Eric Pratt asked:

Soltera Mining Corp. (OTCBB:SLTA) has been busy acquiring properties during the first quarter of 2008. Unstable markets have been unable to dampen the resolve with which management goes about building shareholder value.

Three weeks ago, Soltera announced it had obtained two new Mexican gold properties through the acquisition of Aztek Mineral, S.A. de CV. One week after that, the vending in of the Eureka Copper-Gold property and joint venture with TNR Gold Corp. (TSX.V:TNR) was announced.

That brings to 4 the number of gold projects under development by Soltera, summarized as follows:

El Torno (Argentina, gold, mining rights 7,863 hectares) is located in the Andean Cordillera near the international border with Bolivia. The property contains a very large gold-bearing quartz vein that extends intermittently for at least 14 km long north-south. The vein is sub-vertical and the gold is concentrated in a 2 meter-thick breccia zone along its western flank.

Historically, El Torno was worked by the Incas and the Spanish over a long period and has more than 1,000 m of underground galleries. There is still a small-scale operation extracting gold from elluvial deposits on the east side of the vein. In 1997, Puma Minerals carried out 2,100 m of drilling on a 1 km length; and in 1999 Penoles Minerals (operators of the world’s richest silver mine and Mexico’s richest and largest gold mines) undertook surface sampling, geological mapping and an IP geophysical survey in the same area. The combined (non NI-43-101 compliant) results of this work showed:

a) El Torno is within a “gold province” that extends several hundred kilometers north-south through Argentina and Bolivia;

b) The strongly mineralized breccia zone on the west side of the vein carries up to 37 gpt gold in the tested area, and has potential for several million ounces along the length of the vein;

c) Samples of stockwork zones some distance from the main vein gave up 23 gpt and in one case 112 gpt gold;

d) There are several IP geophysical anomalies that could indicate mineralization, but have not yet been drilled.

Soltera holds almost all the 14 km length and commenced their exploration in late 2007 with a geochemical stream sediment survey combined with structural mapping designed to target specific parts of the vein and the surrounding area for more detailed investigation.

Soltera will now define drill targets using more detailed geochemical and geophysical surveys. Drilling is scheduled to commence in the second quarter of 2008 and, given success, this will lead immediately to a full feasibility study to commence before year’s end.

Real de Cananea, Mexico

The “Real de Cananea” (Mexico, gold, mining claims 1,030 hectares) is located in Sonora State 26 km from the Cananea copper mine owned by Penoles. It contains a gold-bearing fault zone up to 270 m wide and more than 400m long within Cretaceous volcanic rocks that are intensely altered and carry gold.

There is a small old mine in the center of the property that was probably first worked by the Mayas and certainly by the Spaniards, with several shafts reaching 100 m below surface. The hard wallrock was mined with enormous effort and this, together with the fact that water had to be transported 8 km, indicates the importance of the mineralisation. Gold is widespread on the property, with altered rocks showing up to 65 gpt.

Soltera’s target is a large-scale open-pit and the area is broad enough to accommodate well in excess of 1 million ounces. Geochemical, geological and geophysical surveys will be used to define drill targets and drilling is scheduled for the third quarter of 2008.

Eureka, Argentina

(Argentina, copper-gold, around 10,000 hectares) is located in northern Argentina near the Bolivian border and only 3 km from the El Torno project. The property contains ‘Red Bed’ type strata-bound copper mineralization within sedimentary sandstones, clays and conglomerates. The surface exposures are weathered and contain erratically distributed gold. Alluvial gold has been worked in the area since prior to the time of the Spanish arrival and there is an old mine with over 5 km of underground workings that exploited copper and gold on a small scale until 1987.

The deposit is similar in style to major copper deposits in the Bolivian part of the Tertiary Belt. A geological estimate in the late 1990’s (historic resources estimate which is not NI-43-101 compliant) was 50 to 60 million tons grading 1% copper. Only 70 meters of the 450 m deep formation has been explored to date which leaves extensive upside potential.

TNR Gold Corp. (“TNR”), a Vancouver based mining company listed on the TSX with extensive experience in Argentina, has entered into an option agreement with the option vendor to acquire a 75% interest in the property by spending a total of US$3,000,000 in exploration and option payments before April 20, 2010.

TNR will undertake detailed geological mapping, trenching, geochemical and geophysical surveys, sampling the historic underground workings and drilling. Soltera is not required to incur any expenditure on the project at the present time.

Casita Colorada, the Company’s other project in Mexico, is a large mineralized shear zone worked since the end of the 1800’s for gold. The mineralized zone was at least 400 m long and 150 m wide and there is potential for a substantial gold deposit, but the project is being held in reserve so that the company can concentrate on El Torno and Real de Cananea.

Be sure to keep a close eye on SLTA over the next couple months. Geochemical assay results are due any day now, and there’s plenty of news to be generated by exploration activity on all the properties.

gold metal detector

Jon Shanahan asked:

When Teryl Resources Corporation (TSXV: TRC, Pink Sheets: TRYLF) became interested in the Gold Hill Prospect near Bisbee, AZ, they were following a pretty strong lead – Historic Gold Hill, at a 5491-foot elevation, looks out for miles over the Warren mining district, a famously ore-rich region of the Southwest. Phelps Dodge Corporation’s Lavender Pit mine, only 4 miles to the west of the project, is one of the most productive copper mines in history, producing over 75 million tons of copper ore from 1954-70, and in excess of $1B in copper, gold, and silver.

Preliminary geophysical and geological testing on Teryl’s properties in the region has been promising, and the company has recently signed a contract to begin drilling.

Teryl Resources turned an eye to the Gold Hill prospect in the summer of last year, and a number of indicators immediately urged closer inspection. A report by Frederic Rothermel, PhD, outlined a pattern of mineralization that moved from copper-rich/gold-poorer at the centre of the system to gold richer/copper poorer at the fringes – this pattern is consistent with features of the Carlin Trend in Nevada, which contains over 100 million ounces of gold in proven and probable reserves. This zoning pattern at Gold Hill is unique to the Warren mining district. Geophysical parallels to Lavender Pit are numerous, and further geological testing revealed significant gold values and a copper presence of up to 3% in surface assays.

John Robertson, President of Teryl Resources since 1982 states: “The Gold Hill project is an area which may have the potential to be developed into a large lode-type copper deposit. Our geologist feels that the anomaly is similar to that of the Copper Queen deposit (Lavender Pit).” With regard to possible quantities on the property, according to Robertson, “The sky’s the limit.”

