Month: November 2013

By WallStreetDaily.com

When companies drill for shale oil, they encounter large quantities of natural gas – but not enough to be commercially viable.

As a result, the gas ends up being flared, or burned – and the environment bears the burden.

In North Dakota, for instance, the night sky is lit up by flaring as companies look to discard the gas from the Bakken shale formation.

But as you’re about to find out, as these companies burn off this extra natural gas, they’re also throwing away massive profits. And one company in particular has the solution…

Backed into a Corner

North Dakota is now on the verge of enacting regulations that will force producers to cut flaring significantly in the coming years. Right now, more than 30% of the gas produced is flared. The state wants that number down to 5% to 10% in the next few years.

It’s not just North Dakota, either. When I met with the Energy Commissioner in Alaska earlier this year, he told me that dealing with the environmental consequences of natural gas flaring was a top priority.

That means companies need to figure out what to do with the gas. But coming up with an alternative isn’t easy.

The options are limited and expensive. Companies can store the gas and then transport it – or they can hook it up to a pipeline if there’s one close by.

However, both options are much more expensive than flaring.

There is another solution, however – one that could lead to a profit boost for shale companies… and investors.

Click here to continue reading…

The post Turning Waste into Profits appeared first on Wall Street Daily.

Article By WallStreetDaily.com

Original Article: Turning Waste into Profits

By HY Markets Forex Blog

Individuals who want to make money by trading gold might benefit from knowing about recent technical analysis, which has predicted that futures for the precious metal could plunge to $1,200 per ounce by the end of this year.

This forecast was made after the commodity fell into a bear market in April and then managed to extend these losses over the next few months, dropping to less than $1,200 per ounce in June. As a result of these price movements, gold moved to its lowest price in almost three years.

The precious metal managed to enjoy some appreciation after dropping to this recent low, and moved into a bull market in August. In spite of this recent recovery, gold is still down sharply for the year.

Technical analysis predicts further losses

In addition to this depreciation, technical analysis provided by Logic Advisors predicted that the precious metal could depreciate further this year, according to Bloomberg. Bill O’Neill, who is a partner at the firm, stated that since the 50-day moving average for gold futures has declined below the 100-day average during two sessions in a row, a “death cross” has happened. The “death cross” that was described by the partner at Logic Advisors happens when a short-term moving average drops below a long-term measure.

This pattern was created because the 50-day moving average of $1,315.58 an ounce fell below the 100-day measure of $1,319.97 per ounce, the media outlet reported. As a result of this happening, these contracts could drop to as little as $1,200 per ounce before 2013 is over. Falling to this level would result in the precious metal suffering a 5.7 percent drop from the closing value of $1,272.30 per ounce that gold had on Nov. 17. As a result of these developments, the first bearish target of gold futures is $1,250 an ounce. After that, the next key level resides at $1,200 per ounce.

Many factors bearish for gold

Various factors have been pointing to a future for gold that is far from stellar. For example, the demand for the precious metal plunged by more than 20 percent in the third quarter of 2013 when compared to the same period in 2012, according to data provided by the World Gold Council.

In addition, there are concerns that many market experts have lost their faith in the precious metal as a store of value. One example that might point to certain individuals feeling more pessimistic about gold than they did before is the decision that many hedge fund managers made earlier this year to reduce their stake in the metal, CNN Money reported.

John Paulson, who is notorious for being a gold bull, cut his ownership in the SPDR Gold Trust exchange-traded fund earlier this year, according to the news source. In the second quarter, he lowered his stake by more than half. His firm emailed a statement indicating that it had made this move “due to a reduced need for hedging.”

Sustained QE could provide boost

However, amid all these different factors that could easily point to the precious metal moving lower in value, gold could receive upward pressure if the Federal Reserve continues its existing regimen of making bond purchases for some time.

Such a scenario has started to look increasingly likely, as Fed chair nominee Janet Yellen, who may succeed Ben Bernanke in the top post at the central bank, is known for her dovish stance on asset purchases. Market experts have become more hopeful that these transactions will go on at their current pace for some time, as a result of the partial shutdown that the U.S. federal government experience last month.

Individuals who want to make money by trading gold can leverage this information to get a better sense of where gold prices will go in the future.

The post Gold’s 2013 Loss could be Extended as Metal Falls to $1,200, Says Technical Analysis appeared first on | HY Markets Official blog.

Article provided by HY Markets Forex Blog

By CentralBankNews.info
    Japan’s central bank maintained its target for asset purchases, as widely expected, and largely repeated its description of the country’s economic recovery while voicing more confidence about the global economy.
    “Japan’s economy has been recovering moderately. Overseas economies as a whole are picking up moderately, although a lackluster performance is partly seen,” said the Bank of Japan (BOJ), which embarked on an aggressive easing campaign in April to rid the country of some 15 years of deflation.
    Last month the BOJ said Japan’s economy was “recovering moderately,” and that “overseas economies as a whole are gradually heading toward a pick-up.”
    The main difference between this month’s statement and last month is the BOJ’s description of overseas economies, reflecting the slow, but steady strengthening of growth in advanced economies.
    The BOJ maintained its target of expanding the country’s monetary base by an annual 60-70 trillion yen along with increasing its purchases of Japanese government bonds so the outstanding amount rises by an annual pace of some 50 trillion yen. The BOJ is also buying exchange-traded funds and Japanese real estate investment trust along with commercial paper and corporate bonds.
    The BOJ repeated that Japan’s exports were picking up, along with higher business fixed investment due to stronger corporate profits. Public investment and housing investment is also rising while private consumption has remained resilient.
    “Reflecting these developments in demand both at home and abroad, industrial production has been increasing moderately,” the BOJ said, adding that “Japan’s economy is expected to continue a moderate recovery,” with the annual rise in consumer price inflation likely to rise gradually.
    The BOJ also repeated that it would continue with its “quantitative and qualitative monetary easing” in order to reach the price stability target of 2.0 percent.
    Japan’s inflation rate rose further to 1.0 percent in September, the fourth month in a row with rising consumer prices following 12 straight months of deflation.
     The country’s Gross Domestic Product expanded by only 0.5 percent in the third quarter from the second but compared with the third quarter of 2012, the economy grew by 2.7 percent, up from an annual rate of 1.1 percent in the second quarter and 0.3 percent in the first.
     Japan’s yen currency started weakening in October last year when it became clear that Prime Minister Shinzo Abe was likely to win the general election in December.
    From October 1, 2012 the yen tumbled almost 25 percent to a low of 103.48 yen against the U.S. dollar in late May. But since then it has strengthened slightly, quoted at 100.38 to the dollar earlier today.

