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Barrick Gold Boosts Dividend by 40% After Earnings Beat Highest Analyst Estimate SPONSOR: Loncor Resources $ $ $ $RSG $ $GOLD $NEM

Posted by AGORACOM-Eric at 12:40 PM on Thursday, February 13th, 2020
This image has an empty alt attribute; its file name is Loncor-Small-Square.png

Sponsor: Loncor is a Canadian gold explorer that controls over 2,400,000 high grade ounces outside of a Barrick JV. The Ngayu JV property is 200km southwest of the Kibali gold mine, operated by Barrick, which produced 800,000 ounces of gold in 2018. Barrick manages and funds exploration at the Ngayu project until the completion of a pre-feasibility study on any gold discovery meeting the investment criteria of Barrick. Newmont $NGT $NEM owns 7.8%, Resolute $RSG owns 27% Click Here for More Info

On Wednesday, Barrick Gold Corp boosted its quarterly dividend by 40 per cent as it reported adjusted earnings of 17 cents a share for the fourth quarter, beating the highest analyst estimate.Barrick Gold

  • The company boosted its quarterly dividend by 40 per cent as it reported adjusted earnings of 17 cents a share for the fourth quarter, beating the highest analyst estimate.

Barrick Gold Corp., the world’s second-largest producer of the metal, will exceed its target of selling US$1.5 billion in assets by the end of this year, chief executive Mark Bristow said.

“We’re going to beat it,” Bristow said Wednesday in an interview following the release of the miner’s fourth-quarter earnings. “We still have some work to tidy up the portfolio.” The company has roughly US$450 million in sales to go to reach the US$1.5 billion mark, but expects to sell more than that this year, he said.

The Toronto-based company had announced the initial asset-sales target in the wake of its US$5.4 billion acquisition of Randgold Resources Ltd. last year. Barrick sold a number of assets in 2019 including a 50 per cent stake in its Kalgoorlie mine in Western Australia.

The sales have forced Barrick to narrow its five-year annual production range to 4.8 million to 5.2 million ounces. “This is our base plan and of course there are upsides that we’re working on.” In November, Barrick had said it expected to maintain its five-year gold production within a range of 5.1 million to 5.6 million ounces, based on its portfolio at the time.

The company plans to release 10-year production guidance at its annual general meeting later this year, Bristow said. Barrick is thinking about what the company should look like long-term, including its mix between copper and gold production.

In December, Bristow said Barrick may some day look into a possible merger with Freeport-McMoRan Inc., the largest publicly traded copper producer. On Wednesday, Bristow said that idea is still at a conceptual stage, but could include anything from a merger to the acquisition of Freeport assets. “Copper is the most strategic metal,” Bristow said.

On Wednesday, the company boosted its quarterly dividend by 40 per cent as it reported adjusted earnings of 17 cents a share for the fourth quarter, beating the highest analyst estimate.

Barrick is benefiting from rising bullion prices, reporting fourth-quarter revenue of US$2.88 billion that also topped analysts’ estimate. Spot gold averaged about US$1,483 an ounce in the fourth quarter, 21 per cent more than a year earlier, and the metal has extended gains this year as the coronavirus weighs on expectations for economic growth.


Mining Stocks Are Setting Up For Another Run SPONSOR: Loncor Resources $ $ $ $RSG $ $GOLD $NEM

Posted by AGORACOM-Eric at 1:10 PM on Tuesday, February 11th, 2020
This image has an empty alt attribute; its file name is Loncor-Small-Square.png

Sponsor: Loncor is a Canadian gold explorer that controls over 2,400,000 high grade ounces outside of a Barrick JV. The Ngayu JV property is 200km southwest of the Kibali gold mine, operated by Barrick, which produced 800,000 ounces of gold in 2018. Barrick manages and funds exploration at the Ngayu project until the completion of a pre-feasibility study on any gold discovery meeting the investment criteria of Barrick. Newmont $NGT $NEM owns 7.8%, Resolute $RSG owns 27% Click Here for More Info

The Fed is trapped.  If it stops adding money to the money supply, the stock market will crash.  It’s already extended the repo money printing program twice. The first extension was to February and now it has extended it again to April.

What was billed as a temporary “liquidity problem” in the overnight repo market is instead significant problems developing in the credit and derivative markets to an extent that it appears to be putting Too Big To Fail bank balance sheets in harm’s way.  That’s my analysis – the official narrative is that “there’s nothing to see there”.

The delinquency and default rates for below investment grade corporate debt  (junk bonds) and for subprime consumer debt are soaring.   Privately funded credit,  leveraged bank loans,  CLO’s and subprime asset-backed trusts (credit cards, ABS, CMBS)  are starting to melt down. The repo money printing operations is a direct bail out of leveraged funds, mezzanine funds and banks, which are loaded up  on those subprime credit structures.    Not only that,  but  a not insignificant amount of OTC credit default derivatives is “wrapped around” those finance vehicles, which further accelerates the inevitable credit meltdown “Minsky Moment.”

The point here is that I am almost certain, and a growing number of truth-seeking analysts are coming to the same conclusion, that by April the Fed will once again extend and expand the repo operations. As Milton Friedman said, “nothing is so permanent as a temporary government program.”

Gold will sniff this out, just like it sniffed out the September repo implementation at the beginning of June 2019.  I think there’s a good chance that gold will be trading above $1600 by this June, if not sooner.

Eventually the market will discover the junior exploration stocks and the share prices will be off to the races. This is part of the reason Eric Sprott continues to invest aggressively in the companies he considers to have the highest probability of getting enough “wood on the ball to knock the ball out of the park” (sorry, baseball is right around the corner).

Precious metals mining stocks are exceptionally cheap  relative to the price of gold (and silver).   Many of the junior exploration stocks  have sold down to historically cheap levels  in the latest pullback in the sector.   As such, this is a good opportunity to add to existing positions in these names or to start a new position.


Dave Kranzler

No Way Out – Sprott Gold Report SPONSOR: Loncor Resources $ $ $ $RSG $ $GOLD $NEM

Posted by AGORACOM-Eric at 1:30 PM on Tuesday, February 4th, 2020
This image has an empty alt attribute; its file name is Loncor-Small-Square.png

Sponsor: Loncor is a Canadian gold explorer that controls over 2,400,000 high grade ounces outside of a Barrick JV.. The Ngayu JV property is 200km southwest of the Kibali gold mine, operated by Barrick, which produced 800,000 ounces of gold in 2018. Barrick manages and funds exploration at the Ngayu project until the completion of a pre-feasibility study on any gold discovery meeting the investment criteria of Barrick. Newmont $NGT $NEM owns 7.8%, Resolute $RSG owns 27% Click Here for More Info

  • We believe that there is a strong case to expect gold mining shares to outperform the metal in the years ahead…

On September 17, 2019, overnight repo rates spiked 121 basis points, climbing from 2.19% to 3.40%, providing yet another crucial buttress for the bullish rationale for gold. The spike signaled that the U.S. Federal Reserve (“Fed”) had lost control of the price of money. Without subsequent massive injections of liquidity by the Fed into the repo market, out of control, short-term interest rates would have undermined the leverage that underpins record financial asset valuations. Going forward, unless the Fed continues to expand its balance sheet, it risks a meltdown in equity and bond prices that could exceed the damage of the 2008 global financial crisis. Despite consensus expectations, there appears no escape from this treadmill.

The Fed must monetize deficits because non-U.S. investors are no longer absorbing the growing supply of U.S. debt. Ultra-low, short-term interest rates do not compensate foreign investors for the cost of hedging potential foreign currency (FX) losses (see Figure 1). The U.S. fiscal deficit is too high and the issuance of new U.S. treasuries is too great for the market to absorb at such low interest rates. In a free market, interest rates would rise, the economy would stall and financial asset valuations would decline sharply.

Figure 1. Treasury Issuance Goes Up, Foreign Purchases Go Down (2010-2019)

Source: Bloomberg. Data as of 12/31/2019.

The predicament facing monetary policy explains why central banks are buying gold in record quantities, as shown in Figure 2. It also explains the fourth quarter “melt-up” in the equity market, even with Q4 earnings that are likely to be flat to down versus a year ago (marking the second quarter in a row for lackluster results) and the weakest macroeconomic landscape since 2009 (as shown by Figure 3).

Figure 2. Central Banks Purchases of Gold are 12% Higher than Last Year

Source: World Gold Council; Metals Focus; Refinitiv GFMS. Data as of 9/30/2019.

Figure 3. The U.S. ISM PMI Index Indicates Economic Contraction

The U.S. ISM Manufacturing Purchasing Managers Index (PMI)1 ended the year at 47.2, indicating that the U.S. economy is in contraction territory (a reading above 50 indicates expansion, while a reading below 50 indicates contraction).

Source: Bloomberg. Data as of 12/31/2019.

Liquidity injections will result in more debt, both public and private sector, but not necessarily enhanced economic growth:

“As these forms of easing (i.e., interest rate cuts and QE [quantitative easing]) cease to work well and the problem of there being too much debt and non-debt liabilities (e.g., pension and healthcare liabilities) remains, the other forms of easing (most obviously currency depreciations and fiscal deficits that are monetized) will become increasingly likely …. [this] will reduce the value of money and real returns for creditors and will test how far creditors will let central banks go in providing negative real returns before moving into other assets [including gold].”

