of historical aeromagnetic data has shown that in this part of the project area the noritic intrusions have a significant component of remnant magnetism giving them a very distinctive magnetic signature. Mapping of the distribution of this signature suggests that there are considerably more prospective noritic rock in this area than is exposed on surface.

In 1995, there were only three significant responses to the GeoTEM fixed wing survey and they were all single line anomalies associated with exposed mineralization at the Imiak Hill, Fossilik II and Spotty Hill showings. The cluster of 1995 anomalies on the west side of the block corresponds with a lake and is probably caused by conductive sediments.

2011 SkyTEM results from Block 1

Significant conductive target zones include:

Target B1-B: 850 m long, untested, conductor within an interpreted norite body.

Target B1-F: 300 m long untested conductor on the edge of an interpreted norite body.

Target B1-J: Very strong 200 to 300 m long conductor corresponding to Imiak Hill mineralization. This target was detailed and the results will be used to model the mineralization in three dimensions to determine if the mineralization has any depth extent.

Target B1-O: 300 m long untested conductor situated on cross-cutting structure near edge of a Proterozoic olivine diabase dyke.

Target B1-Q: 150 m long conductive zone corresponding to the Fossilik II mineralization. This target was detailed and the results will be used to model the mineralization in three dimension to determine if the mineralization has any depth extent.

Block 2 covers 21 sq km and is centered on a northeast-striking norite intrusion known as Pingo that is exposed over a strike length of more than four km. A short (61.88 m) hole was drilled near the centre of the exposure in 1970 and intersected 4.16 meters of sulphide mineralization averaging 0.58% nickel and 0.24% copper. This is the only recorded drilling on the intrusion.

The terrain in the Pingo area is extremely rugged and the 1995 GeoTEM survey was forced to fly with a ground clearance over 100 m above the mandated 125 m clearance, this, when combined with the relatively high system noise of the old technology, and survey lines that in some areas were almost parallel to strike, severely hindered the ability of the system to see prospective EM anomalies and no EM anomalies were seen in the original interpretation of the data.

Click for Larger Image" src="http://aheadoftheherd.com/Newsletter/2012/North-American-Nickels-In-Greenland_files/image009.jpg" alt="Flight Block Two" width="224" height="171" align="left" border="0" hspace="12" />

NAN’s re-interpretation of the 1995 survey revealed three high priority EM anomalies forming a line that intersects the south edge of the Pingo norite.

The 2011 helicopter SkyTEM survey outlined eight target zones in Block 2.

NAN is modeling the SkyTEM Block 1&2 targets using three-dimensional software to determine the precise location and extent of the Maniitsoq property anomalies. This work will assist the Company in prioritizing potential drill targets for the 2012 exploration program.

The modeling is ongoing and expected to be completed early in the new year.

Share Structure

Issued and Outstanding: 55,058,193

VMS Ventures TSX.V – VMS Owns: 21,825,000

Cash: $1.2 million

Warrants: 31,198,950

@ $0.10 expire Dec. 28th 2012: 6,995,000

Cash Value: $.7M

@ $0.35 expire Nov. 24th 2012: 11,243,950

VMS owns: 5,000,025

Cash value: $3.9m

“Greenland” warrants are priced at @ $0.50, $0.70 & $1.00: 12,960,000

Cash value: $9.2m

Options: 5,250,000

Cash Value: $.8M

Fully Diluted: 91,606,950

Cash, Fully Diluted: $14.6M plus $1.2 = $15.9M

Commodities Supercycle

“It takes vast quantities of natural resources to build infrastructure to accommodate explosive growth in population, upward mobility, urbanization and industrialization.

Economic studies suggest that industrial metals and minerals consumption depends on the stage of development, the stages are normally divided in four, and are said to be dominated by 1) infrastructure development, defined by high use of cement and construction materials; 2) light manufacture, defined by high use of copper; 3) heavy manufacture, defined by high use of aluminum and steel; and 4) Consumer goods, defined by high use of aluminum, energy minerals and specialty steels (Source: USGS).

The stages are expected to take about 20 years each and begin at 5 year intervals, lasting for a total of 30 – 40 years, depending on political and macroeconomic conditions. China for instance, appears to have entered the heavy manufacture stage based on steel consumption, while India may be well into the light manufacturing stage.” Luisa Moreno Investingthesis.com

The evidence is mounting markets will get back to “normal”, the sovereign debt crisis be resolved and growth from China, India and Africa and other developing nations will continue – with or without the west.

There is no shortage of individual reasons, but when taken together the evidence starts to be overwhelming:

Finite raw materials
Unstable weather patterns
Chronic supply constraints
Increasing population base
Growing global middle class
Low real interest rates
Shifting global trade patterns
Continued monetization of European and US debt
Persistent Dollar and Euro feebleness – our political masters attempting to devalue our way to prosperity
The need for asset diversification
Speculation

All of these reasons, working together, will translate into higher commodity prices. Today’s worries have only temporarily unseated the commodities super-cycle with the last sell-off being nothing more than a short downturn within a secular bull market for commodities.

Conclusion

In March 2009, nickel bottomed out at $9,693 per metric ton after a 22-month decline.

Nickel has just, for delivery in three months, risen 3.6 percent to $20,200 a metric ton.

At the same time copper for March delivery gained 1.3 percent to $3.8005 a pound on the Comex in New York.

Greenland is very mining friendly, hugely underexplored and very prospective for mineral discoveries.

Click for Larger Image" src="http://aheadoftheherd.com/Newsletter/2012/North-American-Nickels-In-Greenland_files/image011.jpg" alt="2011 SKYTEM Survey Areas" width="177" height="210" align="left" border="0" hspace="12" />North American Nickel’s 4,841-square-kilometre Maniitsoq property is larger than the entire Sudbury Basin, can be worked year round and has access to year round ports for shipping.

NAN is using modern exploration tools in what is a district sized area and numerous quality drill targets are being located. A drill program will be conducted in 2012.

The area surveyed in 2011 comprises only 8% of the total Maniitsoq project. Based on the success of this program, additional areas are now being evaluated for further helicopter-borne surveying in 2012.

Diamondiferous kimberlite (diamond targets) and carbonatite intrusions (rare earth element targets) have both been found in the vicinity of the project.

For all these reasons North American Nickel should be on every investors radar screen. Is it on yours?

If not, maybe it should be.

Richard (Rick) Mills

rick@aheadoftheherd.com

If you’re interested in learning more about the junior resource sector, bio-tech and technology sectors please come and visit us at www.aheadoftheherd.com

Site membership is free. No credit card or personal information is asked for.

***

Legal Notice / Disclaimer

This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment.

Richard owns shares of North American Nickel TSX.V – NAN

North American Nickel TSX.V – NAN is a sponsor of Richards website, aheadoftheherd.com

Graceland Updates

admin — Wed, 25 Jan 2012 07:01:32 +0000

Graceland Updates 4am-7am

Email:

