Month: April 2014

By MoneyMorning.com.au

Last week on a trip to Denver, I got a firsthand look at one simple fact: America is an energy juggernaut.

Today, I want to share some insight and give you a front-row seat to America’s next big shale play.

Let’s get to it…

In the past 10 years, the US has turned the ship around, quite literally.

We’ve gone from a country that was expecting to import massive amounts of oil and gas — to a country that’s sitting on massive supplies of oil and gas, right under our own soil. There’s real wealth flowing from the ground.

Today, I want to share what looks to be the next hot spot in this evolving story — and potentially our chance to profit!

But first, let’s get one thing right out in the open…

Some folks are hesitant to believe America’s energy comeback. They think America’s oil boom is a flash in the pan. But these naysayers are going to miss an enormous opportunity right here in our own backyard.

With each passing day, major news sources keep producing stupendous resource estimates.

In fact, there are two stats that you should consider…

1. In 2015, the US is set to be the world’s leading crude oil producer, surpassing Russia and Saudi Arabia. No. 1…in the world. This is a prediction Byron King made in his ‘Remade in America’ presentation…and it’s coming true sooner than we could have imagined!
2. By 2019, according to the Energy Information Administration, the US will surpass its 1970s crude oil production peak. We’re going to be producing more oil than EVER here in the US

Long time readers know that I could not be more excited about this.

Indeed, next time you fill up your gas tank at the local station, don’t think about Saudi Arabia, Nigeria or Russia. Instead, think about Texas, North Dakota, Oklahoma, Louisiana and even Colorado!

THESE are the oil plays that are making a difference today…and will continue to do so for decades. It’s an amazing turnaround story here in the US.

America is set to be the world’s leading crude producer.

I’ve talked to big drillers, little drillers, service companies, rig owners… The consensus is the same…. This isn’t a flash in the pan. It’s a decades-long opportunity for America…and investors!

As America’s ‘second oil boom’ gains even more steam, the service companies will continue to profit.

The big names — Halliburton (NYSE: HAL), Baker Hughes (NYSE: BHI) and Schlumberger (NYSE: SLB) — will all continue to do well. But then again, those names have been our Outstanding Investment portfolio for a while, and while they’ll continue to spin cash, they’re not likely to see the biggest run-up from here.

In the service sector, there are smaller companies, too — in field services, water pumping, well maintenance. A lot of the small firms (in the right places) will do well too. I’ve been on-site with some of these players. Drill rigs are spinning, companies are hiring, morale is high — they’ve got blue skies ahead.

The oil producers in today’s shale market could do even better than the service names, though.

A lot of the American companies I follow are showing massive production increases. They’re also sporting fantastic ‘well pad economics’ — meaning the cost of the well is a mere fraction of its lifetime value.

If you’re betting on the ‘right horse’ in the race to produce America’s shale energy, you’ve got a great chance to multiply your money. And it should come as no surprise that when it comes to the US shale race, it all comes back to location, location, location…

OK, so in the US, we’re seeing a huge energy renaissance. There’s oil and gas flowing from all sorts of unlikely places.

North Dakota, for instance, has the massive Bakken Shale oil field. It’s been under development for years now, and produces over 1 million barrels of oil per day. Add it all up and North Dakota accounts for one out of every 10 barrels of oil the US produces — that’s amazing!

Texas is also booming. The Eagle Ford formation in South Texas popped up out of nowhere. Starting in 2007 with essentially no production, today it’s producing nearly 1.4 million barrels per day.

Again, these formations came out of nowhere! And now look at them!

Shale fields in West Texas — a prolific oil area in the 1970s — are also coming to life. The Permian Basin in West Texas is also booming with newfound shale production.

This stuff is happening all around us. And it’s all a matter of where to look for the next big find.

A little over a week ago, I was out west, looking at what could be the next big deposit here in the US…

It’s in Colorado, of all places.

Source: OilIndependents.org
Click to enlarge

Heh, Remember those beer commercials that said, ‘Tap the Rockies’? Well, we’re not far from that idea, but we’re talking about bubbling black crude oil.

The field I’m looking at now, east of Denver, is called the Wattenberg field. It’s part of the Niobrara shale play. It’s an up-and-coming shale zone that’s not on most folks’ radar.

That’s a shame!

I’ve dubbed this area the ‘baby Bakken’ — because within the next few years, we could see an increase in crude production similar to what we saw in North Dakota. By some estimates, Colorado could soon be the third-largest oil-producing state in the US.

To say that little-known companies are going to profit from this is an understatement.

Matt Insley,
Contributing Editor, Money Morning

Ed Note: The above article was originally published in The Daily Reckoning US.

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By MoneyMorning.com.au

By MoneyMorning.com.au

The Australian stock market has hit another multi-year high.

It’s back to where it was in mid-2008, before stocks crashed.

It closed yesterday at 5,536.10.

So, has the run towards 15,000 points begun?

It’s hard to say. But we’re sure it has many cash-heavy investors worried that they’ve missed the boat…

The one thing you’ve probably noticed about Money Morning is that the contributors don’t discuss their personal share investments.

That’s fairly unusual compared to most of the other financial newsletters in the Aussie market.

So, why do we keep quiet? There’s a simple reason. It’s mainly because we don’t want you to construe passing mention of a stock as a nod and a wink that you should also invest in it.

Plus, there’s the issue of conflicts of interest, such as the impression that we may be trying to ramp up a stock price by touting it and hoping that you’ll rush in to buy it and push up the price. Then we could sell.

That would be unethical. So by and large we steer clear of mentioning stocks where we hold a personal investment. Just to avoid giving the wrong impression.

However, today we will bend the rule slightly…ever so slightly.

Despite the pretend crises, stocks are going up

As we mentioned above, the Australian share market closed yesterday at 5,536.10 points. That’s the highest level since mid-2008.

It also means the S&P/ASX 200 is now up 3.4% since the start of the year. In fact, from the low point in February, the Aussie market has rallied 8.6%.

