Jack Chan
www.simplyprofits.org
Nov 26, 2009

We had an excellent entry point on the gold stock ETFs in August, and our positions are deep in profits. However, our allocation was too modest, and there have not been any decent set ups to add to positions. Many members are asking what my upside projection is, and whether they should just jump in.

Gold has no overhead resistance, therefore, any projections are pure guesses.

What I do know, is, if gold is now in a second phase of a bull market, then a multi month consolidation could start anytime, and our better buying opportunity will come in 2010.

If the parabolic rise continues, then this is more like a blow off top similar to what we saw in 1979/1980, and we all know what happened when that party was over.

Let’s take a look at the two possible scenarios.

#1 - Second phase of the gold bull

Since the gold bull began in 2001, shortly after each and every time when gold made a new recovery high, prices began a multi month consolidation before a new leg started again.

A six month consolidation took place in 2002 after reaching a new recovery high of $330.

Also a six month consolidation in 2003.

A four month consolidation in 2004.

An eight month consolidation in 2005.

Another six month consolidation in 2006.

Also a six month consolidation in 2007.

Observation

The first phase of the gold bull market from 2001 to 2007 was very orderly. Each and every year, gold prices spent at least half of the time on average consolidating before a new leg up. Gold stocks followed this same pattern. This gave us plenty of opportunity with set ups to enter the market as some of you may recall.

Therefore, unless this time is different, and unless we are in the middle of a blow off top similar to 1979/1980, prices should soon fall sharply and go sideways at least a few months before the next leg up.

How about gold stocks now?

Gold stocks are lagging gold prices, but should not be a major concern if we are indeed at the beginning of phase two. $HUI can rally another few % to reach resistance, and if gold prices consolidate, we will have a potential “cup & handle” pattern in the $HUI. The “handle” will be similar to the consolidation in gold prices and the bottom of the handle should not be more than 20% from the top.

Silver has more to go before reaching the “rim” of the cup. Read More…

John Browne
Nov 26, 2009

Over past years, we at Euro Pacific have taken an increasingly jaundiced view of paper currencies and written repeatedly about gold as an alternative. Along the way, we have urged investors to consider both the security and physical accessibility of their gold investments, and have advocated for at least some holdings to be in physical form. There are those who may have felt our views were overly cautious, even alarmist. Now, however, it is increasingly clear that major investors, including even central banks, are following our advice. Meanwhile, we continue to set the curve by calling for an even greater share of investors’ portfolios to be in physical bullion or secure equivalents.

Despite the trials Western economies have already experienced, worse economic times still lie ahead. The current administration appears unable to accept the pain of deleveraging and has instead set upon a course of limitless public-sector spending, financed by increased taxation, deficits, and the covert debasement of the U.S. dollar. Obama’s acolytes haven’t acknowledged the threat that their policies could cause the dollar to lose its privileged position as the world’s reserve currency, which would devastate the relative value of the U.S. dollar and many paper investments denominated in dollars, including Treasuries. Indeed, it would likely trigger a second financial collapse, this time with accompanying hyperinflation.

To protect their wealth from inflation and financial panic, big players like hedge funds, sovereign wealth funds, and central banks are turning not just to gold, but to physical gold.

Many investors are demanding and prepared to pay for physical delivery. This indicates an intention to remain invested for a significant period of time, removing considerable selling pressure from the market. More concerning, the willingness to finance physical delivery and storage indicates a fundamental decline in the credibility of paper contracts.

For centuries, gold has been the bane of profligate governments. For decades, Western governments, led by the U.S., have sought to demonetize the ‘embarrassing’ metal. Most recently, the U.S. led other central banks into the secretive Central Bank Gold Agreements (CBGA). These were designed to coordinate, through the IMF, the sale of some 500 metric tonnes of central bank gold into the market each year. The covert aim has been to make gold less attractive by concealing its appreciation and, simultaneously, create maximum price volatility to destroy gold’s legitimacy as a monetary instrument.

Since 1980, when gold reached $850 a fine ounce (or some $2,330 in today’s debased dollars), the CBGA has been successful at disparaging gold investment. To this day, most Wall Street commentators reflexively opine against gold whenever the conversation turns to it. Displaying staggering ignorance or bias, they cite the lack of interest paid on gold and its storage costs. They ignore completely gold’s total return, through capital gain, which is up by over 100 percent in the past five years.

In keeping with the CBGA, it has long been considered taboo for major central banks to be seen buying gold. But the pacts are losing their grip.