Jan 24, 2012

How much gold have you bought since the lows of late December? Hopefully, you bought none. Click this gold battle zone chart now.
When the price of any asset is in a rising trend, as it is now, the only thoughts in your head should be to hold your positions or book some profit. The gold asset has been in a rising trend against the dollar since late December, so you really should have bought no gold since then.
Gold has rallied over $150 on this move from $1525 to $1680. The reason you bought no gold since the $1525 area lows is because you already bought into those lows, or should have, as gold declined from about $1923 to about $1525.
There is an enormous financial difference between one professional investor who bought his own fears into the price zone of $1525 and another amateur investor who bought his own confidence into the rise towards $1680.
The professional investor is now sitting on substantial profits, and is booking some of those profits. The amateur investor is telling himself substantial stories about the future. Professional investors refer to the stories told about market’s future as pipedreams.
The bottom line is that you don’t need a reason to buy gold when it is on sale. The sale price is the reason to buy. End of professional investor story.
Think carefully about where you are emotionally at this point in time in the gold market. Uptrends begin with fear. Are you afraid now? Most investors are not afraid now, but they are not greedy, either.
A substantial amount of loss-booking on short positions by amateur investors has occurred on this $150 move in the gold price, but I am not seeing any substantial buying of new long positions by the amateur group.
The good news is that where amateur investors are, both emotionally and in terms of placing risk capital, suggests that the gold price can go quite a lot higher.
As gold fell towards $1525, amateur gold investors talked a lot about shorting gold if it were to approach the downtrend line on the chart I showed above. Suddenly, we are near that downtrend line.
The confidence of the amateur bears to short gold at the downtrend line has been shaken by the $150 price rise, while the confidence of professional investors to short this market is growing strongly.
The price zone of $1680-$1705 is highly like to see the commercial traders begin to lay in heavier short positions as amateur investors begin to buy new long positions in heavier size. That doesn’t mean that price reverses immediately, but those who enter the gold market here on the long side are taking on unnecessary risk.
If you failed to buy any gold as it declined towards $1525, then I would urge you focus on awaiting the next “severe emotional discomfort zone” before placing any new buy orders.
For the rest of you that did buy into the decline, please don’t underestimate how high this market can continue to rise before suffering a major correction. You worked too hard to establish your positions into the lows to sell them all off for peanut-sized profits.
Click this key oil chart now. You are looking at a multiple head and shoulders bull continuation pattern. It is composed of two heads, two shoulders, and two necklines, and it is very symmetrical. If it plays out in textbook fashion, oil could rise to $130.
This could be a time for options players to step up to the market, preferably with a mix of 70% call options and 30% put options, with the total risk capital allocated to the trade not exceeding 1-2% of your account net liquidation value. Most options traders place about 100 times too much capital on their trades, but can’t figure out why they get obliterated emotionally and then financially, in record time.
Natural gas had an enormous day yesterday. Click this epic UNG volume chart now. I carry both long and short positions in all my long-biased asset accumulation programs, and natural gas is no exception to the rule. Never carry more short positions than longs, if you want to respect the asset you are accumulating as wealth itself. Assets don’t exist just to “make bucks” for you. They are wealth.
Most analysts think the growth of natural gas supply with shale drilling, whether real or implied, is bearish for natural gas. I see the growth in the use of natural gas as something that is strengthening the asset. The more people that use an asset, the stronger it is. Natural gas soared about 10% in the past 2 trading days. While most investors focus on how high or low the price can go, I urge you to focus on gaining control over the entire price grid.
There’s a reason I’m laughing this morning while most natural gas investors are out of the market after booking enormous losses, and it is because I carry short positions, and I focus on being able to emotionally and financially allocate risk capital all the way to a price of zero on the long side of natural gas price gridlines.
Focus on buying the highest quality assets at the prices you know can never occur, if you want to build maximum wealth and emotional control. As UNG careened into the $5 level there was likely an enormous changing of the “natgas guard” from weak hands to strong, and the only question could be, are you one of the strong?
Click this key Dow chart now. A rising wedge pattern is similar to a triangle pattern. When price moves towards the apex/nose cone of a triangle, it can be stated that the pattern has failed. When price moves towards the nose cone of a rising wedge pattern, it often bursts topside before tumbling down and fulfilling the bearish implications of the pattern.
What do you see on the Dow chart today? There is a key wedge pattern in play, and price has pushed into the nose cone and then burst out topside. It is interesting that gold is approaching a key downtrend line while the Dow sits where it is. Bull and bear players of size are making their way into the price arena, and they are ready for substantial battle. You need to prepare yourself emotionally right now, to endure whatever comes next, rather than trying to predict your way through this crisis. Don’t get smarter. Get stronger.
Click this GDXJ super bull wedge chart now. Note the red bear wedge that occurred late last year. Think about the difference in size of the two wedges. You saw how far price moved to the downside from the bear wedge pattern.
The price of GDXJ is extended, but only in the very short term. The gold junior stocks bulls have a bull super wedge price pattern in play, with enormous upside implications!

Special Offer For Website Readers: Send me an email to freereports4@gracelandupdates.com and I’ll rush you my free “Five Alive” junior oils report. Learn which penny oil stocks might be set to launch higher if oil breaks out upside from the multiple h&s pattern!

Thanks!

Cheers

Written between 4am-7am. 5-6 issues per week. Emailed at aprox 9am daily.

Mail to:

Stewart Thomson / 1276 Lakeview Drive / Oakville, Ontario L6H 2M8 Canada

Are You Prepared?

Kalaallit Nunaat – Country of the Greenlanders

admin — Wed, 25 Jan 2012 06:58:04 +0000

Richard (Rick) Mills

Ahead of the Herd

As a general rule, the most successful man in life is the man who has the best information

Greenland, the largest island in the world – Australia is considered a continent – and the only territory ever to leave the European Union (Greenland joined the European Community, now the EU, with Denmark in 1973. Greenland dropped its EU membership over tightened fishing quotas in 1985) is located in the North Atlantic Ocean adjacent to the Canadian arctic archipelago. Its maximum length is 2,655 kilometers (km), maximum distance from east to west is 1,290 km and the length of its coast, which is deeply indented with fiords, is estimated at 5,800 km.

About 84 per cent of Greenland is ice cap that can be up to 3kms thick. Approximately one-twentieth of the world’s ice and one-quarter of the earth’s surface ice is found in Greenland – the ice-free zone around the ice cap is up to 300 kms wide and covers an area of 410,000 km² (area of Germany is 357,000 km).

Eric the Red discovered Greenland in the 10th century, or as the Inuits called the country back then, Inuit Nunaat – country of human beings. Today the Inuits call Greenland Kalaallit Nunaat – Country of the Greenlanders.

The population of Greenland is 56,648 with 14,719 inhabitants living in the capital Nuuk (formerly Godthab). The majority of Greenland’s population live in towns along the fjords in the southwest of the country where the climate is relatively mild. The second largest city is Sisimiut, followed by Ilulissat and Qaqortoq.

While geologically part of North America, Greenland is, historically and economically, closely tied to Europe. It’s a bilingual country, Greenlandic is the main language and Danish is the other with English also widely spoken.

Greenland has had “Self Rule” since June 21, 2009 (including control over minerals and petroleum) – which means that the country has assumed making the political decisions that previously come from Denmark.

The only way to travel directly to Greenland is by air to one of the main gateways: Kangerlussuaq (Søndre Strønfjord) in the West or Narsarsuaq in the South, both former American air bases. There are no roads between the towns on the coast so people travel by airplanes, helicopters or by boat – Air Greenland, with ten planes and 600 employees, has just announced regular flights, starting this summer, between Nuuk and Iqaluit.

Travel by sea is possible throughout the year from Nanortalik, in the South, to Sisimiut in the north west (ports have a year round shipping season), but travel from Sisimiut to sites further north doesn’t start till May, at the earliest, because of ice. A report by the World Meteorology Organization (WMO) shows that temperatures in Greenland have risen around 3C above average over the last year.

The WMO also reported that December 2011 was much warmer than usual with rainfall, instead of snow, recorded for the first time in Kuujjuaq.

In 1721, the Danish-Norwegian priest Hans Egede came to spread the gospel in Greenland. Apparently Hans split his time between missionary work and prospecting for mineral resources. This author is not sure of his spiritual success among Greenland’s citizens but Hans did report finding graphite twenty years after arriving.

Coal was being mined in the Disko Bay area by German miners in 1780, in 1851-1852 copper was being mined by an English company.

Cryolite was valuable for soda and enamel production and in the 1890s was recognized as crucial for the production of aluminium. Mining in Greenland was dominated by cryolite production at Ivittuut from 1900 on. The Cryolite mine, operated by the Danish Cryolite Company, was abandoned in 1987 after 130 years of mining.

The lead-zinc mine in Mestersvig, in central East Greenland, was operated by the Northern Mining Company from 1953-59.

The Black Angel lead-zinc-silver mine, near Uummannaq in West Greenland, is 400 km north of the Arctic Circle and was operated by Cominco Ltd from 1973-86, and from 1986 to 1990 by Boliden AB. The mine was closed with ore reserves of approximately 2Mt remaining – this mine will be reopened.

As mentioned approximately 80% of Greenland is covered by the ice sheet, with the exposed area forming a fringe around the coast. These non ice covered coastal areas – geological terrain that is simply an extension of the *Canadian Shield – expose numerous mineral belts that are highly prospective for gold, nickel, platinum group elements (PGE), copper, lead, zinc, molybdenum, tantalum and niobium, iron ore, several forms of industrial minerals, diamonds, rubies and rare earth elements (REEs).

*Greenland’s geology is continuous with that of Canada and Northern Europe. It includes:

Archaean cratons – potential for diamonds, gold, REE
Palaeoproterozoic mobile belts – potential for base metals, PGE’s, gold and tantalum
Lower Palaeozoic sediments – potential for base metals
Carboniferous Cretaceous sediments – potential for coal
Lower Tertiary intrusive complexes, the Skýrgaard intrusion being the most important in terms of gold and PGE potential

Greenland’s offshore geology is highly prospective for petroleum. The United States Geological Survey (USGS) estimated, in 2007, that the East Greenland Rift Basins Province could hold over 31 billion barrels of oil, gas and natural gas liquids. The USGS also estimated that the waters off Greenland’s west coast could contain more than 110 billion barrels of oil (roughly 42% of Saudi Arabia’s reserves).

ExxonMobil, Chevron, Husky, Encana, the UK’s Cairn Energy and Denmark’s Dong Energy are among the companies that have either already won or applied for exploration licenses from Greenland’s Bureau of Minerals and Petroleum for acreage.

The Government of Greenland recognizes the future of the country lies in the development of its mineral resources and public pressure is increasing for better schools, health care and retirement plans. With the Danish government looking to reduce its subsidy of Greenland (approximately half of government revenues comes from grants, about $650 million in 2009) and an economy historically dependant on shrimping, declining fishing (82% of exports), sealing and fish and seal product exports (Europe has banned seal product imports) development of resource projects is now high on the governments list of priorities.