– Ray Dalio, Paradigm Shifts, Bridgewater Daily Observations, 7/15/2019

Gold Bullion and Miners Shine in 2019

Though overshadowed by the rip-roaring equity market, precious metals and related mining equities also had significant gains in 2019 (up 43.49%)2. Gold’s 18.31% rise last year was its strongest performance since 2016. More significantly, after two more years of range-bound trading, the metal closed out 2019 at its highest level since mid-2013, and within striking distance of $1,900/oz, the all-time high it reached in 2011.

The investment world has taken little notice. Despite gold’s strong performance, GDX3, the best ETF (exchange-traded fund) proxy for precious metals mining stocks, saw significant outflows over the year as shares outstanding declined from 502 million to 441 million (or 12%) over the twelve months, despite posting a 39.73% gain, well ahead of the 31.49% total return for the S&P 500 Total Return Index.4 We believe that there is a strong case to expect gold mining shares to outperform the metal in the years ahead…

It has been our long-held view that until mainstream investment strategies run aground, interest in precious metals will continue to simmer on low, notwithstanding the likelihood that 2020 may be another very good year for the precious metals complex. The many reasons why mainstream investment strategies could unravel are not difficult to imagine. They include the emergence of meaningful inflation, further slippage of the U.S. dollar’s nearly exclusive reserve currency status, and market-driven interest rate increases or a recession. Any or all of these could disrupt the continued expansion of the Fed’s balance sheet, triggering a rapid reversal in financial asset valuations. Each possibility deserves a more complete discussion than space here allows, but evidence strongly suggests that none can be ruled out. While timing the zenith in complacency is risky, we feel confident that a reversal of fortune for high financial asset valuations awaits unsuspecting investors sooner than they expect.

We are even more confident that a bear market will generate far broader investment interest in gold. Considering that institutional exposure to gold and related mining stocks hovers near multi-decade lows, the slightest uptick could easily drive the metal and related precious metals mining shares to historic highs. Today, the aggregate market capitalization of precious metals equity shares is $400 billion, an insignificant speck on the current market landscape.

Investors outflows from precious metals mining stocks in 2019, even as gold rose 18.31%, suggests skepticism that the current rally is sustainable — perhaps hardened by the wounds of years of middling performance. Contrarian analysis would regard such bearishness as grounds to be very bullish. In our opinion, investors have overlooked that the 2019 rise in gold prices has restored financial health to sector balance sheets, earnings and cash flow. Gold stocks offer both relative and absolute fundamental value and growth potential that compares very favorably to conventional investment strategies

We believe that there is a strong case to expect gold mining shares to outperform the metal in the years ahead by a substantially wider margin than they outperformed in 2019. With continued advances in precious metals prices, the return potential from these still unloved orphans and pariahs of the investment universe should prove to be very compelling.


How Effective Is Gold As a Hedge? History Has an Empirical Answer SPONSOR: Loncor Resources $ $ $ $RSG $ $GOLD $NEM

Posted by AGORACOM-Eric at 3:20 PM on Monday, February 3rd, 2020
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Sponsor: Loncor is a Canadian gold explorer that controls over 2,400,000 high grade ounces outside of a Barrick JV.. The Ngayu JV property is 200km southwest of the Kibali gold mine, operated by Barrick, which produced 800,000 ounces of gold in 2018. Barrick manages and funds exploration at the Ngayu project until the completion of a pre-feasibility study on any gold discovery meeting the investment criteria of Barrick. Newmont $NGT $NEM owns 7.8%, Resolute $RSG owns 27% Click Here for More Info

Gold has been a safe haven for literally thousands of years.

But how effective is it as a “hedge”?

A hedge is an asset that tends to rise when others fall. For example, an investor holding common stocks might find it advantageous to hold some gold too, since it has historically been strong during the worst stock market crashes.

But in the big picture, does it really pay to always have some gold in one’s portfolio?

History provides some clear answers. We analyzed several historical scenarios to see how a theoretical portfolio performed with various amounts of gold (including zero).

The Portfolios

Our base portfolio starts with a 60% stock/40% bond mix. We used the S&P 500 for stocks, and the 10-year Treasury for bonds. As gold was added the prevailing spot price was used.

The research runs from January 1999 through September 2019, just shy of 21 years. This includes bull and bear markets in all assets, and thus offers accurate insight into gold’s value through various market environments.

We ran four portfolio scenarios, each starting with $100,000. As the amount of gold was gradually increased, the funds devoted to stocks and bonds were reduced in equal percentages.

  • Zero Gold Portfolio (60% stocks/40% bonds)
  • 3% Gold Portfolio (3% gold/58.5% stocks/38.5% bonds)
  • 5% Gold Portfolio (5% gold/57.5% stocks/37.5% bonds)
  • 10% Gold Portfolio (10% gold/55% stocks/35% bonds)

No adjustments were made for inflation, and exclude commissions, dividends, and tax implications.

The Results

The first chart shows the value of each portfolio at the end of each year. The blue bar represents zero gold (60% stocks/40% bonds), while the gold bar represents a portfolio with the maximum 10% gold allocation.

Portfolio Values by Year

As can be seen, the total value of each portfolio rises as the amount of gold is increased. A portfolio with 10% gold has performed better over the past two+ decades than ones with less amounts of gold.

After 20 years, only the portfolio with 10% gold reached a $250,000 value. This is not surprising considering gold acts as a hedge against stock market declines and recessions, while at other times can provide profit.

This chart shows the annual performance of each portfolio.

Portfolio Returns by Year

While all portfolios frequently rose and fell in tandem, the data show that those containing gold tended to fall less in bear markets and rise more in bull markets.

The exceptions were 2013 through 2015 where portfolios with gold underperformed those with no gold (the differences in 1999 and 2000 were less than 1%). In all other years gold improved portfolio returns.

On a cumulative basis, portfolios with gold have outperformed those with little to no gold.

Long-Term Growth by Portfolio

The statistical differences between portfolios did not show up the first few years, but over time a portfolio with gold has clearly provided a greater return than a portfolio with little to no gold.

The Verdict

As research shows, an allocation to gold in a typical stock/bond portfolio has provided better returns than those with little or no gold. It also lowers your risk.

Portfolios that include gold have fallen less in bear markets and risen more in bull markets. The long-term value of a portfolio is clearly enhanced by including gold.

It should be pointed out that the research specifically uses gold, not “commodities”. Most commodity funds have only a small allocation to gold, so similar results should not be expected when including a mixed fund.

The Gold Advantage is Your Advantage

Research shows that adding gold to a portfolio enhances overall returns.


Can hedge against systemic risk, stock market pullbacks, and recessions.

Lowers the risk in a portfolio.

Can provide liquidity to meet liabilities during times of market stress.

Can hedge not just stocks but all paper assets. Since gold is a real hold-in-your-hand asset, it carries advantages almost no other asset can provide.

The message from history is clear: meaningful exposure to gold can improve your overall portfolio performance.


Barrick is up 76% Under Mark Bristow’s Watch — That Even Beats Gold’s Meteoric Rise SPONSOR: Loncor Resources $ $ $ $RSG $ $GOLD

Posted by AGORACOM-Eric at 10:58 AM on Wednesday, January 29th, 2020
This image has an empty alt attribute; its file name is Loncor-Small-Square.png

Sponsor: Loncor is a Canadian gold exploration company that controls over 2,400,000 high grade ounces outside of a Barrick JV.. The Ngayu JV property is 200km southwest of the Kibali gold mine, operated by Barrick, which produced 800,000 ounces of gold in 2018. Barrick manages and funds exploration at the Ngayu project until the completion of a pre-feasibility study on any gold discovery meeting the investment criteria of Barrick. Click Here for More Info

The market is buzzing with speculation about Barrick Gold Corp. CEO Mark Bristow’s next move, with Freeport-McMoRan, owner of the giant Grasberg copper and gold mine in Indonesia, regarded as a potential takeover target.

A tough-talking South African on a mission to shake up the mining industry. For years the name that would have sprung to mind was Glencore boss Ivan Glasenberg, but not any more. The sector has another swashbuckling executive to watch: Mark Bristow, head of Barrick Gold.

Since the geologist took control of the world’s second-biggest gold miner just over a year ago he has been a whirlwind of activity. Highlights of the past 12 months include a hostile bid for its arch rival — now a partner in a joint venture — a buyout of struggling subsidiary Acacia Mining and more than US$1 billion of asset sales.

But this is just the beginning for 61-year-old Bristow, an adrenalin junkie who enjoys big game hunting and flying planes. “It has been an amazing year,” he said during a wide-ranging interview. “We now have a solid foundation to build on and probably the strongest balance sheet in the gold industry.”

The market is buzzing with speculation about Bristow’s next move, with Freeport-McMoRan, owner of the giant Grasberg copper and gold mine in Indonesia, regarded as a potential takeover target.

Bristow recently described copper as a “strategic metal” because of the role it would play in the shift to a greener economy. “The new, big gold mines are going to come out of the young geologies of the world,” he said. “And in young rocks, gold comes in association with copper or vice versa.”

Asked if he had discussed the merits of a deal with Freeport chief executive Richard Adkerson, Bristow said there had been “conversations” but these had been more theoretical.