But how is that possible? The news has been full of stories about Ukraine, Russia, a tech stock bubble, an Aussie house price bubble, and slowing Chinese and Australian economies.

It’s enough to make most investors flee for the hills and give up on the stock market.

And yet, if price is any measure of investor sentiment, then investors haven’t fled for the hills. And they most certainly haven’t given up on stocks.

That’s the interesting thing. While we aren’t obsessive about watching our own stock portfolio minute-by-minute, we do take a keen interest in the value. After all, like you we’re growing our asset base for retirement too.

So, we tend to check our personal stock portfolio perhaps once or twice per day. Not that we do much with it. A few times per year we’ll add to a position, buy a new stock, or sell something that just isn’t working as we expected (yes, we make mistakes too).

That’s probably a similar way to how you treat your stock portfolio.

But here’s what we’ve noticed: while the press has hooted and hollered about the terrible things happening in the world, like the main Aussie index, the overall value of our personal portfolio has gone up.

Sure, that doesn’t mean every stock has risen (a couple of our speculative positions have taken a bit of a hammering). But most of them have gone up. Again, we dare say you’ve experienced the same thing too.

This is what makes it hard to take seriously the mainstream blather about an impending stock crash.

It’s not hard to find the real problem

Stocks will crash one day. But we’re fairly certain you won’t read the warning for it on the front page of the Sydney Morning Herald or the Age.

The first time you’ll see talk of the next major crash in mainstream press is after the crash has already happened.

That’s just the way it is. It’s the job of newspaper folks to report on the news, not to identify trends or conduct in-depth analysis. So when they do try to predict a big event they typically make a complete hash of it.

This is something we discussed at the recent World War D conference in Melbourne four weeks ago.

Investors and analysts have become obsessed with trying to find the next asset price bubble and the next calamitous crisis that will send stocks crashing.

We don’t know why they bother. It’s not hard to find either. The problem is in the continued money printing by central banks. That’s the cause of any asset price bubble, and it will be the cause of the next crisis.

That’s as far as anyone needs to look. But here’s the thing. While we agree that these central bank policies are terrible they are having one ‘positive’ effect — they are pushing up stock prices.

As we say, that’s obvious. We can see it in our stock portfolio, which continues to edge higher despite the rumblings everywhere of a crisis.

So given that information — that central banks are pushing up stock prices — what should be the logical conclusion? To sit in cash and hope for a crash? Well, you could do that. But we prefer the other option. We prefer to make the most of the situation and buy into these stock opportunities.

The happy sound of dividends hitting your bank account

There’s no doubt it’s high risk. But owning cash is high risk too, especially as living costs, taxes (see the rumours about the Aussie government’s ‘deficit tax’), and price inflation continues to rise.

In that environment, we want to own assets where you can get growth and income, and potentially reap the ‘benefits’ of these inflationary pressures.

And the simplest and most cost effective way to do that is in stocks. We’ve said it for some time now ; keep looking for the next crisis all you like. While you’re doing that we’ll keep enjoying the benefits of rising stock prices and dividend cheques dropping into our bank account.

Stocks or cash? It’s not a hard choice.

Cheers,
Kris+

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By MoneyMorning.com.au

Technical Sentiment: Bearish

Key Takeaways

• Pending US Home Sales increased 3.4%;
• NZD Trade Balance came out at 920M, in line with expectations and above February’s 818M figure;
• 2014 uptrend is at risk below 0.8500.

US Pending Home Sales increased 3.4%, well above the 1% forecast, thus providing the US Dollar with a boost. NZD/USD grinded lower throughout the European and US session, approaching critical support levels ahead of the New Zealand Trade Balance which came out in line with expectations. As long as the pair maintains lower lows and lower highs on 4H timeframe, the Daily landscape will soon adhere to the same principle.

Technical Analysis

 

With the exception of one minor hiccup last week, which was quickly corrected soon after with April 24^th Bearish Engulfing Bar, NZD/USD has been maintaining a solid bearish tendency since April 10th. With a steady configuration of lower highs and lower lows, the pair has now moved safely below the 200 Simple Moving Average on the 4H timeframe. This opened the way for the pair to test most important support levels on a larger scale.

The 50-Day Moving Average (priced at 0.8525) and April 3^rd Low of 0.8514 represent the current key support levels. In the major trend configuration, a breach below 0.8514 would mark the first Lower Low on the Daily, invalidating this year’s uptrend. Since the 0.8500 large round number is just a few pips away, it would be great from a technical perspective if the Low will form in the 0.84xx region, just to make sure it’s not a fake signal. A break and consolidation below 0.8500 would target 0.8430, the pivot zone from early March. However, Stochastic is in oversold territory on the 1H, 4H and Daily timeframes; bringing up the possibility of another 4H rally which will be sold in the coming EU and US sessions.

A stronger bounce off the 0.8515-0.8530 support cluster is possible, albeit less likely, depending on US Consumer Confidence and ANZ Business Confidence reports. In this situation the pair will encounter a similarly strong resistance confluence between 0.8585-0.8600, formed between 50, 100 and 200 SMA on 1H and 4H timeframes. Above 0.8600 the short term bearish configuration will be invalidated on the smaller timeframes, in which case NZD/USD might recover all the way up to 0.8660-0.8700.

*********
Prepared by Alexandru Z., Chief Currency Strategist at Capital Trust Markets

Will “the other monetary metal” be stuck in the doldrums forever?

By Jeff Clark, Senior Precious Metals Analyst, Casey Research

I wrote to Silver last week, and she answered back. I’d like to share our correspondence with you…

Dear Silver,

Happy anniversary. It was on April 25, 2011 that you hit $49.80 per ounce in the New York spot market.

Today, three years later, you sell for around $20, nearly 60% less.

Is your bear market almost over—or are these low prices here to stay? Your price has lagged gold this year, so your normal volatility is lacking. How much longer will you be stuck?

Jeff Clark, silver investor

Here’s her polite response:

Dear Mr. Clark,

I have good news for you. While some investors have lost interest in me and my price is at 2010 levels, things will soon change.