China, now the world’s largest gold producer, has quietly increased its gold holdings by some 75 percent in just 7 years, while remaining a ‘loyal’ CBGA player. Cleverly, she has sidestepped the unwritten CBGA non-purchase rule by quietly diverting part of her domestic production into the central bank’s vaults before it enters the global marketplace.

Publicly, China has led international calls for the replacement of the U.S. dollar as the privileged reserve currency by a basket of currencies and gold.

Unable to tolerate the continued debasement of their dollar reserves, other developing countries are now taking defensive moves. Earlier this month, India bought 200 metric tons of gold from the IMF at market rates, increasing its reserves by 50%. Then, just today, [Wed Nov 25th] Russia announced that it will be shifting reserve ratios in favor of commodity currencies, like the Canadian dollar, and gold.

Far more distressing than the flight of central banks from the paper dollar are recent reports that certain governments, including Germany, Hong Kong, and members of OPEC, are now removing their gold holdings from the Federal Reserve and the Bank of England. If true, these reports could portend the risk of a gold run on the world’s two key central banks.

The actions of foreign central banks expose the most confidential views of their top government officials concerning the outlook for the U.S. dollar and the possibility of renewed panic throughout the global financial system.

Once again, I will go on record as saying that counterparty risk is rising, and the safest metal investment is either to take physical delivery or hold title to actual bullion in a stable country. Euro Pacific has long offered the Perth Mint Certificate Program for investors that don’t want the cost and risk associated with keeping gold ‘under the mattress.’ By holding title to gold in Australia instead of America, investors get better legal standing than with an ETF and the added comfort that the regime securing their holdings has among the world’s longest track records of stability and brightest growth outlooks for the next decade.

I hope - as we all do - that we are being ‘too cautious.’ But most investors are erring on the side of caution after witnessing half of their wealth disappear overnight. The problem is that investments traditionally considered safe might not be so, as the very assumptions built up over the last thirty years have been upended. During the October ‘08 crash, many fled into Treasuries and cash. All signs indicate that, in the case of another crash, a repeat of that behavior could wipe out much of our middle class. Those of us who still have doubts about this stimulus-laden ‘recovery’ are hedging our bets with history’s ultimate hedge - gold you can hold.

###

by Paul Airasian

The economy imploded a year ago. It was traumatic and devastating to many, but it wasn’t really surprising to serious gold investors.

Those who seemed most surprised should not have been: reporters in the mass media who are supposed to be our guardians. They had ignored, and even suppressed, explicit warnings about everything that came to pass. Yet now, when many in the media review what transpired one year ago – and even have the chutzpah to draw “lessons” of what we supposedly now know – they overlook their own complicity in what happened. And in their list of lessons they neglect to mention obvious conclusions:

* Debt cannot be papered over.

* Inflated currency is no substitute for gold.

* A personal portfolio should be diversified beyond stocks.

* Consumer confidence cannot be manipulated indefinitely.

* Politicians can’t ensure prosperity for this generation by bankrupting the next.

The media instead go to the same “experts” who were surprised by the economic meltdown to tell us what lessons we, the duped, should now draw. Usually their lessons come down to this: we should take their advice again – more regulation, higher taxes, more government spending, more lawyers and bureaucracy…

Gloom, glam, doom, damn

Over the last year, it seems like we went through four cycles of media coverage.

First, gloom. When the economy imploded, the media reported that the economy was in freefall and only government could save it…even though government had let it happen.

Second, glam. When President Obama enjoyed a glamorous inauguration, the media coverage seemed to suggest that sheer hope and charisma could save the republic.

Third, doom. When the economy continued to decline, despite “stimulus” and bailouts, the media reported that we may need to be resigned to ongoing recession, high unemployment and massive deficits “as far as the eye can see.”

Fourth, “damn, the economy is still awful.” That’s the media attitude now. And for many investors, the feeling is, “Damn, I wish I had diversified my portfolio to include gold, instead of putting everything into my house, stock and credit cards.”

Silence isn’t golden

Over the last year I’ve heard from a lot of friends and associates about my past warnings about the economy, and how accurate I was as to what unfolded. I wasn’t the only Paul Revere warning that “the crisis is coming, the crisis is coming.” But I regret that I was unable to do more.

“I told you so” is an obnoxious thing to say. We all make mistakes and we don’t like to have people remind us when we were warned. But I’m tempted to be blunt now in saying “I told you so” because this economic crisis is far from over… and you still need to diversify your portfolio. You can still profit from investing in gold. And I don’t want to be saying “I told you so, twice” to friends a year from now.

