Gold to Trade Under $1,000/oz in 2014

This article (edited) was originally published to Premium Subscribers Monday September 23, 2013.

I wrote an article last week for Premium Subscribers and have decided to expand upon the original idea in that article and publish it to my 'free' lists.  One thing of note is that over the next 3 months is when I encourage investors/traders to sign up to my list as generally this is when I accept renewals.  I don't really care about how many subscribers I have, I have never written to make money, I just have a passion about certain things and have a keen understanding of business which I can apply across virtually any sector as is demonstrated in the small list below.  My Premium Letter has outperformed as usual with names like KLH.V, MCR.V, DND.TO, KNDI, GRPN, NCI.V and even ZYNGA doing quite well.  So sign up if want.  No pressure, but it is definitely worth the Bitcoin required to subscribe for a year.

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Sell Your Gold

Yes you heard it here at Beat the Market.  Sell your gold.  Gold will trade under $1,000 next year.  Sell physical gold, sell gold short on the spot contract, write calls, buy puts, do whatever you want to do... but sell your gold ASAP.  This is nothing new to Premium Subscribers at Beat the Market warned Premium Subscribers on February 6, 2013 about the impending gold crash in an article titled Gold... Nearing a Major Inflection Point.

Get it?  Sell it all and go as short as you can.  Gold is on track to trade under $1,000 in 2014.  I am sorry to say but the gold trade is over for now (at least for the next 12 to 18 months).  Markets look forward and there is nothing driving gold to the upside  in the short or medium terms except a threat of WW3 and possible extension of 'no tapering policies'.  So far the Americans have backed down from the Russians ultimatum regarding Syria and international peace regarding the issue has been established.  War mongers in Qatar, Saudi Arabia and the US will have to figure out another way to destabilize Syria and get their NG pipeline into Europe.

The markets dodged the 'tapering bullet' in September, neither was I convinced they were going to in September, since Jobs data was nowhere near the 6.5% to 7.0% range the FED wants to start tapering.  So what happened when 'No Tapering' hit the headlines?  Well...  Gold spiked immediately but failed to break maintain critical levels above $1370 and has now established a downtrend.     POG has now failed another key level at $1340 and is now driving well under this critical price band between $1330 to $1340.  It has also flashed a head and shoulders pattern over the last two months indicating that an imminent price drop could happen at any moment.  If the neckline breaks much below $1300 (a key psychological level)... you could start seeing momentum to the downside we haven't seen since February to April time period.

The gold bug's arguments haven't played out in the last decade and the won't in the next unless a worst case scenario of an apocalyptic nature happens.  Don't be fooled by these guys, FEAR sells, but often our mildest fears never happen let alone worst case scenario's. The US DOLLAR isn't dead.  We don't have a USD that is falling through the floor.  Thinking that the USD is going to become the next Peso are compeltely unfounded.  The USA is not the next Wiemer Republic. Simply put... conditions jsut aren't right for things of this apocayptic nature to happen.  Could conditions become ripe for such a thing?  Possibly.  But alot of things have to come together all at the same time for that to happen and irhgt now there is no indication these fundamental conditions are in place.   One BIG REASON that the USD march to ZERO halted is because printing money is the norm in the modern world of economics.  It's not just the USA doing it.  In a world where everything is relative, when eveyone is doing the same thing and at proportionately greater levels... how can you acutally devalu the USD?  The Japanese do it.  The British do it. The Brazilians do it.  Everyone does it. Even the Chinese do it.  Kind hard to deflate your currency when everyone does the same thing.

So you would think that Gold would track to the moon with these conditions, right?  

WRONG!!!  Simply put, Gold is not an alternative currency.  Gold is not money.  At best; gold is a financial asset and tracks global 'real inflation' over monetary debasment.  The gold market is riddled with flaws and is a poor choice to protect your money in real terms.  

Here are some problems with gold... 

• You can't spend gold.
• It isn't subdividable.
• It is finite and costly to mine, let along find.
• It is a very small market when thinking about global assets.
• Its not driven by theoretical values of money

In short... gold is pretty and it makes really nice jewelry and is prestigious.  But it is a poor financial asset and is definitly does not meet the definition of money.  It may be a unit of account and a store of value... but gold is definitely not a medium of exchange. Try spending an American Eagle (1oz gold coin) in a store.  The clerk is legally oblgiated to give you $50 on monetary value.

"Money is any object or record that is generally accepted as payment for goods and services and repayment of debts in a given socio-economic context or country.  The main functions of money are distinguished as: a medium of exchange (no); a unit of account (yes); a store of value (yes); and, occasionally in the past, a standard of deferred payment. Any kind of object or secure verifiable record that fulfills these functions can be considered money."

So why is isn't gold exploding tracking the debasement of leading global currencies?  

Because there is no inflation. This is not the Wiemar republic that printed money to pay a population.

For all good intentions of modern day QE, the reality is that none of this money ever really enters the system on a grand scale. It is meant to prop up the financial system.  Prop up the banks.  Prop up the fraudsters in Congress and on Wall Street.  You are not seeing major work programs like FDR implemented in the 1930's and 1940's.  You are not seeing govt create new demand with QE.  Nope.  It is meant to save the financial system, because the real dollars haev been scraped out of the system by the 1%. You are not seeing mass subsidies to get people into homes.  You are not seeing huge increases in lending to small business.  US growth topping out at 2.5%???  For all intensive purposes the US is already in a period of stagflation if you account for 'real inflation' increases in food and energy prices.  

For all intesnsive purposes... I believe the USA and Canada and most other developed and Westernized econmies are in a period of stagflation.  

When did we have stagflation?  In the 1970's.  What did gold do in the 1970's?  It was quite volatile.  It made a huge run up in the initial period when inflation initially took off and gold soared to $800 (infaltion adjusted) but then it crashed back down to $400 losing 50% of its value. If gold repeats this pattern during this period of stagflation, then you could expect $1800 to bottom at $900 in a 24 to 36 month consolidation.  I am not saying POG is not going to head even higher due to factors like the FED may never stop QE and may put the foot on the gas again in a few years to fight another recession... but ultimately I believe we are in a period of extreme volatility similar to the 1970's for which gold in my opinion is still firmly entrenched in a bear market.

So why would you buy gold when you short term indicators indicating further downside AND uncertainty about continuation about the overall bull in gold? 

Seems pretty silly to me unless you have fallen in love with a the Yellow Metal.  What would you wife think when you laid down to bed at night adding, Goodnight gold, I love to your regular bedtime chatter with your spouse?

Clearly, she would think you have lost and would have you selling all your gold the next day.