    www.CentralBankNews.info

USDCAD stays in a trading range between 1.0397 and 1.0525. The price action in the range is likely consolidation of the uptrend from 1.0182 (Sep 19 low). Key support is located at the lower line of the upward price channel on 4-hour chart, as long as the channel support holds, the uptrend could be expected to resume, and one more rise towards 1.0700 is still possible after consolidation. On the downside, a clear break below the channel support will signal completion of the uptrend, then the following downward move could bring price to 1.3000 zone.

Provided by ForexCycle.com

By MoneyMorning.com.au

So far it has been a bad week for Australian stocks.

The S&P/ASX 200 has lost 93 points since last Friday. That’s nearly a 2% drop.

So, what’s going on? What does this mean for our 6,000 point year-end target?

If the market doesn’t hit our target, it could leave your editor with a big dollop of egg on our face.

But wait. Outgoing US Federal Reserve chairman Dr Ben S Bernanke speaks. It turns out he’s confirmed what we’ve known all along.

You better put those eggs on hold…

We’ve gone on record throughout this year, trying to convince you that central banks have no intention of raising interest rates.

How long they’ll keep them low is anyone’s guess. Our bet is you can measure it in years. But even that may not be a long enough timescale.

It’s quite possible that the central banks think they can keep interest rates low for…well…forever.

The clue is in a comment from Fed chairman Dr Bernanke, as reported by Bloomberg News:

‘“The target for the federal funds rate is likely to remain near zero for a considerable time after the asset purchases end, perhaps well after” the jobless rate breaches the Fed’s 6.5 percent threshold.‘

OK, maybe not forever. But now do you believe what we’ve said on this?

Stocks Pause for ‘Thinking Time’

However, we’ll stop the self-congratulation for a moment.

Being right is only half the story. We’re not involved in the financial markets as an academic exercise or to score points.

We’re in the financial markets to identify trends and then recommend specific investments. And ultimately to help our readers make money.

That hasn’t happened this week as the market has fallen 93 points. So, should you get those eggs ready again? Not so fast.

Our view is the market and investors are going through the usual period of self-doubt after hitting a new high point (we’re talking specifically about the US market here).

That’s only natural. When the market breaks a record, investors begin to wonder about the sustainability of the current gains and whether it’s possible the market can go any further.

It’s quite normal to see stocks trade around a key level as investors and traders weigh up valuations – are stocks still cheap, fairly priced, or are they overvalued?

Investors ask those questions all the time, and rightly so.

You can see from the following chart that a similar dance played out with the Dow Jones Industrial Average for most of the second half of this year:

Source: Google Finance

It wasn’t until the fourth time of trying that the Dow finally broke through 15,500 points and stayed above it.

Australian Stocks Still Heading for a 10% Gain

Now the Dow is flirting with 16,000 points. This is another key psychological level. It broke through on Monday but failed to stay above it.

It traded above that level again on Tuesday. But once more it failed to stay above the line.

And while we always prefer to see stock markets going up, you shouldn’t panic when stocks have a few days of falls. Remember that the Dow has gained around 600 points – about 4% – over the past month.

So if it gives up a few points, so what?

The same goes for the Australian market. Sure it has lost 93 points in less than a week. But it’s still 150 points higher than it was in early October. And even if the market gives up that gain, the S&P/ASX 200 would still be almost 500 points higher than it was at the start of the year.

The bottom line is this: despite the volatility we still don’t see that anything has changed. Dr Bernanke has confirmed our view – interest rates aren’t going anywhere.

And when the market finally gets that, you’ll see stocks break out of this funk and move higher. So we’re sticking with the game plan.

This is Part of the Federal Reserve’s Plan

Whether you stick to the game plan of buying stocks on these dips is up to you.

We certainly are. As always it’s a risk. Even if the market rallies, not all stocks will achieve the same gains. Some may even fall. So it pays to put in the research to give you a better chance of backing a winning stock.

It was a big risk telling you to buy stocks through May and June when the market slumped 10% in a few short weeks.

But at the time our research and analysis suggested it was the right thing. And we’ve got the same conviction right now.

Remember (and this is the key point) that while the Federal Reserve and other central banks want stocks to go higher, they don’t want them going too high too soon. They’re trying to manipulate prices to achieve slow and steady price growth over time.

So far this year the US market has gained 21%. Is that enough for the Fed? Maybe they will be happy for a 30% gain this year. One thing we’re certain of is that Dr Bernanke won’t do anything to spoil his perceived legacy as he enters the last two months as head of the Fed.

As we see it, while it wouldn’t have been great to see your portfolio take a hit this week, the plus side is that if you have cash available to top up your holdings, now is as good a time as any.

It’s a punt, but if you can cope with the volatility, it’s worth the risk.

Cheers,
Kris+

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By MoneyMorning.com.au

By MoneyMorning.com.au

A deadly war many of us thought we’d won is now being lost, and that’s a problem. A big problem. After a scant few decades’ time – a blip on the historical radar – we’ve become used to living in a world where we don’t fear an enemy that astronomically outnumbers us.

The enemy I am talking about is ancient. When the bombardment of asteroids and comets waned and continents first gathered together, it emerged in the primeval ocean. It has been on this planet far longer than we have, and its domain has never been seriously challenged. From its perspective, in fact, we are the invasive newcomers.