“As the leader of the most valuable gold company in the world, I should be looking at the world’s best gold mines,” he said. “It makes sense for us to be interested in looking at Grasberg and asking ourselves whether Freeport is going to remain an independent company or not.”

A workaholic who maintains a punishing travel schedule, Bristow became chief of Barrick in early 2019 after the Toronto-listed company consummated a nil-premium merger with Randgold Resources, the Africa-focused miner he built into one of the world’s largest gold producers.

The idea behind the deal was to create a gold company focused around five “tier one assets,” mines capable producing more than 500,000oz of gold annually for at least a decade. The merged entity would be run the “Randgold Way” — the decentralised, hands-on management philosophy espoused by Bristow.

When the Randgold merger was announced in September 2018 there were worries about how Bristow would work alongside Barrick’s executive chairman John Thornton, a no-nonsense ex-Goldman Sachs banker.

However, Bristow and his close-knit team of executives have been given their head to run the company. One of his first moves on taking the helm was to cut almost 100 jobs at Barrick’s head office in Toronto in an effort to shape what he calls a “lean, mean machine at the top.” He has also changed the management teams across nearly all of the Barrick assets.

Analysts and investors say Bristow has delivered on the big promises he made at the time of the merger: balance sheet deleveraging, reducing head office costs and asset sales.

“If the gold price stays around US$1,500 an ounce and we generate the same sort of free cash flow as [2019 and] deliver on the rest of our promises as far as realizing the sale of non-core assets we will have zero net debt [by the end of 2020],” Bristow said.

Barrick and arch rival Newmont Corporation’s deal to combine their mines in Nevada into a joint venture, after Barrick dropped its hostile bid for the latter, has also won plaudits.
This has been reflected in Barrick’s share price, which has risen 76 per cent since the Randgold merger was announced — outperforming Newmont (46 per cent) and the gold price (31 per cent).

Barrick Gold Corp’s stock chart since the merger with Rangold was announced Sept. 24, 2018. Bloomberg

Still, some investors lament the passing of Randgold. One top-20 shareholder said it would have delivered a better share price performance had it remained independent — a view backed up by recent results, which show the Randgold side of the portfolio continuing to sparkle while the Barrick portion struggles.

Randgold also boasted a generous dividend policy, something Barrick has yet to match. Analysts estimate Barrick’s dividend would need to rise two to three times from where it is today to be comparable to Randgold’s payout. Bristow said Barrick would look at a long-term dividend policy once its 10-year strategic plan is put in place early this year.
Barrick also remains a very complex business with assets in the Americas, Africa and Asia, leaving Bristow and his management team stretched.

“There is a core of 10 Randgold executives who run the business. They used to fly around all the assets once a quarter,” said one analyst who used to follow Randgold but does not cover Barrick. “That is more difficult to do now given the size and scale of the business.”

A photo of Rangold’s open-pit gold mine in the Democratic Republic of Congo in 2014. Rangold Resources

James Bell, an analyst at RBC Capital Markets, also said the integration of the two companies had become more complicated because some of the assets flagged as potentially noncore at the time of the Barrick deal were now seen as less disposable.

“A good example is Porgera [a mine in Papua New Guinea]. This was an asset initially flagged as noncore but that’s an asset the company is now very excited about because management have seen the geological potential,” he added.

Bristow said Barrick would continue to divest assets where it makes “good, commercial sense”, citing the recent sale of its stake in the Massawa gold project in Senegal for an upfront payment of US$380 million.

Bristow, who had open heart surgery in 2017 after a doctor spotted a problem during a routine medical to renew his pilot’s licence, said he did not know when he would step down.

“I don’t have a particular timeframe but I gave the market a [promise of at least a] full five years. I am certainly committed to that,” he said, adding that there was already a pool of executives that are qualified to lead the organization. “And you can imagine how much better they are going to be with a bit of coaching in the next couple of years.”


Loncor Provides Update on Its Ngayu Project $ $ $ $RSG $ $GOLD

Posted by AGORACOM-Eric at 8:30 AM on Tuesday, January 28th, 2020
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  • Significant upside potential identified at 1,675,000 oz (20.78 Mt @ 2.5 g/t Au) Imbo Concession since 2014 resource estimate

TORONTO, Jan. 28, 2020 — Loncor Resources Inc. (“Loncor” or the “Company“) (TSX: “LN”; OTCQB: “LONCF”) is pleased to provide an update on its activities within the Ngayu Greenstone Belt, where the Company has a dominant foot-print through its joint venture with Barrick Gold (Congo) SARL (“Barrick”) and on its own majority-owned prospecting licences and exploitation concessions.

The Ngayu Archean Greenstone Belt of northeastern Democratic Republic of the Congo (the “DRC”) is geologically similar to the belts which host the world class gold mines of AngloGold Ashanti/Barrick’s Kibali mine in the DRC and AngloGold Ashanti’s Geita mine in Tanzania. Gold mineralization at Ngayu is spatially related to Banded Ironstone Formation (“BIF”), which is the case at both Kibali and Geita and is highlighted in Figures 1 and 2 below. The Ngayu belt is significantly larger in extent than the Geita belt.

Adumbi Deposit
Since the Company’s acquisition of 71.25% of the KGL-Somituri gold project from Kilo Goldmines Ltd. in September 2019, Loncor has focussed on the Imbo exploitation concession in the east of the Ngayu belt where an Inferred Mineral Resource of 1.675 million ounces of gold (20.78 million tonnes grading 2.5 g/t Au, with 71.25% of this Inferred Mineral Resource being attributable to Loncor via its 71.25% interest) was outlined in January 2014 by independent consultants Roscoe Postle Associates Inc (“RPA”) on three separate deposits, Adumbi, Kitenge and Manzako (see Figures 3 and 4 below).  In this study, RPA made a number of recommendations on Adumbi, which were subsequently undertaken during the period 2014-18. The Company’s geological consultants Minecon Resources and Services Limited (“Minecon”) has been assessing the implications of this additional exploration data on Adumbi, which are summarised below.

Additional Drilling
RPA recommended additional drilling at Adumbi to test the down dip/plunge extent of the mineralization. In 2017, four deeper core holes were drilled below the previously outlined RPA inferred resource over a strike length of 400 metres and to a maximum depth of 450 metres below surface. All four holes intersected significant gold mineralization in terms of widths and grade and are summarised below:

BoreholeFrom(m)To(m)Intercept Width(m)True Width(m)Grade (g/t) Au

The above drilling results which are shown on the longtitudinal section (see Figure 5 below), indicate that the gold mineralization is open along strike and at depth. The drilling of an additional 12 core holes has the potential to significantly increase the Adumbi mineral resource as highlighted on the longitudinal section.

Survey and Georeferencing
The Adumbi drill hole collars, trenches, and accessible adits/portals have now been accurately surveyed and the data appropriately georeferenced. In addition, all accessible underground excavations and workings have been accurately surveyed. The new and improved quality of the exploration data will have positive implications on potential future classification of the mineral resources.

Re-logging of All Drill Holes
The re-logging of drill holes after the RPA study has defined the presence of five distinct geological domains in the central part of the Adumbi deposit where the BIF unit attains a thickness of up to 130 metres (see Figure 4 below). From northeast to southwest:

  • Hanging wall schists: dominantly quartz carbonate schist, with interbedded carbonaceous schist.
  • Upper BIF Sequence: an interbedded sequence of BIF and chlorite schist, 45 to 130 metres in thickness.
  • Carbonaceous Marker: a distinctive 3 to 17 metre thick unit of black carbonaceous schist with pale argillaceous bands.
  • Lower BIF Sequence: BIF interbedded with quartz carbonate, carbonaceous and/or chlorite schist in a zone 4 to 30 metres wide.
  • Footwall Schists: similar to the hanging wall schist sequence.

In the central part of Adumbi, three main zones of gold mineralization are present. These include mineralisation:

  • Within the Lower BIF Sequence.
  • In the lower part of the Upper BIF Sequence.  Zones 1 and 2 are separated by the Carbonaceous Marker, which is essentially unmineralized.
  • A weaker zone in the upper part of the Upper BIF Sequence.

The lack of a detailed geological model in the previous resource estimates resulted in wireframes being constructed using only assay values with little regard to geological domains. This has resulted in wireframes cross-cutting the geology which could have resulted in underestimating the previous resource estimate.

Relative Density (“RD”) Measurements
The increase in the sample population coupled with the application of a more rigid RD determination procedure based on recommendations from the RPA resource study, indicates that the new RD measurements from both mineralized and unmineralized material and from the various material types and lithologic units have improved the confidence in the relative RD determination to be applied to any future resource estimates. Relative to the 6 oxide RD measurements used for tonnage estimation in the RPA model, 297 oxide RD measurements within the mineralised domain were undertaken during the review work. For the transition and fresh material, equal number of determinations relative to the previous RD sample volumes were undertaken with the review process employing more rigid RD determination procedures. 

Table 1 below indicates significate positive variance between the previous model RD and the reviewed work for the oxide and transition materials.

Table 1: Summary of Previous and Reviewed Mineralised Average RD Measurements

RD used in
Previous RPA
Additional RD
RD Variance

Oxidation and Fresh Rock Surfaces
The re-logging of the core as per the RPA recommendations identified major differences between the depths of Base of Complete Oxidation (BOCO) and Top of Fresh Rock (TOFR), and the depths used by RPA in the 2014 model. In the RPA model, the BOCO was negligible and the TOFR corresponded approximately to the re-logged BOCO. The deeper levels of oxidation that were observed during the re-logging exercise should have positive implications for the Adumbi project with respect to ore type classification and associated metallurgical recoveries and mining and processing cost estimates.