The geophysical parallels to nearby producers are strong and compelling, but there are indicators that this is an unusually rich deposit area for the region. “One of the interesting parts of the property,” says Robertson, “is that not only does it have very similar geophysical data (to the Copper Queen), but when the previous work was done on these targets from the Lavender Pit property and the Phelps Dodge properties, they didn’t get any surface assays – they drilled it based on geophysical data. With our particular property we actually got some pretty high-grade values on the surface, which is very unusual for that area.”

This indicates that the deposit could be even richer than the neighboring targets: “It’s a better target, when you have not only the geophysical targets, but the geochemical targets as well.”

Developing claims in an historic mining district has obvious infrastructural advantages: “(Gold Hill) is very close to previous producing mines, so there is the infrastructure there.”

The property at the Gold Hill prospect currently comprises 248 acres, and the company is actively acquiring an additional 640 acres as drilling begins.

“The time to really capitalize on a stock is before the drilling commences,” says Robertson, “Once Teryl starts drilling, then the anticipation of good results will increase the value of the stock. And if the results turn out to be positive, you could see the stock increase several-fold. The key time for investors to buy shares of a resource company is before the drilling program.”

Alaska

Teryl Resources is also a main property holder in the Fairbanks Mining Division in Alaska. The company holds interest in a number of properties in the region – the Gil, West Ridge, Fish Creek, and the Stepovich Properties – all of which are near or adjacent to Kinross Gold’s Fort Knox mine, the most prodigious gold-producing mine in Alaska, and the True North deposit, also owned by Kinross Gold.

Teryl has spent 1.6 million on exploration on the Gil property, and has defined a resource of 400,000 ounces of gold (10 million tons X 0.04 ounces per ton). The main zone that contains the resource reaches a thickness of 80 ft., and has been traced along a 2,500 ft. length.

The West Ridge property is 100% owned by Teryl, and anomalies of elevated gold in the soil show a presence of antimony and arsenic that is very similar to Kinross’ neighboring True North Deposit (which has a defined reserve of 616,000 ounces of gold at 0.046 ounces per ton gold). Thus far, Teryl has spent $350,000 on exploration of the property.

At the Fish Creek property – 50% owned by Teryl and adjacent to the north to the Gil property – an auger drill program has identified elevated gold presence that suggests that the Gil resource extends into the Fish Creek property.

“We also have some drill targets that we’re planning on drilling in that area,” comments John Roberston. Once deposits are defined, the ore will be readily processed at Kinross’ nearby mill.

Other Holdings

Teryl Resources also has joint venture silver properties, and ongoing revenue from oil and gas projects in Texas and Kentucky.

For more info: www.terylresources.com

This article is intended for information purposes only, and is not a recommendation to buy or sell the equities of any company mentioned herein. It is based on sources believed to be reliable, but no warranty as to accuracy is expressed or implied. The opinions expressed in the article are those of the author except where statements are attributed to individuals other than the author, in which case the opinions are those of the individual to whom they are attributed.

gold dredges

Eric Pratt asked:

Goldcliff Resources (TSX.V:GCN) assayed a trenching sample from its 100% owned Panorama Ridge project that returned a value of over 15 ounces per tonne of gold. The bonanza grade sample was assayed twice to confirm the result, which has validated the company’s theory that there would be high grade zones encountered throughout broadly disseminated lower grade host rock.

In the Hedley gold camp, the gold mineralization occurs in altered (skarn) sedimentary beds.

At Panorama Ridge,very little of the gold mineralization is visible native gold, even in the Bonanza Trench intercept. In order to have these bonanza gold grades, a gold-telluride compound mineral is thought to be related to the high-grade gold values. Goldcliff is researching the mineralogical possibilities to identify the mineral that is attributed to the high-grade gold values.

The Bonanza Trench, located at the south-western portion of the York-Viking zone, is a major gold discovery. The high-grade gold discovery at Panorama Ridge is comparable to the high-grade gold mineralization mined underground at the Nickel Plate Mine. The high-grade gold beds occur within an overall mineralized sequence that is up to 200 metres in thickness. The lower grade gold portions of this sequence were successfully mined by Mascot Gold Mines’ open pit operation.

The geological setting at Panorama Ridge is similar to these previously successful settings. Goldcliff has been targeting the bulk-tonnage potential of Panorama Ridge with success. The Bonanza Trench gold results confirm the high-grade potential of the property.

Meanwhile, trenching in the Nordic Zone at Panorama Ridge has expanded the area of previously determined mineralization by an additional 175 metres. The Nordic Zone and the York-Viking Zones are roughly 400 metres apart.

The Nordic Zone contains gold values averaging 1.30 to 2.32 g/t with higher grades ranging to 26.50 g/t.

Goldcliff will continue trenching throughout the 2008 exploration season, and will complete the rest of its 10,000 metre core drilling program.

Famous for gold since the first discovery in 1897, and once a thriving mining boomtown during the 1900s, Hedley was one of the great names in Canadian mining, and was named after Robert R. Hedley, manager of the Hall Smelter in Nelson, who had grubstaked many of the original prospectors.

Prospectors noticed coloured striations in the cliffs and recognized them as ore-bearing. Claims staked here were to expose one of the richest fractions in the history of mining in British Columbia. The mines were located high on mountaintops overlooking the town of Hedley below, and an aerial tramway 3 kilometres long had to be built to remove the ore.

The great northern railroad pushed through to Hedley in 1909, and the Nickel Plate mine continued to spew out rich ore at the rate of more than 50,000 ounces per year. The Mascot Fraction joined the action in 1936, to increase the total area production to more than 1.5 million ounces of gold and more than 4 million pounds of copper, significantly enriching the shareholders.

The Hedley Basin has had a long history of gold production (1904 to 1996) from the Hedley North mining district. During this period, 78,506,148 grams (2,524,313 ounces) of gold were produced from auriferous skarn deposits. The Nickel Plate and Hedley-Mascot mines produced more than 97 per cent of the gold from a single gold-skarn deposit (Nickel Plate deposit). Smaller production came from the French, Good Hope and Canty gold skarns. A small amount of gold production came from the Banbury quartz-carbonate veins (Maple Leaf and Pine Knot) located in Hedley Basin South.

The Mascot and Nickel Plate mines eventually fell under the ownership of Mascot Gold Mines Ltd, which traded from a start of $0.45 to a high of $20.63 on Tuesday August 4th, 1987.

Access to the Panorama Ridge property from Hedley is via Highway 3 by turning northeasterly onto the Old Hedley Road (Nickel Plate Mine Road) 2.5 kilometres east of Hedley. Alternatively, access from Keremeos or Penticton is via Highway 3A along the Green Mountain Road and the Apex Mountain Ski Hill Road. The Old Hedley Road public road passes through the northern portion of the property.