I put together this historical chart for you, and I hope you’ll share it with your fellow silver investors. It shows every major bear market over the past four decades. The black line represents what’s taken place from April 2011 through last Friday.

Of the seven prior bear markets, four lasted longer and three were shorter. Four declined less than today; two were about the same; and only one was significantly deeper.

If I were to match the two longest bear markets, my price would stay down until this October. If it matched the other two longer bear markets, it would end this summer.

Over the past 40 years, there has been no bear market that would extend my low past this October.

Or my low may already be in.

Either way, I think it’s safe to say that I’m close to the end of my down cycle. In fact, the historical data say the opportunity to buy me at $20 or less will soon be unavailable.

Let me relay some other data to you that also signal current prices can’t last too much longer…

The US Mint (Still) Can’t Keep Up with Demand

The sharp drop in my price in 2013 unleashed a wave of pent-up demand for silver coins. Look at the response from investors.

The question this year is if those record levels could continue to be supported. The first quarter is over, so I can tell you the answer…

The US Mint sold 13,879,000 ounces of me in Q1, 2.4% less than the 14,223,000 sold in the first quarter last year. Here’s the monthly breakdown:

January’s 36% decline from the prior year looks big, but it’s not what you think: the Mint didn’t begin sales until the end of the second week of the month. The monthly total thus reflects only 2.5 weeks of sales.

And March sales were the fourth-biggest month ever. Add in April’s sales figures and the US Mint is now on pace to exceed 2013 totals.

It’s clear that your fellow investors think my price will go higher.

Silver ETFs Have Net Inflows (Again)

You might remember that silver ETFs’ holdings were largely flat last year, unlike the mass exodus seen in gold funds. The pattern is continuing this year.

Holdings in my exchange-traded products (ETPs) have risen 3.5% year to date, an additional 17.5 million ounces. In fact, the net purchases by silver ETPs have totaled $354 million YTD, the largest influx of all commodity ETPs!

Meanwhile, gold-backed ETPs have seen sales of 500,000 ounces, about a 1% drop.

Jewelers Love Low Prices

Low prices for me have led to increased silver jewelry purchases.

As just one example, the UK reports that silver jewelry sales jumped 40.4% in February, to 351,791 items.

India Just Won’t Stop Buying

India imported 5,500 tonnes of me last year, 180% more than 2012. Imports comprised 20% of all global demand.

Last month’s silver imports were 250% lower. This was mostly due to the recent increase in import duties, and the fact that six banks got permission to import gold, which would soften purchases of me. This could partly explain why my price has struggled.

But as long as politicians keep gold restrictions in place, Indians will keep buying me.

China: More Silver for Solar

Chinese imports of me rose drastically in February, up by 75% month on month and 90% year on year to 358 tonnes, the highest since March 2011. Though lower the following month, March imports were up 16% year over year.

China’s solar industry is growing explosively. In 2009, it represented about 0.2% of the global market; this year, it’s estimated to be one-third.

It’s interesting to note that my price rose in February and fell in March, which suggests that Chinese demand affects my price, too.

Supply Sources Are Concerning

So far, suppliers have managed to meet demand. However, there are dark clouds on the horizon…

• Very little excess supply is expected this year, as production is projected to remain flat, and demand for me shows no signs of letting up.

• Solar power accounted for 29% of added electricity capacity in America last year. “More solar has been installed in the US in the past 18 months than in 30 years,” says the US Solar Energy Industries Association. “Eventually solar will become so large that there will be consequences everywhere.”

• Supply from recycling will probably be weak, because it’s not cost effective to recover every tiny bit of me from cellphones or prescription eyewear or casino chips. One report says that Americans threw away 130 million cellphones last year, containing over 46 tonnes of me.

• Several major base-metals mines are expected to be depleted over the next several years. The problem is that two-thirds of me is a byproduct from base-metals operations—if their output falls, there will be less of me, as well.
• The Silver Institute says that demand for industrial products made from me continues to grow.

No Regrets

As I look at your current situation from a historical perspective, I see a lot of catalysts that will catapult my price higher in the near future. It seems rather clear that as demand continues to grow, supply tightens, and my role as money grows more substantial, I will trade at much higher levels in just a few short years.

In fact, I offered to bet my cousin gold that I will outperform him before this cycle is over. He declined to take the bet.

The clock is ticking. Don’t set yourself up for regret when my price leaves $20 in the dust.

Your friend,

Silver

P.S. Learn about the three best ways to invest in silver, where and when to buy physical silver, and how to find the best silver stocks, in the free 2014 Silver Investor’s Guide.

Source: Brian Sylvester of The Gold Report  (4/28/14)

http://www.theaureport.com/pub/na/thibaut-lepouttres-commodity-plays-in-a-sideways-market

Metals prices have been trading sideways for some time. How can you make gains in your portfolio when commodity prices are in a stalemate? In this interview with The Gold Report, Thibaut Lepouttre, editor of Caesars Report, talks about ways to play metals from gold to copper and tungsten in a market with weak price movement, and scans the globe to find 11 potential winners.

 The Gold Report: The crisis in Ukraine may feel a little bit different in Brussels than in North America. From your point of view, does this look like a civil war? An invasion? Or is this just politics?

 Thibaut Lepouttre: Russia took advantage of the political turmoil in Ukraine to occupy the pro-Russian Crimea region. Crimea has always been closer to Russia than it has been to Ukraine. You could say that Russia is reclaiming a piece of ground it had for more than 200 years that was only separated from it in the past 60 years. Russia wanted to safeguard its interests from the new pro-European Union government in Ukraine.

 TGR: What role should Europe play in restabilizing the area? What about the role of the U.S.?

 TL: I don’t think Europe should do too much. This is a leftover problem from the dismantling of the Soviet Union—it should be dealt with internally between Ukraine and Russia. However, we should react if human rights are being infringed.

