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

While it might not look like it now, the most investable trend over the next 20 years is going to be in the resource sector, the renewable and non-renewable resources, the minerals, ores, fossil fuels and biomass a wealthier and growing global population is increasingly demanding from finite supplies and already strained production capabilities.

Renewable and Non-renewable Resources 

We have crossed a critical threshold. The demand we are now placing on our planets resources appears to have begun to outpace the rate at which they can be supplied.

The gap between human demand on our planet’s renewable resources and the supply of those resources is known as ecological overshoot. To better understand the concept think of your bank account – in it you have $5000.00 paying monthly interest. Month after month you take the interest plus $100. That $100 is your financial, or for our purposes, your ecological overshoot and its withdrawal is obviously unsustainable.

footprintnetwork.org

The human enterprise now consumes nearly 60 billion metric tons of the world’s four key resources – minerals, ores, fossil fuels and biomass (plant materials) – per year.

Developed countries citizens consume an average of 16 tons of those four key resources per capita (ranging up to 40 or more tons per person in some developed countries).

According to a report from the U.N., by 2050, humanity could devour an estimated 140 billion tons of minerals, ores, fossil fuels and biomass per year.

Total global resource use soared from six billion tonnes in 1900 (1.6 billion people) to 49 billion tonnes in 2000 (just over 6 billion people)  and is now running at close to 60 billion tonnes (just over 7 billion people).

Demand/Consumption

Two factors are involved in increasing consumption. One is the growth in population:

2011 7 billion

2020 7.6 billion

2027 8 billion

2030 8.2 billion

2040 8.8 billion

2046 9 billion

2050 9.2 billion

The second factor is the growth in wealth in the major developing countries – China, India, Africa* and Indonesia have enormous numbers of people who are already middle class and hundreds of millions still to become middle class.

*Africans, on a per capita basis, are richer than Indians and a full dozen African states have higher gross national income per capita than China.

Today Africa has 14% of the world’s population and by 2050 one in every four people on the planet will be African. The rapidly emerging African middle class could today number almost 300 million people – that’s out of a total population of one billion.

The Organization for Economic Co-operation and Development says the global middle class numbers 1.8 billon, or 28% of the world’s population.

According to the UN report “RESILIENT PEOPLE RESILIENT PLANET A Future Worth Choosing” the number of middle-class consumers will increase by three billion people over the next 20 years.

The president of the Center for Global Development, Nancy Birdsall, calculates that India has no middle class. The McKinsey Global Institute projects that India’s middle class of 50 million – less than 5% of the country’s population – will explode to 583 million by 2030.

McKinsey Global puts China’s middle class at 43% of its population today, on its way to 76% in 2025.

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

Of course many other factors are at play and will, going forward, contribute to a “perfect storm” in the commodity markets.

Inflation

Because central banks can increase the supply of money virtually at will, and do so, the value of all existing money decreases.

The amount of goods and services remains the same, but now the amount of money chasing them has increased, this increased competition – more money (inflation) for the same amount of goods and services – causes prices to rise.

Governments and Central Banks want slowly rising prices. They pour money into the market to encourage growth so prices increase rather than decrease. Price decreases, or deflation (less money growth), slows economic activity – if people think prices are going to be lower next week they will not buy today, they will wait, this leads to a contraction in economic activity, something all governments fear.

Nations in Europe, and the U.S., will inflate (print more of) their currencies rather than cutting back spending or raising taxes. In a global race to worthless Asian economies will also have to print massive amounts of their currencies so they stay weaker then the US dollar. Asian exports have to be cheap for American consumers and American exports have to be more expensive than locally produced goods.

Many have called for very high levels of inflation possibly leading to hyperinflation. Their reasoning is that over printing of the US dollar will cause the dollar to weaken and inflation to set in – more money chasing the same amount, or less, of goods causes prices to rise. A rise in gold, silver and commodities prices in would be the result.

The precious metals and commodities have gone up, substantially – prices reacted to the increase in the monetary base and the corresponding increase in the velocity of money caused by financial innovations such as mortgage-backed securities (MBS), collateralized debt obligations (CDO), derivatives and credit default swaps etc.

The monetary base was expanding and there was an orgy of money spending fueling expectations of inflation.

As soon as the QE program, part’s 1 & 2, ended in June of 2011 the markets had to get by on a lot less money and liquidity. Austerity has temporarily replaced prolific spending – the monetary base is not expanding, money is not circulating and this is fueling deflationary fears.

Today the dollar is strong because the EU, and the world, have an acute shortage of dollars for the necessary bailouts and needed liquidity. A rising dollar is noninflationary so the rising dollar produces lower commodity prices.

It’s this author’s belief the US, and the world, will return to Quantitative Easing (QE) and will flood the world with liquidity. A falling weaker dollar pushes up the price of commodities.

Single minded money printing has to be the next stage. Politicians, governments and central banks will abandon the restraints they have been operating under and do whatever they think it will take to pacify voters, save their re-election chances, “right” their economies and salvage the fiat monetary system. Tax cuts, more and bigger deficits, continued low interest rates into the forseeable future and aggressive asset purchase programs, steroidal quantitative easing, are all going to achieve previously unimaginable levels.

When we talk about the velocity of money, we are speaking of the average frequency a dollar is spent. If nobody is spending money the velocity is zero.

The monetary base will explode, and if the money velocity chart reverses – if small businesses and consumers actually get their hands on some of this money – precious metals and commodities prices will soar.

Supply

Supply shortages always lead to high enough metal prices for further increases in production, thus supply will eventually exceed demand and prices will drop…right? Well maybe, maybe not. Margins (not price) motivates investment and if the cost of metal production is increasing margins might not be sustainable.

Lets state the obvious:

• For over the last ten years supply has struggled to keep pace with demand
• Metal supply is finite and subject to compounding demand from developing nations
• Metal production is highly cyclical, with intermittent peaks and troughs which are closely linked to economic cycles – declining production has historically been driven by falling demand and prices, not by scarcity
• Rates of production and amounts of reserves continually change in response to movements in markets and technological advances
• Most mineral resources will not be exhausted in the near future
• If energy was cheap and unlimited then recoverable resources would be unlimited

But

• Discovery and development is increasingly becoming more challenging and expensive
• Average ore grades are in decline for most minerals, yet production has increased dramatically
• Our most important metals are suffering from declining ore quality and rising extraction (ore is a different and inferior chemical or structural composition) costs
• Our prosperity has always been based on the fact that producing resources yielded more resources than it cost. However the cost of *energy is climbing, the amount used is climbing but the returns from energy expended is declining. Eventually the quantity of resources used in the extraction process will be 100% of what is produced
• Most older existing mines, the foundation of our supply, have increasing costs with production rates stagnating or even declining
• The rate of discovery is not keeping pace with the rate of depletion, let alone being higher

*Energy can be thought of as a proxy for labor, materials, energy and externalities – environmental, community impact etc.

The metal content of copper ore has been falling since the mid 1990s. A miner now has to dig up an extra 50 percent of ore to get the same amount of copper. As grade drops the amount of rock that must be moved and processed per tonne of produced copper rises dramatically – all the while using more energy that costs several times more than it use to. With the lower grades of ores now being mined energy becomes more and more of a factor when considering economics.

The average grade of gold deposits has been dropping as well.

“We took the nice, simple, easy stuff first from Australia, we took it from the U.S., we went to South America. Now we have to go to the more remote places.” Glencore CEO, Ivan Glasenberg in the Financial Times describing why his firm operates in the Congo and Zambia

We are experiencing a paradigm shift. If nothing else, right now at this point in history, we all have to realize that the mining industry is exiting “easy & cheap” and is starting the upward slope of chronic lower supply, permanently higher prices and higher risk.

Increasingly we will see falling average grades being mined, mines becoming deeper, more remote and come with increased political risk. Extraction of metals from the mined ore will is becoming more complex and expensive.

Resource Nationalism

Country Risk - Where the political and economic stability of the host country is questionable, and abrupt changes in the business environment could adversely affect profits or the value of the company’s assets.

Resource nationalism – The tendency of people and governments to assert control, for strategic and economic reasons, over natural resources located on their territory.

Every country needs to secure supplies of needed commodities at competitive prices yet supply is increasingly constrained and demand is growing. Barring a total global economic collapse or a dramatic reduction in the world’s human population it doesn’t seem to this author demand is going to collapse anytime soon.

Access to raw materials at competitive prices has become essential to the functioning of all industrialized economies. As we move forward developing and developed countries will, with their:

• Massive population booms
• Infrastructure build out and urbanization plans
• Modernization programs for existing, tired and worn out infrastructure

Continue to place extraordinary demands on our ability to access and distribute the planets natural resources.

Threats to access and distribution of these commodities 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

Accessing a sustainable, and secure, supply of raw materials is going to become the number one priority for all countries. Increasingly we are going to see countries ensuring their own industries have first rights of access to internally produced commodities and they will look for such privileged access from other countries.

Numerous countries are taking steps to safeguard their own supply by:

• Stopping or slowing the export of natural resources
• Shutting down traditional supply markets
• Buying companies for their deposits
• Project finance tied to off take agreements

“Resource nationalism is taking other forms as well, including greater controls on foreign participation, mandated beneficiation, use it or lose it demands and mandated government participation.” Ernst & Young Global Mining & Metals Leader Mike Elliott

The PricewaterhouseCoopers Mine 2011 survey highlights what governments across the globe are looking at in regards to the world’s top 40 miners:

• Achieved net profits of $110b last year
• Halved their debt
• Built cash reserves of $105bn
• Announced capital programs of $300b for 2011

Today many governments are looking at ways to get more money from miners as companies report record profits – the higher the returns and the higher the profits, the greedier governments become. As commodity prices rise governments try to boost their share of the proceeds from their countries energy and mining sectors.

Miners are an easy target as mining is a long term investment and one that is especially capital intensive – mines are also immobile, so miners are at the mercy of the countries in which they operate. Outright seizure of assets happens using the twin excuses of historical injustice and environmental/contractual misdeeds. There is no compensation offered and no recourse.

All of this means increasingly scarce, and accessible resources, are going to become much harder to find and develop – meaning companies with projects in politically stable environments are that much more valuable.

Skills and Labor Shortage

A combination of mass retirements and increasing natural resource demand from emerging economies has created a crisis in the resource extraction sector – one which is definitely not on investor’s radar screens.

Currently there is a “massive talent gap” that is going to get worse because the global mining industry is experiencing the biggest wave of workforce retirements in 70 years – the oldest baby boomers turned 65 years old in 2011.

The Mining Industry Human Resources Council (MIHRC) has recently said that about 40% of the resource extraction industry’s workforce is at least 50 years old and one third of them are expected to retire by 2022.

The organization also forecasts that the Canadian mining industry will face a shortage of 140,000 workers by 2021 – this number of workers being needed just to maintain current levels of production.

The Petroleum Human Resources Council of Canada warned a severe oil patch labor shortage is looming and that the “patch” will need to hire 24,000 new employees by 2014.

Increased resource demand is driving demand for skilled workers. A shortage of skilled workers was the second biggest business risk for mining in 2011 (as it was in 2010) and is forecast to be the number two risk (resource nationalism/country risk is the number one risk) for miners again in 2012. In the coming years a lack of skilled workers is going to be the major cause for concern in the resource extraction industry.

“Government or industry reports in the past few years in Australia, the U.S. and South Africa all highlight growing skills shortages in the mining industry.”  Recent HSBC commodities report

The skills shortages are global, shortages are happening in South Africa, Australia, Canada and South America. Costs are increasing, projects are being deferred or perhaps even cancelled outright due to the inability to staff operations – tighter labor markets also provide unions with greater bargaining powers when dealing with companies over wage settlements and other disputes.

“Given the ageing profile of the current workforce and a lack of engineers and geologists with enough experience, the labour resourcing requirements for new mining projects at various stages of development across the globe are simply not going to be met. Production targets and project deadlines are inevitably going to slip. The time taken to train a mining professional can be up to five years, but it is the candidate with around ten years experience who is in particularly short supply. A failure by the mining industry to recruit and train during the tough times in the 1990s, when the price of metals plummeted, has led to particular shortages of mid-career professionals.” Mining Global Employment Review 2011, Faststream Recruitment

Analysts say attracting and retaining increasingly scarce skills will:

• Accelerate cost increases
• Squeeze profit margins
• Threaten the viability of some marginal projects

Conclusion – Junior’s, An Argument for a Contrarian Investment

Our reality – we’re living on a relatively small planet with a finite amount of reserves and a growing human population.

The world’s major miners are making immense profits but they are having an extremely difficult time replacing reserves let alone growing them. Mining is the story of depleting assets, that asset must be constantly replenished, miners that want to stay in business must replace every pound, oz and gram taken out of the ground.

Juniors, not majors, own the worlds future mines and juniors are the ones most adept at finding these future mines – majors do not make discoveries, juniors do, that’s their function in the resource food chain. Junior resource companies already own, and find more of, what the world’s larger mining companies need to replace reserves and grow their asset base.

Junior resource companies – the same ones who today are so oversold and undervalued – are the present owners of the world’s future commodities supply and, most important for investors seeking outsized returns, they act like leveraged exposure (with price gains many times that of the underlying commodity) to the specific commodity(s) investors want exposure to.

Are there a few junior resource companies, with exceptional management teams operating in politically safe jurisdictions, on your radar screen?

If not, maybe there should be.

Richard (Rick) Mills

rick@aheadoftheherd.com

www.aheadoftheherd.com

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

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

***

Richards articles have been published on more than 400 websites including:

Ozcopper, Wall Street Journal, SafeHaven, Market Oracle, USAToday, National Post, Stockhouse, Lewrockwell, Pinnacledigest, Uranium Miner, Beforeitsnews, SeekingAlpha, MontrealGazette, Casey Research, 24hgold, Vancouver Sun, CBSnews, SilverBearCafe, Infomine, Huffington Post, Mineweb, 321Gold, Kitco, Gold-Eagle, The Gold/Energy Reports, Calgary Herald, Resource Investor, Mining.com, Forbes, FNArena, Uraniumseek, Financial Sense, Goldseek, Dallasnews, Vantagewire, Bullion Videos, Resourceclips and the Association of Mining Analysts.

***

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.

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

Almost 200,000 people heading to the California gold fields crossed through what is now Nevada via the California Trail. While many of them camped close to the confluence of the Humboldt River and Maggie Creek in northeastern Nevada none had any idea they were just a very short distance away from one of the most prolific gold deposits in the world.

The area, known as the Carlin Trend, is a belt of gold deposits roughly eight kilometers (km) wide by sixty km long extending in a north-northwest direction through the town of Carlin, Nevada. The Carlin Trend has yielded more than 50 million ounces since its discovery – the entire California Gold Rush produced 40 million ounces.

Although Nevada is called the Silver State the state is the fourth largest gold producer in the world supplying 5.6% of global demand – 79% of all the gold mined in the United States (5,640,000 troy ounces or 175 t in 2009) comes from Nevada. Total gold production from Nevada recorded from 1835 to 2008 totals 152,000,000 troy ounces (4,700 t), worth over US $228 billion at 2011 prices.

Almost all the gold in Nevada comes from large open pit mining and cyanide heap leaching recovery. A number of major mining companies, such as Newmont Mining and Barrick Gold Corporation, operate gold mines in the state.

In 1961 John Livermore was a Newmont geologist looking for gold in the windows of the Carlin Trend – windows occur where obscuring layers of rock, displaced by an uplift, have eroded to expose the rock below. Livermore found gold and staked the claims that became the Carlin Mine.

The vast bulk of Nevada gold production is from large mines where the deposits consist of microscopic gold particles – the gold in this type of deposit cannot be seen by the naked eye, nor can it be concentrated by panning.

“This gold is so fine you just can’t pan it. You can’t even see it under an ordinary microscope.” John Livermore

The old timers principal means of exploration was the gold pan so it’s no wonder our California dreaming gold seekers passed it by – a standard fire assay will capture and reveal the gold with no difficulty.

Newmont Mining Corp. started mining gold at Carlin in 1965, by the end of the year the Carlin mine was the largest gold producer in Nevada and the second largest gold producer in the nation.

But by 1970 only one other new gold mine – the Cortez – had been discovered. Exploration in the area was at a standstill, almost everyone had given up and moved on but Newmont who was busy building a strong land position in the state – by 2002, Newmont owned or controlled 7,915km² of land.

John Livermore also felt there were further discoveries to be made so he started Cordex Exploration in 1971. One of the first things John did was hire Whit DeLaMare to prospect for the company – a smart move as DeLaMare’s work led to the discovery of the Pinson, Preble, Sterling, and Dee mines and the development of the Getchell Trend which is second only to the Carlin Trend in Nevada gold production.

Terraco Gold Corp. (TSX.V TEN | US: TCEGF), has a mix of advanced and early-stage gold-silver projects in Idaho and Nevada, USA.

Terraco’s Moonlight project (100% owned) area was identified by the Cordilleran (Cordex) Exploration Company. Cordex principals are John Livermore – credited with the discovery of the Carlin deposit in Nevada and the discovery and development of the Pinson and Dee mines, and Andy Wallace – credited with a major role in the discoveries of the Marigold and Stonehouse/Lone Tree gold deposits as well as the Daisy (Secret Pass) mine.

Terraco’s Moonlight property adjoins the Barrick Gold Corp./Midway Gold Corp. joint venture Spring Valley Project. The Spring Valley Project hosts a National Instrument 43-101 measured, indicated and inferred resource of 3,500,000 ounces of gold (as reported by Midway Gold). Barrick’s drilling has confirmed the gold mineralization is open towards Moonlight and at depth.

Moonlight lies eight km north of Coeur’s Rochester silver-gold mine, the Rochester mine has produced over 125 million ounces of silver and well over one million ounces of gold in its 24 year history.

Gold and silver mineralization at Moonlight is known to be controlled by northerly-trending structures. The Black Ridge Fault Zone’s eastern boundary controls the eastern margin of precious metals mineralization at Rochester.

Drilling at Moonlight indicates that this district-scale fault system continues through the Moonlight Project properties. So there is evidence to suggest that Moonlight could be the next mineralized event in a string of deposits on the Humboldt Trend ranging from Relief Canyon at the south end, north through Nevada Packard, Rochester, Spring Valley and Moonlight.

 Terraco’s Moonlight Project is one of the largest early stage properties remaining on the Humboldt Trend and the company has been quietly consolidating and increasing its land position over the last three years.

Terraco executed a definitive agreement with Seymork Investments Ltd., a British Columbia company, for the acquisition of a significant land package and mineral rights at, and in, the area of the Moonlight property. This strategic acquisition provides Terraco with 100% ownership of a larger land package and a better overall exploration opportunity for its Moonlight Property.

Terraco has also enhanced its presence in the Humboldt trend by entering into a three-way transaction. Terraco arranged for a US$5,000,000 (non-dilutive) cash infusion and acquired a royalty on mineral production from claims covering the Barrick-led Spring Valley Project. The Spring Valley project currently hosts a National Instrument 43-101 measured, indicated and inferred resource of 3,500,000 ounces of gold.

Terraco completed two royalty transactions (since December 2011) on the Barrick-led Spring Valley Project. The first transaction is a 2.5% royalty option on approximately 75 percent of the claims covering the currently outlined ore body at the Spring Valley Project (outlined in red above). The second transaction captured the remaining portion (approx 23%) of the Spring Valley ore body where Terraco has a one percent net smelter return royalty (outlined in green above). Terraco also has the right of first refusal for a 0.5 percent royalty in a specific area of interest – an almost one kilometer radius around the bulk of the deposit (in red).

The Almaden (Nutmeg Mountain) Project

Terraco’s Almaden Project is 100% owned and is located 109 km north of Boise, Idaho. The advanced-stage project has excellent access and infrastructure and has over 66,140 meters of drilling in 903 drill holes. The project is host to a low-sulphidation, epithermal gold deposit.

The Almaden project is a flat-lying outcropping ore body that, within surface to approximately 300 feet hosts a National Instrument 43-101 compliant measured resource of 239,000 ounces of gold, an indicated resource of 625,000 ounces of gold and an inferred resource of 84,000 ounces of gold in oxide, mixed and sulfide mineralization.

Terraco is in the midst of drilling to explore the extension of the near surface mineralization that is open to the north and south, as well as test for high-grade, bonanza-style structurally controlled gold mineralization at depth.

Terraco’s 2012 Phase I drill program consists of infill and development core drilling together with a third rig that drilled several large four inch diameter core holes for metallurgical test work.

“Terraco started the 2012 program with 3 core rigs in an effort to provide, as quickly as possible, infill drill assay information necessary for the next step of evaluation. We are aggressively pushing towards the economic and geological studies required for a production decision.” Todd Hilditch, President and CEO, Terraco

Project comparisons for Almaden are The Ken Snyder “Midas Mine” (Newmont) and the Hollister Mine (Great Basin Gold) located in northeast Nevada.

Conclusion

The Almaden acquisition created a lot of unrealized value for Terraco shareholders and could add considerably more – very few drill holes at Almaden were below 125 meters. Terraco has put together such a drill program in order to test underneath and proximal to the existing resource for high-grade feeder zones and shoots.

Almaden already has near one million ounces of gold and it could prove to be significantly larger.

Terraco’s Moonlight project has obvious upside exploration potential.

The royalty transactions on the Barrick-led Spring Valley Project, currently host to over 3,500,000 ounces of gold, not only gave Terraco a non-dilutive US$5,000,000 cash infusion in late 2011 but also gave the company what in reality is an ATM card. TEN can use that ATM card and pull out millions of dollars in future non-dilutive financings in order to fund the company going forward by selling pieces or small percentages of the royalty.

All of the gold ever mined in the history of the world would only fill two Olympic-sized swimming pools. The U.S. Geological Society (USGS) estimates that just 51,000 tons of global gold reserves remain in the ground – gold mining is obviously a very lucrative business. Terraco has a royalty on a huge gold deposit that must look desirable to a number of companies, not the least of which may be Barrick itself.

For all these reasons Terraco Gold Corp. TSX.V – TEN should be on everyone’s radar screen.

Is Terraco on yours?

If not, maybe it should be.

 Richard (Rick) Mills

rick@aheadoftheherd.com

www.aheadoftheherd.com

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

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

***

Richards articles have been published on more than 400 websites including:

OzCopper, Wall Street Journal, SafeHaven, Market Oracle, USAToday, National Post, Stockhouse, Lewrockwell, Pinnacledigest, Uranium Miner, Beforeitsnews, SeekingAlpha, MontrealGazette, Casey Research, 24hgold, Vancouver Sun, CBSnews, SilverBearCafe, Infomine, Huffington Post, Mineweb, 321Gold, Kitco, Gold-Eagle, The Gold/Energy Reports, Calgary Herald, Resource Investor, Mining.com, Forbes, FNArena, Uraniumseek, Financial Sense, Goldseek, Dallasnews, Vantagewire, Resourceclips and the Association of Mining Analysts.

***

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.

Richard owns shares of Terraco Gold Corp. TSX.V – TEN 

Terraco Gold Corp. TSX.V – TEN  is a sponsor of Richards site aheadoftheherd.com

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Email:

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stewart@gracelandjuniors.com

May 15, 2012

1. Gold stock investors have been experiencing a type of “2008 again”  decline in the price of their gold stocks, yet many other assets have barely declined at all.  The question on everyone’s minds is, “Will this pain end soon, or is it just the beginning of something much bigger?”
2. Please click here now.  There are some good reasons to believe the Dow could be making an important top.  “Sell in May and go away” is a respected market adage that is based on seasonality, and it is in play now.
3. Aggressive speculators likely have a lot of sell orders just below the 12,700 area.  I’m more interested in buying the Dow if it falls than trying to guess if it is making a top.  It may be simply consolidating for a move towards 14,000, but if it does fall hard, I want to start buying it very lightly.
4. The Dow has risen almost seven thousand points from the 2008 lows near 6500, so I would not commit very much capital to a price sale of only one thousand points.
5. The 12,200 price zone is very light support.  Please click here now.  You can see more substantial support near 11,200.  Buying the Dow very lightly about every 1000 points down is prudent, but investing huge amounts of capital after a few thousand points of price weakness is definitely not a good idea.
6. If the Dow starts a severe price decline, could that cause an acceleration of the decline in gold and gold stocks?  Yes it could, and you need to be prepared for such an event.
7.  A lesson for gold stock investors who think a bottom is in can be had from the price action of natural gas recently.  A lot of investors became interested in natural gas at about $6.
8. Instead of bottoming, it went to $2, and investors who thought that such a decline could never happen found themselves in a fair amount of trouble.
9. I bought all the way down, and if natural gas goes much lower, I’ll continue to accumulate it.  Most investors allocated too much capital in price areas where they thought gas had to stop falling, so their cash reserves are now low or non-existent.  Your buy orders should always be “smaller than you know is rational”.  This is because the market itself is not rational.
10. Let’s not see a repeat of that natural gas situation with gold stocks now.  Many investors and analysts are sure that gold stocks must bottom soon.  Perhaps, but are you prepared to deal with much lower prices if they don’t?  Prepare now, rather than assume that much lower prices are impossible.
11. I think you need to be prepared for dramatically higher prices as well as dramatically lower prices.  Selling gold stocks now probably serves no other purpose than transferring your holdings to powerful bank-type entities.
12. Please click here now.  That’s DUST-nyse, a triple-leveraged fund that bets gold stocks will decline in price.  Some investors are just hoping that gold stocks turn up now.  They hold enormous positions in a wide array of gold stocks bought at much higher prices.  If you are in trouble emotionally, financial trouble is never far behind.
13. If you can buy huge amounts of gold stock at prices much higher than where we are now, surely you can buy a tiny position in DUST now, to hedge your emotions.  It doesn’t take a large counter-position to quell most investor nervousness, but most people keep waiting for a gold stock rally before they will take any action.  That’s only making the situation worse.  It’s exactly what happened with natural gas.
14. When you accumulate an asset, your short position should gradually increase as the price falls.  Your net long position should grow larger, but your absolute short position should also grow.  Send me an email to freereports@gracelandupdates.com and I’ll send you a free video explaining these tactics in greater detail.
15. Fundamentally, most investors in the gold community understand that governments around the world have become horrific freedom-robbing machines that seem bent on borrowing infinite amounts of fiat currency.
16. Their debts cannot be paid, and money printing will increase tremendously, but it can take a long time before this situation creates dramatic institutional liquidity flows into gold stocks.
17. Many investors who own gold stocks think they would be better off owning bullion now.  I don’t agree with that premise.  My main focus now is gold stock accumulation.  Gold bullion could fall a lot further than where it is now, and that could further demoralize investors who book losses on gold stocks and buy bullion as their version of the public sector’s “growth with safety” trade.   They could end up selling the new bullion at a loss if it falls.  It’s possible that gold stocks start rising while bullion falls to the $1400-$1500 price zone.
18. Please click here now.  You are looking at the weekly chart for gold with a focus on the rise from the 2008 lows.  The $1577 support zone has been touched 3 times on the reaction from the highs at about $1923.
19. There’s nothing to be afraid of.  The fundamental case for owning gold is stronger than ever.  The “banksters” are not afraid of $1432 or $1266, and nor are the Indian gold dealers.  Adopt their mindset.  While there is enough fear for a “turn” at this point in time and price, I have to wonder about how high a rally would go without a major change in the European debt crisis.
20. I think a major change is coming.  If a number of weak members are ejected from the European Union, the euro could stage an enormous rally.
21. The most powerful investors in the world seem to agree with me.  Please click here now.  You are looking at the liquidity flows in the euro.  The commercial traders are buying the euro in massive size, in opposition to the large speculators and funds who are shorting it.
22. Do the commercial traders believe that a European sea change is coming, one that is extremely positive for the euro, and hence for gold?  I believe their liquidity flows spell the answer to that question in neon light.
23. The uptrend line in gold may have broken, but commercial traders are buying anyway.  Are you?  They’ve bought many failed uptrend lines in the past, and they will buy many more, profitably.
24. Could GDX and your individual gold stocks tumble to much lower prices before governments around the world embark on “the great reflation”?  Yes they could, which is why it is important to trade smaller than you know is rational and carry a position in an investment vehicle like DUST!

Special Offer For OzCopper Readers: Send me an Email to freereports4@gracelandupdates.com and I’ll send you my free “Hedge My Silver, Please!” report.  Learn how to increase the size of your silver position while increasing your emotional happiness deep in the accumulation zone with professional hedging!

Thanks!

Cheers

St

Thanks!

Cheers

St

Stewart Thomson

Graceland Updates

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

www.gracelandupdates.com

Email: stewart@gracelandupdates.com

Mail to:

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

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?

            ~  Satellite,  Rise Against  ~

Members of my service as well as long time readers know that I do a lot of analysis based on the past. I am constantly looking at long-term historical price charts and data. As a trader, I am always looking for an edge.

Obviously the keys to long-term success involve proper position sizing, risk management mechanisms, and ultimately leveraging probability. Professional traders are masters of these tenets. These characteristics are what separate successful traders from average traders over the long haul.

Sometimes through my rigorous analysis I come across price charts and oscillators that help put together a picture that helps shape my view of the marketplace. The past few months have been some of the most difficult market conditions that I have seen in some time.

The “wall of worries” permeates the financial landscape as risk at present seems unprecedented. The list of macroeconomic concerns ranges from the European sovereign debt crisis to escalation of military action in the Middle East.

I could probably write an entire article about the various risks that plague global financial markets at present, but I try to focus on the positive in any situation. Right now remaining optimistic is a daily battle amid the constant barrage of depressed economic data. Instead of focusing on all of the various risks, I focus on finding opportunities where probabilities are favorable based primarily on historical price data, cycle analysis, and tape reading.

Back on April 9th I proffered an article that discussed my expectation that the U.S. Dollar Index would rally while risk assets such as equities and oil prices would collapse. Additionally I commented on my expectations for weakness in gold, silver, and the entire mining complex. I was wrong about the timing of the U.S. Dollar’s advance, but the ultimate price action analysis was correct.

The following quote came from that article, “As shown above, I believe that short term targets to the downside are likely somewhere in the 1,475 – 1,525 price range. I think gold will find a major bottom near these levels and a strong bounce will play out.” (Click here to view the entire article)

When I originally wrote that article referring to a decline in gold prices gold futures were trading around 1,630 an ounce. Price rallied sharply higher after my article went public, but fast forward to today and my concerns appear to be well founded. I am a long-term gold bull and I ultimately believe that new highs will occur in the future. However, gold and gold miner’s may have further to fall before they find major support.

As stated above, my original expectations for the Dollar Index did not happen in the time frame I was anticipating. However, the belief that a rally was forthcoming proved to be accurate as can be seen from the price chart of the U.S. Dollar Index shown below.

U.S. Dollar Index Daily Chart

Traders Video Analysis Chart

As can be seen above, the price action is confirming serious strength. The weekly close on Friday saw the Dollar close above a key short-term resistance level. Additionally I would point out the double bottom that has been carved out on the chart above which is also bullish. Should resistance near 80.76 give way to higher prices a test of the recent highs is quite possible.

The technical picture suggests higher prices in the near term for the greenback. From a fundamental  viewpoint, recent economic data also suggests that higher prices may await as one the largest weekly debt issuance of 2012 among sovereigns within the Eurozone will transpire next week. If any of the debt auctions go poorly it will reflect negatively on the Euro currency and help push the Dollar higher.

Most of the debt issuance is outside of the 3 year maturity window so the LTRO justification to encumber risk does not apply. Next week we will find out just how serious investors are about accepting default risk on European debt instruments. I would be shocked if the ECB sits idly by, but the sheer amount of capital required to safeguard debt issuance next week is extreme, even for a major central bank.

The Euro currency continues to fall and has broken key resistance around the 1.30 price level on the EUR/USD currency pair. Price is not collapsing as of yet, but we are seeing a slow and steady slog lower for the Euro. This price action serves to boost the Dollar which ultimately places downward pressure on risk assets such as equities and oil. Additionally, it reduces the valuation of gold. The daily chart of gold futures is shown below.

Gold Futures Daily Chart

Gold Trading Video Chart

The recent price action in gold has been quite ugly and price is resting at key support stemming from an intermediate-term descending channel shown above. Should the lower bound break to the downside a sharp move lower could play out.

It is important to remember that gold is coming off a monster multi-year bull run and it only serves to make sense that a nasty pullback that shakes out the bulls would be forthcoming. I continue to believe that strong support and buyers will come back into gold around the 1,450 – 1,550 price range as significant long-term support levels should hold up prices. The key support zone is clearly illustrated in the chart above.

I continue to wait for price to reach that key support level and based on the current proximity those support levels are magnetizing price toward them. When long-term support / resistance levels are near price a test is a common occurrence. The most important question to ask is whether the support zone shown above will hold, or will even lower prices ultimately play out?

Gold and silver both are starting to become oversold on the daily time frame. While the gold bugs have been feeling pain the past few weeks, the gold miners have been taken out back to the woodshed for a good whipping. The miners have been absolutely crushed in 2012 .

My long term analysis revealed something quite extraordinary on the longer term weekly chart of the HUI gold mining index which I believe is critical for readers to watch and monitor. We are nearing valuation levels based on the true strength index that have not been seen since the market crash that took place back in 2008. The weekly chart of the gold bugs index is shown below.

Gold Bugs Index Weekly Chart

Gold HUI Trading Video Chart

As can be seen above, the Gold Bugs Index (HUI) has been under considerable selling pressure since early September of 2011. However, note how low the True Strength Index is based on 5 years of price data. We are nearing the same level that we saw back in 2008 which marked a major bottom that ultimately resulted in a monster move to the upside for the gold miners.

I am of the opinion that this chart demonstrates quite clearly that a great buying opportunity for gold, silver, and the miners is likely going to present itself in the near future. I will be watching this price relationship over the next few weeks waiting for a strong entry point for a longer-term purchase. After this pullback concludes, the potential returns that could occur in gold, silver, and the miners could be breathtaking.

With 3 clear support levels, a defined risk approach could be used in order to scale in or to reduce market risk should prices continue to move below each support level. While the time is not right just yet, more than likely a solid long-term risk / reward trade may very well present itself in the precious metals and mining space. I am likely a bit early, but the ultimate end game as it relates to fiat currency is documented throughout history. The final result has a finality that few truly comprehend.

If you enjoyed this article and analysis, you can get our detailed trading analysis videos every Sunday, Monday, Wednesday and Thursday here risk free: http://tradersvideoplaybook.com/risk-free-30-day-trial/

Happy Trading and Investing!

This material should not be considered investment advice. J.W. Jones is not a registered investment advisor. Under no circumstances should any content from this article or the OptionsTradingSignals.com website be used or interpreted as a recommendation to buy or sell any type of security or commodity contract. This material is not a solicitation for a trading approach to financial markets. Any investment decisions must in all cases be made by the reader or by his or her registered investment advisor. This information is for educational purposes only.

Ahead of the Herd

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

Many have called for very high levels of inflation possibly leading to hyperinflation. Their reasoning is that over printing of the US dollar will cause the dollar to weaken and inflation to set in – more money chasing the same amount, or less, of goods causes prices to rise. A rise in gold and silver (and commodities prices), would be the result.

Gold and commodities have gone up, substantially – prices reacted to the increase in the monetary base and the corresponding increase in the velocity of money caused by financial innovations such as mortgage-backed securities (MBS), collateralized debt obligations (CDO), derivatives and credit default swaps etc.

But the called for massive inflation hasn’t yet happened, yes there’s been more than a modest rise in the real price of goods (much more then the government measured Consumer Price Index), but treasury yields and home prices are at record lows, jobs have languished and credit has stalled. These are not the conditions one would expect to see in a highly inflationary environment.

This brings up two questions:

• We’ve not had the much higher inflation called for – why not?
• Are there further gains to be made in the prices of gold and silver (and commodities in general)?

Between August 11, 2008 and the end of 2011, the monetary base, which only the Fed can produce, almost tripled with a Bernanke Fed injection of $1.7 trillion dollars.

Most of the money issued by the Bernanke Fed is parked in banks as excess reserves that the banks are not required to hold.

On October 6, 2008 the Fed announced it would begin paying interest on the reserve balances of the nation’s banks. The Fed’s records show they were paid $2.18 billion interest on these reserves just in 2009.

These interest payments are an incentive to hold the cash. At the end of 2011 U.S. banks were holding 88 percent of the monetary base ($1.5 trillion of the $1.7 trillion increase) issued by the Fed since August 2008 as excess reserves they are not required to hold.

As long as this money stays parked at the Fed it has no velocity, it’s not loaned out, it’s not changing hands, it’s not being spent, its velocity is zero.

When we talk about the velocity of money, we are speaking of the average frequency a dollar is spent. If nobody is spending money the velocity is zero.

Velocity, as shown by the above chart, is currently at a record low.

Most of the dollars created in the stimulus programs (ie QE’s 1 & 2), after the bubbles burst, have never made it into circulation to be spent by small businesses (the largest job creators) or consumers (the driver of the US and world economies), there either parked at the Fed or the world’s central banks as foreign reserves (many countries hold US dollars in their foreign reserve accounts, China has trillions of US dollars, most of these dollars will never make it into circulation).

Let’s take a look at four charts; the US monetary base, gold’s price, money velocity and the US dollar index. You can see that gold has not, and is not, responding to the dollar’s strength or weakness as much as it responds to the increase in the US monetary base and money’s velocity.

Now we know why precious metals, and commodity prices, were so strong – the monetary base was expanding and there was an orgy of money spending fueling expectations of inflation. Currently the monetary base is not expanding, money is not circulating, this is fueling deflationary fears. Add in the multiple fears of a China slowdown, the EU imploding and the US slipping back into recession and we can see why prices are falling.

The questions we need to find answers for are:

• Are the Fed, and the world’s central banks, done with increasing the global monetary base?
• Have they given up in their attempts to revive credit and fuel another economic “spend your way to riches” prosperity bubble?
• Is austerity here to stay?

Consider:

Governing parties are suffering major losses in election after election as anti-austerity parties make gains.

Unless continuously fed with new credit the global financial system will implode, when confronted with this possibility governments always respond in the same way – by printing more money.

The world’s governments have unlimited printing presses.

France has elected a socialist leader who will demand an end to austerity.

The European Central Bank has accepted that growth should take precedence over balanced budgets.

German Chancellor Angela Merkel’s CDU party won only 31% of the vote in Scheleswig-Holstein, the party’s worst showing in 50 years. Merkel’s hard line austerity programs, so unpopular in the rest of Europe, are increasingly being viewed with skepticism at home in Germany.

Greek voters just delivered a resounding anti-austerity election verdict – more than 50 per cent of them cast votes for parties opposing public spending cuts. If there’s another election in Greece this summer there is a high probability of Greece defaulting and exiting the Euro.

Fed chairman Bernanke has made it clear he’ll step in with more easing if necessary.

Conclusion

The resource boom isn’t over, someone hit the pause button on the printing presses to take stock, do a review of their attempted fix methods and success achieved to date.

Single minded money printing has to be the next stage. Politicians, governments and central banks will abandon the restraints they have been operating under and do whatever they think it will take to pacify voters, save their re-election chances, “right” their economies and salvage the fiat monetary system. Tax cuts, more and bigger deficits, continued low interest rates into the forseeable future and aggressive asset purchase programs, steroidal quantitative easing, are all going to achieve previously unimaginable levels.

The monetary base will explode, and if the money velocity chart reverses – if small businesses and consumers actually get their hands on some of this money – precious metals and commodities prices will soar.

The greatest leverage to soaring precious metal and commodity prices has historically been junior resource companies. It is this authors opinion that we are presently being given the greatest buying opportunity of our lifetimes.

The whole world is the stage and the drama is set to continue. The greatest show on earth, a couple of charts (monetary base/money velocity), and a handful of carefully selected junior resource companies, should be on all our radar screens.

Is the drama, two charts and a couple of juniors on your radar screen?

If not, maybe they should be.

Richard (Rick) Mills

rick@aheadoftheherd.com

www.aheadoftheherd.com

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

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

***

Richards articles have been published on more than 400 websites including:

OzCopper, Wall Street Journal, SafeHaven, Market Oracle, USAToday, National Post, Stockhouse, Lewrockwell, Pinnacledigest, Uranium Miner, Beforeitsnews, SeekingAlpha, MontrealGazette, Casey Research, 24hgold, Vancouver Sun, CBSnews, SilverBearCafe, Infomine, Huffington Post, Mineweb, 321Gold, Kitco, Gold-Eagle, The Gold/Energy Reports, Calgary Herald, Resource Investor, Mining.com, Forbes, FNArena, Uraniumseek, Financial Sense, Goldseek, Dallasnews, Vantagewire, Resourceclips and the Association of Mining Analysts.