In May 2007 a US aluminum producer concluded a memorandum of understanding with the Greenland Home Rule Government to build an aluminum smelter and a power generation facility in the Maniitsoq area – Greenland has abundant hydropower potential.

Bureau of Minerals and Petroleum (BMP)

The BMP is the authoritative body for all administration in relation to the mineral resources industry in Greenland. Licensees only have to apply to one place to obtain all their necessary licenses – the BMP is very much a ‘one stop shop’ – ensuring efficient administration in the area of mineral resources. The BMP has the regulatory authority to review, evaluate and approve all SIA’s, licenses and facilitate public hearing processes.

Process of Mineral Applications

The BMP took over from the Danish authorities in 1998. Because of a lack of awareness of Greenland’s mineral/petroleum potential the resource extraction industry suffered a general decline in interest. This trend continued to the all time low in 2002.

The BMP designed a resource awareness marketing strategy focused on the two biggest mining countries in the world: Australia and Canada.

From 17 exclusive licenses in 2002 the number grew to more than 70 in 2010, and in April 2011 the number had grown to 94 including current applications.

In the same period the number of non-exclusive prospecting licenses went from six in 2002 to 20 in April 2011.

A list can be downloaded here showing all active licences and current applications.

From 2003 to 2010 the Government of Greenland issued four exploitation licenses for mining activities; Angel Mining is producing gold; Black Angel Mining has a mine under construction; QuadraFNX Minnig Ltd. is waiting for higher market prices and one mine is temporarily closed (Minelco). London Mining wants to see the Isua iron ore mine, which hugs Greenland’s ice sheet about 150 kms northeast of Nuuk, in operation by 2015.

Canada experienced a growth in expenditures (exploration expenses and activities) of 35 percent from CAD $1.911 billion in 2006 to CAD $2.624 billion in 2010. Greenland, in the same period, experienced an increase of almost 390 percent from DKK 135 million to a record DKK 524.5 million in 2010.

Australia experienced a growth between of 116 percent from AUD 1.028 billion in 2004 to AUD 2.223 billion in 2009.

Australian and Canadian listed company’s represent more than 55 percent of the resource sector companies currently working in Greenland.

Conclusion

Greenland is politically stable, maintains a long lived democracy and tax system, is open to foreign investment, and is mining friendly being eager to attain political independence from Denmark.

But how will Greenland pay for the responsibilities it may eventually take over from the Danish state? The main challenge to securing greater self-government is overcoming the reliance on the annual grant Greenland receives from Denmark and replacing it with revenues generated from within the country. Mineral mining and oil and gas production would ease this dependence. Fortunately Greenland is highly prospective for minerals and is hugely underexplored – the country is a new, and one of the last, frontiers for mineral and petroleum exploration.

“…climate change has already opened new areas for the exploitation of mineral resources as the ice cap is retreating. And in combination with the political and economical control of our mineral resources it will open new opportunities for Greenland to gain more economical and political independence from Denmark.” Josef Motzfeldt, MP in Greenland’s Home Rule government

Aheadoftheherd.com will be featuring two companies working in Greenland in future articles. The first has a 100% interest in 1,300 sq km being highly prospective for rare earths, diamonds, specialty and base metals. Our second featured company has acquired an exclusive exploration license for 4,841 sq km covering numerous outcrops of nickel-copper sulphide and other metals.

Greenland should be on every resource investors radar screen. Is it on yours?

If not, maybe it should be.

Richard (Rick) Mills

rick@aheadoftheherd.com

If you’re interested in learning more about the junior resource sector, bio-tech and technology sectors please come and visit us at www.aheadoftheherd.com

Site membership is free. No credit card or personal information is asked for.

***

Legal Notice / Disclaimer

This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment.

A Coming Great Global Angst

admin — Mon, 23 Jan 2012 22:29:18 +0000

Richard (Rick) Mills
Ahead of the Herd

As a general rule, the most successful man in life is the man who has the best information

Our agriculture system is concentrated on producing a very few staple crops – there is a very serious lack of crop diversity. Corn, wheat, rice and soy are the main staples and production is oftentimes half a world away from where the majority of the crop would be consumed. The world’s extreme poor exist almost exclusively on what is a ‘buy today, eat today’ plant based diet – wheat, corn, soy or rice provide the bulk of their calories.

Taken together, this means if we get hit by a particularly bad harvest in one area, if a severe El Nino strikes, or more localized severe weather phenomena strikes, food supplies can get totally out of control in many countries.

Considering that the global food supply chain is weak (easily disrupted by lack of transportation, weather, insurgency, stealing) and non-existent in many areas then you have a recipe for potential disaster in many regions of the world.

Inefficient supply chains, intensified weather phenomena and a race to secure dwindling supplies of commodities by developed economies (and their richer inhabitants) all mean the very basics of human survival will become increasingly scarce for the poorer people in the developing world.

Hundreds of millions of marginalized people, people perhaps counted by the billions, across all nations, will feel the extreme pinch of increased prices, across all asset classes, on their household budgets. But especially so in what those people need the most – water, food and clothing – the bare essentials necessary for survival. Socio-economic turmoil – lawlessness, poverty, lack of adequate medical facilities and attention, low to no employment, low wages, disease, no clean drinking water or water for irrigation and shortages of food or unaffordable food can all cause socio-economic pressure to build in many countries.

The increase in the price of food is the straw that breaks the camel’s back – the real cause of global angst is the rising cost of survival. Many people, already living in poverty, and those on poverties edges, are far less capable of absorbing the increased costs of what is really just basic survival for themselves and their families. Yet this is the first group of people who will be impacted by the coming unstoppable waves of inflation and real shortages - whether localized or temporary because of supply chain breakages or poor harvests.

The most severe consequences of non-existent or more expensive staple foods are first felt in developing countries whose citizens spend an exorbitant percentage of their incomes feeding themselves and their family compared to families in the western world. Almost half of the planets population lives on less than $2.50 a day – roughly 1.4 billion people live on less than $1.25 per day. When food prices soar these people lack the money to feed themselves and their children – when your living on a couple of dollars a day, or less, and most of your income already goes to feed your family there’s no money to cover a price spike in the cost of survival.

On average developing countries citizens spend a much larger percentage of their wages on food than do their counterparts in developed nations. Some published estimates are as high as 50 to 60 percent of income going towards food – when, not if, a food supply shortfall happens, for whatever reason, then almost any city, and almost any countryside could be aflame with strikes, riots and civil disobedience.

When a countries citizens get upset, when the drama hits the streets, when the riots start, regime change in many of these developing countries can quickly become a reality.

Conclusion

“Angst denotes the constant struggle one has with the burdens of life that weighs on the dispossessed.” urbandictionary.com

Narrowly focusing on increasing production as the Green Revolution did cannot alleviate hunger because it failed to alter three simple facts:

An increase in food production does not necessarily result in less hunger – if the poor don’t have the money to buy food increased production is not going to help them
A narrow focus on production ultimately defeats itself as it destroys the base on which agriculture depends – topsoil and water
To end hunger once and for all, we must make food production sustainable and develop secure distribution networks of needed foodstuffs

The combination of a supply chain breakdown, crippling national debts, out of control government spending, climate change and runaway inflation might cause a global food crisis. Is the rising cost of survival on your radar screen?

If not, maybe it should be.

Richard (Rick) Mills

rick@aheadoftheherd.com

If you’re interested in learning more about the junior resource sector, bio-tech and technology sectors please come and visit us at www.aheadoftheherd.com

Site membership is free. No credit card or personal information is asked for.

***

Richard is host of Aheadoftheherd.com and invests in the junior resource sector. His articles have been published on over 300 websites, including: Wall Street Journal, SafeHaven, Market Oracle, USAToday, National Post, Ozcopper, Stockhouse, Lewrockwell, Uranium Miner, Casey Research, 24hgold, Vancouver Sun, SilverBearCafe, Infomine, Huffington Post, Mineweb, 321Gold, Kitco, Gold-Eagle, The Gold/Energy Reports, Calgary Herald, Resource Investor, Mining.com, Forbes, FNArena, Uraniumseek, and Financial Sense.

***

Legal Notice / Disclaimer

This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment.

Cangold – More Than Meets the Eye

admin — Sat, 21 Jan 2012 05:19:15 +0000

Richard (Rick) Mills
Ahead of the Herd

As a general rule, the most successful man in life is the man who has the best information

In late April 2011, Cangold Ltd. TSX.V – CLD, signed a letter of intent with Brigus Gold Corp. (formerly Linear Gold). By paying one million dollars and issuing six million shares to Brigus, CLD entered into an option agreement to acquire a 75% interest in the Ixhuatan advanced stage gold project.

The Deal

To earn its 75% interest Cangold will be required to pay to Brigus a total of CDN$10 million and issue twenty million shares over a three year period. CLD also has to complete an independent third party feasibility study on the Campamento Deposit located on the Ixhuatan property.

Brigus will receive a payment of CDN$5.00 per ounce of gold in the Proven and Probable category included in the feasibility study and has a two percent net smelter royalty (NSR) on production.

