Posted by AGORACOM
at 2:07 PM on Tuesday, January 28th, 2020
SPONSOR: American Creek owns a 20% Carried Interest to Production at the Treaty Creek Project in the Golden Triangle. 2019’s first hole averaged of 0.683 g/t Au over 780m in a vertical intercept. The Treaty Creek property is located in the same hydrothermal system as the Pretivm and Seabridge’s KSM deposits. Click Here For More Info
Excerpts from Crescat Capital November Newsletter:
Precious Metals
Precious metals are poised to benefit from what we consider to be the
best macro set up we’ve seen in our careers. The stars are all
aligning. We believe strongly that this time monetary policy will come
at a cost. Look in the chart below at how the new wave of global money
printing just initiated by the Fed in response to the Treasury market
funding crisis is highly likely to pull depressed gold prices up with
it.
The imbalance between historically depressed commodity prices
relative to record overvalued US stocks remains at the core of our macro
views. On the long side, we believe strongly commodities offer
tremendous upside potential on many fronts. Precious metals remain our
favorite. We view gold as the ultimate haven asset to likely outperform
in an environment of either a downturn in the business cycle, rising
global currency wars, implosion of fiat currencies backed by record
indebted government, or even a full-blown inflationary set up. These
scenarios are all possible. Our base case is that governments and
central banks will keep their pedals to the metal to attempt to fend off
credit implosion or to mop up after one has already occurred until
inflation becomes a persistent problem.
The gold and silver mining industry is precisely where we see one of
the greatest ways to express this investment thesis. These stocks have
been in a severe bear market from 2011 to 2015 and have been formed a
strong base over the last four years. They are offer and incredibly
attractive deep-value opportunity and appear to be just starting to
break out this year. We have done a deep dive in this sector and met
with over 40 different management teams this year. Combining that work
with our proprietary equity models, we are finding some of the greatest
free-cash-flow growth and value opportunities in the market today
unrivaled by any other industry. We have also found undervalued
high-quality exploration assets that will make excellent buyout
candidates.
We recently point out this 12-year breakout in mining stocks relative
to gold now looks as solid as a rock. In our view, this is just the
beginning of a major bull market for this entire industry. We encourage
investors to consider our new Crescat Precious Metals SMA strategy which
is performing extremely well this year.
Zero Discounting for Inflation Risk Today
With historic Federal debt relative to GDP and large deficits into
the future as far as the eye can see, if the global financial markets
cannot absorb the increase in Treasury debt, the Fed will be forced to
monetize it even more. The problem is that the Fed’s panic money
printing at this point in the economic cycle may hasten the unwinding of
the imbalances it is so desperate to maintain because it has perversely
fed the last-gasp melt up of speculation in already record over-valued
and extended equity and corporate credit markets. It is reminiscent of
when the Fed injected emergency cash into the repo market at the peak of
the tech bubble at the end of 1999 to fend off a potential Y2K computer
glitch that led to that market and business cycle top. After 40
years of declining inflation expectations in the US, there is a major
disconnect today between portfolio positioning, valuation, and economic
reality. Too much of the investment world is long the “risk parityâ€
trade to one degree or another, long stocks paired with leveraged long
bonds, a strategy that has back-tested great over the last 40 years, but
one that would be a disaster in a secular rising inflation environment.
With historic Federal debt relative to GDP and large deficits into
the future as far as the eye can see, rising long-term inflation, and
the hidden tax thereon, is the default, bi-partisan plan for the US
government’s future funding regardless of who is in the White House and
Congress after the 2020 elections. The market could start discounting
this sooner rather than later. The Fed’s excessive money printing
may only reinforce the unraveling of financial asset imbalances today as
it leads to rising inflation expectations and thereby a sell-off in
today’s highly over-valued long duration assets including Treasury bonds
and US equities, particularly insanely overvalued growth stocks. We
believe we are in the vicinity of a major US stock market and business
cycle peak.
Posted by AGORACOM
at 7:40 PM on Monday, January 13th, 2020
SPONSOR: American Creek owns a 20% Carried Interest to Production at the Treaty Creek Project in the Golden Triangle. 2019’s first hole averaged of 0.683 g/t Au over 780m in a vertical intercept. The Treaty Creek property is located in the same hydrothermal system as the Pretivm and Seabridge’s KSM deposits.
Excerpts from Crescat Capitals November Newsletter:
Precious Metals
Precious metals are poised to benefit from what we consider to be the
best macro set up we’ve seen in our careers. The stars are all
aligning. We believe strongly that this time monetary policy will come
at a cost. Look in the chart below at how the new wave of global money
printing just initiated by the Fed in response to the Treasury market
funding crisis is highly likely to pull depressed gold prices up with
it.
The imbalance between historically depressed commodity prices
relative to record overvalued US stocks remains at the core of our macro
views. On the long side, we believe strongly commodities offer
tremendous upside potential on many fronts. Precious metals remain our
favorite. We view gold as the ultimate haven asset to likely outperform
in an environment of either a downturn in the business cycle, rising
global currency wars, implosion of fiat currencies backed by record
indebted government, or even a full-blown inflationary set up. These
scenarios are all possible. Our base case is that governments and
central banks will keep their pedals to the metal to attempt to fend off
credit implosion or to mop up after one has already occurred until
inflation becomes a persistent problem.