Will we see that ultimate parabolic spike like we did in the early 80's?  The gold bugs are still certainly convinced.  But those guys have had the same arguments for the last 35 to 40 years.  Even a broken clock is right twice a day.  I don't want to say soemthing is going to happenig when clearly it is not happening ad the conditions that make such a rally are no where to be seen.

Clearly... POG is a BIG FAT SELL.   If you want to buy your gold back,... buy it back at the cost the gold miners produce it at. Most of the CEO's at these huge miners are still in LALALALA land about the prospects about POG.  The group beleives their own dribble to the point they judgement is clouded and like I always say... the proof is in the pudding.


None of these guys have imlemented hedging programs... Watchout.  When gold breaks below $1200.. there is going to be a scramble by producers to hedge the next 12 to 18 months productiom.  The smart ones have started doing it... but finding a smart gold mining  CEO  these days is not that easy since al the smart ones have retired with small fortunes and moved on to bigger and better things.


We may see that ultimate spike in the later half of the decade, but the fundamentals on the macro level are not in place for this to happen. Not yet.  Continued global debasement will eventually leak into the system and will eventually devalue currencies worldwide.  But will this drive gold higher?  Only if it is seen as an alternative currency and gold at the present moment is losing its appeal in that category in favor of crypto currencies like Bitcoin which actually serve that purpose while gold is struggles just to maintain its relevance as a financial asset. Clearly it does not track global fiat currency debasement.

Maybe I am just young and don't see the appeal of gold... but why would I buy gold as an alternative currency when I can buy Bitcoin?  I can easily spend Bitcoin.  It is not debasable.  The only way to make it cheaper is to subdivide it... which they will eventually do as Bitcoin tracks well over a $1,000 in the coming years. That my friends is a true alternative currency.

Gold will eventually float too... but only as other, more favorable products enter their 'deemed' market valuation.  gold will be consdiered the poor cousin to Bitcoin simply because gold does not perform as a true medium of exhcange.  On the other hand... as global debasement continues or abates.... Bitcoin is clearly 'undervalued'.

One key element that is missing and is still debateable that will happen for POG to make its ultimate parabolic spike.... interest rates need to make a sharp turn and the US needs to lose thier ability to set their own interest rates.  You want conditions that mimic 30 to 40 years ago?  Interest rate need to go to 15% to 20% first.  Or at least be well on track for that.

If global debasement continues...  it is possible that this may happen to the US???

YES

But at this point in time... that is not likely and the US has no appetite to raise rates 1% or 2% let alone see GOVT T-Bills paying out close to 10%.

A review of the ST fundamentals....  

• US tapering fears
• Similarities with stagflation in 1970's when gold oringially spiked and then dropped 50% in value
• European Crisis abating 
• NO FEAR anywhere
• Low growth environment
• Abating inflation for things like food and energy
• zero wage inflation
• uncertainty about timeline of global QE programs.

The US has gone through a period of major food and energy price inflation with little or no wage growth.  Second half stagflation will see low growth persist and inflation due to natural wage increase response over the second half of the decade.    If you see wage price increase during 2015 to 2020 and continued global QE.  Eventually these conditions with rising rates will and put a bottom in the price of gold.  But at this point in time it is definitely not $1200 per oz.  POG could easily drop to $700 to $900 where the cost of production is for a lot of major mines and targeted cost of prodction for major new prodcution for mines like Detour Lake and Malartic.  These are two massive operations I watch very closely because if you want any more gold out of the ground, you are going to have to mine these types of deposits and account for 1.5M ounces of potential new production when operating at capacity.  

So what do we have left in the short term bull gold camp? 

Are you going to buy gold because you think WW3 breaks out?  Maybe on the confirmation of a global war I might consider a trade depending on the variables involved, but to be invested in gold under the guise that global conflict might escalate is shear stupidity.  Are the Chinese o ntnhe verge of dumping US treasuries on the open makret as an act of aggression?  NO.  We had a nice little rally this summer, and as predicted POG topped out in the last week of August and is now in a downtrend.

My gut says that this October you do not want to be long gold.  This is an unwinding of the US monetization trade and as Ben leaves the FED, so does this trade OFFICIALLY END.  Please take heed of this advice.  The Gold Bull is definitively over, or at least on HOLD; and as more and more people realize this liek the dumb dinosaur Gold Mining CEO's... you are going to see major momentum to the downside.  When does this happen?  I don't know.... but I do know that the bear market is continuing and technically for the last few weeks, the alarm bells kept ringing that this is a trade that you want nothing to do with.  

The rally after Ben announcing no taper was a relief 'get me the hell out' rally at best.  The selling after the initial burst is your first clue that you do not want to own gold. Here is the second clue.  Gold just flashed a major technical sell signal.

Which one you ask?

Only a head and shoulder pattern developing. The neckline is $1270 to $1300 and once those two critical areas of support break there is only resistance at $1200 before POG enters FREEFALL MODE.  



The breakdown this February to June will seem like child's play as this next breakdown is almost certain to lead gold well under $1000 per ounce next year.  Gold could lose up to 50% of its value over the next 12 to 18 months and this is just not something most of you will want to eat in your 'net wrorth' calculation.  The commodities super bull is over or at least on an extended break, and there are no signs anywhere this will abate any time soon! The US is reigning in spending and reigning in monetization and it will be a huge mistake to step in front of this trade.  When you cut the deficit in half... do you realy need all that QE?

Not really.

I am also of the suspicion the the US market has topped out, but this needs further analysis before I can confirm this.

But after watching POG carefully in September, you do not want to be anywhere near this trade on the long side.  I am sorry to be the bearer of bad news but this is almost certain.  I would be reestablishing short positions if not already done in anticipation of a major breakdown in price this fall and continuing into 2014.

I don't like to be the bearer of bad news...  SORRY.


On the other hand

Kandi has finally woken up!   The Chinese govt announced electric vehicle subsidies to the tune of $10,000 per electric vehicle and up to $80,000 for each electric bus sold.  The problem with KNDI stock is that it tends to move in days and then consolidate for months so this movement to the upside may only be temporary.  KNDI has not established a trend. The stock does not close above $8 I think you it will trend down towards a trendline that the stock is trying to establish.  It from today's trading and the candles it looks like you have upside to $8 or $8.50 intraday but without a daily close above $8.  It is hard to confirm any type of momentum past $8.  It is trying to establish a trend so the stock is looking better and better as a momentum play.