A number of logging and mining roads give excellent access to most areas of the property. The Winters Creek Forest Access road and their branches access the eastern and south eastern portions of the property. The West Cahill Forest Access Road accesses the western portion of the property (Skar prospect). The Good Hope Mine road accesses the south western portion of the property while the East Cahill Forest Access road accesses the Nordic, Spar, York and Slope prospects.

gold metal detectors

Katherine Young asked:

When Teryl Resources (TSX.V: TRC) announced the initiation of drilling on its Gold Hill copper-gold-silver project located near Bisbee, Arizona, investors familiar with the area sat up in their chairs. Their interest was piqued, firstly, because Gold Hill is four miles from Phelps Dodge’s Copper Queen/Lavender Pit Mine, which produced in excess of 75 million tonnes of copper, silver and gold ore between 1954 and 1974. Secondly, because surrounding mines in the Bisbee area have collectively produced more than $6 billion in metals over the past 100 years.

Teryl Resources’ President, John Robertson, who acquired the property, expounds a strategy for finding minerals that is simple, effective wisdom in the mining exploration industry. In Robertson’s words, “the key to discovering a good property, any mining property, is to drill near existing gold and copper properties. Always. You want to be in any area where there is known gold or known copper production.”

Given the setting, optimism about the geology at Gold Hill seems fair. The geological conditions suggest a large, disseminated deposit of gold and copper amenable to low-cost open pit mining. In one report, John Shanahan of Resourcex Group cited a geological report on the prospect, commenting, “a report by Frederic Rothermel, PhD, outlined a pattern of mineralization that moved from copper-rich/gold-poorer at the centre of the system to gold richer/copper poorer at the fringes — this pattern is consistent with features of the Carlin Trend in Nevada, which contains over 100 million ounces of gold in proven and probable reserves.”

Hopeful that the Carlin trend comparison is apt, Teryl is moving ahead with exploration on the property. Teryl has employed Diversified Drilling LLC to drill at least three holes on identified, high-grade, surface copper targets. Exploration completed on the project so far has included aeromagnetic survey interpretation and field examinations. This work, and a sampling program that assayed up to 2.54% copper, were used to identify the proposed Gold Hill drill locations.

The advantageously located prospect consists of seven claim blocks including Old Gold Hill, Superior, and Bastion Mines in the Warren Mining District, Arizona. Teryl has the right to earn 100% interest in the property subject to 10% net profit interest.

At all Teryl’s properties, Robertson, who boasts twenty-five years’ experience raising money for companies in the natural resources sector, uses the same recipe for success. “First, find the money for the company; then find an excellent property. Next we start a junior exploration program that we finance ourselves. Once we come up with some excellent results, we will continue to drill, raise more money and bring in a partner and they can develop it further.”

If he makes it sound simple, it’s because Robertson has done it before in both oil & gas and mining. In Alaska, Teryl is one of the largest property owners in the mineral-rich Fairbanks Mining Division.

Teryl has collected properties adjacent or close to Kinross Gold’s True North Property and Kinross’ Fort Knox Mine, the largest producing gold mine in Alaska. Teryl’s Gil property, a joint venture with Kinross, hosts a resource of 400,000 ounces of gold. True to Robertson’s strategy, after doing grass roots exploration on the property, Teryl entered into a joint venture agreement with Kinross Gold to further develop the resource.

Another of Teryl’s Alaskan properties, the 100% owned Westridge property has seen initial exploration including sampling. A news release dated November 2004 reported results that favorably compared the Westridge geology to that of other gold properties in the Fairbanks area. The finding “suggests that gold mineralization within the sample grid may be intrusive related, a similarity shared by several other intrusive-related gold systems the Fairbanks District.”

Teryl’s Fish Creek gold property, a 50% option from Linux Gold Corp, comprises 30 mineral claims adjacent to the Gil property. Teryl and Linux Gold recently announced the discovery of six new geophysical targets on the property. The two companies, according to a recent press release, plan to begin an exploration program at Fish Creek this winter.

The remaining Alaskan claim is the Stepovich silver claim adjacent to Kinross Gold’s Fort Knox Mine where Teryl has 10% net profit interest and Kinross owns 100% of the claims subject to Teryl’s 10% interest.

Finally, oil and gas prospects in Texas and Kentucky provide a financial foundation for Teryl. Robertson commented, “One of the core things for a junior company is cash flow to pay for their administration costs. So having oil and gas properties is helping the company having revenue.”

With crucial cash flow, and excellent projects underway in Alaska, Teryl Resources has turned its attention to Gold Hill in Arizona. Robertson doesn’t mince words about his intentions. “We have claims in properties that could evolve into a major mine because we’re near a major gold and major copper mine. We’re looking to find a major discovery and then we will probably joint venture with a major company and they will put it into production.”

With properties collected in both Fairbanks Mining Division and Warren Mining District, major mining companies close by and money for exploration, Teryl Resources seems to be making all the right moves to follow through on Robertson’s plan.

This article is intended for information purposes only, and is not a recommendation to buy or sell the equities of any company mentioned herein. It is based on sources believed to be reliable, but no warranty as to accuracy is expressed or implied. The opinions expressed in the article are those of the author except where statements are attributed to individuals other than the author, in which case the opinions are those of the individual to whom they are attributed.

gold mining equipment

James West asked:

The hemorrhaging of stock values in the resource exploration sector, particularly gold stocks, is a direct result of the contraction of available capital at the center of the banking universe. The general sell-off in the market has trickled down to companies that have considerable amounts of gold in the ground, and these companies are a steal right now.

The gold price is starting to really gain traction with the broader market now, and the reasons for that have to do with the onset of economic recession.

Are we going into economic recession? In North America, the answer is “yes”. But globally?

Yes. Here’s why:

The worst piece of news last week, and the one that bodes most ill for the future, was the loss of 17,000 jobs in the United States. That is the first drop in 4 years, and confirms in the minds of many that the U.S. recession is now underway.

With the incessant write-downs of banks that have dominated the news for the last 5 months, one could be forgiven for failing to understand why anyone is surprised about the onset o recession, or why some don’t see it as inevitable.

Banks worldwide have suffered more than $135 billion in credit losses and write-downs, and some analysts estimate that the write-downs could total as much as $800 billion.