The gold and silver mining industry is precisely where we see one of
the greatest ways to express this investment thesis. These stocks have
been in a severe bear market from 2011 to 2015 and have been formed a
strong base over the last four years. They are offer and incredibly
attractive deep-value opportunity and appear to be just starting to
break out this year. We have done a deep dive in this sector and met
with over 40 different management teams this year. Combining that work
with our proprietary equity models, we are finding some of the greatest
free-cash-flow growth and value opportunities in the market today
unrivaled by any other industry. We have also found undervalued
high-quality exploration assets that will make excellent buyout
candidates.
We recently point out this 12-year breakout in mining stocks relative
to gold now looks as solid as a rock. In our view, this is just the
beginning of a major bull market for this entire industry. We encourage
investors to consider our new Crescat Precious Metals SMA strategy which
is performing extremely well this year.
Zero Discounting for Inflation Risk Today
With historic Federal debt relative to GDP and large deficits into
the future as far as the eye can see, if the global financial markets
cannot absorb the increase in Treasury debt, the Fed will be forced to
monetize it even more. The problem is that the Fed’s panic money
printing at this point in the economic cycle may hasten the unwinding of
the imbalances it is so desperate to maintain because it has perversely
fed the last-gasp melt up of speculation in already record over-valued
and extended equity and corporate credit markets. It is reminiscent of
when the Fed injected emergency cash into the repo market at the peak of
the tech bubble at the end of 1999 to fend off a potential Y2K computer
glitch that led to that market and business cycle top. After 40
years of declining inflation expectations in the US, there is a major
disconnect today between portfolio positioning, valuation, and economic
reality. Too much of the investment world is long the “risk parityâ€
trade to one degree or another, long stocks paired with leveraged long
bonds, a strategy that has back-tested great over the last 40 years, but
one that would be a disaster in a secular rising inflation environment.
With historic Federal debt relative to GDP and large deficits into
the future as far as the eye can see, rising long-term inflation, and
the hidden tax thereon, is the default, bi-partisan plan for the US
government’s future funding regardless of who is in the White House and
Congress after the 2020 elections. The market could start discounting
this sooner rather than later. The Fed’s excessive money printing
may only reinforce the unraveling of financial asset imbalances today as
it leads to rising inflation expectations and thereby a sell-off in
today’s highly over-valued long duration assets including Treasury bonds
and US equities, particularly insanely overvalued growth stocks. We
believe we are in the vicinity of a major US stock market and business
cycle peak.
Posted by AGORACOM
at 2:20 PM on Friday, January 10th, 2020
This article is an overview of the economic conditions that will
drive the gold price in 2020 and beyond. The turn of the credit cycle,
the effect on government deficits and how they are to be financed are
addressed.
In the absence of foreign demand for new US Treasuries
and of a rise in the savings rate the US budget deficit can only be
financed by monetary inflation. This is bound to lead to higher bond
yields as the dollar’s falling purchasing power accelerates due to the
sheer quantity of new dollars entering circulation. The relationship
between rising bond yields and the gold price is also discussed.
It
may turn out that the recent extraordinary events on Comex, with the
expansion of open interest failing to suppress the gold price, are an
early recognition in some quarters of the US Government’s debt trap.
The strains leading to a crisis for fiat currencies are emerging into plain sight.
Introduction
In 2019, priced in dollars gold rose 18.3% and silver by 15.1%. Or
rather, and this is the more relevant way of putting it, priced in gold
the dollar fell 15.5% and in silver 13%. This is because the story of
2019, as it will be in 2020, was of the re-emergence of fiat currency
debasement. Particularly in the last quarter, the Fed began aggressively
injecting new money into a surprisingly illiquid banking system through
repurchase agreements, whereby banks’ reserves at the Fed are credited
with cash loaned in return for T-bills and coupon-bearing Treasuries as
collateral. Furthermore, the ECB restarted quantitative easing in
November, and the Bank of Japan stands ready to ease policy further “if
the momentum towards its 2% inflation target comes under threat†(Kuroda
– 26 December).
The Bank of Japan is still buying bonds, but at
a pace which is expected to fall beneath redemptions of its existing
holdings. Therefore, we enter 2020 with money supply being expanded by
two, possibly all three of the major western central banks. Besides
liquidity problems, the central bankers’ nightmare is the threat that
the global economy will slide into recession, though no one will confess
it openly because it would be an admission of policy failure. And
policy makers are also terrified that if bankers get wind of a declining
economy, they will withdraw loan facilities from businesses and make
things much worse.
Of the latter concern central banks have good
cause. A combination of the turn of the credit cycle towards its
regular crisis phase and Trump’s tariff war has already hit
international trade badly, with exporting economies such as Germany
already in recession and important trade indicators, such as the Baltic
dry index collapsing. No doubt, President Trump’s most recent
announcement that a trade deal with China is ready for signing is driven
by an understanding in some quarters of the White House that over trade
policy, Trump is turning out to be the turkey who voted for Christmas.
But we have heard this story several times before: a forthcoming
agreement announced only to be scrapped or suspended at the last moment.
The
subject which will begin to dominate monetary policy in 2020 is who
will fund escalating government deficits. At the moment it is on few
investors’ radar, but it is bound to dawn on markets that a growing
budget deficit in America will be financed almost entirely by monetary
inflation, a funding policy equally adopted in other jurisdictions.
Furthermore, Christine Lagarde, the new ECB president, has stated her
desire for the ECB’s quantitative easing to be extended from government
financing to financing environmental projects as well.
2020 is
shaping up to be the year that all pretence of respect for money’s role
as a store of value is abandoned in favour of using it as a means of
government funding without raising taxes. 2020 will then be the year
when currencies begin to be visibly trashed in the hands of their
long-suffering users.