Christopher Skidmore


Beat the Market Stock Picks

Energizer Resources’ Green Giant Demonstrates Potential ‘Top Graphite Mine’ Qualities

Energizer Resources EGZ.T Share Price…. $0.205 Shares Out… 192.6M Market Cap… $39.4M It has been over a year since my visit to Energizer Resources’ (EGZ-T) MadagascarGreen Giant Graphite Project in  May, 2012.  Even at its earliest stages, this massive graphite property, stretching more than 120km looked like a world class mine in the making.  Telltale graphitic staining turned the normally rust colored African dirt to grey everywhere we went.  When we visited the Molo site on the second day and walked th e heart of the Molo Zone, a 300 meter trench continuously mineralized at surface; I was convinced that we were standing on a site that would supply a majority of the world’s graphite needs.   Not that I really knew much about graphite mining back then, but clearly, there was more graphite in Madagascar than the world could ever need.  Even I could see that. Over the past year the company has completed several key milestones including…   1.   Completed an initial NI43-101 resources estimate with 9,246m of drilling. 84.0Mt Indicated @ 6.36%C 40.3Mt Inferred @ 6.29%C   2.   Completed a PEA study indicating robust economics: $162M Capital cost $421M Pre-tax NPV discounted @ 10% 48% Internal rate of return (IRR)   3.   Greater than 99.9%C in advanced metallurgical studies   4.  'Large flake’ distributions up to 47.4% This summer's recent news of excellent flake distributions and high purity have sealed Green Giant as a future mine site.  The market may not yet be convinced, with huge price discrepancies and disagreement in the investment community as to which deposits are ultimately the most economic.  Graphite stocks like Syrah Resources SYR.A and Zenyatta Ventures ZEN.V are worth $300M and $200M, respectively, in market capitalization.  In comparison, other companies like Energizer Resources EGZ.T and Mason Graphite LLG.V, which have arguably just as valuable deposits, if not more, are valued at a paltry $40M and $32M market capitalization.  Never have I seen such disparity between companies within a given sector.  Companies which will be mining graphite within the next 2 years like Energizer, Focus and Northern Graphite are currently being valued at a fraction of the price of companies which do not have a resource or whose confidence is so low you can complete an economic study.  How does that make sense? Do companies like Syrah and Zenyatta really deserve this type of premium over its peers?  Are low cost producers like Energizer, Focus Graphite and Mason Graphite undervalued as potential mining operations?  This report compares these companies in order to attempt an answer to some of these questions. The best of ALL WORLDS… Purity, Flake Distribution and Tonnage  Madagascar graphite is known in the industry as the best graphite in the world.  Madagascar sits on a major continental shear zone.  This is one of the rarest geological formations in the world, located between two massive continental plates resulting in one of the highest temperature environments for mineral deposition.  This high temperature environment led to high purity graphite with very little contaminants being deposited along this shear zone in a hydrothermal process similar to the formation of graphite in the breccia pipes at Zenyatta’s Albany deposit.  Green Giant even has brecciated graphite deposits on the property.  The biggest difference between Albany and Green Giant; is that in Madagascar, the mineralization is on a regional scale stretching along the entire continental shear zone.  The reason the high temperature environment is so important is that it leads to most of the impurities simply being burned away in the deposition process.  What makes Madagascar graphite so unique is that both hydrothermal and metamorphic process were involved in the formation of these deposits resulting in both high purity and extremely large flake graphite formation.  In the graphite world, that is considered to be the best of both worlds. Green Giant graphite displays all the typical qualities of Madagascar graphite, especially when it comes to large flake distribution and extremely high purity.  The market may not think Energizer has what it takes, but everyone else in the graphite industry does.  DRA and Asbury have stated they are impressed with the high quality nature of Energizer’s graphite.  The high quality nature lends to the graphite being easily purified and worked which gives Energizer more flexibility to give the end user a specific desired product.  It also means processing costs will be low in comparison to other projects which will require more acid to reach the desired purities of the end user. Energizer has identified three qualities at Green Giant that ensure as a world class graphite mine site in the making.  High purity graphite in excess of 99.9%C High percentage of large flake of up to 47.6% (+80 mesh) Enough tonnage to mine into the 22nd century Extremely High Purity EGZ recently reported they achieved 99.9%C on a first-pass single stage hydrometallurgical purification using conventional leach technology test at SGS Canada.   The significance of the news and the corresponding 150% SP increase on July 29th is the potential for VALUE ADDED revenue streams at Energizer’s Molo Project.  99.9% purity means Energizer can sell into VALUE ADDED GRAPHITE MARKETS including spherical graphite manufacturers’ who require the highest purity natural flake graphite.  Energizer Resources will be able to sell this high purity graphite into the market for products like ‘Lithium Ion Batteries’ and ‘Specialty Graphite foils’ which are destined for applications like energy storage and certain refractory applications.   Specialty graphite foils are major components in smart phones, consumer electronics, solar panels, laptops and all flat panel TV and PC screens. It also means EGZ.T will be able to achieve a high purity with a simple processing flow sheet compared to SYR.A’s Balama which contains vanadium.  Vanadium is not a contaminant for many graphite applications, but if they want to sell their product to the battery manufactures or spherical graphite manufacturers, Syrah will have to process the vanadium out.  Vanadium is a known contaminant in lithium ion batteries.  Balama has low levels of other impurities like Green Giant, but the Vanadium in the deposit will make Syrah go the extra processing step if they want to try to capture the battery market.  Currently, the battery market is very small and wouldn’t support Bisset Creek’s production let alone Syrah's.  Demand for 99.95% graphite for lithium ion batteries was 15,000 tonnes in 2012 with demand split 50/50 between natural and synthetic. The trend is toward replacing synthetic with natural in the majority of lithium ion battery applications.  This market is expected to grow to 120,000 tonnes by 2020. In addition to achieving 99.9%C purity by leaching the graphite with acid, Energizer upgraded the standard floatation purity results used in the PEA from 94.9%C to 96.3%C.  They also achieved a much higher flake distribution by applying a simpler processing technique by using only a soft grind and gentle polish between floatation ,stages.  The most recent news release was very promising for improving the economics of the Green Giant project.  Not only did Energizer significantly improve results, but they mentioned to me they can even improve upon that!   Energizer can be a little bit more aggressive in polishing and grinding to achieve higher purities with a little less large flake distribution.  This gives Energizer maximum flexibility in tailoring a product to its end user requirements as a refractory would rather have large flake and 97% purity while battery manufacturers are more concerned about purities.  Ultimately, Energizer’s customers will determine the product mix that the company produces, but the combination of increased large flake distribution and purity will increase average revenue by at least $100 to $200 per tonne from the PEA and decrease operating costs.  Processing costs of $22.90 per tonne milled, (80% of the cost of producing a graphite concentrate) will decrease in the next economic study. Mining costs…..          $4.76/t mined Processing costs….   $22.90/t milled Instead of receiving $1,400 for their large flake, Energizer will receive $1,500 per tonne; they will be receiving $1,300 per tonne instead of $1,100 for medium flake, and between 10% to 15% of the medium flake will sell as large flake, further enhancing revenues.   This means that no matter where graphite prices go, Energizer will always receive premium pricing in the industry compared to its peers.   Current Graphite Prices of August  2013 USD$/tonne (94-97%C) Large Flake $1,400 - $1,500 (+80 mesh) Medium Flake $1,100 - $1,300 (+100-80 mesh) Amorphous $500 - $700 (80-85%C) High Percentage of Flake Distribution Energizer may not be the highest grading deposit at 6.3% compared with Balama 10.2% or Lac Gueret at 20.4%; however, when it comes to the distribution table, Green Giant is second to none and shows why flake distribution matters a whole lot more than grade.  Energizer’s large flake distribution (+80 mesh) at Molo is 47.6% while Syrah’s large flake (+75 mesh) runs at around 8%.  Syrah plans on mining 20%C grade ore at start-up while Energizer will be mining 8.5% ore.  