Adit Sampling and Georeferencing
Following the accurate surveying of the 10 historical adits and appropriately georeferencing, the 796 adit samples (1,121 metres in total) when applied should have positive implications on the data spacing and classification of any future mineral resources.

In summary, most of the previous recommendations from the 2014 RPA mineral resource study on Adumbi have been undertaken. In addition, the previously recommended LIDAR survey by RPA was completed this month over Adumbi by Southern Mapping of South Africa.

The results of all the above tasks coupled with the higher current gold price compared with the previous study in 2014 indicate significant upside at Adumbi. Minecon is undertaking further studies to better quantify this significant upside. At present and subject to the Company securing the necessary financing, the Company is planning to drill the additional 12 deeper holes at Adumbi and then commence a preliminary economic assessment when an updated mineral resource study will be undertaken.

Ongoing studies are also continuing by Minecon on further assessing the data elsewhere on the Imbo exploitation concession including Kitenge and Manzako.

As announced in November 2019, joint venture partner and operator Barrick has identified a number of priority drill targets within the 1,894 square kilometre joint venture land package (the “JV Areas”) at Ngayu and that are planned to be drilled during the current dry season. Drill targets include Bakpau, Lybie-Salisa and Itali in the Imva area as well as Anguluku in the southwest of the Ngayu belt and Yambenda in the north. As per the joint venture agreement signed in January 2016, Barrick manages and funds exploration on the JV Areas at the Ngayu project until the completion of a pre-feasibility study on any gold discovery meeting the investment criteria of Barrick. Subject to the DRC’s free carried interest requirements, Barrick would earn 65% of any discovery with Loncor holding the balance of 35%. Loncor will be required, from that point forward, to fund its pro-rata share in respect of the discovery in order to maintain its 35% interest or be diluted.  

About Loncor Resources Inc.
Loncor is a Canadian gold exploration company focused on two projects in the DRC – the Ngayu and North Kivu projects. Both projects have historic gold production. Exploration at the Ngayu project is currently being undertaken by Loncor’s joint venture partner Barrick Gold Corporation through its DRC subsidiary Barrick Gold (Congo) SARL (“Barrick”). The Ngayu project is 200 kilometres southwest of the Kibali gold mine, which is operated by Barrick and in 2018 produced approximately 800,000 ounces of gold. As per the joint venture agreement signed in January 2016, Barrick manages and funds exploration at the Ngayu project until the completion of a pre-feasibility study on any gold discovery meeting the investment criteria of Barrick. Subject to the DRC’s free carried interest requirements, Barrick would earn 65% of any discovery with Loncor holding the balance of 35%. Loncor will be required, from that point forward, to fund its pro-rata share in respect of the discovery in order to maintain its 35% interest or be diluted. 

Certain parcels of land within the Ngayu project surrounding and including the Makapela and Yindi prospects have been retained by Loncor and do not form part of the joint venture with Barrick. Barrick has certain pre-emptive rights over these two areas. Loncor’s Makapela prospect has an Indicated Mineral Resource of 614,200 ounces of gold (2.20 million tonnes grading 8.66 g/t Au) and an Inferred Mineral Resource of 549,600 ounces of gold (3.22 million tonnes grading 5.30 g/t Au). Loncor also recently acquired a 71.25% interest in the KGL-Somituri gold project in the Ngayu gold belt which has an Inferred Mineral Resource of 1.675 million ounces of gold (20.78 million tonnes grading 2.5 g/t Au), with 71.25% of this resource being attributable to Loncor via its 71.25% interest. 

Resolute Mining Limited (ASX/LSE: “RSG”) owns 27% of the outstanding shares of Loncor and holds a pre-emptive right to maintain its pro rata equity ownership interest in Loncor following the completion by Loncor of any proposed equity offering. Newmont Goldcorp Corporation (NYSE: “NEM”; TSX: “NGT”) owns 7.8% of Loncor’s outstanding shares

Additional information with respect to Loncor and its projects can be found on Loncor’s website at 

Qualified Person
Peter N. Cowley, who is President of Loncor and a “qualified person” as such term is defined in National Instrument 43-101, has reviewed and approved the technical information in this press release. 

Technical Reports
Certain additional information with respect to the Company’s Ngayu project is contained in the technical report of Venmyn Rand (Pty) Ltd dated May 29, 2012 and entitled “Updated National Instrument 43-101 Independent Technical Report on the Ngayu Gold Project, Orientale Province, Democratic Republic of the Congo”. A copy of the said report can be obtained from SEDAR at and EDGAR at

Certain additional information with respect to the Company’s recently acquired KGL-Somituri project is contained in the technical report of Roscoe Postle Associates Inc. dated February 28, 2014 and entitled “Technical Report on the Somituri Project Imbo Licence, Democratic Republic of the Congo”.  A copy of the said report, which was prepared for, and filed on SEDAR by, Kilo Goldmines Ltd., can be obtained from SEDAR at To the best of the Company’s knowledge, information and belief, there is no new material scientific or technical information that would make the disclosure of the KGL-Somituri mineral resource set out in this press release inaccurate or misleading. 

Cautionary Note to U.S. Investors
The United States Securities and Exchange Commission (the “SEC”) permits U.S. mining companies, in their filings with the SEC, to disclose only those mineral deposits that a company can economically and legally extract or produce. Certain terms are used by the Company, such as “Indicated” and “Inferred” “Resources”, that the SEC guidelines strictly prohibit U.S. registered companies from including in their filings with the SEC. U.S. Investors are urged to consider closely the disclosure in the Company’s Form 20-F annual report, File No. 001- 35124, which may be secured from the Company, or from the SEC’s website at

For further information, please visit our website at, or contact: Arnold Kondrat, CEO, Toronto, Ontario, Tel: + 1 (416) 366 7300.

The 5 Figures referred to in this announcement are available at

Kibali Mine Production Soars Past Guidance to Post Another Record Year SPONSOR: Loncor Resources $ $ $ $RSG $ $GOLD

Posted by AGORACOM-Eric at 1:56 PM on Monday, January 27th, 2020
This image has an empty alt attribute; its file name is Loncor-Small-Square.png

Sponsor: Loncor is a Canadian gold exploration company that controls over 2,400,000 high grade ounces outside of a Barrick JV.. The Ngayu JV property is 200km southwest of the Kibali gold mine, operated by Barrick, which produced 800,000 ounces of gold in 2018. Barrick manages and funds exploration at the Ngayu project until the completion of a pre-feasibility study on any gold discovery meeting the investment criteria of Barrick. Click Here for More Info

  • Barrick Gold’s Kibali mine beat its 2019 production guidance of 750,000 ounces by delivering 814,027 ounces
  • Kibali is 200km to the southwest of Loncor’s JV with Barrick in search for further Tier Once mining assets

KINSHASA, Democratic Republic of Congo, Jan. 27, 2020 (GLOBE NEWSWIRE) — Barrick Gold Corporation (NYSE:GOLD) (TSX:ABX) - Barrick Gold Corporation’s Kibali mine beat its 2019 production guidance of 750,000 ounces of gold by a substantial margin, delivering 814,027 ounces in another record year.

Barrick president and chief executive Mark Bristow told a media briefing here that Kibali’s continuing stellar performance was a demonstration of how a modern, Tier One gold mine could be developed and operated successfully in what is one of the world’s most remote and infrastructurally under-endowed regions.  He also noted that in line with Barrick’s policy of employing, training and advancing locals, the mine was managed by a majority Congolese team, supported by a corps of majority Congolese supervisors and personnel.

Already one of the world’s most highly automated underground gold mines, Kibali continues its technological advance with the introduction of truck and drill training simulators and the integration of systems for personnel safety tracking and ventilation demand control. The simulators will also be used to train operators from Barrick’s Tanzanian mines.

“The completion of the Kalimva Ikamva prefeasibility study has delivered another viable opencast project which will help balance Kibali’s opencast/underground ore ratio and enhance the flexibility of the mine plan.  Down-plunge extension drilling at Gorumbwa has highlighted future underground potential and ongoing conversion drilling at KCD is delivering reserve replenishment.  All in all, Kibali is well on track not only to meet its 10-year production targets but to extend them beyond this horizon,” Bristow said.

“We’re maintaining a strong focus on energy efficiency through the development of our grid stabilizer project, scheduled for commissioning in the second quarter of 2020. This uses new battery technology to offset the need for running diesel generators as a spinning reserve and ensures we maximize the use of renewable hydro power.  The installation of three new elution diesel heaters will also help improve efficiencies and control power costs.  It’s worth noting that our clean energy strategy not only achieves cost and efficiency benefits but also once again reduces Kibali’s environmental footprint.”

Bristow said despite the pace of production and the size and complexity of the mine, Kibali was maintaining its solid safety and environmental records, certified by ISO 45001 and ISO 14001 accreditations.  It also remained committed to community upliftment and local economic development.  In 2019, it spent $158 million with Congolese contractors and suppliers and in December, it started work on a trial section for a new concrete road between Durba and the Watsa bridge.