Gold in the context of distorted markets
At the core of current market distortions is a combination of
interest rate suppression and banking regulation. It is unnecessary to
belabour the point about interest rates, because minimal and even
negative rates have demonstrably failed to stimulate anything other than
asset prices into bubble territory. But there is a woeful lack of
appreciation about the general direction of monetary policy and where it
is headed.
The stated intention is the opposite of reality,
which is not to rescue the economy: while important, from a bureaucrat’s
point of view that is not the greatest priority. It is to ensure that
governments are never short of funds. Inflationary financing guarantees
the government will always be able to spend, and government-licenced
banks exist to ensure the government always has access to credit.
Unbeknown
to the public, the government licences the banks to conduct their
business in a way which for an unlicensed organisation is legally
fraudulent. The banks create credit or through their participation in QE
they facilitate the creation of base money out of thin air which is
added to their reserves. It transfers wealth from unsuspecting members
of the public to the government, crony capitalists, financial
speculators and consumers living beyond their means. The government
conspires with its macroeconomists to supress the evidence of rising
prices by manipulating the inflation statistics. So successful has this
scheme of deception been, that by fuelling GDP, monetary debasement is
presented as economic growth, with very few in financial mainstream
understanding the deceit.
The government monopoly of issuing
money, and through their regulators controlling the expansion of credit,
was bound to lead to progressively greater abuse of monetary trust. And
now, in this last credit cycle, the consumer who is also the producer
has had his income and savings so depleted by continuing monetary
debasement that he can no longer generate the taxes to balance his
government’s books later in the credit cycle.
The problem is not
new. America has not had a budget surplus since 2001. The last credit
cycle in the run up to the Lehman crisis did not deliver a budget
surplus, nor has the current cycle. Instead, following the Lehman crisis
we saw a marked acceleration of monetary inflation, and Figure 2 shows
how dollar fiat money has expanded above its long-term trend since then.
In recent years, the Fed’s attempt to return to monetary normality by
reducing its balance sheet has failed miserably. After a brief pause,
the fiat money quantity has begun to grow at a pace not seen since the
immediate aftermath of the Lehman crisis itself and is back in record
territory. Figure 1 is updated to 1 November, since when FMQ will have
increased even more.
In order to communicate effectively the
background for the relationship between gold and fiat currencies in 2020
it is necessary to put the situation as plainly as possible. We enter
the new decade with the highest levels of monetary ignorance imaginable.
It is a systemic issue of not realising the emperor has no clothes.
Consequently, markets have probably become more distorted than we have
ever seen in the recorded history of money and credit, as widespread
negative interest rates and negative-yielding bonds attest. In our
attempt to divine the future, it leaves us with two problems: assessing
when the tension between wishful thinking in financial markets and
market reality will crash the system, and the degree of chaos that will
ensue.
The timing is impossible to predict with certainty
because we cannot know the future. But, if the characteristics of past
credit cycles are a guide, it will be marked with a financial and
systemic crisis in one or more large banks. Liquidity strains suggest
that event is close, even within months and possibly weeks. If so, banks
will be bailed, of that we can be certain. It will require central
banks to create yet more money, additional to that required to finance
escalating government budget deficits. Monetary chaos promises to be
greater than anything seen heretofore, and it will engulf all western
welfare-dependent economies and those that trade with them.
We
have established that between keeping governments financed, bailing out
banks and perhaps investing in renewable green energy, the issuance of
new money in 2020 will in all probability be unprecedented, greater than
anything seen so far. It will lead to a feature of the crisis, which
may have already started, and that is an increase in borrowing costs
forced by markets onto central banks and their governments. The yield on
10-year US Treasuries is already on the rise, as shown in Figure 3.
Assuming no significant increase in the rate of savings and
despite all attempts to suppress the evidence, the acceleration in the
rate of monetary inflation will eventually lead to runaway increases in
the general level of prices measured in dollars. As Milton Friedman put
it, inflation [of prices] is always and everywhere a monetary
phenomenon.
Through QE, central banks believe they can contain
the cost of government funding by setting rates. What they do not seem
to realise is that while to a borrower interest is a cost to set against
income, to a lender it reflects time-preference, which is the
difference between current possession, in this case of cash dollars, and
possession at a future date. Unless and until the Fed realises and
addresses the time preference problem, the dollar will lose purchasing
power. Not only will it be sold in the foreign exchanges, but depositors
will move to minimise their balances and creditors their ownership of
debt.
If, as it appears in Figure 3, dollar bond yields are
beginning a rising trend, the inexorable pull of time preference is
already beginning to apply and further rises in bond yields will imperil
government financing. The Congressional Budget Office assumes the
average interest rate on debt held by the public will be 2.5% for the
next three years, and that net interest in fiscal 2020 will be $390bn,
being about 38% of the projected deficit of $1,008bn. Combining the
additional consequences for government finances of a recession with
higher bond yields than the CBO expects will be disastrous.
Clearly,
in these circumstances the Fed will do everything in its power to stop
markets setting the cost of government borrowing. But we have been here
before. The similarities between the situation for the dollar today and
the deterioration of British government finances in the early to
mid-1970s are remarkable. They resulted in multiple funding crises and
an eventual bail-out from the IMF. Except today there can be no IMF
bail-out for the US and the dollar, because the bailor gets its currency
from the bailee.
Nearly fifty years ago, in the UK gold rose
from under £15 per ounce in 1970 to £80 in December 1974. The peak of
the credit cycle was at the end of 1971, when the 10-year gilt yield to
maturity was 7%. By December 1974, the stock market had crashed, a
banking crisis had followed, price inflation was well into double
figures and the 10-year gilt yield to maturity had risen to over 16%.