Location

The Ixhuatan property is in the north-western part of Chiapas State, southern Mexico, 100 kilometers (km) south of the city of Villahermosa. Chiapas State lies in the 450km long gap between the Trans Mexican Volcanic Belt to the northwest and the Central American Volcanic Arch to the southeast. The area is both volcanically and tectonically active and covers the triple junction of three crustal plates – the North American, Caribbean and the Central American. This tectonic setting has generated a highly favorable environment for the development of structures and the associated fluid flow required for major world class gold and base metal deposits.

Ixhuatan

The Ixhuatan property comprises 4,176 hectares and there are several distinct styles of mineralization around the southern and western flanks of a highly eroded volcano.

The property is host to the Campamento Au-Ag deposit (carbonate base metal Au mineralization) and the Cerro La Mina Porphyry Cu-Au-Mo prospect.

Several other Au and Au-Ag mineralized zones and exploration targets have been identified. The San Isidro, Laguna Chica, Central, Caracol and Cacate prospects, are all located in a one to two kilometer wide, four km long corridor between the Campamento and Cerro la Mina deposits.

Both the porphyry and carbonate base metal mineralization on the property are prone to supergene gold enrichment and produce strong gold in soil geochemical anomalies.

The only other significant mineralization discovered to date, close to the Ixhuatan property, is the Santa Fe Mine area (The Santa Fe mine claims have belonged to Minera Frisco since the 1960’s, Minera Frisco is controlled by telecom tycoon and mining magnate billionaire Carlos Slim). The Ixhuatan property was acquired by Linear, in 2000, due to its proximity to the Santa Fe mine.

Investigation of numerous gold and copper zones at the former polymetallic (gold, silver and copper) Santa Fe mine indicated that the geological setting was a high sulphidation environment with the potential for a copper/gold porphyry system at depth.

A stream sediment geochemical study was carried out in the northern portion of Chiapas. The survey indicated strong gold in stream sediment anomalies on the Ixhuatan property and the properties geochemical anomalies were located during follow-up work.

Three areas of Au-Cu-Mo (molybdenum/moly) geochemistry – the San Isidro, Central and El Campamento zones – were found to be highly altered in a similar fashion to the Santa Fe area.

More than 89,000 meters of drilling in 342 holes have been completed on the Ixhuatan Project.

Campamento

Gold and silver mineralization occurs with base metals in veinlets and as wall rock disseminations with native gold and electrum being the dominant gold bearing minerals.

The first drill campaign was conducted on the property between May 2004 and October 2007. There was 69,679 m of drilling done in 282 drill holes. This drilling was completed on six separate targets but most of the drilling occured on the Campamento Zone.

Resource

The Campamento deposit contains a NI43-101 compliant resource estimate, using a using a 0.50 gram per tonne (g/t) gold cut-off, of:

Measured and Indicated – 1.041 million oz of gold and 4.4m oz of silver within 17.6 million tonnes (Mt) at an average gold grade of 1.84 grams per tonne and average silver grade of 7.79 g/t.

1.84g/t gold = $97.85 tonne @ $1654.10 gold per oz.

7.79g/t = $7.58 a tonne silver at $30.25 an oz of silver.

Inferred – 0.703m oz of gold and 2.26m oz of silver within 21.8 Mt at average grades of 1.01 g/t gold ($53.71) and 3.23 g/t ($3.14) silver.

Since the Campamento resource is already so well defined Cangold will concentrate on the engineering studies needed to move the deposit as fast as possible down the development path towards a full feasibility study. Metallurgical sampling has been initiated to facilitate initial flow sheet development and ascertain potential gold and silver recoveries. This work provides the critical information necessary for the completion of a scoping study. The next step would be starting a prefeasibility study in the second half of 2012.

Cerro La Mina

A second drilling campaign consisting of 20,027 meters of drilling in 60 holes was completed from October 2007 through December 2009. The emphasis was on defining the emerging gold-copper-molybdenum resource of the Cerro la Mina deposit 1.5 km ENE of the Campamento deposit, plus evaluation of the showings between Campamento and Cerro la Mina.

Infrastructure

Chiapas has good communications and highway systems. The Pan American Highway links the state capital, Tuxtla Gutiérrez, to the state of Oaxaca and the country of Guatemala. Highway 195 passes adjacent to the Ixhuatan property and joins Tuxtla Gutiérrez to Tabasco State’s capital, Villahermosa. Both cities can provide services, supplies and personnel.

The railway system and air transportation are also good with international airports located in Villahermosa and at Tuxtla Gutiérrez.

Access to the Pacific Ocean is from Puerto Madero, a port city near the Guatemala border.

Chiapas has four major hydroelectric power plants so electricity is plentiful and inexpensive.

Enviromental

Environmental regulations in Mexico are governed by the Secretaría de Medio Ambiente y Recursos Naturales (SEMARNAT).

Land Tenure

The ejido, a communal land system, is a distinctive part of Mexican history. Ejido lands are the lands surrounding villages and settlements. The ejidos own the surface rights to the lands near their villages. Land tenure for mineral rights are acquired through the national government.

Agreements have to be negotiated with each ejido to allow work to be carried out.

The projection of the Cerro La Mina magnetic (intrusive) and geochemical trends clearly continues northeast onto the San Francisco Jacona ejido area. Unfortunately the ejido, who control surface rights to Cerro la Mina, voted unanimously to deny access to their properties – Kinross withdrew from the option agreement with Liniar (Brigus Gold) after expending US$11,612,610.34 on the Ixhuatan project (on the Cerro la Mina showing) between October 2007 and December 2009.

Social Due Diligence

Cangold intends to work with the local communities in advancing the Ixhuatan project and will use a collaborative approach to project development after identifying all local stakeholders.

Potential

Linear and Kinross Gold Corporation agreed on September 6, 2007 for Kinross to earn up to a 70% interest in the Ixhuatan project by:

“Undertaking US$15,000,000 of exploration expenditure and making payments to Linear of US$101 million plus a production decision fee of up to US$15 million.”

When the San Francisco Jacona ejido refused permission for Kinross to work on their lands Kinross walked away from the deal with Linear. There was simply no way for them to potentially negotiate a deal, and then get the necessary results back from their work, within the time frame of their massive cash earn in commitment. The Campamento resource, while a very big deal for a junior was not, at the time, something a major mining company would option a property for, certainly not on those agreement terms. Kinross was hunting for something much bigger and they drilled plus 20,000 meters and spent $11m looking for it before they were forced to drop the deal. Recall also that this was 2009, post-crash, and everyone was slashing exploration budgets.

“The setting of the area shows similarities to that of the majority of giant porphyry deposits worldwide: it occurs above shallowly-dipping subduction, where an aseismic ridge is being subducted. The composition of the associated igneous rocks is alkalic, of the shoshonite suite, similar to those hosting such deposits as Grasberg (Indonesia) and Bingham Canyon (USA). The main prospects under exploration in the Ixhuatan area show abundant evidence for porphyry affinities, including very widespread biotite and feldspar alteration, and the appearance along the eastern margin of the area of a very thick advanced argillic lithocap similar to those found over porphyry deposits in other parts of the world.” Noel White, world renowned geologist

Conclusion

The Ixhuatan Gold Project already has, in the Campamento Deposit, a NI 43-101 compliant measured and indicated resource of 1,041,000 ounces of gold and 4,400,000 million ounces of silver, and another 700,000 ounces of gold and 2,250,000 ounces of silver in the inferred category – a total of 1,741,000 ozs of gold and 6,650,000 ozs of silver.

Cangold can earn 75% of the existing resource for taking what is already a scoping level project through feasibility.

“Sometimes it isn’t just about the resource, sometimes it’s also about the resourcefulness.” anon

Bob Archer, Cangolds president and CEO, and his management team are old Mexico hands, they are well established in the country having numerous good contacts. They know how to work there, that’s beside the fact they have proven they can secure projects and put them into production – Bob is also president and CEO of Great Panther Silver TSX with its two operating mines. It was Bob Archer who did the deal and bought GPR’s Guanajuato mine from a co-op of miners – and who also put the Guanajuato and Topia mines into production and secured the San Ignacio project, GPR’s next mine.

Cangold management has been in the country for a number of years and they know how to work in Mexico.

Cangold is currently trading at .31 a share. For this you get:

75% of the resource of 1,741,000 ozs of gold and 6,650,000 ozs of silver on the Campamento Deposit
Maybe the potential of Cerro La Mina
The showings between Campamento and Cerro la Mina
A commanding position controlling a highly prospective district the main potential of which is for world-class epithermal and porphyry copper-gold deposits
Excellent management, very experienced in Mexico and in dealing with the Ejido’s
Tight share structure with high insider ownership
Stocked treasury
Minera Frisco – good neighbors to have

So is there more to the Cangold story than meets the eye? Perhaps, truly only time will tell, but it is an intriguing story, considerably de-risked, well supported by possible production from the current Campamento gold/silver resource and, in this authors opinion, currently undervalued based on its 43-101 compliant resource.