***

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.

Ahead of the Herd

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

In December 2006, Kootenay Silver TSX.V – KTN announced an agreement to acquire 100% interest in the former producing Promontorio Mine and the surrounding properties and mineral rights known as the Promontorio Concession. The claims cover approximately 79,000 hectares and are located in the historic, prolific silver and gold producing Sierra Madre Region of northwest Mexico.

Historical data from Promontorio shows individual holes with 1 kilogram (kg) of silver over 5 meters (m), 10m, 15m and an average silver grade of 367 grams per tonne (g/t). Historic reports also cite widths of 20 meters on average.

The project had seen some sporadic exploration and limited production (once in the 1920s and again in the 1980s) over the years but Kootenay’s exploration efforts represent the first thorough exploration program using highly advanced modern techniques.

Kootenay drilled over 50,000 meters and produced a 43-101 resource report which outlined 21 million ounces of silver equivalent – over 10 million ounces of silver along with substantial amounts of lead and zinc.

The independent mineral resource estimate from AGP Mining Consultants (AGP), for just the Pit Discovery Zone, comprises Indicated Mineral Resources of 5.22 million tonnes averaging 52.7 g/t silver, 0.86% lead and 0.96% zinc, containing 8.9 million oz Silver, 99.3 million pounds of lead and 110.8 million pounds of zinc.

AGP also estimated that Promontorio contains 0.65 million tonnes averaging 55.7 g/t silver, 0.94% lead and 1.00% zinc in the Inferred category, containing 1.17 million oz Silver,13.4 million pounds of lead and 14.3 million pounds of zinc.

That 43-101 report was published over 18 months ago, since that time KTN has drilled off another 35,000 m – an initial 10,000 m in RC and then 25,000 m of core.

 KTN is currently revising their 43-101 resource report to include all 85,000 meters of drilling.

“We have said all along the proof will be in the drill bit, and thus far it has yet to let us down. Based on supporting scientific data and the advancements we are seeing now, we have every reason to believe we have a viable shot to double or triple our current resource, or more.” James McDonald, Kootenay Silver CEO

There is no doubt the Company has good reason for its optimism, 35,000 m of drilling has been done, this was after the initial resource estimate. There are some pretty outstanding results (all posted on the website for investors to look at) from a lot of that drilling yet to be incorporated into a new resource estimate.

Highlights:

• 18 Meters of 254 gpt Silver Eqv Within 89 Meters of 84 gpt Silver Eqv (*Includes 120 gpt Silver and 3.1% Pb+Zn and 41 gpt Silver and 1.01%Pb+Zn)

• 873 gpt AgEqv Over 18 M in NE Zone (471 gpt Ag, 9.42% Pb+Zn) and 150 gpt AgEqv Over 17 M in SW Zone (118 gpt Ag, 0.76% Pb+Zn)

• 706 gpt Silver Eqv Over 16 Meters (370 Ag and 7.79 % Pb-Zn)

• 120 M of 164 gpt Silver Eqv (68 gpt Ag & 2.24% Pb+Zn) Incl High-Grade Intervals; 31 M of 292 gpt Silver Eqv (118 gpt Ag & 4.06 Pb+Zn) and 13 M of 362 gpt Silver Eqv

• 83 meters of 166 gpt Silver Equivalent (58.2 Ag gpt, 2.52% Pb +Zn) Including 329 gpt Silver Equivalent Over 6 Meters (111 gpt Ag, 5.11% Pb +Zn)

• Step Out Drilling on Promontorio Intercepts 92 m of 147 gpt Silver Eqv (56 gpt Ag,2.11% Pb+Zn) Extending the SW Zone 100 M Down Dip. Includes 5 M of 378 gpt Silver Eqv (174 gpt Ag,4.72% Pb+Zn)

• 205 meters of 117 gpt Silver Equivalent in Step-Out Drilling in Southwest Zone that includes 169 gpt Silver Equivalent over 50 meters.

Doubling or tripling its current silver resource at Promontorio could drive the total contained metal values on the project to over $1 billion. In short, if objectives are met, Promontorio, as it sits today, could well be a ‘Company Maker’.

The zones discovered to date are all open ended. After the new resource is out KTN will start another large program and start stepping off where the zones are still open ended and also start drill testing other targets in the immediate corridor zone.

Management believes the potential is for the resource to be in the 50 million ounce silver range plus an equivalent value in the lead/zinc. If so, shareholders have got a resource that could support a very significant silver producer for a 10 or 15 year time period.

Metallurgy

Preliminary metallurgy has been conducted on a composited 115 kg. sample taken from within the Pit Resource. The sample responded well to a standard lead/zinc sequential flotation flow sheet producing concentrates that would be highly saleable in the event a deposit is developed.

Locked cycle tests were conducted, 85 percent of the feed lead was recovered into a final lead concentrate containing 62 percent lead and 4250 g/tonne silver. On average, 82 percent of the silver reported to the lead concentrate and 7 percent reported to the zinc concentrate. Zinc was 91 percent recovered to the final zinc concentrate which graded 57 percent zinc.

Following lead and zinc recovery, 87 percent of the gold could be recovered into a pyrite concentrate. Sodium cyanide leach tests conducted on pyrite concentrates showed further work is required to develop a suitable process to extract gold from the pyrite concentrate.

Diatreme

Kootenay is dealing with a diatreme-hosted silver system (A diatreme is a breccia-filled volcanic pipe or concave body that was formed by a gaseous explosion or hydrostatic forces). What makes a diatreme system so exciting is the upside potential. Some of the world’s largest precious metal deposits are hosted in diatremes, and diatreme systems can keep producing new discoveries over a long period of time.

Two examples in Mexico are:

Goldcorp’s Penasquito Mine – In 2010, the Peñasquito mine achieved commercial production. Over a 22-year life, Peñasquito is expected to produce an annual average of 500,000 ounces of gold, 28 million ounces of silver, 450 million pounds of zinc and 200 million pounds of lead. Peñasquito will be Mexico’s largest open pit mine, consisting of two open pits – Peñasco and Chile Colorado – containing gold, silver, lead and zinc. Exploration continues to expand the high-grade manto deposits beneath the Peñasquito pit.

Silver Standard’s Pitarrilla – The Pitarrilla Project is a grass roots discovery made by Silver Standard in 2002. The Pitarrilla Project is located on the eastern flank of the Sierra Madre mountain range in the central part of Durango State, Mexico. Pitarrilla is one of the biggest deposits of its type in the world – currently 640 million ounces of silver. Five zones of mineralization have been identified to date on the Pitarrilla property.

Another example would be the Cripple Creek deposits in Colorado, these are diatreme-hosted systems that have had a long production history, over a hundred years. They are still giving off discoveries – a new pipe was discovered that, while only 130 m in diameter, went to 800 m depth and contains over 8 million ounces of gold.

A significant diatreme event formed the giant Sullivan (lead-zinc-silver) orebody in British Columbia, Canada.

These systems are incredibly exciting and can hold a lot of silver and gold ounces.

The Best of Both Worlds

Without internally generated positive cash flow our juniors are money-eating machines constantly having to go to the market to raise capital through equity offerings.

However there are companies doing things a little different than the mainstream junior – they’re called “Project Generators.” Project generators, after finding and securing a property, do the initial mapping, sampling and maybe a small drill program. Upon making a discovery, basically finding something of interest, they turn it over to a joint venture partner who puts up the money and or its own shares to earn into the property while investigating the discovery.

A property ownership dilution business model is not as well liked as the much more common share dilution (through equity offerings known as private placements) model. Yes the project generator shareholder’s eventual ownership of a discovery is diluted, BUT, their ownership in the prospect generating company is not diluted because there is very little dilution of the project generators outstanding shares. This is because the exploration/development expenses are paid by the partner, not the generator.

Kootenay Silver’s strategy has been to build a company incorporating both the property ownership dilution business model and share dilution model. They have several projects joint ventured with other junior explorers who pay costs for exploration and issue KTN shares in their company.

Kootenay Silver is a generator of new discoveries in both Mexico and the Kootenay region of British Columbia, Canada. They’ve send out their prospectors, generated new discoveries and brought in joint venture partners to conduct work programs while retaining 100% ownership of their flag ship Mexican property – the advanced stage Promontorio silver project.

This type of business model – property dilution versus share dilution -  minimizes risk and allows other people’s money (OPM) to be spent in the ground on drilling while avoiding diluting KTN shareholders. These joint ventured properties offer new discovery potential with every drill program.

Conclusion

Everything I’ve talked about so far is based on what Kootenay has discovered to date, and while it is considerable, and makes for an incredible backstop while still offering further resource growth, there is yet vast untapped potential on the rest of the Promontorio Concession outside of the Promontorio Mine area.

There’s 80,000 hectares of continuous land attached to the diatreme Kootenay is currently working on. Over the course of the last three years, they’ve been exploring some of these other areas (concentrating on three areas containing six different zones of mineralization) on a grassroots level, and there are now over half a dozen targets that are drill ready or very near drill ready. A number of these targets are breccia hosted, while others are disseminating, fracture-controlled, silver-gold systems and structurally focused high-grade systems.

There’s quite a number of things going on in the property outside of the resource project area KTN is currently working.

For all these reasons Kootenay Silver TSX.V – KTN should be on everyone’s radar screen.

Is Kootenay on yours?

If not, maybe it should be.

 Richard (Rick) Mills

rick@aheadoftheherd.com

www.aheadoftheherd.com

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

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

***

Richards articles have been published on more than 400 websites including:

OzCopper, Wall Street Journal, SafeHaven, Market Oracle, USAToday, National Post, Stockhouse, Lewrockwell, Pinnacledigest, Uranium Miner, Beforeitsnews, SeekingAlpha, MontrealGazette, Casey Research, 24hgold, Vancouver Sun, CBSnews, SilverBearCafe, Infomine, Huffington Post, Mineweb, 321Gold, Kitco, Gold-Eagle, The Gold/Energy Reports, Calgary Herald, Resource Investor, Mining.com, Forbes, FNArena, Uraniumseek, Financial Sense, Goldseek, Dallasnews, Vantagewire, Resourceclips and the Association of Mining Analysts.

***

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.

Richard does not own any shares of Kootenay Silver TSX.V – KTN

Kootenay Silver TSX.V – KTN is a sponsor of Richards site aheadoftheherd.com

www.gracelandupdates.com

www.gracelandjuniors.com

Email:

stewart@gracelandupdates.com

stewart@gracelandjuniors.com

May 8, 2012

1. Wikipedia tells you that gold dust refers to fine particles of gold that are produced by machining.  They can also occur naturally.  I agree.
2. Please click here now.  DUST-nyse is a triple-leveraged ETF that shorts GDX-nyse.  I don’t think that shorting gold stocks has ever been as important to the gold community as it is now.
3. Most investors try to use short positions to call tops in markets.  Instead, I suggest you use them to manage your emotions in the lowest prices areas, as you accumulate your gold stocks.  I refer to these prices areas as my “personal surprise zones”.
4. If you look at this DUST chart over the past two months, you can see that the price has risen about 100%.  Investors like to wait for a substantial correction in price before buying any asset.  I don’t think that’s such a good idea in this case.
5. If DUST was a mining company, I’d endorse that strategy, but it is not a mining company.  It’s a leveraged bet against mining companies.
6. I view DUST as emotional insurance, not financial insurance.  Most investors never expected gold stock prices to fall to the levels they are at now, and many are emotionally shattered.
7. A similar thing happened in 2008, but in 2008 you didn’t have an investment vehicle like DUST to help you navigate through your personal surprise zone.  So, many investors sold out into those lows.  Let’s not repeat that error in 2012.
8. Buy only the amount of DUST required to kill the emotional urge to liquidate your gold stocks.  You will be pleasantly surprised by how little stock is required.
9. Let me use a key analogy to illustrate the importance of vehicles like DUST to the gold stock accumulator.  Natural gas just rallied about 10%, but has been sinking for years.  Companies are beginning to cut back on production.
10. Still, it can take many years for prices to recover and for supply shortages to develop.  I add small short positions in natural gas on small rallies like this one, while buying much bigger long positions into price weakness.
11. I don’t do that because I think the price is going lower or to “call a turn”.  It’s done because I’m continuing to accumulate the asset and I don’t know what my emotional condition will be at prices that could be much lower than where we are now.
12. Don’t wait for a “big rally” before adding short positions.  Professionally manage the risk that you sell a lot of your accumulated long positions in a moment of panic.
13. What if GDX and your individual gold stocks keep falling here, before any rally of size occurs?  It happened with natural gas.  Small short positions are the main reason I’m still accumulating natural gas from an emotionally comfortable position.
14. Leveraged traders often fully hedge their positions, by entering into short positions that are as large as their core long positions.  Unfortunately, financial drawdowns are part of the gold stocks game.  You can’t avoid heavy drawdowns, but you can avoid capitulation.
15. Look forward to adding DUST to your portfolio at even higher prices than where it is now, because you know it will be overwhelmed by your vastly bigger purchases of GDX, GDXJ, and individual gold stocks.
16. Where are the big buying areas for GDX?  Please click here now.  HSR (horizontal support & resistance) sits in the $41-$42 area.  It is defined by the highs that I’ve circled in blue on the left side of the chart.
17. If GDX touches the $42 area I would suggest you add some DUST shares at the same time as you buy GDX and related individual issues, to help manage your emotional psyche if it doesn’t bottom there, but instead plummets to much lower prices.
18. Has quantitative easing turned into your bridge on the river Kwai?  Perhaps.  One thing is for sure; it doesn’t really matter how much quantitative easing is coming if you have thrown in the gold stocks towel.
19. Please click here now.  You are looking at a 60 day chart of gold priced in Indian rupees.  If you are wondering why the gold market feels somewhat “lifeless”, that chart explains the situation.
20. In US dollars, the price of gold has been drifting lower.  In rupees, it has been moving steadily higher.  India’s gold dealers are not interested in paying up for their gold.  They don’t have any “breakout” points on the chart.
21. Most jewellers are well-stocked with gold.  They have little interest in buying now.  There has been a slight slippage in price over the past few days, but that is hardly what an Indian gold dealer is going to call a “big sale”.
22. Please click here now.  That’s the daily chart of gold priced in US dollars.  Note the “lifeless” trading to the right of the chart.  The Stochastics oscillator is trading in a similar fashion; wandering aimlessly.
23. Western gold investors think the price is drifting lower, while Indian dealers think the price is soaring.  Western investors, sadly, tend to sell price weakness, while Indian dealers do not buy price strength.
24. Those two “liquidity flows forces” are at work now in the gold market, and the net result is a gold price that is drifting like a sailboat with no sail.  This scenario will change.  Stay focused on gold stock accumulation, but do it professionally.  Don’t bite the dust.  Buy the DUST!

Special Offer For OzCopper Readers: Send me an email to freereports4@gracelandupdates.com and I’ll send you my free “Technical Fakeouts” report.  Learn whether a breakdown from a support zone is likely to be real or just a fakedown that takes investors out of their positions!

Thanks!

Cheers

St

Stewart Thomson

Graceland Updates

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

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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?

Talking about market manipulation always opens up a can of worms and sparks some interesting theories… And while everyone has their own views and opinion on this subject I thought I would briefly share the main points I pulled from our conversation.

I did talk about the dollar index last week, but the recent price action unfolding today is important so I’m going to recap on it again.

My Weekend Conversation Key Thoughts:

Point form thoughts supporting Lower Equity prices and a Higher Dollar:

-          Dollar index looks ready for a major rally (high dollar means lower stocks)

-          SP500 may have just formed a double top

-          SP500 closed strongly below the 20 day moving average

-          First week of May for the past two years have been intermediate market tops

Points supporting Higher Equity prices and a Lower Dollar:

-          Countries around the globe are trying to keep their currency value low including the United States.

-          Presidential cycle strongly favors higher stocks prices which means the dollar should not rally until Nov.

What do all these points mean? Let’s take a look at the dollar charts below…

4 Hour Dollar Index Chart:

This chart time frame allows us to see all intraday price action while being able to zoom out several months for patterns along with key support and resistance levels.

As you can see over the past few months the dollar has been consolidating sideways. Within this consolidation it has formed two bullish falling wedges with the most recent one breakout last week right on queue.

Using this 24 hour futures dollar index chart we can see where things are trading through the weekend. On Friday the dollar index closed around the 79.50 level. As you can see the dollar has surged Sunday night by more than half a penny breaking through its down trend line.

The next few weeks will continue to be exciting ones as strong moves in the dollar will create wild movements in stocks and commodities.

Long Term Weekly Dollar Index Chart:

If you zoom WAY OUT using the weekly chart this shows you the two major areas where the dollar index is likely to reach come November. Also with these levels are my SP500 price points which are simply numbers I pulled from the charts using basic analysis. I say this because I’m not into long term forecasting but rather shorter term price movements. A lot can change between now and then.

So, if the dollar index rallies to the 86 – 88 level then I would expect the SP500 to be trading back down at the 1000 level. If this takes place, the Fed will likely issue QE3 to jam the dollar back down and boost equities.

The flip side of the coin is that the dollar rolls over here and gets pulled down. This will boost stock prices in favor for the president’s election. After that the dollar would likely rally which in turn would put a major top in the stock market, kick starting a bear market.

The big question…

Do you short the market in anticipation of rising dollar and falling stock prices? OR do you buck the trend and stick with the theory of a lower dollar value and presidential cycle?

The charts above clearly show how we are entering a major tipping point for the market and the next couple months are likely going to provide some big price swings for stocks, commodities and currencies.

If you want to get my thoughts and market ideas each morning before the opening bell be sure to join my video newsletter www.TheGoldAndOilGuy.com

Chris Vermeulen

Ahead of the Herd

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

A combination of mass retirements and increasing natural resource demand from emerging economies has created a crisis in the resource extraction sector – one which is definitely not on investor’s radar screens.

Currently there is a “massive talent gap” that is going to get worse because the global mining industry is experiencing the biggest wave of workforce retirements in 70 years – the oldest baby boomers turned 65 years old in 2011.

The Mining Industry Human Resources Council (MIHRC) has recently said that about 40% of the resource extraction industry’s workforce is at least 50 years old and one third of them are expected to retire by 2022.

The organization also forecasts that the Canadian mining industry will face a shortage of 140,000 workers by 2021 – this number of workers being needed just to maintain current levels of production.

The Petroleum Human Resources Council of Canada warned a severe oil patch labor shortage is looming and that the “patch” will need to hire 24,000 new employees by 2014.

Increased resource demand is driving demand for skilled workers. A shortage of skilled workers was the second biggest business risk for mining in 2011 (as it was in 2010) and is forecast to be the number two risk (resource nationalism/country risk is the number one risk) for miners again in 2012. In the coming years a lack of skilled workers is going to be the major cause for concern in the resource extraction industry.

“Government or industry reports in the past few years in Australia, the U.S. and South Africa all highlight growing skills shortages in the mining industry.” Recent HSBC commodities report

“A lot of people ask me what is my biggest concern. What keeps me awake? Having skilled people available to do the job… That is one of the biggest challenges. We are looking to build a whole lot of mines in the future. And getting the right skills to build those mines is a challenge, not only for us, but for the various engineering companies… The baby boomers are starting to get to retirement age. And there is a whole lot of them that are going to disappear very quickly… If you look at the youngsters coming through, they are looking at other industries.” Gold Fields CEO Nick Holland at  the Reuters Global Mining and Metals Summit

The skills shortages are global, shortages are happening in South Africa, Australia, Canada and South America. Costs are increasing, projects are being deferred or perhaps even cancelled outright due to the inability to staff operations – tighter labor markets also provide unions with greater bargaining powers when dealing with companies over wage settlements and other disputes.

“Given the ageing profile of the current workforce and a lack of engineers and geologists with enough experience, the labour resourcing requirements for new mining projects at various stages of development across the globe are simply not going to be met. Production targets and project deadlines are inevitably going to slip. The time taken to train a mining professional can be up to five years, but it is the candidate with around ten years experience who is in particularly short supply. A failure by the mining industry to recruit and train during the tough times in the 1990s, when the price of metals plummeted, has led to particular shortages of mid-career professionals.” Mining Global Employment Review 2011, Faststream Recruitment

Analysts say attracting and retaining increasingly scarce skills will:

• Accelerate cost increases
• Squeeze profit margins
• Threaten the viability of some marginal projects

Cause for Concern

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

Increasingly we will see falling average grades being mined, mines becoming deeper, more remote and come with increased political and nationalization risk. Extraction of metals from the mined ore will become increasingly more complex and expensive, even more so when one considers the effects of Peak Oil – the cost of technology innovation to power mining will be very high.

Broad spectrum peak commodities is a cause for concern over the longer term.

In the shorter to medium term there are several serious concerns in regards to global resource extraction that we need to consider:

• Resource nationalism/Country risk
• A looming skills shortage
• Smaller areas open for exploration
• Competition with Chinese mining investment
• Low hanging fruit, the high quality large deposits have already been found
• Lack of financing options for smaller deposits
• Lack of innovation and technological advancements
• Incredibly difficult and lengthy permitting processes

Just when we need it the most the mining industry is starting to suffer a massive loss of accumulated wisdom, knowledge and field experience. This loss of experience, when combined with labor shortages, means future mineral output will be constrained and that has bullish implications for prices.

Conclusion

Who is going to teach the aspiring mining engineers, metallurgists, and geologists when most of the professors and academics are also at, or close to, retirement age? And when they do get trained whose going to mentor and guide the green, fresh out of school, workers in the field – whose going to be left to pass on the years of accumulated wisdom and knowledge, the practical hands on experience – garnered over decades of pounding rocks and actually building mines – that’s so necessary to reduce the drastic learning curve and achieve success?

The existing shortage of skilled personnel, the imminent retirement of so many baby boomers and the skills supply gap in the 1980’s and 1990’s combined with the mining sector being in direct competition with the energy sector for people to train means prospects are bleak for either industry to obtain the necessary bodies and minds.

The coming crisis in the resource extraction sector needs to be on all our radar screens. Is it on yours?

If not, maybe it should be.

Richard (Rick) Mills

rick@aheadoftheherd.com

www.aheadoftheherd.com

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

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Richards articles have been published on more than 400 websites including:

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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 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.

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

Today I’m speaking with Dr. Rui Feng. Dr. Feng has been Chairman and Chief Executive Officer of Silvercorp Metals Inc. since 2003. Dr. Feng is also the CEO and a director of New Pacific Metals Corp.

Dr. Feng is a Director of the Canada China Business Council – BC Chapter Board, and Vice President of the Canada China Business Association.

Rick: How fast is demand in the Chinese precious metal market climbing?

Rui: Growth is between 30% to 40% a year, in terms of Chinese gold and silver buying.

Rick: That’s nothing short of explosive, in your opinion why is this happening?

Rui: The Chinese people have very few options left to invest their money in. They used to be able to buy apartments, invest in property, but now, to control speculation, they are limited to just one or two apartments.

Of course the Chinese stock market has been dropping over the last several years so they aren’t interested in investing in stocks.

And they have very limited options in terms of investing offshore. They can buy a QDI fund but every person who bought up QD’s lost money after the market crash back in 2007-2008 so nobody’s touching those anymore.

Rick: The Chinese have an affinity for gold and silver that goes back thousands of years.

Rui: Yes, and the Chinese government has made it very easy for people to buy gold and silver, it’s so much easier for Chinese than North Americans. Literally, you can walk into any bank and convert your money into gold or silver.

Silver is money in China, it has always been a big part of everyone’s savings, but because gold is expensive a lot of ordinary people can’t afford gold so they turn to silver, like here in North America, silver is the poor man’s gold, and it’s been this way, as you said for millennia.

Rick: Can you tell us about yourself Rui, and your position at Silvercorp?

Rui:  I am the chairman and CEO of Silvercorp Metals NYSE/TSX: SVM which is one of the largest primary silver miners in China. We originally built Silvercorp as a Chinese exploration company. In 2004 we made some discoveries; we converted those into a mining operation within two years. Since then we’ve been building on that success and last year Silvercorp made almost $60 million net profit, and the cash flow was over $100 million.

Rick: How many ounces of silver did you produce in 2011?

Rui: We produced 5.6 million ounces of silver plus almost 100 million pounds of lead and zinc and 4,000 ounces of gold. Silver equivalent would be over 10 million ounces of silver production per year.

Rick: Rui, you are also CEO and a director of New Pacific Metals Corp. TSX.V – NUX. How did NUX get its start?

Rui:  Silvercorp had explored a lot of properties, for mostly silver, in China. In the mix were a few prospective for nickel-copper projects, they were spun off into New Pacific and the company went to work exploring these and other properties it acquired.

New Pacific spent about US$3 million and made a small gold discovery, a 1/2 million gold ounces in the inferred category, which the company sold for US$23 million cash in 2011.

Back in 2008 project prices started getting more expensive, it was getting very hard to find good value in China at the time so we decided to come to North America and look for quality opportunities here.

Rick: You came into North America looking for high quality assets; you had a lot of money in the treasury and based on your success with Silvercorp investors would have to believe you know a quality asset when you see one, what happened next?

Rui: We acquired 100 percent ownership of the Tagish Lake Gold Project in Canada’s Yukon Territory, in December 2010. Right after that we raised Cdn$24 million. So, in the treasury, we had the just raised $24 million plus the money we received from the Chinese asset sale. After spending roughly $10 million on Tagish Lake project last year, we still have $32 million in the bank.

Rick: Tell us about Tagish Lake and what was so attractive about it.

Rui: Over 130,000m of surface and underground drilling has been completed.  There is over 5,000m of underground tunnels with a mill that needs to be refurbished. The mill was built in 1986 and produced roughly 80,000 ounces of gold from 1986 to 1988.

Besides having good access with all-weather roads, the project contains two advanced-stage gold-silver deposits and one historical producer, the Mt. Skukum Mine, which produced roughly 80,000 ounces of gold from 1986 to 1988.

It’s only a one hour drive to Whitehorse for supplies and a 2.5 hour drive to Skagway, a port in Alaska from which to ship our concentrates. The project hosts a reasonably high-grade deposit, with approximately 650,000 ounces gold-equivalent at an average grade better than nine grams gold equivalent and there exists great potential to add to this historical resource.

The mine site hadn’t operated for several years. Very little work has been carried out recently so the first thing we did was repair a lot of the roads and then we refurbished some of the most important tunnels. The original tailings facility, the waste containment area, is still there and it was constructed for 10 years of mining at 300 tonnes per day.

Of course we also managed to drill ~12,500m last year with many of the holes reporting reasonably good grades at better than 4-5 g/t gold, and several thicker intercepts with better than 10 g/t.

Rick: Permitting for drilling and water?

Rui: There have been regulation changes over the years so we have to re-permit the containment facilities. The reason we stopped drilling last year was that our exploration permit expired in October 2011. We just received a new exploration permit from the Yukon government in February.

Rick: So we do have our exploration permit for drilling in 2012. Water?

Rui: We will apply in 2012 for a Class B Water Use License, but this is not necessary to complete the planned drilling within certain water use and discharge thresholds, it’s more to support future advancement project.

Rick: Is the camp being refurbished?

Rui: We have a new camp with a 50-person capacity and a 6,000 square-foot geological office and core logging facility, already completed.

Rick: Metallurgy?

Rui:  There have been a lot of metallurgic studies done on the material. Preliminary studies indicate that if you put in place a simple flotation circuit you can recover over 96% of the gold and 94% silver.

Rick: Tell us about your plans for the year.

NUX: In response to the uncertain market and permitting challenges, the Tagish Lake Gold project will be advanced and funded at a “measured” rather than aggressive pace.  Also, the decision to put off a mine start-up is in favor of resource growth, based on having the potential for a much larger range of throughput considerations, and a “right sized” mine design. We believe that getting to the one million ounce level on this project and beyond is realistic and not far off.

We have a NI 43-101 resource calculation in the works, to bring our resource statement to a current status and also consider new drill information since the 2003 and 2007 historical based resource work took place. We expect growth in the overall resource, which should be public within a month or two. We intend to also use this current statement to direct and target the most promising zones among these resources, where the M&I confidence can be expanded and high grade ounces and tonnes can be added. Beyond this, we will work with stakeholders and First Nations to effect the best development plan for the project.

Rick: A lot of companies get branded as a northern stock; they don’t put out a lot of news from their northern properties during the Yukon winter because they simply don’t have any. I’ve always said that you need to have a second property you can work year round, or at least in the Yukon off-season, to keep the news flow going, keep investors interested in your story.

Rui: That’s a concern. We are going to do two things, keep on drilling and advancing our project in the Yukon and we are now looking at several prospects in China. We have seen Chinese asset prices starting to drop to the point where there is now significant opportunity there and we’ll focus on acquiring near term production capable assets in China.

Rick: We’ve got an MOU on the LMC silver-gold-lead-zinc property in China.

Rui: Yes, we are doing confirmation drilling as part of our due diligence. If we get confirmation of what we need to see the capital investment will be minimal. The LMC project already has a mining permit, and there’s a mill there. The capital requirement to get into production may be only US$5 million.

Rick:  We’ve got a historical resource of 20 million ounces of silver and about 36,000 ounces of gold.

Rui:  That’s a good starting point but remember we’re not interested in the oxidized material; we are more interested in the sulfide ore. It’s the primary ore, drill hole 4402 has 3.7 m of 114 g silver and 15% lead-zinc. In China you can make a lot of money on this. For this kind of ore the properties margin will be well over 85 percent. You start to make a lot of money and from there you use cash flow to expand the resource.

Rick: Okay, any other acquisitions on your radar screen?

Rui:  Yes, the gentleman who owns the LMC property has seven projects in total. Right now we are considering looking at two of his other producing assets and he has four exploration projects we’re potentially interested in.

Rick: Do you find that investors in the junior resource area have a problem investing in companies working in China?

Rui: Yes, right now there are some problems. In the US market there were organized attacks on Chinese companies by short sellers over the last year or so. They were making false allegations over dubious accounting practices while short selling the stock.

This has created a lot of problems for Chinese companies.

Rick: Corporate earnings drive stock values and shareholder returns, if you want to drive a corporation’s share price down calling the quality, or truth, of its earnings into question would certainly do it.

Rui: Yes, but in the end investors will eventually look at what you have in the company, what’s your asset, what’s your cash flow generating abilities. They will be able to see if you are real or not. We’ll get past this.

Rick: I find paying dividends a very interesting concept in a precious metal production company.

Rui: Silvercorp was one of the first junior companies to pay dividends to our shareholders. We managed to get to production, grow the profits year after year and we started to pay our shareholder’s a dividend back 2007.

Rick: I see it’s been continuous.

Rui: Yes, I believe if you have a good business you should always pay a dividend.

Rick: I think there’s been a precedent set by Silvercorp in regards to New Pacific Metals. Maybe investors can see a business plan, get into production and perhaps pay a dividend.

I also see Silvercorp’ s been a very large buyer of New Pacific shares, now at over 15 percent ownership, you’re also a large shareholder in New Pacific. You must be coming up on 10 percent ownership now?

Rui: The plan is to build value for the shareholders. I am also on side with shareholders of both Silvercorp and New Pacific being a very large shareholder of both.

Rick: I like to see insider participation; it’s a confidence builder for somebody looking at an investment to realize that management has their own money in and needs something to happen to monetize their piece of it.

If you’re not willing to buy your own shares, why in God’s name would somebody else be? You’ve got to show a little bit of leadership in that department and put your money where you’re asking everybody else to put theirs.

Rui: Yes.

Rick: Thank you Dr. Feng, it’s been a pleasure.

Richard (Rick) Mills

rick@aheadoftheherd.com

www.aheadoftheherd.com

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

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

***

Ahead of the Herd featured on:

OzCopper, Wall Street Journal, SafeHaven, Market Oracle, USAToday, National Post, Stockhouse, Lewrockwell, Pinnacledigest, Uranium Miner, Beforeitsnews, SeekingAlpha, MontrealGazette, Casey Research, 24hgold, Vancouver Sun, CBSnews, SilverBearCafe, Infomine, Huffington Post, Mineweb, 321Gold, Kitco, Gold-Eagle, The Gold/Energy Reports, Calgary Herald, Resource Investor, Mining.com, Forbes, FNArena, Uraniumseek, Financial Sense, Goldseek, Dallasnews, Vantagewire, Resourceclips and the Association of Mining Analysts.

***

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.

Richard Mills does not own shares of Silvercorp Metals NYSE/TSX:SVM or New Pacific Metals Corp. TSX.V – NUX

New Pacific Metals Corp. is a sponsor of Richards website www.aheadoftheherd.com

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stewart@gracelandjuniors.com

May 1, 2012

1.   The only chart I see that looks better than this GDX bull wedge chart, is this GDXJ chart.  Both charts are showing classic breakouts from bull wedge patterns.  Another few days of consolidation in advance of the jobs report is probably just what the “breakout doctor” ordered, at this point in price and time.
2. Please click here now.  That’s a ratio chart of GDXJ versus gold bullion.  Note the position of the “King Daddy” TRIX indicator.  It’s flashing a massive buy signal for GDXJ.
3. If you look at ratio charts of GDXJ against silver and against the Dow, you will see a similar set-up.  Gold junior stocks are probably about to enter a period of substantial outperformance against every asset class.
4. I like to see the general commodity indices rising nicely when junior gold stocks begin to rally.  Please click here now.  That’s the CRB general commodity index, and if you look at the technical indicators and oscillators you can see powerful buy signals in play.
5. Note the lows at 292.39, 293.50, and 298.22, and the highs at 324.99 and 326.02.  A small rally has already started from 298.22 and I think there’s a good chance that the CRB price bursts out of this congestion zone on the upside.
6. Individual commodities are showing similar action, which is a very bullish sign.  Please click here now.  Natural gas is one such commodity, and it is pushing into horizontal resistance in the $2.23 area.
7. It’s very important not to get carried away with calling a turn for gold stocks or commodities.  Amateur investors tend to think “space helmet on” means “Place huge buy orders now, because the price of the asset is about to blast higher!”  That’s not how the professional investor thinks.
8. To the professional investor, the term “space helmets on” means that positions accumulated into severe price weakness may be about to experience a period of tremendous price strength.  That’s really all it means.
9. The professional is prepared to endure much more price weakness if the “blast off alert” goes awry.  The professional will continue to accumulate while the amateur becomes demoralized.
10. Trade smaller than you know is rational, so you can continue to accumulate alongside professional investors when there are problems on the “launch pad” of your stock and commodity rocket ships.
11. If you place a tremendous amount of capital in any one price zone, you run an even more tremendous risk of finding yourself deeply underwater.  You’ll soon be cursing the asset instead of continuing steady accumulation.
12. This is a good time to add light short positions in assets like natural gas.  The rally gives natural gas accumulators a breath of fresh air, and fresh short positions give you added emotional and financial firepower to manage your “personal surprise zone”. 
13. If the price of “ole natty” takes out the bottom at $1.90, you’ll be very glad to be holding those short positions while continuing your overall accumulation of this mighty asset.
14. While all gold stock accumulators should own bullion, be very careful about falling into the same trap that “Elmer Fudd Public Investor” fell into when the general equity market entered his personal surprise zone in 2008-2009.
15. The “growth with safety” play in the gold community is a move out of gold stocks and into bullion.  When the public moved out the stock market in 2008-2009, and into low-yield bonds, the stock market promptly rose almost 100% in eighteen months.  Many Dow stocks tripled and quadrupled.  The public will never recover what their “growth with safety” play cost them.
16. I believe a very similar situation is at hand for the gold community.  Gold stocks appear set to dramatically outperform bullion, yet many investors are looking to move into bullion to avoid further drawdowns in gold stocks.
17. Enormous drawdowns in gold stocks are just part of this game, and in my professional opinion, it is only lottery winners who experience tiny drawdowns.
18. If the heat in the gold stocks kitchen is too high, I would consider buying the Dow rather than bullion.  As the dollar comes under more and more pressure, institutional money managers are likely to buy the general stock market and push it dramatically higher.
19. The problem with that play is that the Dow is quite high right now.  Selling gold stocks low and buying the Dow high is not how to build wealth.  It’s a tactic that could impoverish the investor.
20. The best time to enter the Dow is after a crash.  May to October is the weak price season for the Dow, and August to October is what I term, “crash season”.  Wait for the Dow and its component stocks to fall hard before moving any capital from gold stocks into it.
21. If you are experiencing 50% drawdowns or more on gold stocks you should understand that such action is normal in good times.  In this super-crisis, those drawdowns should be considered modest or even tiny.  
22. Try to step “outside the drawdown box” and focus on accumulation, patience, and the mind-boggling size of this crisis.
23. Gold stocks are not short-term bonds.  They are bucking broncos, and riders need to understand that wild drawdowns are not the exception, but the rule.
24. At this point in time, it is highly probable that junior gold stocks are set to dramatically outperform all other asset classes.  If that happens, great!  If not, well, that’s why you carry some short positions and some bullion!

Special Offer For OzCopper Readers:  Send me an email to freereports4@gracelandupdates.com and I’ll send you my “Reader’s Choice” report.  I maintain a database of hundreds of junior resource stocks followed by gold community investors.  Which ten look the best right now?  I’ll show you!

Thanks!

Cheers

St

Stewart Thomson

Graceland Updates

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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?

Unfortunately I was sick the past few weeks and I am just now getting back into the swing of things. Similar to the demand pull that the warmer than usual spring has had on macroeconomic data, the warmer spring caused me to have an earlier than usual sinus infection as well as some horrific allergies. I suppose I am pushing it a bit far when I am comparing my health concerns to economic data, but alas I fly my nerd flag proudly.

Recently I have been advising members of my service to be cautious as the market appears to be at a major crossroads. The U.S. Dollar Index is on the verge of a major breakdown. If a breakdown occurs it will be clear that the Federal Reserve will have officially stopped any potential rise in the U.S. Dollar. Over the past few months the Dollar has been producing a series of higher highs and higher lows, however the current cycle may break the pattern as can be seen below.

If the U.S. Dollar pushes down below the recent lows and we get continuation to the downside, we will break the recent bullish pattern. Furthermore, if the Dollar starts to weaken it should benefit equities and other risk assets such as oil. Higher energy prices would not be long term bullish for equity markets so there is concern if the Dollar really starts to extend lower.

However, if the Dollar finds a bottom and rallies it clearly would create a headwind for equities. We should know whether we have a major breakdown on the daily chart in the next few weeks. Until then, the Dollar could go either way and obviously the price action in the Dollar will have a major impact on risk assets and stock market returns in the near future.

From a macroeconomic viewpoint, risk assets such as the S&P 500 Index could be in trouble in the months ahead. U.S. gross domestic product (GDP) came in lower than expected with revisions likely in the near future. Unemployment claims appear to have bottomed and are rising week after week even though the major media fails to report it appropriately as it would appear that the Bureau of Labor Statistics has stumped media pundits with data revisions.

Additionally, there are two other macroeconomic data points which need to be mentioned. The Citigroup Economic Surprise Index has moved below zero and is showing a negative reading. This index is generally a leading indicator regarding equity prices and the recent decline shown below is problematic for the bullish case.

Chart Courtesy of Morgan Stanley

As can be seen above, fundamental data is starting to skew towards the downside which is likely a result of the recession that is in the process of developing over in Europe and potentially in China. Time will tell if the index can reverse, but the bulls need to see a major reversal in the near future.

The chart below illustrates the relationship between metal prices and industrial productivity. Demand for metal increases when economies are expanding and prices generally contract when economies retract. The chart below demonstrates global metal demand. The chart speaks for itself.

Chart Courtesy of Morgan Stanley

Clearly if industrial production contracts (reduction in Global Manufacturing PMI) the impact on the global economy will be felt across multiple countries’ economies. The chart below illustrates the MSCI World Index compared to global manufacturing PMI. Similarly to the chart above, this chart also tells a significant story about what investors and traders should expect if the PMI numbers come in light   against expectations.

Chart Courtesy of Morgan Stanley

As quoted from the zerohedge.com article entitled What do Metal Prices Tell us About the Future of the Stock Market, “In other words, for those who still believe in logical, causal relationships (even in a time of ubiquitous central planning) unless something drastically changes to push fundamental demand of metals higher, one could say the the outlook for equities is not good.”

Essentially, the data shown above is certainly not bullish in the intermediate to longer term. However, it generally takes time for macroeconomic data to permeate all the way through to equity markets. For right now, the story regarding global growth is at the very least questionable based on the data illustrated above.