This is essentially the global banking system admitting to the public that it has overvalued the quality of the assets backing its loan portfolio. Since this is all essentially sub-prime mortgages on residential real estate, a lot of people, particularly in the United States, have been living way beyond their means, and a lot of the profit that has generated for companies is now going to evaporate as the system is forced to correct itself.

The effect of this contraction in global money supply is that real estate owners are forced to sell assets at whatever price they can get for them to cover inflated financing costs coincident with declining asset value. The owners we’re talking about here are homeowners and the banks who financed them.

Citigroup Inc. (NYSE:C), the world’s largest corporation and the Unites States’ #1 bank, wrote down the value of its portfolio by $18.1 billion. It chopped a total of 21,400 jobs in 2007, and subsequently sold 4.9% of itself to the Abu Dhabi Investment Authority for $7.5 billion and diluted itself again in January with an additional $12.5 billion in financing in a private offering.

And herein lies the great paradox. At the center of the financial universe, the nattily dressed and over-educated Wall Street boobs who have managed to engineer themselves into a Ph.D. level disaster have now sent out ripples amounting to the fire-sale of equities with real value represented by natural resource assets.

This means a buying opportunity for anybody with liquidity.

The forced sale of quality assets is amplified by the Sheep Effect.

Investors see the sell-off and think it’s a reflection of the value of the equities being sold, and in panic they dump whatever they’ve got fearing the worst.

And here we are. Mining and oil and gas stocks at ridiculously low prices, looking for a buyer.

China and India, and to lesser extent, South America and Russia, are widely expected to prevent the recession from growing to global proportions, but it is unlikely that this will be the case.

Yes, China is the manufacturing center of the universe, gobbling up a large percentage of the raw commodities that have powered the mining sector, and India too is in the midst of an infrastructure build-out unlike anything in its history.

But these two economies have grown on the back of a strong U.S. economy, and with the diminishing revenues from this source that are to result from the contraction of the U.S. economy, the impetus of China and India’s growth will also suffer.

Furthermore, and this applies to China more so than India, the U.S. Dollar’s diminishing value and its apparent tendency to try and spur growth through rate cuts resulting in further downward pressures on the dollar means that the US dollars held as foreign reserves are going to have a negative effect on the Chinese balance sheet.

So I think you’ll see growth slow around the world. Which means that its time to buy gold.

And sure, you can buy the metal, but as ever, and especially now, the real big wins will be made from juniors who have the goods. Past producers that shut down and sold during the depressed gold price of the late 90’s with ounces left behind are a safe bet.

Some great deals in the junior exploration sector?

Look at ATW Venture Corp. (TSX.V:ATW), who picked up the Burnakura Gold Mine for a song. The Burnakura Gold Mine consists of 58.8 square km of mining leases and prospecting licenses, a fully permitted 160,000 tonne per annum (450 tpd) CIL gold plant, rolling stock, underground equipment, workshops, office space and a 90 man camp. The project covers 12km of prospective strike length along a major auriferous shear zone and mesothermal gold system. Historic production on the project focused on lower grade surface oxides, which had been historically mined from 15 open pits stretching along the entire 12 km of strike length.

Another good choice: Animas Resources Ltd. (TSX.V:ANI) . This is company was put together in the summer of last year, and in short order has raised over CA$5 million and acquired to large land packages in Sonora, Mexico that includes the past producing Santa Gertrudis Mine containing a historic (non 43-101 compliant) resource of 720,000 ounces of gold. The advisory board and board of directors is made up of past senior management of Phelps Dodge, now part of Freeport McMoran (NYSE:FCX) , Newmont Mining (NYSE:NEM), and Cominco. (TSX:TCK)

And last but certainly not least, Premier Gold Mines Ltd., (TSX.V:PG) formed after Wolfden Resources (TSX:WLF) spun its Ontario gold assets into the new vehicle in a dividend to existing shareholders of Wolfden. Premier is a joint venture partner with Goldcorp (TSX:G), and a major shareholder is Inmet Mining (TSX:IMN).

Premier has had many high grade intercepts of gold on its Red Lake properties, and is exploring a large portfolio of mostly advanced properties in Canada and Mexico. The company has CA$20 Million in cash on hand, and with 6 drills working in various locations, there will be no shortage of news to drive the share price in the right direction.

underwater metal detector

Katherine Young asked:

In a meritocracy, the pure, rich cream floats to the top. It’s where people are selected competitively according to merit, talent, motivation and effort, based on the idea that positions of responsibility and prestige should be earned. Kootenay Gold and its team are an example of just that.

CEO and Director James McDonald, at 46, is one of the youngest men in a directorial role in Canadian mining and boasts a track record dating back twenty years. He started as a geologist in 1983 at Noranda. Then he went to work at Hemlo where he met Richard Hughes, the mining legend and brains behind the Hemlo discovery, one of the largest gold discoveries in Canadian history. This experience seems to be the impetus behind his formidable motivation. As McDonald put it in a presentation featured on Kootenay’s website, “I really got bitten by the gold bug at [Hemlo].”

In the late 1990s, working closely with Hughes, McDonald and Albert Matter formed National Gold, secured the Mulatos deposit in Mexico, and joint ventured with Alamos Minerals. McDonald merged the two companies to form Alamos Gold, which opened the Mulatos mine that is still in production today, producing over 100,000 ounces of gold annually.

McDonald had other successes at White Knight, and Genco Resources (currently producing 1,000,000 ounces per year of silver) where he served as President until 2006, when he stepped aside (he remains on board) to focus his efforts on building Kootenay Gold.

“Part of the reason for creating Kootenay Gold,” he said, “is an opportunity to put together a team of people that I had worked with mostly on a contract basis. In this industry it’s not really the properties, it’s the people that are valuable. If you put the good teams together, you’ll get the good properties and you’ll make the discoveries. You’ve got to have those people.”

With Hughes as a director on the board, and McDonald at the helm, they began to pull together key players in the industry and an exploration strategy. McDonald says about forming Kootenay Gold, “There’s a prospecting family that I’d worked with in various companies on various jobs. I was always looking for the opportunity to put them together in a company to form the core of a good exploration company.”

McDonald and his team carefully selected the west Kootenay region because they considered it to be highly prospective, but underexplored. The mineralized belt, on the American side of the border, has produced over 6 million ounces of high grade gold, but on the Canadian side was somewhat untouched. McDonald put the Kennedys – a family of highly skilled prospectors – to work in the Kootenays where they have considerable knowledge. Their findings allowed Kootenay to stake 45 mineralized claims in the area, every one of which is a new discovery.