History
rhymes, as they say. But for historians the parallels between the
outlook for the dollar and US Treasury funding costs at the beginning of
2020, and what transpired for the British economy following the Barbour
boom of 1970-71 are too close to ignore. It is the same background for
the relationship between gold and fiat currencies for 2020 and the few
years that follow.
Gold and rising interest rates
Received investment wisdom is that rising interest rates are bad for
the gold price, because gold has no yield. Yet experience repeatedly
contradicts it. Anyone who remembers investing in UK gilts at a 7% yield
in December 1971 only to see prices collapse to a yield of over 16%,
while gold rose from under £15 to £80 to the ounce over the three years
following should attest otherwise.
Part of the error is to
believe that gold has no yield. This is only true of gold held as cash
and for non-monetary usage. As money, it is loaned and borrowed, just
like any other form of money. Monetary gold has its own time preference,
as do government currencies. In the absence of state intervention, time
preferences for gold and government currencies are set by their
respective users, bearing in mind the characteristics special to each.
It is not a subject for simple arbitrage, selling gold and buying
government money to gain the interest differential, because the spread
reflects important differences which cannot be ignored. It is like
shorting Swiss francs and buying dollars in the belief there is no
currency risk.
The principal variable between the time
preferences of gold and a government currency is the difference between
an established form of money derived from the collective preferences of
its users, for which there is no issuer risk, and state-issued currency
which becomes an instrument of funding by means of its debasement.
The
time preference of gold will obviously vary depending on lending risk,
which is in addition to an originary rate, but it is considerably more
stable than the time preference of a fiat currency. Gold’s interest rate
stability is illustrated in Figure 4, which covers the period of the
gold standard from the Bank Charter Act of 1844 to before the First
World War, during which time the gold standard was properly implemented.
With the exception of uncontrolled bank credit, sterling operated as a
gold substitute.
Admittedly, due to problems created by the cycle of bank credit,
these year-end values conceal some significant fluctuations, such as at
the time of the Overend Gurney collapse in 1866 when borrowing rates
spiked to 10%. The depression following the Barings crisis of 1890
stalled credit demand which is evident from the chart. However,
wholesale borrowing rates, which were effectively the cost of borrowing
in gold, were otherwise remarkably stable, varying between 2-3½%. Some
of this variation can be ascribed to changing perceptions of general
borrower risk and some to changes in industrial investment demand,
related to the cycle of bank credit.
Compare this with dollar
interest rates since 1971, when the dollar had suspended the remaining
fig-leaf of gold backing, which is shown in Figure 5 for the decade
following.
In February 1972 the Fed Funds rate was 3.29%, rising eventually
to over 19% in January 1981. At the same time gold rose from $46 to a
high of $843 at the morning fix on 21 January 1980. Taking gold’s
originary interest rate as approximately 2% it required a 17% interest
rate penalty to dissuade people from hoarding gold and to hold onto
dollars instead.
In 1971, US Government debt stood at 35% of GDP
and in 1981 it stood at 31%. The US Government ran a budget surplus over
the decade sufficient to absorb the rising interest cost on its T-bill
obligations and any new Treasury funding. America enters 2020 with a
debt to GDP ratio of over 100%. Higher interest rates are therefore not a
policy option and the US Government, and the dollar, are ensnared in a
debt trap from which the dollar is unlikely to recover.
The seeds
of the dollar’s destruction were sown over fifty years ago, when the
London gold pool was formed, whereby central banks committed to help the
US maintain the price at $35, being forced to do so because the US
could no longer supress the gold price on its own. And with good reason:
Figure 6 shows how the last fifty years have eroded the purchasing
power of the four major currencies since the gold pool failed.
Over the last fifty years, the yen has lost over 92%, the
dollar 97.6%, the euro (and its earlier components 98.2% and sterling
the most at 98.7%. And now we are about to embark on the greatest
increase of global monetary inflation ever seen.
The market for physical gold
In recent years, demand for physical gold has been strong. Chinese
and Indian private sector buyers have to date respectively accumulated
an estimated 17,000 tonnes (based on deliveries from Shanghai Gold
Exchange vaults) and about 24,000 tonnes (according to WGC Director
Somasundaram PR quoted in India’s Financial Express last May).
It
is generally thought that higher prices for gold will deter future
demand from these sources, with the vast bulk of it being categorised as
simply jewellery. But this is a western view based on a belief in
objective values for government currencies and subjective prices for
gold. It ignores the fact that for Asians, it is gold that has the
objective value. In Asia gold jewellery is acquired as a store of value
to avoid the depreciation of government currency, hoarded as a central
component of a family’s long-term wealth accumulation.
Therefore,
there is no certainty higher prices will compromise Asian demand.
Indeed, demand has not been undermined in India with the price rising
from R300 to the ounce to over R100,000 today since the London gold pool
failed, and that’s despite all the government disincentives and even
bans from buying gold.
Additionally, since 2008 central banks
have accumulated over 4,400 tonnes to increase their official reserves
to 34,500 tonnes. The central banks most active in the gold market are
Asian, and increasingly the East and Central Europeans.
There
are two threads to this development. First there is a geopolitical
element, with Russia replacing reserve dollars for gold, and China
having deliberately moved to control global physical delivery markets.
And second, there is evidence of concern amongst the Europeans that the
dollar’s role as the reserve currency is either being compromised or no
longer fit for a changed world. Furthermore, the rising power of Asia’s
two hegemons continues to drive over two-thirds of the world’s
population away from the dollar towards gold.