Gold at $1,600 Is The ‘Bare Minimum’ for 2020 SPONSOR: Loncor Resources $ $ $ $RSG $

Posted by AGORACOM-Eric at 11:37 AM on Tuesday, January 21st, 2020
This image has an empty alt attribute; its file name is Loncor-Small-Square.png

Sponsor: Loncor is a Canadian gold exploration company that controls over 2,400,000 high grade ounces outside of a Barrick JV. Exploration is currently being conducted by Barrick. The Ngayu property is 200km southwest of the Kibali gold mine, operated by Barrick, which produced 800,000 ounces of gold in 2018. Barrick manages and funds exploration at the Ngayu project until the completion of a pre-feasibility study on any gold discovery meeting the investment criteria of Barrick. Click Here for More Info

  • Gold is a hedge against inflation that is being used more and more
  • Goldex CEO pointed to a recent Goldman Sachs report that pointed to gold as being a better hedge than oil.
  • This view is the new consensus that will increase demand for gold.

(Kitco News) What can take the gold market from $1,550 to $1,600 and higher? Goldex CEO and founder Sylvia Carrasco told Kitco News that she is not ruling out the $1,900 an ounce level this year if geopolitical and trade tensions escalate in the current economic climate.

There are a number of strong drivers supporting gold prices this year, including geopolitical and trade tensions, global debt, dovish central banks, weakening U.S. dollar as well as the political situation in the U.S., Carrasco said on Thursday.

“Last year, I said that the perfect storm was forming and I think I would use this phrase again. The perfect storm is now happening,” Carrasco noted. “Gold should be around $1,600 if nothing else crazy happens. At this moment in time, I can see gold between the $1,500 and the $2,000 mark during 2020.”

If the market sees a further increase in geopolitical tensions or additional trade concerns this year, gold will surge towards $1,900, Goldex CEO pointed out. And if things do calm down, Carrasco does not see gold falling much below $1,500 an ounce.

“It is going to be another record year,” she said, referring to gold hitting record-highs in many currencies last year. “And it will be mainly due to geopolitical tensions raising prices higher.”

“With the current economic climate, gold should be between $1,500 and $1,600. If on top of that bare minimum, you add very strong geopolitical tensions or commercial trade issues, then you take it from $1,600 up to $1,900,” she added.

At the time of writing, the spot gold price was trading at $1,560.40, up 0.24% on the day and up 2.8% since the start of the year.

Gold is a hedge against inflation that is being used more and more by investors who are realizing the benefits of the yellow metal, Carrasco said.

“Gold is the hedge that people should be using. I wouldn’t build my personal wealth portfolio just on gold. But gold is more and more clearly overtaking oil and any other hedging mechanisms … Gold will be a good trade whether for speculative reasons or for trading,” she noted.

Goldex CEO pointed to a recent Goldman Sachs report that pointed to gold as being a better hedge than oil. Carrasco added that this view is the new consensus that will increase demand for gold.

Gold began the year with a bang as U.S.-Iran tensions flared up and surprised the markets in the first two weeks of January.

“The rally we’ve seen is based on geopolitical tensions between the U.S. and Iran. We need to see also the reasons behind Trump’s approach when it comes to Iran … In September, the U.S. ended up a positive net exporter of oil for the first time in history. That gives you a reason why Trump thinks he is not affected by the tensions even though the rest of the world is affected,” Carrasco described.

Also, U.S. President Donald Trump was driven by the goal to distract the market from the impeachment proceedings against him, she added.

Going forward, gold prices are likely to rise further, especially considering that most of the major central banks around the world are not planning to start raising rates any time soon.

“Central banks using unconventional ways … Is there going to be an increase in interest rates in Europe or in the U.S.? The answer is no. And if interest rates are not going to increase, gold is the first one that is affected,” Carrasco said.

On top of that, the central banks will remain significant gold buyers in 2020. “That’s another reason why gold prices will increase this year,” she said.

Growing debt also supports higher gold prices this year, the CEO added. “We’ve been talking about debt for years — how corporate debt and government debt continues to increase. More debt effectively means a potentially weaker U.S. dollar. The moment the U.S. dollar is weak, where do you go? The only safe place is gold. And I think we are going to be seeing a weakening dollar as the year continues,” Carrasco described.


Gold’s Big Picture SPONSOR: Loncor Resources $ $ $ $RSG $

Posted by AGORACOM-Eric at 12:32 PM on Friday, January 17th, 2020
This image has an empty alt attribute; its file name is Loncor-Small-Square.png

Sponsor: Loncor is a Canadian gold exploration company focused on two projects in the DRC – the Ngayu and North Kivu projects, both have historic gold production. Exploration at the Ngayu project is currently being undertaken by Loncor’s joint venture partner Barrick Gold. The Ngayu project is 200km southwest of the Kibali gold mine, operated by Barrick, which produced 800,000 ounces of gold in 2018. Barrick manages and funds exploration at the Ngayu project until the completion of a pre-feasibility study on any gold discovery meeting the investment criteria of Barrick. Click Here for More Info

From the HRA Journal: Issue 314

The fun doesn’t stop. Waves of liquidity continue to wash traders cares away. Even assassinations and war mongering generate little more than half day dips on Wall St. It seems nothing can get in the way of the bull rally that’s carrying all risk assets higher.

It feels like it could go on for a while, though I think the liquidity will have to keep coming to sustain it. By most readings, bullishness on Wall St is at levels that are rarely sustained for more than a few weeks. Some sort of correction on Wall St seems highly likely, and soon. Whether its substantial or just another blip on the way higher remains to be seen.

The resource sector, especially gold and silver stocks, have had their own rally. Our Santa Claus market was as good or better than Wall St’s for a change. And I don’t think its over yet. I think we’re in for the best Q1 we’ve seen for a few years. And we could be in for something better than that even. I increasingly see signs of a major rally developing in the gold space. It’s already been pretty good but I think a multi-quarter, or longer, move may be starting to take shape.

I usually spend time on all the metals in the first issue of the year. But, because the makings of this gold rally are complex and long in coming I decided to detail my reasoning. That ended up taking several pages so I’ll save talk on base metals and other markets for the next issue.

Eric Coffin
January 7, 2020

Gold’s Big Picture

Après moi, le déluge

No, I’m not writing about Louis IV, though there might be some appropriateness to the analogy, now that I think about it. The quote is famous, even though there’s no agreement on what it was supposed to mean. Most figure Louis was referring to the biblical flood, that all would be chaos once his reign ended.

The deluge I’m referring to isn’t water. It’s the flood of money the US Fed, and other central banks, continue to unleash to keep markets stable. Markets, especially stock markets, love liquidity. You can see the impact of the latest deluge, particularly the US Fed’s in the chart below that traces both the SPX index value and the level of a “Global Liquidity Proxy” (“GLP”) measuring fiscal/monetary tightness and weakness.

You can see the GLP moved lower in late 2018 as the Fed tightened and the impact that had on Wall St. Conversely, you can see the SPX running higher in the past couple of months as the US backed off rate increases, increased fiscal deficit expansion, and grew the Fed balance sheet through, mainly, repo market operations.

Wall St, and most other bourses, are loving these money flows. The Santa Claus rally discussed in the last issue continued to strengthen all the way to and through year end. As it turned out, the Fed either provided enough backstop in advance or the yearend repo issues were overstated. The repo market itself was calm going through year end and a lot of the short-term money offered by the Fed during that week wasn’t taken down.

Everything may have changed in the past couple of days with the dramatic increase in US-Iran tensions. I don’t know how big an issue that will be, since no one knows what form Iran’s retaliation will be or how much things will escalate. I DO think it’s potentially a big deal with very negative connotations, but it may take time to unfold. Someone at the Fed thought so too, as the past couple of days saw a return to large scale Fed lending in the repo market.

I’ve no doubt Iran will try and take revenge for the assassination of its most famous military commander by the US. But I don’t know what form it will take and if this means the US has drawn itself into the Mideast quagmire even more. I fear it has though. The US is already talking about adding 3,000 troops to its Mideast presence and they’re just warming up. Even larger scale attacks, if they happen, may not derail Wall St, but they’re certainly not a positive development at any level.

We know how stretched both market valuations and sentiment were before the Suleimani drone strike. The chart below shows a three-year trace of the “fear/greed index”. You can see that its hardly a stable reading. It flip flops often and extreme readings rarely hold for long. At last check, the reading was 94% bullish.

Sentiment almost never gets that bullish and, when it does, nothing good comes of it for bulls. A reading that close to 100% tells you we’re just about out of buyers. Whatever happens in and around Iran, I think a near term correction is inevitable. The only question is whether it’s a large one or not.

A rapid escalation in US-Iran tensions could certainly make a near term correction larger. If the flood of liquidity continues though, a correction could just be another waystation on the road to higher highs. There are a couple of other dangers Wall St still faces that I’ll touch on briefly at the end of this article. First however, lets move on to the main event for us-the gold market.

It wasn’t just the SPX enjoying a Santa rally this year. Gold experienced the rally we were hoping for that gold miner stocks seemed to be foretelling early last month. Gold’s been doing well since it bottomed at $1275 in June, but it didn’t feel that way during the long hiatus between the early September high and the current move. The gold price currently sits above September’s multi-year high, after breaching that high in the wake of the Baghdad drone strike. And the first retaliatory strike by Iran. Volatility will be very high for a while going forward.