So, I will give you an overview of gold…and urge you to take action.

The 3 R’s – Reality, Reasoning, Recommendations

REALITY: Gold is money. Gold has been, and remains, the most important money in the world. It has been accepted as money around the world for over 4,000 years.

If you doubt that gold is the most important money, let me ask you: What does the U.S. military pack in the emergency kit of fighter pilots in case they need to buy their survival? They don’t put in dollars, yen, pound notes, or any other paper money. The U.S. military puts into the emergency kit some gold coins. Why? Because at all times, and in all circumstances, GOLD IS MONEY.

To appreciate the reality of gold, consider it in terms of past, present and future.

In the past, no currency has been as powerful, sought-after, or legendary. Gold is the classic example of wealth — memorialized in legend by the Chinese, Aztecs, Egyptians, Greeks and Romans.

Gold not only symbolizes wealth, it implies success and winning: good as Gold, the Golden touch, the Gold medal, and history’s Golden Rule: he that holds the Gold makes the rules.

Gold is the ultimate store of value. It has outlasted all paper currency and fiat money. And it certainly has out-lasted stocks. In fact, of the 30 original stocks that made up the Dow in 1929, only 1 is still there today. Gold will retain its value when many of today’s stocks are nothing more than a memory.

Gold bullion is forever. Gold bullion cannot decline to zero and it cannot be created at will by central bankers or governments.

Yes, gold is rare and limited. It takes a tremendous amount of energy, time and effort to manufacture gold and bring it to the surface from a mine — unlike paper money, which is printed daily and endlessly by central banks all over the world.

So, gold is precious…it has intrinsic value…and gold is forever.

That is the reality of the past. Let’s look at realities of the present.

Gold has almost quadrupled since the gold bull market started in April, 2001.

Some worry that gold’s current value of around $1,000 per ounce may not be sustainable. But when you factor in inflation over the last ten years, you realize that it’s not at an unsustainable high; there’s huge potential for continued growth. Read More…

- The Casey Files -
by Jeff Clark
Senior Editor, Casey’s Gold & Resource Report
November 12, 2009

“There’s no doubt in my mind that we’ll have a mania in gold. And because the gold and especially silver markets are so tiny, the rush into them will be like trying to push the contents of Hoover Dam through a garden hose. Our positions will go absolutely ballistic.” –Doug Casey, September 2009

Dear Readers,
Elmer Sutton’s eyebrows shot up when he saw the ad proclaiming gold stocks might make you wealthy.

It sounded like the perfect solution for his stock portfolio, loaded with investments going nowhere. He vaguely recalled hearing a little about gold, but if what the ad said was true, he thought he could make a killing.

So he called the broker and made an appointment for the next day. The broker seemed very knowledgeable and took the time to explain why he felt gold stocks were one of the best investments right now. He said this was not a get-rich-quick scheme, but that if you stuck with it, you could see potentially enormous profits. It sounded good. Elmer wrote a check for $2,500, and the broker bought three gold stocks for him.
The very next day, gold took a big drop and his spankin’ new gold stocks sold off hard. Not only that, there were riots in South Africa, where one of the companies was located. Elmer was instantly disgusted. He was losing money yet again. This time, however, he’d play it smart and get out before he lost it all – something his wife made sure he understood – so he hastily called the broker and told him he wanted his money back.

“Elmer, you can’t do that,” the broker told him. “This isn’t Woolworth’s.”
“I’m not buying them!” he yelled to the broker and slammed the phone down. Elmer wanted out, and that was that. He wasn’t about to lose any more money in the stock market.

Three years later, long after he’d forgotten about that broker, newspaper headlines were screaming about gold. Everyone at the party Elmer attended the night before was talking about how well their gold stocks were doing. His co-workers bragged about the good deals they were getting buying gold and silver coins. Everyone was talking about precious metals.

Elmer panicked; he didn’t want to be left behind. He scrounged around the house until he found the original confirmations of the trade he’d broken with “that broker”: 1,500 shares of Grootvlei at 35¢, 500 Anglo American at $2.50, and 1,000 Leslie at 50¢. He grabbed his newspaper and saw that Anglo was up 500% since then, and the others were paying dividends – this year alone – totaling more than he would have paid for his shares in 1976.

As the newspaper went limp in his hands, he had a vague recollection of the broker he met with and quickly tracked down the phone number. “I want to buy some gold stocks,” he breathlessly panted to the secretary answering the phone. She said the broker wasn’t in, and that while they would be happy to buy a stock for him, they were actually recommending investors sell their gold stocks.