This enemy is still the prevalent form of life on the planet. If all of its minions could be weighed, they’d outweigh every plant and animal on the globe. It’s in the air, even far up in the atmosphere. It is in the soil and can be found deep under the sea and underground. It can live inside rocks and ice and can even consume radioactive waste. Within and upon your body, it actually outnumbers your own human cells by 10 to one.

This enemy is invisible, and it is everywhere. The enemy is bacteria.

A History of the War

The invisibility of the enemy persisted through most of history. It wasn’t until the 1800s that scientific research revealed that infectious diseases were spread by microscopic bacteria.

Even before the germ theory of disease was accepted, however, early innovators like Oliver Wendell Holmes Sr. hypothesised that infectious diseases could be spread by doctors as they moved from patient to patient. His solution was hand-washing.

In Austria, Hungarian obstetrician Ignaz Semmelweis pioneered hand-washing with antiseptic solutions to reduce the rate of infection in birthing clinics. Unfortunately, the medical community wasn’t ready to accept what was, at the time, a radical idea.

The thought that blame for childbed infections lay with poor practices by physicians was considered offensive. It also didn’t help that Semmelweis was Jewish and the prejudices of that time and place kept physicians from accepting his excellent ideas.

Sadly, Semmelweis, rejected and ridiculed, died of the kind of infection he was trying to eradicate.

This cause of death happened all too often. Not too long ago, within living memory, death from bacterial infection was one of the most common ways for humans to shuffle off the mortal coil. In historical times, bacterial plagues halved the populations of entire continents. Bacterial pneumonia also killed millions, and a mere scratch could lead an otherwise hale and healthy person to develop a blood infection and die.

But then, 20th-century discoveries made by the likes of Alexander Fleming, Benjamin Duggar and Selman Waksman taught us how to fight back with new drugs called antibiotics. They discovered that other organisms had developed ways to fight back against bacteria and that we could adapt their methods to our own defensive ends.

Fleming found the first of the important antibiotics, penicillin, in his mold cultures. Duggar and Waksman also discovered natural antibiotics, tetracycline and streptomycin among them. It might seem ironic that these were secreted by bacteria themselves, members of a soil-dwelling family known as actinomycetes.

But since soil bacteria live in close proximity to each other, they compete for the same resources. Some species have evolved defense mechanisms to gain a competitive edge, and we’ve learned to use them.

The Flaw You Can’t Ignore

But our new tools weren’t perfect. Unlike, for example, a cancer therapy, antibiotics have a limited shelf life. A cancer therapy invented 50 years ago is still just as effective today as it was back then. An antibiotic, on the other hand, can become ineffective over time, especially if misused. Early on, Alexander Fleming noted this thorny problem in his Nobel Prize acceptance speech:

‘It is not difficult to make microbes resistant to penicillin in the laboratory by exposing them to concentrations not sufficient to kill them, and the same thing has occasionally happened in the body.

‘The time may come when penicillin can be bought by anyone in the shops. Then there is the danger that the ignorant man may easily underdose himself, and by exposing his microbes to nonlethal quantities of the drug, make them resistant.‘

And that is almost exactly what has happened. Overprescribing antibiotics to people who do not actually need them, as well as not completing a full recommended antibiotic regimen, has helped deadly bacteria develop resistance. Using massive amounts of antibiotics in agricultural operations also hasn’t been helpful. This practice has created a new avenue through which bacteria can evolve resistance.

The end result, unfortunately, is that many older antibiotics are suffering declining utility. The bacteria have adapted. When a bacterium is exposed to an antibiotic, it can evolve, making changes to its genes that grant it resistance. One way bacteria can become resistant is by developing mechanisms to pump antibiotic molecules out before they can kill them. Even worse, they can share resistance genes with each other.

Source: Google Finance

To add to the resistance problem, there has been a drought of new antibiotics to replenish the dwindling power of older ones to combat the threat entering the market in recent decades.

The pharmaceutical industry used to develop dozens of new antibiotics that could work against resistant bacteria. This is no longer the case. And worryingly, even our final lines of defense, the antibiotics of last resort, are starting to lose effectiveness against newly emerging resistant bacterial strains.

Why We’re Losing the Fight

Make no mistake, after the stunning antibiotic advances made in the middle of the 20th century, we are starting to lose the fight.

The reports are dire. These new strains are killing increasing numbers of people in our hospitals. According to the US Center for Disease Control, at least 2 million people are now infected with resistant strains yearly, and at least 23,000 die.

250,000 people are hospitalised yearly for infection by clostridium difficile, leading to 14,000 deaths. Just one variety, methicillin-resistant staphylococcus aureus (MRSA), is believed to kill more Americans every year than HIV, Parkinson’s, emphysema and homicide combined.

And even scarier, these resistant varieties are starting to be found outside our hospitals at alarming rates.

In fact, one in 20 hospitalised patients can expect to contract a hospital-acquired infection, and the percentage of multidrug-resistant infections continues to grow.

The financial burden of resistant bacteria is also a heavy one, creating $20 billion in excess health care costs and $35 billion in lost productivity, according to the CDC. Other estimates are even higher.

Moreover, in our globalised age, resistant bacteria can spread across the planet in a short period of time. A newly resistant variety that emerges in China, for example, can show up in New York in a matter of days, hitching a ride on an international flight.

It’s clear we are in the early stages of a health crisis. Lawmakers and regulators are now cognizant of the great need for new antibiotics and are taking steps to facilitate their development. Last year, President Obama signed the GAIN Act into law. GAIN provides incentives for antibiotics developers, including enhanced market exclusivity, and it earmarks antibiotics for a higher-priority review status by the FDA. It’s hoped that this will help spur increased antibiotic development.

Fortunately, small biotechnology companies are leading the charge against nightmare bacteria and stand to benefit from the regulatory changes.

Ray Blanco
Contributing Editor, Money Morning

Publisher’s Note: Vanquishing An Ancient Enemy originally appeared in The Daily Reckoning USA.