So, while generating discoveries in BC, Kootenay’s strategy has been to joint venture with junior explorers to help fund and conduct exploration on the properties. The joint venture partners absorb some of the risk to Kootenay and pay Kootenay in cash and stock. The stock, in this resource market, becomes an appreciating asset. In other words, it’s a win-win situation for Kootenay.

The best development for Kootenay Gold in the Kootenay area so far has been the Jumping Josephine project, which is a joint venture with Astral Mining Corp. Astral has the right to earn a 60% interest in the property. Recent drilling on Jumping Josephine reported on July 12, 2007, returned 19 m of 7.01 g/t gold, including 5 m at 16.42 g/t gold. In an interview with Stanley Hunt on Smartstox Talk Show, McDonald explained the potential at Jumping Josephine. “It’s a high grade system…They’re on round two of the drilling now. Personally, I think they’re starting to drill off a resource now. This started out as a raw prospect. We’ve got an advanced project down in Mexico, which has been our lead project, but this is catching up.”

Northern Mexico has been Kootenay’s major focus. Using the philosophy that it is critical to select properties well and then commit time, work and money, McDonald and his team saw opportunity in Mexico. Their belief is that northern Mexico has potential similar to Nevada in the 1980s – a period that led to Nevada becoming the third largest gold producer in the world.

McDonald said authoritatively, “Mexico is already the number two silver producer in the world. It’ll retake its number one position probably in another year. It’s going to become a major gold producer and you can also expect to see a lot of base metals, copper, lead, zinc coming out of Mexico as well in new discoveries.”

He points out that in a 250 km stretch, through the area where Kootenay has staked 500,000+ hectares, there have been five new mines opened in the last six years, with another two currently under construction and two more in the feasibility stage. In that time, the area has boasted the discovery of 15 million ounces of gold and 480 million ounces of silver.

In Mexico, once again, Kootenay has found an edge. Several edges actually. Kootenay hired a Brit named Dr. Tony Starling and his company Telluris Consulting Ltd. to conduct satellite imagery and interpretation of the geological structures over a vast area of land. Starling has spent fourteen years in Mexico working with some of the biggest names in mining.

McDonald explains, “He’s developed a process, an analysis that allows him to identify mineral systems from the satellite imagery.” The technology works by measuring the various wavelengths of reflected light to identify mineral systems, McDonald explained. “If you’re doing it without a lot of skill and experience you get a lot of things that are not associated with minerals…You get a lot of red herrings.” Based on results to date, McDonald says, Starling has about a 90% accuracy rate. “And that makes things suddenly very efficient, rather than running around, looking at hundreds of targets, the vast majority of which have nothing to do with mineral systems. We’re now going in here and I would say it’s about a 90% success ratio.”

For Kootenay, the result is that they were able to identify more than 30 mineralized systems over approximately 180,000 square km area, which “allowed us to very quickly tie up a lot of prospective ground in Mexico.”

Leveraging another advantage – a relationship with the skilled and powerful in mining –Kootenay’s exploration efforts were funded by Richard Hughes through Klondike Silver. Klondike earned the right to choose six properties from Kootenay’s claim package. Ken Berry, President of Kootenay Gold, says “Richard Hughes has a tremendous confidence in Jim McDonald’s ability to identify mineral projects as well as grow a company. Because of that confidence level, Richard Hughes has been able to offer Kootenay joint venture support through Klondike Silver and Amador.”

So Kootenay has the people, the connections, the properties, the technology, the land positions, and the financial structure. SmartStox host Stanley Hunt prompted McDonald to point out the advantage Kootenay has in Mexico and McDonald obliged, “We’ve built up a big infrastructure in Mexico. We’ve got a regional office there. We’re way up on the learning curve. We know the ropes down there. For somebody to go in brand new into Mexico, it’s going to take them quite a few months and a lot of dollars to get established like we are. They’ll be there well over a year getting established, just to get going. We are optioning properties there. They can have a property and get going in a month by doing a deal with Kootenay Gold.”

Kootenay’s major project in Mexico right now is its flagship, advanced-stage, 100% owned, Promontorio silver project. Historic data on Promontorio show individual holes with 1 kg of silver over 5 m, 10 m, 15 m and an average silver grade of 367 g/t. Historic reports also cite widths of 20 m on average. McDonald is optimistic about the width, “you’re going to have a low cost if you’re able to find a deposit with that kind of width.” Hughes is similarly positive. In a recent presentation he stated unequivocally, “That Promontorio, by the way, is a potential company builder. And as Chad Buckland, who couldn’t be with us today, said – he’s a broker and a geological engineer – “That’s the kind of property that could really make a company. That gives a company the multi-dollar exposure… And so I think you’ve got a great project.”

Investors seem to agree. Kootenay stock has been climbing steadily over the last month from below a dollar to above the dollar and a quarter mark.

This article is intended for information purposes only, and is not a recommendation to buy or sell the equities of any company mentioned herein. It is based on sources believed to be reliable, but no warranty as to accuracy is expressed or implied. The opinions expressed in the article are those of the author except where statements are attributed to individuals other than the author, in which case the opinions are those of the individual to whom they are attributed.

Underwater Gold Detector

John Hurst asked:

When Zoran Pudar returned to his Vancouver head office this week, his briefcase contained lots of good news about the ongoing exploration program on the company’s two prospective gold properties located in Far East Russia – across the Bering Strait from Alaska. The vice-president of exploration for Golden Reign Resources Ltd. (TSX-V: GRR) was returning from a field visit to the company’s properties. At the Dorozhni property, which covers 8.8 square km, gold mineralization is thought to be the source of 150,000 ounces of historically mined placer gold.

“In approximately two weeks time, I expect to receive assay results for samples collected during my visit to the properties,” he told Resourcex Investor on Thursday, “and we are still collecting some samples from the Butarni property. In total, 18 samples were sent to Alex Stewart (Assayers) Ltd., a British lab in Moscow.”

The Russian government has limited research data on the properties in the Magadan Region, under agreement to Golden Reign and more extensive information has been coming out only in recent weeks. Most of the work had been done following World War II and in the late 1980s. The property is held under a 20-year comprehensive exploration-mining licence.

“From what we know about the Dorozhni property,” Pudar said, “they were chasing some high-grade quartz veins. Typically, the gold is coarse. I had a chance to spend several days there and focused on the eastern part of the property where we have recently completed 1.5 km of trenching. We sampled some of those veins, which in 1946 had yielded over six kilos of gold (approx. 20 ounces).”

He said that high-grade gold mineralization occurs at the intersection of northwest orientated structures and the intrusive, hosting quartz veins. Of particular interest is the newly exposed mineralized sediments and breccia zone discovered in a river bed.