Elmer couldn’t believe it. How ludicrous! Everyone he knew was buying, and he was personally acquainted with many people who were getting rich. He pushed on. “Look, everyone’s into gold right now. It’s on the front page of the paper, for crying out loud. So I want to buy some gold stocks right away.”

“That’s fine, sir, but I think you should talk to the broker first,” the secretary replied. “We really don’t recommend you do that.”

“I don’t care!” Elmer screamed, which he didn’t mean to do, but panic was setting in. “What’s this clown’s name anyway?”

“Doug Casey,” she replied.

Please Don’t Crowd the Emergency Exit
This true story explains how Doug Casey bought gold stocks at the very bottom of the market, as he took on those abandoned shares from Elmer. But today’s lesson underscores what Doug Casey saw back in the late 1970s: there’s certain to be a rush into gold and silver, and buying before Main Street catches gold fever is the only way to play this trend.

Because when Midas fever hits, prices will explode to the upside, for both the metals and the stocks. How do we know that?

First, let’s look at gold. If we added up all the gold ever mined on the planet, its total value would equal no more than $5 trillion at today’s prices. Yet, look at how this compares to the debt and bailouts and other monetary mischief of current governments…

*MZM (Money of Zero Maturity) is a measure of the liquid money supply in the economy. It consists of coins and currency, checking accounts, savings deposits, and money market funds.
**Year to date figures.

Let’s make this chart very clear. Of the $5 trillion in gold ever mined…

• The U.S. government has thrown over twice as much at the economy in the past 12 months.
• The U.S. debt is more than double this amount so far this year.
• Total global government bailouts are almost four times larger (and this is a conservative figure; one estimate puts it at $24 trillion).

I intended to include annual gold production as one of the comparisons, but the chart isn’t big enough and neither is your monitor: 2008’s global gold production equaled about $73 billion, and to make that figure discernable on the chart would require the Global Bailouts bar to hit the ceiling above your head. That’s how small the gold market is.

The implications are undeniable: when the greater public rushes into gold – whether in response to inflation, dollar woes, war, whatever – the price will be forced up by an order of magnitude.
[For an elegant and profitable way to own bullion gold, check out this website.] Read More…

By: Adam Brochert

Gold’s getting ready to have a short-term correction if it didn’t start today. Trying to game short-term corrections in a raging bull market is a fool’s game and there’s no reason to do it. Simply buy on sharp pullbacks and hold on. It’s not rocket science for those with a time horizon of more than a few days. One simple 10 year monthly log-scale chart can tell you where the current secular bull market is:

Anyone who has studied prior secular bull markets knows that a 4 fold gain over ten years is not a bubble and is not anywhere a secular top, but “bubble” calls are everywhere in the mainstream financial community regarding Gold. First, they don’t see it coming and say it can never happen and then they call “bubble” the second it does! I love it because Gold is still climbing a wall of worry. Yes, the short-term speculative froth is a little high, but long term (I am not a day trader), Gold has a long way to go regardless of what paperbugs think.

There is too much confusion regarding Gold and its role in society. This confusion, of course, is not by accident in a paper currency regime. The deflation versus inflation debate, it seems to me, has become the democrat versus republican debate in my opinion. In other words, it is a distraction and unimportant to serious Gold investors. Those who thought a democrat (i.e. Obama) would fix our country’s structural problems and stop the senseless warfare against innocent third world nations hopefully now understand and will learn from their naive mistake.

We are in the “confidence versus no confidence” cycle and let’s just say that confidence in Wall street and government isn’t exactly waxing right now. The Dow to Gold ratio, in my opinion, is a more reasonable proxy for the current secular cycle than the inflation versus deflation debate. The Dow to Gold ratio is a measure of confidence in “the system.” Gold is a proxy vote of “no confidence” in the system while the Dow Jones Industrial Average is a proxy for a “confidence” vote in the system.

People who think Gold is a good inflation hedge and a lousy deflation hedge have accepted the argument of the paperbugs. The rest of the argument then goes on to tell you why oil or stocks are a better inflation hedge and how Gold has failed as an inflation hedge in the past. Once you accept the false premise of Gold as another commodity play/inflation hedge like oil, you can no longer analyze Gold in its proper context.