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By MoneyMorning.com.au

By OilPrice.com

As Canadian energy stocks are finally seeing a bit of a push, and demand for Canadian commodities looks set to rise, juniors are confident that economics will ensure that Canadian oil—the cheapest in the world—will find its way to more markets, with or without Washington’s approval of Keystone XL. In the meantime, some sweet spots in the Western Canada Sedimentary Basin, like the Montney shale formation—are showing promise as gas turns into oil for the bigger players, while the juniors are hoping to piggyback on this new success.

In an exclusive interview with Colin Soares, the CEO of High North Resources we discuss:

• How Libya and Warren Buffet boosted Canadian energy stocks
• Why we can expect stronger demand for Canadian commodities
• Why simple economics favors Canada’s cheap crude
• Why Canadian juniors are banking on $70 oil
• Why oil price volatility will haunt us
• Why we shouldn’t expect a big change in Canadian crude price differentials just yet
• Why Washington’s approval of Keystone XL isn’t as critical as before
• What we can expect from all the hush-hush over the Western Canadian Sedimentary Basin
• How the key for juniors in the Montney shale is to piggyback off the shift from gas to oil exploration

Interview by James Stafford of Oilprice.com

James Stafford: For the first time in months, Canadian ETFs are seeing an increase in flows—especially for financial and energy stocks. What is pushing this?

Colin Soares: I think there were a few factors. International money started flowing back into Canadian energy as global oil prices jumped 15%, on the back of Libya production falling down. WTI followed suit and all of a sudden the Canadian oil price was over $100 a barrel. Cash flow and profitability soared in Q3 2013.

Canadian management teams have got so used to deep oil price discounts, we focus only on developing top assets—ones that payout in a year on $75 oil. That’s certainly true for the juniors—and there are hundreds of them in Canada. We have become a lot more disciplined in the last year as investors switched from growth at all costs to sustainable growth; growing within cash flow.

Then I think you just combine all that with the fact that the valuations on Canadian oils were so cheap—from juniors like us right through to seniors like Suncor. Warren Buffett bought a big chunk of Suncor this year and I think that helped money flows into our sector as well.

James Stafford: Can we expect stronger demand for Canadian commodities?

Colin Soares: Absolutely. The Americans are not allowed to export their crude, and Canada is. We now have the cheapest oil in the world, and simple economics says it will find a way to a market. The light oil might go to the west coast via a new pipeline, or it might travel across Canada to the eastern Maritime provinces, but it will find a way—for both heavy and light oil.

The US will always want our heavy oil, as their refining complex is mostly heavy oil. And our heavy oil trades at a discount to both Mexican and Venezuelan heavy oil.

James Stafford: What does this mean for Canadian juniors?

Colin Soares: It means we can budget on at least $70 oil, which is what we’re doing.

James Stafford: Canadian heavy crude is sold at a large discount to US and world crude, but analysts are now predicting the end of these big price “differentials” as they’re called, for Canadian heavy oil. Do you see an end to this volatility, and what factors will contribute to closing this gap?

Colin Soares: No, volatility will absolutely stay. Just having one refinery go down creates a big differential for a few days. And of course, pricing is seasonal as refinery maintenance happens in spring and fall, and oil prices are lower then, and the differentials are bigger then. You just get used to that and budget an overall price. Strong projects, with good economics will make money regardless of fluctuations in the oil price.

At High North we have been using a $70/barrel oil price to calculate our numbers and we are confident that we still have one of the fastest payouts of any wells in North America.

James Stafford: How do you see this playing out by the end of the year and into the first quarter of 2014?

Colin Soares: Differentials will stay larger than normal—though what’s normal anymore?—through Q1 2014 until more pipeline capacity gets into place around North America. There is 800,000 barrels a day of refining capacity coming online in just the next two weeks! That is more competition and will raise North American oil prices.

And pipelines are racing to keep up to production increases and doing a good job. TransCanada’s Keystone South project will be starting in just a few weeks taking oil from Cushing down to Houston.

James Stafford: How much depends on Washington’s approval of the northern leg, the Keystone XL pipeline?

Colin Soares: Fundamentally, not as much as before—because of huge increases in crude being transported by rail—but from a market point of view I think it’s still a big deal– I think market valuations would increase with Keystone approval.

But even with the approval of the Keystone XL, we are still a long way off until the pipeline is built and price differentials narrow to be really tight. Once again, good projects with strong economics will make money regardless of the fluctuations in the oil price.

James Stafford: Will Canada continue to increasingly rely on rail transport for oil products despite the Quebec train disaster?

Colin Soares: Yes, and in the US as well. Right now Canada is transporting about 200,000 bopd of oil by rail, and experts are thinking that will more than double in two years. Until new pipelines are approved and built, oil products will rely more on rail.

James Stafford: As we head into a New Year, what will be the key drivers for the Canadian oil and gas industry?

Colin Soares: I think the market will be more focused on balance sheet and financials, not just straight growth, or growth at any price. It’s a lot more about sustainability now. With a lower oil price, you will have to show you can grow inside cash flow, or very close to cash flow. Plays where the wells payout their costs really quickly—like around a year–will get a premium. And that’s the type of asset we have.

James Stafford: Canada’s National Energy Board just said the Montney Formation in the
Western Canadian Sedimentary Basin is one of the largest gas deposits in the world—some 450 trillion cubic feet of gas, 14.5 billion barrels of liquids and 1.1 billion barrels of oil. What does that mean for the Canadian energy industry?

Colin Soares: For gas, it means we have decades of supply—and low cost supply. All those liquids like propane and condensate pay for the gas wells—so the gas has almost no cost to it. The liquids make the gas very economic.

And so when everybody starts drilling these big gas wells, they’ve been finding oil as well. And you’re seeing a lot more exploration now targeting light oil to the North. The oil is shallower, and so it’s cheaper to get it out of the ground—it’s actually a perfect play for a junior like High North.