Pudar says that this newly discovered breccia zone appears to be 50 by 70 metres wide. “It is the type of target I was looking for. In fact, I brought home some really nice samples, just for show and tell. This new zone has really great potential, but the riverbed has to be totally exposed and properly sampled. There is rich sulphide mineralization within the zone, which is often associated with gold. This zone is considered a primary target for continued exploration.”

The first phase of exploration at the Dorozhni property was initiated this fall. Dorozhni, one of Golden Reign’s two highly-prospective gold properties at Magadan, is located at the headwaters of Dorozhni Creek. Previous exploration work focused on identifying and testing five separate gold-mineralized quartz veins at or near surface. The veins, which have been traced for 380 metres along strike, average between 0.4 to 2.4 metres in width and occasionally expand up to 17 metres wide. The distance between the veins ranges from 15 to 50 metres. Gold distribution is extremely irregular, with the highest reported grades resulting from two separate channel samples, both of which were collected from Vein No 1, of 6,322.2 g/t over 0.1 metres and 2,678.2 g/t over 0.5 metres.

Golden Reign believes that the property has potential for a low-grade bulk tonnage gold deposit. Exploration will test the sheeted vein system within the granite intrusive to evaluate the gold content between veins, with the intent of determining an average gold grade from the vein swarm and the intervening intrusive.

The first phase of exploration was designed to map the mineralized zones and to test whether the gold mineralization is restricted solely to quartz veins and veinlets, or whether mineralization occurs in the surrounding host rocks. Exploration will test the sheeted vein system within the granite intrusive to evaluate the gold content between veins, with the intent of determining an average gold grade from the vein swarm and the intervening intrusive.

The company has established an exploration camp, mobilized equipment and upgraded an existing access road. It has built a new two-km road to provide access to previously untested mineralized zones within the property boundaries. Comprehensive geological mapping, including reconnaissance traverses, and grab sampling have been completed. Assay results are pending and will be released as they become available.

Magadan, one of the world’s richest mining areas, has about 2,000 placer gold deposits, 100 gold ore deposits and 48 silver deposits. Total probable gold reserves in the Magadan Oblast are estimated at 4,000 tons (128,000,000 ounces).

Pudar, who has been active in Russia for over 10 years, is a graduate of the University of Tuzla, Bosnia and Herzegovina in the former Yugoslavia. He worked at the Geoinstitute of Sarajevo, Bosnia, and for several Canadian public and private companies involved in mineral property exploration.

In late Summer, work also began on Golden Reign’s Butarni property, 9.3 square km situated approximately 310 km north of Magadan, the capital city of the province. It is underlain by clastic sediments, which have been intruded by a biotite granite stock with dimensions of approximately 3.0 km x 1.6 km. Five known mineralized quartz vein zones are outlined within the stock, with a length ranging from 700 metres to 1,500 metres. Major veins are between 0.1 and 1.5 metres in width, 100 to 150 metres in length and are accompanied by zones of parallel quartz veinlets. Previous grab and channel sampling returned values from 1 g/t to 334.4 g/t, with an average grade of 21.3 g/t gold from 45 selected grab samples and 29.6 g/t gold from 22 channel samples.

This article is intended for information purposes only, and is not a recommendation to buy or sell the equities of any company mentioned herein. It is based on sources believed to be reliable, but no warranty as to accuracy is expressed or implied. The opinions expressed in the article are those of the author except where statements are attributed to individuals other than the author, in which case the opinions are those of the individual to whom they are attributed.

gold mining equipment

Katherine Young asked:

Everyone knows the adage—buy low and sell high, but buying low means buying what few others value. Just a few sellers can attract more panicked selling and, conversely, a couple major shareholders can spur more optimistic buying. Market leaders have the courage and skill to stray from the herd and buy a stock based on its actual value, not simply because everyone else is buying.

The same logic holds true for exploration companies: Create investor wealth by buying and developing properties where others have failed – due to higher commodity prices, market conditions, politics or lack of courage or skill.

PMI Gold’s (TSX.V:PMV) President Doug MacQuarrie has had his eye on the Asankrangwa gold belt in Ghana, West Africa since 1994 when he co-commissioned the first modern, geophysical airborne survey flown over the belt. The survey determined that the belt was a major unexplored break, equivalent in features and structure to the prolific Ashanti belt located nearby. The major difference being that although virtually the entire belt had been staked by juniors, the Asankrangwa has had far less production than Ashanti.

So when the gold price fell and the juniors began to drop away en masse, MacQuarrie and his Ghanaian partners followed his contrarian instincts and bought concessions along the Asankrangwa, in the heart of the Ghana Gold Triangle, for a fraction of the price they would cost today.

It’s this kind of maverick thinking that put PMI ahead of the curve before the bull market started and continues to distinguish it today.

MacQuarrie plans a mine distinctly different from its peers. Intent on moving to production on its Kubi project, MacQuarrie envisions a small, inexpensive 500 tonne per day operation that targets high-grade gold initially averaging between 12 and 15 g/t, and results in about the same amount of gold produced as in a bulk-tonnage low-grade open pit mine.

Kubi, which PMI acquired in October of this year, has a 43-101* compliant resource estimate of 604,000 indicated ounces of gold and 315,000 inferred ounces. Between 1999 and 2005 the Kubi mine produced 59,000 ounces of gold for AngloGold Ashanti from 500,000 tonnes of ore at an average grade of 3.65 g/t.

Before completing pre-feasibility on Kubi, PMI is focused on raising $50 million in project financing to put both the Kubi and Obotan past producing mines back into production as underground operations. The Kubi project is further advanced and PMI will move on it first, developing toward pre-feasibility as soon as financing is in place. The mining lease has already been issued. The mine is located only twenty minutes south of infrastructure at Obuasi, Ghana’s main underground mining district. And because the gold grades are high, MacQuarrie plans to move to production within eighteen months.

Mining high-grade, low tonnage presents the opportunity for lower capital costs, lower financing requirements, and short time lines to production. However, like in the past, when MacQuarrie bought concessions in Ghana at the same time as other juniors were selling off, MacQuarrie appears the contrarian.

“We are serious about putting two mines into production and concentrating on margin,” he says. His model is different. It’s not large scale, and it’s not high tech, but it is potentially lucrative.

And there are side benefits. Mining in a developing country like Ghana, creates the opportunity for providing labour for hundreds of trained but unemployed locals. Instead of spending money on expensive capital equipment such as a jumbo drill rigs which employ few operators, PMI is able to train and pay many unemployed Ghanaians to use and repair cheap low-tech conventional equipment like jack-legs and stopers, while saving on capital costs.