I think we’ll see more multi-year highs going forward. I hate that the latest move higher is driven by geopolitics. Scary geopolitics and military confrontations mean people are dying. We don’t want to profit from misery. And we won’t anyway, if things get ugly enough in the Mideast to scare traders out of the market.

Geopolitical price moves almost always unwind quickly. I’d much prefer to see gold moving higher for macro reasons, not as a political safety trade. I expect more political/military inspired moves. As the Iran conflict unfolds. Make no mistake, Iran is NOT Iraq. Its army is far larger, better trained and better equipped than Iraq. This could get ugly.

The balance of this piece will deal with my macro argument for higher gold prices over an extended period. The geopolitical stuff will be layered on top of that for the next while and could strengthen both gold prices and the $US in risk-off trading. It should be viewed as a separate event from the argument laid out below.

What else is driving gold higher? In part, it was gold’s inverse relationship with the US Dollar. As you already know, I’m not a believer that “its all about the USD, all the time” when it comes to the gold market. That’s an over-simplification of a more complex relationship. It also discounts the idea of gold as its own asset class that trades for its own reasons.

If you look at the gold chart above, and the USD chart below it, its immediately apparent that there isn’t a constant negative correlation at play. Gold rallied during the summer at the same time the USD did and for the same reason; the world-wide explosion of negative real yields. Gold weakened a bit when yields reversed to the upside and the USD got a bit of traction, but things changed again at the start of December.

The USD turned lower and lost two percent during December. US bond yields were generally rising during the month and the market (right or wrong) was assuming economic growth was accelerating. So, neither of those items explains the USD weakness.

If gold was a “risk off” trade, you sure couldn’t see it in the way any other market was trading. So, is there another explanation for recent strength in the gold price, and what does it tell us about 2020 and, perhaps, beyond?

Well, I’ve got a theory. If I’m right, it could mean a bull run for gold has a long way to go.

Some of this theory will be no surprise to you because it does partially hinge on further USD weakness. There are long term structural reasons why the US currency should weaken. But there are also fluctuating sources of demand for USDs, particularly from offshore buyers and borrowers that transact in US currency. That can create enough demand to strengthen the US over long periods. We just went though one such period, but it looks like that may have come to an end, with more bearish forces to the USD reasserting themselves.

How did we get here? Let’s start with the big picture, displayed on the top chart on the next page. It gives a long-term view of US Federal deficits and the unemployment rate. Normally, these travel in tandem. Higher unemployment means more social spending and higher deficits. Government spending expands during recessions and contracts-or should- (as a percentage of GDP) during expansions. Classic Keynesian stuff.

You rarely see these two measures diverge. The two times they did significantly before, on the left side of the chart, was due to “wartime deficits” which acted (along with conscription) to stimulate the economy and drive down unemployment.

You can see the Korean and Vietnam war periods pointed out on the chart.

The current period stands out for the extreme size of the divergence. US unemployment rates are at multi decade lows and yet the fiscal deficit as a percentage of GDP keeps rising. There has never been a divergence this large and its due to get larger.

We know why this is. Big tax cuts combined with a budget that is mostly non-discretionary. And the US is 10 years into an economic expansion, however weak. Just think what this graph will look like the next time the US goes into recession.

We can assume US government deficits aren’t going to shrink any time soon (and I think we can, pun intended, take that to the bank). That leaves trade in goods to act as a counterbalance to the funding demand created by fiscal deficits.

The chart above makes it clear the US won’t get much help from international trade. The US trade balance has been getting increasingly negative for decades. It’s better recently, but unlikely to turn positive soon, and maybe not ever.

To be clear, this is not a bad thing in itself, notwithstanding the view from the White House. The relative strength of the US economy and the US Dollar and cheaper offshore production costs have driven the trade balance. It’s grown because Americans found they got more value buying abroad and the world was happy to help finance it. It’s not a bad thing, but not a US Dollar support either.

The more complete picture of currency/investment flows is given by changes in the Current Account. In simplified terms, the Current Account measures the difference between what a country produces and what it consumes. For example, if a country’s trade deficit increases, so does its current account deficit. If there are funds flowing in from overseas investments on the other hand, this decrease the Current Account deficit or increase the surplus.

The graph below summarizes quarterly changes in the US current account. You can see how the balance got increasingly negative in the mid 2000’s as both imports and foreign investment by US companies increased.

Not coincidentally, this same period leading up to the Financial Crisis included a sustained downtrend in the US Dollar Index. The USD index chart on the bottom of the next page shows the scale of that decline, from an index value of 120 at the start of 2002 all the way down to 73 in early 2008.

The current account deficit (and value of the USD) improved markedly up to the end of the Financial Crisis as money poured into the US as a safe haven and consumers cut back on imports. The current account deficit bas been relatively stable since then, running at about $100bn/quarter until it dipped a bit again last year.

Trade, funds flows and changes in money supply have the largest long-term impacts on currency values. When the US Fed ended QE and started tightening monetary conditions in 2014, the USD enjoyed a strong rally. The USD Index was back to 100 by early 2015 and stayed there until loosening monetary conditions-and lots of jawboning from Washington-led to pullback. Things reversed again and the USD maintained a mild uptrend from early 2018 until now.

There are still plenty of US Dollar bulls around, and their arguments have short-term merit. Yes, the US has higher real interest rates and somewhat higher growth. Both are important to relative currency valuations as I’ve said in the past. Longer term however, the “twin deficits” -fiscal and current account-should underpin the fundamental value of the currency.

Movements don’t happen overnight, especially when you’re talking about the worlds reserve currency that has the deepest and largest market supporting it. Changing the overall trend for the USD is like turning a supertanker. I think it’s happening though, and it has big potential implications for commodities, especially gold.

Dollar bulls will tell you the USD is the “cleanest shirt in the laundry hamper”, referring to the relative strength of the growth rate and interest rates compared to other major currencies. That’s true if we just look at those measures but definitely not true when we look at the longer term-fiscal and current account deficits.

In fact, the US has about the worst combined fiscal/current account deficit in the G7. The chart at the bottom of this page, from shows the 2018 values for Current Account and Trade balances for a number of major economies, as a percentage of their GDP. It’s not a handsome group.

Both the trade and current account deficits are negative for most of them. In terms of G7 economies, the US has the worst combined Current/Trade deficit at 6% of GDP annually. You may be surprised to note that the Current/Trade balance for the Euro zone is much better than the US, thanks to a large Trade surplus. Much of that is generated by Germany. Indeed, this chart explains Germanys defense of the Euro. It’s combined Trade/Current Account surplus is so large it’s currency would be skyrocketing if it still used the Deutschmark.

Because the current account deficit is cumulative, the overall international investment position of the US has continued to worsen. The US has gone from being an international creditor to an international debtor, and the scale if its debt keeps increasing. That means it’s getting harder every year to reverse the current account position as the US borrows ever more abroad to cover its trade and fiscal deficits. Interest outflows keep growing and investment inflows shrinking. Something has to give.

The US has to borrow overseas, as private domestic demand for Treasury bonds isn’t high enough to fund the twin deficits. In the past, whenever the US Dollar got too high, offshore demand for US government debt diminished. It’s not clear why. Maybe the higher dollar made raising enough foreign funds difficult, or perhaps buyers started worrying about the USD dropping after they bought when it got too expensive. Whatever the reason, foreign holdings of US Treasuries have been declining, forcing the US to find new, domestic, buyers.

Last year, the US Fed stopped its quantitative tightening program, due to concerns about Dollar liquidity. Then came the repo market. Since September, the Fed’s balance sheet has expanded by over $400 billion, mainly due to repo market transactions.

The Fed maintains this “isn’t QE” because these are very short duration transactions but, cumulatively, the total Fed balance sheet keeps expanding. The “QE/no QE” debate is just semantics.

What do these transactions look like? Mostly, its Primary Dealers, banks that also take part in Treasury auctions, in the repo market. The Fed buys bonds, usually Treasuries, from these banks and pays for them in newly printed Dollars. That injects money into the system, helps hold down interest rates in the repo market and, not coincidentally, effectively helps fund the US fiscal deficit. To put the series of transactions in their simplest form, the US is effectively monetizing its deficit with a lot of these transactions.

The chart below illustrates the problem for the Primary Dealer US banks. They’ve got to buy Treasuries when they’re auctioned-that is their commitment as Primary Dealers. They also need to hold minimum cash balances as a percentage of assets under Basel II bank regulations. Cash balances fell to the minimum mandated level by late 2019- the horizontal black line on the chart. That’s when the trouble started.

These banks are so stuffed with Treasuries that they didn’t have excess cash reserves to lend into the repo market. Hence the blow up back in September and the need for the Fed to inject cash by buying Treasuries. The point, however, is that this isn’t really a “repo market issue”, that’s just where it reared its head. It’s a “too many Treasuries and not enough buyers” problem.

It will be tough for the Treasury to attract more offshore buyers unless the USD weakens, or interest rates rise enough to make them irresistible. Or a big drop in the federal deficit reduces the supply of Treasuries itself.

I doubt we’ll see interest rates move up significantly. I don’t think the economy could handle it and it would be self-defeating anyway, as the government deficit would explode because of interest expenses. And that’s not even taking into account the fact that President Trump would be freaking out daily.