James Stafford: How much can we expect to be spent on developing the Montney oil play for this year and next?

Colin Soares: There are several companies working in north-western Alberta who are having success developing the Montney oil play. Long Run Exploration recently announced a $110-million expenditure to develop its Montney oil project—they’re right beside us developing a big fairway. RMP Energy recently raised $50 million through GMP Securities, bringing their capital budget to $168 million for their Montney project.

James Stafford: What’s the sweet spot in the Montney formation for oil?

Colin Soares: That’s too early to say yet. I would love to say we are in the sweet spot, being as Long Run is just to the north and east of us and RMP is just to the south and west, but the reality is that RMP right now looks like it has an initial sweet spot at Ante Creek.

But there is still a learning curve involved with drilling successful wells. The key for the juniors is to piggyback off the knowledge of larger players like Long Run and RMP.

James Stafford : Colin, thanks for taking the time to join us today.

Source: http://oilprice.com/Interviews/Are-Canadian-Energy-Stocks-Set-for-a-Rebound-Interview-with-Colin-Soares.html

This interview is part of our CEO spotlight series. If you are interested in speaking with us on current energy issues please do get in touch.

Source: Brian Sylvester of The Gold Report (11/20/13)

http://www.theaureport.com/pub/na/stefan-ioannous-three-things-to-look-for-in-three-base-metal-plays

The fundamentals tell Stefan Ioannou, mining analyst with Haywood Securities, that the outlook is good for copper and zinc in the midterm, while for nickel, stronger-for-longer is the watchword. In this interview with The Gold Report, he warns that nickel’s price is unlikely to cycle up before 2017. For all three metals, producers are the safest bet, but some splashy exploration plays could have the biggest payoff.

The Gold Report: In October, Haywood Securities revised its prices for several commodities and predicted that copper prices should remain strong in the short term, zinc prices should strengthen over the medium term, and nickel would remain a long-term price play. Can you recap the fundamentals for each metal, starting with copper?

Stefan Ioannou: Because it is so widely used, copper is the master of the base metals. All base metal prices have been stressed this year, due to global economic uncertainty. Despite some week-to-week and month-to-month volatility, copper prices have generally stayed in the $3.25 to $3.35/pound ($3.35/lb) range.

Concern over a near-term surplus in copper supply has kept the price from going higher. Over H1/13, London Metals Exchange (LME) inventories increased over 100,000 tonnes (100 Kt), venturing north of 600 Kt. Year-to-date, net LME inventories are up 40%. Many market forecasters still predict 2013 net surpluses of over 250 Kt.

TGR: Yet the Chinese are paying a premium of $0.08 to $0.10/lb in Shanghai.

SI: LME inventories are just one piece of the pie. There also are the Shanghai inventories, in-house inventories held by producers and inventories in what are called Chinese bonded warehouses.

Data through September suggest that, while LME inventories have been up 100 Kt, the Chinese bonded warehouse inventories are down 700 to 800 Kt, implying a net deficit on the order of 600 Kt. That paints a very different picture.

Of course, we don’t know how the copper moving out of the Chinese bonded warehouses is being used. Is it going into manufactured goods, used as finance collateral, or just being stored elsewhere? Furthermore, recent data pertaining to the month of October suggests Chinese bonded warehouse inventories have since rebounded by 150 to 200 Kt.

TGR: What are the fundamentals for zinc?

SI: Zinc inventories on the LME reached an all-time high of 1.2 million tons (1.2 Mt) in 2013 and remain very high. In the short term there’s a lot of zinc out there for consumption.

The key thing underpinning the zinc story is an anticipated shortfall on the supply side. The zinc space differs from the copper space in that a lot of production comes from smaller mines. Over the years, that has created a fragmented industry.

A number of very large zinc mines are poised to end production over the next two or three years simply because they’ve run their course. That will take 10–11% of global zinc production offstream. The current list of timely advanced-stage development projects doesn’t come close to filling that gap.

Today, zinc is $0.85/lb, but there is a strong argument that as we move into 2015 and especially by 2016, zinc prices could be well north of $1.50/lb.

TGR: That would be something. What about nickel?

SI: Nickel is a longer-term story. In 2007, nickel ran up to $25/lb. That price spike sparked the rise of nickel pig iron production, which is nickel made from lateritic ores. It’s a sub-grade product, but can be used in certain types of steel manufacturing in place of higher-cost nickel. When nickel pig iron came on strong, it drove the nickel price down.

Some fundamental, long-term changes are underway in the nickel space. A lot of nickel comes from Indonesia. The first change is that the Indonesian government is implementing export reform. Heavy export taxes will either restrict exports or raise the cost of exported ore considerably.

Second, the high-grade ore has already been mined in Indonesia. We’re left with lower-grade ore, and lower grade usually translates into higher cost.

Third, even the ore that does get exported—most of it to China, by the way—is put through furnaces in a very energy-intensive process. Power costs have been going up in China. This adds another cost to the nickel pig iron price equation.

In short, nickel pig iron has been pictured as a cheap alternative. It remains relatively cheap, but it’s getting more expensive.

I would add one caveat. More of the nickel pig iron production in China goes through rotary kiln furnaces, which are somewhat less energy intensive. Realistically, new nickel pig iron projects probably need a nickel price of $9/lb to be economically viable. With prices now in the low $6/lb range, new production facilities will need higher nickel prices to get going.

TGR: Thank you for a very thorough summary. What three things should investors look for in a copper project?

SI: Number one, look for high grade over low grade.

TGR: And what is high grade, above 1%?

SI: It depends on the type of mine: underground or open pit. These days, I would say anything greater than 0.5% to 0.6% copper in an open-pit scenario would be relatively high grade. Anything greater than 1% would be very high grade in an open-pit scenario.

As you move underground, you want at least 2% copper.

Obviously, the presence of other byproduct credits changes the economics, but those would be my back-of-the-envelope numbers.

TGR: What else should investors look for in a copper project?