Goldmoney estimates
there are roughly 180,000 tonnes of gold above ground, much of which
cannot be categorised as monetary: monetary not as defined for the
purposes of customs reporting, but in the wider sense to include all
bars, coins and pure gold jewellery accumulated for its long-term wealth
benefits through good and bad times. Annual mine production adds
3,000-3,500 tonnes, giving a stock to flow ratio of over 50 times. Put
another way, the annual increase in the gold quantity is similar to the
growth in the world’s population, imparting great stability as a medium
of exchange.
These qualities stand in contrast to the
increasingly certain acceleration of fiat currency debasement over the
next few years. Anyone prepared to stand back from the financial
coalface can easily see where the relationship between gold and fiat
currencies is going. Most of the world’s population is moving away from
the established fiat regime towards gold as a store of value, their own
fiat currencies lacking sufficient credibility to act as a dollar
alternative. And financial markets immersed in the fiat regime have very
little physical gold in possession. Instead, where it is now perceived
that there is a risk of missing out on a rise in the gold price,
investors have begun accumulating in greater quantities the paper
alternatives to physical gold: ETFs, futures, options, forward contracts
and mining shares.
Paper markets
From the US Government’s point of view, gold as a rival to the dollar
must be quashed, and the primary purpose of futures options and
forwards is to expand artificial supply to keep the price from rising.
In a wider context, the ability to print synthetic commodities out of
thin air is a means of suppressing prices generally and we must not be
distracted by claims that derivatives improve liquidity: they only
improve liquidity at lower prices.
When the dollar price of gold
found a major turning point on 17 December 2015, open interest on Comex
stood at 393,000 contacts. The year-end figure today is nearly double
that at 786,422 contracts, representing an increase of paper supply
equivalent to 1,224 tonnes. But that is not all. Not only are there
other regulated derivative exchanges with gold contracts, but also there
are unregulated over the counter markets. According to the Bank for
International Settlements from end-2015 unregulated OTC contracts
(principally London forward contracts) expanded by the equivalent of
2,450 tonnes by last June, taken at contemporary prices. And we must not
forget the unknown quantity of bank liabilities to customers’
unallocated accounts which probably involve an additional few thousand
tonnes.
In recent months, the paper suppression regime has
stepped up a gear, evidenced by Comex’s open interest rising. This is
illustrated in Figure 7.
There are two notable features in the chart. First, the rising
gold price has seen increasing paper supply, which we would expect from a
market designed to keep a lid on prices. Secondly instead of declining
with the gold price, open interest continued to rise following the price
peak in early September while the gold price declined by about $100.
This tells us that the price suppression scheme has run into trouble,
with large buyers taking the opportunity to increase their positions at
lower prices.
In the past, bullion banks have been able to put a
lid on prices by creating Comex contracts out of thin air. The recent
expansion of open interest has failed to achieve this objective, and it
is worth noting that the quantity of gold in Comex vaults eligible for
delivery and pledged is only 2% of the 2,446-tonne short position. In
London, there are only 3,052 tonnes in LBMA vaults (excluding the Bank
of England), which includes an unknown quantity of ETF and custodial
gold. Physical liquidity for the forward market in London is therefore
likely to be very small relative to forward deliveries. And of course,
the bullion banks in London and elsewhare do not have the metal to cover
their obligations to unallocated account holders, which is an
additional consideration.
Clearly, there is not the gold
available in the system to legitimise derivative paper. It now appears
that paper gold markets could be drifting into systemic difficulties
with bullion banks squeezed by a rising gold price, short positions and
unallocated accounts.
There are mechanisms to counter these
systemic risks, such as the ability to declare force majeure on Comex,
and standard unallocated account contracts which permit a bullion bank
to deliver cash equivalents to bullion obligations. But the triggering
of any such escape from physical gold obligations could exacerbate a
buying panic, driving prices even higher. It leads to the conclusion
that any rescue of the bullion market system is destined to fail.
A two-step future for the gold price
It has been evident for some time that the world of fiat currencies
has been drifting into ever greater difficulties of far greater
magnitude than can be contained by spinning a few thousand tonnes of
gold back and forth on Comex and in London. That appears to be the
lesson to be drawn from the inability of a massive increase in open
interest on Comex to contain a rising gold price.
It will take a
substantial upward shift in the gold price to appraise western financial
markets of this reality. In combination with systemic strains
increasing, a gold price of over $2,000 may do the trick. Professional
investors will have found themselves wrongfooted; underinvested in ETFs,
gold mines and regulated derivatives, in which case their gold demand
is likely to drive one or more bullion houses into considerable
difficulties. We might call this the first step in a two-step monetary
future.
The extent to which gold prices rise could be
substantial, but assuming the immediate crisis itself passes, banks
having been bailed in or out, and QE accelerated in an attempt to put a
lid on government bond yields, then the gold price might be deemed to
have risen too far, and due for a correction. But then there will be the
prospect of an accelerating loss of purchasing power for fiat
currencies as a result of the monetary inflation, and that will drive
the second step as investors realise that what they are seeing is not a
rising gold price but a fiat currency collapse.
The high levels
of government debt today in the three major jurisdictions appear to
almost guarantee this outcome. The amounts involved are so large that
today’s paper gold suppression scheme is likely to be too small in
comparison and cannot stop it happening. The effect on currency
purchasing powers will then be beyond question. Monetary authorities
will be clueless in their response, because they have all bought into a
form of economics that puts what will happen beyond their understanding.
As noted above, the path to a final crisis for fiat currencies
might have already started, with the failure by the establishment to
suppress the gold price through the creation of an extra 100,000 Comex
contracts. If not, then any success by the monetary authorities to
reassert control is likely to be temporary.