A company that is both on the path to production and profits, and has such enormous blue sky potential should be on every investors radar screen. Is Cangold on yours?

If not maybe it should be.

If you’re interested in learning more about the junior resource sector, bio-tech and technology sectors please come and visit us at www.aheadoftheherd.com

Site membership is free. No credit card or personal information is asked for.

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Richard is host of Aheadoftheherd.com and invests in the junior resource sector. His articles have been published on over 300 websites, including: Wall Street Journal, SafeHaven, Market Oracle, USAToday, National Post, Stockhouse, Lewrockwell, Uranium Miner, Casey Research, 24hgold, Vancouver Sun, SilverBearCafe, Infomine, Huffington Post, Mineweb, 321Gold, Kitco, Gold-Eagle, The Gold/Energy Reports, Calgary Herald, Resource Investor, Mining.com, Forbes, FNArena, Uraniumseek, and Financial Sense.

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Legal Notice / Disclaimer

This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment.

Richard does not own shares of Cangold Ltd. TSX.V – CLD

Cangold Ltd. TSX.V – CLD is a sponsor of Richard’s website aheadoftheherd.com

Derisking Gold Juniors, Step by Step

admin — Thu, 19 Jan 2012 10:07:07 +0000

Richard (Rick) Mills

Ahead of the Herd

As a general rule, the most successful man in life is the man who has the best information

Derisking Gold Juniors, Step by Step: Rick Mills

Source: Sally Lowder of The Gold Report (1/18/12)

If you’re among the many who consider investing in the junior resource sector nothing more than a crapshoot, look into Ahead of the Herd Publisher Rick Mills’ steps to derisk the inherently risky business of investing in junior resource companies. In this exclusive interview with The Gold Report, Mills not only spells out the steps involved in the derisking process, but also cites specific examples of juniors he especially likes and discusses the features that put them ahead of the herd.

Companies Mentioned: Altair Ventures Inc. – Aurizon Mines Ltd. – Brigus Gold Corp. – Cangold Ltd. – Kootenay Gold Inc. – NioGold Mining Corp. – Terraco Gold Corp. – VMS Ventures Inc.

The Gold Report: We have seen some incredible volatility in the market over the last three or four months, with many junior resource stocks on the Toronto Venture Exchange beaten down, even if they have proven resources and substantial cash treasuries. We have also seen some volatility in the price of gold and a disconnect between the price of gold and the price of juniors. In this environment, how should investors approach risk in the junior resource space?

Rick Mills: I agree with Baron Nathan Rothschild who became a legend during the financial crisis right after the Franco-Prussian War. As the story goes, a panic-stricken investor came screaming into his office yelling, “You advise me to buy securities now? Now? The streets of Paris run with blood!” Rothschild replied, “My dear friend, if the streets of Paris were not running with blood, do you think you would be able to buy at the present prices? Buy when there’s blood in the streets, even if the blood is your own.”

I’m pretty sure things today are not as bad as they were back then, but this market offers contrarian-minded investors an opportunity to take huge advantage of discount share prices and, as you pointed out, many are trading below cash in the bank. Many, many are way undervalued compared to what they have in the ground and what they will have. The thing to do is to even further derisk.

Everything we do has some level of risk, from flying in a plane to walking across the street. All our lives we identify and quantify risk, so it’s second nature and part of our makeup. Everyone has his own risk profile, of course. For instance, maybe you won’t bungee-jump off a bridge or willingly parachute from an airplane, but you’ll happily get crazy driving around on an ATV or a snowmobile. You have a risk profile. You will do this; you won’t do that.

TGR: So far, so good. So how do you derisk these stocks?

RM: The way to derisk investments into junior resource companies is to know your risk profile. Then wisely deploy capital into the right management team in the right stage, for you, of company development.

TGR: What steps would investors take to identify companies they’re comfortable with? How can they make better-informed choices and thus create less risk?

RM: The most important things are to know yourself and to know that juniors are inherently risky. Understand how much volatility you can handle and how much patience you have to wait while a story plays out. Develop the discipline not to get faked out of your position or chase after hot tips or listen to the cheerleaders. Have a clear and complete understanding of why you’re here in the first place. Know the different development stages of a junior, because risk lessens as a company moves a project through drilling and post-discovery resource definition, then into the various mining studies, and finally into raising money, building the mine, and ultimately, mining. You really have to know who you are invested with and the story. Monitor the progress of your management team with its project and make sure they’re meeting goals and timelines.

TGR: And when you find companies that suit your risk profile and pass muster in terms of development stage and management performance, you jump in?

RM: You don’t want to just walk in and buy all your shares. Develop a plan to buy shares over time . I don’t use stops, because these stocks can make huge moves down in a day and you could get knocked out just before they move back up and go on a tear the next day. I’m here long term so short-term moves don’t bother me; stops in juniors, for non-traders, create more problems than they solve.

TGR: Could you elaborate a bit on evaluating the various development stages?

RM: The most upside and the greatest risk come with the greenfields, the junior resource companies when they are exploring. It takes a lot of patience with them and with the management teams to let stories play out. Some of these stocks are very thinly traded, so it doesn’t take much to make them jump in either direction. Make a discovery, get some good drill assays and they explode in the share price. Get some bad assays and they implode to the downside—make sure they have a back up play, a plan B, already secured and ready to go. They are the riskiest plays by far, but they offer the highest reward.

Next is what I call the post-discovery resource definition stage. A company at this stage already has found something, its share price has exploded and now the company is undertaking a nice drill program. After the price has settled back, decide on an entry point and start to get in. Let the company build an NI 43-101-compliant resource. The risk has been greatly reduced, and of course there’s no longer any waiting for a discovery.

The study stage comes next. After the company has its NI 43-101-compliant resource, it gets into scoping, prefeasibility and feasibility studies. Companies at this stage are so much further down the development path that much of the guesswork about grade, size, cost and metallurgy has been taken out of the equation for investors. These companies have done sufficient work to give investors a certain level of confidence that they’ll successfully move their projects along.

TGR: Haven’t a lot of companies at this stage also been derisked in the sense that their share prices are depressed as well?

RM: Oh, absolutely. A lot of these companies not only have the value, but they continue working and adding to that value every day. It’s a fantastic opportunity to buy some companies not only on the path to production but also on the path to some pretty decent cash flows.

TGR: Could you talk about any companies you like that are enroute to production and positive cash flow?

RM: Not yet. We haven’t finished derisking. Let’s look at gold mining. Even though the price of gold has gone up roughly six times, global gold production has been falling since 2001, which tells us that higher gold prices are not bringing on more gold supply. The money being spent on gold exploration is finally starting to climb, but very few big new deposits are being found, so gold miners are adding to their resources by buying them from smaller-cap miners and explorers—the companies making the new discoveries. The majors need them to replace their reserves and depend on them for their upstream flow of new projects for development. That’s what juniors do; that’s their function in the food chain. So it removes even more risk from the equation for the juniors that are sitting on existing deposits; they are becoming more valuable day by day.

The majors have gone through mergers for much of the last decade, and every round of mergers obviously leaves fewer majors. That said, large Asian miners have been entering the sector. They love not only the gold deposits, but copper-gold porphyries and base metals as well. All of this makes juniors with discernible deposits moving down a path to production all that much more valuable.

TGR: And less risky. So are you ready to tell us about some of those companies, the ones with discernible deposits that are close to production?

RM: Not quite. What is the biggest risk all junior companies face—not investors, but the companies themselves?

TGR: Running out of money?

RM: Move to the head of the class because that is the absolute major risk, the most serious risk all the juniors face—remember most do not have cash flow. So if the markets look a little wonky and you think juniors will have a hard time raising money, you can further derisk by looking at companies with treasuries full enough to keep them working—to get by for a couple of years. And you can derisk even more by narrowing these companies down to those that have cash now and that will actually get some cash flow from production in the next little while.

TGR: You’ve given us a good group of filters for investors to use.

RM: We’re doing some pretty serious research here and we have a very strong plan in place. We have directly targeted risk with the objective to lessen it yet leave potential major share price upside.

With careful due diligence and by thoughtfully choosing the development stage of companies we invest in, I think we can make some money.

TGR: So are we ready to hear about some of those companies?

RM: Yes. And these are in no particular order. Let’s start with Cangold Ltd. (CLD:TSX.V). This is Bob Archer’s gold company, which is working the Ixhuatan gold project in southern Mexico. Archer also has a silver company called Great Panther Silver Ltd. (GPR:TSX; GPL:NYSE.A). The Ixhuatan property encompasses seven or eight different zones, all within a kilometer or two of each other, and all viable targets in their own right that Cangold intends to evaluate. So far, the most drilling has been done on the Campamento deposit, so bringing that into production is the main focus.