Based on recent history and political expediency, I’d say the odds of significant budget deficit reductions are slim and none. That’s especially true going into an election year. There’s just no way we’re going to see spending restraint or tax increases in the next couple of years. Indeed, the supply of Treasuries will keep growing even if the US economy grows too. If there is any sort of significant slowdown or recession the Federal deficit will explode and so will the new supply of Treasures. Not an easy fix.

Barring new haven demand for US Treasuries, odds are the Fed will have to keep sopping up excess supply. That means expanding its balance sheet and, in so doing, effectively increasing the US money supply.

That brings us (finally!) to the “money shot” chart that appears above. It compares changes in the size of the Fed balance sheet and the US Dollar Index. To make it readable and allow me to match the scales, I generated a chart that tracks annual percentage changes.

The chart shows a strong inverse correlation between changes in the size of the Fed balance sheet and the value of the USD. This is unsurprising as most transactions that expand the Fed balance sheet also expand the money supply.

It’s impossible to tell how long the repo market transactions will continue but, after three months, they aren’t feeling very “temporary”. To me, it increasingly looks like these market operations are “debt monetization in drag”.

I don’t know if that’s the Fed’s real intent or just a side effect. It doesn’t really matter if the funding and money printing continues at scale. Even if the repo market calms completely, the odds are good we see some sort of “new QE” start up. Whatever official reason is given for it; I think it will happen mainly to soak up the excess supply of Treasuries fiscal deficits are creating.

I don’t blame the FOMC if they’re being disingenuous about it. That’s their job after all. If you’re a central banker, the LAST thing you’re going to say is “our government is having trouble finding buyers for its debt”, especially if its true.

With no prospect of lower deficits and apparent continued reduction in offshore Treasury holdings, this could develop into long-term sustained trend. I don’t expect it to move in a straight line, markets never do. A severe escalation in Mideast tensions or the start of a serious recession could both generate safe-haven Treasury buying. Money flows from that would take the pressure off the Fed and would be US Dollar supportive too.

That said, it seems the US has reached the point where a substantial increase in its central bank’s balance sheet is inevitable. Both Japan and the Eurozone have gotten there before the Fed, but it looks like it won’t be immune.

The Eurozone at least has a “Twin surplus” to help cushion things. And Japan, considered a basket case economically, had an extremely deep pool of domestic savings (far deeper than the US) to draw on. Until very recently, Japan also ran massive Current Account surpluses thanks to decades of heavy investments overseas by Japanese entities. Those advantages allowed the ECB and especially the BoJ to massively expand their balance sheets without generating a huge run up in interest rates or currency collapse.

I don’t know how far the US Fed can expand its balance sheet before bond yields start getting away from it. I think pretty far though. Having the world’s reserve currency is a massive advantage. There is huge built in demand for US Dollars and US denominated debt. That gives the Fed some runway if it must keep buying US Treasuries.

Assuming a run on yields doesn’t spoil the party, continued balance sheet and money supply expansion should put increasing downward pressure on the US Dollar. I don’t know if we’ll see a move as large as the mid-2000s but a move down to the low 80s for the USD Index over the course of two or three years wouldn’t be surprising.

It won’t be a straight-line move. A recession could derail things, though the bear market on Wall St that would generate would support bullion. Currency markets tend to be self-correcting over extended periods. If the USD Index falls enough and there is a bump in US real interest rates offshore demand for Treasuries should increase again.

The bottom line is that this is, and will continue to be, a very dynamic system. Even so, I think we’ve reached a major inflection point for the US currency. The 2000s were pretty good for the gold market and gold stocks. We started from a much lower base of $300/oz on the gold price. Starting at a $1200-1300 base this time, I think a price above $2000/oz is a real possibility over the next year or two.

It’s not hard to extrapolate prices higher than that, but I’m not looking or hoping for those. I prefer to see a longer, steadier move that brings traders along rather than freaking them out.

This prediction isn’t a sure thing. Predictions never are. But I think the probabilities now favor an extended bull run in the gold price. Assuming stock markets don’t blow up (though I still expect that correction), gold stocks should put in a leveraged performance much more impressive than the bullion price itself.

There will be consolidations and corrections along the way, but I think there will be many gold explorers and developers that rack up share price gains in the hundreds of percent. That doesn’t mean buying blindly and never trading. We still need to adjust when a stock gets overweight and manage risk around major exploration campaigns. The last few weeks has been a lot more fun in the resource space. I don’t think the fun’s over yet. Enjoy the ride.

Like any good contrarian, a 10-year bull market makes me alert of signs of potential trouble. As noted at the start of this editorial, I’m expecting continues floods of liquidity. That may simply overwhelm everything else for a while and allow Wall St to keep rallying, come what may.

That said, a couple of data points recently got my attention. One is more of a sentiment indicator, seen in the chart below. More than one wag has joked that the Fed need only worry about Wall St, since the stock market is the economy now. Turns out there is more than a bit of truth to that.

The chart shows the US Leading Indicator reading with the level of the stock market (which is a component of the official Leading Indicator) removed. As you can see, without Wall St, the indicator implies zero growth going forward. I’m mainly showing it as evidence of just how surreal things have become.

The chart above is something to keep an eye on going forward. It shows weekly State unemployment claims for several major sectors of the economy. What’s interesting about this chart is that claims have been climbing rapidly over the past few weeks. Doubly interesting is that the increase in claims is broad, both within and across several sectors of the economy.

I take the monthly Non-Farm Payroll number less seriously than most, because it’s a backward-looking indicator. This move in unemployment claims looks increasingly like a trend though. It’s now at its highest level since the Financial Crisis.

It’s not in the danger zone-yet. But its climbing fast. We may need to start paying more attention to those payroll numbers. If the chart below isn’t a statistical fluke, we may start seeing negative surprises in the NFP soon. That won’t hurt the gold price either.

Source and Thanks:

Will 2020 Be Junior Mining’s Year? SPONSOR: Loncor $ $ $ $RSG $

Posted by AGORACOM-Eric at 1:55 PM on Thursday, January 9th, 2020
This image has an empty alt attribute; its file name is Loncor-Small-Square.png

Sponsor: Loncor is a Canadian gold exploration company focused on two projects in the DRC – the Ngayu and North Kivu projects, both have historic gold production. Exploration at the Ngayu project is currently being undertaken by Loncor’s joint venture partner Barrick Gold. The Ngayu project is 200km southwest of the Kibali gold mine, operated by Barrick, which produced 800,000 ounces of gold in 2018. Barrick manages and funds exploration at the Ngayu project until the completion of a pre-feasibility study on any gold discovery meeting the investment criteria of Barrick. Click Here for More Info

Another year of covering commodities and select junior mining stocks is all but done and dusted. 

We’ve seen palladium prices more than double those of platinum, its sister metal, on tight supply and high demand for catalytic converters in gas-powered vehicles, as smog-belching diesel cars and trucks get phased out to meet tighter air emissions standards particularly in Europe and China. 

Indonesia advanced a 2022 deadline for banning the export of mineral ores, including nickel, prompting a massive surge in the price of the stainless steel and electric-vehicle battery ingredient. In September, nickel powered past $8 a pound, before slipping back to around $6/lb after the resumption of Indonesian ore exports and weaker demand from the stainless steel industry.  

Palladium and nickel are both in-demand metals for the foreseeable future, nickel for its use in batteries and stainless steel, and palladium as an important ingredient of catalytic converters found in gas-powered/ hybrid vehicles.

Zinc inventories in February fell to the point where there were less than two days worth of global consumption locked in London Metal Exchange (LME) warehouses. The paucity of the metal used to prevent rusting caused prices to spike to the highest since June 2018. 

Gold started off the year around $1,300/oz, and didn’t do much for the first half on account of higher interest rates holding prices down. In July though, gold started to run when the US Federal Reserve reversed course and began cutting interest rates instead of raising them. The ECB and a number of other central banks followed suit, wanting to keep interest rates low to try and boost flagging economic growth. 

The yellow metal advanced to $1,550 in early September due to a combination of factors including negative real interest rates (always good for gold), a sluggish dollar, and safe haven demand owing to US tensions with Iran, impeachment, Brexit fears, etc.

Silver followed a similar, though more bumpy trajectory. The white metal used more for industrial than investment purposes traded in a tight range (~$1.50) from January to May, bottoming out at $14.38 before jumping Sept. 4 to within two bits of $20 ($19.57). 

Copper had an off year in 2018 over fears of slowing Chinese growth and the US-China trade war, but as we at AOTH have always maintained, the market fundamentals are solid. Over 200 copper mines currently in operation will reach the end of their productive life before 2035. Most of the low-hanging copper “fruit” has been picked. New copper mines will be lower-grade and farther afield, meaning higher capex and production costs.

Although copper prices suffered in the second and third quarter, things are looking up for the essential base metal needed for plumbing and wiring, power generation, communications, 5G networks, and electric vehicles, which use around four times as much copper as a conventional car or truck. 

Energized by a rip-roaring fourth quarter, copper bulls are back on board. From its 52-week low in August of $2.51/lb, the red metal gained an impressive 11%, reaching a pinnacle of $2.83/lb Dec. 12, on expectations of a trade war resolution between the world’s number one and two economies, and the improved economic growth prospects that would entail. Copper has risen 7% in December alone. 