Perhaps we are
already beginning to see the fiat currency system beginning to unravel,
in which case those that insist gold is not money will find themselves
impoverished.
Posted by AGORACOM
at 5:48 PM on Thursday, January 9th, 2020
American Creek owns a 20% Carried Interest to Production at the Treaty Creek Project in the Golden Triangle. 2019’s first hole averaged 0.683 g/t Au over 780m in a vertical intercept. The Treaty Creek property is located in the same hydrothermal system as the Pretivm and Seabridge’s KSM deposits.
Global gold-backed exchange-traded funds (ETFs) and similar products
had $19.2 billion or 400 tonnes of net inflows in 2019 after holdings
rebounded in December, the World Gold Council (WGC) reports. In the fourth quarter, ETF holdings reached an all-time high of 2,900 tonnes.
Overall, gold-backed assets under management (AUM) grew by 37% in
dollar terms during the year owing to positive demand and an 18.4%
increase in the gold price.
From a regional perspective, North American funds led the way with
inflows of 206 tonnes ($10.1 billion, 14.4% AUM). SPDR Gold Shares – the
world’s biggest gold ETF—and iShares Gold Trust accounted for nearly
half of last year’s inflows.
Low-cost gold-backed ETFs in the US have seen positive flows for 18
of the past 19 months and increased their collective holdings by 60%,
according to the latest WGC data.
Elsewhere, holdings in European funds increased by 188 tonnes ($8.8
billion, 13.6%), while funds listed in Asia were nearly flat, recording
an outflow of 0.1 tonnes ($12 million, 0.3%). The remaining regions had
combined inflows of 6.3 tonnes ($311 million, 16.3%).
Looking ahead, WGC analysts said that they expect investor demand to remain robust through 2020.
“The strength of gold was mainly the byproduct of a dovish shift in monetary policy. Our research indicates that a shift from a hawkish or neutral stance to a dovish one has historically led gold to outperform,†a WGC analyst said.
About American Creek
American Creek is a Canadian mineral exploration company with a strong portfolio of gold and silver properties in British Columbia. Three of those properties are located in the prolific “Golden Triangleâ€; the Treaty Creek and Electrum joint venture projects with Tudor Gold/Walter Storm as well as the 100% owned past producing Dunwell Mine.
The Corporation also holds the Gold Hill, Austruck-Bonanza, Ample Goldmax, Silver Side, and Glitter King properties located in other prospective areas of the province.
For further information please contact Kelvin Burton at: Phone: 403 752-4040 or Email: [email protected]. Information relating to the Corporation is available on its website at www.americancreek.com
Posted by AGORACOM
at 9:35 AM on Tuesday, January 7th, 2020
American Creek has strengthened its position both financially and strategically
Treaty Creek will be advancing in a major way
Eric Sprott made two separate investments of $1,000,000 making Mr. Sprott the largest external investor in Treaty Creek
American Creek Resources Ltd. (TSXV: AMK) (OTC Pink: ACKRF)
(“American Creek”) (“the Corporation”) is pleased to report that 2019
was a pivotal year for the company which is now positioned to take full
advantage of the precious metals bull run that many experts believe we
are only in the early stages of, even though gold hit a 7 year high of
$1,580 this week. Looking back, on the first day of trading in 2019 AMK
closed at $0.03 and on the last day of trading in 2019 AMK closed at
$0.09 representing a significant annual increase. Management envisions
positive developments to continue in 2020 through the geological
advancements of its properties including the potential for a world class
resource on the Treaty Creek JV project located in the “Golden
Triangle” of Northwestern British Columbia.
Darren Blaney, CEO of
American Creek stated: “This past year was a significant turning point
for the company and will be the catalyst for more exciting developments
in 2020. The company has strengthened its position both financially and
strategically and is poised to benefit from not only a strengthening
gold and silver market but also from the investment community becoming
more aware of the company’s projects and potential. The Treaty Creek
project will be advancing in a major way and several of our other
projects including the Dunwell and Gold Hill will also be the focus of
attention this year. We very much look forward to 2020 and wish all of
our shareholders the very best this upcoming year!”
Image of the Goldstorm Zone found along the base of this hill at Treaty Creek.
The
company raised over $3.3 million in 2019 through common and
flow-through shares along with the exercise of warrants. Through these
events the company was able to strengthen existing alliances and create a
number of new highly strategic relationships bringing strength,
credibility and future increased exposure to American Creek.
Of
note, Canadian billionaire Eric Sprott made two separate investments of
$1,000,000 into American Creek as well as an additional $8,400,000
investment in our JV partner Tudor Gold for the development of the
Treaty Creek property. This makes Mr. Sprott the largest external
investor in Treaty Creek. He recently stated that he is “very excited about the opportunity there as the project has a great shot at having 20 million ounces.”
Geological Position
TREATY CREEK
The
2019 drilling at Treaty Creek was very successful and produced some of
the most significant gold intercepts in the exploration industry. The
focus has been on the gold enriched Goldstorm Zone which is on trend
with, and part of, the same geological system as Seabridge Gold’s
neighboring KSM deposits. With approximately one billion tonnes of gold
enriched rock identified (potential for a resource calculation in
2020), the Goldstorm has potential to become a world class gold deposit.
The 2019 drilling was designed to define a gold deposit with the
potential of being open pit mined. The upcoming 2020 drilling is
designed to significantly expand the deposit as the system is open to
the north, the east and at depth.