SI: Number two is jurisdiction. Politics has always played a role, but we’re seeing more issues with projects in challenging areas. In Africa, for example, governments can change overnight and the resulting changes to ownership structures usually disadvantage the mining company.

It can cause trouble when the local population isn’t happy with mining in the neighborhood. Native groups, even in stable countries like Canada, are a significant consideration. For a mining project to work, everyone has to work together.

The last thing is infrastructure. Imagine two geologically identical projects. One is next to a highway with power lines and a port facility. The other is in the middle of the northern Arctic and you have to fly in. Those two projects have significant economic differences when it comes to development. Having established infrastructure is a massive advantage.

TGR: Which companies that you follow have not only those three characteristics, but could also get a lift from higher copper prices?

SI: One of the interesting ones just from an infrastructure point of view is Capstone Mining Corp. (CS:TSX). The company recently bought a mine called Pinto Valley in Arizona, which helped to change the Capstone story from short to medium term.

The company will produce about 85 million pounds (85 Mlb) of copper from its Cozamin and Minto mines this year. The addition of Pinto Valley, which is in production now, will take its production to more than 230 Mlb in 2014.

Capstone also has a development project in Chile called Santo Domingo, a very large, low-grade copper-iron project. Looking at infrastructure, it is next to a paved highway and close to port facilities. That kind of infrastructure makes a low-grade project potentially viable.

TGR: Capstone bills itself as a leading intermediate copper producer. Will Capstone ever be a major copper producer?

SI: I think it’s well on its way. The Pinto Valley acquisition was an important growth step for Capstone. Beyond that, the company has a very strong balance sheet, a good debt-equity ratio. Santo Domingo represents the next big step. It likely won’t be in production until at least 2018 or so, but when that happens, Capstone could be producing well over 400 Mlb annually. That puts it in the realm of Lundin Mining Corp. (LUN:TSX; LUMI:OMX) and HudBay Minerals Inc. (HBM:TSX; HBM:NYSE).

TGR: Nice company to keep. What’s one more copper play you follow?

SI: One that will merit more recognition as it goes forward is Nevsun Resources Ltd. (NSU:TSX; NSU:NYSE.MKT). A one-mine company, Nevsun is an established producer. Its Bisha mine is in Eritrea, which has frightened some investors off. That said, the company has worked extremely well with the government over the last decade to discover, permit, build and put Bisha into production.

Initially, Nevsun was thought of as a gold company as it mined through the oxide gold cap at Bisha, which is a polymetallic volcanogenic massive sulfide (VMS) deposit. However, the operation is now transitioning into supergene copper—copper mineralization that can be made into a concentrate for shipping. Its first, full-bore year of copper concentrate production will be 2014. In a geological sense, Bisha is truly a base metals mine.

TGR: A lot must depend on Nevsun’s relationship with the Eritrean government.

SI: Yes, and I give the Eritrean government a lot of credit. Bisha is a world-class deposit; on a total resource basis it contains more than 40 Mt of very high-grade material. When it was first discovered the government recognized right away that Bisha could be its ticket to greater financial viability. The government acted responsibly by bringing in independent, third-party engineers to evaluate its worth and set up an ownership structure with Nevsun. Nevsun owns 60% of the deposit, the government has a free 10% carried interest on the project and then it also bought an additional 30%. That makes a 60/40 ownership structure between Nevsun and the government.

The Eritrean government paid close to $250 million for its 30% interest. Any analyst on the street at the time would agree that, on a net asset value basis, was a pretty fair valuation. Bisha is a huge source of tax revenue for the country, and its 40% interest gives the government direct cash flow.

The Eritreans are working in a similar way with companies that have made subsequent discoveries. Nevsun really paved the way for doing business in Eritrea.

TGR: Moving on, what three things should investors want in a zinc project?

SI: Grade, jurisdiction and infrastructure are important to any commodity or mining play. With zinc, you really want to pay attention to grade. Typically, grade translates directly into a cash cost number. For instance, copper is trading at $3.25/lb. The cash cost for even the highest-cost copper producers is around $2.50/lb. That gives them a significant margin.

The zinc space is quite different. Zinc is trading around $0.85/lb. I would estimate that cash costs for 25% of the zinc production is at or near that price. The margins are a lot tighter. Miners without good grades run the risk of having a mine that may not be able to weather the down cycles within zinc’s overall price cycle.

TGR: Zinc is also tricky in that there are very few pure-play zinc producers. Which zinc equities does Haywood cover?

SI: There is pretty good market consensus that Trevali Mining Corp. (TV:TSX; TREVF:OTCQX; TV:BVL) is the go-to name. Its mine in Peru is just starting production and a second mine in New Brunswick is scheduled to come online late next year.

Foran Mining Corporation (FOM:TSX.V) is a notable developer. Its McIlvenna Bay project in Saskatchewan is just over the border from Manitoba. McIlvenna Bay is a 24 Mt VMS deposit, right on the doorstep of HudBay’s 777 and Lalor projects. That puts it close to infrastructure in a politically stable jurisdiction. Foran still has to define a mine plan, but over time, this could become the next mine in the evolution of the Flin Flon camps.

Canadian Zinc Corp. (CZN:TSX; CZICF:OTCQB), Chieftain Metals Inc. (CFB:TSX) and Sunridge Gold Corp. (SGC:TSX.V) also have safe development projects with a lot of zinc in their profiles. Any of them could do very well on the back of a strong zinc price.

TGR: As you suggested, nickel is facing headwinds. Is this a situation where you look for smaller companies with large resources that could be ready to go into production when the nickel price trades up?

SI: It is. First off, you have to believe in the thesis that nickel prices will rise. If you believe that, the next question is what kind of nickel projects you want to get involved with.

Nickel comes from three sources. First are the typical sulfide deposits like Voisey’s Bay, where you make nickel concentrate. The laterites are second. They are basically weathered dirt and are processed differently. Three is nickel pig iron, which we talked about earlier.

From both a technical and economic view, the sulfides are the least risky. The processing technology is well over 100 years old and is very well understood. If I had my pick, I would steer toward sulfides.