In the short term anything is seemingly possible. The S&P 500 Index closed above the key 1,400 price level on Friday. I would not be shocked to see prices extend up to the recent highs near 1,420. Ultimately I think we are in a long term topping formation that might require another higher high up to around 1,440 before we see a deeper correction.

The past few weeks have produced a very mild correction compared to the monster rally we have seen since October of 2011. This is a bullish signal, but we need to see prices continue higher and climb a serious “wall of worry” that is coming out of a variety of places. The European situation continues to worsen overall and we have lower than expected GDP numbers in the US paired with concerns about growth in China.

The S&P 500 has some negative headlines to deal with, but so far it has been able to shrug off poor economic data and we could see an extension higher that would shake out the shorts and run stops above the recent highs. However a move lower remains possible. The daily chart of the S&P 500 illustrates the recent correction and the 1,420 highs.

I believe that the next few weeks are going to be critical and the S&P 500 may trade in a consolidation zone between recent lows and the 1,420 highs while traders await more economic data. Fundamental data is starting to indicate that a slow down may be beginning. In contrast, the topping pattern that we appear to be carving out may require higher prices to suck in more longs before moving into a deeper correction.

In the short run, the Dollar will likely hold clues regarding the immediate future for risk assets. However, the longer term picture for equities is quite murky based on the economic data points we are seeing paired with additional concerns stemming from the European sovereign debt crisis. Right now I am looking at time decay based strategies in the near term and will likely stay away from directional biased trades. I would urge readers to be cautious regardless of which direction they favor.

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This material should not be considered investment advice. J.W. Jones is not a registered investment advisor. Under no circumstances should any content from this article or the OptionsTradingSignals.com website be used or interpreted as a recommendation to buy or sell any type of security or commodity contract. This material is not a solicitation for a trading approach to financial markets. Any investment decisions must in all cases be made by the reader or by his or her registered investment advisor. This information is for educational purposes only.

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

On the night of November 22, 1910 a delegation of the nation’s leading financiers, led by Senator Nelson Aldrich, left New Jersey for a very secret ten day meeting on Jekyll Island, Georgia.

After the Jekyll Island visit the National Monetary Commission wrote the Aldrich Plan which formed the basis for the Federal Reserve system.

After several failed attempts to push the Federal Reserve Act through Congress, a group of bankers funded and staffed Woodrow Wilson’s campaign for President. He had committed to sign a slightly different version of the Federal Reserve Act than Aldrich’s Plan.

In 1913, Senator Aldrich pushed the Federal Reserve Act through Congress just before Christmas when much of Congress was on vacation. When elected president Woodrow Wilson passed the Federal Reserve Act.

In the Federal Reserve Act Congress established three key objectives for monetary policy:

• Maximum employment
• Stable prices
• Moderate long-term interest rates

The first two objectives are often referred to as the Federal Reserve’s dual mandate.

Over time, the roles and responsibilities of the Federal Reserve System have expanded and its structure has evolved.

According to official Federal Reserve documentation today’s duties are:

• Conduct the nation’s monetary policy
• Supervise and regulate banking institutions
• Maintain the stability of the financial system
• Provide financial services for depository institutions, the U.S. government, and foreign official institutions
• Conduct research into the economy and publish results ie the Beige Book

The Federal Reserve’s structure is composed of a Board of Governors who – including its chairman and vice-chairman – are chosen by the President and confirmed by the Senate, the Federal Open Market Committee (FOMC), twelve regional Federal Reserve Banks, privately owned U.S. banks and advisory councils.

The only stockholders of the 12 regional Federal Reserve Banks are the national banks (the ones chartered by the federal government) and those state-chartered banks that wish to join and can meet certain requirements. Roughly 38 percent of the county’s plus 8,000 banks are members of the Fed system, and they own the 12 Fed banks.

The FOMC is the committee responsible for setting monetary policy, the committee regulates the nation’s money supply and sets targets for short-term interest rates. The FOMC consists of all seven members (a voting majority) of the Board of Governors and the twelve regional bank presidents. Only five of the bank presidents vote at any given time – the president of the New York Fed is a permanent seat and four seats are rotated among the eleven other regional bank presidents.

The US Federal Reserve System is unique:

• According to its Board of Governors “Its monetary policy decisions do not have to be approved by the President or anyone else in the executive or legislative branches of government”

• Also unusual is that an entity outside of the US central bank – the United States Department of the Treasury – creates the currency used

“When you or I write a check, there must be sufficient funds in our account to cover the check, but when the Federal Reserve writes a check, there is no bank deposit on which that check is drawn. When the Federal Reserve writes a check, it is creating money.” Federal Reserve Bank of Boston, Putting it Simply (1984)

The Fed is highly profitable, since it can create the money that it needs at no cost the return on its investments flows directly to the bottom line. Federal Reserve banks are also exempt from state and Federal taxes.

The Fed’s investment portfolio grew in 2011, it’s now approaching three trillion dollars. Almost 97 percent of the Fed’s income is generated by interest payments on its investment portfolio – the Fed is the largest single investor in federal government debt and securities issued by the government owned mortgage finance companies Fannie Mae and Freddie Mac.

Most of the money flowing into the Fed’s coffers comes from US taxpayers and the U.S. Government receives all of the system’s annual profits, after a statutory dividend of six percent on member banks’ capital investment is paid, operating expenses are paid (since no one audits the Fed its operating expenses have never seen the light of day and are what the Fed says they are) and an account surplus is maintained.

In 2010, the Federal Reserve made a profit of $82 billion and transferred $79 billion to the U.S. Treasury. This was followed at the end of 2011 with a transfer of $77 billion in profits to the U.S. Treasury Department.

Consider:

The Fed’s twelve regional bank are owned by US Federal and State chartered banks – 100% of its shareholders are banks, the stock is not publicly traded and none of its stock is owned by the US government.

The Fed does not look to Congress for annual appropriation. The Fed spends whatever it wants on operations and its profit are whatever remains after all expenses and dividends have been paid – in contrast to ordinary corporate accounting.

The Fed generates profits for its shareholders – six percent may not be considered much of a profit but any business that covers all of its expenses and gives shareholders a guaranteed tax free six percent return is a “for profit” corporation.

In addition to the guaranteed six percent, member banks get interest from the Fed, read taxpayers, on their extra reserves. Of the $1.7 trillion dollars injected into the banking system through two rounds of Quantitative Easing (QE) $1.5 trillion dollars is sitting in the Feds coffers and is collecting .25% interest from the Fed for its member banks – it’s shareholders.

“Between August 11, 2008 and the end of 2011, the monetary base, which only the Fed can produce, almost tripled with a Bernanke Fed injection of $1.7 trillion dollars.

Most of the money issued by the Bernanke Fed is parked in banks as excess reserves that the banks are not required to hold.

The Bernanke Fed has been paying banks interest on these excess reserves since October 2008. This is an incentive to hold the cash. At the end of 2011 the U.S. banks were holding 88 percent of the monetary base issued by the Fed since August 2008 as excess reserves they are not required to hold. The banks held $1.5 trillion in excess reserves of the $1.7 trillion increase in the monetary base.” Robert Auerbach, Malpractice at the Bernanke Federal Reserve, huffingtonpost.com

Member banks also borrow at the low Fed funds rate, then turn around and put this money into longer term Treasury bonds earning an immediate return from taxpayers.

The US Congress gave the Fed the right to print money at no interest to the Fed. The Fed creates money from nothing, loans it out through banks and charges interest. The Fed also buys government debt with money from nothing, and charges U.S. taxpayers interest. The Fed banking system collects tens of billions of dollars in interest annually and distributes the profits to its bank shareholders.

Ownership of a piece of the Fed’s 12 regional banks, and their highly unusual business model, “make money for free,” is extremely lucrative for the Fed and it’s banker shareholders.

Conclusion

Is the Federal Reserve Bank a privately owned company that controls, and whose shareholders profit immensely, by printing money through the US Treasury and regulating its value?

I’ll leave that for you to decide, but there is no doubt that the Fed is, first and foremost, looking out for the special interests of its shareholders, the banks, insurance companies, and securities firms.

The ownership question is moot, it’s nothing but splitting hairs and simple misdirection.

The first question we should be asking ourselves is; “What does taking care of its shareholders special interests first, have to do with the Fed’s official dual mandate: stable prices and high employment?”

The second question we need to be asking has to be; “What do we replace, not just the Fed with, but the entire global fiat monetary system with?”

A return to real money, gold and silver, has to be on everyone’s radar screens. Is it on yours?

If not, maybe it should be.

Richard (Rick) Mills

rick@aheadoftheherd.com

www.aheadoftheherd.com

If you’re interested in learning more about the junior resource and bio-med 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 400 websites, including:

OzCopper, Wall Street Journal, SafeHaven, Market Oracle, USAToday, National Post, Stockhouse, Lewrockwell, Pinnacledigest, Uranium Miner, Beforeitsnews, SeekingAlpha, MontrealGazette, Casey Research, 24hgold, Vancouver Sun, CBSnews, SilverBearCafe, Infomine, Huffington Post, Mineweb, 321Gold, Kitco, Gold-Eagle, The Gold/Energy Reports, Calgary Herald, Resource Investor, Mining.com, Forbes, FNArena, Uraniumseek, Financial Sense, Goldseek, Dallasnews, Vantagewire, Resourceclips and the Association of Mining Analysts.

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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 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.

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

Today I’m speaking with Christopher Taylor, M.Sc, P.Geo, President and Director of Planet Mining Exploration TSX.V – PXI

Rick: Tell us a little about yourself Chris.

Chris: I was a project geologist with Imperial Metals. I worked on their Red Chris and Mount Polley mines in British Columbia and ran an epithermal gold exploration project for them in Nevada for several years, the Sterling Gold Mine which is currently going into production.

Although I was familiar with the development and production part of the mining cycle I really wanted to get involved with junior explorers, the grassroots kind of work they do, that initial part of the development process where they secure a property, make a discovery and advance it to a resource.

With a partner I set up the Preakness Group, where we run mineral exploration projects and manage junior mining companies. Our annual exploration budget, across all the Preakness Group of companies, is $10-$15 million.

Rick: How did Planet Exploration become involved with the Preakness Group?

Chris: The previous management of Planet got in contact with us and brought the company over. Planet had developed a resource of 360,000 ounces of gold at their Sidace Lake Project, in the Red Lake district of Ontario. It’s still open for expansion and Goldcorp acquired control with a 60% interest.

Planet’s mandate is to bring advanced level exploration projects up to a resource level within a short time frame. So they were coming to us looking for a project that was ready to go to a resource in a short period of time.

We took over control of Planet in late 2010, it had $4.5 million in the treasury and we added a million by getting a few select major shareholders involved, then we found the Golden Loon Project and dropped it in.

Rick: Tell us about the Golden Loon.

Chris: When I first saw the Golden Loon Project I was immediately attracted to it, it’s only an hour north of Kamloops, it’s right on the main highway that goes between Vancouver, Kamloops, Jasper and Edmonton, it’s got a rail line that runs just off the edge of the claims, less than a kilometer away and it’s got a power line that actually runs over one of the big mineralized bodies on the project.

From an infrastructure and access point of view, and all the other points you would look for, to aid in the development of a project, they’re all in place already.

Which means that whatever you’re able to find on the Golden Loon has a much higher chance of going further into the development stage. With our mandate in Planet to find resource-ready properties and then to build the resource, it’s a perfect match for us.

Rick: The Golden Loon is an interesting story from another perspective, the property hosts two different types of mineralization.

Chris: Yes, there is a very large bulk tonnage nickel-cobalt-silver-platinum mineralized ultramafic body and right along side of that the Geological Survey of Canada (GSC) mapped out multiple large gold mineralized structures that converge on the property.

These gold mineralized structures run for tens of kilometers in all directions, but they come together almost like a crow’s foot pattern on the Golden Loon Project.

So we are in the enviable position of having two different types of mineralization, each of which would be interesting in its own right, coming together on the same property. What we’ve been doing with Planet is developing both of those assets simultaneously so that we can hopefully ratchet up the value of the project in a short period of time.

Rick: It’s an extremely interesting scenario.

Chris: You’re looking at two big systems that are mineralized over the space of kilometers, there’s enormous strike and depth potential involved.

Rick: Lets break down the two systems individually for our readers.

Chris: The first stage of exploration we did was 12 sq km of gold in soil surveying. That exploration initially defined an 8 sq km gold and soil anomaly system.

Now when you find a big gold system like that in soils in BC, everybody knows that it could have been transported from somewhere else, so my initial concern was that we’re looking at gold that might have originated in one area and, over time, been smeared around by glaciers.

We followed up with a drill program, that initial program showed us that over 700 m of strike, everywhere that we drilled, had gold in the bedrock underlying the gold in soils. That’s what really showed us the size potential and the merits of the project.

Rick: You drilled one target out of…

Chris: Using the data we generated last summer and historical data that we got from past operators and assessment reports, we now know that we have a gold in soil system that extends for over ten kilometers of strike on the project.

And when you look at these gold in soils targets, that are the possible surface expression of multiple gold in bedrock zones, there’s more than 30 of these targets that we need to test this year.

Rick: Let’s talk about the low-grade bulk tonnage ultramafic nickel-cobalt-silver-PGE system.

Chris: We’ve actually got an area of over 10 sq km of surface exposure of this body, where it sits up as a hill over the rest of the flat plateau that the property’s on. It’s a 150 m high hill with a gentle slope that’s about 7 km long, two km wide, the entire hill seems to be mineralized with nickel-cobalt-silver and PGE’s.

We’ve recently assayed 1400 m of drilling in eight different drill holes, very consistent grades, the key word being consistency, a consistency in the nickel mineralization, consistency in the cobalt mineralization. We assayed about 600m of the core for silver and the big upside surprise for us on this is the very consistent silver mineralization, it’s quite unusual with this type of system but half of the meters we assayed returned more than 5 g per tonne silver, with a high of about 91 g per tonne silver.

Rick: From what you’ve said the targets size potential must be immense?

Chris: We’re just getting started, but if you connect the dots between the drill holes, just in the area we’ve drilled, you’d be looking at our primary exploration target.

Rick: That’s more than a billion tonnes of nickel-cobalt-silver-platinum mineralization. Is Royal Nickel’s Dumont deposit an apple to apple comparision?

Chris: Yes it is. They’re looking at a dunite ore body and the Dumont deposit has similar grades on the nickel and cobalt.

They’ve proven up 1.4 billion tonnes, that’s going to yield a billion and a half pounds of nickel, quite a bit of cobalt and some PGEs. Based on their prefeasibility study they can produce a 30% nickel concentrate, that should be a nice saleable concentrate.

Rick: Any major differences?

Chris: They’ve got similar infrastructure to ours but they’ve got a long thinner deposit that doesn’t have very much surface exposure. I believe the strip ratios and other characteristics of our deposit could be better than Dumont’s.

Rick: Why is that, is it because of the difference in the two deposits geometries?

Chris: On the Golden Loon you’re looking at something that’s sitting up as a two km wide by seven km long hill, 150m above your nearest diluting rocks. If you think about it you’re looking at something that could have a perfect geometry for mining.

In a development scenario, your strips could be very low for a huge portion of the mine life. If it’s already sticking up 150m above the base elevation and you want a 300m deep pit you’re only looking at going 150m below the base level of the plateau. You take the hill away and you have a very manageable pit after that.

Rick: This is proven metallurgy, it’s been done before, you’re not looking at anything new or having to reinvent the wheel.

Chris: We’re following in the footsteps of people that have already successfully shown viable metallurgy on these deposits.

What most people are looking for on these deposits is the dunites being your primary host for mineralization. In our deposit, both the dunites and lherzolites, the two main ultramafic rock types, are mineralized in the same way with nickel, cobalt and silver. There was also platinum intercepts in both those rocks.

The nickel metallurgy looks good, we did ammonium citrate partial leach tests on all the rock. We’re getting good recoveries on what we’ve put through, we’ve got comparable deposits with good metallurgy and a good concentrate product being developed at Dumont already.

Rick: How fast are you going to move on the ultramafics and gold?

Chris: A big advantage for us is that our ultramafics deposit has massive surface exposure, more than 10 sq km of exposure right at surface of consistent mineralization, that’ll really help drive the economics on this deposit.

SRK has already designed a resource drill program, we’re already doing the metallurgy. Within this calendar year, we want to get a resource out to the market.

Rick: And the gold side?

Chris: In parallel with what we’re doing on the ultramafic, we’re looking at showing the size potential of the gold system. I really want to be able to test more of our gold targets. The first drilling that we’ve done was very encouraging. We’ve got 30 targets to test and we’ve only tested one. We’re working with the drill crews to drill off a lot of these things in a short period of time. So, as soon as we’ve got the drill rig on site, we’re just going to hit it as quickly as possible, that’s going to start shortly.

Rick: The ultramafic, being right on the surface and with consistent grade to depth shouldn’t take much of a drill program to define a resource.

Chris: This is where we believe the value comes for shareholders, according to the preliminary discussions I’ve had with SRK, we can drill the skeleton resource with as little as sixteen or so additional drill holes.

Say sixteen vertical holes down to 300 m, that’s going to give you a very good outline of your resource.  And then, if the consistency is like what we see now, you’d do some in fill work on that, likely another 15 or 16 holes, about two months’ worth of drilling to get to the resource level.

Rick: What were Royal Nickels economics like, and are there large scale mining operations here in BC we can look at?

Chris: In regards to Royal Nickel’s Dumont project when you have viable metallurgy you’re usually looking at very cheap mining costs. Royal Nickel has shown that each tonne of rock is worth about $20 and they’re looking at about $8 a tonne in terms of mining cost.

You end up looking at good margins per tonne of rock, and you’re moving a lot of rock. You’re looking at something in scale of operation that potentially looks a lot like a Highland Valley. They are very profitable operations once you get them rolling because you’re making good money on each tonne of rock, and it’s not costing you very much money to move it compared to other deposits.

Rick: We’re talking critical metals. Nickel isn’t listed as a strategic or a critical metal, but when you consider that it’s extremely important in the production of cobalt and the platinum group elements, the PGEs, it’s pretty much a critical metal, and then you look at cobalt, that is a strategic or critical metal, and as well as the PGEs, and even more important is the source of a lot of these metals.

A lot of nickel comes from Canada, of course, but a lot of nickel also comes from Zambia, the Democratic Republic of Congo (DRC), you look at cobalt, most of the supply comes from Russia, it comes from China via the DRC. You look at the platinum group elements, and they come mostly from the Bushveld for platinum in South Africa. Palladium comes from Russia and some of these countries, we’re not talking about countries that are always real friendly to the US.

Chris: As soon as we put out the initial news about the fact we had one of these large nickel mineralized systems on the project, we immediately had a number of phone calls from Asian investment groups that are looking for sources of nickel and cobalt in infrastructure rich areas in Canada, a friendly jurisdiction that’s going to have a stable supply over a long time period.  So, it’s very attractive to a number of investors from that point of view.

Rick: There was a time when people thought that BC’s porphyry copper/gold deposits were uneconomic because they were only 0.3% to 0.5% copper, maybe a quarter gram or a bit better gold. And of course they said the same thing regarding Carlin Trend and its one gram per tonne gold.

Chris: Yes, and here we are now looking at a type of deposit which has excellent potential economics, a very big bulk tonnage system with reliable grades of mineralization, in good areas that are going to be cheap to operate in and are going to produce a valuable product.  So, anybody that has the ability to invest based on fundamentals is going to be very interested in this project.

If you’re making money, and you’re making good money off of what you’re mining out of the ground, you should be open to different investment opportunities.

Rick: Investment decisions should be based not on profit but on sustainable margins.

We’re not mining a copper-gold porphyry, but the historical long-term average, the all in cost in BC of mining these copper/gold porphyries is less than $10 a tonne.

Chris: People have studied the comparables to what we’re working on. Because they’re big, because they’re on surface, or near surface, in our case it’s on and above surface, you’re looking at mining costs that tend to be anywhere between $7 and $10 range.

Rick: Your working on the project now.

Chris: Yes. We’ve got about six weeks of drilling in so far and results are starting to come in. We’ve been drilling the gold system because we did a lot of re-assaying on the nickel. We took one meter intervals out of the core for 1,400 m of core, that took months to get the assay data back from the lab.

We’re working with that data, that’s going to be concluded within the next couple months, and then we’ll be resource drilling.

Rick: How’s the money holding out?

Chris: Money’s good.  We have $3.8m in the treasury and because of the low cost, it’d be somewhere around a million dollars, to drill off the nickel resource. That leaves us a lot of cash in the bank to do the necessary work on the gold system.

Rick: Anything else you’d like to add Chris?

Chris: The area around and the Golden Loon project has been exploited for resource extraction the last 50 or 60 years, there’s been a lot of commercial logging activity in the area. The local people, Little Fort is the nearest community, are very supportive of the project. They’re looking for benefits and we are going involve them in every way that we can.

It’s one of those projects where I could pop into my car and drive to the drill site in five hours from Vancouver. When you’re there you stay at the motel in Little Fort. It’s cheap for us to operate, which is great, and comfortable for all the people working on the project.

The city of Kamloops is just an hour south of the project, the city has a large, well trained experienced mining workforce. They understand mining. They like it. They realize how important resource extraction is to their economy, and they’re a major supply center for mining in central BC.

Rick: Thank you Chris, it’s been a pleasure.

Richard (Rick) Mills

rick@aheadoftheherd.com

www.aheadoftheherd.com

If you’re interested in learning more about the junior resource and bio-med 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: OzCopper, Wall Street Journal, SafeHaven, Market Oracle, USAToday, National Post, Stockhouse, Lewrockwell, Uranium Miner, Casey Research, 24hgold, Vancouver Sun, CBSnews, 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.

Richard Mills does not own shares of Planet Mining Exploration TSX.V – PXI

Planet Mining Exploration TSX.V – PXI is a sponsor of Richards website www.aheadoftheherd.com

Graceland Updates 4am-7am

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Email:

stewart@gracelandupdates.com

stewart@gracelandjuniors.com

April 24, 2012

1. If you analyze the market, you are usually trying to identify the next market trend, so that investors can place buy or sell orders.  The reason for placing these orders is to book a profit or a loss.
2. When it comes to the gold market, I’m not sure that analysis is the best tool to maximize profits and emotional stability in this super-crisis.  In a super-crisis, destruction is a major theme.
3. If you view the gold price grid as a battlefield, and view gold bullion as the “Queen” of your forces, I think you will fare better.  Rather than looking at a gold bull market and a dollar bear market, view this crisis as a financial war where you are a predator.  You exist solely to take what your opponent has.
4. Look at this crisis as a war between a “gold bullion punisher” and a “dollar bug” enemy.
5. Most of the gold community is heavily invested in gold stocks, and the key HSR (horizontal support & resistance) levels on the monthly chart of the $HUI gold bugs index are your main buying zones.
6. Gold-based wealth is built as you accumulate, not as you liquidate.  Please click here now.  For 95% of the gold community, I believe this is the most important chart in the world.
7. These HSR zones are price areas where “queen gold” orders her armed forces to engage the dollar bug enemy in enormous financial battle.
8. The GDX-nyse ETF is based on the $HUI index, but it hasn’t been in existence as long as the $HUI has, so you need to use the $HUI chart too.
9. Use these monthly chart HSR zones as your “personal aircraft carriers” in the war against the dollar bugs.
10. I’d like you to make careful note of each HSR zone.  In 2008, the first major point of gold stock accumulation occurred at a price of 258.60.  I’ve highlighted that key HSR zone in orange colour.
11. The 2^nd point of gold stock accumulation in 2008 was ushered in when price arrived at the black HSR line at 154.99.  You can either buy at these HSR lines, or buy into them, preferably with increasing size, as price drops.
12. Where are we now?  Well, the $HUI traded yesterday at a low of 422.92.  The $HUI is rapidly approaching an enormous gold stock accumulation zone, defined by the purple HSR line at 401.69.
13. While most analysts are trying to figure where price might be going to, I’d prefer you to think like a soldier, and focus on “opening fire” on your opponent in the price area surrounding these key HSR lines.
14. Like it or not, the time is now, to open fire.  Business owners in the gold community with enormous cash flows but weak emotions need to stop hesitating and start fighting.  Re-buy what you bailed on and increase your buying.  Fight back against the dollar bugs.
15. I don’t think that anything Ben Bernanke says at the FOMC meeting will be enough to stop the enormous battle that has begun as we approach $HUI 401.69.  You don’t need QE.  You need to buy into 401.69.  Do it by buying GDX, GDXJ, and your favourite individual gold stocks.
16. I was a heavy buyer of GDX yesterday, and if the $HUI gets closer to 401.69, I’ll be an even heavier buyer.
17. The gold community can win this fight.  Many investors have endured 70-90% drawdowns in 2008.  Use that pain to get angry.  You’re in a military fight, not an analysis contest.  Direct your rage into pressing the buy button on your computer.
18. What happens if the $HUI falls all the way down to the orange HSR battle zone at 258.60?  Well, the answer is that you engage the enemy and take their stock.
19. If you have never been a robbery victim, you are likely to become somewhat irrational if you are approached by robbers, and I think that is a very similar feeling to what gold investors are experiencing now.
20. Ironically, at precisely the point where gold stocks are mostly likely to stop falling and start rising, investors are becoming convinced that they can only fall.
21. Once you jettison the flip trading mentality and embrace the much bigger HSR zones in play on the monthly charts, you are set to regain a lot of “market sanity”.  Let’s take a close-up look at the gold bullion chart.  The weekly chart can help to closely illuminate the big monthly chart HSR zones that are currently in play.
22. Please click here now.  For the gold community, the 2^nd most important chart in the world is probably the monthly gold chart with the major HSR lines highlighted.  This is the weekly chart, and it gives you a bird’s-eye view of the key HSR zones.
23. I don’t think it matters that the two declines from $1923.70 bottomed at $1535 and $1523.90.  What matters is that they entered the key HSR zone at $1577.40, and you need to be an accumulator in the area around $1577.40.  Note the orange HSR line at $1424.30.  Guessing about whether the gold price goes to $1424.30 is a complete waste of time, in my professional opinion.  I don’t think we go down there, but if we do you need to understand that the soldiers in “queen gold’s army” will be there, and they will engage the dollar bugs in serious battle.   You need to be prepared to engage there too.
24. I’m 90% sure that GDX and your individual gold stocks will be propelled higher by current HSR in the gold bullion $1577.40 and $HUI 401.69 price zones.  More importantly, I’m 90% sure that most of the gold community is tired of analyzing and ready to start fighting.  So, let’s do it!  I’ll see you out there, buying stock, on the major HSR gridlines!

Special Offer For OzCopper Readers: Please send me an Email to freereports4@gracelandupdates.com and I’ll send you my free “GDXJ monster buys!” report, where I correlate the key $HUI support at 401.69 with specific price points on the GDXJ chart!  I’ll also include a horrifying report on how the internet search engines are morphing into internet direction  engines!

Thanks!

        Cheers

St

Stewart Thomson

Graceland Updates

www.gracelandupdates.com

Email: stewart@gracelandupdates.com

Mail to:

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

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?

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

In July 1944, delegates from 44 nations met at Bretton Woods, New Hampshire – the United Nations Monetary and Financial Conference – and agreed to “peg” their currencies to the U.S. dollar, the only currency strong enough to meet the rising demands for international currency transactions.

Member nations were required to establish a parity of their national currencies in terms of the US dollar, the “peg”, and to maintain exchange rates within plus or minus one percent of parity, the “band.”

What made the dollar so attractive to use as an international currency was each US dollar was based on 1/35th of an ounce of gold, and the gold was to held in the US Treasury. The value of gold being fixed by law at 35 US dollars an ounce made the value of each dollar very stable.

The US dollar, at the time, was considered better then gold for many reasons:

• The strength of the U.S. economy
• The fixed relationship of the dollar to gold at $35 an ounce
• The commitment of the U.S. government to convert dollars into gold at that price
• The dollar earned interest
• The dollar was more flexible than gold

There’s a lesson not learned that reverberates throughout monetary history; when government, any government, comes under financial pressure they cannot resist printing money and debasing their currency to pay for debts.

Lets fast forward a few decades…

The Vietnam War was going to cost the US $500 Billion. The stark reality was the US simply could not print enough money to cover its war costs, it’s gold reserve had only $30 billion, most of its reserve was already backing existing US dollars, and the government refused to raise taxes.

In the 1960s President Lyndon B. Johnson’s administration declared war on poverty and put in place its Great Society programs:

• Head Start
• Job Corps
• Food stamps
• Medicaid
• Funded education
• Job training
• Direct food assistance
• Direct medical assistance

More than four million new recipients signed up for welfare.

During the Nixon administration welfare programs underwent major expansions. States were required to provide food stamps. Supplemental Security Income (SSI) consolidated aid for aged, blind, and disabled persons. The Earned Income Credit provided the working poor with direct cash assistance in the form of tax credits and welfare rolls kept growing.

“The problem with Socialism is that eventually you run out of other people’s money.” Margaret Thatcher

Bretton Woods collapsed in 1971 when Nixon severed (known as the Nixon Shock because the decision was made without consulting the other signatories of Bretton Woods, even his own State Department wasn’t consulted or forewarned) the link between the dollar and gold – the US dollar was now a fully floating fiat currency and the government had no problem printing more money.

Because of the massive printing of the US dollar to cover war and welfare reform costs Nixon worried about the strength of his country’s currency.

Recognizing that the US, and the rest of the world, was going to need and use more oil, a lot more oil, and that Saudi Arabia wanted to sell the world’s largest economy (by far the US) more oil, Nixon and Saudi Arabia came to an agreement whereby Saudi oil could only be purchased in US dollars. This caused an immediate and strong global demand for US dollars.

“Beginning in the mid-1970’s the American Century system of global economic dominance underwent a dramatic change. The oil price shocks of 1973-1974 and 1979 suddenly created enormous demand for the floating dollar. Oil importing countries from Germany to Argentina to Japan, all were faced with how to acquire export-based dollars to pay their expensive new oil import bills. The rise in the price of oil flooded OPEC with dollars that far exceeded domestic investment needs, and were therefore categorized as “surplus petrodollars.” A major share of these oil dollars came to London and New York banks where the new process of monetary petrodollar recycling was initiated.

In 1974 U.S Assistant Treasury Secretary Jack F. Bennett and David Mulford of the London-based Eurobond firm of White Weld & Co set about the mechanism to handle the surplus OPEC petrodollars. Kissinger, Bennett and Mulford helped orchestrate the secret financial arrangement with the Saudi Arabia Monetary Agency (SAMA) that creatively transformed the high oil prices of 1973-1974 to the direct benefit of the U.S. Federal Reserve banks and the Bank of England.

Despite the financial windfall enjoyed by the U.S./U.K banking and petroleum conglomerates who “managed the recycling of petrodollar flows,” most Americans regard the 1973-74 oil shocks as a particularly painful time period of high inflation and long lines at every gas station. In the Third World these high oil prices created huge loans from the International Monetary Fund – debts to be re-paid entirely in dollars.” petrodollarwarfare.com

By 1975 all OPEC members had agreed to sell their oil only in US dollars.

The US Dollar Today

republicbroadcasting.org

The dollar lost 95% of its value from 1913 (inception of the Federal Reserve) to 2010. Nixon cut the Bretton Woods tie to gold in 1971 and did the oil for US dollars deal with Saudi Arabia in 1973.

Current Account Deficit

The more popular the worlds reserve currency is relative to other currencies (remember Nixon’s deal with the Saudis?), the higher its exchange rate and the less competitive domestic exporting industries become. This causes a trade deficit for the reserve currency issuing country – the United States is running the largest current account deficit in the world.

The current account is the difference between the value of exports of goods and services and the value of imports of goods and services. A deficit then means that the country is importing more goods and services than it is exporting.

The U.S. current account deficit for 2011 was $473.4 billion or 3.1 percent of GDP. A sustainable current account deficit is considered to be in the 2-2.5% range.

A country’s current account deficit may become unsustainable if it is unable to secure the necessary financing – countries like China are shunning U.S. Treasuries, “In 2009, such foreign purchases of U.S. debt amounted to 6 percent of GDP and has since fallen by over eighty percent to a paltry 0.9 percent.” Money News article

The Federal Reserve bought approximately 61 percent of all government debt issued by the U.S. Treasury Department in 2011.

This is called “monetizing the debt” – printing money to buy your own debt is the most inflationary thing a country can do.

Trade imbalances – deficits and surpluses – between nations are one of the major reasons for financial crises.

Fiat versus Bretton Woods

Todays fiat monetary system as compared to the Bretton Woods system:

• Economic growth is a full percentage point slower, with an average annual increase in real per-capita GDP of only 1.8%

• World inflation of 4.8% a year is 1.5 percentage point higher

• Downturns for the median countries have more than tripled to 13% of the total period

• The number of banking crises per year has soared to 2.6 per year, compared to only one every ten years under Bretton Woods

Moreover, abandoning the gold standard in favor of free floating currencies was supposed to eliminate currency crises and lead to an automatic adjustment in trade imbalances. Instead:

• The number of currency crises has increased to 3.7 per year from 1.7 per year

• Current account deficits have nearly tripled to 2.2% of world GDP from only 0.8% of GDP under Bretton Woods

These results demonstrate beyond a reasonable doubt that the experiment with floating paper currencies has been a disaster for the people of the world. Charles Kadlec, An International Gold Standard Beats The Rule Of The Governing Elite, forbes.com

Gold Today

Gold purchases by the world’s central banks soared from 77.0 tonnes (t) in 2010 to 439.7t in 2011.

According to the World Gold Council (WGC) this reflects “the need to diversify assets, reduce reliance on one or two foreign currencies, rebalance reserves and ultimately protect national wealth.”

Has it only taken 41 years, 1971-2012, for the world’s governments to realize…

“The commodity used most successfully for money to date has been gold.” John Tomlinson, Honest Money

and that

“Paper money eventually returns to its intrinsic value – zero” Voltaire 1729

Investors certainly understand gold’s role in the monetary system.

Record investment demand lifted global gold demand to an all-time high in 2011 – 4,067t. The main driver for this increase was the investment sector where annual demand was 1,640.7t, up 5% from the previous record set in 2010.

“What is certain is that the long-term fundamentals for gold remain strong, with a diverse and growing demand base, coupled with constrained supply side activity.” Marcus Grubb, managing director for investment at the World Gold Council

Conclusion

In the time of the ancient Babylonians – long before the periodic table – there were seven sacred metals: gold, silver, copper, iron, tin, lead and mercury.

In Roman and Greek Mythology, the First Age was called Golden, the Second Age Silver.

Gold and silver have played a role in most countries’ currency systems for well over two thousand years.

The history of fiat money has always been one of failure (most paper money economies downfall  can be linked directly to the costs of financing out of control military growth and its wars). Every fiat currency since the Romans started diluting the silver content of their denarius has ended in devaluation and eventual collapse of  both the currency and of that particular economy.

Silver and gold have stood the test of time, as a medium of exchange, a storehouse of value and a safe haven in times of turmoil.

Gold remained the basis of the monetary system until 1971.

For the very first time in our history, all money, all currencies, are now fiat – the US dollar use to be gold backed and it was the rock all the worlds currencies were anchored to – when the US dollar became fiat, all the worlds currencies became fiat.

Our 41 year experiment with paper money is almost over. This fact should be on all our radar screens. Is it on yours?

If not, maybe it should be.

Richard (Rick) Mills

rick@aheadoftheherd.com

www.aheadoftheherd.com

If you’re interested in learning more about the junior resource and bio-med 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: OzCopper, Wall Street Journal, SafeHaven, Market Oracle, USAToday, National Post, Stockhouse, Lewrockwell, Uranium Miner, Casey Research, 24hgold, Vancouver Sun, CBSnews, SilverBearCafe, Infomine, Huffington Post, Mineweb, 321Gold, Kitco, Gold-Eagle, The Gold/Energy Reports, Calgary Herald, Resource Investor, Mining.com, Forbes, FNArena, Uraniumseek, Financial Sense, and the Association of Mining Analysts.

***

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.

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

Today I’m speaking with Jamie Tuer, President of Hudson Resources TSX.V – HUD.

Hudson Resources is focused on the Sarfartoq Carbonatite Project. The Sarfartoq Carbonatite Complex, in west Greenland, is one of the world’s largest carbonatite complexes having approximate dimensions of 13km X 8 km.

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 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.

Rick: Hudson was a successful diamond exploration company yet you made the transition to rare earths.

Jamie: We’d just come out of 2008 where everything was a disaster. We were successful as diamond explorers but the diamond market had just fallen badly. No one was prepared to invest in a diamond exploration company even though we had found multiple high quality two carat stones on our Garnet Lake property in Greenland.

On the same license as the diamonds we had a very large carbonatite that we knew hosted high grade niobium and some rare earth occurrences so we started looking at rare earths.

Rick: What’s your take on the current rare earth market?

Jamie: My take is that it’s still robust. We’ve gone through a cycle. We’re bottoming on pricing, but we’re bottoming at prices that are still much higher than they started at a couple of years ago.

Rick: Neodymium is a major component of the high-powered magnets that are needed today.

Jamie: That’s what Hudson has an abundance of and it’s the main driver of the rare earth’s space.

Neodymium represents about 30% of a permanent magnet and those go from the scale of an iPhone, right up to the large three megawatt wind turbines.

Rick: A growing market awareness of the importance of rare earths and the realization that China controls 97% of the market was a huge factor in the escalation of rare earth prices.

Jamie: When we first started looking at rare earths in Greenland, neodymium was trading at $18-$20 per kg. We actually thought that was pretty good because we had seen samples on the surface at our Sarfartoq project from between five to ten percent total rare earths, which at those neodymium prices would give us $250 – $500 a tonne rock.

Since then we’ve seen neodymium go from $18 to $500 a kilo before dropping back down to about $130 per kg, free on board (FOB) China.

Rick: We have two different types of market, both concern China because we have almost no refining capability here in the West to make the high purity oxides or the powders used in making the magnets.

Jamie: That’s correct, we do have two markets. We have the FOB export market, and we have the internal Chinese market, the difference is a function of export taxes and VATs.

There’s very, very few refining facilities outside of China. Molycorp had one, but it’s not operating right now, they’re rebuilding a facility. Lynas is building a separation facility in Malaysia. Molycorp bought the Estonian operation of Silmet, but that’s only about 3000 tonnes per year of production.

Some new entrants are trying to establish separation facilities, but up to this point China is the only one that is separating rare earths into high purity powders used in the making of the neodymium iron boron magnet in any kind of volume.

Rick: China currently has control of the REE space?

Jamie: The Chinese are saying if you set up your production plants in China, we’ll guarantee a steady supply of the rare earths that you might need for your businesses. The businesses that are still operating outside of China are looking for security of supply.

And it’s that security of supply that is critical to the Europeans, the Japanese, the Koreans, and the Americans. We’re seeing a lot of political wrangling over rare earths with the World Trade Organization (WTO) even getting the mix.

Rick: The Japanese company Sumitomo, and others, Hecla comes to mind, scoured the globe for rare earths in the 1970s. Most of today’s deposits were looked at, drilled and dropped years ago because of complex mineralogy, metallurgy that just didn’t work and or infrastructure limitations.

Tell us about Hudson Resources Sarfartoq Project in Greenland.

Jamie: Sarfartoq was never explored for rare earths. Nobody had drilled the carbonotite for rare earths before we did.

Rick: It’s unique among REE deposits for another reason isn’t it? It stands out on a list of rare earth deposits for an extremely significant reason.

Jamie: We have an inferred resource of 14 million tonnes of 1.5 percent total rare earths. About twenty percent of that is neodymium, which is high. When you look at Mountain Pass, for example, only about twelve percent of the mix is neodymium, but of course, they have a higher grade which accounts for their three billion dollar market cap. The tonnage that we’ve found so far is enough for a 20 year mine life, which we think is important.

Rick: You recently released the results of your Preliminary Economic Assessment or PEA.

Jamie: The study showed a net present value of $616M and an internal rate of return of 31.2 % with a 2.7 year pay-back period. The PEA was based on our current 43-101 compliant inferred resource of 14.1Mt at 1.5% TREO at the ST1 Zone.

In January, we received assays from a five tonne bulk metallurgical sample we collected from surface at the ST1 Zone. It graded 2.5% total rare earth oxides, and Neodymium oxide averaged about 20% of the total.

Rick: I know of five REE host minerals that the mineralogy, the metallurgy, the processability of is well known; monazite, bastnasite, zenotime, loparite and the ion absorption clays.

Jamie: Sarfartoq is a light rare earth deposit, meaning that it’s a carbonatite based system. The rare earths are hosted in bastnasite and monazite minerals and they are two of the known rare earth minerals that have been commercially exploited.