The Treaty Creek Project is a joint venture with Tudor Gold owning 3/5th and acting as project operator. American Creek and Teuton Resources each have a 1/5th
interest in the project. American Creek and Teuton are both fully
carried until such time as a Production Notice is issued, at which time
they are required to contribute their respective 20% share of
development costs. Until such time, Tudor is required to fund all
exploration and development costs while both American Creek and Teuton
have “free rides”.
DUNWELL MINE
A maiden drill program was
initiated in 2019 on the 100% owned Dunwell Mine project located in the
heart of the Golden Triangle a few kilometers outside of Stewart, BC.
This past producing high grade mine (gold, silver, lead, zinc) holds
tremendous potential and may have the best logistics found in the Golden
Triangle. Assays from the program are currently pending.
GOLD HILL AND OTHER PROJECTS
The
Gold Hill property is believed to contain the principle source lode for
Canada’s fourth largest placer deposit located downstream (Wild Horse
River Gold Rush) which produced over 48 tonnes gold (and is still
producing). Work is planned for 2020 which will advance this highly
prospective project.
American Creek also holds several other high
potential projects in other prospective areas of BC such as the
Austruck-Bonanza, Ample Goldmax, Silver Side, and Glitter King.
Marketing
American
Creek will be going to great lengths in 2020 to increase the
Corporation’s exposure and recognition. Near future events including
attending many conferences including the Vancouver Resource Investment
Conference (Vancouver), AME Roundup (Vancouver), Red Cloud (Toronto),
Raise Capital (Toronto), and the Prospectors and Developers Association
of Canada (PDAC) convention (Toronto).
About American Creek
American
Creek is a Canadian mineral exploration company with a strong portfolio
of gold and silver properties in British Columbia. Three of those
properties are located in the prolific “Golden Triangle”; the Treaty
Creek and Electrum joint venture projects with Tudor Gold/Walter Storm
as well as the 100% owned past producing Dunwell Mine.
The
Corporation also holds the Gold Hill, Austruck-Bonanza, Ample Goldmax,
Silver Side, and Glitter King properties located in other prospective
areas of the province.
For further information please contact Kelvin Burton at: Phone: 403 752-4040 or Email: [email protected]. Information relating to the Corporation is available on its website at www.americancreek.com
Posted by AGORACOM
at 3:28 PM on Monday, January 6th, 2020
American Creek owns a 20% Carried Interest to Production at the Treaty Creek Project in the Golden Triangle. 2019’s first hole averaged of 0.683 g/t Au over 780m in a vertical intercept. The Treaty Creek property is located in the same hydrothermal system as the Pretivm and Seabridge’s KSM deposits.
Welcome to 2020, a year in which the President of the United States conducts war via his Twitter account:
Regardless of how you feel about President
Trump or the US/Iran situation, the fact is that things escalated a
great deal over the weekend after a US airstrike eliminated Iranian
General Suleimani on Thursday night in Baghdad.
This
dangerous escalation of posturing between the mightiest military on the
planet and a country of more than 80 million people which also happens
to possess formidable conventional and unconventional military
capabilities could have potentially far reaching financial market
implications.
With Middle East equity indices already
down between 3% and 5% I fully expect S&P futures to open lower
Sunday night. Gold futures and crude oil futures could also rise sharply
in thin Sunday night trading as scared short sellers are forced to
close out losing positions.
My interest is in gold in
particular. Turning to the monthly chart we can see that gold ended
last week right at previous support from 2011-2013:
Gold (Monthly)
There is layer of resistance stretching from
the September 2019 peak at $1565 to the April 2013 high at $1604.30. If
gold gaps higher into the teeth of this resistance it should make for an
interesting week of trading which is likely to be characterized by
higher volatility and higher trading volumes. Gold sentiment is running
hot after a more than $100 rally over the span of five weeks. In
addition, positioning among gold futures traders is also at an extreme
with commercial traders (producers, swap dealers, etc.) in gold futures
holding their largest net notional short position on record (more than
US$50 billion):
Technically speaking, gold is getting a bit
overheated on shorter time frames (daily, hourly, etc.). However, on the
weekly and monthly charts the gold party could be just getting started
after a 6+ year bottoming process that only transitioned into a nascent
uptrend six months ago.
Nobody knows how the US/Iran situation is going to unfold, but one thing is for sure and that is that it’s a scary situation which has the potential to get a lot worse before it gets better. If there was ever a time to own gold it would be now, and perhaps that is why we should take standard sentiment/technical indicators with a grain of salt. Judging by the massive commercial short position in gold futures the yellow metal is in the midst of a massive short squeeze – short squeezes can often reach crazy extremes before experiencing a reversal (only once the most leveraged short players have been forced to cover at the highs). This may be what is about to unfold in gold.
Posted by AGORACOM
at 9:20 AM on Tuesday, December 31st, 2019
Cardston, Alberta–(December 31, 2019) – American Creek Resources
Ltd. (TSXV: AMK) (OTC Pink: ACKRF) (“American Creek”) (“the
Corporation”) is pleased to report that Canadian billionaire Eric Sprott
has invested an additional $2,900,000 in our JV partner Tudor Gold for
the upcoming 2020 drill program on Treaty Creek, located in the “Golden
Triangle” of Northwestern British Columbia.
The 2019 drilling at Treaty Creek was very successful and produced
some of the most significant gold intercepts in the exploration
industry. The focus has been on the gold enriched Goldstorm Zone which
is on trend with Seabridge Gold’s Iron Cap Zone located approximately
five kilometers to the southwest. Drilling was designed to define a gold
deposit with the potential of being open pit mined.