 I think the role of the West will be quite limited to acting as some kind of intermediary between Ukraine and Russia. Political sanctions are perilous because Russia has real opportunities to retaliate. Look at the gas imports from the European Union: Germany imports 35% of domestic consumption from Russia, Hungary is about 45–50%, and the Czech Republic and Bulgaria are more than 70%. The moment the West and Europe try to impose some kind of economic sanctions on Russia, the Russians will retaliate.

 TGR: What about actions such as what happened at the airport in mid-April—small, measured attempts to destabilize the Ukraine?

 TL: Russia may attempt to destabilize the pro-EU government, but I do not think that the country will go into a full-on attack or invasion of Ukraine. There may be small infringements on Ukrainian sovereignty, but not full-out war.

 TGR: The West seemed to dismiss Russia’s actions in Crimea as “one and done.” Was that the right approach?

 TL: Yes. The Crimea region was historically Russian and more than 80% of the people speak Russian. Western countries realize that it might make more sense that Crimea be a part of Russia instead of an autonomous region of Ukraine, which could continue to cause political instability inside Ukraine.

 TGR: Do you see this situation as having any further impact on commodities, such as gold, silver and perhaps even base metals?

 TL: Full-on war in the Ukraine could be a real catalyst, but commodities will likely continue to trade sideways at least through the summer.

 TGR: In October, you said you thought gold would continue to trade sideways between $1,200/ounce ($1,200/oz) to $1,410/oz. You’ve been pretty accurate with that prediction. Does a possible realignment in Eastern Europe impact your predictions?

 TL: We saw a short spike in the gold price the moment that Russia flexed its muscles in the Crimea region, but I fail to see a decent catalyst that could catapult the gold price in one direction or the other.

 TGR: After a rough couple of years for gold equities, some companies saw a slight bump in Q1/14. What gold companies have caught your eye?

 TL: I’d like to highlight two companies operating in Quebec: Metanor Resources Inc. (MTO:TSX.V) and Integra Gold Corp. (ICG:TSX.V). Those companies had a very interesting Q1/14. They have more than doubled—but then lost, once again, 40% since mid-March.

 Metanor Resources is producing gold at a rate of 50,000 oz (50 Koz)/year at an all-in cost that is probably lower than $1,000/oz. Further exploration work at the Bachelor Lake mine, where the company is producing its gold, has indicated its main vein is continuing at depth. This will bode well for future resource expansions, which will extend the mine life at Bachelor Lake. Metanor is trading way too cheaply at a market cap of $42 million ($42M). It is producing profitably. It’s an interesting company. It’s had its fair share of bad luck in the past, but it’s on track again.

 TGR: Bachelor Lake reached commercial production. What’s the next catalyst?

 TL: Its financial results from Q1/14. That was the first quarter that the mine was in commercial production and the first quarter where Metanor can prove to the market that it’s a profitable mining company.

 TGR: And Integra?

 TL: Integra also made tremendous progress in Q1/14, as it released another resource estimate and a preliminary economic assessment (PEA). The new resource estimate contains more than 800 Koz gold at an average grade of more than 10 grams per ton. The PEA was quite excellent. Using a gold price of $1,275/oz, the internal rate of return was a little more than 50%. It was mainly the result of low initial capital expenditures, which were $50–65M. On top of that, the all-in sustaining cash cost was about $750/oz. It’s a highly profitable and high-margin project. Furthermore, the PEA just took a part of the new resource estimate into consideration. It’s likely that further exploration will result in a longer mine life and a higher net-present value (NPV).

 TGR: Integra has a reasonably young management team. Should that be cause for concern?

 TL: Young, perhaps, but not inexperienced. CEO Steve de Jong has assembled a good team on the ground. Vice President of Exploration Hervé Thiboutot has several decades of experience under his belt, including time at Alamos Gold Inc. (AGI:TSX).

 TGR: Do you see silver tracking gold throughout 2014 or do you see a bit of a separation occurring?

 TL: There will continue to be some kind of correlation between the gold and silver prices. Silver won’t track gold one-on-one, but the difference in price variations and changes will not be that high.

 TGR: Can silver be profitably mined at current prices?

 TL: Yes, margins are much thinner than if silver were between $25–30/oz, but there are some companies that would be profitable at the current silver price. Golden Arrow Resources Corp. (GRG:TSX.V; GAC:FSE; GARWF:OTCPK), which owns the Chinchillas silver project in Argentina, seems to have its hands on a very interesting one. The project’s current resource is more than 100 Moz silver equivalent (Ag eq). A PEA has shown an after-tax NPV of around $100M using a silver price of $22/oz. The operating expenditures outlined in the PEA were about $11/oz silver, but the NPV could be much higher if more resources can be added. After talking to the management team, I’m convinced there’s potential for probably 200 Moz Ag eq. The mine life could be extended much longer. I think we’ll see a lot more ounces in the ground after this year’s drill program, which is expected to total about 25,000 meters. I’ll be looking forward to seeing another resource update.

 TGR: Let’s talk about copper. The Chilean Copper Commission (Cochilco) revised its copper price forecast downward by about $0.10 to $3.05/pound ($3.05/lb) in 2014. What do you predict for copper prices for the remainder of the year?

TL: I’ve always been conservative about the copper price because I expect a lot more supply coming on the market than demand. I always use a long-term copper price of $2.75/lb.

TGR: Are there copper plays that you are following?

TL: There’s one pure copper play and a silver-copper play. Let me start with Revett Mining Co. Inc. (RVM:TSX; RMV:NYSE.MKT). Revett owns a silver-copper project in the U.S., in Montana. It had to close the Troy mine in December 2012 after a seismic event caused a rock slide. The company is constructing a new drift to access the mineralized zones again. It should be ready by September, so the company can restart stockpiling ore in Q3/14, with a mill restart anticipated in Q4/14 and full production in Q2/15.

It’s important to look at Revett’s production statistics before the mine closed; it produced 1.2 Moz/year silver and about 9 million pounds (9 Mlb) copper at a cash cost of about $10/oz silver. The copper was used as a byproduct credit. If the company can achieve 1.2 Moz silver again with a cash cost of $10/oz, Revett Mining is probably one of the best choices to get exposure to silver and copper at this moment.