What we know about these types of mineralization is that with acids they can be cracked, and then the rare earths can be liberated.

Rick: To some, Greenland might seem to be an isolated and difficult place to work.

Jamie: The irony is that Greenland sounds like it’s inhospitable when it comes to mining, but we’re actually only 20 km away from an inland fjord, so we have access to open water shipping.

Rick: That’s year round?

Jamie: From where the port is being proposed, there will be some ice for a few months of the year. This can be easily broken up using conventional methods – so yes – there is virtually year-round shipping.

To access the project we need just a 20 km road from the port. The international airport, which is closed for bad weather on average one day a year, is only 60 km away. That’s a short 15-20 minute helicopter ride.

Because of the international airport there’s abundant fuel nearby. There’s all sorts of reasons why the infrastructure works.

For example, we only lost one day to weather in two six week drill campaigns last year and drilled over 16,000 meters. In the Arctic, depending on where you are, you have completely different infrastructure challenges and weather challenges. Across the Davis Inlet in Nunavut and Labrador they can get some very challenging winter conditions.

Rick: Interesting, why is that?

Jamie: Because of our proximity to the ice cap, which is only 100 km away, we typically get high pressure systems bringing good stable weather. Even though we are on the Arctic Circle we get more moderate temperatures due to the ocean influence. Operating a mine year round in this environment is not a problem. Some very large and robust diamond mines lie right on the Arctic Circle including Diavik, Ekati and Udachnaya in Siberia

One of the best ways to get a feel for the Hudson Project and the area of Greenland we’re in is to go to our website (hudsonresources.ca) and watch the video posted there on the front page. You’ll get a really good feel for the project and the environment we operate in.

Rick: Greenland’s very receptive to mining.

Jamie: They’re certainly looking towards mining and the oil and gas business becoming the key driver for their economy. Shrimping and fishing are their major industries right now and they see mining as a very important contribution to their economic viability going forward.

Rick, you wrote quite a comprehensive and well laid out article on Greenland and readers should access it to see all the advantages we have in operating there.

Greenlanders  are very supportive of mining. They do want to be aggressive at developing their natural resources. But they feel a great responsibility for the environment and have developed high quality world standard environmental guidelines. They are well thought out and are implemented by a single regulatory body which makes the process very manageable.

Rick: You’ve got an excellent country to conduct your business in. You’ve got an area with all the necessary infrastructure and good weather to work on the project. You also have rare earths that are in demand now and will be in demand for the forseeable future.

Jamie:  Every rare earth deposit is comprised of each of the rare earth elements – lanthanum through lutetium. So, whether they are classified as a heavy (HREE) or as a light (LREE) rare earth deposit, you are going to have a large amount of the two major lights, cerium and lanthanum, and you’re going to have some percentage of praseodymium and neodymium as well, and as you know praseodymium and neodymium together make up 25 percent of Hudson’s rare earth deposits.

We have a fair bit of Europium which adds some good credits, as well as samarium and gadolinium to create a very saleable rare earth carbonate concentrate.

Rick: Can Hudson take it a step further and perhaps sell the high purity oxides?

Jamie: We’re looking at including a separation facility in the next stage of engineering because there is a lot more added value if you look at the individual oxides, as opposed to selling a rare earth carbonate. We’re exploring the cost benefit of going that extra step.

When you’re looking at costs, if you were to separate them, you could envision cerium and lanthanum paying for your mining and processing costs if they were trading in the $10-$15 per kg range.

There will be a lot of cerium and lanthanum if Molycorp and Lynas get into production, but they are very, very useful for a number of businesses and they do trade in volume. For example, cerium is an additive for petroleum cracking, where a drum of heavy oil can be turned into three drums of light. So there is a price where it will sell in great volume, and I think that’s in the $10-$15 per kg range.  At that price point, it will pay for our mining and processing, leaving all the free profit for the neodymium, praseodymium and europium.

Rick: How’s the treasury?

Jamie:  We’ve got $12 million in the bank. Our program last year was $6 million, our average drill cost was $350 a meter all in – helicopter, transportation, geologist, assays, reserve calculations, PEAs. Etc.

Rick: That’s a really good number.

Jamie: We’re very efficient with our cash, and we have over eight years experience operating in Greenland. Our burn rate is probably the lowest of our REE peers.

Rick: And what are we going to be doing this year?

Jamie:  We should have our new ST1 resource calculation out soon, which will move resources from the inferred category to the indicated category.  We’re planning about 10,000 m of drilling and a lot of it will be focused on expanding the current ST1 resource to extend the high grade intercepts from our 2011 program as the deposit is still open at depth and to the north and south. At the far north end we hit some of our best grade at over 6% TREO and we want to define more of this material.

Of course we are also exploring for new deposits on the project. We’ve got tremendous prospecting results with samples in the 10% – 12% total rare earth (TREE) range and multiple locations around an effective strike length of up to 30 km. So, there’s huge upside potential to increase the resource over multiple bodies.

Rick: You envision an open pit mining scenario?

Jamie: Because some of our higher-grade material looks consistent from surface to considerable depth, we’re now examining the benefits of a combination of a starter pit and an underground mining operation. Since the ST1 deposit has allot of high grade ore at depth, it makes sense to look at it that way. An underground operation would minimize our environmental footprint and allow us to chase the high grade zones we are seeing at depth, like the 6% TREO intercept we hit drilling at the far north end.

We’ve also looked at the costs and see no appreciable difference in mining costs between an open pit and underground mining project of this scope and it has the potential to enhance the projects net present value. We think we can increase the grade substantially this way, as well. The lower grade tonnes will of course go down, but the minable grade goes up, so that’s an important metric.

Rick:  There are significant niobium and tantalum values found on the Sarfartoq Project.

Jamie:  Yes, the carbonatite was historically looked at for niobium and tantalum. We’ve never worked on it so these are all non-43-101 compliant resources, but the Australians were in there and they were talking up to a few 100,000 tonnes of pyrochlore, which contained 5% to 8% niobium with 1% uranium and it remains very underexplored.

Rick:  That’s the highest niobium grade I’ve heard of.

Jamie:  Niobec is IAMGOLD’s niobium mine, it’s very profitable at 0.6 percent. So, those are very high grades.  The issue that we have is that there’s a one percent uranium credit to it, which usually wouldn’t sound like a problem, but it is.

Rick:  Most junior uranium companies would kill for that grade.

Jamie:  It’s pretty good and so are the associated tantalum grades. The pyrochlore is extremely rich, by itself in isolation it’s something like twenty percent niobium, which turns out to be around thirty percent Nb205. It’s super, super high-grade material.

But there’s a uranium mining debate going on in Greenland, and it’s off the table for us until a decision is made on whether to allow uranium exports. For us, it’s an asset that is completely unrecognized but has tremendous upside potential.

Rick: How does the current debate effect us?

Jamie: Our rare earth project has less than 10 parts per million uranium and about 500 parts per million thorium which is not very high, but however small these amounts may be they still have to be dealt with.

We’re working with experts in the field of managing radioactive products. We have to make the case that the thorium can be controlled in an environmentally safe manner and that it doesn’t pose a health and safety risk to the workforce.

Under the current regulations we have no rights to the thorium or the uranium.

Rick: Who would actually want a neodymium magnet mine?

Jamie: The European Union (EU) is a natural. In fact a delegation from the  EU is coming to our project in June as part of a look at Greenland’s rare earth and mining potential. They’re desperate for security of supply.

Apart from the EU itself, German companies are forming an industrial alliance to secure rare earth production. They’re looking at security of supply outside of China. BASF, for example, uses a lot of cerium for petroleum cracking products, as well magnet materials, Siemens would need REE’s, in particular neodymium, as a wind turbine manufacturer. Potentially GE would need it, not only for their wind turbine businesses, but for many, many other consumer products applications that use generators, motors, speakers etc.

Rick: One of the big problems right now is that everyone’s buying in the spot market and there’s no real predictable price.

Jamie: Everybody needs a secure supply of neodymium outside of China, if the taps get turned off they’ll still have a business. If they’re not just buying spot from China, if they have their own supply, then they have more predictable pricing. Then their predictable pricing can go to the Japanese, who are their major buyer, and the Japanese can then make their hard drives and everything else. Their pricing can be more predictable as well.

We need this security of supply to be from outside of China to give some predictability to pricing, once you do that, the entire space will grow dramatically.

Rick: Any last comment?

Jamie: I’m not worried about too many companies entering this market. I’m worried about too few companies because we’ve seen talk of substitution. As long as we have reasonable prices because of security of supply, substitution won’t be a reality. Neodymium consumption is expected to grow by over 17% per annum and we haven’t even begun to see the myriad of fantastic applications that neodymium magnets will bring to our world.

Rick:  Thank you Jamie, it’s been a pleasure.

Richard (Rick) Mills

rick@aheadoftheherd.com

www.aheadoftheherd.com

If you’re interested in learning more about the junior resource and bio-med 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: OzCopper, Wall Street Journal, SafeHaven, Market Oracle, USAToday, National Post, Stockhouse, Lewrockwell, Uranium Miner, Casey Research, 24hgold, Vancouver Sun, CBSnews, SilverBearCafe, Infomine, Huffington Post, Mineweb, 321Gold, Kitco, Gold-Eagle, The Gold/Energy Reports, Calgary Herald, Resource Investor, Mining.com, Forbes, FNArena, Uraniumseek, Financial Sense, and the Association of Mining Analysts.

***

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.

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

Hudson Resources TSX.V – HUD is a sponsor of Richards website www.aheadoftheherd.com

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stewart@gracelandjuniors.com

April 17, 2012

1.  What economic phenomenon is most worrisome to Dr. Ben Bernanke?  To view a picture of the answer, please click here now.
2. A higher oil price is Dr. Bernanke’s biggest fear, and I believe a new move higher is beginning right now.
3. David “SuperDave” Greenlaw is Morgan Stanley’s chief U.S. fixed income strategist.  A number of Morgan Stanley’s top economists, including SuperDave, have issued substantial warnings that the American economy faces what they term a “fiscal cliff” in 2013.
4. 4.   There is talk of dividend tax hikes, the end of the Bush tax cut extensions, and it’s conceivable that both individuals and American corporations could enter the year 2013 with no idea what their tax rates will be for the year.
5. How much fiscal tightening are you facing in 2013?  Well, Dave argues that the total amount of fiscal tightening will not be the “3.5% of GDP” number bandied about by many respected economists and by the congressional budget office.
6. He feels the American economy is facing a 5% hammer that will send America back into recession in 2013.
7. I agree, because if the Dow Jones Industrial Average had a chief economist, it would be “Doctor Copper”.  The weekly chart of copper looks like a train wreck waiting to happen.
8. In my view, this chart “technically certifies” the superb fundamental analysis produced by SuperDave, who says, “Under current law, the US economy will experience a fiscal tightening of unprecedented magnitude at the end of this year.”  If you like horror movies, you’ll love this copper chart.  To view Dr. Copper’s horrifying forecast for the economy of America, please click here now.
9. That head and shoulders top pattern is ominous.  Sadly, I think that for the intermediate term, Doctor Copper, both fundamentally and technically, is about to become Doctor Plopper.
10. The last time that the U.S. economy faced a fiscal tightening almost as big as what appears to be your coming 2012 Christmas present was in 1969, and America didn’t rise from those ashes until the 1980s.
11. Quite frankly, if the price of oil skyrockets, I don’t think SuperDave will want to imagine the magnitude of the American recession that he could be forecasting.
12. Probably the single most important question to be asked if the economy goes into severe recession in 2013 is; what are the ramifications of a new recession for the existing mountain of OTC derivative contracts?  They look like a minefield of financial nuclear weapons with hair trigger detonation switches.
13. New OTC derivatives are cleared through professional clearing houses, but there are hundreds of trillions of existing OTC derivatives baggage that are cleared nowhere, and it’s unknown what happens if a new recession occurs.
14. The Dow has hesitated here, but it has not fallen.  Please click here now.  There’s a small head and shoulders top pattern that is forming, but note the position of the Stochastics oscillator and the MACD indicator.
15. 15.          They are both verging on crossover buy signals, telling you that the Dow could surge to a new high just as easily as it could break below 12,700.
16. How the Dow, and gold, move from here is likely to be determined by the action of the US Treasury bond.  Please click here now.  Note the small wedge pattern that I have highlighted.
17. Many technicians thought the bond market would decline strongly from the 139 price area.  From there, a small decline took the bond down to the 136 area.  The bond could have fallen further, but instead a substantial rally occurred, shocking the bears.
18. Look at the Stochastics indicator now.  It’s rolling over, but it’s unknown what happens if the bond itself rolls over at this point in time and price, because the market sits in “analysis quagmire”.
19. After months of reports that showed an improving economy, the latest jobs report shredded the view that everything is fine, and happy times are here because it is an election year.  Still, there simply hasn’t been enough data released to convince institutional money managers that the recovery has died.
20. When the bond first broke down, money managers believed it was because the economic news was so good that no further credit easing was required.
21. Now, they are less sure but not yet convinced that the recovery is dying.
22. Gold has been tracking the bond price.  Please click here now.  Gold seems to be attempting to establish a new uptrend, which I’ve highlighted with two trend line arrows.
23. My main concern is that I think most investors in the gold community are looking at the “super-wedge” pattern on the gold chart as something that will produce a violent move to the upside.
24. A vertical move could occur, but I think the most likely scenario is a “steady as she goes” plodding type of move towards $1800.  Gold is your beacon of light in a crisis of darkness, but I still believe there are too many gamblers rushing to buy a perceived “breakout” each time gold moves higher to allow for that type of vertical move.  If you are always long gold, and I always am, you will benefit from any vertical move, but I would suggest the focus should be away from a vertical move and towards the slow but growing buy programs of central banks that will support gold on price weakness, and ultimately revalue it thousands of dollars higher!

Special Offer For OzCopper Readers: Send me an Email to freereports4@gracelandupdates.com and I’ll send you my free “Fiscal Tightening Checklist” report.  Learn the five tools you need to make it through 2013 financially intact!

Thanks!

        Cheers

St

Stewart Thomson

Graceland Updates

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

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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?

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

Is gold’s run over? Let’s look at some facts.

The amount of money the federal government owes to its creditors, combined with IOUs to government retirement and other programs, now tops $15.23 trillion. That’s roughly equal to the value of all goods and services the U.S. economy produces in one year: $15.17 trillion as of September, 2011.

Among advanced economies, only Greece, Iceland, Ireland, Italy, Japan and Portugal have debts larger than their economies.

The U.S. government spent over 454 billion dollars just on interest on the national debt during fiscal 2011.

The debt ceiling stands at nearly $16.4 trillion. Some predict the U.S. will run out of money by September 2012. The next increase to the debt ceiling could be as high as $2 trillion.

zerohedge.com

Since Barack Obama was elected, the U.S. government has added five trillion more dollars to the national debt.

The United States government is responsible for more than a third of all the government debt in the entire world.

Mandatory federal spending surpassed total federal revenue for the first time ever in fiscal 2011.

The deficit has ballooned to nearly $48,000 for every man, woman and child in the U.S.

During fiscal year 2011, the U.S. government spent 3.7 trillion dollars but it only brought in 2.4 trillion dollars.

“The government’s total indebtedness — its fiscal gap — now stands at $211 trillion, by my arithmetic. The fiscal gap is the difference, measured in present value, between all projected future spending obligations — including our huge defense expenditures and massive entitlement programs, as well as making interest and principal payments on the official debt — and all projected future taxes.” Professor Laurence J. Kotlikoff, CNN

Obamacare will add 17 trillion dollars more to US long term unfunded obligations.

The FT World Markets Index EX U.S. declined 3% in March.

President Obama’s 2012 budget shows the debt soaring past $26 trillion a decade from now.

The US accounts for 45.7 percent of total military spending by the world’s 171 governments and territories.

Adding in all of these non-DOD agencies’ costs:

• The $20 billion in military retirement spending by the Treasury Department
• Military aid to countries like Israel and Pakistan
• Secret or black operations costs
• Homeland defense costs in the Department of Homeland Security
• The costs of caring for veterans of past and current wars in the Department of Veterans Affairs
• The budget for nuclear weapons is in the Department of Energy

Plus a share of the annual interest on the national debt gets total US defense-related spending up to $1 trillion.

Currently spending by the federal government accounts for 24 percent of GDP. In 2001, it accounted for 18 percent.

“The time for austerity is not today. If we were to put in austerity measures right now, it would take the economy in the wrong way.” White House Chief of Staff Jack Lew, NBC News, Meet the Press

Your government cannot spend more than the sum of what it has and what it can raise. The places a government can get its money from are:

• Taxes – no politician will raise taxes, they would never get re-elected

• Debt

• Income – government income is small and limited

• Fines – revenue here is limited as well

• Inflation

The top five percent of all income earners already pay nearly 50 percent of all federal taxes.

The United States already has world’s highest corporate tax rate (includes central government, regional and local taxes) at 39.5 percent.

Countries like China are shunning U.S. Treasuries, “In 2009, such foreign purchases of U.S. debt amounted to 6 percent of GDP and has since fallen by over eighty percent to a paltry 0.9 percent.” Money News article

The Federal Reserve bought approximately 61 percent of all government debt issued by the U.S. Treasury Department in 2011.

This is called “monetizing the debt” – printing money to buy your own debt is the most inflationary thing a country can do.

Consider:

• There are more than 12 million officially unemployed. The unofficial number is 22 million
• There are 46 million people on food stamps
• Home prices are falling despite near record low mortgage rates
• The BRICS nations are actively seeking an alternative to the U.S dollar for settlement of trade, this threatens the dollar’s reserve currency status
• A possible war in the Middle East
• A “Super Committee” of Democrats and Republicans couldn’t agree on a deficit reduction plan. After the last budget battle the credit rating of the U.S. was downgraded. US debt was just downgraded again – citing the lack of any tangible progress on addressing the problems and the continued rise in debt to GDP Egan-Jones downgraded the US to AA from AA+.
• The US, and most other countries, are going to continue to run deficits and build up debt. They will finance their debt by printing money. Their currencies are going to be worth less and less and less and less. None of this debt will be paid back.

When the only tool in your toolbox is a hammer, everything is a nail. All central banks, and the US’s Federal Reserve, have in their toolbox is the ability to print money – inflate. The Fed’s answer to everything is to print more.

businessinsider.com

inflation.us.com

The Fed has already spent $2.3 trillion in two rounds of Quantitative Easing (QE), so far the money has been hoarded by banks to prop up their balance sheets and to buy over priced stocks to make the markets look good and help management cash out on their option plans.

Okun’s Law

Despite what can only be described as a very weak economic recovery the US unemployment rate dropped, from nine percent to 8.3 percent this quarter. Yet Okun’s Law holds that an economy, it’s GDP, must grow above its potential to reduce the unemployment rate.

Okun’s Law says that year-on-year economic growth of two percent above the trend (considered to be 2.5 percent) is needed to lower unemployment by one point. Many are forecasting real GDP growth of less than two percent for this quarter, not 4.5 percent, yet the unemployment rate is falling.

The apparent failure of Okun’s law could be caused by faulty growth estimates and misleading unemployment figures.

“While it is true that growth was stronger in the fourth quarter, most of that growth was due to inventory accumulation…To begin with, the economic data looked brighter at this point in 2010 and again in 2011, only to fade as we got into the second and third quarters of those years…

Although the sharp decline in the unemployment from 9 percent last September to 8.3 percent in February suggests we are doing better than that, it is important to recognize that about half of that decline was due to a declining labor force participation rate. In fact, had the labor force participation rate not declined from around 66 percent in mid-2008 to under 64 percent in February, the unemployment rate would still be over 10 percent.”  William Dudley, President New York Federal Reserve 

Is Quantitative Easing Over?

Early in 2012 a faint, but false glimmer of hope was given to consumers by way of increased economic growth estimates and improving employment figures. Consumers responded, personal spending increased 0.8% in January – while during the same time period personal income was up just 0.2%.

Can consumers, on their own, continue spending .06 percent above the rise in personal income? Not according to Ben Bernanke, Federal Reserve head…

“Further significant improvements in the unemployment rate will likely require a more-rapid expansion of production and demand from consumers and businesses, a process that can be supported by continued accommodative policies.”

Bernanke’s speech was from March 26th, before the April 6th jobs report – which said 120,000 new jobs were created. That’s half of the number that the consensus of analysts were expecting, and half the number created in the prior month.

Conclusion

It’s obvious to this author gold is on hold and solidifying its gains from over the last decade – gold’s run is not over.

The U.S. dollar, the euro, the yen, all the world’s currencies, are being de-valued by the massive money creation that has taken place and that will continue to happen. Gold’s not really rising – it’s fiat currencies that are falling.

The fact that gold is being treated as money, the fact that gold is being valued according to its relationship with other currencies, the fact that the world’s central banks are buying, and not selling gold, should be on all our radar screens, are these truths on yours?

If not, maybe they should be.

Richard (Rick) Mills

rick@aheadoftheherd.com

www.aheadoftheherd.com

If you’re interested in learning more about the junior resource and bio-med 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: OzCopper, Wall Street Journal, SafeHaven, Market Oracle, USAToday, National Post, Stockhouse, Lewrockwell, Uranium Miner, Casey Research, 24hgold, Vancouver Sun, CBSnews, SilverBearCafe, Infomine, Huffington Post, Mineweb, 321Gold, Kitco, Gold-Eagle, The Gold/Energy Reports, Calgary Herald, Resource Investor, Mining.com, Forbes, FNArena, Uraniumseek, PinnacleDigest 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.

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

Fact – our reality is we’re living on a relatively small planet with a finite amount of reserves and a growing human population that wants an increase in their standard of living.

I think we would all agree that the planet’s booming population and rising standards of living are going to put unprecedented demands on supply.

Here’s something else to think about – when was the last time you heard of a major mining company actually finding a deposit? Think about that for a few minutes.

Well it rarely happens – juniors, not majors, own the worlds future mines and juniors are the ones most adept at finding these future mines, that is their place on the food chain. They already own, and find more of, what the world’s larger mining companies need to replace reserves and grow their asset base.

But how does a junior find a quality project to acquire and how does an investor find that quality junior – the one with a project so good it sticks head and shoulders above the rest, the one that is screaming to have money spent on it, the one junior with the project so damn good you need to have a piece of it? Well it boils down to people, the network of contacts you’ve built – people who trust you and are willing to work with you and of course a huge amount of due diligence.

Nickel Tenor – Ni concentration in 100% sulphides.

In nickel exploration you look for nickel tenor, which is a reflection of how much nickel you know is in the sulfides as a percentage of that sulfide. If you have nickel tenor of 6% and you have 50% sulfide in your deposit, you are going to have 3% nickel – you know the grade, you know the outcome if you hit sulfides and that outcome is usually fairly consistent.

Kryolitselskabet Øresund (A/S-KØ) *drilled 119 holes between 1965 and 1972, totaling 6,287 meters for an average hole depth of 53 meters. All but six of these holes were drilled with a portable *Winkie drill. Most of this  drilling tested exposed sulphide mineralization and shallow electromagnetic (EM) anomalies directly associated with exposed mineralization – this equates to about $3 million worth of drilling in today’s dollars.

*Fred Wink designed the Winkie drill in the mid 1970’s and it’s the core drilling rig of choice for drilling in remote locations such as high mountains, deserts, arctic tundra or dense jungles. The main reason for this is because the drill weighs only 180 pounds, has the capacity to drill 475 feet, and can be carried by pickup truck, mule, helicopter or two men into the most difficult terrain.

Most of the Kryolitselskabet Øresund core still exists and is being protected in dry space by the Danish government. Falconbridge and Cominco have both looked at the core and Falconbridge did a study on the nickel tenor in 2000.

This chart shows the sulphur and nickel values for drill core samples from throughout the belt.

The chart shows you, in regards to the nickel, that when the sulfide component is high the nickel component is also high (the dashed line shows the general trend) – if we were looking at a low-grade nickel environment the slope of the dashed line would be much flatter.

According to the work done by Falconbridge, samples across this entire belt, 15 km wide by 70 km long, have sulphide nickel tenors averaging 6% to 8%.

When looking for a nickel deposit, or even better a nickel camp, you need to have evidence of a large long-lasting magmatic event, and then you can start looking for nickel tenor. In this case the shear size of the belt indicates we are dealing with a large event. Now we also have evidence that high grade nickel mineralization is associated with it.

This is the evidence I needed to see to convince myself this project needs money spent on it.

But there’s more to this unfolding story than yet revealed and the untold part makes it an even better project for this author’s money.

Why, if Kryolitselskabet Øresund, Falconbridge and Cominco were working this nickel belt – considering the drill results they did have – didn’t they stay? They knew about the grade, they knew about the size of the project, but they left it for our junior to claim.

The answer is simple – they didn’t have quality time domain electromagnetic (EM) targets and they weren’t there for five million tonnes. They were looking for ten or more fifteen million tonne deposits and they needed an EM signal telling them they were there.

Fortunately for us the most they could get was a 2-line EM conductor, which might suggest 100 or maybe a 200m strike line – so they left, they just could not see the targets they needed to see to justify staying and spending more money.

Today’s helicopter SkyTEM system has a much higher signal to noise ratio than the old fixed wing survey flown would have had and a helicopter can better maintain the required altitude above the ground to maximize detection of geophysical signals. The fixed wing GeoTEM system was also 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. Parts of the project were flown in 2011 and three high priority targets were identified.

This spring our junior is going to fly the southern part of the project using helicopter TEM. A drill program is planned for the summer months.

If they do hit sulfides they will use down hole probe technology – you lay wire on the ground roughly 300m in diameter with your drill hole in the center, you send a little tool down to the bottom of the hole, then pull it up.  It records any evidence of a conductive body within that 300 m diameter – the 150m all around the hole.

Our exploration advantage today is threefold;

• We know there is high-grade nickel, we have drill assays and can use these known mineralized areas to identify other mineralized areas
• We’ll have much better targeting because of today’s modern helicopter SkyTEM system
• We have the down hole probe technology to tell us whether there’s more sulfides anywhere around that drill hole

Discovery

What about the overall market? Do we have to worry about that? Well ask yourself why you would invest in this company? One word – Discovery.

It’s this author’s opinion that this is a green fields early stage exploration stock and that a discovery of the magnitude we’re looking for, a 100% owned nickel camp, will make whatever market conditions we face inconsequential.

It isn’t a nickel story, it’s a discovery story. But it isn’t just a discovery story, this is a belt story, and it’s not just a belt story, it’s a belt story with all of this evidence in a politically secure jurisdiction on tide water across from the big processing facility that Inco was forced to build in Newfoundland.

That facility could be waiting for our junior’s feed.

You’re looking at an opportunity where this company, if it makes a discovery, will own the neighborhood, and I point out that if you look back at Voisey’s Bay how much money was made in all of those neighborhood plays.

Except there won’t be a neighborhood play because we own it all.

I’ll say it again – we own the neighborhood. That’s exactly right. So therefore, the upside on this is bigger than any opportunity you’ve seen, and I challenge anybody to show me an upside the size of a Sudbury.

Laterites v Sulphides

What about the laterites coming on? They say the laterite technology is finally going to work.  Well we’ve heard that for 20 years. Nickel sulfides are here to stay and nickel prices are solid – RBC Capital Markets forecasts nickel growth at 9.5% in 2012, 10.3% in 2013, and trend growth of approximately 5.0% thereafter.

My take on the laterites was that the reason that people are chasing them and trying to develop them was because nobody was finding sulfides, but that does not mean that sulfides are gone. It just means that they are harder and harder to find. The easier ones have all been found so they had to develop something else. But for anybody that finds a sulfide deposit today the technology’s there. It’s the old standby. It’s a sulfide deposit.  It’s going to work, it would be a hugely important discovery.

Nickel Sulphide Deposits

Magmas (magma is a mixture of molten rock, volatiles and solids that is found beneath the surface of the Earth – Lava is the extrusive equivalent of magma) originate in the upper mantle and contain small amounts of nickel, copper and PGE. As the magmas ascend through the crust they cool as they encounter the colder crustal rocks.

If the original sulfur (S) content of the magma is sufficient, or if S is added from crustal wall rocks, a sulphide liquid forms as droplets dispersed throughout the magma. Because the partition coefficients of nickel, copper, iron and Platinum Group Elements (PGE) favor sulphide liquid these elements transfer into the sulphide droplets in the magma. The sulphide droplets sink toward the base of the magma because of their greater density and form sulphide concentrations. On further cooling, the sulphide liquid crystallizes to form the ore deposits that contain these metals.

Currently, the majority of today’s nickel is produced from sulphide deposits, as it is easier and cheaper to mine and process than lateritic ore. However known sulphide deposits are getting depleted, ore grades are falling and new discoveries are scarce.

There are two main types of nickel sulphide deposits. In the first, Ni-Cu sulphide deposits, nickel (Ni) and copper (Cu) are the main economic commodities – copper may be either a co-product or by-product, and cobalt (Co), Platinum Group Elements (PGE) and gold (Au) are the usual by-products.

The second type of deposit is mined exclusively for PGE’s with the other associated metals being by-products.

Nickel sulphide deposits can occur as individual sulphide bodies but groups of deposits may occur in areas or belts ten’s, even hundreds of kilometers long. Such groups of deposits are known as districts. Two giant Ni-Cu districts stand out above all the rest in the world: Sudbury Ontario, and Noril’sk-Talnakh, Russia.

The most important platinum-rich PGE district in the world is the Bushveld Complex, South Africa. The second PGE district in importance is the Noril’sk-Talnakh district, which is exceptionally Palladium (Pd) rich as a by-product of its Ni-Cu ores.

Nickel laterite deposits

Nickel laterite deposits were first discovered in 1864 by French civil engineer Jules Garnier in New Caledonia – commercial production started in 1875. New Caledonia’s laterites were the world’s largest source of nickel until Sudbury Ontario’s sulphide deposits started production in 1905 and totally dominated global production for the next 70 years.

Eighty-four million tons, or roughly 60 percent of global available nickel is in laterite deposits – a deposit in which weathering of ultramafic rocks has taken place. The initial nickel content is strongly enriched in the course of lateritization – under tropical conditions fresh rock weathers very quickly. Some metals may be leached away by the weathering process but others, such as aluminum, iron and nickel can remain.

Typically nickel laterite deposits are very large tonnage, low-grade deposits located close to the surface. They tend to be tabular and flat covering many square kilometers. They are most often in the range of 20 million tonnes and upwards, with some examples approaching a billion tonnes of material.

Laterite deposits usually contain both an upper dark red limonite (higher in iron and lower in nickel, magnesium and silica) and lower bright green saprolite zone (higher nickel, magnesium and silica but lower iron content). Due to the different quantities of iron, magnesium and silica in each zone they must be processed differently to cost-effectively retrieve the nickel.

HPAL technology

Most nickel sulfide deposits have traditionally been processed by concentration through a froth flotation process followed by pyrometallurgical extraction

Laterite saprolite (higher nickel, magnesium and silica but lower iron content) orebodies are processed with standard pyrometallurgical technology.

However a laterite limonite zone is higher in iron and lower in nickel, magnesium and silica, which means using High Pressure Acid Leaching (HPAL) technology.

HPAL involves processing ore in a sulphuric acid leach at temperatures up to 270ºC and pressures up to 600 psi to extract the nickel and cobalt from the iron rich ore – the pressure leaching is done in titanium lined autoclaves.

Counter-current decantation is used to separate the solids and liquids. Separating and purifying the nickel/cobalt solution is done by solvent extraction and electrowinning.

Conclusion

There aren’t any nickel names left. Once Inco went, who do you invest in if you want nickel?  And that’s why that chart I mentioned a few pages back, the nickel tenor one that goes on a perfect diagonal right up the line between the two axis to get to 6% to 8% nickel tenor is so important. You know if you’ve got sulfides you’ve got economic grade. That’s huge.

Mine production of many different 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
• There hasn’t been a new technology shift in mining for decades – heap leach and open pit mining come to mind but they are both decades old innovation

Increasingly we will see falling average grades being mined, mines becoming deeper, more remote and come with increased political risk. Extraction of metals from the mined ore will become increasingly more complex and expensive.

Every country needs to secure supplies of needed commodities at competitive prices yet supply is increasingly constrained and demand is growing. This is our reality – we’re living on a relatively small planet with a finite amount of reserves and a growing human population.

Quality greenfield junior exploration plays like Our Junior should be on every resource investors radar screen. Is this junior on yours?

If not, maybe it should be.

Richard (Rick) Mills

rick@aheadoftheherd.com

www.aheadoftheherd.com

If you’re interested in learning more about the junior resource and bio-med 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: OzCopper, Wall Street Journal, SafeHaven, Market Oracle, USAToday, National Post, Stockhouse, Lewrockwell, Uranium Miner, Casey Research, 24hgold, Vancouver Sun, CBSnews, 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.

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

North American Nickel is a sponsor of Richards website www.aheadoftheherd.com

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April 10, 2012

1. If Warren Buffett was a member of the gold community, would he book losses on his gold stocks now and exit the market?
2. I’ll suggest that he would be a buyer, not a bailer, and he would be anticipating an enormous rally.
3. Marking some of the OTC derivatives debt to model has created the illusion that the size of this debt has shrunk.  I don’t think much of the OTC derivatives problem has really been solved, and the story of the OTCDs is really now the story of the invisible man.
4. Or is the story better termed the invisible bomb?
5. After buying American government debt by the boatload, and then bailing on a lot of it, the Chinese government is now apparently sinking its teeth into Japanese government debt.  The definition of insanity is to repeat the same behaviour in a similar situation and expect a different outcome.  Japan is arguably in worse shape than America, and I doubt the outcome for China will be any different than it was with their American bond-buying expedition.  It will fail.
6. The global mountain of debt that created an enormous bear market in all paper currencies has not shrunk while GDX has sold off.  It has grown.  Unfortunately, drawdowns in the price of most gold stocks have caused irrational loss-booking by most investors.
7. I don’t believe it’s possible to approach markets in the manner they were approached by most investors in the late 1990s.  I think it’s a myth that you can engage in sector rotation throughout your life and end up in a profitable position.  That approach failed then, and it will fail now.
8. There is a role for sector rotation, but I believe asset accumulation is the main tactic that you must employ to build wealth.  Gold bullion is the ultimate asset, but gold stocks are also good assets to own.  Sector rotation should be used to tweak your accumulation of gold stock assets.
9.   Don’t wag your asset accumulation dog with a sector rotation tail, or you’ll only go from the fry pan into the blast furnace.
10. Warren Buffett turns on his stereo and plays classical music when the market crashes.  He waltzes around the room as his holdings draw down hard.  If Warren thinks the market “might fall down”, he doesn’t bail on his holdings.
11. I’ll dare to suggest that far too much testosterone exists in the gold community.  You may want to consider replacing your market timing program on steroids with Warren Buffett’s stereo.
12. In the market, the use of leverage is like the use of steroids in the gym.  Leverage, like steroids, comes in many forms.  It’s not just borrowed funds.  For example, investors own gold stocks to leverage the price of gold.
13. Concentration of enormous risk capital in a single price area is also a form of leverage, and it is the single biggest reason why gold stock investors are generally unhappy now.
14. I would guess that the average investor probably has about 3-10 times more risk capital invested in the market than they can handle emotionally.  Speaking personally, am I concerned that GDX, GDXJ and individual gold stocks could fall a lot lower from here?  Yes.
15. Am I concerned enough to sell anything?  No.  Quite the opposite is the case.  My only thought is whether my next buy order at $45 for GDX gets filled, and next one, and the next one.
16. The gold community thinks they have “gold stock problems”.  Here’s a super-sized wake-up call for those that need it; in 1998, while the general stock market soared, Warren Buffett’s Berkshire Hathaway stock fell by about 50%!  Did he bail?  No!
17. Please click here now.  You can see that during the greatest stock mania of the 20^th century, Warren had to endure a horrific meltdown in the price of his stock.
18. 18.           Now, please click here.  That chart shows the performance of Warren’s Berkshire Hathaway stock against the Dow during the same timeframe.  It’s a chart of horrors, but Warren took the pain and emerged in the honey pot zone.
19. 19.          I remember that time well, because I was a broker, and I had supposedly rational business owner clients demand to liquidate their Berkshire holdings at huge losses.  I followed their instructions while shaking my head.  Please don’t make the same mistakes they did then with your gold stocks now.
20. 20.          Please click here now.  Note point “A”.  When GDXJ burst over that green supply line earlier this year, I warned that price could fall to the $22-$23 area without changing the bullish picture.
21. 21.          Well, that’s where we are now, and the bullish gold stocks picture is unchanged.  Hopefully, the music playing on the stereo you borrowed from Warren Buffett is also unchanged.
22. It’s too early to make generalizations about Friday’s jobs report “accident”, other than to say it is very strange that so many private polls had their numbers so far off from the government numbers.  Institutional money managers will carefully watch the economic reports that are released this week, to see if the jobs report represents a change in trend, or whether it was just an “aberration”.
23. Please click here now.  The gold price is quietly chewing through one minor overhead resistance point at a time, since bottoming in the $1615 area.  Now, please click here now.  Floor traders in the gold market have a belief that “all gaps are filled”.  I would suggest that all weak gaps in price are filled.  That gap was created by a stunning jobs report, but it will require additional weak economic data to make it a gap with power.  Wait for the data, rather than predicting it.  The low for gold is likely in, but that doesn’t mean that gap can’t get filled or price can’t meander in this general area for many more weeks.
24. The man’s name is Warren Buffett.  Not Warren Buffoon.  Learn it well!

Special Offer For OzCopper Readers:  Send me an Email to freereports4@gracelandupdates.com and I’ll send you my free “Guess The Bottom!” report on natural gas.  I’ll show you a trick of how to guess the exact bottom price, with a one in twenty chance of getting it to the penny!

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St

Stewart Thomson

Graceland Updates

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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?

In the not-so-distant past arguing that precious metals prices were setup to fall generally elicited a response which was not real pleasant. In fact, during gold’s infamous bull market rally on several occasions I called for pullbacks which regardless of the accuracy of my call generated hate mail that seemingly never ended.

Fast forward to the present and hardcore gold bugs remain transfixed on the idea that precious metals must rise. The gold bull market has ended, at least for now and those still holding the bag are looking at large losses from the all time highs set back in 2011.

These same gold bugs will cite a litany of reasons why gold should be moving higher from the unprecedented printing of money by global central banks to the deficit spending and eventual fiscal day of reckoning facing most Western nations. I do not disagree with the gold bugs that in the long run gold prices will rally above the all time highs, but in the short to intermediate term there are several forces which have the potential to drive gold prices lower.

Gold prices cannot rise continually,regardless of the macro-economic backdrop. Nothing, not even Apple Computer (AAPL) or Priceline.com (PCLN) will rise forever. Eventually prices will come back down to earth and revert to the long term mean. It has happened in gold and it will happen to Apple Computer and Priceline.com at some point in the future, it is simply a matter of time.

Before I discuss my reasoning as to why gold and silver are likely to pullback in the intermediate term, I need to remind readers that I remain long-term bullish of precious metals. While the long-term remains bright, the short-term is especially murky and dark.

The first primary concern for gold bugs should be the price behavior of the U.S. Dollar Index recently. The Dollar has rallied sharply higher after carving out a higher low on the daily chart (bullish). The Dollar is on the verge of breaking out above a major descending trendline on the daily chart. Once that breakout to the upside has occurred it will become likely that the recent highs will be tested and possibly taken out. The daily chart of the Dollar Index is shown below.

Dollar Index Daily Chart

The U.S. Dollar’s price action shown above is not indicative of bearish expectations. In fact, I would argue that the Dollar is, and likely will remain in a bull market in the short and intermediate time frames. However, it is important to recognize that strong periods of volatility will persist as Ben Bernanke and the Federal Reserve will continue to try to break the Dollar’s rally as it tries to grind higher.

The Federal Reserve hates deflation, and a stronger Dollar will push risk assets like equities lower and right now that is not part of the Federal Reserve’s election playbook. QE III will likely be announced at some point in the future as an attempt to break the Dollar’s rally and to put a floor underneath stock prices.

The Federal Reserve has used QE I and QE II to help prevent economic disaster. Recently “Operation Twist” has also been used to increase liquidity while keeping the bullish game going. Low interest rates and additional easing adjustments have staved off disaster before and they will likely be utilized again by the Federal Reserve.

Ultimately the free market and cycles will exert their will and the Federal Reserve will be left helpless. The day where monetary easing has no major impact is coming, but we are not quite there just yet.

In addition to the strength in the Dollar Index, the gold miners have been under major selling pressure. In fact, the gold miners have recently broken down out of a major consolidation zone that will likely lead to lower prices in the near term.