Then, I would look at projects that will touch the potential nickel cycle when it starts to kick up again. That means looking long term toward 2017–2018.

TGR: Which small-cap nickel equities does Haywood follow?

SI: The main one is Royal Nickel Corp. (RNX:TSX), because, number one, its Dumont project is a sulfide project. Two, Dumont is in Québec just outside Val-d’Or, which has well-established mining infrastructure. Three, this is a mining region where the Québec government is on its side.

The company has a very large resource. It is low-grade, so it is very leveraged to the nickel price, but if you believe in nickel’s longer price outlook, it fits the bill. This project should come onstream in 2017–2018, which positions it to catch that nickel price-cycle when it takes off.

TGR: The Dumont project will need at least a billion dollars to reach production. How will Royal Nickel raise that cash?

SI: Financing is a key challenge, especially when a junior company is behind the name. These days, juniors can’t finance development themselves through standard debt equity. Increasingly, we see juniors sell a direct project interest to a major partner, whether it be a major miner, an Asian smelting group or an entity that has strategic interest in securing concentrate. That is what Capstone did with Santo Domingo and others have followed suit.

The way the deal works, especially if it’s with an Asian smelter group, is that the smelter guarantees to arrange upward of 60% of the capital cost in the form of project debt. That leaves 40% outstanding, which is paid for by the company and smelter through equity.

What the smelter pays for the project interest basically offsets whatever the junior has to pay in its equity contribution going forward. If it’s structured just right, a company can end up with a situation where it sells a 40% interest in the project, but faces minimal equity dilution thereafter.

TGR: Do the platinum group metals (PGMs) in the Dumont deposit set it apart from other large, low-grade nickel deposits?

SI: I would say no. They’re not that significant in terms of volumetric production, but they do benefit Dumont’s nickel cash cost profile.

In our model, Dumont will produce close to 100 Mlb of nickel a year. It will also produce approximately 4,500 ounces (4.5 Koz) of platinum a year and 10 Koz of palladium a year.

The PGMs are a byproduct credit. In our model, the total life-of-mine average cash costs at Dumont, net of byproduct credits, are around $5/lb. If we were to take the PGMs out of the project, the cash costs would be closer to $5.50/lb. That means about a $0.50 credit—or 10%—to the cash costs. That is significant, especially when nickel’s trading so low; every penny counts.

The main caveat with Dumont is a stronger-for-longer nickel price outlook. Dumont’s economics are challenged at nickel prices below $9/lb.

TGR: What other nickel equities does Haywood follow?

SI: We don’t cover much in the nickel space, but there have been a few notable discoveries recently.

One of the best is North American Nickel Inc. (NAN:TSX.V). This is a grassroots play in Greenland. The company’s Maniitsoq project includes a recent discovery at a target called Imiak Hill. As early as this past summer, we knew the company had hit massive sulfides. At the time, the question was if they were nickel-bearing sulfides. The answer appears to be yes.

Last month, the company released a discovery hole: 19 meters (19m) of 4.3% nickel and 0.6% copper plus a bit of cobalt. A significant intersection. Subsequently, another hole returned 25m grading 3.2% nickel and 1.1% copper.

Those grades are similar to the Voisey’s Bay discovery in the 1990s, although that was underpinned by intervals upward of 100m thick. The thickness at Imiak Hill isn’t quite the same, but the grades definitely are.

It’s a quiet period for North American Nickel now; it won’t get back out to the project until the spring. In the meantime, it can go through the data and nail down drill targets for 2014 and start demonstrating Maniitsoq’s potential size.

TGR: North American Nickel bills Maniitsoq as being bigger than the Sudbury Basin. Is that valid?

SI: I think the land position is larger, yes. Obviously the question is if it is all nickel bearing.

TGR: Sudbury Basin isn’t all nickel bearing either.

SI: Fair enough. The interesting question is why look for nickel in Greenland? The rocks at Maniitsoq are the same rocks that host Voisey’s Bay. At one time, they were connected. Now, because of tectonics, there’s a sea between them.

TGR: Does this shift North American Nickel’s focus away from Post Creek/Halcyon and North Thompson to Maniitsoq?

SI: Maniitsoq is definitely North American Nickel’s flagship project. It’s a junior company with a modest market cap. Its value will be derived from Maniitsoq. Will the company shut off work at those other projects? Probably not, but the market will want to see the company spend most of its energy and capital at Maniitsoq.

TGR: Are there any other head-turning discoveries in the base metals world worth keeping an eye on?

SI: Colorado Resources Ltd. (CXO:TSX.V) made a significant discovery last spring in northern British Colombia. The North ROK project returned a 333m drill hole intersection grading 0.5% copper and 0.7 grams per ton (0.7 g/t) gold, including 242m at 0.63% copper and 0.85 g/t gold, basically starting from surface. That implies the project is open-pittable. Anything over 0.5% copper is great; having a gold grade kicker is even better.

North ROK has infrastructure too. It’s 5 kilometers from Imperial Metals Corp.’s (III:TSX) Red Chris development project. Ten years ago, this would have been considered the middle of nowhere, but Red Chris opened up the whole region.

TGR: Colorado was a rare performer in an otherwise bleak summer for mining equities. Should investors wait for the next drill results to come out or get in now?

SI: Looking at the stock chart, it’s already gone through the classic lifecycle of a mining stock profile. On discovery of that intercept, the stock price spiked to almost $1.50. It’s come off to below $0.25 now.

Colorado Resources is in that quiet period when ground truthing and engineering start to kick in. The stock price won’t pick up again until we have a sense of North ROK’s mineability and the company moves toward production.

There have been other holes, not as good as the first. Now it’s a matter of keeping it all together and getting tonnage. I think the market understands that Red Chris will get a lot bigger over time. North ROK has some better grades than Red Chris.

TGR: What can you tell our readers about discoveries in Europe?