Even though Syrah is mining grades 150% higher than Energizer, Energizer will actually produce almost 2 and a half times large flake graphite per tonne, as  the above table shows is significantly more valuable than medium flake or amorphous.  Company Project Grade %C Purity Achieved Distribution Chart (um) Large Flake Medium Flake Fines/Amorphous Energizer Resources EGZ:TSE Green Giant 6.3%  99.9% Cgr +80 47.6% +15 23.5% -150 28.9% Syrah Resources SYR:ASX Balama 10.2%  97.0% Cgr +75 8.0% +150 45.0% -150 47.0% Mason Graphite LLG:CVE Lac Gueret 20.4%  96.4% Cgr +80 30.6% +150 14.3% -150 55.1% Please note that not all -150 mesh is created equal.  Amorphous graphite actually starts at -400 mesh. While Syrah, Focus and Mason all have plenty of -400 mesh graphite, Energizer’s Green Giant has none.  Graphite pricing is set by supply contracts and the prices listed in Industrial Minerals reflect that with only the most popular markets being quoted.  Energizers fines will receive superior pricing to the ‘amorphous’ graphite of other projects.  If you give zero value to fines/amorphous because it is not certain they have any economic value selling against the Chinese amorphous production, Syrah is mining 150% higher grades, but poor distribution leads to 40% more revenue per tonne for Syrah milled at  $114/t vs. $81/t.  Syrah is still netting more $$$ per tonne in a straight out and out mining scenario, but the difference between revenues and grades is much less than is implied by grade due to Green Giant’s higher quality flake distribution.   Syrah will net $114 per tonne of ore at 20%C… $24 per tonne for large flake @ $1500/t $90 per tonne for medium flake @ $1,000/t $47 per tonne for fines @ $550/t Green Giant will net $81 per tonne of ore at 8.5%C… $61 per tonne for large flake @ $1500/t $20 per tonne for medium flake @ $1000/t $12 per tonne for fines @ $500/t When you factor in Energizer will produce 2.5 times the revenue per tonne of the more desirable large flake, Green Giant has a strategic advantage over a company like Syrah. Amorphous and medium flake markets will be subject to supply shock when Balama comes online while the large flake market is a lot more insulated. Resulting in a much higher pricing risk for medium flake and amorphous graphite markets.  Considering other factors like simpler processing, higher purity and the absence of vanadium in the deposit; Green Giant clealy emerges as the favorable mining scenario for graphite compared to Syrah Resources Balama. When you analyze future revenue streams of these two planned mines… does a $300M valuation for $114/t while a $33M valuation for $81/t make sense? Not when mining/milling cost is less than $30/tonne. Tonnage/Geometry/Scalability Now this is something I have tried to hammer home since I first wrote about Green Giant: this deposit is undeniably one of largest graphite deposits in the world, if not the biggest.  Green Giant is so big, you can easily locate the telltale grey staining of the deposit on Google Maps and see the trends stretching the entire property for over three hundred kilometers at surface.  Technically Syrah's drilling over a billion tonnes of graphite ore in Mozambique makes them officially bigger; but with mineralization stretching for more than 120km and the deposit being defined for only 1km in strike length Green Giant has more ore on its property than Balama. Different exploration approaches lead to different results. Energizer chose to drill a small portion on the deposit to do definitive economic studies while Syrah chose the ‘shock and awe’ route of widely spaced holes to demonstrate a large resource.  While Syrah has to go back and drill to raise the confidence of the mineralization to complete even the most basic economic reports, EGZ is working full steam ahead towards and updated economic study this winter which will include all the latest results.  In the long run, Energizer is further ahead towards building a mine than Syrah at Balama, which must initiate another expensive drill program before showing any economic confidence in the deposit. Green Giant has the greatest exploration upside of any graphite deposit in the world.  It covers a much wider area than Balama or Graphite Creek and the graphite is proving to be the best anywhere in the world.  When looking at new mine sites to be the backbone of a developing materials sector like graphite, you want to pick sites that have longevity and the ability to ramp up production in a timely and cost effective manner.  But if you want to build the next world class mine in the graphite sector, you need to have tonnage to bring all the pieces of the pie together.  Green Giant, Balama, and to a lesser extent Graphite Creek, all exhibit these qualities; have high quality graphite AND the capacity to expand production with the capability to mine into the 22nd century.     Just to give you an idea of the capacity of these new graphite discoveries… Green Giant has the capacity to produce the entire current flake market. Just think about these dizzying numbers for a second.   If you built a mine the size Western Copper’s WRN-T Casino (a 100,000 tonne conventional copper mine plus 25,000tpd heap leach), Green Giant would produce well over 2Mt of graphite per year of all types and purities.  100,000tpd times 0.06%Cg = 6,000 tonnes of graphite per day 6,000 tonnes times 365 days = 2,190,000 tonnes of graphite per annum With Green Giant’s recent flake distribution numbers and purities: 1.04Mt @ 96.8%C (+80 mesh) 0.51Mt @ 95.6%C (+150-80 mesh) 0.63Mt @ 95.7%C (-150 mesh)  2.19MT of graphite per year!!! With the large flake averaging the highest standard the industry has pricing for.   Do you get it yet? That is almost double the current size the ENTIRE GRAPHITE MARKET. Do you understand why it is "game over" for most flake graphite explorers yet?  Especially those with smaller deposits, something that is world class similar to Green Gaint or with grades like Lac Kinfe or Lac Geuret will have to be discovered to ever convince anyone to build a mine when you have BEHEMOTHS like Green Giant and Balama going into production in the next 3 or 4 years. These two monsters can simply pump out flake at a fraction of the cost because they can take advantage of economies of scale that smaller deposits cannot.   In the end, the small players just won’t be able to pump out graphite cheap enough to survive and be able to compete with Green Giant or Balama.  You are going to have to have a specialty product like lump or show such impressive distributions of large flake AND purities to continue in the game with the ‘Big Boys.’ Not even the Chinese will be able to pump out high purity graphite as inexpensively as Energizer will be able to at Green Giant. No mine will ever start out producing graphite at that rate because you would drown yourself in graphite stockpiles.  The market simply cannot handle and isn’t ready for it. Green Giant is a site that can easily be ramped up over the decades as anticipated demand for graphite grows.  The mining industry would be nuts to bank all their hopes on one mine when the whole graphite argument came about because of security of supply. The market could support at least 2 or 3 major mines outside of China, especially when the mines promise to be competitive against Chinese flake production.  Why would you risk it all in one mine?  It would be absolute craziness.  Right now it appears the TWO heavyweights in the graphite industry outside of China will be Balama in Mozambique and Green Giant in Madagascar. While Balama will be primarily a bulk medium flake producer, Green Giant will be known as a large flake producer and produce the most large flake graphite of any planned mine. This niche makes Green Giant special and unique as it looks like everyone has the ability to achieve high purity results while not everyone possess the large flake that Green Giant does.  In fact, Green Giant will produce almost half of the incremental large flake graphite from 4 planned mines; Lac Knife, Lac Gueret, Balama, and Green Giant.   EGZ.T and SYR.A planned start-up rates of 220,000 and 84,000 tonnes of graphite per annum, repecitvely, would represent close to a 30% increase in supply of the material over the next few years.  AND AGAIN, not to hammer it home or anything, but the big thing, vital for putting down production roots outside China, is that both deposits can easily match ANY INCREASE IN DEMAND unlike Lac Knife or Lac Gueret which are restricted in capacity due to limitations on the size of the resource. According to Industrial Minerals, graphite demand is expected to increase to 235,000t by 2016 under a base case scenario.  Demand is expected to increase to 528,000t under a bullish case scenario.   Just between Energizer and Syrah, that is 304,000t.  When including from the high grade Quebec mines Lac Knife and Lac Gueret; another 100,000t of incremental supply is added to the market.  That is enough graphite from 4 mines to meet 80% of the forecasted demand in the most bullish of cases. The biggest question in my mind is will it be the right type of graphite?  310,000t of that graphite will be -80 mesh. Graphite Mine Total Graphite Production Large Flake Medium Flake Fines Green Giant 84,000t 40,000t @ 96.3%C 19,720t @ 95.6%C 24,280t @ 95.7%C Lac knife 43,600t 14,600t @ 98.3%C 12,990 @ 98.2%C 16,000t @ ~98%C Lac Gueret 50,000t 15,300t @ ~96%C 7,136t @ ~96%C 27,569t @ ~96%C Balama 220,000t 17,600t @ ~97%C 99,000 @ ~97%C 103,400t @ ~97%C Incremental Graphite Supply 397,600t 87,500t 138,800t 171,300t A future flood of Medium Flake? A future glut of medium flake and amorphous may be on the horizon.  