Similarly, instead of processing hundreds of thousands of tonnes of ore in a huge open pit, PMI can keep its environmental footprint light and save on reclamation costs, all for the same net amount of gold. Projects like this, MacQuarrie contends, “are easier to sell to developing countries. You don’t end up having to move families and villages, and provide more and longer term employment opportunities.”

In addition to Kubi, production at Obotan is on the horizon as well. Past production at Obotan on the Asankrangwa belt totalled 730,000 ounces of gold – 590,000 of which came from the Nkran pit with the remaining 140,000 from the Adubiaso and Abore pits.

While there isn’t yet a 43-101 resource estimate for the Nkran project, Golder Associates have been commissioned to prepare one for early 2008. PMI Gold believes there is an exploration target of up to 2 million ounces under the Nkran pit.

Recent assays from a 2,539 m drill program on the Obotan property included highlights from the Nkran pit of 44.5 m of 2.61 g/t gold testing the down dip extension of the orebody. And a drill hole 170 m to the south of the southern end of the pit returned a highlight of 2.7 m of 8.91 g/t gold.

MacQuarrie is confident in his strategy, however different it may be. And he has another plan that should sound good to investors: “Once we’ve paid back the bank we’re going to pay our shareholders a significant percentage of our net earnings, after all the bank debt is retired, as dividends.”

PMI stock is currently trading at about $0.24 with a 52 week high of $0.47. Fully diluted, the company has 87M shares outstanding.

This article is intended for information purposes only, and is not a recommendation to buy or sell the equities of any company mentioned herein. It is based on sources believed to be reliable, but no warranty as to accuracy is expressed or implied. The opinions expressed in the article are those of the author except where statements are attributed to individuals other than the author, in which case the opinions are those of the individual to whom they are attributed.

gold panning supplies

Darryl Kelley asked:

Its not often one discovers an OTC-listed mining company that has a board of directors and management team with the caliber and pedigree of Little Squaw Gold Mining Company (OTCBB:LITS).

The president, Richard Walters, besides being a certified professional geologist with the American Institute of Professional Geologists and a Qualified Person as defined in National Instrument 43-101, was also a founder, director, president and chief operating officer of Yamana Resources Inc. the forerunner to Yamana Gold Inc., (TSX:YRI) between December 1994 and March 2000. He also serves as a director and executive vice-president of Marifil Mines Ltd. (TSX.V:MFM).

Rodney Blakestad, the vice-president of exploration, has in his thirty years as a geologist worked with Columbia Metals Corp. (TSX.V:COL), Nevada Star (now Pure Nickel – TSX:NIC), and Robex Resources (now Robex Gold – TSX.V:RBX). He is credited in part with the discovery of the 4 million ounce Fort Knox Gold Mine, now owned by Kinross Gold Corporation (TSX:KGC).

Robert Pate, the company’s vice-president of operations, is also a 30 year veteran of mine operation and mineral exploration having served with Yamana Resources, Freeport Copper (a division of Freeport McMoran – NYSE: FCX) , Coeur d’Alene Mines (NYSE:CDE), and Atlas Precious Metals were he was the chief geologist at the Gold Bar Mine in Nevada. At Freeport, he was a senior supervisor of the huge Grassberg Indonesia copper/ gold mine.

In the board of directors, William Schara is the Chairman, and was the chief financial officer of Minera Andes Inc. (TSX:MAI), a Vancouver-based company bringing a new gold and silver mine into production in Argentina. He is currently the CEO of Nevoro (TSX.NVR), and is also an alumni of Yamana Resources.

The rest of the directors have collectively had stints with Kennecott Corporation (now a division of Rio Tinto PLC – NYSE:RTP), Bond International Gold, Copper Range Corp, Newmont Mining (NYSE:NEM), Revett Minerals (TSX:RVM), and Pegasus Gold Corp (now Apollo Gold – AMEX:AGT). The affiliations with professional associations related to mining are simply too numerous to list here.

So the point is, don’t think of Little Squaw as just another OTC-listed mining deal. This is a powerful, been-there, done-that team of seasoned executives who are unlikely to waste their time on anything less than projects with the strong potential to become mines.

Which brings us to their flagship project, the Chandalar mining district. Bear in mind that the past employment of both management and directors is extremely relevant to this property, in that there is a great deal of history spent on the part of this team in the jurisdiction of Chandalar – Alaska.

This 23 square mile property package has above average potential for underground, open pit, and placer mining operations. Little Squaw owns 100% of the ground, and an independent study by Pacific Rim Geological has drawn comparisons in the geology at Chandalar to, among others, the 38 million ounce Sukhoi-Log mine in Russia, the 7.9 million ounce Natalka mine, also in Russia, the Juneau district in Alaska, which produced over 3 million ounces, Cape Nome, Alaska, which produced over 5 million ounces of placer gold, and Treadwell, Alaska, which produced more than 3 million ounces of gold.

The main hard rock deposits in the Chandalar district are the Mikado Lode, Chandalar-Eneveloe Lode, Summit Lode, and the Little Squaw Lode. Other Lode Gold Prospects in the Chandalar Mining District include the Crystal Vein, Big Squaw Claim, Pioneer Prospect, Drumlummon Prospect, Grubstake Vein, Grubstake East Prospect, Prospector East Prospect, Indicate-Tonapah Lode, Chandalar Vein, Jupiter Vein, Bonanza Vein, Pallasgren Claim, St. Marys Prospect, Star Claim Group, Star No. 3 Claim, Duplex-Triplex Vein, Wildcat Prospect, Jackpot Prospect, Woodchuck Claim, Little Kiska Occurrence, Pedro Prospect, and the Grubstake West Claim Group. Most of these prospects are historic discoveries carrying significant gold values that remain as yet unexplored.

This mineral belt includes such famous deposits as Cominco’s Red Dog zinc mine, the largest zinc deposit in the world, and the prolific Ambler volcanogenic massive sulfide (copper & zinc) district, now controlled by Nova Gold. Prospectors discovered the district about 100 years ago, and its recorded production from placer and lode mines is 84,000 ounces. There has been a substantial but unknown amount of unreported and otherwise secret production. Of the recorded production, 76,000 ounces of gold or about 90 percent of the total was recovered from placer deposits.

Trenching last year produced some excellent results including a 20-foot-wide structure that assayed 10.58 grams per tonne. Drilling has intersected good grades and widths such as 6.1 metres grading 4 grams per tonne gold, 9.1 metres grading 4.7 grams per tonne gold, and 29 metres of just under 1 gram per tonne gold, each of these occurring in three different zones.