SI: Reservoir Minerals Inc. (RMC:TSX.V) has a copper-gold project in Serbia called Timok—a very high-grade discovery with flashy drill hole intercepts. The discovery that got the stock going was a 70m intercept grading 11.6% cooper and 7 g/t gold.

This is a joint venture project with Freeport-McMoRan Copper & Gold Inc. (FCX:NYSE); Freeport owns 75% and Reservoir 25%. Freeport is paying for the exploration.

As a result, Reservoir has a great trap line of results coming in at no cost, and at great benefit to its share price.

In addition, Timok looks to be a high-grade, high-sulphidization epithermal system. One could argue that Freeport’s real interest is an adjacent, deeper-seeded porphyry that may have fed the high-sulphidization system. The porphyry would be lower grade, but much bigger tonnage, and would move the needle for Freeport-McMoRan.

TGR: Like a smallish Grasberg.

SI: Sort of. Even if Freeport decides the porphyry’s not there or not in a significant enough form, Reservoir will be left with a nice high-sulphidization project that would be attractive to a number of midtier companies out there looking for high grade.

TGR: Reservoir also has a 45% interest in the nearby Deli Jovan concession with Orogen Gold Ltd. (ORE:LSE). Are those two interests enough for investors to make money with Reservoir?

SI: I think investors will be focused on the company’s progress at Timok.

TGR: Can you leave our readers with one positive thought on the base metal space?

SI: Short term, I wouldn’t read too much gloom-and-doom into the copper numbers. The Chinese bonded warehouses provide one interesting data point suggesting that the surplus isn’t nearly as significant as some people would have us believe.

The zinc space is interesting because there are so few zinc players. When the zinc price runs, anyone associated with zinc stands to do well.

TGR: Stefan, thank you for your time and your insights.

Stefan Ioannou has spent the last seven years as a mining analyst covering mid-cap base metal companies at Haywood Securities. Prior to joining Haywood, he worked with a number of exploration and mining companies, as well as government agencies as a field geologist in Nevada and throughout the Canadian Shield in both the gold and base metal sectors.

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DISCLOSURE:

1) Brian Sylvester conducted this interview for The Gold Report and provides services to The Gold Report as an independent contractor. He or his family own shares of the following companies mentioned in this interview: None.

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3) Stefan Ioannou: I or my family own shares of the following companies mentioned in this interview: None. I personally am or my family is paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: Trevali Resources Corp. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.

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Article by Investazor.com

From the low hit on 7^th of November the Euro started to rise in front of the US dollar, getting itself back around 1.3550. Although both the current Fed governor, Ben Bernanke, and the future one, Janet Yellen, sustained that the US economy still needs the QE at its full speed it wasn’t enough to keep the dollar on a down trend. Today the ECB mentioned in a statement that they are willing to get to negative rates if necessarily to help the Euro Area economy and that ended in a drop in the EURUSD.

Chart: EURUSD, Daily

From the technical point of view the current situation looks a bit bearish. The retest on 1.3550 was also a test of the 50% retrace of the drop and a retest on the earlier broken trend line. Today’s fall managed to engulf the price action of the last 5 days signaling heavy selling of the Euro.

We are expecting to see a continuation of this drop all the way to 1.3300, support level or even a continuation of the down move to 1.3200. Even though on the short term the direction is down don’t forget to keep an eye, especially if you are a day trader, on the economic releases which might trigger high volatility and sudden reversing moves.

The post Short Term Technical Forecast for EURUSD appeared first on investazor.com.

By George Leong for Investment Contrarians

Sound the bull horns, folks! Stocks are sizzling on the chart, and Wall Street is partying like there’s no tomorrow. Kind of sounds like late 1999/early 2000, doesn’t it? And we all know what happened when the party ended then, with the NASDAQ having surged to a ridiculous 5,132 and subsequently crashing.

On Monday, the S&P 500 broke 1,600 and the Dow Jones Industrial Average invaded 16,000 for the first time. There have been five new records broken over the past six sessions. And while the NASDAQ is still eyeing 4,000, there will likely be a move soon.

With about 30 trading days remaining in the year, stocks appear to be heading higher.

While the creation of stock market wealth is fantastic for market participants, I’m growing more wary with each record and feel the stock market is vulnerable to selling.

As I have commented on numerous occasions, you can thank the Federal Reserve and central bankers around the world for the stock market advance.

And with the dovish Janet Yellen expected to be approved as the next Chair of the Fed, the easy money will likely linger going forward.

The buying in the stock market will likely continue to be driven by expectations that the Fed will maintain its bond buying until at least the first quarter of 2014 and low interest rates for a few years.

The obvious reaction to the new records is the reference to a bubble. Now while I don’t think the stock market will crash like it did in early 2000 (that was not fun to watch), I continue to believe the S&P 500 and Dow Jones Industrial are vulnerable to a stock market correction.

My previous discussion on the initial public offering (IPO) market indicates there is clearly some froth. In the previous week, Zulily, Inc. (NASDAQ/ZU), an online retailer of women’s and kids’ clothing, surged over 70% in its IPO debut. The jump was staggering, especially as it values the company, which has only $567 million in sales over the trailing 12 months ended September 29, at around $4.5 billion. At nearly eight times its sales, Zulily’s valuation is ridiculous, and I would not be surprised to see a correction.

The market action in the IPO stock market clearly points to overheated buying and suggests there could be some selling on the horizon.

The reality is that the fact that stocks continue to edge higher is amazing. It appears the market is just happy not to see downward revisions and accepting average results.

But with the advance, the stock market is vulnerable to selling on any major negative news.

Now, as we approach the key Black Friday on November 29, the focus over the next few weeks will be on the retail sector. But it could be a sad holiday season and an ugly showing.

At this point, I suggest you continue to ride the gains and don’t fight the tape, as the market appears to be heading higher. However, at the same time, consider taking some profits and having some put options in place as a hedge.

http://www.investmentcontrarians.com/stock-market/why-im-getting-flashbacks-to-1999/3323/