TGR: Would you say the market beat up Revett too much for what happened at its Troy mine and now it is an undervalued asset?

TL: That’s exactly what happened. The market was disappointed when the company tried to re-access the mineralized zones throughout a parallel adit. The restart of production was delayed for about a year. There was also a slide in the silver price and, more recently, the copper price, but the impact to the company has been overdone. The company has a market cap of $35M and will produce 1.2 Moz silver at a cash cost of $10/oz. Even at a silver price of $20/oz, the company will generate about $10M in operating cash flow the moment it gets up and running again. The company is trading at 3.5 times its expected operating cash flow and that’s a sign that the market is underestimating the potential of Revett. And then you aren’t even considering the company’s Rock Creek project which contains 230 Moz silver and over 2 billion pounds (2Blb) copper in a historical resource estimate.

I’m also following Nevada Copper Corp. (NCU:TSX), which is constructing the Pumpkin Hollow project in Nevada. Pumpkin Hollow is a two-phase project. In the first phase, the company is expected to open an underground mine, which is fully permitted and almost fully financed. It still needs about $75–100M. In the first few years of the operation, the underground project should produce about 75 Mlb/year copper. At a $2.75/lb copper price, the after-tax NPV is in excess of $200M. Besides the underground project, Nevada Copper also plans a large, open-pit operation. It has recently completed the feasibility study, forecasting a 70,000-ton-per-day (70 Ktpd) operation.

There is a land change bill going through Congress that could make the permitting easier for Nevada Copper’s second phase. If the land could get transferred from the federal government to the city and the state, that would shorten the permitting process by about two years.

The initial capital expenditures for the large, open-pit project are about $1 billion ($1B). Nevada Copper will likely need a partner to build the project. My main fear is that the company will be bought out before it’s producing from the open pit. It’s a huge copper asset containing 5.2 Blb copper, 1 Moz gold, about 33 Moz silver and about 0.5 billion tons iron ore. It’s on the radar of a lot of companies. I wouldn’t be surprised if it were taken out. Fortunately, the CEO of the company has about 9% fully diluted shares, so his interests are aligned with the shareholders’ interests.

TGR: Let’s move to tungsten. What does the supply-demand picture look like?

TL: The supply-demand ratio in tungsten is very tight. Tungsten is dominated by a few countries, mainly China. That has led Western Europe and the U.S. to look at the security of their supply of strategic minerals like tungsten. Over the past few years, when the tungsten price started to move up again from $200/metric ton ($200/mt) to in excess of $400/mt, more and more companies have evaluated previously producing assets and tried to reopen them. Assets that were not profitable at $100/mt might be highly profitable at $360/mt.

TGR: What are some companies that own the rights to some of these past producers?

TL: Wolf Minerals Ltd. (WLF:ASX), which is constructing the Hemerdon project in the U.K., has secured financing and is targeting a H2/15 start of production. The company will produce about 345,000 metric ton units (345 kmtu)/year at a cash cost of $110/mt. If you extrapolate that and use a $360/mtu price for tungsten, this mine will be a cash cow. The operating margin is extremely high. The initial mine life is about 10 years based on the reserves, but the Measured and Indicated resources could extend that by several decades. It’s an interesting, near-term production story to keep an eye on.

The second company I would highlight is Blackheath Resources Inc. (BHR:TSX.V), which has assembled an interesting portfolio of past-producing tungsten projects in Portugal, the Mecca of tungsten. Blackheath’s most interesting project, Covas, has a historical resource of about 900,000 tons of 0.78% tungsten. It’s about 720 Kmtu for an in situ value of about $260M at the current tungsten price. I’d like to emphasize that 0.78% is a high grade compared to others, like Wolf Minerals, which will be mining ore at a grade of 0.19%. Blackheath has several other projects in Portugal, as well. It’s getting ready for a busy exploration year. There will be a lot of news flow coming from that company.

TGR: Does it have cash?

TL: Blackheath raised $1M in December. Once the exploration results kick in—the company started drilling earlier this month on its main targets—it will probably raise some more money. We will likely see some more dilution down the road.

The third company I would highlight is Carbine Tungsten Ltd. (CNQ:ASX) in Australia. It will likely restart production from stockpiles for about $15M in capital expenditures. Carbine can produce about 80 Kmtu/year. From an initial $7M, it can double that to 160 Kmtu/year. That’s just low-grade stockpile stuff, but for an additional $45M, Carbine could start a phase-three production, which would feed the hard rock of the project being mined. That would result in an output of about 265 Kmtu/year at a cash cost of less than $150/mtu. If we apply a $360/mtu market price for tungsten, this project will generate about $50M in cash flow.

The company has an offtake agreement with Mitsubishi Corp. (MSBSHY:OTCPK) in Japan, which validates the merits of the project. It’s important to have a strategic partner like Mitsubishi. Who knows what might happen down the road, as Mitsubishi is clearly keen to secure its future supply of tungsten.

TGR: Over in Peru, there are a couple of companies that are toll milling gold operations. Tell us about toll mining and the risks involved.

TL: Toll milling is a very interesting concept because companies that are engaged in toll milling aren’t real miners. They provide service to artisanal miners that have no efficient way to treat their ore.

The toll milling company pays the miners based on the average gold grade of the expected recovery rate and factor in a little wiggle room in case the gold price changes. It’s a win-win situation because the artisanal miners have a way to efficiently treat ore. If they did it themselves without the right permits, they would be breaking the law and could go to jail for a long time.

The average recovery will be much higher than what a private person could reach. Most artisanal miners reach a recovery of about 40–60%, while modern toll milling companies with modern equipment can reach recoveries of 90% and higher. It’s a win-win situation. The toll milling company takes a cut of the value of the gold, the artisanal miner has a way to efficiently process ore and the Peruvian government gets more tax income because everything will be formalized.