Unless gold miners can regain the breakdown level on a major reversal this coming week, the most we can hope for is a backtest of the support trendline sometime in the near future once the miner’s become significantly oversold. The weakness in the miners is just another example as to why lower prices for gold appear to be likely in the short to intermediate time frames. The weekly chart of the gold miners ETF is shown below.

Gold Miner’s (GDX) Weekly Chart

The gold miners are likely to lead equity markets lower in the near term, but lower prices for gold miners is certainly not positive for gold either. Obviously there are several economic factors which could still see gold prices working higher such as a collapse of the Eurozone, however at this moment the likelihood of that outcome in the short to intermediate term is not likely.

The European Central Bank and the Federal Reserve are not going to give up that easily. The process of admitting defeat will take time and global central banks will print money until they feel they have papered over the issue. It is the culmination of either QE III or other monetary easing around the world that will eventually move gold back above the all time highs. Unfortunately the short term price action of gold will most certainly remain under selling pressure barring any major unexpected announcements. The daily chart of gold futures is shown below.

Gold Futures Daily Chart

As shown above, I believe that short term targets to the downside are likely somewhere in the 1,475 – 1,525 price range. I think gold will find a major bottom near these levels and a strong bounce will play out. For long term buyers, I would take advantage of the forthcoming pullback. However, I would be mindful that further selling is quite possible before gold finds a major bottom.

As I said before, the longer term is bright for gold. However, the short to intermediate term will likely see more selling pressure. Until either the Dollar tops or some form of major quantitative easing is announced, I would anticipate lower prices in the yellow metal.

In the near term gold does not look attractive, but the longer term the catalysts for a major move above recent highs are present. The real question has become when and where will the Dollar top? When the Dollar tops and gold finds a major bottom, the potential for a monster move higher will become likely.

Until then, risk remains high.

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

Trade imbalances – deficits and surpluses – between nations are one of the major reasons for financial crises. Countries become trapped in a vicious spiral – they accumulate debt because they are sustaining a trade deficit, the bigger their debt grows year after year, the harder it becomes to generate a trade surplus.

Only the countries with a trade surplus have any room to manipulate policy, there’s very little debtor nations can do.

In 1942-1943 John Maynard Keynes formulated a solution. His answer was to “persuade” the creditor nations to spend their surplus money back into the economies of debtor nations.

His proposed creation, the International Clearing Union, would be a global bank and issue its own currency, the Bancor, a supranational currency to be used in international trade as a unit of account exchangeable with national currencies at fixed rates of exchange.

The bancor would be used to measure a country’s trade deficit or trade surplus. Every country would have an overdraft facility equivalent to half the average value of its trade over the past five years. Any country racking up a trade deficit of more than half of its bancor overdraft allowance would be charged interest on its account, have to reduce the value of its currency and prevent export of capital.

On the other side of the trade balance any nation with a trade surplus (a bancor credit balance) more than half the size of its overdraft facility would be charged interest, have to increase the value of its currency and permit export of capital.

Keynes proposed penalty for missed compliance on nations with a trade surplus was severe, it was designed to give nations with a surplus a powerful incentive to erase it and in doing so automatically clear other nations’ deficits. By the end of the year a countries credit balance could not exceed the total value of its permitted overdraft, if it was the surplus would be confiscated.

“It would be difficult to exaggerate the electrifying effect on thought throughout the whole relevant apparatus of government … nothing so imaginative and so ambitious had ever been discussed.” Lionel Robbins, British economist

Britain adopted Keynes’s solution as its official negotiating position for the Bretton Woods conference in 1944 – the United Kingdom wanted to introduce the Bancor after the Second World War ended.

The US was vehemently opposed to the idea…

“We have been perfectly adamant on that point. We have taken the position of absolutely no.” Harry Dexter White, head of the US delegation at Bretton Woods

The Bretton Woods conference established the U.S. dollar as the worlds reserve currency.

“Lord Keynes was right … the world will bitterly regret the fact that his arguments were rejected.” Geoffrey Crowther in 1944, editor Economist magazine

On April 13 2010, the Strategy, Policy and Review Department of the IMF published a comprehensive report entitled “Reserve Accumulation and International Monetary Stability.” The IMF report advocates the adoption of a true global currency, the “Bancor” (so named in honor of Keynes),  administered by a global central bank…

“A global currency, bancor, issued by a global central bank would be designed as a stable store of value that is not tied exclusively to the conditions of any particular economy. As trade and finance continue to grow rapidly and global integration increases, the importance of this broader perspective is expected to continue growing.”

The Triffin Dilemma

When a national currency also serves as an international reserve currency conflicts between a country’s national monetary policy and its global monetary policy will arise.

“In October of 1959, a Yale professor sat in front of Congress’ Joint Economic Committee and calmly announced that the Bretton Woods system was doomed. The dollar could not survive as the world’s reserve currency without requiring the United States to run ever-growing deficits. This dismal scientist was Belgium-born Robert Triffin, and he was right. The Bretton Woods system collapsed in 1971, and today the dollar’s role as the reserve currency has the United States running the largest current account deficit in the world.

By “agreeing” to have its currency used as a reserve currency, a country pins its hands behind its back. In order to keep the global economy chugging along, it may have to inject large amounts of currency into circulation, driving up inflation at home. The more popular the reserve currency is relative to other currencies, the higher its exchange rate and the less competitive domestic exporting industries become. This causes a trade deficit for the currency-issuing country, but makes the world happy. If the reserve currency country instead decides to focus on domestic monetary policy by not issuing more currency then the world is unhappy.

Becoming a reserve currency presents countries with a paradox. They want the “interest-free” loan generated by selling currency to foreign governments, and the ability to raise capital quickly, because of high demand for reserve currency-denominated bonds. At the same time they want to be able to use capital and monetary policy to ensure that domestic industries are competitive in the world market, and to make sure that the domestic economy is healthy and not running large trade deficits.

Unfortunately, both of these ideas – cheap sources of capital and positive trade balances – can’t really happen at the same time.” How The Triffin Dilemma Affects Currencies, investopedia.com

“Providing reserves and exchanges for the whole world is too much for one country and one currency to bear.” Henry H. Fowler, U.S. Secretary of the Treasury

In the wake of the financial crisis of 2007–2008, Zhou Xiaochuan the governor of the People’s Bank of China, said that a national currency is unsuitable as a global reserve currency because the Triffin dilemma is today, the root cause of global economic disorder.

In a speech titled “Reform the International Monetary System” Zhou argued that part of the reason for the original Bretton Woods system breaking down was the refusal to adopt Keynes’ bancor. Calling Keynes’s bancor approach “farsighted” Xiaochuan proposed strengthening existing global currency controls through the IMF by the adoption of International Monetary Fund (IMF) special drawing rights (SDRs) as a global reserve currency.

When Special Drawing Rights were originally created in 1969 one SDR was defined as having a value of 0.888671 grams of gold, equal to the value of one US dollar at that time. After the breakdown of the Bretton Woods system the SDR was redefined in terms of a basket of four currencies.

From January 1 2011, the IMF has determined that the four currencies will be assigned revised weights based on their roles in international trade and reserves.

Due to varying exchange rates, the relative value of each currency varies continuously and thus the value of the SDR fluctuates. The IMF fixes daily the value of one SDR in terms of US dollars based on the exchange rates of the constituent currencies.

The following is the current breakdown of the components of an SDR on Thursday April 5th 2012….

U.S. Dollar: 41.9 percent

Euro: 37.4 percent

Yen: 9.4 percent

Pound: 11.3 percent

“A limitation of the SDR as discussed previously is that it is not a currency. Both the SDR and SDR-denominated instruments need to be converted eventually to a national currency for most payments or interventions in foreign exchange markets, which adds to cumbersome use in transactions. And though an SDR-based system would move away from a dominant national currency, the SDR’s value remains heavily linked to the conditions and performance of the major component countries.” IMF report “Reserve Accumulation and International Monetary Stability”

A Single Global Currency: Is it Feasible? By S. Korra, B. Gopal and S. Gollapalli

“For almost 2,500 years, countries across the world have experienced multicurrency foreign exchange (FX) transactions and its erratic currency fluctuations. The daily turnover in currency markets rose to $3.2 trillion, which was more than 10 times the world GDP. Daily volumes of cross-currency swaps grew by 281% between 2004 and 2007. International corporations were participating more actively in FX market. The US dollar remained the prominent currency in the FX market covering two-fifths of daily transactions. Emerging market currencies were also gaining equal significance on the FX front with 20% of all transactions by April 2008.

Turnover of foreign exchange options and cross-currency swaps more than doubled to $0.3 trillion per day. Though the multicurrency FX market stated a surge of 71% in volume since 2004, it was associated with various costs.

Transactions costs in currency trading were very huge at $400 billion in 2007. Frequent speculations in currency trading resulted in currency fluctuations and in extreme cases led to currency crises. On the contrary, these expensive costs in forex transactions would not be considered in the 3-G world (a Global Monetary Union, with a Global Central Bank and a Single Global Currency – Rick). The 3-G world is the implementation of a single global currency to be managed by a Global Central Bank within a Global Monetary Union. The successful examples were the euro and the dollar.

Moreover, the number of currencies declined to 147 from 159 in the early 21st century. With the implementation of a single global currency huge transaction costs would be saved. There would not be any currency fluctuations and currency risks while dealing in the FX market.”

During a trip to China, International Monetary Fund director Dominique Strauss-Kahn said the days of one country’s currency as the global benchmark are numbered, globalization demands a new global currency that provides representation for the growing importance of a variety of major economies.

“If we are to have a truly global economy, a single world currency makes sense.” Paul Volcker, former Governor of the Federal Reserve Board

Economist Robert A. Mundell says that the creation of a global currency is “a project that would restore a needed coherence to the international monetary system, give the International Monetary Fund a function that would help it to promote stability, and be a catalyst for international harmony. The benefits from a world currency would be enormous. Prices all over the world would be denominated in the same unit and would be kept equal in different parts of the world to the extent that the law of one price was allowed to work itself out. Apart from tariffs and controls, trade between countries would be as easy as it is between states of the United States.”

The Council on Foreign Relations (whose founding members included J.P. Morgan, John D. Rockefeller, Paul Warburg, Otto Kahn, and Jacob Schiff – the same people who had engineered the establishment of the Federal Reserve System) 2007’s article “The End of National Currency” advanced the idea of a global wide currency restructuring. After examining the European Monetary Union it turned to the prospects for monetary unions in North America, South America and East Asia. Regional Monetary Integration emphasizes “the economic and institutional requirements for successful monetary integration, including the need for a single central bank in the case of a full-fledged monetary union and the corresponding need for multinational institutions to safeguard the bank’s independence and assure its accountability.”

Of course this is only a follow up to numerous articles written earlier, such as the CFR journal, Foreign Affairs for July/August 1999. In the opening paragraph of his essay, From EMU to AMU?: The Case for Regional Currencies, Zanny Beddoes of Britain’s The Economist pronounces: “By 2030 the world will have two major currency zones – one European, the other American. The euro will be used from Brest to Bucharest, and the dollar from Alaska to Argentina, perhaps even Asia.”

How important, how widespread and far reaching is the CFR?

“Since 1934 almost every United States Secretary of State has been a CFR member; and ALL Secretaries of War or Defense, from Henry L. Stimson through Richard Cheney…nearly ALL presidential candidates have been CFR members. President Truman, who was not a member, was advised by a group of “wise men,” all six of whom were CFR members, according to Gary Allen. In 1952 and 1956, CFR Adlai Stevenson challenged CFR Eisenhower.

CFR candidates for president include George McGovern, Walter Mondale, Edmund Muskie, John Anderson, and Lloyd Bentsen. In 1976 we had Jimmy Carter, who is a member of the Trilateral Commission, created by David Rockefeller and CFR member Zbigniew Brzezinski with the goal of economic linkage between Japan, Europe, and the United States, and: “…managing the world economy…a smooth and peaceful evolution of the global system.

 We have also had (though his name strangely disappears from the membership list in 1979) CFR director (1977-79) George Bush, and last but not least, CFR member Bill Clinton.”  William Blase, The Council on Foreign Relations (CFR) and The New World Order

President Obama has surrounded himself with CFR members ie Susan E. Rice, is a prominent member of the Council On Foreign Relations and serves as the U.S. Permanent Representative to the United Nations and is a member of President Obama’s Cabinet. Rice will lead the U.N. Security Council and is considered a leading contender for secretary of state if Obama wins a second term

The Bank for International Settlements (BIS) – established in 1930 and self described as the central and the oldest focal point for coordination of global governance arrangements is, in reality, the central bank for the world’s central banks and is the one true authority in terms of ‘global governance’ – has publicly endorsed a global currency.

Conclusion

With a global government not yet in place how will the process of a global currency be accomplished? The process is already well established (and unrecognized by most) with the advancement of regional currencies such as the Euro, SUCRE (South America), floating the idea of the AMERO (US, Canada and Mexico), the Franc of the African Financial Community, an Asian currency and a Arabian Gulf regional currency.

Once 159 national currencies are five or so regional currencies, with most of the world’s population involved, it’s a logical step down to one global currency built around the regional currencies.

It isn’t if we get a global currency, it’s when, the only question being will gold play a part?

The Dream of a World Currency, Interview of Tommaso Padoa-Schioppa by Alberto Orioli

“AO: Thus the lesson for the future is a single currency, as China is asking for?

TPS: As a former central banker, I think that when you talk about global standards, you should first think about monetary standards and then about legal ones, because that is a functional economic fact, even though it rests on a legal basis. In other words, I do think this crisis poses the problem of a new international monetary standard. Its absence, and the absence of the discipline that it would impose are one of the deep reasons of the present crisis.

AO: Once the currency was pegged to gold…

TPS: If that peg still existed, in the last few years the countries that were accumulating big external deficits – such as the United States – should of had to convert a part of it into gold; the consequent scarcity of gold reserves would have obliged them to change their course.”

Today no country is on a gold standard and all currencies are fiat. If a future fiat global currency was put in place without full, or at least a hefty partial gold backing, then we’d simply be repeating Bretton Woods – the 1944 US dollar failed reserve currency experiment – except it’d be on a much grander scale.

A future 3-G world, and a re-introduction of gold into the global monetary system, should be on all our radar screens. Is it on yours?

If not, maybe it should be.

Richard (Rick) Mills

rick@aheadoftheherd.com

www.aheadoftheherd.com

If you’re interested in learning more about the junior resource and bio-med 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: OzCopper, 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.

***

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.

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

Rare and critical metals are playing a crucial role in recent scientific advancements, especially in the environmental technologies and energy sectors. These advancements in today’s and tomorrow’s green technology are driving industrial countries like the United States to allocate significant funding for breakthroughs in alternative fuels for vehicles and alternative energy storage.

Furthermore, there is an increasing scientific consensus that we need to protect the environment from growing pollution, while frustrated drivers continue to bear the cost of emissions through surging gas prices. On these premises governments have been pushing policies which foster sustainable consumption and production efforts. These calls for action reinforce the belief that the clean energy sector is definitely here to stay. Spearheading the progression are two frontrunners; Lithium and Graphite. Both are key resources in developing higher range and lower cost electric vehicles, specifically in the application of Lithium batteries.

Graphite is a key component in rechargeable Lithium batteries, with China cutting back production and with the west’s supply replacement and much needed new supply not on stream Graphite’s price value is yet to level. By comparison, Lithium, which has already gone through one price surge, is seeing it’s demand prices firming, and with the rechargeable battery industry for EV’s and consumer electronics driving demand, forecasters believe lithium’s price could as much as double in value in the near future.

Lithium is the next step to reducing greenhouse gasses and supporting sustainable development – it is a vital component in many environmental technologies. It is the lightest of the metals and provides considerable savings due to its high energy density which is crucial for energy storage in mobility applications. Already the most widely used battery in portable electronics’ the Lithium battery is also the choice of preference for plug-in hybrids, mainly for its chemical attribute allowing us to create the batteries with specific power and energy capacity without the so called memory effect – with every charging cycle the battery loses part of its capacity.

There is currently no substitute for Lithium; hence it has to be either obtained through salar brines by way of evaporation or through mined hard rock.

Recognizing the advantages to being in the rare metal and rechargeable energy space several companies have been building up their rare metal resources, one such company being International Lithium Corp. TSX.V – ILC

International Lithium is a global Lithium and rare metals exploration company with a dynamic portfolio of projects worldwide, particularly in Lithium-rich Argentina, Ireland and Canada.

ILC was successfully launched into the market in 2011 through a spin-out from their parent company TNR Gold Corp. With their previous experience, a strong management team as well as a balanced portfolio, ILC was able to secure Ganfeng Lithium Co. Ltd., a globally recognized Lithium manufacturer as a key partner and investor.

Gangfeng recently increased its equity stake in ILC to 14.7% on a non-diluted basis. The company is a professional producer of lithium products which has developed a comprehensive product chain, including lithium metal and alloys, inorganic and organic lithium chemicals, supplies a wide range of lithium products for primary and secondary lithium battery market, pharmaceutical and new material industries. Ganfeng recently announced USD75million in sales revenue in their 2011 annual report, representing a 34% increase over the previous year.

ILC’s  overall approach is to build shareholder value through quality projects and strategic land positions; thus far they are off to a strong start and are rapidly accelerating operations. At present ILC has nine viable projects including operations within the world renowned Lithium Belt in South America as well as highly prospective Mavis Lake, Ontario and Backstairs, Ireland.

The Mavis Lake rare metals pegmatite project is strategically situated with excellent infrastructure and accessibility being located 15km northeast of Dryden, Ontario and 5km from the Trans Canada Highway. The property comprises a total of 2,624 hectares and encompasses a continuous pegmatite field exhibiting high-grade, well-evolved, lithium and tantalum zonation as well as significant levels of cesium and rubidium.

A recent 20 hole drill program, totaling 1,750 meters, was completed on the property and exceeded expectations by revealing additional and more extensive pegmatite intersections than anticipated.  One hole, MF11-12, drilled to the north of past exploration activity encountered a 78 meter pegmatite intersection reporting two intervals grading 1.86% Li2O over 26.25m and 1.22% Li2O over 28.45m.  The discovery of this previously unknown high-grade lithium near surface pegmatite attests to the under explored potential of the property and the Company intends to expand the scope of the project in the coming year.

The Blackstairs rare metal pegmatite project located 80 km south of Dublin, Ireland, totals 292 square kilometers and encompasses the extensive NE-SW oriented 50 kilometer long Leinster Pegmatite Belt.  Nineteen significant lithium pegmatite prospects have been identified along the trend primarily as boulder occurrences with five buried pegmatites revealed through a modicum of past trenching and drilling.

The Aclare House pegmatite initially discovered through boulder prospecting is reportedly up to 20 metres wide, has been traced for more than 400 metres along strike and grades 1.5% Li2O.

Recently ILC discovered an extensive high-grade lithium boulder field within a concentrated 250 x 250 meter area from a preliminary reconnaissance at Moylisha. Four samples were collected in this new area with three of the samples grading better than 3% Li2O and the highest returning an outstanding 4.59% Li2O.  The density and size distribution of the lithium boulders at Moylisha indicates a potentially sizable, yet to be discovered buried pegmatite body and such significant findings from a cursory investigation highlights the potential to discover additional buried pegmatite bodies elsewhere on the Property.

The Mariana lithium-potash brine project is one of the more prominent salar (‘salt lake’) basins in the world renowned lithium belt of South America; host to the vast majority of global lithium production.  The project totals 160km² and strategically encompasses the entire salar effectively ruling out any competition for the lithium-potash brine resident within the basin.  Initial sampling of the surface brine revealed highly compelling geochemistry returning average grades of 440 mg/L lithium and 12,700 mg/L potassium.

The lithium grades are comparable to early stage exploration from other salars in the area, however the potassium levels represent one of the highest grades outside of the world class operation on the Atacama salar in Chile.

Recently, a widely spaced four-hole Phase 1 resource delineation drilling program was completed at Mariana and extensive brine hosting sand-rich layers were intersected below the surficial halite horizon. Unconsolidated stratigraphic units with a considerable granular or sand component represent an ideal brine host and are an important target in the lithium-potash brine exploration model. This setting, in conjunction with the high brine density and flow measurements during drilling, indicates the potential for a significant brine aquifer at the Mariana lithium-potash project.  Drilling results are anticipated shortly and according to the Company will provide the basis to rightfully rank the Mariana project amongst some of the more advanced lithium-potash brine projects in the world.

Responding to industry demand and growing global focus on sustainable development International Lithium Corp. is opportunely positioned to advance in the Lithium Market. With a stable Canadian currency that is encouraging international trade, diverse global assets and a strategic partner, they are well on their way to providing strong value to their shareholders and securing a threshold in lithium assets.

Is International Lithium Corp. TSX.V – ILC on your green radar screen?

If not, maybe it should be.

Richard (Rick) Mills

rick@aheadoftheherd.com

www.aheadoftheherd.com

If you’re interested in learning more about the junior resource and bio-med 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: OzCopper, 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.

***

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.

Richard Mills does not own shares of International Lithium Corp. TSX.V – ILC

International Lithium Corp. TSX.V – ILC is a sponsor of Richards website

www.aheadoftheherd.com

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

Today I’m speaking with Dr. Philip Toleikis, B.A., M.Sc., Ph.D. and President and CEO of Sernova Corp.

Sernova Corp. TSX:V-SVA is a clinical stage company developing a natural and immune-protected environment for delivering therapeutic cells to patients with chronic diseases such as diabetes. Due to the enormous unmet medical need and market potential, Sernova’s first product focus is on treating insulin-dependent diabetes.

The Standard of Care for patients with insulin-dependent diabetes is monitoring and injecting insulin multiple times a day. Worldwide expenditures on insulin are estimated to be over U.S. $15 billion annually, and growing, while a patient track record of missing dosages and serious side effects result in U.S. $150 billion a year in hospital costs in North America alone.

Sernova’s Cell Pouch System™ is a versatile, scalable, first-in-class medical device, made entirely of FDA approved materials, that provides a natural “organ-like” environment for therapeutic cells, such as islets which control sugar levels that insulin-dependent diabetic patients are normally not able to do. The Cell Pouch System™, being thin and typically smaller than a business card, fits easily under the skin with virtually no visibility.

Think of the Cell Pouch System™ as a potential natural insulin producing pump with the added benefit of fine-tuned glucose control with no need to replenish the insulin. When placed under the skin and filled with islets it develops endocrine pancreas-like characteristics taking over normal glucose control. A key feature of the device is its ability to develop tissue matrix and natural microvessels, thought to be essential for the long-term survival and function of these therapeutic cells.

Rick: Philip can you tell us about yourself, your background?

Philip: I have a strong business and product development background. Having earned advanced degrees from the University of Michigan (MSc.) and the University of British Columbia (Ph.D.), after which I completed postdoctoral research, I worked with a series of successful therapeutic, medical device and combination product development companies.

Rick: Your Ph.D. was….

Philip: I completed my graduate training in the diabetes field focused on the cardiovascular side effects. I then went on and completed postdoctoral training at the British Columbia Cancer Agency which focused on bringing therapeutic products to the cancer patient. I strategically broadened my experience in various diseases in preparation for a career in the medical industry.

Rick: You were involved very early on with an amazing story that relates directly to what we are going to talk about today.

Philip: In 1996, while at the BC Cancer Agency, I was hired by a start-up company called Angiotech Pharmaceuticals. During my tenure at Angiotech, between 1996 and 2006, the company developed the paclitaxel eluting coronary stent and other drug-device combination products. The stent, a small metal tubular cage that props open narrowed blood vessels in the heart typically shut down in 6-9 months due to a scarring process called restenosis. Angiotech studied the mechanism of restenosis and coated the appropriate drug on the stent which alleviated this twenty year old problem, turning a $500 million market into a $4-5 billion a year market with the co-exclusive licensing of the technology to Boston Scientific and Cook.  In fact, it was the biggest medical device launch ever.

Rick: That’s extreme value added. What happened next?

Philip: At Angiotech, we wrote a considerable number of patents and conducted resultant product development activities on multiple products. The business, management and product development experience there was second to none. We worked in “dog-years” as the company grew in leaps and bounds. Being a part of that incredible success story had prepared me well for the future.

When I left Angiotech as Vice President of Pharmacology and Drug Screening in 2006, the company had a $1.7 billion market cap and had earned close to $200 million per year in revenues.

Rick: What came next for you?

Philip: I set up my own consulting business and during the ensuing three years consulted for multiple companies. At the same time, I was looking for the next blockbuster product opportunity. Serendipitously, I met a Director of Sernova while collaborating on a project and he was charged with finding a new CEO. He felt my background at Angiotech was a perfect fit.

Rick: You could not have asked for a better situation given your areas of expertise and previous experience.

Philip: My expertise and interest is in finding ways to improve existing products that have the potential to become significant in huge markets with the correct improvements.

For the coronary stent, we improved the function of the device and in turn increased the market by about 10 times. I saw a much bigger opportunity for Sernova.

Sernova is working in the very promising field of regenerative medicine and cell therapy. It is considered the next wave of therapeutics beyond drugs and many big pharma companies are starting to get on the bandwagon because of its multibillion dollar opportunities. Sernova had patents in a technology that could eliminate the need for toxic anti-rejection drugs in patients when placed locally with donor transplanted therapeutic cells to treat diabetes, and multiple other chronic diseases. They were beginning to work on a medical device to contain the therapeutic cells – a key part of the technology.

In the case of therapeutic cells for diabetes, it’s the islets that measure sugar levels in the blood and release insulin to control those levels. In diabetic patients these cells have been damaged or destroyed. The current standard of care for islet transplantation, the Edmonton Protocol, is a method in which donor islets are delivered to a blood vessel in the liver called the portal vein and then patients are given anti-rejection drugs to prevent destruction of those cells by the immune system.

This technique can result in the early death of at least 50% of the islets, a result of being bathed in blood. Thus, patients usually require the islets from between 2-4 donors. Early on the Edmonton Protocol showed a success rate of 40% at one year and 10% at five years. Fortunately, more recent improved antirejection drug regimens such as the one that will be used in the clinical study with Sernova’s Cell Pouch™ have improved long-term insulin independence rates. This in combination with an improved environment of the Cell Pouch™ is expected to increase long term islet survival.

Currently, only a very small number of select patients with insulin-dependent diabetes, of the nine million or so in North America, can be treated with this procedure. These are typically patients with insulin-unawareness, a condition in which patients can die following an insulin injection due to a severe drop in sugar levels. Islet transplantation with its capability to control glucose naturally can alleviate this condition.

Sernova bet that if a product could be developed to improve the safety, efficacy and efficiency of islet transplantation, there was the potential to treat millions of patients a year with the possibility of bringing in billions of dollars in revenue. It was a relatively simple but elegant concept, similar to the drug-eluting stent but with much bigger market potential and the possibility to expand through additional cell therapy treatments.

Rick: Sernova thought they had the answer to keeping the donor cells alive?

Philip: Yes, Sernova is focused on three key components of its technology; an unlimited source of therapeutic cells, an implantable device which forms a natural environment for cells to keep them alive long term and a technology that could protect donor cells within the device from attack by the body. I joined the company as President and CEO to execute on a tiered rational plan to develop these products as a strategy to help millions of patients requiring cell therapies.

This combination could, over time, result in an efficient and efficacious treatment keeping the islets in a natural environment while protecting them using a non-toxic approach. With this approach the number of treatable patients could be increased because of expanded islet survivability and a non-toxic method to protect the cells.  With these technologies, one could theoretically treat millions of patients.

When I came on board I hired a core and experienced management team who in turn hired scientists who were very dedicated to our strategic plan.

Rick: To set the scene, you’ve now developed the strategic plan, hired the employees and are now ready for execution of the plan.

Philip: We then received a significant National Research Council (NRC-IRAP) contribution which was a real endorsement of our technology potential and the ability of the management team to execute on the plan. This endorsement then enabled the company to raise funds in the capital markets. These funds, along with additional small private placements and further NRC funding, enabled our R&D team to successfully complete large animal autograft and allograft transplantation safety and efficacy studies in diabetic animals using the Cell Pouch System™.  The excellent safety and efficacy results using a much reduced islet dose in these two models was our first validation of the human-scaled technology. Each successful study de-risked the technology and moved Sernova closer to human clinical trials.

Rick: Let’s backtrack a bit. Where did the idea for the Cell Pouch™ first come from?  It seems like a bit of a stretch to go from injection into the portal vein to a Cell Pouch™. Where did this come from, the idea behind it.

Philip: For a long time, surgeons realized that the islets were not doing very well in the portal vein so they had been testing different locations in the body to put the islets. Some of these methods did not work, while others were not realistic from an islet dose perspective. Some groups even worked on devices that walled off the immune system from the transplanted cells, but these failed because they prevented key blood vessels from interacting with the islets.

The scientists at Sernova looked at the problems of portal vein delivery and learned about the natural environment of islets. It’s a similar approach Angiotech took in finding the right drug for the stent – understand the biology first and develop the product around that. Our scientists then worked with surgeons to assess their transplant needs, engineers to examine the materials possibilities, and biologists to assess the material effects on the body and came up with an appropriate proprietary design for the device.

We also used polymers that were already approved by regulatory authorities for use in the human body.  We developed the Cell Pouch System™ as a novel device taking all these factors into consideration and got it right. It might seem like magic, but a lot of thought and experience went into it. From a manufacturing perspective, our contract manufacturer, Moog Medical Devices Group, with their team of engineers, was very helpful in developing our semi-automated manufacturing process, having previously worked with multi-national device companies. They are confident they will be able to scale-up the process for treating as many patients as required.

Rick: So this is a similar story to what you did at Angiotech. You’re taking something that has shown promise and you’re improving it. What’s the difference in the size of the markets between the stent and Sernova’s Cell Pouch™?

Philip: The market for the drug-eluting stent was $4-5 billion a year. When we combine the Cell Pouch™ with an unlimited source of cells and a cell protector technology, we have the ability to treat up to nine million patients in North America who are taking insulin injections. If we treat one percent of those patients with our Cell Pouch™ it represents $2-$3 billion/year in revenue.

If we move into countries such as China, where there are about 45 million patients with insulin-dependent diabetes, the revenue potential is enormous.

Rick: Paul Lacy was one of the originators of islet transplantation a few decades ago. There have been a lot of attempts to duplicate his work in humans, none being as successful as Dr. Shapiro with the development of the Edmonton Protocol. How did Dr. Shapiro, a key opinion leader in the field, become interested in being the principal investigator in the upcoming human clinical study of the Cell Pouch™?

Philip: It’s all about the solid scientific foundation Sernova’s R&D team built through conducting rigorous scientific studies in multiple models of diabetes, evaluating the safety and efficacy of our products. We have also been presenting our results at international cell transplantation meetings to the physicians who will be using our products in the future. This is part of building a solid foundation for our products and in thinking towards the future.

In fact, we were introduced to Dr. James Shapiro at one of these conferences by the chair of our scientific advisory board, Dr. David White, and he asked to review all our data. We presented our six months isograft (transplant from organisms with similar genetic makeup) data as well as our autograft (transplant from self-tissue) and allograft (donor transplant) safety and efficacy results using the human product. We have shown consistent results in four animal models and three different species. His review of our data convinced him that our product had good potential in humans. This is when he showed interest in becoming principal investigator for our clinical study.

Rick: Sernova will be entering human clinical trials with its Cell Pouch™ in a very short while.

Philip: Yes, Health Canada is currently in the process of reviewing the documents to allow the start of the clinical trial. In addition, we have manufactured the Cell Pouch™ according to ISO13485 standards, which means our device has been made according to the strictest guidelines and meets regulatory standards for Canada, the U.S. and Europe.

The anticipation is that we are going to be starting our clinical trial in early Q2’12, pending Health Canada clearance.

Rick: Could you outline the clinical study and projected timeline once we’re in clinical trials?

Philip: The human study is a Phase I/II clinical study with a primary endpoint of safety and a secondary endpoint of efficacy. Up to 20 patients will be studied at the University of Alberta under the direction of Dr. Shapiro. Eligible diabetic patients will have the Cell Pouch™ implanted. Soon afterwards they will be ready for their islet transplantation. In this study, the patients will be administered the latest improved anti-rejection therapy that has been approved by Health Canada. The primary and secondary endpoints will be measured by three months after a successful transplant in each patient. For the efficacy assessment, we will measure the proportion of patients that are insulin-independent. To assess the long-term impact of the Cell Pouch™, we will be following the patients for a minimum of three years.

Rick: I think it’s important to point out that this is a “real time” study and explain what this means.

Philip: “Real time” study means that the study is designed to have interim study time points. This means that we will be assessing the results in groups of patients while the study is being conducted and could release safety and efficacy data once Dr. Shapiro and the evaluation team feels confident in the results.

Rick: What does it mean for a patient to have this Cell Pouch™, the islets implanted and it works?

Philip: This will mean that the patient no longer will need to take insulin injections. It will be a huge improvement in their quality of life. Even if the patients reduce the number of insulin injections on a daily basis it will be considered an enormous success by the physicians and patients.

Rick: Insulin dependence could be over, is that what you’re saying?

Philip: That’s the holy grail of diabetes treatment, for patients not to have to take insulin injections. The other interesting point about this is when one controls blood sugar levels, like we hope to do with islets in the Cell Pouch™, then it’s known that the severity and the incidence of diabetes side effects actually starts to drop. In North America, that is about $150 billion a year in health care costs. If we can start to chip away and reduce that, it will be a very significant improvement. It’s important not only for the patient, but it’s also important from a reimbursement perspective.

Rick: What’s the end game for investors?

Philip: For investors it is first about increasing the valuation of the company.

Our positive preclinical results, completion of contract manufacturing and submission of documents to Health Canada for the clinical study has significantly de-risked the technology and increased the value of the Company.

Positive results in the study should be a strong value driver for the Company because we’ll have proven the concept in humans. This will give the Company lots of options for growth.

There then may be interest from other companies in our technology as mentioned previously. It is possible that a company may license some of our technology and may combine it with their technology increasing the potential of the product further. Typical of a licensing deal would involve an upfront payment, milestone payments and royalties. Such a deal would substantially increase the valuation of Sernova.

Our plan as we’ve stated from the outset is to demonstrate the safety and efficacy of the Cell Pouch™ in humans and then to add our Sertolin™ local protection technology and then add a source of cells such as insulin controlling stem cells which could provide the treatment of an unlimited number of patients. Each of these would provide further significant increases in valuation.

We also plan to expand the number of chronic diseases we are working on through collaborations.

So, we have a whole series of events that will continue to drive the valuation of the company forward over the next years beyond just the short-term diabetes test results. These events will provide long-term exit strategies for investors as the valuation of the company increases. This, combined with the work we are doing with Russo Partners, our investor relations firm to get the word out about Sernova, should be very beneficial for investors.

Rick: When could we expect our first efficacy results from this Phase I/II clinical trial?

Philip: We’re anticipating that we should have safety results by the end of 2012, with the first efficacy anticipated soon after that. Of course it all depends on approval to begin the study from Health Canada and then the rate of patient enrolment which we will find out as the study progresses.

Rick: If we’re successful in the diabetes study, what other applications could the Cell Pouch™ potentially be used for?

Philip: The Cell Pouch™ could be used for any chronic disease where a deficient or missing protein or hormone can be replaced by therapeutic cell transplantation.  A short list includes: parathyroid disease, haemophelia, liver disease, Parkinson’s disease, etc.  So, we have quite a number of opportunities.

As we look into the future, our goal is to provide the surgeon with the Cell Pouch™, a vial of therapeutic cells, and a vial of protector cells. So, the physician would then implant the Cell Pouch™, and shortly after, transplant the therapeutic and protector cells. This could eventually occur in any hospital in the world and that would be a significant achievement in the transplantation field.

Rick: Has this approach been tried before?

Philip: We believe the combination of our proprietary Cell Pouch™ and the local immune protection provides the exact natural environment for the body to allow therapeutic cells to function long-term. No one has been able to do that on a commercial scale prior to Sernova. Sernova believes it has a real advantage because it has the right combination of technologies that match the needs of the body.

Rick: There is no competition existing or even close to SVA’s technology development stage.

Philip: Essentially, there isn’t. Our competition, I would say, would be insulin pumps and insulin injections, and that’s what everyone is trying to get away from, the insulin injections.

Rick: There are significant issues with insulin pumps.

Philip: Patients must monitor their blood glucose levels, and there is always the concern that they’re releasing too much insulin, which is actually a very serious problem. It can put the patients into a coma. Of course the pumps have to be maintained and reloaded with insulin on an ongoing basis.

Rick: When do you think we’re going to have our first patients with islets in them?

Philip: I would say probably end of Q2, 2012, again depending on the regulatory authorities. As soon as we get our Health Canada clearance to start, we’ll be able to begin the study and get our first patient enrolled. Then we’ll have a much better idea of when that patient will have their implantation and then transplantation of islets.

Rick: Let’s make it clear. This is a real time study, and you’re not going to be shy about putting out news. It’s going to come out in a very timely fashion.

Philip: Yes, it will come out over time in press releases as the data starts to come in. The key being that Dr. Shapiro and the evaluation team will be reviewing the data as it comes in. When there is clear efficacy data in a number of patients, we’ll be able to release those data.

Rick: You mentioned controlling the money supply and it was difficult at the beginning to raise $400,000 and get the grant and then do another $500,000. We’ve always had a series of small money raises, and yet this last money raise was $3.5 million, and it certainly didn’t take long to fill. What is the difference between raising money last week versus last year? Why was it quicker and easier Philip?

Philip: When we started in 2009 we didn’t have a lot of data. Fortunately, we got that first government contribution agreement for funds. As the data started to roll in from our studies the results looked very positive, we started to reduce the risk of failure. Then Dr. Shapiro came on board, that was a key driver of us being able to raise a million dollars in a very short period of time because Dr. Shapiro was a key opinion leader in the world for islet transplantation.

Knowledgeable investors started to realize the potential of the company.

Rick: Dr. Shapiro’s stamp of approval was a real confidence builder in your technologies and that opened doors.

Philip: Dr. Shapiro is a luminary in the field, having been an important player in developing and improving the current standard of care for islet transplantation. His review of our data was key to his interest in becoming principal investigator of our human study.

The next key aspect of it was when we got all of our regulatory documents completed and were about to submit to Health Canada. Our investors could really see that there’s a transition between a preclinical and clinical stage company, and that’s what Sernova is now, a clinical stage company. So the $3.5 million came in from investors who could see the potential of the stock and of the company going forward, and of us being able to treat diabetic patients with our commercial product and improve their lives at the same time.

I think that as we move forward, there’s going to be more and more interest in Sernova, and we’re getting the word out. We focused our funds during the first three years on the science, and we built a very, very strong foundation for the company. Now we’re entering into the clinic and will build strong human clinical data, and at the same time we’re getting the word out about the company.

Rick: When will we need more money?

Philip: My goal was to raise enough funds to provide the company with a good runway to enable us to obtain clinical results which should drive the valuation significantly and we have achieved this with our $3.6M oversubscribed private placement. We are currently working on non-dilutive grants to expand that runway. As we move forward towards a pivotal study, we will need additional funding, but with positive results this will be at a much higher valuation with less dilution.

Rick: We’ll have efficacy results before we need more money?

Philip: We anticipate having safety and efficacy results in a significant number of patients. That should be a strong driver of the Company valuation.

Rick: Exactly who would be interested in something like this, from a partnership or “we want it” perspective?

Philip: We have the opportunity to partner with large pharmaceutical companies, medical device companies and specialty cell therapy companies. Large pharmaceutical companies are looking for the next therapeutic wave beyond blockbuster drugs.

The word on the street is that the cell therapy market will become as big as the monoclonal antibody market, if not bigger. We are looking at long-term treatment of chronic diseases with fewer side effects and better efficacy than current therapies. So this is an improvement from a safety, efficacy and economic perspective. We have what we think is a better alternative to the insulin pump and have been noted by a number of medical device companies. Specialty cell therapy companies are interested in our ability to house the cells naturally and protect them from the immune environment. It’s a win-win situation for everyone. We have been attending partnering conferences, which brings hundreds of companies together providing the ability for companies to spark collaborations and potential deals. We are working on getting the word out about Sernova. This becomes extremely important with entry into clinical trials and as our clinical data starts to be released.

Rick: What about patents?

Philip: For our Cell Pouch™ device and associated technologies, we have approximately 19 years left of patent protection, and we have filed applications around the world to ensure we are in all the important markets. We also have over 20 patents and applications on our Sertolin™ immune protection technology and related technologies. We have a mandate to develop new intellectual property to expand our product development possibilities.