Cangold has stepped into something that is already well defined, based on 342 holes and 89,000 meters (m) of drilling, so it won’t have to spend $500,000 a year drilling to try to find something or basically drilling this off. This deposit has a Measured and Compliant resource of 1.041 million ounces (Moz) gold and 4.4 Moz silver, with another 0.7 Moz gold and 2.2 Moz silver in the Inferred category. The deal Cangold made with Brigus Gold Corp. (BRD:TSX; BRD:NYSE.A) calls for Cangold to earn 75% interest by taking this through feasibility.

Campamento is at the scoping study level right now, and Cangold plans to move it as fast as it can through prefeasibility and feasibility. The work needed to advance this project to the mine stage is almost all engineering studies. Optimizing the open-pit shell, looking for the best place to locate a plant and tailing ponds has already started. So this is basically a kit mine that Cangold will develop and put into production.

And Cangold already has done a 5:1 rollback. It didn’t have any problem raising money at $0.50, has a very tightly held share structure and has all that gold and silver in the ground to bring out via an open-pit mine. And it’s trading at $0.30/share.

TGR: Why did Brigus make this partnership with Cangold when it already is a producer, running the Black Fox Mine up in Canada?

RM: I really think it’s because of Bob Archer and his experience with Great Panther. He’s well-established in Mexico, has excellent contacts and knows how to work there. Also, major shareholders such as Sprott back this deal up.

TGR: Certainly Archer has had great success with his mine at Guanajuato.

RM: That’s right. I was buying Great Panther years ago in the high $0.30s and talked with him at the time. He laid out what he wanted to do and has basically delivered on everything. He has built a very strong team that works hard and gets the job done.

TGR: What are some of those other companies?

RM: Okay, the next one is Kootenay Gold Inc. (KTN:TSX.V), which has the 100%-owned Promontorio silver project in Sonora, Mexico. Like Cangold, Kootenay already has a significant resource. AGP Mining Consultants’ resource estimate puts Indicated mineral resource at 5.2 million tons, with 8.9 Moz silver, 99 million pounds (Mlb) lead and 111 Mlb zinc. It grades 52 grams of silver, 0.86% lead and 0.96% zinc.

Since that estimate, Kootenay has drilled 53,000m into Promontorio at an average depth of 300m; the results from two-thirds of that drilling will go into a new resource estimate, which is due out in another month or two. Going back through the results on the website, you see some pretty decent assays, and I expect a very definite resource increase—a doubling or even tripling in the new estimate. Then Kootenay will launch another big and aggressive drill program. It wouldn’t surprise me to see 50 Moz silver and quite likely the equivalent to that in lead and zinc after that drilling.

With all of that, plus a very good share structure with heavy management participation, a very healthy treasury, and more news coming, I refuse to believe that Kootenay won’t be revalued much, much higher over the coming year.

TGR: With the flagship property actually focused more on silver than gold, is it odd that this company is Kootenay Gold rather than Kootenay Silver?

RM: The company took its name from the Kootenay region of British Columbia, where it started, and it has eight or nine serious joint ventures (JVs) with some pretty good junior resource companies on gold properties there and in other parts of B.C.—Copley, Red Lobster, Deer Creek, Jumping Josephine and Rosetta Stone.

Kootenay has the best of both worlds, and operates on the prospector generator business model, taking property dilution instead of share dilution. It uses the money that generates along with money raised to work on its 100%-owned Promontorio. I don’t think most people realize that Promontorio, as a standalone, will be able to potentially produce 3–5 Moz silver a year plus another 3–5 Moz silver equivalent over a 10-year-plus timeframe. In the context of other silver producers in Mexico, that’s a pretty significant asset. It usually takes these producers two or three mines to get up to production numbers like that, and Kootenay will get there with a single asset. That’s pretty uncommon and pretty valuable.

TGR: A lot of great silver producers in Mexico certainly would be interested in this project.

RM: Oh, one project with the potential to produce that much silver and silver equivalent in a year has to be on every radar screen. Don’t get me wrong, Kootenay can take this to production. It absolutely can. It’s just a matter of whether an offer is too good to refuse.

TGR: Well, you’ve named two companies with assets in Mexico. It certainly is a great mining location.

RM: It is, but let’s move up north into Nevada and Idaho with Terraco Gold Corp. (TEN:TSX.V). Terraco has two exciting projects—the Almaden, northwest of Boise, and the Moonlight, northeast of Reno.

The Almaden project could go into production today; it’s very similar to deposits such as the Hollister mine and the Ken Snyder Midas mine in northeast Nevada. It has almost 1 Moz of Measured, Indicated and Inferred NI 43-101-complaint resources, based on almost 900 drill holes. Some of the mineralization outcrops, in fact the bulk of the deposit, lies within 100m of the surface. The exciting thing about this deposit, as with the Hollister and Midas mines, is that the deposit has substantial evidence to suggest higher-grade—maybe bonanza-grade—feeder shoots at depth.

I think Terraco will boost the resource quite a bit just due to the type of drilling program it is using and the fact that it is improving the metallurgy. So even if Terraco does not hit any more gold, I expect a significant increase in the resource. But if the model the drilling is based on proves to be correct and Terraco hits these feeder zones, the impact will be huge.

TGR: Terraco’s chart suggests it has been beaten down quite severely, roughly about 50% in the last nine months.

RM: That’s right. But Ken Snyder and Charlie Sulfrian, who are running the drill program, have discovered several mines. Snyder is one of the foremost geologists and explorationists working today and Sulfrian is a mine finder as well and a very good metallurgist. When he says he might be able to work on the recoveries, you have to anticipate a measure of success. When I asked him if the Almaden could be put into production as it is, he said yes. As I said, with the different drill methods and improved metallurgy, you’re going see the resources at Almaden expand, and when you add in the blue sky of the feeder zones, you’re looking at something pretty exciting. The story gets better and better all the time.

As you indicated, it’s a little beaten up and has been a little worked over—who isn’t—but Terraco has money in the bank and continues to increase shareholder value. Management isn’t turtling up and crawling into a hole and crying themselves to sleep at night. When the market turns around—I fully believe the market’s going to turn around—the companies we’re talking about will be ahead of the herd. They’re out there working and building shareholder value.

TGR: How about the Moonlight project?

RM: Moonlight is a call option on gold discovery. It sits directly north of Spring Valley, a resource of 4.1 Moz. Since that estimate, Terraco has secured the Black Ridge Fault property and incorporated it into Moonlight, hired Tom Chadwick to map it and has now started drilling.

TGR: Terraco also closed a very creative financing in December, with the royalty deal it made on the Spring Valley gold project.

RM: Yes. That deal is a hell of an example of how to create value for shareholders. Spring Valley is a JV between Barrick Gold Corp. (ABS:TSX; ABS:NYSE) and Midway Gold Corp. (MDW:TSX; MDW:NYSE.A), where Barrick has the right to earn 60% interest in the project by completing work expenditures totaling $30 million (M) by the end of 2013. But that sliding royalty from the Barrick/Midway JV is really interesting. I did the math.

TGR: Okay, let’s hear about it.

RM: Terraco receives no royalty on the first 500,000 ounces (oz) of production. After that, Terraco pays $12.5M and gets a 2.5% royalty on 76% of the deposit or, as it stands today, 2.15 Moz. A very conservative 70% recovery means 1.51 Moz gold. Using $500/oz as the cost and a very conservative gold price of $1,100/oz means $600/oz net. On 1.51 Moz gold, that adds up to $22.6M. It will cost $12.5M to get that, of course, which takes Terraco down to $10.1M. Terraco has already received $5M as an initial payment for doing the deal. So with the $10.1M coming from the Barrick/Midway JV net smelter returns royalty and the $5M already in the treasury, Terraco is cashed up today and has a future royalty stream.

It’s a good example of a pretty smart, on-the-ball management team increasing shareholder value. I think investors will find some joy in this one.

TGR: Excellent. Heading further north, do you have any Canadian projects to talk about?

RM: VMS Ventures Inc. (VMS:TSX.V) is a solid junior, among the smartest explorers around using all the modern techniques, and it’s a survivor. VMS Ventures has been through the tough times, back in 2000 and again a few years ago in 2008. This company knows how risky it is for a junior to run out of money, and it isn’t going to do it. It has $10M in the treasury to start 2012—enough to keep exploring and going on its own until cash flow starts. Let’s talk about that cash flow.

VMS Ventures has a JV with HudBay Minerals Inc. (HBM:TSX; HBM:NYSE) on its Reed Lake copper deposit that will take the company to production next year. It will get 30% from this operating mine—that’s many, many millions of dollars a year. When you look at the kind of cash flow that this carried-to-production scenario at Reed Lake will give the company, you have to expect an upward revaluation in the share price. Another factor that helps derisk VMS Ventures is HudBay’s Trout Lake Mine is coming offline, its plant in Flin Flon is underutilized, so it needs the feed from production at Reed Lake.

In addition to the JV, HudBay has optioned some of VMS Venture’s properties. One discovery, Reed North, has enormous potential to be an absolute monster of a deposit.