The small-scale mining sector in Peru is officially estimated at about $2B/year. Unofficially, that number could be much higher, perhaps even $3–4B/year. As a country that has become serious about formalizing its mining sector, there are a lot of possibilities in Peru in toll milling.

TGR: What companies are making money in the toll milling business?

TL: There are two companies that I’d like to highlight that are duplicating Dynacor Gold Mines Inc.’s (DNG:TSX) model. The first one is Inca One Resources Corp. (IO:TSX.V), which currently operates a 25 tons per day (25 tpd) facility in the Chala district, Peru. The company is trying to fine tune its processing facility. The recoveries at the Chala plant have been consistently higher than 90%. The company is doubling its capacity, up to about 50 tpd, and will eventually take it to 100 tpd and then probably to 300–350 tpd.

In Chala last month, seven illegal gold plants were shut down and destroyed by the army. There is less choice for artisanal miners in Chala to process their ore. It puts Inca One in an excellent position to reach mill capacity.

A second company in Peru is Standard Tolling Co. (TON:TSX.V). Standard Tolling is not in production yet, but is compiling a study to determine the location of a facility, which is due by early June. It will likely start with a relatively large capacity of 100 tpd because it could benefit from economies of scale. This company has added some interesting people to its board. It has Andrew Neale, who operated a gold milling business in Central America and is knowledgeable about the ins and outs of gold milling. The company also added a Peruvian director with experience on the legal side of mining in Peru.

TGR: Any other companies you want to talk about?

TL: There’s one other company I’d like to highlight: Tsodilo Resources Ltd. (TSD:TSX.V). It’s operating in Botswana, which has been called the “Switzerland of Africa” because it’s the African country with the least corruption. There is less corruption in Botswana than Spain, Portugal or Colombia. It’s one of the safest mining jurisdiction, not only in Africa but worldwide.

Tsodilo Resources has a two-step approach. It has a joint venture with First Quantum Minerals Ltd. (FM:TSX; FQM:LSE) on its copper project. First Quantum will have to spend $6M and an additional $9M in exploration expenditures. If it results in a resource estimate of more than 4.4 Blb copper, First Quantum retains 70% ownership in the project. If it’s less than 4.4 Blb copper, First Quantum keeps a 51% stake. First Quantum has partnered up with Tsodilo because it is hunting for the big elephant. It doesn’t care about a 1 Blb copper deposit.

TGR: Tsodilo is a story with diamonds, copper, base metals and uranium. Doesn’t that confuse investors?

TL: Don’t forget the iron ore, Brian. It does confuse investors. The company is trying to rebrand itself as a copper and iron ore company, as those projects are closer to development. The uranium overlaps with the metal licenses so additional resources are not needed for that project and the diamond exploration continues, however with a secondary emphasis at this stage .

TGR: Botswana is well known for its diamond mining. De Beers has some prolific mines there. What do you know about its diamond assets?

TL: Diamond mines in Botswana will have to go underground during the next decade, increasing the cost and reducing the output. It’s one of the main reasons why Botswana is supporting the development of other mineral and commodity projects. It’s helping these companies out by trying to unlock the country—it’s a land-locked country with no access to the sea. It signed an agreement with Namibia last month whereby Botswana and Namibia will construct a Trans-Kalahari Railway. That will be important for gold and iron projects because it will provide rail access to the Port of Walvis Bay in Namibia. Botswana understands the needs of the companies working in the country and is trying to accommodate them. It wants to continue to be one of the most important and safest mining destinations in Africa.

TGR: Do you want to talk about any other base metal companies?

TL: One company that warrants a closer look is Confederation Minerals Ltd. (CFM:TSX.V). The company owns 50% of the Newman Todd project in Ontario and has encountered very interesting intersections over a length of 1.8 kilometers. In fact, every hole of the 2011 drill program has hit mineralization, which I see as extremely encouraging. More drilling will be needed to connect all the dots, and it will be interesting to see what future drill campaigns will reveal.

TGR: Do you have any other advice to investors that you’d want to leave us with?

TL: Do your homework. Understand every aspect of a company and its project. Never be afraid of getting in touch with the investor relations division of the company. Never be afraid to ask questions. You have to make sure you fully understand every aspect of the business before considering an investment.

TGR: Thank you for your insights.

Thibaut Lepouttre is the editor of the Caesars Report, a newsletter and mining portal based in Belgium that covers several junior mining companies with a special focus on precious metals and base metals. Lepouttre has a Bachelor of Law degree and two economics masters degrees that have forged his analytical approach to the mining sector. Considered a number cruncher, Lepouttre focuses on the valuations of companies and is consistently on the lookout for the next undervalued mining company.

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DISCLOSURE:
1) Brian Sylvester conducted this interview for Streetwise Reports LLC, publisher of The Gold Report, The Energy Report, The Life Sciences Report and The Mining Report and and provides services to Streetwise Reports as an independent contractor. He owns, or his family owns, shares of the following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors of Streetwise Reports: Metanor Resources Inc., Integra Gold Corp., Carbine Tungsten Ltd. and Confederation Minerals Ltd. Streetwise Reports does not accept stock in exchange for its services.
3) Thibaut Lepouttre: I own, or my family owns, shares of the following companies mentioned in this interview: Nevada Copper Corp., Revett Mining Co. Inc., Golden Arrow Resources Corp., Metanor Resources Inc., Tsodilo Resources Ltd., Blackheath Resources Inc., Wolf Minerals Ltd., Standard Tolling Co., Inca One Resources Corp., Confederation Minerals Ltd. and Integra Gold Corp. 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: Inca One Resources Corp., Standard Tolling Co., Blackheath Resources Inc., Tsodilo Resources Ltd., Revett Mining Co. Inc., Golden Arrow Resources Corp., Nevada Copper Corp. and Metanor Resources Inc. 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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A visual history of complacency and fear as seen by the 10-year spread over German Bunds

By Elliott Wave International

The one-two punch 2014 winter storms that battered the southeastern United States left $13.5 million in damages in Georgia alone and thousands of residents displaced due to burst pipes and power outages. I am one of the displaced. Three months after the flood, I’m still living out of suitcases in a hotel while my apartment gets rebuilt.