Proven right 

Our predictions for all of these metals have been bang on. We were right to say, as we did last January, that Commodities are the right story for 2019

We pinned our thesis on three key points: 1/ Commodities are cyclical, and the timing is right to get in now; 2/ The US dollar is falling, and will likely continue to fall or be range-bound going forward. A resolution to the trade war between the US and China, and a looser monetary policy by the Federal Reserve (both of which are likely) will weigh on the dollar and be good for commodities; 3/ The need for infrastructure spending is not going to let up. 

Close to a year later, our commodities hypothesis rings true. The dollar’s upward march in 2018 (DXY moved from 89 to 97) did stop in 2019, helping commodities priced in US dollars. The US-China trade war escalated but as we predicted, there was a resolution – not a complete trade deal – but enough hope for one, to send copper, the most important base metal, soaring in recent weeks. 

At the beginning of the year, as stock markets bounced back from their awful fourth-quarter 2018, everyone thought that the US economy was roaring. We weren’t so sure, and presented evidence of a less sanguine picture including negative fallout from the trade war with China and a yield curve inversion which is a very accurate indicator of a coming recession. 

The US Federal Reserve appeared to agree. Worried about low growth, globally and in the US, the Fed slammed the brakes on the interest rate hikes it started in 2015, and began lowering them in July, 2019. That immediately juiced gold and silver. Investors piled into precious metals as an alternative to near-zero or negative-yielding sovereign bonds. Looser monetary policy, check. 

In later articles we showed the bullish cases for zinc, nickel and palladium. 

The palladium price tripled from the start of 2016 to spring of 2019, beating gold just under a year ago for the first time in 16 years. Palladium has been in deficit for eight straight years, because of low mined output and smoking-hot demand from the auto sector. So far in 2019 it has gained 47%. 

Battery companies have been developing nickel-rich batteries in two of the dominant chemistries for EVs, the nickel-manganese-cobalt (NMC) battery used in the Chevy Bolt (also the Nissan Leaf and BMW i3) and the nickel-cobalt-aluminum (NCA) battery manufactured by Panasonic/Tesla. Added to Indonesia’s on and off export ban, a demand boost from nickel’s growing use in electric-vehicle batteries, and dwindling global stockpiles, have helped support nickel prices.

According to the USGS, despite new zinc mines opening in Australia and Cuba, supply failed to keep up with consumption. Some very large zinc mines have been depleted and shut down in recent years, with not enough new mine supply to take their place. As a result, the zinc market was in deficit in 2018. 

Tighter environmental restrictions in China are lessening the amount smelters can produce. National production of refined zinc in 2018 fell to just 4.53 million tonnes, the sharpest downturn since 2013. The result has been a record amount of refined zinc imported by the world’s largest metals consumer, 715,355t in 2018. The high demand in China has also pulled a lot of zinc out of LME warehouses.

In October zinc prices hit a four-month high due to falling zinc stocks – inventories in London Metal Exchange-registered warehouses plunged to 57,775 tonnes – a smidgen higher than the 50,425t in April, the lowest since the 1990s, Reuters said. 

Tough market for explorers

It’s good to see we were right about so many metal markets. 

Regrettably however, the valuations of mineral exploration companies have yet to follow the prices of the metals they are hunting. 

Indeed the junior mining sector has been in a funk since around 2012. 

The juniors’ place in the mining food chain is to provide projects to be turned into mines for larger mining companies whose reserves are running low. This is becoming a growing problem as all the low-hanging, high-grade deposit fruit has been picked. Such is the case for gold, silver, copperpalladium, zinc and nickel, all of which are encountering, or will shortly encounter, supply deficits, amid booming demand for battery metals and precious metals. 

Finding the kind of grades at amounts that will make a mine profitable usually requires going farther afield or deeper – greatly adding to costs per ounce or tonne.

Here’s the problem juniors have been facing: At the same time as investment capital has been pulled out of the mining majors and mid-tiers – by investors tired of seeing falling or stagnant stock prices/ red ink balance sheets – there’s been a dearth of speculative capital flowing into exploration companies.

The ascendance of index funds has also made it harder for juniors to attract money, because they are too small to be in the funds that these vehicle track. 

According to a 2019 report by PDAC – the association that puts on the annual mining show in Toronto – and Oreninc, a junior financing tracker, equity financing in 2018 was 35% less than in 2017 – a decade-low $4.1 billion. 

A good chunk of that cash went to marijuana stocks, as dozens of companies emerged to take advantage of the pot legalization bill passed by the Canadian federal government. Whereas weed stock IPOs attracted $491.1 million in investment dollars in 2018, mining IPOs only accounted for $51.6 million, a startling drop from the $830 million in 2017.

That’s a lot of speculative capital pulled out of resource stocks. However it’s not all gloom and doom, according to TD Securities mining investment bankers, who say “current market conditions and historical precedents make them optimistic generalist investors will return in greater numbers to mining stocks,” Bloomberg reported:

“The current market is reminiscent of the late 90’s and early 2000’s, [TD Securities’ Deputy Chairman Rick] McCreary says. At the time, investors had low interest in mining, and companies found it hard to raise capital. That was followed by waves of consolidation and a mining bull run. A similar trend may be building as this ‘period of consolidation’ rolls on.”

Gold M&A 

As far as that goes, mining companies, especially in the gold space, have realized since the vicious 2012-16 bear market, they have cut as much as they can and the next step is to bring assets and companies together. On top of that, the top gold miners are running out of reserves, and are looking to replace them with high-margin projects that have the right combination of grade, size and infrastructure.

This explains Barrick combining with South Africa’s Randgold, the Barrick-Newmont joint venture in Nevada, the fusing of Newmont and Goldcorp, a $1-billion deal for Lundin Mining to acquire a Brazilian copper-gold mine from Yamana Gold, Newcrest’s 70% purchase of Imperial Metals’ Red Chris mine in British Columbia, and other recent examples of gold mining M&A.

Among December’s gold deals are Zijin Mining’s cash purchase of Continental Gold’s Buriticá project in Colombia, for CAD$1.3 billion; and a $770 million merger between two mid-tier gold miners, Equinox Gold and Leagold Mining. The latter arrangement will keep the Equinox name and create a company valued at $1.75 billion with six mines spread across Brazil, Mexico and the United States. 

Junior resource M&A? 

The goal of every junior resource investor is for the company(ies) they are invested in to get bought out, resulting in a 5, 10, even 20-bagger.

The question is, will the current round of mergers and acquisitions at the major and mid-tier level trickle down to the juniors? PwC appears hopeful. In its 2019 report â€˜Shifting Ground’ the mining consultancy states, 

The heightened level of deal activities, most of which have been in the gold sector, may well spark further moves among intermediate players seeking to grow into multi-project companies. A new phase of industry consolidation could pave the way for more exploration and mine development and boost investor interest and activity.

Another optimistic opinion comes from Tom Palmer, chief operating officer at Newmont, who told the Wall Street Journal that smaller players are waiting to see what the bigger miners sell once they have completed their mergers before they start their own M&A.

“Fast forward two or three years, there will be countless more” mergers, he said.

In fact we are already starting to see this happening. Nevada has witnessed the return of junior gold explorers, and majors, after a lull in activity between 2012 and 2016. According to an industry report, exploration in Nevada increased by 15% in 2017, with 19,040 new claims. The tide has continued to turn in mining’s favor, with 198,337 active claims as of January, 2019 – 7% more than in 2018.

In 2018 Idaho-based Hecla Mining snapped up Klondex Mines for US$462 million, delivering three more Nevada properties – Fire Creek, Midas and Hollister – to Hecla’s stable of mines and adding 162,000 gold-equivalent ounces to its annual production. 

Also in Nevada, last year Alio Gold paid Rye Patch Gold $128 million for the Vancouver-based company and its past-producing Florida Canyon mine. 

The 2019 creation of Nevada Gold Mines (the Barrick-Newmont JV) has piqued the interest of other companies looking to discover and develop new ounces in the golden state. Major miners with new projects include AngloGold Ashanti, Coeur Mining and Kinross Gold. For the details read Getchell’s Gold 

And for an inspiring story of junior mining success in Canada, look no further than Great Bear Resources. Working the historic Red Lake gold camp in Ontario, Great Bear’s drills discovered the “LP Fault Zone” this past May. That eureka moment, the realization that most of the gold on its property is structurally controlled, prompted a massive 90,000m drill program aimed at identifying the parameters. The discovery of three new gold zones with high-grade intercepts, along with the earlier nearby Hinge-Dixie Limb discoveries, caught the market’s attention; within 18 months, Great Bear’s stock catapulted 2,000%. 


I firmly believe that 2019 has been a pivotal year for junior mining. Coming out of 2018’s slump in several commodities, due mostly to the uncertainty associated with the US-China trade war, this year we saw very strong performances from gold, silver, copper, palladium, nickel and zinc – having correctly predicted price corrections for each.

While it’s disappointing not to see a rising tide of junior miner stock prices to accompany these bullish calls, we continue to believe.

After all, we want to own the cheapest most in demand metals we can find to reap the maximum coming rewards. That means buying it while it’s still in the ground.

The fact is junior resource companies – the owners of the world’s future mines – are on sale. If you like their management teams, their projects and their plans for 2020, perhaps now is the time to be acquiring a position.

Courtesy of Richard (Rick) Mills:
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