Let me ask you some important philosophical questions:

Why did Gold back currencies or act as a currency in multiple previous historical periods (i.e. what was the rationale) over the past few thousand years and why did Nixon sever the U.S. Dollar’s final link to Gold in 1971?

Why was Gold ownership made illegal for citizens in the United States from the early 1930s thru the early 1970s?

Why has Gold gone up significantly in price during a recent period of rising interest rates (i.e. the 1970s) and during a period of falling interest rates (i.e. the 2000s)?

The answer to these questions is part of the answer to why Gold will continue to appreciate in price. This is despite the fact that you can’t eat Gold, the world is not coming to an end, Gold pays no interest, Gold has no growth prospects, Gold pays no dividends and you can’t spend Gold at Wal-Mart. Yes, Gold will continue to outperform general stocks, whether you think it’s appropriate or not.

Is the secret to Gold the U.S. Dollar Index? Not if recent history is a guide:

Read More…

Puru Saxena
Nov 13, 2009

We have been bullish about gold since 2001 but unlike some of the die-hard gold bugs, images of our children living in shanty towns do not keep us awake at night. In our view, gold is not a mystical metal, rather it is the ultimate store of value which tends to do well when fiscal and monetary policies are poor. On the contrary, the yellow metal does badly when the financial system is stable and confidence in central banking is running high.

It is our contention that the macro-economic environment has never been better for gold and the following factors will cause its price to rise:

a. Rising investment demand – We are living in treacherous times where the policymakers are committed to destroying the purchasing power of paper money. Wherever you care to look, central banks are inflating the supply of money and they are encouraging debt growth. Furthermore, most nations do not want a strong currency and they are engaged in competitive currency devaluations. Under these spooky circumstances, more and more wealthy investors will turn to gold as a safe-haven for their savings. As the money-printing intensifies in the future, we are certain that various creditor nations will also try to protect their foreign exchange reserves by increasing their positions in physical gold. Figure 1 shows that gold holdings as a percentage of international reserves have declined for three decades but this may be about to change.

Figure 1: Will governments start buying gold?

Source: The Tudor Group, IMF

b. Shrinking supply – It seems to us that the supply of gold will contract over the following years. It is interesting to note that the mined supply of gold peaked a few years ago and it is now in decline.

In addition to this reduction in production, central banks have recently signed another 5-year agreement which will limit their annual gold sales to 400 tonnes or 14.1 million ounces. This ceiling represents a reduction of 20% when compared to the previous agreement which permitted annual gold sales of 500 tonnes. Therefore, the new arrangement will further remove supply from the gold market.

c. Scarcity factor – Throughout history, only 165,000 tonnes of gold has ever been mined. At today’s price, all this gold is valued at almost US$5.5 trillion which is a tiny sum when compared to the gigantic pools of base money in circulation. Remember, central banks are currently sitting on US$8 trillion worth of paper money reserves and the broad money supply on a global basis is a whopping US$60 trillion! As governments all over the world desperately create money out of thin air, it is our view that gold’s value will appreciate as its scarcity relative to printed currencies increases.

In parting, we firmly believe that the investment demand for gold will increase in the future. Fortunately, for the gold bulls, this incremental demand will be met by sales from current owners who will want a much higher price as compensation for parting with the ultimate store of value during these turbulent times.

Puru Saxena

Saxena Archives
email: puru@purusaxena.com
website: www.purusaxena.com

By: Kenneth Gerbino, Kenneth J. Gerbino & Company

Gold Market

The financial crisis is now a year behind us and so far with very little inflation (which won’t last long) it is unusual for gold to be acting so robust. Usually when one sees a stock or a commodity going up when most of the usual reasons for its normal price behavior are absent, it signifies new, powerful and unknown force(s) have entered the marketplace.

There are four new forces that were not present in past cycles: 1&2) Central Bank and Sovereign Wealth Funds buying bullion discreetly and in an orderly fashion. With the recent Indian purchase of 200 tonnes of IMF gold this force is now out in the open. The fact this was not done covertly and undercover is very unusual. It is also very bullish, as it implies that other central banks are going to be doing the same thing. 3) Financial Institutions and money managers who have never invested in gold are buying gold as a small percent of their portfolio as pure monetary insurance. These three buying forces should be long term and steady investors. They will not be price sensitive buyers. They will look at gold for the long term in a way that quarter to quarter performance conscious money managers or traders do not. They will buy gold as insurance against the follies of governments including their own. They are also the deepest of pockets and could easily accumulate as much gold each year as is annually mined or disinvested by traders and scared retail sellers. 4) The last force is a hybrid of the old standby “gold bug” crowd and represents a new retail crowd outside of and distinct from the old line street wise buyer in India and China or hard money person. I call this force the nickel and dime force. It means that all over the world (in a hundred or more countries) small amounts of gold are being bought by people because of the unnerving events of the last 18 months. The buyers of this gold are people from the highest to lowest income tiers. Collectively they could swamp the even the institutions with buying power.