Something like 98% of VMS’s properties are 100% owned. The company did several drill programs last year and will be following up on three discoveries made on three different 100%-owned properties. VMS also owns 45% of North American Nickel Inc. (NAN:TSX.V), which has a possible district-size nickel play in Greenland. With all it has going—its considerable treasury, the cash flow, the exploration upside, the management—VMS Ventures is a poster child for how juniors should manage capital. As we agreed, the most dangerous thing for a junior is to run out of money. This company absolutely doesn’t have that problem. And, as a matter of fact, the closer it moves to production, it’s just going to get better and better.

Fully cashed up with $10M in the bank and financing costs for its 30% of the mine covered, VMS Ventures also focuses on some of the safest areas for investment. It has no geopolitical risk.

TGR: Because VMS is a copper play, you must anticipate somewhat stable demand for copper, too.

RM: We’re never going to see $0.85/pound (lb) copper again. With copper at $3–4/lb, Reed Lake should be wildly profitable. Put $71M into building a ramp down to the deposit and who knows how much more copper it will find? It’s not only that this deposit has 5% copper equivalent over a couple of million tons, but these deposits come in pods. So far, VMS has not drilled off to the side or underneath because it simply doesn’t make economic sense. But once it has the decline into the deposit, it will build side rooms, set up drills and start fan-drilling and see what it gets, right?

TGR: Right. And the idea of diversifying a little bit into base metals makes sense for the typical investor. Any more juniors that you’d like to talk about?

RM: I really like NioGold Mining Corp. (NOX:TSX.V; NOXGF:OTCPK), which is focused in Quebec. These people at NioGold are smart. They can put land packages together, and they have. And look at the deal that they’ve done with Aurizon Mines Ltd. (ARZ:TSX; AZK:NYSE.A). Aurizon right now can earn 65% interest in NioGold’s Marban Block property, an initial 50% by spending $20M over three years, completing an updated NI 43-101-compliant mineral resource estimate, which will be done this March, and then making a resource payment for 50% of the total gold ounces defined by that resource estimate.

So far, Aurizon has completed a first phase, drilling 50,000m, spending $6M and identifying two new gold zones. The second phase will be a $5M, 34,000m diamond drill program, updated resource estimate and basic technical studies this year. If it sees what it needs to see in the resource estimate—and I don’t see why it won’t, because it already has two new discoveries—it just doesn’t make sense for Aurizon to do a third year, buy those ounces and carry NioGold with it to production. Instead, I would think that Aurizon would buy NioGold out as soon as it gets a feel for what’s there.

TGR: Aurizon certainly has the capability to do that. It’s had so much success with building the resource base at the Joanna gold project. So yes, that’s very logical.

RM: And the thing about NioGold is it is fully cashed up. It has lots of money in the treasury. It is also going to have this resource payment. And it has a discovery right beside Osisko Mining Corp.’s (OSK:TSX) Malartic deposit. It also looks as if NioGold has the extension of the Marban deposits, Marbanite and Norbenite, on its 100%-owned block of ground just north of where Aurizon’s drilling. So, NioGold has immense blue-sky potential as well as the deal with Aurizon.

TGR: With the stock trading at around $0.35, NioGold would seem to be a bargain at this point. Any more names in that hat, Rick?

RM: One more. And this might be the cheapest safest gold ounces you’ll find on the Venture Exchange and quite an opportunity. It’s a story that’s been dormant for a long time, but revived itself with acquisition of a hell of a property.

TGR: Tell us more.

RM: On Jan. 3, Altair Ventures Inc. (AVX:TSX.V) put out a news release to announce signing a letter of agreement for an option to acquire from Sultan Minerals Inc. (SUL:TSX.V) up to a 75% interest in the Kena gold project, located close to Nelson in southeastern B.C. At 7,600 hectares, this is a fairly large property in a safe jurisdiction with access to infrastructure. But more important, it covers 8,000m of strike length on a district scale gold and copper-gold system. It has a 1.1 Moz gold resource now, with the potential to double or triple that resource. I have a prospector buddy who’s worked all over the area and on this property. He absolutely loves this property, has been following it for years and always wondered why nothing was ever done with it.

TGR: Do you know why?

RM: Well, Sultan spent about $500,000 tying up this property, which is a lower-grade, bulk-tonnage target, between 2000 and 2003, and had the resource defined by 2004. At that time gold wasn’t as high as it is now, and low-grade bulk-tonnage properties didn’t really come into vogue until later.

TGR: I see Bob Archer is involved with this one as well.

RM: Yes he is. I think at around $0.07/share, with 42M shares outstanding, it has to be some of the cheapest gold on the exchange. The property is severely undervalued, and with the exploration potential to double and possibly even triple the resource, this is pretty exciting stuff. Now it is going to rollback three for one and will have to raise some money. So maybe this isn’t as derisked as others we have mentioned, but this is, in my opinion, incredibly undervalued based on the existing resource and exploration upside as shown from results on other areas of the property.

TGR: You’ve given us a lot of interesting ideas, Rick, and investors certainly will appreciate your explanation of how to lessen their risk as they venture into the junior space. Is there anything you’d like to add before we say goodbye?

RM: Maybe just to emphasize the importance of doing your homework. There’s absolutely no way around it. As an investor, you can rely on other people to do some of it—Ahead of the Herd and Streetwise just did by showcasing, for free, several excellent companies to do further due diligence on—but the ultimate decision and the ultimate responsibility for every decision you make rests with you. That’s why you need to satisfy yourself that what you put your money into is run by a competent management team.

Know your risk profile. Pick your stock. Plan your entrance, and have the patience and discipline to let a quality management team go to work for you and build value. But be sure to have an exit plan as well; pick the stage at which you get out, because you don’t make any money until you sell—stick to your plan.

TGR: Excellent. Thank you, Rick.

RM: Thank you.

Richard (Rick) Mills is the founder, owner and president of Northern Venture Group, which owns aheadoftheherd.com, as well as publisher, editor and host of the website. Focusing on the junior resource sector, Mills has had articles appearing on more than 300 websites, including: The Wall Street Journal, SafeHaven, Ozcopper, Market Oracle, USA Today, National Post, Stockhouse, Lewrockwell, Uranium Miner, Casey Research, 24hgold, Vancouver Sun, SilverBearCafe, Infomine, Huffington Post, Mineweb, 321Gold, Kitco, Gold-Eagle, The Gold/Energy/Critical Metals Reports, Calgary Herald, Resource Investor, Mining.com, Forbes, FNArena, Uraniumseek, and Financial Sense.

Want to read more exclusive Gold Report interviews like this? Sign up for our free e-newsletter, and you’ll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Exclusive Interviews page.

DISCLOSURE:
1) Sally Lowder of The Gold Report conducted this interview. She personally and/or her family own shares of the following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors of The Gold Report: Great Panther Silver Ltd., Terraco Gold Corp., Aurizon Mines Ltd. Streetwise Reports does not accept stock in exchange for services.
3) Rick Mills: I personally and/or my family own shares of the following companies mentioned in this interview: None. The following companies are sponsors of my website aheadoftheherd.com: Kootenay Gold Inc., Terraco Gold Corp., VMS Ventures Inc., Cangold Ltd., Altair Ventures Inc., NioGold Mining Corp., Great Panther Silver Ltd. I was not paid by Streetwise for participating in this story.

***

Richard (Rick) Mills

rick@aheadoftheherd.com

If you’re interested in learning more about the junior resource sector, bio-tech and technology sectors please come and visit us at www.aheadoftheherd.com

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Graceland Updates

admin — Wed, 18 Jan 2012 10:34:05 +0000

Graceland Updates 4am-7am

Email:

Jan 17, 2012

Probably the most critical part of investing is forcing yourself to remain professional in your actions on the price grids. The nature of human emotion has not changed for thousands of years.
It is highly unlikely that today marks the beginning of any change in the emotional status quo of the human race.
Unfortunately, I believe that January 17, 2012 could be seen as a day that marked the beginning of a new “price chase” in the gold market.
Since December 29, the dollar price of an ounce of your gold has risen strongly. The price has jumped almost $150, from about $1525 to $1667, basis February futures. Investors are starting to feel the flow of “emotional juices”. In the simplest terms, Sir Greed is coming back to gold town.
As gold prices soar, investors are measured by their ability to remain professional in market action, not by the ability to hold a dance party and wave mine reports in the air. Those who sold out into the $1500-$1600 price zone lows will today begin to feel an emotional pull to re-buy their positions, before price “gets away”.
Amateur technicians are focused on the downtrend line on the gold chart. The theory is that if this downtrend line is taken out on the upside, it represents a massive buy signal. My view is that it is a siren on the rocks for price chasers.
Let’s take a cold look at the gold chart, and leave our primal urges out of the picture. Click this gold engages the dollar bugs in a battle for $1667 chart now.
Some investors will engage in a debate about whether they should just buy now, because if the red downtrend line is taken out on the upside, then the gold price could just “go vertical”.
Some of these same investors knew (felt urges?) that gold was surely going below $1500 and sold out into the recent lows. They will now have certain ideas (urges?) about what is supposedly coming on the upside.
The sad reality is that none of us are sure of anything other than death, taxes, and our emotional urges. In this epic crisis, consistently following these urges with movement of risk capital could put you into a breadline.
Try to focus more on horizontal price levels (HSR). Horizontal support and resistance allow you to respond more professionally to the movement of the gold price, rather than making guesses about where it supposedly must go to from here.
As of this morning, gold arrived at the horizontal resistance level of $1667 and has “engaged” the dollar bugs in battle. Today is not a day of victory for gold against the dollar.
It is a day of battle, and you should be a very light seller of gold this morning. Buy and sell gold with cold professionalism. Today you should be either a seller or holding your ground.
Chasing $200 of gold price appreciation with buy orders is simply not professional market action. When your grocery store holds a sale, do you run through the store screaming at the patrons, “Don’t buy this sale, it’s a falling knife!”? Sadly, that’s exactly what happened with gold, in a very big way, in the $1500-$1600 price zone.
What matters most in the market is perhaps not where the price of your investment is going, but how you handle the journey to that destination, or the failure to get there. Operating with as much professionalism as possible is your key to success. Click this copper ultra-bull chart now. If you are a copper bull, I would advise you to look carefully at this chart.
You are looking at a massive head and shoulders continuation pattern, with an upside price target of at least $8-$10. I have long argued, almost alone, that the Dow would hyper-inflate as this crisis wears on.
The bottom line is that earnings don’t matter when money printing has enveloped the world. “Dr. Copper” is arguing strongly now that the Dow should indeed skyrocket.
Click this Dow Diamonds ETF chart. The same head and shoulders bull continuation pattern is clearly evident on this chart that you see on copper, and projects that the Dow could rise to 18,000. I think 30,000 is possible and probable.
Having said that, it doesn’t matter if the Dow is going to 300 million, if you can’t endure a 100 point decline professionally. The key to building wealth is not to project your destination, but to endure the ride to it.
Click this shorter term Dow chart now. That’s a rising wedge pattern. The good news for the Dow and gold stock bulls is that price has moved quite far towards the apex of the wedge, weakening the strength of this bearish wedge pattern.
Still, the Dow has been crushing the dollar bugs for quite some time. Stock market prices are extended in the short term. A negative surprise in the Greek debt negotiations could see that wedge pattern activate, and rain on the “risk on” parade.
Whatever negative surprises may await investors in the short term, the longer term “risk-on” asset charts suggest a huge fall in the dollar is coming in 2012, and huge rise in almost everything else is coming as a result of that fall.
It’s theoretically possible that the risk-on assets could rise to the projected targets within this calendar year. That’s not necessarily good news, as it would open the door to massive efforts to reign in those prices in 2013. Commodity futures margins would likely be the mechanism to trip up the risk-on partygoers. My strongest suggestion is to enjoy 2012 to the fullest extent possible, because 2013 may not be anywhere near so pleasant, and could make team “2008 again” think 2008 was a walk in the park.
Click silver silver blast-off preparation chart. I’d like to see price remain above the green neckline of the small h&s pattern, but silver seems to be prepared, technically, for a substantial move higher, which is good news for those of you who bought it professionally and incrementally into this decline!

Special Offer For Ozcopper Readers: Send me an Email to freereports4@gracelandupdates.com and I’ll rush you my free “top 3 silver stocks” report. Which 3 silver stocks are poised to move highest from here? Learn now!

Thanks!

Cheers

Written between 4am-7am. 5-6 issues per week. Emailed at aprox 9am daily.

Mail to:

Stewart Thomson / 1276 Lakeview Drive / Oakville, Ontario L6H 2M8 Canada

Are You Prepared?

Provisions Shortage Sparked Arab Spring

admin — Sat, 14 Jan 2012 01:32:11 +0000

Richard (Rick) Mills

Ahead of the Herd

As a general rule, the most successful man in life is the man who has the best information

In 1798 32 year-old British economist Malthus anonymously published “An Essay on the Principle of Population” and in it he argued that human population’s increase geometrically (1, 2, 4, 16 etc.) while their food supply can only increase arithmetically (1, 2, 3, 4 etc.).

“The power of population is indefinitely greater than the power in the earth to produce subsistence for man”. Thomas Robert Malthus

It is estimated that the population of the world reached:

One billion in 1804
Two billion in 1927
Three billion in 1960
Four billion in 1974
Five billion in 1987
Six billion in 1999

The second half of the 20th century saw the biggest increase in the world’s population in human history. Our population surged because:

Medical advances lessened the mortality rate in many countries
Massive increases in agricultural productivity because of the “Green Revolution”

The global death rate has dropped almost continuously since the start of the industrial revolution – personal hygiene, improved methods of sanitation and the development of antibiotics have all played a major role.

The world’s population was said to have reached 7 billion on October 31, 2011 and is estimated to hit the eight billion mark by 2030.

By 2050, the world’s population is expected to reach around nine billion – minimum and maximum projections range from 7.4 billion to 10.6 billion.

By the mid 2060s it’s possible that 11.4 billion people will inhabit this planet.

Malthusian pessimism has long been criticized by doubters believing technological advancements in:

Agriculture
Energy
Water use
Manufacturing
Disease control
Fertilizers
Information management
Transportation

would keep crop production ahead of the population growth curve.

Malthus’s prediction hasn’t come true because, so far, rising agricultural yields have always outpaced population growth.

Enter the Black Swans

The Black Swan Theory or “Theory of Black Swan Events” was developed by Nassim Nicholas Taleb to explain: 1) the disproportionate role of high-impact, hard to predict, and rare events that are beyond the realm of normal expectations in history, science, finance and technology, 2) the non-computability of the probability of the consequential rare events using scientific methods (owing to their very nature of small probabilities) and 3) the psychological biases that make people individually and collectively blind to uncertainty and unaware of the massive role of the rare event in historical affairs. Black Swan Theory refers to unexpected events of large magnitude and consequence and their dominant role in history. Such events, considered extreme outliers, collectively play vastly larger roles than regular occurrences. Wikipedia

Threats to access and distribution of food supplies could include:

Political instability of supplier countries
The manipulation of supplies
The competition over supplies
Attacks on supply infrastructure
Accidents and natural disasters
Climate change

The term Green Revolution refers to a series of research, development, and technology transfers that happened between the 1940s and the late 1970s.

The initiatives involved:

Development of high yielding varieties of cereal grains
Expansion of irrigation infrastructure
Modernization of management techniques
Mechanization
Distribution of hybridized seeds, synthetic fertilizers, and pesticides to farmers

All these new technologies increased global agriculture production with the full effects starting to be felt in the 1960s. The Green Revolution’s use of hybrid seeds, irrigation, chemical fertilizers, pesticides, fossil fuels, farm machinery, and high-tech growing and processing systems combined to greatly increase agriculture yields. The Green Revolution is responsible for feeding billions – and likely enabling the birth of billions more people.

Cereal production more than doubled in developing nations – yields of rice, maize, and wheat increased steadily. Between 1950 and 1984 world grain production increased by over 250% – and the world added a couple more billion people to the dinner table.

Unfortunately the high yield growth is tapering off and in some cases declining. This is in large part because of an increase in the price of fertilizers, other chemicals and fossil fuels, but also because the overuse of chemicals has exhausted the soil and irrigation has depleted water aquifers.

“World agricultural markets have become so finely balanced between supply and demand that local disruptions can have a major impact on the global prices of the affected commodities and then reverberate throughout the entire food chain.” HSBC report

Over the next fifty years, as we add another 4.5 billion people to the world’s population, global demand for food will increase almost 70% if population growth predictions are correct.

Already approximately one billion people go to bed hungry each night.

Somewhere in the world someone starves to death every 3.6 seconds – most are children under the age of five.

“The power of population is so superior to the power of the earth to produce subsistence for man, that premature death must in some shape or other visit the human race.” Malthus T.R. 1798. An essay on the principle of population.

There has been almost no real increase in funding of the international agricultural science effort since the 1970s. This global decline in agricultural R&D means less new technology will be available to farmers. What is available are Genetically Modified Organisms (GMOs) – heavily bio-engineered seeds – which rely on the same industrial credits – fertilizers, pesticides, diesel and irrigation - that the first Green Revolution did.

Conclusion

“Social unrest may reflect a variety of factors such as poverty, unemployment, and social injustice. Despite the many possible contributing factors, the timing of violent protests in North Africa and the Middle East in 2011 as well as earlier riots in 2008 coincides with large peaks in global food prices.” M. Lagi, K.Z. Bertrand and Y. Bar-Yam, “The Food Crises and Political Instability in North Africa and the Middle East” New England Complex Systems Institute

New England Complex Systems Institute

Population growth and increasing demand for food supplies go hand in hand. Unfortunately yield increases have generally leveled off and supply is barely keeping up with demand. The fact is, that today, we’re one poor harvest, one Black Swan event away from a food supply catastrophe and a repeat of the food shortages that caused the Arab Spring. These facts should be on everyone’s radar screen. Are they on yours?

If not, maybe they should be.

Richard (Rick) Mills

rick@aheadoftheherd.com