I’m ashamed to admit before Icepocalypse, I had the least comprehensive homeowner’s insurance. Why bother, I thought. This is Atlanta. The only blizzard this city’s seen in the last decade is on the dessert menu at Dairy Queen.

But now, you better believe the first thing I’m going to do when I move back in is upgrade my policy to cover all and any acts of man and God — fire, tornado, sharknado, alien invasion, you name it.

It’s human nature. You can never truly prepare for the worst until you experience it first-hand. Then, and only then, do you go above and beyond to protect your health and welfare.

Nowhere is this more apparent than in the world of finance. The tendency for investors to be blindly optimistic in the run-up to disaster, and then stringently fearful after is undeniable. You can actually see it with your own eyes in the yield spread between low-grade bonds and long-term securities.

In a nutshell: A falling yield spread signals a growing appetite for risk among investors, while a rising yield spread signals an aversion to risk.

As for a real-world example, the April 2014 Elliott Wave European Financial Forecast opens with a special, two-page section on one of the most accurate gauges of eurozone sentiment since the start of the financial crisis: the 10-year spread over German Bunds.

Before we delve into our analysis, let’s set the pre-crisis scene to 2006 early 2007. Europhoria is off the charts as seen in these headlines from the time:

– “Euro Bull is Far From Over! Not only has the bear market been consigned to memory, it has been replaced by a rampaging bull market in equities. It’s Goldilocks all over again!” — April 20, 2006 National Post

– And — “Lehman Brothers strategy boffin says buy, buy, buy Europe.” — January 16, 2007 Daily Mail

So, did the yield spread mirror the blind optimism among investors?

You betcha! Here, the April 2014 European Financial Forecast confirms: “By mid-year 2007, bond investors lent money to treasuries in Greece, Ireland, Italy, Portugal and Spain at more or less the same rate as they lent money to Germany.” The first half of our chart of the 10-year spread over German bunds captures this historic complacency:

The move in the other direction was far from swift, as ingrained optimism persisted amidst the 2007 U.S subprime implosion, and 2008 Lehman Brothers bankruptcy. The next series of charts show how investors didn’t fully “snap awake” until late 2008-9.

From there, the needle of sentiment swung firmly into risk-aversion territory:

The spread between 10-year yields in Germany versus peripheral Europe rose by a factor of 43 — from around 23 basis points in January 2008 to almost 1,000 basis points in January 2012.

Now is the time for reckoning. Historic complacency coincides with peaks, while historic fear with bottoms. So there is only question before you: Where does the 10-year spread over German Bunds stand now?

The April 2014 European Financial Forecast zooms in on the yield spread’s performance since 2012 and has this answer:

Only a trend of “epic proportion can explain” today’s reading; and when this phase gets underway, equities along with debt instruments “of all stripes” will follow.

Don’t wait until after the tide has already turned. Prepare for the long-term changes ahead in Europe’s leading economies with EWI’s European Financial Forecast Service.

Start your 2-week free trial to the European Financial Forecast Service today and you’ll get: The monthly European Financial Forecast, with intermediate-term analysis of European markets: DAX, FTSE, CAC, SMI and Euro Stoxx 50 The European Short Term Update (delivered online 3 times a week) Elliott Wave Theorist (delivered online at least twelve times a year), with Robert Prechter’s latest Elliott wave research focusing on the long-term direction of the markets and the manifestations of waves in society Start your 2-week free trial now >>

By CentralBankNews.info
    Egypt’s central bank, which earlier today held its benchmark overnight deposit rate steady at 8.25 percent, reiterated its guidance from February that the “pronounced downside risks to domestic GDP combined with the negative output gap since 2011 will limit upside risks to the inflation outlook going forward.”
    The Central Bank of Egypt (CBE) added that upside risks to inflation continue to be contained as a sharp rebound in international food prices is unlikely in light of the global economy.
    Egypt’s headline inflation rate rose to 9.82 percent in March from 9.76 percent in February after declining in recent months from a 2013 high of 12.97 percent in November, the highest rate since February 2009.
    The central bank, which has maintained rates this year after cutting them by 100 basis points in 2013, was widely expected to hold rates steady.
    The increase in prices was mainly driven by higher prices of several food items along with a seasonal increase in fruits and vegetables, the CBE said, adding that core CPI rose to an annual rate of 9.90 percent in March from 9.70 percent.

    Egypt’s economy has been suffering since the political uprising in 2011 and the CBE said there were downside risks to growth from the challenges facing the euro area and softening growth in emerging markets.
    Egypt’s Gross Domestic Product expanded by 1.4 percent in the second quarter of the current 2013/14 fiscal year, which ended in December 2013, compared with growth of 1.04 percent in the previous quarter.
    This brought the annual growth rate for the first half of the current fiscal year to “a feeble” 1.2 percent, down from growth of 2.1 percent in the 2012/13 fiscal year that ended June 30, CBE said.
    The CBE said economic activity remained sluggish in the second fiscal quarter due to modest growth in most key sectors, such as manufacturing and construction, with a contraction seen in both the tourism and petroleum sectors.
    Investment activity is also low due to the heightened uncertainty that has faced investors since early 2011 and weak credit growth to the private sector, the bank said.

    http://ift.tt/1iP0FNb

By WallStreetDaily.com

In my last article, I mentioned how carbon dioxide (CO2) injection technology holds the promise of tripling oil production from domestic enhanced recovery operations.

At least, that’s what Michael Ming, General Manager of General Electric (GE), claims.

The company is working with Norway’s privately owned Sargas SA to capture CO2 emissions from power plants. The carbon dioxide will later be injected into oil fields.

Now, it’s impressive enough that the company has taken notice of the trend’s emerging importance – since many others in the industry are ignoring its potential.

That being said, however, the CO2 business for GE is still relatively small.

So let’s take a look at some players that stand to benefit from the coming CO2 boom in oil production.