An underground channel from the 180–metre-long Little Squaw vein assayed an astounding 89 ounces per tonne of gold.

So there’s a lot of potential here, and the company’s exploration program is getting ramped up for a busy summer.

Besides this primary project, Little Squaw also has two other projects in the western hemisphere in prolific gold producing regions that are politically secure. These include the Broken Hills West property, which is 15 miles north of Gabbs in the Walker Lane Trend in Nevada, which has produced over 50 million ounces of gold so far, and the Pedra de Fogo project in Goias State, Brazil in the middle of a prolific gold mining region.

But these will be the subject of future articles, so keep your eyes open for more information on this little known, but outstanding opportunity.

gold equipment

Justice Litle asked:

What’s Driving Gold and Gold Stocks (Part One)

Justice Litle, Editorial Director, Taipan Publishing Group

Gold and gold stocks have been hit hard in recent days. In part one we examine the reasons as to why, and in part two cover why gold stocks could be one of the biggest trades of 2009.

Gold and gold stocks have been hammered as of late. The yellow metal took a header on Monday, with the futures closing right on the 200-day exponential moving average. If that support doesn’t hold today (Tuesday), gold may even be trading lower by the time you read this.

So what’s going on exactly?

There are a few factors at work at here. To skip ahead a bit, there is still strong reason to believe gold stocks could be one of the best trades of the year – but in the short run, the environment for gold looks challenging.

The IMF Bogey

One old bogey that has come out of the woodwork is the prospect of IMF gold sales. At the recent meeting of the G20 in London, there was general agreement that the IMF (International Monetary Fund) should sell just over 403 tons of gold to free up cash for loans to poor countries.

Yawn…. the “IMF to Sell Gold” headline makes for much better press than the actual details.

For one thing, 403 tons of gold is just not that much. We’re talking roughly $11 billion worth at today’s prices. That’s a drop in the bucket, especially compared to China’s roughly $2 trillion pile of reserves… less than one percent of which are held in gold.

(For more detail on the relatively tiny gold holdings of many of the world’s central banks, see the Feb. 24 Taipan Daily piece “Why the IMF and Fort Knox Won’t Put the Hurt on Gold.”)

For another thing, the prospect of IMF sales is not new. The IMF has actually been trying to sell gold for more than two years. Part of why it hasn’t been able to do so is because authorizing the sales requires an 85% majority vote from the IMF’s 185 member countries.

On top of that 85% hurdle, the United States basically holds veto power over any IMF gold sales measure (because America’s proportional voting rights are so large). In that regard, the U.S. government has informed the IMF that, by order of law, authorization from Congress is required for any gold sale to go ahead. (Can you imagine Turbo Timmy making that request, to this Congress, in this climate? Ron Paul would have a field day.)

So any approved IMF gold sale would be small, in quantities easily absorbed by countries like Russia or China (who have openly stated a distaste for their overlarge dollar holdings). Any sale would further require 85% approval, plus approval from the United States Congress… and last but not least such sales, if they happened, would probably be disbursed over many years. The remaining 3,200 tons of gold the IMF holds represent quota requirements from member countries and cannot legally be sold.

But, still, gold has been sinking like a stone. What else could be the problem?

Ready to Scrap

Another factor hurting gold in the short term is “gold scrap,” or scrap sales. Private holders of jewelry and trinkets, particularly in Turkey, the Middle East and Asia, have been stepping up and selling their scrap gold.

India, the “world’s largest gold buyer by a wide margin,” has even stopped importing “for the first time in 10 years,” the Financial Times reports. In February and March India saw zero gold imports, while January imports came in light. Vietnam and Thailand, normally reliable buyers of gold, have also been selling. Stepped-up scrap sales have even put Asia scrap sales at a discount to the standard London quote.

It’s important to point out that many of these scrap sales are driven by distress more than any sense of market timing. Unemployment woes and rising food costs have forced hard-up Asian families to dip into their emergency stashes. Traders have further noted that these scrap sales seem sensitive to price. As the gold price per ounce fell towards $900 and below, scrap sales volume saw a clear decline.

Mark-to-Whatever

Yet another factor weighing on gold has been the suspension of “mark-to-market” accounting rules.

Last week America’s FASB (Financial Accounting Standards Board) bowed to pressure from Wall Street and loosened up mark-to-market accounting rules, causing a huge sigh of relief from the banks. Here is how I explained it to Macro Trader members on Friday:

Part of the reason stocks rallied big on Thursday was a suspension of “mark-to-market” accounting rules.

In plain English, this means the banks will no longer have to use real-time pricing for the stinky stuff on their balance sheets. They’ll be able to “estimate” what the toxic assets should be worth instead.

This is sort of like a homeowner saying “well, my house might not be saleable in this tough real estate market, but in a better market I’m sure it would be worth, oh, $300,000… so that’s what I’ll say it’s worth for now…”

Some people think the suspension of mark-to-market rules for bank assets is a smart idea. Others think it’s a terrible idea. Either way, it’s pretty bullish for the financials, at least in the short term.

Stocks also rallied [recently] on news of a potential trillion dollar injection into the IMF (International Monetary Fund), and the general perception that the G20 meeting in London was a success.

The mark-to-market change is basically a cheap magic trick. The banks may benefit from the opportunity to abandon real-world accounting in favor of fantasy-world accounting, but toxic assets are still toxic assets. Smoke and mirrors won’t change that.

Hot Money Rotation

In sum, the current weakness in gold and gold stocks is all about short-term perceptions (with the exception of increased pressure from scrap sales, which remain sensitive to distress and price). The IMF news is more hype than substance, and the abandoning of mark-to-market accounting rules is more a tacit admission of how ugly the picture still looks for banks, rather than a concrete step towards fixing the problem.

Meanwhile, rally-happy traders saw the chance to buy up risky assets on the back of mark-to-market suspension and good G20 news. As a result of the major move we just saw – the biggest 4-week rally in the S&P since 1933 – areas of the market that had previously suffered from lack of liquidity, like high-yield debt, commercial real estate assets and so forth, caught a huge bid. There was a fast-and-furious hot money rotation out of “crisis insurance” type assets (like gold and gold stocks) and into “woohoo let’s party!” type assets (like bank stocks and high-yield debt).

That wraps up the near-term end of things as to why gold (and thus gold stocks) are out of favor right now.

Tomorrow I’ll share my reasoning as to why gold and gold stocks could still be setting up for one of the biggest trades of the year.

 

gold dredge