The largest jewelry retail market in the world, India, has significantly reduced gold imports. Taking up the slack is investment demand that is not readily defined. Therefore this slack, in my opinion is coming from the above four areas.

U.S. Economy

Turning to the U.S. economy, it appears that things have stopped getting worse (except unemployment) and that we may have seen the bottom. It doesn’t mean boom times ahead but it could mean a stagnant/sideways economy that could last a long time or recover slowly. The 2010 Congressional elections are going to be very competitive as the country is in a huge all out liberal/conservative war. Congressmen know that middle of road voters will usually vote their pocket book and in a close election the economy becomes the supreme issue.

If the economy is bad and their district is doing badly they will do badly. Therefore there will be tremendous pressure on the Fed (from the 435 Congressmen) to stay loose for at least another 12 months. The Fed should comply, not only to bail out the many banks that are still in bad shape but because they are now under scrutiny from HR Bill 1207 which demands the Fed to be more transparent. The Bill has a lot of support from both liberals and conservatives. This means the Fed is going to be under a lot of pressure to play ball or else.

Recent economic reports could be signaling a bottoming out process and slow recovery: Manufacturing Index – although still negative has had 6 straight months of improving stats. Building permits and retail sales (still in negative territory) have at least leveled off the last 9 months. Last but not least, Gross Domestic Product, which crashed in the 3^rd & 4^th Qtr. of 2008 and the first Qtr. of 2009 was down only slightly in the 2^nd Qtr. and up 3.5% in the 3^rd Qtr. These are stats that are saying, “It’s bad, but not as bad as it was.”

In the last ten years the Consumer Price Index in the United States has increased from 166 to 224. This means that if you were a retiree and had savings in August of 1999, you have experienced a 35% reduction in purchasing power. The Fed and the established political machine in Washington (includes Republicans and Democrats) have been operating a paper money system since 1934, and this abuse of monetary policy has become increasingly worse. The recent financial turmoil that almost took down the global banking system necessitated creating more money and credit in unprecedented amounts. (The U.S. money supply is up 20% in just the last year). The next 5 years will be very inflationary here and abroad and will drive gold to new highs.

Problems That Could Arise

The three areas that could present big financial problems in the future are: 1) State governments are mostly in horrible financial shape and could require massive federal bailout funding. 2) European banks are more leveraged today than our banking system was during the crisis. This is a simple measurement of their tangible assets (real stuff) versus what they have lent out or invested. The US major banks that were in trouble were leveraged 45 times (up from 18 times in 1998). The major Euro zone banks are 55 times leveraged. 3) The commercial real estate market in the U.S. needs a recovery and quickly. If not, this huge $3.5 trillion arena could face even more severe credit conditions and bankruptcies. Interestingly, all roads lead to printing more money to bail out the country’s problems. This is bullish for gold and the mining sector.

Gold Mining Stocks

The precious metal mining sector should one day explode to the upside for the same reasons that have been staring investors in the face for a long time

Mining is one of the few industries where many of the best of breed professionals do not want to work at a major company. The industry lives and dies based on geologists and engineers. Geologists find the metals and the engineers build the mines and infrastructure. The geologists or “mine finders,” have vastly better compensation if they create their own company and do away with the layers of corporate management that must approve exploration budgets. Consequently, thousands of these risk taking professionals with seed capital from venture funds embark to find large economic deposits around the globe. Most fail. But the ones that do discover and develop quality properties reap rewards in the $10’s of millions versus an $80,000 salary working for a major mining company. Because the best and brightest are independent and flexible, approximately 85% of all new mines coming on stream are because the initial discovery was made outside of a major company.

The majors therefore can rely on this professional army of risk takers to be at the forefront of the discovery cycle. They wait and pay $100 million to billions for a proven and developed property. Our job is to find companies that have already found and proven up metal deposits that would be prime candidates for a takeover. Since the gold industry produces about 80 million ounces each year, the industry has to replenish these reserves each year with viable new deposits. This is very difficult, especially for the larger producers. Hence consolidations and takeovers are numerous and expected to grow as gold demand increases in the years to come. Read More…