Rick: Is there anything you want to add?

Philip:  Over the past three years, we have significantly reduced the risk and increased the value of the Company. With contract manufacturing and the preclinical package completed, as well as clinical documents in place and a top tiered clinical investigator, we have transformed this company from a shell with intellectual property to a clinical development stage company using less than U.S. $3.5 million in equity. That is an incredible feat in the medical products field and one the team at Sernova is very proud of. This translates to incredible value for shareholders.

Rick: It’s not your intention to build a large integrated pharma company is it?

Philip: Correct, while our business development strategy is evolving, our current strategy is to find and development out-licensing partnerships for our diabetes product and find partners to work with in expanding new clinical indications for the Cell Pouch™.  Eventually, Sernova may be bought by a larger company wanting to take advantage of the opportunity at a much higher valuation but we want to build in that increased valuation first. So, we have quite a number of options in front of us. These are exciting times for Sernova and everyone involved.

Rick: Excellent, thank you Philip.

Richard (Rick) Mills

rick@aheadoftheherd.com

www.aheadoftheherd.com

If you’re interested in learning more about the junior resource and bio-med 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: OzCopper, 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.

***

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.

Richard Mills owns shares of Sernova Corp. TSX.V – SVA

Sernova Corp. TSX.V – SVA is a sponsor of Richards website aheadoftheherd.com

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stewart@gracelandjuniors.com

April 3, 2012

1. Large movements in the price of US T-bonds can affect the price of gold dramatically.  Since I highlighted the overbought condition of the monthly T-bond chart, some investors have concluded that the bond bull market is over.
2. I believe that this conclusion may be a little premature.  There is no question that the indicators and oscillators on the T-bond monthly chart are overbought, but that alone is not enough to call an end to a major bull market.
3. It’s critical to look at why those oscillators are overbought, and that means giving careful consideration to the viewpoints expressed by institutional money managers and major commercial bank economists.  Central banks usually consult with institutional players before making major changes in interest rate policy.
4. The current viewpoint of most institutional money managers and bank economists is not that bonds have topped out and are about to enter a “papa bear” market.  Their view is that central bank managers and government treasury departments have worked together to implement substantial global monetary easing, and that easing will continue for quite some time, barring any unforeseen surprises.
5. Actions produce reactions.  Global monetary easing was designed to boost economic growth, not make the debt payable.  Growth has occurred, and the long term bond market chart suggests that global monetary easing (GME) is likely to continue.
6. Please note that there is a difference between the phrases, “likely to continue”, and “guaranteed to continue”.
7. To view the monthly bond chart, please click here now.  Technical analysis of the bond market chart supports the fundamental views held by institutions, central banks, and government policy makers.  Institutional money managers have moved some risk capital away from bonds and into general equities, because they believe central banks and policy makers are likely to continue to engage in GME for most of 2012 and perhaps all of 2013 as well.
8. Institutional money managers and commercial bank economists expect that growth produced by GME will continue over the next 6-18 months, and 2013 should see even stronger growth than in 2012.  They expect GDP to grow at 3-4% for the next 6-18 months, and in my opinion, they are likely correct.
9.    The symmetrical triangle in play on the monthly bond chart supports the scenario that temporary weakness in the bond will be followed by further GME policy actions, which will produce more anemic growth.
10. The bond is not falling because of inflationary concerns.  It is falling because institutions, central banks, and governments believe that GME will produce more growth and push the general stock market higher.
11. Will GME solve the OTC derivatives-based debt problem?  No. The enormous wedge pattern in play on the gold chart is an echo of the bond market chart, and suggests that while it is a waste of time trying to guess whether “the low” is in for gold, the current congestion pattern is a consolidation, not a top, and price will be launched above $2000 this year, by the implementation of more GME.
12. Fundamentally-based liquidity flows create charts.  Charts don’t create fundamentals, but they can create additional liquidity flows.  Those of you who follow the major economic reports know that most market liquidity flows are based on fundamental analysis, rather than technical analysis.
13. 13.          On that note, yesterday was a watershed day for the gold market.  The Indian gold industry strike was suspended, and the suspension is likely permanent.  During the strike, over $1 billion a week was lost by the Indian gold business.    Without Indian buyers in play, rallies can be feeble even if the market is oversold.
14. The end of the strike is occurring at a very key point in “technical time”.  The gold chart shows an enormous wedge pattern, with head & shouldering action within the wedge.  To view my take on that h&s pattern within the wedge, please click here now.
15. That picture speaks a million words, and if you take the time to learn how institutional money managers think, you’ll probably have a lot more patience with your positions.  The system is already bankrupt, and debts have been marked to model.
16. 16.          The institutional money managers see all the same charts that you see.  They know the debt is un-payable, but that doesn’t mean that the price of gold starts skyrocketing “any moment now”.  A bankrupt system can remain open and continue to operate, indefinitely.  The massive wedge pattern indicates that the gold price is coiling to strike at the $2000-$2500 price area, because of the size of the pattern, the time length of the pattern, and because of the institutional view that GME will continue.
17. When will gold possibly “go parabolic”?  That comes after growth dies a withering death rather than an explosive one, and institutional money managers and bank economists call for much greater global monetary stimulation.  I doubt that a parabolic move happens before 2014, but anything is theoretically possible.
18. A parabolic move could also occur if there is an unexpected surprise that rocks markets.  I agree with Morgan Stanley’s head of global economics, Joachim Fels, that an oil price spike or a gridlock amongst government policy makers are the two biggest “tail risks” to the scenario that I’ve laid out here.
19. I’ve noticed substantial frustration in the gold community, but I believe a lot of the frustration would disappear if investors could have patience with the viewpoints held by major institutions and central bank managers.
20. Simply put, there is a lag time between the implementation of GME and the pick-up in economic activity.  That pick-up in economic activity is happening now, and is likely to continue throughout 2012 and perhaps throughout 2013.
21. That could put further pressure on the T-bond price, but it would not “finish it off”.  An oil price spike could do great harm to the bond, and a policy making gridlock would also likely create a severe correction.
22. You might feel a need for your gold stocks to rise in a parabolic price move right now, but that doesn’t mean it’s going to happen before institutional money managers see the current economic growth begin to fade.  They see “more of the same” GME coming, which means more slow growth coming for the next 6-18 months.  In my professional opinion, that is the most likely scenario over that timeframe.
23. 23.          What that means for gold is higher prices, but not a parabolic move just yet.  Once growth deteriorates, either later this year or sometime in 2013, I strongly believe that institutional money managers and commercial bank economists will pressure central banks into engaging in much more aggressive gold buy programs, with the sole goal of devaluing paper currency, thereby reducing the debt owed by the world’s debtors to the world’s creditors.   
24. 24.          If you feel frustration with gold, silver, commodities, and gold stocks, you’ll realize that most of your frustration probably comes from “fighting the institutional tide”.  Things don’t happen before their time.  Trying to make what institutional money managers are doing fit your view is a mistake.  Fit your view around theirs.  Work as a team, and you’ll get richer, with less frustration.  Waiting for the system to “blow” is a waste of time.  It’s already blown, it’s already been marked to model, and the creditors are going to get paid much less than they are really owed, with heavily diluted paper currency.  So, your gold positions are going much higher!

Special Offer For Ozcopper Readers:  Send me an Email to freereports4@gracelandupdates.com and I’ll send you my free “True Love” report.  I’ll show you how to build a “player’s position” in GDX and most importantly, how to relax and enjoy that position 365 days a year!

Thanks!

       Cheer

St

Stewart Thomson

Graceland Updates

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

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

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?

Richard (Rick) Mills
AheadoftheHerd.com

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

No term generates more confusion or misunderstanding than fascism, too many people believe that fascism exists solely in images on the History Channel – storm troopers pounding thundering jackboots down cobblestone streets of occupied countries while throwing the Roman salute. But fascism is not defined by clothing, symbolism or salutes.

Fascism is a totalitarian system of government that bases its economy on capitalism, it’s a marriage of government authority and military/police power managed by corporate influence.

“The liberty of a democracy is not safe if the people tolerate the growth of private power to a point where it comes stronger than their democratic state itself. That, in its essence, is fascism – ownership of government by an individual, by a group.” Franklin D. Roosevelt

Consider the following, all are characteristics of fascism:

• A dictatorial ruling cabal runs the country
• The military is increasingly being used to control the civilian population
• The government repeatedly violates the U.S. Constitution
• Government informants are spying on their fellow citizens
• Controlled mass media
• Fraudulent elections
• Powerful and continuing nationalism, calls for national unity
• Militaristic values are spreading in society and the power of the military is increasing, glorification of war
• Obsession with national security
• Disdain for the recognition of human rights, racism
• Radical opposition to Communism/Socialism, Modernism and attacks on Liberals
• Identification of enemies as a unifying cause
• Corporate power is protected while labors power is suppressed – Fascism and capitalism are inseparable because the corporate power structure is authoritarian, and is geared to reward the elite owners, but not the workers. Few would argue against the fact that corporations control our government and have the dominant role in our society
• Obsession with crime and punishment
• Militarization of the police – Since the terrorist attacks in 2011 the US has spent $635 billion to militarize its police forces
• A trend toward corporatism and systematic destruction of the middle class
• Rampant cronyism and corruption
• Intertwining of government and religion
• A cult like leader

Consequences of fascism to the governed are the loss of rights and the enhancement of the elitists.

Creeping Fascism

“It is a mistake to think that early in a fascist shift you see the profile of barbed wire against the sky. In the early days, things look normal on the surface; peasants were celebrating harvest festivals in Calabria in 1922; people were shopping and going to the movies in Berlin in 1931. Early on, as WH Auden put it, the horror is always elsewhere – while someone is being tortured, children are skating, ships are sailing: “dogs go on with their doggy life … How everything turns away/ Quite leisurely from the disaster.”

As Americans turn away quite leisurely, keeping tuned to internet shopping and American Idol, the foundations of democracy are being fatally corroded. Something has changed profoundly that weakens us unprecedentedly: our democratic traditions, independent judiciary and free press do their work today in a context in which we are “at war” in a “long war” – a war without end, on a battlefield described as the globe, in a context that gives the president – without US citizens realising it yet – the power over US citizens of freedom or long solitary incarceration, on his say-so alone.” Naomi Wolf, Fascist America in 10 Easy Steps, guardian.co.uk

Fascism is dangerous because its insidious, it is a natural degenerative process of a capitalistic society caused by the revolving door between government and the most powerful global corporations. Large multi-national corporations, through campaign finance and intense lobbying, come to dominant the legislative and political process.

“Fascism in America won’t come with jackboots, book burnings, mass rallies, and fevered harangues, nor will it come with black helicopters or tanks on the street. It won’t come like a storm but as a break in the weather, that sudden change of season you might feel when the wind shifts on an October evening: Everything is the same, but everything has changed. Something has gone, departed from the world, and a new reality will have taken its place.

All the old forms will still be there: legislatures, elections, campaigns plenty of bread and circuses. But consent of the governed will no longer apply; actual control of the state will have passed to a small and privileged group who rule for the benefit of their wealthy peers and corporate patrons.

To be sure, there will be factional conflicts among the elite, and a degree of debate will be permitted; but no one outside the privileged circle will be allowed to influence state policy. Dissidents will be marginalized usually by the people themselves. Deprived of historical knowledge by a thoroughly impoverished educational system designed to produce complacent consumers, left ignorant of current events by a corporate media devoted solely to profit, many will internalize the force-fed values of the ruling elite, and act accordingly. There will be little need for overt methods of control.

The rulers will act in secret, for reasons of national security, and the people will not be permitted to know what goes on in their name. Actions once unthinkable will be accepted as routine: government by executive fiat, state murder of enemies selected by the leader, undeclared wars, torture, mass detentions without charge, the looting of the national treasury, the creation of huge new security structures targeted at the populace. In time, this will be seen as normal, as the chill of autumn feels normal when summer is gone. It will all seem normal.” Chris Floyd, November 10, 2001 Moscow Times

Assassination

The President of the United States claims he has absolute arbitrary power over the life and liberty of every person on earth – that he can order the execution or kidnapping of any person, in any country.

The Obama administration has compiled a hit list of American citizens targeted for assassination. Obama’s top Terrorism adviser has suggested that the number of U.S. citizens targeted for assassination could be in the dozens.

It’s obvious that if the present US administration thinks it can kill its own citizens with impunity the gloves are off for foreign nationals of any country.

Rendition

The Obama administration maintains that rendition is legal under U.S. law –  rendition is the practice of snatching terrorism suspects from one country and rendering them into the custody of another.

“U.S. law does not even preclude the United States from rendering an individual to a foreign location where he or she could be abused or tortured.” CIA assistant general counsel Daniel Pines

New Yorker journalist Jane Mayer says Egypt is the most common destination for suspects rendered by the United States.

According to aformer CIA agent, “If you want a serious interrogation, you send a prisoner to Jordan. If you want them to be tortured, you send them to Syria. If you want someone to disappear – never to see them again – you send them to Egypt.”

Indefinite Detention

The US federal government is looking for contractors to provide staff and supplies for “emergency camps” located around the country.

The recently passed National Authorization Defense Act has a provision which empowers the government to arrest Americans and hold them in these emergency camps – you should read that as detention camps – with no legal recourse.

Also under the new law the US military has the power to carry out domestic anti-terrorism operations on US soil. The NDAA authorizes the military to detain even US citizens without trial and no legal recourse.

NDAA section 102: “which purports to authorize the president of the United States to use the armed forces of the United States to detain American citizens who the president suspects are or have been substantial supports of al-Qaida, the Taliban, or associated forces, and to hold such citizens indefinitely.”

“The power of the Executive to cast a man into prison without formulating any charge known to the law, and particularly to deny him the judgment of his peers, is in the highest degree odious and is the foundation of all totalitarian government whether Nazi or Communist.”  Winston Churchill

Checkpoint USA

TSA motto – “Dominate. Intimidate. Control.”

The Transportation Security Administration’s (TSA) 25 Visible Intermodal Prevention and Response (VIPR) teams have run more than 9,300 unannounced checkpoints and other search operations in the last year.

Department of Homeland Security officials have asked Congress for funding to add 12 more teams to the federal agency’s 25 VIPR units that are already scattered across the country.

“Uncontrolled search and seizure is one of the first and most effective weapons in the arsenal of every arbitrary government…Among deprivations of rights, none is so effective in cowing a population, crushing the spirit of the individual and putting terror in every heart.” Justice Robert Jackson, chief U.S. prosecutor at the Nuremberg Trials

The $24 million in funding (in addition to the $110 million spent in fiscal year 2011) is in addition to the TSA’s role in airports which costs taxpayers $5 billion a year.

VIPR units, comprised of federal air marshals, surface transportation security inspectors, transportation security officers, behavior detection officers and explosive detection canine teams are responsible for manning terrorism and drug checkpoints on interstates, in bus and train terminals, seaports, at major sporting events and, according to a May 2011 Federal Court ruling, even a Santa Fe high school prom.

“TSA and VIPR searches also indoctrinate children to accept pat-downs, full-body scans, and the like, as a regular component of the relationship between government and its citizens. In this way, police state tactics will gradually grow in acceptance as simply “the way things are.” A child who has been molested by government officials since before he could read is unlikely to question such activities as an unjustified exercise of authority when an adult.

Furthermore, the normalization of intrusive searches arguably reworks the content of the protections provided by the Constitution, particularly the Fourth Amendment. Increasing use of pat-downs and other controversial screening procedures changes the definition of what is a “reasonable” search and seizure from a cultural perspective and therefore actually re-engineers the constitutional fabric by altering the definition of what is “reasonable” under the Fourth Amendment.

The increasing deployment of VIPR teams, obviously, also drastically undermines the right to privacy. There is both an intrinsic and instrumental value to privacy. Intrinsically, privacy is precious to the extent that it is a component of liberty. Part of citizenship in a free society is the expectation that one’s personal affairs and physical person are inviolable so long as one remains within the law. A robust conception of freedom includes the freedom from constant and intrusive government surveillance of one’s life. From this perspective, Fourth Amendment violations are objectionable for the simple fact that the government is doing something it has no license to do, i.e., invading the privacy of a law-abiding freeman by monitoring his daily activities and laying hands on his person without any evidence of wrongdoing.”  John W. Whitehead, ohiofreepress.com

“First we are told by the U.S. Supreme Court that American citizens have no 4th Amendment protections at border crossings, even when standing on U.S. soil. Now TSA takes the next logical step and simply detains and searches U.S. citizens at wholly internal checkpoints.” Texas Congressman and US presidential candidate Ron Paul

Wiretapping the Internet

Federal law enforcement and national security officials argue that their wiretap abilities are dramatically decreasing as people increasingly communicate over the internet instead of by telephone.

Officials are asking Congress to require all services like BlackBerry with its encrypted e-mail transmitters and Skype because it’s software allows direct messaging to be technically capable of complying with a wiretap order.

Data Mining

Why is the US government spending time, money and resources on watching over those that help bring news to the masses?

According to Oxford University Press, A Dictionary of World History “The inhabitants of a police state experience restrictions on their mobility, and on their freedom to express or communicate political or other views, which are subject to police monitoring or enforcement. Political control may be exerted by means of a secret police force which operates outside the boundaries normally imposed by a constitutional state.”

The National Operations Center (NOC)’s Media Monitoring Initiative has given the NCO and its Office of Operations Coordination and Planning (OPS) permission to retain data on users of social media, online networking platforms, news anchors, journalists, reporters and anyone else, including government officials and common bloggers, who may use “traditional and/or social media in real time to keep their audience situationally aware and informed.”

The Department of Homeland Security’s says such data could consist of any intellect “that permits the identity of an individual to be directly or indirectly inferred, including any information which is linked or linkable to that individual.”

The Department of Homeland Security, under the NOC Monitoring Initiative has been collecting information since 2010 and the data is shared with private sector businesses and international third parties.

Escaping The Matrix

Over 11,500 terrorist attacks occurred in 72 countries in 2010, resulting in almost 13,200 deaths – the number of attacks rose by almost five percent over the previous year.Of the 13,200 deaths caused by terrorism in 2010 just 15 were American private citizens, 13 died in Afghanistan, one in Iraq and one in Uganda.

The Heritage Foundation has compiled a list of 39 foiled internal terrorist plots against the US since September 2001.

“11,500 terrorist attacks occurred in 72 countries in 2010, resulting in almost 13,200 deaths” is an average of 1.14 deaths per attack. That’s 39 x 1.14 = 44.46 lives saved.

In the ten years directly after 9/11 the increase in US domestic homeland security has cost in excess of one trillion dollars – does not include foreign wars.

The risk of dying in the U.S. from terrorism is substantially less than the risk of dying in an accident caused by a deer.

2010 Leading Causes of Death in America

• Heart Disease – 595,444 deaths
• Cancer – 573,855 deaths
• Chronic lung disease – 137,789 deaths
• Strokes – 129,180 deaths
• Accidents – 118,043 deaths

The actual leading causes of death in the US are:

• Tobacco
• Poor diet and physical inactivity
• Alcohol consumption
• Motor vehicle crashes

“The defining dramatic moment in the film occurs just after Morpheus invites Neo to choose between a red pill and a blue pill. The red pill promises ‘the truth and nothing more.’ Neo takes the red pill and awakes to reality – something utterly different from anything Neo, or the audience, could have expected. What Neo had assumed to be reality turned out to be only a collective illusion, fabricated by the Matrix and fed to a population that is asleep, cocooned in grotesque embryonic pods. In the Matrix world, true reality and perceived reality exist on entirely different planes.” Escaping the Matrix by Richard K. Moore.

Is a red pill, and the natural degenerative process of a capitalistic society, on your radar screen?

If not, maybe they should be.

Richard (Rick) Mills

rick@aheadoftheherd.com

www.aheadoftheherd.com

If you’re interested in learning more about the junior resource sector, and specific junior 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 300 websites, including: Ozcopper, 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.

***

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.

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

Today I’m speaking with Jody Dahrouge of Dahrouge Geological Consulting Ltd. Dahrouge Geological is in charge of the exploration programs for Strike Graphite Corp. TSX.V – SRK

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 with demand across both industries rising at five percent per annum. The steel industry uses graphite as liners for ladles and crucibles, 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.

New, high-tech applications – Flexible graphite sheets, graphene, lithium-ion and vanadium batteries, fuel cells, semi conductors, nuclear, wind and solar power – require more and more graphite production. 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.

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, however most newly emerging technologies and applications require large flake graphite. Of the approximately 1.2 million tons of graphite that are processed each year just 40% is flake.

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

Strike Graphite has recently acquired three graphite projects within mining friendly, politically stable jurisdictions; Deep Bay East, Saskatchewan, Simon Lake, Saskatchewan and the Wagon Graphite Project in Quebec. All three projects possess geologic traits for the discovery of significant, large flake graphite deposits.

Rick: Jody tell us about yourself and Dahrouge Geological Consulting.

Jody: I graduated from the University of Alberta’s geology program in 1988 and for the next three years I worked in the resource industry. The industry is pretty cyclical, being completely tied to the resource market and at that time the market hadn’t yet experienced the explosive growth in commodity demand as a function of Chinese growth.

Consequently a lot of geologists would work for a few years, get laid off, work for a few years and so on. I was employed by ATCO Power, a major coal and electricity producer in Alberta. While working full time for ATCO I decided to go back to University and graduated in 1993 with a degree in computing science.

Upon graduation, instead of going to work in the high-tech industry, I decided to claim stake for industrial minerals in British Columbia. I went to work for a company called Halferdahl and Associates, a consulting company based out of Edmonton that was run by Laurie Halferdahl. Laurie passed away in 1999 after operating his business since 1971.

I purchased the Halferdahl assets from his estate in 1999 and have since run Dahrouge Geological Consulting, we’re primarily focused on industrial minerals and rare metals. We work primarily in Canada and the United States, though we’ve worked around the world, East Africa, China, Australia and South America. We have worldwide experience but we’ve been lucky enough to stay active primarily across North America.

I was also President of Fission Energy for a short time.

Rick: What’s your take on the graphite market?

Jody: Graphite is quite unique because of its unique combination of properties. Graphite in terms of being an electrode has one of the highest conductivities and as you’re aware the amount of graphite in a lithium-ion battery is anywhere from 10 to 20 times the amount of lithium.

The demand just from that one use could potentially double the market over the next ten years to over two million tonnes annually. That type of demand growth would require 25 new mines at 40,000 tonnes per year.

The United States Geological Society (USGS) says the need for graphite in the type of fuel cells being developed could consume as much graphite as all other uses combined.

All of these markets demand the highest quality large-flake graphite, that’s where the most growth would be.

Graphite in itself is not necessarily rare, it’s carbon. It’s an extremely common mineral occuring in a wide variety of geologic terrains. However what is rare is the greater than 177 microns or 0.2 mm large-flake graphite.

Large-flake usually occurs only in very specific geologic environments such as high-grade metamorphic terrains. Metamorphic rocks are those which have changed from their original formation by increasing pressure or temperature, the change gives rise to large-flake graphite under specific conditions.

In order to capture the highest value, you have to beneficiate your graphite deposit and produce this coarse-grained graphite and make sure it’s relatively free of impurities. You need an excess of 94% to 97% carbon content to make the battery-grade graphite.

Rick: Okay, what else is graphite used for?

Jody: One growing demand, or perceived growth in the market, is going to be graphene, which is an exceptionally strong man-made mineral with high conductivity, so there’s all sorts of technological advances that can fuel this growth even further.

Rick: When I look at the recent report by the United States Geological Survey on graphite, there’s no mine production of graphite in the United States. The US relies 100 percent on imports and has for years.

Jody: Yes, and there’s only two mines in production in Canada, one’s in British Columbia and is a small producer, the other is in Quebec. But there are in excess of 40 graphite producers in China. A vast majority of the Chinese mines are producing amorphous graphite, which is generally less than 37 microns, and commands much lower prices than large flake graphite.

China controls about 73% of the market, India is next with 10% to 15%, North Korea is a big producer, less than India, but bigger than Canada in terms of its graphite production, but China consumes most of North Korea’s production.

This is all in terms of a strategic commodity, so once again North American seems to be left out in the cold and beholden to production from China and other Asian countries.

Rick: In 2011, China, Canada, and Brazil were in descending order of tonnage, the major suppliers of crystalline-flake and flake-dust graphite, and in 2011, China produced the majority of the world’s graphite. There’s talk about China cutting back on their graphite production, but this is not, I want to make it very clear that this is not the rare earth space.

The mineralogy and the metallurgy of many rare earth deposits are not well known or understood here in the West, whereas with graphite, we’re perhaps the leaders in mineralogy and metallurgy, we understand it.

Jody: Certainly the experience with rare earth mineralogy is quite important. There’s only been four minerals that are known to have produced rare earth’s; monazite, bastnasite, xenotime and loparite. So the process ability of those minerals is well known, when people started exploring for rare earth deposits, they found rare earths formed numerous minerals that have never been commercially produced.  Hence the large learning curves towards the unknown metallurgy.

There are 17 different rare earths and they are always found together in the host mineral. There are tens if not hundreds of rare earth minerals, some of which are very complicated and not known to be amenable to processing using standard techniques. So, people were finding rare earth deposits, but what was more important were recoveries and processability of the minerals once you recovered them.

Rick: Why is China going to become quickly irrelevant to this market?

Jody: Graphite is a different story. Graphite is a mineral on its own, it’s one mineral. It may have some built-in impurities or may occur with other minerals, such as mica, which may be somewhat difficult to separate from the graphite. However graphite has a relatively low specific gravity allowing a concentrate to be produced by conventional floatation techniques. If the 94% to 97% carbon cutoff for their product was not then attained, they could apply an acid bath to their product to further remove deleterious constituents to upgrade it. It’s not complicated mineral processing or metallurgy. It’s pretty straight forward, overall.

Rick: I was reading about one company using air in the floatation, they got 85% recovery. When they used a pine oil, they got +95%, and then when they went to an acid, they achieved 99.99% purity. It wasn’t a complicated procedure.  It’s not proprietary methods, there’s nothing secretive about it is there?

Jody: No, nothing secretive about it. It’s pretty simple and pretty straight forward. It’s a recovery technology that’s been around for in excess of 100 years. A company that finds a large deposit of coarse-grain flake graphite, with little in the way of impurities, can put a deposit into production a lot faster than say a company that finds a metallurgically complex rare metal deposit, which would have to have a very unique metallurgical process and a mineral upgrading process designed specifically for that deposit.

Rick: I was reading a news release from Northern Graphite saying they just raised $10 million. However, what was interesting was they said that the $10 million is for all the normal stuff, but also they are going to do a prefeasibility and metallurgical studies. I was shocked at just how far $10 million will carry a graphite company through their studies and permitting activities to actually get to the point where you’re going to build a mine. It was mindboggling how far relatively little money could go in this space.

Jody: Exactly, that’s a very good point because the geology of these deposits are typically pretty straight forward. So in terms of getting from the discovery, say an outcrop with graphite all the way to the resource stage, you could, depending on the geology, advance that in terms of months as opposed to years.

Rick: Most people think this is a race to get to be first to production, but that’s not the reality is it?

Jody: The first one to production might garner the most attention, but go back to our comments earlier on regarding the explosive growth of the sector, there’s going to be many mines required to fill the void, not just one or two.

Rick: I’ve had a lot of people asking me about what the industry means by ‘large-flake’ and why one flake is more valuable than the other. Could you explain to our readers exactly what is meant by flake size?

Jody: Well, large-flake graphite is generally referred to as 80 mesh. Mesh size is a technique of measuring openings in a screen. Different mesh sizes correspond to measurement sizes of the screen openings. Millimeters, or microns would the best way to characterize a mesh size.

80 mesh corresponds to greater than 177 microns in size, 0.177 mm. So, that is what the large-flake graphite is classified as, greater than 177 microns, and it demands the highest price.  You can always crush something that is coarse grained and make it smaller, but it is far more expensive to upgrade something that is fine grained into something coarse grained.

The reason the large flake demands the greatest price is because it has the greatest electrical conductivity – it makes the best batteries. Large-flake graphite costs anywhere from $2,500 to $3,500 per tonne.

Rick: Okay, could you explain the different sizes they talk about with respect to the grade and the money they get, the 40 mesh etc., get into that?

Jody: Ok, large flake refers to grains that will not pass 80 mesh and is greater than 177 microns, which is 0.177 mm and up. I prefer to use the micron size, which is in millimeters (mm) as opposed to mesh size because it’s a lot easier for people to understand.

Medium-flake graphite is in the 149-177 micron range. Fine flake is less 149 microns, which is 0.149 mm. Amorphous graphite is generally less than 37 microns and the price is generally under $1000 a tonne.

From the fine flake and above, you start to get a dramatic jump in prices.  Currently, fine flake ranges from $2,000 to $2,500.  Medium flake is actually priced very close, and the large flake can be anywhere from $2,500 to $3,500 or above even.

Rick: How did you get involved in Strike Graphite Corp. TSX.V – SRK?

Jody: I’ve been conducting exploration for various commodities in Saskatchewan since the beginning of my career, and Dahrouge Geological Consulting has been doing it for over 30 years. Saskatchewan is often ranked as one of the best jurisdictions worldwide to do business, I’m sure you’ve seen the Fraser Institute rankings.

We’ve had a lot of success doing business in Saskatchewan. They’ve put every commodity you can imagine under the sun into production, uranium, potash, industrial minerals. They have a booming oil and gas business and they’ve got gold mines and base metal mines as well. So, with the fantastic geology that’s in Saskatchewan, and my background looking for various commodities plus my involvement in the uranium sector, I recognized the potential and the correct geologic area of Saskatchewan to host deposits of graphite.

In the case of Saskatchewan graphite, there’s lots of Canadian Shield-type rocks that have undergone high-grade metamorphic conditions. The rocks were originally sedimentary and when you start going through government files and our private office files, you recognize lots of graphite occurrences.

Rick: Many times uranium is associated with graphite.

Jody: One of the common ways to do uranium exploration is to complete an airborne electromagnetic survey looking for conductors.  As we mentioned, graphite has great electrical conductivity and uranium and graphite often go hand in hand.

In the Athabasca Basin, which is one of the premier uranium exploration and development districts in Northern Saskatchewan, uranium companies will fly these airborne surveys, and they’ll identify a conductor. Commonly the conductors are located along faults. Graphite being primarily carbon, is a great reductant, so when oxygen-rich fluids impregnated with uranium meet this conductor, they deposit out the uranium.

Hence, the prolific uranium district in Northern Saskatchewan. In the course of flying all these airborne surveys over Northern Saskatchewan for 30-40 years, numerous conductors all over the province associated with uranium, and not associated with uranium, were identified, and a number of companies interested in graphite exploration started looking at these occurrences in the early 1970s.

Rick: One of these companies was Superior Graphite.

Jody: Yes, they had identified a project around Deep Bay in East Central Saskatchewan and they explored the property in 1972. What they were doing was following up a 1968 discovery by Sherritt Gordon Mines, in which very rich graphite zones were discovered around Deep Bay while searching for base-metals. In 1968 they drilled several holes, conducted an airborne survey, did ground work etc. Upon finding very little in the way of base-metals, they allowed the property to lapse.

Then in 1972 Superior commissioned a report on the area that focused on the graphite potential. They went as far as bulk sampling, processing, market studies, hypothetical mining, milling, processing scenarios and transportation scenarios. All this work was based around two deposits, one on the west side of Deep Bay, the other on the east side of Deep Bay.

Dahrouge Geological staked the property on the east side of Deep Bay and vended the project into Strike Graphite.

Rick: The project on the west side of Deep Bay is more advanced than Strike’s Deep Bay East property.

Jody: Deep Bay West is within a Native Reserve owned by the Peter Ballantyne Cree Nation and they’ve done a lot of work on it. There’s a historic resource, not 43-101 compliant, we haven’t done the necessary work to confirm the resource, but based on assessment records, we’re pretty confident in that it has in excess of a million tonnes of greater than 10% graphite.

Historic records indicate 60% of that graphite is coarse grained, and work done by Superior Graphite in 1972, 1973, showed greater than 80% recoveries, recent work has shown they can upgrade that deposit to 99% carbon. So graphite in this area will demand the highest prices.

Rick: Is there similarities between what the Natives have and what Strike has?

Jody: It’s not the same deposit, but it’s in the exact same stratographic package, the exact same rock unit, except we’re on the east side of Deep Bay, and they’re on the west side of Deep Bay.

There’s lots of infrastructure in place and they’ve done everything necessary to get to the point where they can start mining and processing. But we believe our deposit has a higher tonnage potential.

Sherritt Gordon and Superior Graphite identified a target area that was 1.6 km long, they drilled four holes into it and results include 35 m of 8.5% graphite. Sherritt’s and Superior’s mineralogy and metallurgical studies showed greater than 40% of the material they collected was coarse-grained 80 mesh or greater.

Preliminary metallurgy showed 80%-85% recovery so I’m quite confident we can get a high-quality, high-value product from our deposit.

Rick: In a February 29th news release, the preliminary data from a VTEM survey confirmed the historic conductor at approximately 2.5 kilometer (km) strike length, and a second, newly discovered conductor, of approximately two km in length.

Jody: What that survey showed is actually not two separate conductors but rather one conductor folded back on itself giving a total strike length of about 5 km. So that gives us a lot of exploration upside for this project.

The target we’re developing is a conceptual exploration target that’s roughly 2000 m in length. It’s up to 35 to 50 m wide and if it continued down to 100 m or beyond in depth we potentially have 18 million tonnes or greater.

That’s not a 43-101 resource, that’s a conceptual exploration target, but we believe, based upon the historic work that was done, we can achieve that target. Remember I believe the airborne survey that we’ve just completed shows the conductor to total in excess of 5 km.

Rick: Let’s talk about the newest project that SRK has, the Wagon property.

Jody: The Wagon property was discovered about 30 years ago by Michelle Roberge, he was a metallurgist at the Niobec Mine, a niobium operation.

This project is located 10km east of the Timcal Mine. The Timcal is the largest graphite producer in Canada, consequently the area has lots of infrastructure, power, mining knowhow and numerous roads.

The way the claims were originally explored was by surface outcrops, they mapped over 100 outcrops. Samples ranged from 4% to 18% graphite and this was by chemical analysis. The geologists described flakes of graphite up to 3 mm, which is exceptionally coarse. So, it’s in the right location and at 3000 hectares in size it’s a large project that is very near an existing graphite mine. Quite frankly, you couldn’t ask for a better project.

Rick: SRK has another project that we want to talk about.

Jody: The third project is called Simon Lake, it’s located in Northeastern Saskatchewan just off highway 905. This highway leads to a group of uranium mines and mills in the eastern part of the Athabasca Basin.

Again, this is a project that was explored originally for base metals but we found a relatively big conductor. It was in coarse-grained metamorphic rocks that were subsequently subjected to high-temperature/pressure conditions and therefore it had the potential to develop coarse-grained graphite.

We originally staked a 500 hectare property covering a 10 km strike line for this conductor but after flying an airborne survey over a much expanded area what we found was a 25 km long conductor that was relatively continuous. Within this conductor were historic drill holes that tested this conductor over approximately 5.5 km of strike length.

I have to caution this isn’t chemical analysis, there could be a lot of inaccuracies in the terms of percentages of graphite, but visually they intersected anywhere from 9 m of 35% graphite to 42 m of 38% graphite.  They never did chemical analyses, as I said they were looking for base metals.

They describe coarse flakes of graphite up to 4 mm across all the way down to fine-grained graphite. Given the length of this conductor at 25 km long and that almost all the holes drilled into it bottomed in graphite we’re assuming, based on the geophysics, a potentially very large source of graphite may exist. We really don’t know what the grade is, but we believe that this is the elephant of graphite deposits in Saskatchewan.

Rick: Nobody is saying we have a mine here, nobody is confirming historic numbers, people talk about seeing moly in drill cores, it’s easy to see molybdenum, the same as visible gold and native copper and electrum. What your saying is “we’ve got something, it appears to be large, we need to go in, spend some money, and find out exactly what we’ve got.”

Jody: Absolutely, we’re not saying the historic visual estimates are reliable, we’re saying they’re a good indication that there’s significant quantities of graphite over a vast area. But it’s important to point out this work was done over the 1960s, 1970s and 1980s, multiple geologists at different times tested this feature, and they all describe graphite. So, there’s a high degree of confidence around the potential of this project.

Rick: Graphite is graphite. You’re not going to mistake it, it’s either there or it isn’t. If it’s there you see it and you can judge flake size in the field.

Jody: It’s pretty difficult to mistake it. As we talked about earlier, it’s very important to recognize that, in terms of geology, you fly an airborne survey, you find a conductor. Step two is to get boots on the ground, confirm drill targets, step three is drill test that conductor. The first project we’re actually going to explore in a significant way, is Simon Lake. We intend to drill this conductor at various intervals and are also going to drill unique geophysical characteristics all along this 25 km feature.

We’re going to take the material and analyze it as quickly as possible, look at the mineralogy. If it appears to have coarse-grained characteristics to it or a large percentage of it is coarse grained, we’re going to ship it off quite quickly for metallurgical test work. We hope to come back in the fall with a follow-up drill program and build out a resource around the best part of those combinations of grade, ability to process, and coarseness.

Rick: What about infrastructure in the area?

Jody: We have a road on the west side of the property.  It’s highway 905 and it leads to a couple of uranium mills at Rabbit Lake and McClean Lake and the transportation hub of Points North, which is host to a lot of infrastructure for the uranium explorers. The Cigar Lake Mine is in the area, it’s under development.

On the east side of the property, we have a second road that’s under construction, that goes to Wollaston Lake. Simon Lake has fabulous infrastructure for an exploration property in Northern Saskatchewan.

Rick: If you hit it’s going to be a discovery.

Jody: Yes, a grassroots discovery.

Rick: Give us a step by step breakdown on how you, as a geo running the show, plan to approach this.

Jody: Based upon our review of the historic literature we identified Simon Lake as having high potential to host a graphite deposit of significant size.  So, the very first step beyond that is to conduct an airborne VTEM survey.  The VTEM survey is an electromagnetic survey.  It pumps a current into the air which is transmitted into the ground, that electricity is measured and a conductor, if it’s there is identified.

Rick: Wherever it flows, that’s a target for ground follow up?

Jody: Yes, and it flowed in a very consistent way over a full 25 km. So, our next step is to do ground follow-up. Get some geologists on the ground, where there may be outcrops and lots of granite. Approximately 60% – 70% of the ground is covered by glacial till but the balance of it is rock and our geologists can evaluate that in detail. They can take a close look at these rocks, and they can see graphite right away.

They should be able to see grain size right away and they should be able to get good guesstimates as to the percentages of graphite. So, the next step beyond that is if we want to further targets for drilling, is to conduct ground geophysical surveys, which will further identify the boundaries of these conductors. The next step beyond that is drilling, which we’ve scheduled for the second quarter 2012.

Rick: We understand flying the VTEM to identify a conductor. We understand boots on the ground. What are the ground geophysical surveys?

Jody: We can do ground electromagnetics as well, just like you can do airborne. One common type of survey is called a Max-Min survey and is where two people will read the conductivity of the ground. It involves carrying a cable that is 50 or 100 m long, at one end you have a transmitter and at the other end you have a receiver allowing one to measure the conductivity of the ground. That will allow you to very accurately delineate the most conductive parts of the rock below the surface.

Rick: You’re fine tuning the VTEM.

Jody: That’s exactly what you’re doing. And quite frankly, it might not even be necessary. It might be a bit of overkill because the VTEM survey is extremely accurate and extremely useful on its own. And so, when the geologist goes on the ground he can identify outcrops with graphite in them, right away he might see a drill target. We don’t believe we will need to do any further ground follow-up.

The target is a zone of sedimentary rocks that were subjected to high-grade metamorphic conditions, which likely produced coarse-grained graphite. One of the first targets we’re going to drill is to simply twin one of the historic holes that intersected graphite.  We must reproduce them and in the modern context confirm what they were observing 30-35 years ago.

Rick: Are we going to do any exploratory holes in this first round?

Jody: Absolutely. We intend to drill at least five holes in the first round.  One of the holes will be a twin, and the next four will be exploratory testing various parts of the 25 km long conductor. Once we’ve done that, we’re going to take core samples, log them and write down our own observations.

We will then split the core and send half of it off for analysis, that will tell us exactly what we have in terms of graphite content. We are going to try and identify all the pertinent characteristics that make a graphite operation successful.

Rick: And we’ve got two backup plays?