310,000t of medium flake and fines/amorphous is a lot of supply for the market to absorb, especially when a large portion of incremental demand is going to be for large flake graphite.   In the base case scenario of 235,000, if just half the new demand is for large flake, it could even put the squeeze of on large flake prices while medium and amorphous prices fall due to oversupply. The big elephant in the room regarding medium flake is Syrah’s Balama.  Approximately 99,000 tonnes of medium flake graphite will come onto the market when Balama goes into production.  Nearly a quarter the entire flake graphite market AND almost triple the combined medium flake production of Lac Knife, Green Giant and LAc Gueret.  99,000 tonnes of medium flake is a lot for the market to handle and could ultimately drive medium flake prices lower, closer to other medium flake producers cost of production. A 47.6 large flake distribution gives Energizer a huge advantage and leverage as a mine producing a high demand product that other planned mines just cannot produce. This certainly gives Green Giant an advantage in pricing risk vs. Balama and gives a much better assurance of the net present value and return on investment on the project.  Large flake prices will be a lot more stable and may even enjoy a larger premium over medium flake in the future. Potential to be one of the LOWEST COST graphite mines The new discoveries made in the graphite sector in 2012 promise to be the cornerstones of graphite production for the next century.  These deposits represent the low hanging fruit in the industry.  They are the biggest graphite deposits in the world.  They have excellent purity, grade from 4% to 20%, and are cash cows at current graphite prices.  Green Giant, Balama, Lac Knife, and Lac Gueret all have merit as legitimate graphite mining operations.  They are world class flake graphite deposits which promise to meet the world’s graphite demands.  What makes these projects stand out above the rest is the fact that all these mining operations promise to be some of the lowest cost mines in the graphite industry.  Mines with a cost so low, they will be able to compete against Chinese flake producers. Energizer Resource’s Molo may even be the lowest cost producing large flake graphite mine once fully up in operation.  Mines that could flood the ‘Chinese Flake’ market?!?!?! One factor you need to look at when building a graphite mine is meeting or exceeding the Chinese cost of production.   Chinese graphite mines can produce flake graphite between $350 and $900 per tonne.  According to my conversations with Energizer management who have toured the 4 of China’s larger graphite operations, the current Chinese cost of production before freight ranges from $350 to $450 per tonne.  The smaller, more remote, mom and pop operations can exceed $900 per tonne which is on par with Northern Graphite’s cost of production and the cost of production threshold for any graphite mine.  This certainly puts Green Giant and the smaller higher grade operations competitive against Chinese production of large and medium flake graphite. Estimates for Green Giant range depending on different variables, but under the most basic scenario Molo is estimated to produce large flake graphite concentrate at around $418 per tonne (ex-freight) which is similar to the lowest cost Chinese producers.  The higher grade  Quebec operations such as Lac Knife and Lac Gueret are also competitive because they have such a high grade only mine a small amount for a high output.  These mines are estimated at $435/t for Lac Knife and $390/t for Lac Gueret. The $418/t cost estimate for Molo is just for start-up production.  Management expects to be able to reduce these costs further by optimizing operations and using synergies with the nearby developing Sakoa Coal Fields. Currently, the Green Giant PEA is not optimized for mining, with initial plans including expensive containerized diesel as primary energy source.  Synergies with Sakoa Coal Project could bring costs down close to $250 per tonne with the addition of power, heavy oil and paved roads to the project.  The PEA was also done in South African Rand indicating further enhancements converting the PEA to the appreciating USD. Test shipments are being made to the Port of Soalara later this year from Sakoa, which means Green Giant will have access to the cost saving infrastructure sooner than later. Another big factor is processing, currently at 80% of the cost of producing a concentrate.  Energizer achieved better results from the PEA by applying a softer grind to the graphite.  A simpler and less intense process could result in further processing cost savings than was initially indicated in the PEA released in February.   The PEA was considered extremely conservative to start, but even if Energizer comes close to the targets in the PEA and then add further enhancements and synergies, Green Giant could be mined for $200 to $250 per tonne before they ship it to the coast. $250 per tonne vs. $350 per tonne?!?!??! If cost estimates are remotely accurate, this is quite a role reversal from 20 years ago when the Chinese flooded the market with graphite, putting Uley and Kringel out of business while mothballing projects like Bisset Creek and  Lac Knife. The Chinese have lost nearly all advantages that made them low cost producers and they don’t have the biggest advantage of all: limitless graphite resources to source from for the next 100 plus years that will enjoy all the synergies from economies of scale. The current Chinese flake mines are mining flake near the Russian border and trucking ore 3000km to the nearest purification plants at a highly subsidized $100/tonne cost which virtually nullifies Energizer’s transportation cost of $105/t.  I expect Energizer will eventually tie into rail to the coast, which will all but eliminate the transportation cost giving Energizer’s Green Giant that much more of a cushion on the Chinese competition. Consdering these factors: Chinese mines are depleting in grade and a quality. Chinese have lost a wage advantage mining  wages rise towards a global wage Energizer has optimal flake distribution percentages at Molo. Energizer has the purest flake commanding premium pricing Green Giant is the largest graphite deposit defined by area anywhere in the world ensuring limitless supply of graphite for years. Molo has the potential to be the lowest cost producer in the industry once in full production.    Low Cost Production Makes You King Some people say grade is king.  Well they are partially correct.  Grade is usually king because it makes a low cost producer.  So, in my opinion, low cost mining is king.  But grade is a good determinant of low cost production.   I don’t have to tell you how significant it is to be the lowest cost producer in the industry, especially when 70% of the industry originates in one country.  The biggest reason low cost production is so important is that it dramatically reduces the risk of the project’s long term viability through any and all types of markets. It ensures a profit before your competition and it ensures your company a competitive advantage for life.  It means that you are king of the miners within that given sector and everyone looks to you to lead the market place.  You set the market price.  Even in the worst markets, it is your production that still makes it to the end user. How did the Chinese capture the REE and graphite markets over the last 25 years and put mines like Mountain Pass and Uley out of business?   Simply by having the lowest cost production in the industry.   They could not have flooded the market without the lowest cost production, no matter how much China subsidized the miners. This is why I am so high on specific projects like Green Giant and Balama and Lac Gueret.  These projects have all the desired qualities to become world class graphite mines that will lead the industry into the 21st century and display qualities to be low cost industry leaders: They are massive graphite deposits which have 100+ year mine lives, with scalability They are in strategic locations close to water in Alaska, Madagascar, and Mozambique They are high grade deposits with even higher grade cores All 3 have excellent metallurgical results and the potential for value added markets, such as spherical graphite and receive premium pricing. Everything that anyone could want in a graphite mine, these projects have.  Tonnage, grade, purity and an ideal location close to water in politically safe jurisdictions.  These projects will ensure a cheap and reliable source of flake graphite for years to come. A typical flake graphite mine in China now mines flake for $350 to $450 per tonne. Green Giant Lac Gueret Lac Knife Stage of Development PEA PEA PEA Mine Size 3,000tpd 500tpd 800tpd Production 84,000tpa 50,0000tpa 43,600tpa Average Selling Price $1,564/tonne $1,525/tonne $4,490/tonne* Production Costs $418/tonne** $390/tonne $435/tonne Mine Life 20 years 22 years 20 years Capital Cost $162M $107.9M $154M Pre-tax NPV @ 10% $421M $283M $246M IRR 48% 33.7% 32% Payback 3 years 2.5 years 2.8 years *Focus Metals uses $10,000 price for their 99.95%C product, most likely materially overstated. **$105/tonne freight has been excluded from cost structure for comparison purposes. Christopher Skidmore Beat the Market Stock Picks