Denbury Resources Leading the Way

A big player in this up-and-coming sector is Denbury Resources (DNR).

Denbury owns the largest reserves of naturally occurring underground carbon dioxide used for oil recovery east of the Mississippi River.

And its primary focus is using CO2 to increase oil output from past-producing fields of stranded oil.

The company happens to be involved in America’s largest carbon capture project in partnership with Air Products & Chemicals (APD) and Valero Energy (VLO). The project received a $284-million investment from the U.S. Department of Energy because it cuts carbon emissions.

Air Products runs a hydrogen plant that captures 50 million cubic feet of carbon dioxide per day at Valero’s refinery in Port Arthur, Texas. The company then compresses the CO2 and puts it into a pipeline to Denbury.

Denbury then uses the captured CO2 for its EOR operations all across the Gulf Coast.

GE says the only thing holding back this corner of the energy industry right now is supply challenges. The cost of capturing carbon from power plants and industries must fall to make it worthwhile for other companies to adapt the technology.

So more projects like Denbury’s venture with Air Products are needed. But Denbury is benefiting, nonetheless.

Statoil and GE Team Up

CO2′s use in enhanced recovery operations isn’t the only possible use for the gas in the energy industry.

As mentioned briefly in my last article, carbon dioxide may one day replace water in fracking operations.

GE is leading the way here, along with Norwegian energy company, Statoil ASA (STO).

The two companies are working on a $10-billion research program that’s aimed at using captured CO2 instead of water in fracking.

The firms are studying how a chilled form of CO2, known as a “super-critical fluid” – neither solid nor liquid – could become the new energy industry standard.

CO2 has already been used for fracking on a small scale in the 1990s by Canadian FracMaster (before it filed for bankruptcy). At the time, the company proved that it could produce more oil and natural gas than using water. That’s because CO2 fracks occur at higher pressures than fracks using water.

Today, GE and Statoil plan to use their deeper pockets to find the perfect viscosity for the chilled CO2. By doing so, the carbon dioxide can carry proppant sand – a key factor in the fracking process.

They also need to figure out how to re-capture the carbon dioxide at the wellhead so that it can be re-used to frack additional wells.

Of course, using CO2 for fracking on a wide scale is probably a few years away.

But when the technology moves forward, it’ll be a game changer for the industry.

And “the chase” continues,

Tim Maverick

The post Key Players in the Shale Industry’s Shift to Carbon Dioxide appeared first on Wall Street Daily.

Article By WallStreetDaily.com

Original Article: Key Players in the Shale Industry’s Shift to Carbon Dioxide

By CentralBankNews.info
    Egypt’s central bank held its benchmark overnight deposit rate steady at 8.25 percent, along with its other rates, saying a statement from the monetary policy committee (MPC) would be issued shortly.
    The Central Bank of Egypt (CBE), which has maintained rates this year after cutting them by 100 basis points in 2013, was widely expected to keep rates steady.
    At its last meeting in February, the bank said risks to domestic growth combined with a persistently negative output gap since 2011 would limit inflationary risks.
    Egypt’s headline inflation rate rose slightly to 9.82 percent in March from 9.76 percent after declining in recent months from a 2013 high of 12.97 percent in November, the highest rate since February 2009.
    Egypt’s economy has suffered since the political uprising in 2011 with Gross Domestic Product expanding by only 1.04 percent in the third quarter of 2013 from the second quarter, the seventh consecutive quarter of declining growth rates.
   
    http://ift.tt/1iP0FNb

By CentralBankNews.info
    The central bank of Mauritius held its repo rate steady at 4.65 percent, with a majority of the bank’s Monetary Policy Committee considering it “premature to tighten the current monetary policy stance given continued downside risks to the growth outlook and subdued inflationary pressures.”
    The Bank of Mauritius, which last cut its rate by 25 basis points in June 2013, also said the bank’s staff had forecast inflation within a range of 3.9 to 4.1 percent by June before rising to a range of 3.9 percent to 4.3 percent by December, based on no rate changes.
    Other members of the central bank’s policy committee “considered it important to start the process of normalizing interest rates to enhance savings in the economy and address vulnerabilities in the banking and financial system due to a prolonged period of low interest rates,” the bank said.
    Minutes of the bank’s meeting will first be released on May 12, but it is likely that the bank’s governor, Rundheersing Bheenick, shared the minority view as he has frequently called for higher rates to meet the bank’s year-end inflation target of 4.0 percent.
    Inflation in Mauritius eased to 4.5 percent in March from 5.6 percent in February but up from 4.0 percent in December 2013, mainly reflecting fluctuations in fresh vegetable prices.

    In February Bheenick told Reuters that monetary policy had fallen behind the curve and the import-dependent island in the Indian Ocean could expect greater external pressure on prices as inflation picks up in developed economies.
    But Bheenick and two other committee members were outvoted at the last monetary meeting in February by external members of the committee that are appointed by the finance ministry. The policy committee comprises eight members, five of which are appointed by the ministry.
    Bheenick, who has also called for more independence in forming the central bank’s monetary policy committee, and Finance Minister Xavier Duval have publicly disagreed over whether to raise rates and the two met on Feb. 18 to discuss their differences.
    Last week the International Monetary Fund said the Bank of Mauritius’ current monetary stance was “broadly appropriate” but a withdrawal of accommodation might be necessary if inflationary pressures intensify. They also suggested that Mauritius should adopt a formal inflation targeting framework and that fiscal policy should be tightened this year to meet debt ratio targets.
    Economic activity in Mauritius is project to pick up as the recovery in its export markets takes hold, notwithstanding a slowdown in the fourth quarter of 2013, the bank said.
    The forecast for Gross Domestic Product growth has been maintained within a range of 3.7 to 4.0 percent for 2014, up from an estimated 3.2 percent growth in 2013, the bank said.
    The IMF forecast 3.7 percent GDP growth this year.
    “The MPC maintains strong vigilance in monitoring economic and financial developments and stands ready to meet in between its regular meeting, if the need arises,” the bank said.

    http://ift.tt/1iP0FNb