Jody: We have backup plays. But I’m very confident in Simon Lake. If we have success, with the drilling, the mineralogy, the geochemistry, and with the processing, we can come back in the third quarter, say September to November, and we can further drill test at a very, much tighter spacing, instead of drilling every five km, we could be drilling every 50-100m, and build out a resource in and around a discovery. The resource will be calculated by someone independent, presuming we’ve intersected what we’re looking for. Hopefully we could publish resource numbers sometime in the 1st quarter of 2013.

Rick: Anything you’d like to add Jody?

Jody: The graphite market is not like the rare earth space. I truly believe in the rare earth space, and I think long term it will prove out to be as good as people had anticipated early on. It’s just that with the complexities of those deposits, there may lots of bumps and hurtles, but in the graphite space, those bumps and hurtles are a lot smaller and a lot easier to overcome.

Rick: Thank you, it’s been a pleasure.

Richard (Rick) Mills

rick@aheadoftheherd.com

www.aheadoftheherd.com

If you’re interested in learning more about the junior resource sector, and specific junior companies, 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: Ozcopper, 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.

***

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.

Richard Mills does not own shares of Strike Graphite Corp. TSX.V – SRK

Strike Graphite is a sponsor of Richards website www.aheadoftheherd.com

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www.gracelandjuniors.com

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stewart@gracelandjuniors.com

Mar 27, 2012

1. 1.    Mainstream media tells you that the Dow soared yesterday.  Maybe it did, against the dollar.  Against gold, the Dow fell.  Please click here now.  Gold is potentially set to outperform both the dollar and the Dow, in a very big way, in a very short amount of time.
2. The same is true for silver.  I talked yesterday about what I’ve termed the “wedgification” of the gold chart.  Wedgification is not a real word.  It is a term I coined, like “head and shouldering”, to describe the process where one chart pattern displays fractal-like action, morphing repeatedly into ever-larger patterns of the same type.
3. A small head and shoulders pattern can become the head of a larger head and shoulders pattern.  Likewise, the initial and very bullish gold wedge has just become overpowered by an even larger wedge.
4. In the case of silver, there is a process going on that I’ve termed “rectangularization”.  Please click here now.  Note the black supply line that I’ve highlighted at point “A” on the chart.
5.  Now look at point “B”.  That’s the price area that was rightfully called a “breakout” by most silver investors.  Breakouts should never be bought by anyone other than gamblers.  A breakout indicates the potential coming profits on positions already bought at much lower prices.
6. The breakout at point B was a very positive event for the silver market.   Now, make note of point “C”.  That’s the point where silver suddenly declined as the bond market began to fall.  Now that the silver price has spent some time well below point C, you can draw in a new supply line across that point.
7. You can now see the “rectangularization” of the silver chart in play, as an even bigger drifting rectangle is now visible on the chart.  Bigger price patterns have bigger price targets. 
8. The reason I push the gold community so hard about building emotional strength to manage growing volatility in the gold price is because the upside is so enormous.
9. In this epic crisis, if you can’t endure gold dropping a few hundred dollars an ounce you’ll likely never make it to the “honeypot zone”.
10. The t-bond has been put onto the radar screens of most institutional money managers.  Rising interest rates can negatively affect gold in the short term.  Yesterday, you received some good news, in the form of statements made by Ben Bernanke about the need to maintain “accommodative” monetary policy.
11. I’m not sure how many investors looked at the bond chart as Dr. Bernanke made those statements, but there was not much in the way of celebration, and that remains a concern.  Please click here now.  You can see that the bond did not exactly cheer as the head of the Fed spoke.
12. Note the price resistance in the 139 area on that chart.  It’s going to be important to watch how the bond price acts if there is a rally towards 139.
13. One of the most bearish charts I see in any major market right now is the monthly bond chart.  To view a veritable “landslide of sell signals”, please click here now.
14. How do you, the investor, reconcile the horrific picture on the bond chart against the ultra-bullish picture on the gold chart?  You start by strengthening yourself emotionally to deal with the fact that surprise, not prediction, is the theme of this crisis.
15. Another “chart of horrors”  that I’d like you to focus on is the US dollar monthly chart.  Please click here now.  The 14,3,3 Stochastics series has done a very good job of indicating tops in the dollar, and one such “top call” is in play now.
16. Bond market players appear to be very negative about the prospects for QE3, while gold market players seem to believe that a collapse in the bond will be quickly followed by an even bigger collapse in the dollar.
17. The appearance of both the gold and bond charts seem to indicate this is an accurate picture of the “liquidity flows posturing” of the largest major market players.
18. To view the “gold wedgification” chart, please click here now. Look at how the supply line drawn through high price of point “A” and the demand line combined to create a powerful wedge pattern.
19.  Within the wedge there is head and shouldering action, but the overall picture is that of a wedge, not a head and shoulders pattern.
20. Now, make note of the supply line drawn through point “B”.  Coupled with the same demand line, there is now an even larger wedge pattern in play, which I’ve termed a “super wedge”.
21. Investors need to understand that the gold price can move hundreds of dollars in either direction and all that movement may do is create an even larger wedge pattern.
22. Generally speaking, gold stock investors were a little glum yesterday, as once again bullion blasted higher while their stocks mostly meandered or failed to perform.  I talked yesterday about the need to be selective in your stock picking.
23. Please click here now.  That is the GLDX-nyse gold juniors fund.  Many investors were disappointed that GLDX failed to perform to the degree that GDXJ-nyse did yesterday.  Patience is required in a super-crisis, but I think your time to shine is finally here.
24. The GLDX chart looks extremely bullish.  Almost every indicator and oscillator is flashing light or heavy buy signals, while price itself coils into a fabulous wedge pattern, like a king cobra poised to strike at the hearts of your dollarbug foes!

Special Offer For Ozcopper Readers:  Send me an Email to freereports4@gracelandupdates.com and I’ll rush you my free “Batman!” report.  I’ll show you the key “Batman” chart pattern in play now on the GDXJ daily chart, and where this pattern indicates prices are likely headed to against the “US dollar joker”!

Thanks!

       Cheers

St

Stewart Thomson

Graceland Updates

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

www.gracelandupdates.com

Email: stewart@gracelandupdates.com

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

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?

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

One Year On - International Atomic Energy Agency

Beneath the Pacific Ocean’s floor deep in the Japanese trench, tectonic plate boundaries slipped repeatedly, triggering one of the most severe earthquakes in recent history. The earthquake’s epicenter lay off the eastern coastline of Japan near the Fukushima Prefecture. The plates’ movements generated a tsunami that swiftly drove forward ranks of waves towards the earthquake-battered Japanese coast.

It was 11 March 2011.

Along the coastline, sensors detected violent ground motion and automatically shut down all operating reactors at Tokai Daini, Onagawa, Fukushima Daiichi and Fukushima Daini Nuclear Power Stations.

Off-site Power Lost

The reactors at TEPCO’s Fukushima Daiichi Nuclear Power Plant require an electric power supply to safely remain in “shutdown” condition. If power fails, back-up generators supply electrical power for the equipment needed to shut down the reactor safely and maintain the security of the plant.

The “Great East Japan Earthquake” toppled pylons supporting the overland electrical power lines. As soon as off-site power was lost at Fukushima Daiichi, on-site emergency diesel generators started automatically, supplying electricity to the reactors’ “essential loads”, namely emergency core cooling pumps, valves, monitoring instruments and controls.

Vital Cooling

Minutes after the earthquake hit the plant, the specially trained operation teams confirmed that the chain reaction in the three operating reactors at Fukushima Daiichi had stopped and that the emergency diesel generators were operating.

In an operational nuclear power plant, the fission process in the reactor core produces heat. Cooling water continuously absorbs and carries off the heat. In a “boiling water reactor” like those operating at Fukushima Daiichi, the cooling water boils in the core. A mixture of steam and water then flows through separators where steam is extracted and diverted to spin the power plants’ turbine-generators to produce electricity. When the steam is cooled, it condenses into water, which is returned to the reactor core that heats it again, producing steam and restarting the cycle. Powerful pumps drive the primary cooling fluid, in this closed loop, maintaining the reactor core at operating temperatures.

After the emergency shutdown, the nuclear fuel in the reactors nonetheless continues to release a considerable amount of decay heat. Continuous and reliable cooling, provided by the emergency diesel generators, is vitally important to prevent overheating and fuel damage.

Tsunami Strikes

About 40 minutes after the Fukushima Daiichi reactors were shut down, several massive tsunami waves crashed over the six-Unit plant’s protective wall, forcing seawater deep into the plant. Emergency generators and some of the associated electrical equipment were flooded. Thirteen generators ceased operating. Only one emergency generator survived the onslaught, providing power to Units five and six.

The earthquake had already disrupted mobile and landline communication and now the on-rushing tsunami waters hurled debris into the plant, damaging equipment and buildings and blocking access.

The combined effects of the earthquake and tsunami devastated the coastal area, exacting a dreadful toll: almost 16 000 lives were lost, over 8 000 people remain missing, and more than 679 000 homes were destroyed or damaged.”

The accident at Fukushima resulted from:

• Natural disaster combination – First the reactors had to withstand a magnitude 9.0 earthquake, an earthquake far more powerful than they were designed to handle. Next came 14 meter high tsunami waves that swept over the reactors protective sea wall
• Human and organizational failing – Oversight of the plant operator (TEPCO) was weak because Japan’s nuclear regulatory authority was not sufficiently independent and the plants emergency response training for its workforce was inadequate for this situation
• Plant design – The backup power supply vital for reactor and spent fuel rod cooling, in case of loss of primary power supply, was not properly protected

It was the tsunami – caused by the largest earthquake ever to strike Japan – that killed 16,000 people.

It was the tsunami – and the earthquake – that destroyed or severely damaged hundreds of thousands of buildings.

But it’s Fukushima that’s the headline disaster. Yet the Fukushima reactors did not completely melt down even after:

• A magnitude 9.0 earthquake and aftershocks
• A relatively direct hit from multiple, and massive, tsunami waves
• Backup power supply failure

Consider:

• The plant itself was well over 40 years old and slated for decommissioning in the very near term – Fukushima was built in the 1970s
• The technology on which it was based dated from a decade earlier

Since Fukushima nuclear power generation has become safer.

The nuclear industry’s safety record was second to none before Fukushima – today it’s even better. New plant designs – the generation III reactors – have enhanced safety features compared to the Fukushima 1970s era generation II’s. The regulatory framework has been strengthened – new and extremely high benchmarks for the regulations and the licensing of every stage of the process have been modified and put in place, steps were taken and are still being put in place:

• Improving preparedness for prolonged power outages, protection of backup power sources and ensuring the availability of water for cooling even under the most severe accident conditions
• Global nuclear safety standards are being reviewed and international emergency response capabilities are being upgraded
• Countries are opening their plants to more international safety reviews and plant operators and national regulators are being scrutinized more critically

Japan – No Energy Security

Japan had plans to construct nine new nuclear power plants by 2020 and at least another 14 by 2030. After Fukushima, Japan’s then Prime Minister Kan advocated replacing nuclear energy with renewables.

Kan resigned because of criticism of his handling of the crisis and questions over his energy strategy. Japans current Prime Minister has changed course and backed away from his predecessors sudden shift to phasing out nuclear and jumping headlong into renewable energy.

Japan has little of its own coal, oil or natural gas so the country has made up a good portion of their missing nuclear supplied energy by burning even more imported liquefied natural gas (LNG), coal and fuel oil. Japan is now the world’s largest importer of coal and liquefied natural gas and is the second largest importer of oil – the country now imports about 84% of its energy requirements.

In response to an appeal for support from the US regarding an Iranian oil sanction Japan pledged to cut Iranian oil imports – Iranian crude makes up just 10 percent of Japan’s overall oil imports.

“It would cause immense damage if they were cut to zero.” Japanese Finance Minister Jun Azumi said referring to Japan’s Iranian imports.

Japan Prime Minister Yoshihiko Noda voiced concern about the potential impact of the US sanctions on Japan.

All of Japans LNG imports come from the middle east and LNG currently supplies a large portion of Japan’s energy needs.

Playing Populist Politics in Germany

In 2002, Germany enacted a law to phase out nuclear power, but the current government, led by Chancellor Angela Merkel decided (autumn 2010) to extend the lifetimes of the country’s reactors by an average of 12 years. This was based on the judgment that Germany would not be able to meet its power demand using only natural energy sources – wind and solar power – and would not be able to meet the governments ambitious goals of a 40% reduction in carbon emissions by 2020 burning more coal and natural gas.

Then, playing populist politics and over reacting to the partial meltdowns in Japan’s Fukushima Daiichi nuclear complex Merkels government immediately shut down almost half of the country’s nuclear power. Germany, overnight, decided 40 percent of its nuclear power capacity will be shut down and removed 8,800 megawatts (MW) from the grid, the remaining 12,700 MW of nuclear supplied electricity will be gone by 2022.

Carbon Footprint

It will be difficult for any country to achieve sustainable energy supplies and curb greenhouse gases unless nuclear power remains an important part of their energy mix.

Nuclear reactors do not emit carbon dioxide

Japan has unplugged their nuclear reactors that provided 30 percent of the country’s electricity before Fukushima.

“They’re swapping fossil fuels for nuclear, and that’s driving up their CO2 emissions and the carbon intensity of their electricity supply.” Jesse Jenkins, energy analyst, the Breakthrough Institute

Germany’s 17 reactors provided 28 percent of its power. Germany is going to shut down all its nuclear plants by 2022 – eight were shut down immediately after Fukushima.

There’s a similar CO2 rise in Germany as in Japan and its going to effect the entire EU.

“The additional German emissions alone could add up to more than 300 million tons by 2020, which according to the World Nuclear Association, would ‘virtually cancel out the 335-million-ton savings intended to be achieved in the entire European Union by the 2011 Energy Efficiency Directive’.” New Scientist

Germany had pledged to slash its *carbon emissions to 40 percent below 1990 levels by 2020.

* Nuclear power’s life-cycle emissions range from 2 to 59 gram-equivalents of carbon dioxide per kilowatt-hour. Only hydropower’s range ranked lower at 2 to 48 grams of carbon dioxide-equivalents per kilowatt-hour. Wind came in at 7 to 124 grams and solar photovoltaic at 13 to 731 grams. Emissions from natural gas fired plants ranged from 389 to 511 grams. Coal produces 790 to 1,182 grams of carbon dioxide equivalents per kilowatt hour.

According to Siemens (which built all of Germany’s 17 nuclear plants) Germany’s exit from nuclear power could cost the country as much as 1.7 trillion euros ($2.15 trillion) by 2030 – two thirds of the country’s GDP in 2011.

“This will either be paid by energy customers or taxpayers.” Michael Suess, head of Siemen’s Energy Sector, in a Reuters interview

Siemens is no longer in the nuclear business, however the company is active in several areas including power transmission, solar, wind and hydro power.

Conclusion

Many decisions, made with the best of intentions, yet undertaken when emotions are running high might not result in the best direction for individuals or countries.

A civil nuclear renaissance, because of energy security, safety and a reduction in our carbon footprint, should be on everyone’s radar screen. Is it on yours?

If not, maybe it should be.

Richard (Rick) Mills

rick@aheadoftheherd.com

www.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,OzCopper,  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 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.

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stewart@gracelandjuniors.com

Mar 20, 2012

1. In the theoretical world, gold stocks are a fantastic bargain.   In the theoretical world, gold and silver bullion are on sale at “once in a lifetime” prices.
2. In the real world, gold investors (you) have bought the gold stock sales repeatedly.  Instead of entering a world of sugarplum stock prices in the sky, you’ve been thrown into a gold stock gulag.  After years in the gulag, instead of releasing you, the guards have dropped you through a trap door into a dungeon.
3. To top it all off, things could get much worse before getting better.  I warned the gold community not to wish too hard for a collapsing bond market, because you just might get it.
4. Unfortunately, I don’t think most investors have taken the falling bond market very seriously, particularly in regards to the ramifications for the gold price.
5. To view the Barclays 20+ year treasury bond fund monthly chart (TLT-nyse), please click here now.  The good news is that strong HSR (horizontal support and resistance) sits near the current price.
6. Click here now to view the three MACD series that I run for the same TLT monthly chart.  The picture painted by “Sir MACD” is very nasty.
7. When inflation is rising rapidly, the Fed will raise interest rates dramatically to combat that inflation.
8. It takes time for rising interest rates to cause the rate of inflation to fall.  In the meantime, the price of gold can rise dramatically higher.  That’s not what’s going on here.  At the present time, institutions believe that rates are rising because of economic strength that has been surprisingly strong.
9. I’m a little worried that gold investors may have put a bit too much effort into trying to deny the picture that institutions have of the major markets.  When rates rise while inflation is officially considered to be tame, as it is now, institutions can sell gold very aggressively.
10. Unfortunately, most institutional money managers don’t care what the shadow rate of inflation might be.  They care only about the growth and inflation numbers that are released by the government.
11. All options have always been on the table since the gold price entered the $1500-$1900 trading range.   Gold is definitely oversold now, and a strong wedge pattern is solidly in place.  Gold could rise hundreds of dollars higher from here, but it could also fall hundreds of dollars lower if the bond doesn’t reverse course.
12. The only financial question that really matters is whether you are strong enough to endure whatever price surprises this crisis has in store for you.  There are many more surprises ahead, and most of them will be very unpleasant.
13. The winners in this crisis will be those who can endure their way to the end, and the losers will be those who try to predict their way to the end.
14. In the short term, there is some much-needed good news.  If institutional money managers believe rising rates reflect a strengthening economy, they will buy the Dow.  If they have concerns about the economy, they will sell the Dow and buy bonds, which is good for the gold price.
15. Click here now.  You are looking at the daily chart for the TLT bond fund.  Note the oversold position of the RSI, Williams, and CCI technical indicators.  A rally in the bond market should cause a rally in the gold market.
16. The big question is not whether the bond can rally, but to what degree do institutional money managers believe the economy may have turned the corner, and for how long do they believe the economy can continue to surprise the analysts?
17. If institutions believe that bond rallies are to be shorted rather than dips bought, I would suggest that Martin Armstrong’s $1100 gold price scenario should not be ridiculed with too much gusto.
18. For now, the gold price chart looks like a bullish work of art.  Click here now.  The enormous wedge pattern sits there basking in glory.  The current pullback appears to be perfectly normal and healthy.  The 14,7,7 series for the Stochastics indicator is in a position where substantial rallies can begin, but it can take several weeks for such rallies to materialize.
19. Let’s all hope that the gold community’s “super-wedge” doesn’t turn into a beached whale that is on the receiving end of a volley of bond market harpoons, launched from a flotilla of institutional whaling ships.
20. There is more good news in the short term.  Click here now.  This chart covers about a month of trading for the Dow, via June futures.  Note the trend line break.  That’s a positive event for gold as well, because it will put pressure on institutions to move back into the bond, even if it is just temporarily.
21. There is quite a lot of talk going around about whether the weekly chart of the HUI (senior and intermediate gold stocks) index shows a “breakdown”.  The GDX-nyse ETF mimics the action of the HUI.
22. Click here now to view a picture that some analysts believe speaks 1000 words, ominously, for gold stocks. The 500 price point on the HUI corresponds roughly with the $50 round number price point for GDX.
23. Is there a breakdown?  A technician could argue that a fall to any lower prices would usher in a fall towards $33, based on the view that the entire $50-$67 price range is a “top”.
24. I would argue that you need to carry a short position that is up to 30% of your long position, or utilize put options, to manage such powerful fears.  I’m a buyer of GDX, all the way to a price point of zero.  I don’t really care whether GDX falls to $33 or rises to $133.  Do what it takes to maintain the utmost professionalism on the price grid, especially when this crisis takes you deep inside of your personal surprise zone!

Special Offer For OzCopper Readers: Send me an Email to freereports4@gracelandupdates.com and I’ll send you my free “What Is Currency?” report.  Learn whether you are using dollars or gold as currency, and what the advantages are of both systems!

Thanks!

       Cheers

St

Stewart Thomson

Graceland Updates

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

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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?

March 19th, 2012 at 8:45 am

This week may provide some trading opportunities for us if all goes well now that most traders are investors are all giddy about stocks again. Last week we saw money move out of bonds and into stocks and the bullishness vibe in the air reminds of many market peaks just before a 5%+ correction in stocks.

Depending how the SP500 unfolds we may be going long or short equities, long precious metals, long bonds, and our VXX trade may spike in our favor.

Bonds: After last week’s strong move down in bonds as the HERD moved out of bonds and into stocks it may be providing us an opportunity to catch a dip or bounce in the price of bonds. If the stock market sees strong selling this week money will run back into bonds.

Looking at precious metals it looks as though gold, gold miners and silver may still head lower this week. The charts are still bearish and pointing to another multi percent drop in value. Gold will look bullish around $1600, Gold miners (GDX) around $48, and Silver around $30 but we need to see one more wave of strong distribution selling for that to take place.

Crude oil has recovered nicely from its 5 wave correction which shook us out of the trade for a profit. I still like the chart for higher prices but with it trading at resistance and a high possibility of sellers stepping back in at this level I am not getting involved here.

The SP500 made a new high last night but has run into sellers early this morning taking prices straight back down. The chart in pre-market looks as though we will see lower stock prices later today and with any luck the fear index (VIX) will continue to rise in our favor.

Watch Live Video Analysis: http://www.thetechnicaltraders.com/ETF-trading-videos/

Chris Vermeulen
http://www.GoldAndOilGuy.com

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 following have all combined to limit control of foreign minerals by US companies:

• In 2011, Resource nationalism became the number one risk for mining companies
• Nationalization
• Expropriation
• Increased taxation
• Constraints on the degree of foreign ownership
• A trend in the less developed countries toward processing their own ores
• Increased completion from large eastern based mega mining companies
• Increasing competition from sovereign wealth funds and end users wishing to vertically integrate

Several major and uncontrollable factors have led to a decline in mining and in the US mineral processing industry:

• Sharply higher energy costs
• Most of the world’s mineral wealth is not located in the US
• Foreign ore deposits are usually richer than those found in the US
• Foreign mines are usually located close to cheap energy sources and low-cost labor

Plenty Of Blame For The US:

• Restrictive environmental regulations make mining and processing more difficult and costly and has increased lead times for new mine development – the nonfuel minerals industry is impeded by 80 different laws administered by 20 different agencies
• Approximately three-fourths of the 750 million acres of public land has been closed to exploitation, and closure continues
• The U.S. share of investment in mining is at an all-time low dropping from 21 percent of the world’s mining investment in the early 1990′s to 10 percent in 2000 and 8 percent today

“Gold and copper exploration in the United States kept it in sixth place regionally, ahead of the Pacific Islands.” World Exploration Trends 2012 – A Special Report from the Metals Economics Group

The Metallurgical Achilles’ Heel of the United States

“The United States has consistently maintained that a strong domestic minerals and metals industry is an essential contributor to the nation’s economic and security interests…The United States has a fundamental interest in maintaining a competitive minerals and metals sector that will continue to contribute significantly to the nation’s economic strength and military security. The industry represents an $87 billion enterprise that employs over 500,000 U.S. workers and provides the material foundation for U.S. manufacturing.” The 1980 National Academy of Sciences executive summary of “Competitiveness of the U.S. Minerals and Metals Industry”

A concise summary of U.S. mineral vulnerabilities was presented to the Industrial Readiness Panel of the House Armed Services Committee as early as 1980 by General Alton D. Slay, Commander Air Force Systems Command. He pointed out that technological advances have increased the demand for exotic minerals at the same time that legislative and regulatory restrictions have been imposed on the U.S. mining industry.

The 1981 report  “A Congressional Handbook on U.S. Minerals Dependency/Vulnerability” singled out eight materials “for which the industrial health and defense of the United States is most vulnerable to potential supply disruptions” – chromium, cobalt, manganese, the platinum group of metals, titanium, bauxite/aluminum, columbium, and tantalum – the first five have been called “the metallurgical Achilles’ heel of our civilization.”

In 1984 U.S. Marine Corps Major R.A. Hagerman wrote: “Since World War ll, the United States has become increasingly dependent on foreign sources for almost all non-fuel minerals. The availability of these minerals have an extremely important impact on American industry and, in turn, on U.S. defense capabilities. Without just a few critical minerals, such as cobalt, manganese, chromium and platinum, it would be virtually impossible to produce many defense products such as jet engine, missile components, electronic components, iron, steel, etc. This places the U.S. in a vulnerable position with a direct threat to our defense production capability if the supply of strategic minerals is disrupted by foreign powers.”

In 1985, the secretary of the United States Army testified before Congress that America was more than 50 percent dependent on foreign sources for 23 of 40 critical materials essential to U.S. national security.

The 1988 article “United States Dependence On Imports Of Four Strategic And Critical Minerals: Implications And Policy Alternatives” by G. Kevin Jones was written in regards to what he thought are the most critical minerals upon which the United States is dependent for foreign sources of supply – chromium, cobalt, manganese and the platinum group metals (PGE).  These metals represent the “metallurgical Achilles’ heel” of United States strategic mineral supply because their role in the economy is pervasive and they are vulnerable to supply interruption.

The May 1989 report “U.S. Strategic and Critical Materials Imports: Dependency and Vulnerability. The Latin American Alternative,” deals with over 90 materials identified in the Defense Material inventories as of September 1987. At least 15 of these minerals are considered “key minerals” because the US is over 50% import reliant. All these minerals are essential to domestic security and the national economy but four are referred to as the “first tier” or “big four” strategic materials because of their widespread role and vulnerability to supply disruptions – chromium, cobalt, manganese and platinum group metals.

“The U.S. depends on southern Africa’s minerals for about the fifty percent of the “big four”. Thus, a long-term cutoff of any or all of these materials has the potential for an economic and strategic crisis of greater proportions than the oil crisis of the 1970s. An embargo of South African minerals to the U.S. would affect millions of American jobs in the steel, aerospace, and petroleum industries, and could in effect shut down those industry groups.” U.S. Strategic and Critical Materials Imports: Dependency and Vulnerability

Chromium, cobalt, manganese, the platinum group, and titanium have been labeled “the metallurgical Achilles’ heel of our civilization” – MII, 1996, Gaston, 2001.

While much of the rest of the world is scrambling to tie up control of strategic minerals America has deliberately hamstrung itself. Americans don’t get it, yet they’ve had plenty of warning starting as far back as WWl.

In World War I severe material shortages (tungsten, tin, chromite, optical grade glass, and manila fiber for ropes) 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 ie guerrilla warfare in Zaire during the 1970s caused the worldwide price of cobalt to increase from $6 to $45 a pound, and a United Nations (UN) trade boycott of Zimbabwe (formerly Rhodesia) stopped legal exports of chromium from the country.

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.

“Without increased domestic exploration, significant declines in US mineral production are unavoidable as present reserves are exhausted. We will continue to ship American jobs overseas and forfeit our economic competitiveness unless we take steps to develop our own mineral resources.” Subcommittee on Energy and Mineral Resources Chairman Doug Lamborn

The Five Horsemen

Chromium - is a mineral the United States Geological Survey (USGS) still considers “one of the nation’s most important strategic and critical materials.”

In 2011, the United States was expected to consume about 5% of world chromite ore production in various forms of imported materials, such as chromite ore, chromium chemicals, chromium ferroalloys, chromium metal, and stainless steel.

Import Sources (2007–10): Chromium contained in chromite ore, chromium ferroalloys and metal, and stainless steel mill products and scrap: South Africa, 34%; Kazakhstan, 17%; Russia, 9%; China, 5%; and other, 35%.

Net import reliance as a percentage of apparent consumption: 2007 – 67%, 2008 – 66%, 2009 – 12%, 2010 – 62%, 2011 – 60%, USGS

Some 90% of chromite mined worldwide is converted to ferrochrome – Ferrochrome (FeCr) is an alloy of chromium and iron containing between 50% and 70% chromium. Stainless steel production consumes most of the ferrochrome produced annually. Chromium is also used to make heat-resisting steel. Superalloys use chromium and have strategic military applications. Chromium is one of the major elemental resources that the United States depends upon. The Republic of South Africa and Zimbabwe contain 98% of the world’s reserves of this mineral.

There is no good alternative for chromium in the manufacture of steel or chromium chemicals.

Global steel production is forecast to rise to 1.5 billion tons in 2012. Higher labor and fuel costs, as well as a substantial devaluation of the US dollar, has led to a sizeable increase in costs of ferrochrome and chrome ore production.

Cobalt has not been mined in the U.S. since 1971 – the US has no domestic production and is 100% dependent on imports for its supply of primary cobalt. The US is the world’s largest consumer of cobalt and considers cobalt a strategic metal.

mapsofworld.com

Approximately 48% of the world’s 2007 mined cobalt was a byproduct of nickel mining from sulfide and laterite deposits. An additional 37% was produced as a byproduct of copper operations, mainly in the Democratic Republic of the Congo (DRC) and Zambia. The remaining 15% of cobalt mining came from primary producers.

The copper deposits in the Katanga Province of the Democratic Republic of the Congo are the top producers of cobalt and the political situation in the Congo influences the price of cobalt significantly. The politically unstable Democratic Republic of Congo contains half the world’s cobalt supply and represents the lion’s share of anticipated future cobalt supply – the DRC’s 2007 output was equal to the combined production of cobalt by Canada, Australia and Zambia.

In a nine billion dollar joint venture with the DRC China got the rights to the vast copper and cobalt resources of the North Kivu in exchange for providing $6 billion worth of road construction, two hydroelectric dams, hospitals, schools and railway links to southern Africa, to Katanga and to the Congo Atlantic port at Matadi. The other $3 billion is to be invested by China in development of new mining areas. Approximately half of  known global cobalt reserves are in the DRC, and close to 40%-50% of incremental cobalt production, over the next five years, is anticipated to emanate from the DRC.

Net import reliance as a percentage of apparent consumption: 2007 –  80%, 2008 – 81%, 2009 – 76%, 2010 – 81%, 2011 – 75%

In 2011, cobalt contained in purchased scrap represented an estimated 24% of cobalt reported consumption.

Import Sources (2007–10): Cobalt contained in metal, oxide, and salts: China, 18%; Norway, 16%; Russia, 13%; Canada, 10%; and other, 43%.

Nickel – Nickel, while not included in the list of top four or as a Metallurgical Achilles Heel is mentioned here because of its importance in regards to the mining of cobalt and Platinum Group Elements (PGE).

The United States does not have any active nickel mines but limited amounts of byproduct nickel were recovered from copper and palladium-platinum ores mined in the Western United States. The estimated value of apparent primary nickel consumption in the US was $2.93 billion.

The U.S. Government sold the last of the nickel in the National Defense Stockpile in 1999.

RBC Capital Markets forecasts nickel growth at 9.5% in 2012, 10.3% in 2013, and trend growth of approximately 5.0% thereafter. Citing Reuters, RBC Capital Markets Ltd. said Russia’s OAO GMK Norilsk Nickel plans to trim output in 2012.

There are two main types of nickel sulphide deposits. In the first, Ni-Cu sulphide deposits, nickel (Ni) and copper (Cu) are the main economic commodities – copper may be either a co-product or by-product, and cobalt (Co), Platinum Group Elements (PGE) and gold (Au) are the usual by-products.

The second type of deposit is mined exclusively for PGE’s with the other associated metals being by-products.

The long-term decline in discovery of new sulfide deposits in traditional mining districts has forced companies to shift exploration efforts to more challenging locations like the Arabian Peninsula, east-central Africa, and the Subarctic.

China is the leading consumer of nickel and is competing for supplies with recovering US industrial demand, as well as India, Russia and Brazil.

Import Sources (2007–10): Canada, 38%; Russia, 17%; Australia, 10%; Norway, 10%; and other, 25%.

Net import reliance as a percentage of apparent consumption: 2007 – 17%, 2008 – 33%, 2009 – 21%, 2010 – 34%, 2011 – 47%

Manganese – From the USGS – Events, Trends, and Issues: U.S. steel production in 2011 was projected to be 18% more than that in 2010. Imports of manganese materials were expected to be significantly more in 2011 than in 2010 – 17%, 20%, and 35% more for manganese ore, ferromanganese, and silicomanganese, respectively. As a result, U.S. manganese apparent consumption increased by an estimated 7% to 810,000 tons in 2011, which is less than might be expected based on increased imports because of a significant amount of manganese added to the Government stockpile.

The annual average domestic manganese ore contract price followed the decrease in the average international price for metallurgical-grade ore set between Japanese consumers and major suppliers in 2011. Improved economic conditions led to planned expansions at three manganese mines and the startup of two new manganese mines, which added about 4.2 million tons per year of additional manganese ore production capacity worldwide.

Net import reliance as a percentage of apparent consumption: 2007 – 100%, 2008 – 100%, 2009 – 100%, 2010 – 100%, 2011 – 100%

Import Sources (2007–10): Manganese ore: Gabon, 57%; Australia, 15%; South Africa, 12%; Brazil, 4%; and other, 12%. Ferromanganese: South Africa, 50%; China, 19%; Ukraine, 6%; Mexico, 6%; and other, 19%. Manganese contained in all manganese imports: South Africa, 33%; Gabon, 19%; China, 10%; Australia, 9%; and other, 29%.

World Resources: Land-based manganese resources are large but irregularly distributed; those of the United States are very low grade and have potentially high extraction costs. South Africa accounts for about 75% of the world’s identified manganese resources, and Ukraine accounts for 10%.

Platinum – South Africa contains 73% of the world reserves of platinum and virtually all of the United States need is met by this country.

Net import reliance as a percentage of apparent consumption: 2007 – 91%, 2008 – 89%, 2009 – 95%, 2010 – 91%, 2011 – 88%

The most important platinum-rich PGE district in the world is South Africa’s Bushveld Complex.

The government of South Africa is proposing a 50 percent tax on company profits once a “reasonable return” on mining activities has been achieved – this in a sector that is facing rising labor and power costs.

South African is in the process of building a state mining company to ensure cheap domestic supplies of minerals. This may evolve into significant state control of specific areas of mining. While South Africa has flatly denied a general nationalization of its mining industry specific sector targeted nationalization is obviously on the table.

The second PGE district in importance is the Noril’sk-Talnakh district, which is exceptionally Palladium (Pd) rich as a by-product of its Ni-Cu ores.

Competition – Have supply concerns been mitigated over the years?

“Continued growth in consumption resources is being driven by growth in China and the rest of Asia. Chinese companies are increasingly acquiring assets, as are Indian companies, prompting other global miners into a race to secure mineral assets of their own.” George Fang, Standard Bank’s Head of Mining and Metals China

In his 1989 book “The Rise and Fall of Great Powers” historian Paul Kennedy argues that a country with a growing economy prefers to become wealthy instead of funneling its economic output into the military. While China’s, and other developing countries military might has grown there is no doubt their greatest concern is to secure the needed energy and raw commodities necessary to continue their economic expansion.

The global mining industry is facing stiff new competition in getting deals done. The new competitor’s for the world’s resources have a mandate to secure long term resource deals for domestic use and have the financing capabilities any major mining company, or for that matter any government, would be envious of.

China’s state owned enterprises (SOE) and sovereign wealth funds (SWF) were armed with hundreds of billions of US dollars from the country’s foreign reserves and sent out to scour the globe for resources – they went on the hunt to fuel China’s exploding economy.

China wants to diversify out of the massive US dollar component of its Foreign Reserves which means:

• SOE/SWFs have no problem dealing in straight cash and operating in what some might consider high risk areas

• The Chinese have a longer term horizon for their ultimate payoff because they are mostly after off-take supply agreements from early stage development projects

• The Chinese government funds infrastructure projects that secure the cooperation of the host country with regard to mine development and off-take agreements

• Thanks to the trillions of foreign exchange reserves it currently holds China offers loans at highly competitive interest rates. For example, the Export-Import Bank of China (Exim Bank) gave the Angolan government three loans at interest rates ranging from LIBOR (London Interbank Offered Rate – the rate banks charge each other on loans) plus 1.25 percent, up to LIBOR plus 1.75 percent, as well Exim Bank offered generous grace periods and long repayment terms

The future production from the deposits that the Chinese, Indians and others acquire and develop through state-owned entities will flow directly back to their respective countries and bypass the global commodity markets. It’s obvious they are not putting these deposits into production so that they can make a profit selling output into the commodities market.

Conclusion

Many minerals were recognized as critical and strategic decades ago. Some – referred to as the big four, the top tier or the metallurgical achilles heel of the US – are more critical than others.

The Rare Earth Elements (REE) and most recently graphite, have caught investors attention and rightly so. But let’s not forget the achilles heel’s – chromium, cobalt, manganese and the platinum group metals (PGE) – are the basic building blocks any nation needs for its economic foundation.

The fact is, the US has a metallurgical achilles heel because it’s still dependent on South Africa (and its march to Marxism), the politically unstable Democratic Republic of Congo (DRC) and an increasingly unreliable China for supply of what it considered stragetic or critical minerals 30 plus years ago.

Over the intervening decades these minerals have become ever more critical and supplier countries even more unreliable.

The 2011/2012 Fraser Institute survey rankings examines which jurisdictions provide the most favorable business climates for the resource extraction industry. Out of 93 places surveyed, the US depends on a large majority of its supply of its most critical minerals, it’s Metallurgical Achilles Heel, from countries that ranked no higher than 50th in the survey:

Zambia 50th

South Africa 54th

China 58th

Russia 71st

Zimbabwe 74th

DRC 76th

Kazakhstan 81st

India 89th

“As resource constraints tighten globally, countries that depend heavily on ecological services from other nations may find that their resource supply becomes insecure and unreliable. This has economic implications – in particular for countries that depend upon large amounts of ecological assets to power their key industries or to support their consumption patterns and lifestyles.” Dr. Mathis Wackernagel, President of the Global Footprint Network

Accessing a sustainable, and secure, supply of raw materials is going to become the number one priority for all countries. Increasingly we are going to see countries ensuring their own industries have first rights of access to internally produced commodities and they will look for such privileged access from other countries.

Numerous countries are taking steps to safeguard their own supply by:

• Stopping or slowing the export of natural resources
• Shutting down traditional supply markets
• Buying companies for their deposits
• Project finance tied to off take agreements

Conclusion

The United States needs to figure out who its friends are and work with them to establish Security of Supply. The countries politicians, and its citizens, also need to figure out that true wealth, a growing economy and a strong country are built by resource extraction and manufacturing not a service based system pandering to the cries of non-government organizations  (NGO).

Critical materials, and there sources, should be on every investors radar screens. Are they on yours?

If not, maybe they should be.

Richard (Rick) Mills

rick@aheadoftheherd.com

www.aheadoftheherd.com

If you’re interested in learning more about the junior resource sector, and specific nickel, cobalt and PGE junior 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 300 websites, including: OzCopper, 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.