Gold Relief Rally Ahead of Fed Tapering Decision

Golden Relief Rally Ahead of FED Tapering Decision

To taper or not to taper...?

That is the question the financial world wants answered.  With the two most manipulated stats in the Western Financial System as targets; employment and inflation.  Tapering will start when the powers that be want tapering to start.  Basically on someone else's whim.  But if you are looking at the clues, like the fact we are even talking about tapering. It seems like those in the know have decided that enough is enough.  What I find must amazing is the abrupt turnaround in policy in less than a year.  From QE to infinity and beyond to talk of tapering QE, in less thatn a year.  Trying to predict anything that the govt has control over is as easy as reading people's minds.   It is like trying to predict where the little white ball on the roulette wheel is going to land...  only the house knows when.  They are the only ones who control the magnet underneath the roulette wheel which tells where the little white ball is supposed to land.   

It's house rules and all the house wants us to know is that tapering is indeed imminent.   Nice for us regular folks to finally know about tapering so we can sell our gold $300 cheaper than the inside sellers front running the FED this February.  Who thinks Bernanke, Yellen and Summers all sold their gold in February?  Just joking, Bernanke doesn't own any gold, but it really does make your mind wonder and wander about the dramatic sell off this February in the paper market.  Real FED policy gets churned out months in advance of the FED meetings.  The meetings are only a stage to jawbone the market where the powers that be at the FED feel they want it on a given day. 

Sometimes you get lucky... but only when the house wants you to.  In any event, tapering looks like it is a reality and will most likely be ushered in with a new  Federal Reserve Chair.  September should bring us a little more clarity on this issue.  Next week's FED meeting is a non starter... you might as well keep your vacations plans... all eyes are to September.  

Which leads us to the other burning question..... "who is replacing the 'fired' Ben Bernanke?"

Most would predict Janet Yellen, while she is the obvious choice and has been there with Bernanke through out the Quantitative Easing Policies and should be able to smooth the transition to a more normalized system.  The 'hated' Larry Summers has been appearing in headlines as Obama's man recently. Having 'his guy' as Chair at the FED may be too good of an opportunity to pass up.  It would certainly make the Obama administration a much more powerful administration having much greater influence in monetary policy. While Yellen is the logical choice, Obama knows and likes Summers while he does not know Yellen.  This could hold a lot of weight as these two positions have to be on the same page or that may be how Obama justifies it.  Who knows?
   
              OR


Tapering as Soon As September

We might not get tapering in September, but at this point in time, tapering is pretty much set in stone. Anyone holding on to thoughts that the US would continue to print money through QE style asset purchases is going to be sorely mistaken.   

So much for the Buzz Lightyear Theme... "QE to Infinity and Beyond."  

Currently, the only nation who is engaged in currency debasement are the Japanese and that is not enough to make me want to line my pockets with gold. Certainly not yet at this price which is still well above the $500/oz price when I first starting writing about the precious metal back in 2005/2006.      

That being said.....

Gold has made an important seasonal bottom

It was a little bit later in June this year, in fact POG took to the very last trading day of June to make a bottom.  July saw a modest $130 rebound in the price to $1330 and has now broken the accelerated downtrend it started in February of this year. Many quality gold producers (whose true cost of production is well under $700 per ounce and not the $1000 to $1200 that gold producers are apparently trying to convince the market) are still at fire sale prices and most have technically put in a double bottom.  

If this truly is the bottom for POG, (and I am not convinced it is)...  the gold producers are still at FIRE SALE PRICES and should continue to rally while POG has some strength.  Even if the POG isn't at a bottom and does drop to $1,000 and under... there certainly is more conviction with the Gold Stocks.  There are some really good names out their whose costs are well under $1,000 that I would certainly take a shot at going into September's FED meeting.  Although I would have sold all gold assets before the next FED meeting.

  


Why is GOLD ultimately going lower?  

It is a debt issue.

Ultimately, gold soared as the US debt spiraled out of control and ultimately, as the US deals with their deficit/debt issue or doesn't deal with it... will drive the price of gold.  Simple.  End of story.  Nothing else drives gold more than out of control US govt spending. Yes there are other variables that play into this trade at certain times like the risk trade or a declining USD or inflation; but the number one thing that drives the long term out look of gold is 'out of control US spending.'  

Bernanke is printing massive amounts of money.  He is injecting an unprecedented $85 Billion per month into the system. To the layman you would think that this unprecedented expansion of the balance sheet through monetary expansion would send the USD spiraling down to its death like in Zimbabwe.  But there is a huge difference.  The biggest being that QE has not affected the money supply.  All of the QE money hit the banks' balance sheets and stayed there.  Propping up America's sickest financial institutions and pumping up the biggest US Banks balance sheets to be meet Basil requirements.  None of that money ever really went into the system.  None.  In fact one of the reason's Ben Bernanke stated for end QE in the 'tapering' meeting was that the banks are now "Basil Compliant".

You can't have out of control inflation from record money printing if none of the money ever hits the streets.  It just cant happen.  Everyone had pictures of Helicopter Ben throwing money from a helicopter into the streets when Ben first came to the FED.... In reality it worked quite a bit different.  The common man did not benefit from QE except that there is a still bank on his block to who keeps sticking its hand in his pocket.  Ben basically stood at a giant podium telling the world he is throwing all this money out but in reality the cash feel into the front row of small gathering which was dominated by the biggest US banks.  Print all the money you want Ben.... because as long as the choke point at the banks remains in place.   There is no impending inflation.  Hell, if the money doesn't even get into the system and is just sitting the the US banks.  There is very little argument the USD should be devalued because there is still the same amount of demand (if not more) for the same US dollars. 

So what does this all have to do with gold going lower?  A lot.  No inflation.  No monetary debasement.  

And the fact that the biggest thing diving gold and the REAL REASON behind QE, 'out of control US spending' is disappearing faster than the ice cap on Greenland.  And in spite of things getting worse for the majority in America, the economy continues to be a resilient 'corporate economy' being the best of breed among the global economy.  American companies continue to lead all global developed and developing companies.  And one of the big reasons they aren't on the pickle the rest of the world is because they QE'd their way to Basil compliant and QE'D their deficit during this time.  In fact it really smoothed out the downturns as European Banks struggled to meet Basil complaint the old fashioned way.  Talk about a competitive advantage.

Ben Bernanke no longer needs to finance the US deficit.   The US banks are Basil compliant.  The Sequester has come and gone and was relatively painless seeing the US deficit go from $1.1 trillion to the current $817 Billion in 6 months.  A massive reduction in the deficit in just half a year.  In fact I am projecting that by the time the Obama administration has left office, the US will be very close to eliminating the deficit entirely and may even by in a surplus.  The Obama administration has stated they want to reduce the deficit another $800 Billion by the end of his term which will potentially put the US in a surplus if the US economy continues to grow.   

Don't think they can cut another $800 Billion...?  US spending amounts to $3.5 Trillion... The US GOVT only has to reduce its budget by 23% to achieve this goal.  I have full confidence any country can tighten the belts 23%.  I have always said that the US debficit problem isn't a revenue problem.  It is spending problem and I have full confidence given the current trajectory that this is achievable.  

US Deficit Same Size as QE... Coincidence?

If you hadn't noticed, the size of QE was the size of the US deficit because no one wanted to buy US treasuries while their spending was out of control.  The only other alternative for the US was Greece like interest rates if QE wasn't enacted upon.  The USA could have easily gone through a couple of Greece style crisis during the last 5 years and seen rates go to 6 or 7% just like Italy.  But when you are at the center of the financial system, you can print money to solve all your problems and get away with murder. No one else can do what the US did, except maybe Japan. 

Ben Bernanke is now leaving the Fed because QE is now no longer needed.  The US can still enjoy low interest rates because they have their spending under control and gaining back confidence of the international financial community.  They can now grow their GDP into their debt and slowly roll it over while slowly letting rates raise over the next decade. So some of you out there think they have to continue to buy bonds to keep rates low... I don't buy it... why?  

Because they have....

1. Restored confidence to the system
2. Fixed their banks
3. Maintained the integrity of the US dollar 
4. Are leading a global economic recovery while most countries still struggle

If only everyone could just print money to save their banks.  But alas... only the Banker at the game of monopoly can do this.

But in the game of monopoly... if you did do this... other players would quickly call you out as a cheater.  When did the world get turned so upside down that cheaters can cheat openly and the biggest cheaters of all end up winning the most?   Doesn't seem fair unless you are American. 


So the US have their spending under control, the no longer need QE to prop up the financial system AND their economy is the best of the bunch in a global economy.  So you tell me?  

BUY GOLD????

I can remember Peter Grandich's favorite line being... "everyone knows the USD is dead but the USA."... that was when gold was at $500 an ounce.   The USD is no longer dead and gold is at $1300 per ounce. Doesn't really seem like a great investing environment for gold to me.  Not a long term one...  The only thing propping up the price of gold is supply and demand and now that demand is waning, the price of gold becomes much more a reflection of the price of supply which is why the World Gold Council has colluded with the worlds biggest gold miners like Anglo Gold Ashanti and Barrick to artificially inflate their expenses in this new category loosely called "All-in Attributable Costs".  