***

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.

www.gracelandupdates.com

www.gracelandjuniors.com

Email:

stewart@gracelandupdates.com

stewart@gracelandjuniors.com

Mar 13, 2012

1. Today is “FOMC day”.  Every six weeks or so, the US central bank’s open market committee meets.  They issue their views and policies for both the markets and the economy.  The gold community should understand that most fundamentalists view the FOMC report as the single most important report that is issued about the major markets.
2. When two opposing fundamental forces of size meet in a major market battle, that fight is often ultimately resolved by definitive policy statements that are made by the FOMC.  There’s a high likelihood that today is resolution day in the gold market.
3. Highly leveraged traders will go to the sidelines, rather than risking being on the wrong side of the market, as the FOMC report is released.  I would suggest that you should focus on yawning your way through the report.
4. Think bigger in the gold market.  A $100 price move to the downside is a “yawn buy”, and a $300 move to the upside is a “modest profit booking opportunity”.
5. Two schools of thought have been battling it out quite intensely.  First, there is the “quantitative easing crew”.  These fundamentalists believe that unsterilized quantitative easing has been delayed but will still occur.
6. In opposition to team QE3 are the fundamentalists who believe that the economy has improved enough so that quantitative easing is not required.  At minimum, they believe it will be put on the Fed’s back burner for a long time.
7. The US central bank has loaned European central banks dollars, and this can be viewed as “QE from the shadows”, but unless institutional money managers believe substantially more such shadow QE is coming, they won’t engage in gold-friendly liquidity flows.  In their minds, most of the shadow QE has already been factored into the gold price.
8. Another fundamental issue working against those who believe more QE is imminent is the “sterilization factor”.  Some commercial bank analysts have suggested that Dr. Bernanke could buy US Treasury bonds and then re-sell them to commercial banks.
9. That move would sterilize the “inflationary germ”.  It would be liquidity flows-neutral or even slightly negative for the gold price.  The European central bank is already engaging in sterilized quantitative easing.
10. Most investors in the gold community, unfortunately, have been fairly sure that unsterilized QE was coming with absolute certainly.  Their disappointment is reflected in the failure of the gold price to rise above $1800.
11. Ben Bernanke has clearly stated that while the recent jobs reports are positive events, the overall jobs situation is nowhere near normal.  If you are an investor, then give yourself the gift of being emotionally strong enough to buy gold on every $100 price sale.  That’s your financial immunization shot against the QE “desperation analysis plague”.  When compared to your ability to buy gold on repeated $100 price sales, the importance of unsterilized quantitative easing is miniscule.
12. Back in the fall of 2009, I got a lot of emails about natural gas possibly bottoming.  I agreed that it was an asset to be accumulated, but warned that it is the world’s most volatile commodity.
13. I also suggested that it was best accumulated with my pyramid generator in a pgen that extended “all the way to a price of zero”.  Accumulating an asset in the “on sale” zone is not the same endeavor as calling a turn on it.  I’m not interested in how high an item might go.  I’m interested in buying it at the lowest possible price.
14. Since that initial blast of turn-call excitement, interest in natural gas has waned, while I accelerate my buy program.  It’s absolutely critical to carry short positions when engaging in a major accumulation program.
15. It’s a waste of time predicting the turn date or turn price.  The turn could come after your first buy, or it could come at a price that is 99% below your first buy.  I limit my total short position to a maximum of 30% of my long position, at all points of time and price.
16. Click here now to view about 20 years of natural gas trading history.  Today might be the “unlucky 13^th” date in time, but your “lucky number 7” Stochastics buy signal is in play now on that long term natural gas chart.  All of the previous six buy signals have been followed by enormous rallies in the natural gas price.
17. Note that one of the previous low points came at a price of about $1.25.  The current price is about $2.23, which is historically low, but in no way should anyone believe that natural gas can’t fall 50% in price from here, because it certainly can.  If it does, I’ll cover more short positions and buy more longs.   Do I think the price of natural gas will fall to $1.25?  No.  Am I prepared for it to do so, both mentally and financially?  Yes.
18. Your greatest “on sale” purchases of the greatest assets will usually occur inside of your “personal surprise zone”, which is the price zone that you believe can never occur, but when it does, you act professionally and accumulate the assets at your very best prices.
19. Another arguably great asset is the Dow.  I realize that great emphasis is being placed on the idea that the Dow must bottom at a ratio price that is about 1 Dow unit to 1 gold unit.   That’s happened in the past, but the Dow is less than 200 years old, while gold has been the ultimate asset for thousands of years.  I want an asset at prices that are low, rather than at prices that represent any kind of turn call point.
20. Click here now to view the Dow chart against gold.  For all practical intents and purposes, the Dow is trading at a price near 8 ounces a share.  That price is not high.  It’s low.  I really don’t see many people in the gold community getting more gold by watching the dollar price of gold.  Quite the opposite is the case.  Little declines in the price are met with panic selling.
21. You may have to force yourself to consider buying the Dow, incrementally, all the way to a price of zero against gold, if you want to get more ounces of gold.  If you pay 8 ounces of gold for a Dow share, and it falls to 1, you lose 88%.  If you sell it at 40, your gold holdings increase to 40 ounces, which I believe is a 400% return on your investment.
22. If you buy the Dow ubmat a price of 1 ounce per share, a retracement just to 8 is a 700% return on your investment, and that return can be in the form of physical gold, stacked on your scale!  Don’t underestimate the power of the Dow, here and now, to build your gold holdings.  Every single price point under “10 ounces per share” on that Dow chart has the potential to put an enormous amount of physical gold bullion onto your scale.
23. Gold investors looking to build dollars of wealth with your gold are understandably frustrated at this point in time.  The 14,7,7 series Stochastics indicator on the daily chart suggested that frustration could happen, back in early February.  I run that series on the daily chart and it rarely lets me down.  Click here now to view the daily gold chart.  Note the position of the 14,7,7 Stochastics indicator now.
24. After giving a sell signal in early February, and then creating a non-confirmation with the gold price at about $1793, the indicator is now in an area where I’d consider gold to be readying for a blast to the upside against the dollar, and today’s FOMC meeting could be the surprise bull catalyst that makes it happen!

Special Offer For OzCopper Readers:  Send me an email to freereports4@gracelandupdates.com and I’ll send you my “14,7,7” report, covering my views on all the major markets, including GDX and GDXJ, based on the action of the 14,7,7 Stochastics indicator!

Thanks!

       Cheers

St

Stewart Thomson

Graceland Updates

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

www.gracelandupdates.com

Email: stewart@gracelandupdates.com

Mail to:

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

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?

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

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 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

Demand is increasing for critical metals due to:

• Economic growth of developing countries
• Emergence of new technologies and products

Access to raw materials at competitive prices has become essential to the functioning of all industrialized economies. As we move forward developing and developed countries will, with their:

• Massive population booms
• Infrastructure build out and urbanization plans
• Modernization programs for existing, tired and worn out infrastructure

Continue to place extraordinary demands on our ability to access and distribute the planets natural resources.

Threats to access and distribution of these commodities 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

Accessing a sustainable, and secure, supply of raw materials is going to become the number one priority for all countries. Increasingly we are going to see countries ensuring their own industries have first rights of access to internally produced commodities and they will look for such privileged access from other countries.

Numerous countries are taking steps to safeguard their own supply by:

• Stopping or slowing the export of natural resources
• Shutting down traditional supply markets
• Buying companies for their deposits
• Project finance tied to off take agreements

In this article I am going to take a look at three reports covering what the US and Europe consider critical or strategic minerals and materials.

In its first Critical Materials Strategy, 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

In its report the DOE provided data for nine rare earth elements: yttrium, lanthanum, cerium, praseodymium, neodymium, samarium, europium, terbium and dysprosium as well as indium, gallium, tellurium, cobalt and lithium.

Five of the rare earth metals – dysprosium, neodymium, terbium, europium and yttrium – as well as indium, were assessed as most critical in the short term. The DOE defines “criticality” as a measure that combines importance to the clean energy economy and risk of supply disruption.

In a follow up to its earlier report the U.S. Department of Energy, Dec. 2011 – 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.

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

Securing Materials for Emerging Technologies

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.

“Energy-related systems are typically materials intensive. As new technologies are widely deployed, significant quantities of the elements required to manufacture them will be needed. However, many of these unfamiliar elements are not presently mined, refined, or traded in large quantities, and, as a result, their availability might be constrained by many complex factors. A shortage of these energy-critical elements (ECEs) could significantly inhibit the adoption of otherwise game-changing energy technologies. This, in turn, would limit the competitiveness of U.S. industries and the domestic scientific enterprise and, eventually, diminish the quality of life in the United States.”

According to the APS and MRS report several factors can contribute to limiting the domestic availability of an ECE:

• The element may not be abundant in the earth’s crust or might not be concentrated by geological processes
• An element might only occur in a few economic deposits worldwide, production might be dominated by and, therefore, subject to manipulation by one or more countries – the United States already relies on other countries for more than 90% of most of the ECEs identified in the report
• Many ECEs have, up to this point, been produced in relatively small quantities as by-products of primary metals mining and refining. Joint production complicates attempts to ramp up output by a large factor.
• Because they are relatively scarce, extraction of ECEs often involves processing large amounts of material, sometimes in ways that do unacceptable environmental damage
• The time required for production and utilization to adapt to fluctuations in price and availability of ECEs is long, making planning and investment difficult

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:

• Gallium, germanium, indium, selenium, silver, and tellurium – employed in advanced photovoltaic solar cells, especially thin film photovoltaics.
• Dysprosium, neodymium, praseodymium, samarium and cobalt – used in high-strength permanent magnets for many energy related applications, such as wind turbines and hybrid automobiles.
• Gadolinium (most REEs made this list) for its unusual paramagnetic qualities and europium and terbium for their role in managing the color of fluorescent lighting. Yttrium, another REE, is an important ingredient in energy-efficient solid-state lighting.
• Lithium and lanthanum, used in high performance batteries.
• Helium, required in cryogenics, energy research, advanced nuclear reactor designs, and manufacturing in the energy sector.
• Platinum, palladium, and other PGEs, used as catalysts in fuel cells that may find wide applications in transportation. Cerium, a REE, is also used as an auto-emissions catalyst.

The third report I looked at, “Critical Raw Materials for the EU” listed 14 raw materials which are  deemed critical to the European Union (EU): antimony, beryllium, cobalt, fluorspar, gallium, germanium, graphite, indium, magnesium, niobium, platinum group metals, rare earths, tantalum and tungsten.

“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 according to a report published today by an expert group chaired by the European Commission. In this first ever overview on the state of access to raw materials in the EU, the experts label a selection of 14 raw materials as “critical” out of 41 minerals and metals analyzed. The growing demand for raw materials is driven by the growth of developing economies and new emerging technologies.”

For 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

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

The key issues in regards to critical metals are:

• Finite resources
• Chinese market dominance in many sectors
• Long lead times for mine development
• Resource nationalism/country risk
• High project development cost
• Relentless demand for high tech consumer products
• Ongoing material use research
• Low substitutability
• Environmental crackdowns
• Low recycling rates
• Lack of intellectual knowledge and operational expertise in the west

Conclusion

Critical materials should be on every investors radar screens. Are they on yours?

If not, maybe they should be.

Richard (Rick) Mills

rick@aheadoftheherd.com

www.aheadoftheherd.com

If you’re interested in learning more about the junior resource sector, and a specific cobalt and critical metals company, 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: OzCopper, 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.

***

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.

www.gracelandupdates.com

www.gracelandjuniors.com

Email:

stewart@gracelandupdates.com

stewart@gracelandjuniors.com

Mar 6, 2012

1. Are you financially invincible?  I think you are, and not just because you own gold bullion.  About a year ago, I asked the gold community to consider “going on the aggressive” against the “dollar bugs”.  In a war, the ultimate winner tends to have the greatest intestinal fortitude.
2. While many investors fear “2008 again”, I would argue that it’s time to use the 2008 experience to understand your own invincibility.  Most of the gold community held junior gold stocks in 2008, and the average portfolio experienced what can only be described as a nuclear winter.  This crisis is likely to go on for years, and perhaps for decades.
3. There’s almost nothing that the gold bears can do to you that you haven’t experienced already.  You can use the 2008 experience to spend the coming years discussing how afraid you are of “2008 again”, or you can use it to laugh in the face of your opponent. 
4. Use that intestinal fortitude to your advantage.  Rather than showing your opponent how high gold stocks can go, show them what you can endure on the downside.  Click here now to laugh in the face of your opponent.  There are a myriad of technically positive events happening on that GDXJ chart, but without a supreme will to win, you’ll never make it to the exit door of the gulag.
5. The $29.65 to $31.95 price band represents substantial resistance.  Since October 2011, GDXJ has made three attempts to penetrate it.  I warned that you need to take a run at a heavy door with a battering ram, rather than just knocking on it and hoping the hedge funds open it.  The bigger “chart resistance doors” require numerous charges at each door.
6. GDXJ is showcasing the type of technical action that is required to successfully penetrate this overhead resistance.  A potentially powerful head and shoulders bottom pattern is shaping up very nicely.  Price is declining into what is likely the right shoulder of that pattern.
7. There is light support at $26.25 and $25.25, which I’ve highlighted with thin horizontal lines.  I’d like to see buying at both of those support levels, if they occur.
8. The left shoulder was firmly established by the $23.65 low.  The head was defined by the $22.58 area low.  The right shoulder could be completed at any point in the $23-$26.50 range.
9. What action should you take if the head & shoulders pattern fails, and the price of GDXJ melts through the low at $22.58?  Well, my humble suggestion is that you laugh hysterically in the face of your opponent if that happens.  It’s probably long past “due date” for the gold community to stop investing, and start fighting.
10. Note the thick black downtrend line that I’ve highlighted on the GDXJ chart.  When price surged above that line in February of this year, I warned you that a pullback to that line was perfectly normal technical action, and that pullback is in play now.
11. As many of you know, I believe in quarantining different investments.  I use separate accounts to hold each major investment.  Take buy or sell action based on the price movement of the investment in play, rather than just the net liquidation value of a “master account”.  Some brokerages will allow you to operate multiple accounts from a single control screen, and this is a highly useful tool.
12. I like to do the same thing with technical indicators.  I isolate them into small groups or view them totally alone.  It’s very important to maintain maximum clarity and simplicity, especially when the metals are falling, as they are now.
13. Click here now to view the current Williams and Stochastics series chart for GDXJ.  I’ve put an orange circle on the longer time frame Stochastics indicator.  That marks the indicator as neutral.
14. The Williams and shorter time series Stochastic oscillators are both circled in blue.  A blue circle indicates that the item is oversold and buys can be executed.  Against the backdrop of the h&s pattern and the pullback to the thick black supply line, the position of these oscillators is very positive.
15. Click here now to view the “MACD tri-light” for GDXJ.  All three MACD series are showing a clear and rising trend.  Don’t ask why the price of GDXJ is declining.  Just buy it professionally, as it happens.
16. The last indicator I want to highlight for GDXJ, and hence for the gold juniors group as a whole, is the CCI indicator.  Click here now to view the current CCI action.
17. We are clearly at a point where the indicator bottoms and begins to turn upwards.  Whether that turn comes today, tomorrow, or a week from now is irrelevant to the professional wealth builder.
18. There has been great talk about quantitative easing, new metals exchanges, China’s forex programs, and other factors that are fundamentally bullish for gold.
19. Those are all very interesting, but in the final analysis, the greatest bullish fundamental factor for gold is your personal ability to endure every price tick of this crisis with the biggest smile you can create for yourself.
20. The stock market is quite high, although it can go higher.   Click here now to view the short term price action of the Dow.  At this stage in the crisis, you can’t buy little sell-offs in gold stocks or the Dow with large amounts of risk capital.  Volatility is building, and it could spike dramatically higher.
21.  I wouldn’t waste time shorting the Dow, but some of you may want to buy a few put options anyways, to help manage the stress of making it to the exit door of the gold stocks gulag.
22. Click here now to view the longer term weekly chart for the Dow.  There is no question that price is “up there”, and there’s no question that a decline in the Dow could put enough pressure on the price of GDXJ to complete the right shoulder of the gold juniors head and shoulders pattern there.
23. A gold price of $1400 or higher is more than enough of a foundation to power gold junior stocks higher, so that last thing you need to be worried about is the gold price, at this point in time.
24. Worry only about laughing in the face of your opponents as “Sir GDXJ” works to complete his right shoulder and touch the black supply line.  The technical indicators show that GDXJ is building momentum for a serious attack on resistance in the $30 area, and the only question is, are you onside?

Special Offer For OzCopper Readers:  You’ve been devastated by the apparent failure of gold and silver to surge dramatically higher after what appeared to be a “sure thing” breakout from a wedge pattern.  Send me an Email to freereports4@gracelandupdates.com and I’ll send you my “Horizontal versus Sloping Trendlines” report.  Learn how to properly use sloping trendines with horizontal ones, to maximize management of risk and reward!

Thanks!

       Cheers

St

Stewart Thomson

Graceland Updates

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

www.gracelandupdates.com

Email: stewart@gracelandupdates.com

Mail to:

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

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?

Over the past 5 months we have seen volatility steadily decline as stocks and commodities rise in value. The 65% drop in the volatility index is now trading at a level which has triggered many selloffs in the stock market over the years as investors become more and more comfortable and greedy with rising stock prices.

Looking at the market from a HERD mentality and seeing everyone run to buy more stocks for their portfolio has me on edge. We could see a strong wave of fear/selling hit the S&P 500 Index over the next two weeks catching the masses with their hand in the cookie jar . . . again.

If you don’t know what the volatility index (VIX) is, then think of it as the fear index. It tells us how fearful/uncertain investors are or how complacent they are with rising stock prices. Additionally a rising VIX also demonstrates how certain the herd is that higher prices should continue.

The chart below shows this fear index on top with the SP500 index below and the correlation between the two underlying assets. Just remember the phrase “When the VIX is low it’s time to GO, When the VIX is high it’s time to BUY”.

Additionally the Volatility Index prices in fear for the next 30 days so do not be looking at this for big picture analysis. Fear happens very quickly and turns on a dime so it should only be used for short term trading, generally 3-15 days.

Volatility Index and SP500 Correlation & Forecast Daily Chart:

Global Issues Continue To Grow But What Will Spark Global Fear?

Everyone has to admit the stock market has been on fire since the October lows of last year with the S&P 500 Index trading up over 26%. It has been a great run, but is it about to end? Where should investors focus on putting their money? Dividend stocks, bonds, gold, or just sit in cash for the time being??

I may be able to help you figure that out.

Below is a chart of the Volatility index and the gold exchange traded fund which tracks the price of gold bullion. Notice how when fear is just starting to ramp up gold tends to be a neutral or a little weak but not long after investors start selling their shares of securities we see money flow into the shiny yellow safe haven.

Gold & Fear Go Hand-In-Hand: Daily Chart

Looking at the relationship between investor fear/uncertainty and gold you will notice scared money has a tendency to move out of stocks and into safe havens.

Trading Conclusion Looking Forward 3 months…

In short, I feel the financial markets overall (stocks, commodities, and currencies) are going to start seeing a rise in volatility meaning larger daily swings which inherently increased overall downside risk to portfolios and all open positions.

To give you a really basic example of how risk increases, look at the daily potential risk the SP500 can have during different VIX price levels:

Volatility index under 20.00 Low Risk: Expect up to 1% price gaps at 9:30am ET, and up to 5% corrections from a previous high.

Volatility index between 20 – 30 Medium Risk: Expect up to 2% price gaps at 9:30am ET, and up to 15% corrections from recent market tops or bottoms.

Volatility index over 30 High Risk: Expect 3+% price gaps at 9:30am ET, and possibly another 5-15% correction from the previous VIX reading at Medium Risk

Note on price gaps: If you don’t know what I am talking about a price gap is simply the difference between the previous day’s close at 4:00pm ET and the opening price at 9:30am ET.

To continue on my market outlook, I feel the stock market will trade sideways or possibly grind higher for the next 1-2 weeks, during this time volatility should trade flat or slightly higher because it is already trading at a historically low level. It is just a matter of time before some bad news hits the market or sellers start to apply pressure and either of these will send the fear index higher.

I hope you found this info useful and if you would like to get these reports free every week delivered to your inbox be sure to join my FREE NEWSLETTER HERE: www.GoldAndOilGuy.com

Chris Vermeulen

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 most investable trend over the next 20 years is going to be the rising price of commodities, rising prices will be caused by two factors;

• Increasing consumption
• Inflation

Consumption

Two factors are involved in increasing consumption. One is the growth in population:

2011 7 billion

2020 7.6 billion

2027 8 billion

2030 8.2 billion

2040 8.8 billion

2046 9 billion

2050 9.2 billion

The second factor is the growth in wealth in the major developing countries – China, India, and Indonesia have enormous numbers of people who are already middle class and hundreds of millions still to become middle class.

Africans, on a per capita basis, are richer than Indians and a full dozen African states have higher gross national income per capita than China. Today Africa has 14% of the world’s population and by 2050 one in every four people on the planet will be African. Development expert Vijay Majahan, author of Africa Rising, said the rapidly emerging African middle class could today number almost 300 million people – that’s out of a total population of one billion.

The Organization for Economic Co-operation and Development says the global middle class numbers 1.8 billon, or 28% of the world’s population.

According to the UN report RESILIENT PEOPLE RESILIENT PLANET A Future Worth Choosing, the number of middle-class consumers will increase by three billion people over the next 20 years.

The president of the Center for Global Development, Nancy Birdsall, calculates that India has no middle class. The McKinsey Global Institute projects that India’s middle class of 50 million, less than 5% of the country’s population, will explode to 583 million by 2030.

McKinsey Global puts China’s middle class at 43% of its population today, on its way to 76% in 2025.

Chasing The American Dream

Middle class has come to mean having what Americans have: large houses or apartments, more than one car, all the latest appliances, flat screen TVs with cable or satellite, laptops and i-pads – “development” for these people has come to mean more than just the basics – electricity, telephones and running water. Indonesia is a good example.

Indonesia – the missing BRIC?

“Indonesia is one of the world’s economic success stories.” Nielsen, Consumer and media research company

With a population of 238m (In 2015, Indonesia’s Population is expected to be 250m) Indonesia is Southeast Asia’s fastest-growing major economy clocking growth at six percent in 2011.

The country has a rapidly expanding middle class that accounts for 44 percent of all fast moving consumer goods (FMCG) spending in the country.

Indonesians love to watch TV and nearly 95% of middle class homes owns one.

Internet usage and mobile phone ownership is surging.

Consumption accounts for almost half of GDP growth.

The country’s middle class, 1.6m in 2004, now numbers about 50m – more than India and bigger than elsewhere in the region. The number could reach 150m by 2014. It would seem newly affluent Indonesians are certainly…

Movin’ on Up

Well we’re movin on up,
To the east side.
To a deluxe apartment in the sky.
Movin on up,
To the east side.
We finally got a piece of the pie.

Well we’re movin on up,
To the east side.
To a deluxe apartment in the sky.
Movin on up,
To the east side.
We finally got a piece of the pie.

Theme from the TV show the Jeffersons

“Given high economic growth rates in many parts of the world, as well as the rapid spread of electronic media, advertising, and consumer goods, we must ask what kind of consuming future we can expect in areas that are now constrained by poverty and isolation. If everyone develops a desire for the Western high-consumption lifestyle, the relentless growth in consumption, energy use, waste, and emissions may be disastrous.”  National Academy of Sciences, Environmentally Significant Consumption (1997)

Inflation

“The seasonally-adjusted St. Louis Fed Adjusted Monetary Base just jumped to an historic high level in the two-week period ended February 22nd, as shown in the (above graph)… Adding liquidity to the system usually is contrary to the action that would be taken if the Fed were trying to reduce inflation. Indeed, the Fed is not trying to reduce inflation – despite inflation running significantly above its 2.0% inflation target – instead, the U.S. central bank continues its efforts to provide liquidity to a still severely-impaired U.S. banking system.” John Williams, ShadowStats.com

Consumption Facts

The human enterprise now consumes nearly 60 billion metric tons of the world’s four key resources – minerals, ores, fossil fuels and biomass (plant materials) – per year.

Developed countries citizens consume an average of 16 tons of those four key resources per capita (ranging up to 40 or more tons per person in some developed countries).

Projected Population Growth:

2020 7.6 billion

2027 8 billion

2030 8.2 billion

2040 8.8 billion

2046 9 billion

2050 9.2 billion

According to a report from the U.N., by 2050, humanity could devour an estimated 140 billion tons of minerals, ores, fossil fuels and biomass per year.

Total global resource use soared from six billion tonnes in 1900 (1.6 billion people) to 49 billion tonnes in 2000 (just over 6 billion people)  and is now running at close to 60 billion tonnes (just over 7 billion people).

Consider:

• The average person in India today consumes just four metric tons of the world’s four key resources in a year
• An average American uses 88 kilograms of stuff per day
• The average American consumes about fifty-three times more goods and services than someone from China
• A child born in the United States will drain as many resources as thirty-five natives of India
• The UNEP-hosted International Resource Panel report entitled Decoupling: Natural Resource Use and Environmental Impacts from Economic Growth shows that on average the annual per capita consumption of natural resources – known as the ‘metabolic rate’ – in Europe is around 13 tons per person

How Long Will It Last?

Robert Gordon, Tom Graedel and colleagues at Yale University used data from the US Geological Survey’s annual reports and UN statistics on global population to answer the following:

If every human on the planet consumed minerals at just half the rate of an average US resident how many years would the minerals last?

Their calculations do not take into account new technologies or new discoveries and assume current production equals consumption.

HOW MANY YEARS LEFT?

Q & A

Commodities expert Jim Rogers said there are three questions you need to ask (and answer) to determine if a commodity is headed higher in price.

Lets answer based from a metals perspective:

Q1 – How much production is there worldwide?

A – Not enough, most older existing mines, the foundation of our supply, have increasing costs with production rates stagnating or even declining because of lower grade ore

Q2 – Are there new sources of supply?

A – Yes, but the rate of depletion is much greater than the rate of discovery.

We also face complicated more expensive extraction of metals from increasingly harder to find, lower grade ore bodies in almost inaccessible and hostile parts of the world

Q3 – Are there new potential supplies?

A – Yes, if energy was cheap and unlimited then recoverable resources would be unlimited

The U.S. Energy Information Administration (EIA) said that world oil consumption grew by an estimated one million barrels a day (bbl/d) in 2011 to 88.1 million bbl/d. The EIA also said world oil consumption is expected to grow by an average 1.3 million barrels per day (bbl/d) in 2012 and 1.5 million bbl/d in 2013.

Conclusion

People in the developed nations have had the luxury of taking a great many things for granted, one of them is our lifestyle involving unfettered consumerism. We need to stop taking things for granted.

When we were kids our parents taught us the value of sharing, a lesson that’s going to come in very handy over the next few decades.

The Great Sharing should be on everyone’s radar screen. Is it on yours?

If not, maybe it should be.

Richard (Rick) Mills

rick@aheadoftheherd.com

www.aheadoftheherd.com

If you’re interested in learning more about the junior resource sector 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: OzCopper, 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.

***

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.

If you are interested in learning more about the resource sector and investing in junior resource companies I would STRONGLY recommend becoming an aheadoftheherd.com member.

Ahead of the Herd provides original content in the form of articles and interviews, we screen dozens of contributors articles every day for publication and we search the web for news regarding the various resource sectors.

We do all this so you don’t have to.

No one is better when it comes to keeping YOU informed, and current, on what is happening in the world of resources.

Richard (Rick) Mills

Host, aheadoftheherd.com

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www.gracelandjuniors.com

Email:

stewart@gracelandupdates.com

stewart@gracelandjuniors.com

Feb 28, 2012

1.  Ancient wisdom says, “your friend is your enemy and your enemy is your friend”.  In the gold & silver market, this ancient wisdom may be particularly valuable for investors today.
2. Gold plays the role of punisher in this crisis, and punishes the debt-a-holics.  The crisis is enormous, and could go on for decades, but just because the crisis may have decades to run doesn’t mean that gold rises forcefully, all the time. 
3. The economy can have enormous bouts of strength while slowing disintegrating, and you have all seen the shockingly bullish economic reports pouring out, in recent months.  Analysts continue to under-estimate  the economic numbers.
4. Something has got to give here; either the analysts are correct and economic numbers are about to nose-dive, or the economy is surfing a much bigger up wave than the analysts comprehend.
5. Click here now to view the current gold chart.  Note the small head and shoulders top pattern in play, and the broken uptrend line.  I personally couldn’t care less about the microscopic fall in price implied by this technical action.  I’m only interesting in buying price sales of $100 or more.
6. My interest lies with the divergence between gold and silver, and why that divergence may be occurring.   Silver investors should click here now.  I’ve talked about the importance of silver investors holding your ground against “big sister gold”.  Life as the little brother can be frustrating at times, but this could well be your time to shine, but not because silver is “poor man’s gold”.
7. Last night the price of silver ripped thru its right shoulder high, and the price action is beginning to resemble the action of the Dow, even more so than that of gold.  Click here now to view the Dow “chomping at the 13,000 point bit”.  Silver’s price action in the $36 area is very similar to the price action of the Dow in the 13,000 point area.
8. If we are on the cusp of an institutional capitulation, one that acknowledges that a much bigger recovery has started, then silver, platinum, and palladium could all out-perform gold.
9. If not, then silver is likely to resume its role as “gold’s sidecar”, and still fare pretty well.  Platinum and palladium may not fare as well as silver if the crisis accelerates dramatically.
10. Gold appears to be silver’s best friend, but if a shocking economic revival is just around the corner, perhaps it is the supposed enemies of silver, the Dow and real estate, who will become silver’s friends, at least for a period of economic time.
11. How big of an economic surge am I talking about?  To view the shocking super-rally in real estate that I am predicting, click here now.
12. That’s the IYR-nyse real estate ETF from ishares, and I’m predicting a near-immediate rise in price to my $100 price target, a scenario that will cause 99% of the gold community to do the ultimate “double take”.
13. There’s an enormous head & shoulders pattern on the monthly chart, and the daily chart also looks extremely positive.  Click here now.  Note the position of the Stochastics oscillator, and the solid support in the $58 price range.
14. Both real estate and the Dow may add surprising fuel to the silver rally, but that doesn’t mean you should buy today.   Bullish price patterns reveal where price might go on the upside, but they are not buy signals.
15. It’s critical to understand that surprise is the theme of this crisis.  It’s equally critical to understand that the markets are a fight more than an investment.  You don’t really have “fellow investors”.  You have opponents that you need to ravage and destroy.  You can face that fact, or be destroyed by those who live the markets in fight-mode.
16. You can’t buy silver after it has skyrocketed, because you will be buying it from strong hands, and doing so alongside weak hands.  If you don’t feel morbid when you buy, don’t buy.
17. What’s better, to feel morbid when you buy, or morbid when you sell out at a loss?   Buy in the morbid zone and sell in your personal party and analysis zone. Those who want to feel good both on the buy and on the sell are likely living a pipedream.
18. If we are entering a period of shocking economic growth, albeit growth printed out of an electronic photocopier machine, then perhaps silver and other industrial-precious hybrid metals will substantially outperform gold for a period of time.
19. If real estate joins the Dow in ravaging the dollar, then gold stocks could also join silver in outperforming gold.  I’m fully aware that most of the gold community is highly invested in gold stocks, with many in the community owning no gold bullion at all.
20. While the policy of holding no gold bullion is a bad mistake, that doesn’t change the fact that it could be your time to shine, if you are all-in on gold stocks.  Real estate and the Dow, the gold stock community’s “enemies”, may soon become your trusted friend, for at least a period of time.
21.  Click here now to view the GDX chart.  I’m an immediate buyer at the $55.50 and $53.50 price points.  Note the action around the $58 price point.  GDX is attempting to blast over the red trend line.  If the Dow surges through 13,000 and the IYR rips up through $61.68, I think GDX could experience a “price flash” to $70.
22. The incredible 35% rally in gold junior stocks, via GDXJ, has been all but forgotten, and with good reason.  Most gold junior investors are 50-70% underwater, and more so in some cases.  Just because the Dow investors of 1929 were wiped out didn’t mean the Dow couldn’t rise from the ashes, and it is the same with junior gold stocks. 
23. Click here now to view the asset class most likely to continue the out-performance that it began two months ago.  GDXJ has entered an uptrend channel and is showing light volume on this decline.
24. You should be an immediate buyer of GDXJ at $27.16, if you are lucky enough to see price go there.   If you like gold junior stocks, stare hard into the copper, real estate, platinum, and palladium charts.  Those asset classes look set to blast higher and may drastically outperform gold!

Special Offer For Ozcopper Readers:  Send me an Email to freereports4@gracelandupdates.com and I’ll send you my free “Platinum & Palladium, Your Spaceship To Mars?” report!

Thanks!

       Cheers

St

Stewart Thomson

Graceland Updates

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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:

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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 massive growth of global prosperity over the last five centuries has been driven by easy and cheap access to critical materials:

• Food
• Fibre
• Energy
• Minerals

However since October 2001 the CRB BLS Spot Index has reached record levels.

The Spot Market Price Index is a measure of price movements of 22 basic commodities. The spot price is the price at which a commodity is selling for immediate delivery.

Commodity price rises could be caused by:

• Raw materials shortages
• Resource nationalism
• Emerging market demand
• Speculation
• Intense weather pattern changes
• War
• Inflation
• Hoarding
• Low interest rates

Many people might assume that out of all the reasons given these three would be the main drivers:

• War
• Inflation
• Emerging market demand

Inflation & War

Because central banks can increase the supply of money virtually at will, and do so, the value of all existing money decreases. The amount of goods and services remains the same, but now the amount of money chasing them has increased, this increased competition – more money (inflation) for the same amount of goods and services – causes prices to rise.

Doug Short, advisorperspectives.com

Governments and Central Banks want slowly rising prices. They pour money into the market to encourage growth so prices increase rather than decrease. Price decreases, or deflation (less money growth), slows economic activity – if people think prices are going to be lower next week they will not buy today, they will wait, this leads to a contraction in economic activity, something all governments fear.

Low interest rates play their part as well. When governments lower interest rates to stimulate borrowing businesses expand and consumers borrow to buy homes, cars and other goods. Demand for goods and services increase and so to do prices of commodities used in manufacturing.

Nations in Europe, and the U.S. will inflate (print more of) their currencies rather than cutting back spending or raising taxes. In a global race to worthless Asian economies will also have to print massive amounts of their currencies so they stay weaker then the US dollar. Asian exports have to be cheap for American consumers and American exports have to be more expensive than locally produced goods.

The buildup to war, and the actual running of a war is expensive. Governments will typically devalue their currencies by printing the money needed – very few people would ever consent to go to war if they were made to pay for it out of their pockets. How many Americans would consent to the trillions of dollars necessary for America’s endless wars and vast military complex if the money required came directly off their paycheques? Government control over the money supply makes the business of war easy to finance because the financial support of its citizens is not needed.

Actual war does not seem to be one of the main causes of the decade long commodities price increase, rather it’s the creation of the money necessary to go to war – government created inflation. In regards to recent wars, we haven’t had a global conflict, and the resultant massive global destruction and rebuilding, since World War II. Wars today are localized affairs and do not bring about the massive use of commodities for rebuilding as a global conflict would.

Throughout history periods of rising money supply growth has coincided with rising commodity prices, and falling money supply growth coincided with periods of falling commodity prices.

A key driver of higher commodity prices, global government sponsored inflation (and quite likely continuing war inflation) are locked in place for years to come.

Developing Country Demand

China’s plus nine percent annual growth, and other developing nations growth (averaging much less), are usually named as the biggest cause of price rises in the  commodities markets. China has been growing at plus nine percent annually for well over two decades. Compounded that’s a lot of growth, add in other developing countries growth then realize a considerable period of this growth was spent in the commodity bear market. The growth story is suddenly an overnight sensation, inflations effects start to percolate, wars are started and speculators play.

A mismatch between demand and supply is not a new problem in commodity markets. It can and does take years to find and develop new resources and bring the commodities to market. If war and emerging country demand cause prices to rise – shortage caused price spikes – an increase in production (after a war or ramping up for developing country demand) would satisfy increased demand. But it hasn’t happened yet and it’s been over a decade since commodity prices have gone on their spectacular run.

So far inflation would seem to be the driver for commodity price increases, everything else seems temporary or if permanent, such as developing country demand, fixed with an increase in production.

But

There is a major paradigm shift taking place in the mining industry and it concerns the supply, not the demand side we hear so much about.

Supply

Supply shortages always lead to high enough metal prices for further increases in production, thus supply will eventually exceed demand and prices will drop…right? Well maybe, maybe not. Margins (not price) motivates investment and if the cost of metal production is increasing margins might not be sustainable.

Lets state the obvious:

• For over the last ten years supply has struggled to keep pace with demand
• Metal supply is finite and subject to compounding demand from developing nations
• Metal production is highly cyclical, with intermittent peaks and troughs which are closely linked to economic cycles – declining production has historically been driven by falling demand and prices, not by scarcity
• Rates of production and amounts of reserves continually change in response to movements in markets and technological advances
• Most mineral resources will not be exhausted in the near future
• If energy was cheap and unlimited then recoverable resources would be unlimited

But

• Discovery and development is increasingly becoming more challenging and expensive
• Average ore grades are in decline for most minerals, yet production has increased dramatically
• Our most important metals are suffering from declining ore quality and rising extraction (ore is a different and inferior chemical or structural composition) costs
• Our prosperity has always been based on the fact that producing resources yielded more resources than it cost. However the cost of *energy is climbing, the amount used is climbing but the returns from energy expended is declining. Eventually the quantity of resources used in the extraction process will be 100% of what is produced
• Most older existing mines, the foundation of our supply, have increasing costs with production rates stagnating or even declining
• The rate of discovery is not keeping pace with the rate of depletion, let alone being higher

*Energy can be thought of as a proxy for labor, materials, energy and externalities – environmental, community impact etc.

Copper and Gold as Proxies

The metal content of copper ore has been falling since the mid 1990s. A miner now has to dig up an extra 50 percent of ore to get the same amount of copper. As grade drops the amount of rock that must be moved and processed per tonne of produced copper rises dramatically – all the while using more energy that costs several times more than it use to. With the lower grades of ores now being mined energy becomes more and more of a factor when considering economics.

Conclusion

Complicated more expensive extraction of metals from increasingly harder to find, lower grade ore bodies in almost inaccessible and hostile parts of the world is going to affect our lifestyles.

What changes are we going to have to make as nature – the finite supply of materials and energy constraints – dictates lifestyles and aspirations?

“We took the nice, simple, easy stuff first from Australia, we took it from the U.S., we went to South America. Now we have to go to the more remote places.” Glencore CEO, Ivan Glasenberg in the Financial Times describing why his firm operates in the Congo and Zambia

We are experiencing a paradigm shift. If nothing else, right now at this point in history, we all have to realize that the mining industry is exiting “easy & cheap” and is starting the upward slope of chronic lower supply, permanently higher prices and higher risk.

We all have to agree that the planet’s booming population and rising standards of living are going to put unprecedented demands on supply.

This should be on everyone’s radar screen. Is it on yours?

If not, maybe it should be.

Richard (Rick) Mills

rick@aheadoftheherd.com

www.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, 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.

www.gracelandupdates.com

www.gracelandjuniors.com

Email:

stewart@gracelandupdates.com

stewart@gracelandjuniors.com

Feb 21, 2012

1.  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.
2. 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.
3. 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.
4. 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.
5. 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.
6. 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.
7. 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.
8. 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.
9. 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.
10. 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.
11. 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?
12. 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.
13. 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.
14. 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.
15. 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.
16. 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?
17. 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.
18. 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.
19. 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.
20. 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.
21. 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.
22. 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.
23. 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.
24. 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

St

Stewart Thomson

Graceland Updates

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Stewart Thomson is a retired Merrill Lynch broker. Stewart writes the Graceland Updates daily between 4am-7am. They are sent out around 8am-9am. The newsletter is attractively priced and the format is a unique numbered point form.  Giving clarity of each point and saving valuable reading time.

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?

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

www.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.

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

www.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.

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.

www.gracelandupdates.com

www.gracelandjuniors.com

Email:

stewart@gracelandupdates.com

stewart@gracelandjuniors.com

Feb 14, 2012

1. 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.
2. 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.
3. 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.
4. 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.
5. 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.
6. 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.
7. Click this stock market liquidity flows chart from www.sentimentrader.com.  The picture painted by the liquidity flows on this chart is truly frightening.
8. 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. 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. 
10. 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?
11. 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.
12. 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.
13. 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”?
14. 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.
15. 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”.
16. 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.
17. 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.
18. 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.
19. 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.
20. 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.
21. 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.
22. 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.
23. 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.
24. 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

St

Stewart Thomson

Graceland Updates

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

www.gracelandupdates.com

Email: stewart@gracelandupdates.com

Mail to:

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

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?

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.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, 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.

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

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

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

www.gracelandupdates.com

www.gracelandjuniors.com

Email:

stewart@gracelandupdates.com

stewart@gracelandjuniors.com

Feb 7, 2012

1. 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.
2. 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?
3. 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.      
4. 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.
5. 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.
6. 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.
7. 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.
8. 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.
9. 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.
10. 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.
11. 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.
12. 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.
13. 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.
14. 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.
15. 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.
16.  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.
17. 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.
18. 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?
19. 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.
20. 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.
21. 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.
22. 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.
23. 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.
24.  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

St

Stewart Thomson

Graceland Updates

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

www.gracelandupdates.com

Email: stewart@gracelandupdates.com

Mail to:

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

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?

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

www.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, 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.

***

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.

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

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

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: 

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

www.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, 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.

Graceland Updates 4am-7am

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Email:

stewart@gracelandupdates.com

stewart@gracelandjuniors.com

Jan 31, 2012

1. 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.
2.  In the simplest terms, credit default swaps (CDS) are a financial insurance product used heavily by hedgers and speculators in the government debt arena.
3. 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).
4. 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”.
5. 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.
6. 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.
7. 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. 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.  
9. 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?
10. 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?
11. 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.
12. 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. 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.
14. Moderation brings the best wealth-building results.  Selling a bit of gold into this strength is wise.
15. 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.
16. 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.
17. 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.
18. 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.
19. 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.
20. 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.
21. 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.
22. Simplicity is the fuel of the successful financial engine.  Is it time for a fill-up?
23. 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.
24. 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

St

Stewart Thomson

Graceland Updates

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

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

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?