Right now these giant gold companies are writing off billions and putting it right into their cost of goods sold which defies pretty much every accounting principle I was taught in school. Certainly the timing and matching principles are being violated. These giant gold companies have made billion dollar mistakes and hav somehow justified those mistakes as regular expenses.  They misforecasted the market, overpaid for assets, put billions into projects that may never mine and none of these miners bothered hedging when gold hit $1900 an ounce.  In fact now only a few miners are actually thinking... "(hmmmm  maybe hedging might be a good thing)"  

These executives have made billion dollar mistakes in any industry would be written off as an extra line item, but in the gold industry , apparently because CEO's are 'special' they get special treatment and this a regular cost of doing business.  

Well maybe if you have gone FULL RETARD. 

And Barrick is now warning that the Pascua Lama charge may hit $5.5B.  With the new rules defined by the World Gold Council... this is just a regular cost of doing business and an easy way to show these huge non cash impairments that dramatically increase the cost of gold.  Don't be fooled.  If a gold miner's cash cost is $600 and their all-in cost is $1000... they will keep mining gold until POG hits $600 and not $1,000.  The gold industry is in collusion to artificially inflate the gold price so they can hedge into the retail market and pyshcology put in a floor for gold above $1,000.  Why?  Because they know they same thing I know.  POG is only going one way over the next 3 to 4 years and maybe even longer...  and that way is down. 


Going Back to the gold Standard.... NOT!!!

Does anyone still believe the Gold Bug myth that we are going to the Gold Standard?  Just because gold was on the rise or is on the rise does not mean any one country would adopt the gold standard or any individual for that fact. Gold is a financial asset that helps you have keep a diverse portfolio and helps protect against increased monetary inflation.  You would have to have a complete meltdown for gold to get much higher than double the industry average cost of production as the law of supply and demand always dictates prices must come back into equilibrium... and anyone who follows the gold market knows that gold prices have been out of whack in relation to almost every currency for the last 10 years and only now are things starting to correct to a more nomralized range of prices.  Which seems to me is most likely some where between $700 to $1000 once gold finishes selling off.  Anyone trying to convince you of that indusry costs are $1,200 has an agenda.  They are not looking out for your best interest!  

Anyone trying to convince you we are going back to the godl standard has clearly not thought things through and doesn't understand what the original Bretton-Woods agreement was about and tried to solve.   There just wasn't enough gold to expand the monetary system as the same rate as the population expanded.  There was no nefarious reason at all... simple put... gold was an old relic and had worn out its usefulness in the monetary system.   Think about it.  Gold is finite.  There is only so much of it above ground and only so much of it you can mine.  The Earth's population is continually expanding and has more than quadrupled in the last 100 years.  There is no way  the financial system could have grown to match the population curve with every note being linked to gold.  It just couldn't happen.  Everyone would be chasing after continually less dollars each subsequent generation which would eventually lead to war between impoverished nations.

The system does work as intended when it is not abused.  And to put another nail in the coffin of gold... the only other reason to own gold is to have it as an alternative currency to protect yourself against goverment likethe recent Cypriot bank deposit scandal.  Bitcoin in the span of 4 years has overtaken gold as the alternative currency of choice.  Who wants to pay $5 premium on every silver dollar?  How can you spend a silver dollar?  You can't.  The biggest reason gold and silver are failing is that they do not work as alternative currencies. Their value is not legal tender.  You just can't spend it.  You can spend bitcoins.  You can easily transfer bitcoins into cash with a small transaction fee... the same can't be said for precious metals.

Gold and silver... no matter how you cut it... just does not meet the definition of money.  

Gold Bugs are like a broken clock.  They are right twice a day because its always two o'clock twice a day. They have again completely missed out on what has happend and now that we are at the end of the gold/debasement cycle.... they still think gold is going higher because they don't truly understand the godl market.  

Take a step back brother... a rational thinker looks at the drastically shrinking US deficit and goes...

"UH-OH.  QE is not going to last too much longer."  

And then they ask...  How can this be good for Gold?  Bottom line... is its not.
 

Three gold stocks to TRADE the recovery

In my opinion high grade is the name of the game and it is essential for low cost mining in a period of rising fuel and labor prices which low grade operations are much more exposed to moving 10 times the rock of a high grade mining operation. Barrick's Pascua Lama, Kinross's Tsiast and GoldCorp's Penasquito are all low grade billion dollar boondoggles.   Going after mines with grade is a way to protect yourself from further SP declines and companies like San Gold Resources SGR going from $5 to the current $0.10.  Although SGR may not be the best example as they are a company that does have grade.... just not enough of it.  

A great way to play this trade is to buy the best of the gold stocks for a 4 to 6 week rally to the point where they originally broke down in mid April.   Technically they may not get all the way back to that point, but the SP's in all the gold stocks will try and 'fill the gap' back up. 

I have 3 speculative gold trades for the next 4 to 6 weeks.   If you are long POG or gold stocks after that... you are playing under House rules... remember that.   Sometimes the market seem to change on a whim. 



Lake Shore Gold LSG.TO 
Share Price... $0.35  Breakdown Point... $0.55
Shares Out... 416.6M
Market Cap... $145M

Gold Production Guidance for 2013...  

• 120,000 to 135,000 ounces
•  ~4.5 g/t average grade
• $700 to $825 cash cost per ounce
• 2,800 to 3,000 tpd throughput capacity

I rank LSG ahead of KGI just because of its current price and may represent a better short term trading opportunity.  LSG has the advantage of a bulk situation underground while KGI is mining narrower veins.  



Kirkland Lake Gold KGI.TO
Share Price... $3.59   Breakdown Point... $5.70
Shares Out... 70.2M
Market Cap... $251M


Gold Production Guidance for 2013...

• 150,000 to 180,000 ounces
• 1.800 to 2,200 tpd throughput capacity
• ~10 g/t average grade
• $800 to $900 cash cost per ounce

Note... KGI expanded from 1,000 to 1,800 which led to increased costs and lower grade. Most of the expansion is finished and KGI can get back to mining high grade ore. Seems very cheap considering when it is all said and done this 2,200 tpd mill with reserves grading almost 14 g/t.  The best is yest to come for KGI with grades expected to increase over the years.  Increase in average grade will decrease cost per ounce. 




Detour Lake Gold DGC.TO
Share Price... $11.49
Shares Out... 138M
Market Cap... $1.56B

Gold Production Guidance...

• 260,000 to 320,000 ounces
• 55,000 tpd throughput capacity
• ~0.75 g/t average grade
• $800 to $1000 cash costs

Christopher Skidmore

Beat the Market Stock Picks