The Treaty Creek Project is a joint venture with Tudor Gold owning
3/5th and acting as project operator. American Creek and Teuton
Resources each have a 1/5th interest in the project. American Creek and
Teuton are both fully carried until such time as a Production Notice is
issued, at which time they are required to contribute their respective
20% share of development costs. Until such time, Tudor is required to
fund all exploration and development costs while both American Creek and
Teuton have “free rides”.
Darren Blaney, CEO of American Creek stated: “Mr. Sprott has now made
multiple significant investments in Tudor Gold in 2019 for the
development of the Treaty Creek property. On December 13, 2019 Mr.
Sprott stated: “Treaty Creek has a great shot at having 20 million
ounces, the holes are so deep, they have a thousand-meter holes that are
running close to a gram a ton and it’s wide open, so I’m very excited
about the opportunity there”. He continues to put his money where
his mouth is and has given another huge endorsement to the Treaty Creek
project with this latest significant injection of cash. He also made two
prior $1,000,000 investments in American Creek earlier in 2019.”
The Treaty Creek Project lies in the same hydrothermal system as
Pretium’s Brucejack mine and Seabridge’s KSM deposits however, the
Treaty Creek project has far better logistics.
On December 27, 2019 Sprotts “Weekly Roundup” show hosted Bob
Thompson, Senior Vice President of Raymond James in Vancouver who does
an excellent job at describing where we are on the “Mining Clock” along
with other valuable insights into the precious metals industry.
We highly recommend you take a few minutes to listen:
About American Creek
American Creek is a Canadian mineral exploration company with a
strong portfolio of gold and silver properties in British Columbia.
Three of those properties are located in the prolific “Golden Triangle”;
the Treaty Creek and Electrum joint venture projects with Tudor
Gold/Walter Storm as well as the 100% owned past producing Dunwell Mine.
The Corporation also holds the Gold Hill, Austruck-Bonanza, Ample
Goldmax, Silver Side, and Glitter King properties located in other
prospective areas of the province.
For further information please contact Kelvin Burton at: Phone: 403 752-4040 or Email: [email protected]. Information relating to the Corporation is available on its website at www.americancreek.com
Posted by AGORACOM
at 9:56 AM on Thursday, December 19th, 2019
American Creek Resources (TSXV: AMK) (OTC Pink: ACKRF) (the “Corporation” or “American Creek”) is pleased to announce its partner Tudor Gold has concluded the interpretation of a copper-silver mineralized zone, the ‘CS 600 Horizon’,
within the Goldstorm Zone. Composite grades for drill holes GS19-42,
47, 48, 49, 52 and CB18-39 were re-calculated utilizing the copper and
silver grades obtained from the 2019 drill-hole program. These holes are
located in the northeastern-most area of the project. The copper and
silver mineralization contributed greatly to increasing the gold
equivalent content of all drill holes that cut the new copper-rich ‘CS 600 Horizon’.
The largest increase in gold equivalent content to the ‘300 Horizon’
was from GS19-42. The gold-only grade previously reported for the 370.5 m interval was 1.097 gpt Au. After adding the copper-silver mineralization, the gold metal equivalent content has increased to 1.275 gpt Au Eq over the same 370.5metre interval. This was due mainly to the elevated silver grades.
Copper grades were very consistent within the ‘CS 600 Horizon’. Grades ranged from approximately
0.16% Cu to 0.34% Cu over intervals of 69m to 151.5m in holes GS19-42,
47, 48, 49 and 52. These intercepts led to the largest gold equivalent
increases within the Goldstorm System.
Silver grades averaged as high as 10 gpt within both the ‘300 Horizon’ and the ‘CS 600 Horizon’ and the metal appears to occur throughout the entire Goldstorm System.
Vice President of Project Development, Ken Konkin P.Geo. comments:“The
newly discovered copper-rich ‘CS 600 Horizon’ is a very important
feature of the Goldstorm System. The presence of copper and silver
mineralization gives this discovery a true polymetallic nature yet it
remains a gold-dominant project. Copper grades appear to be increasing
with depth within the ‘CS 600 Horizon’. In the following weeks our
technical team will continue to examine the rest of the drill holes to
re-compute the gold-equivalent grades to include copper and silver
throughout the entire system.”
Table l provides gold equivalent composites from
five drill holes completed on three sections that cut the ‘300 Horizon’
and the ‘CS 600 Horizon’ within the Goldstorm System. Although the sixth
hole in this table (CB18-39) did not intersect the ‘CS 600 Horizon’,
the Au Eq composite increased the grade of the intercept by over 11%
within the ‘300 Horizon’. Sections attached demonstrate that the copper
pulse is un-like the main gold mineralization within the ‘300 Horizon’
as the ‘CS 600 Horizon’ appears to be dipping sub-parallel to the main
Treaty Thrust Fault (TTF1) shown in section 111+00 NE. The Company’s
Press Release dated October 24th provides the drill collar data
including drill hole location, elevation, inclination, azimuth and drill
hole length.
* All assay grades are uncut and intervals reflect drilled intercept
lengths. True widths of the mineralization have not been determined. HQ
and NQ2 diameter core samples were sawn in half and typically sampled at
standard 1.5m intervals.
**Prices used to calculate the AuEq metal content are: Gold $1322/oz,
Ag: $15.91/oz, Cu: $2.86/lb. All metals are reported in USD and
calculations do not consider metal recoveries.
The goal is to design a diamond drill hole program that will
fast-track the exploration program for 2020 with the objective to begin
the Mineral Resource Estimate work at the end of the 2020 field season.
Tudor hopes to accomplish as much drilling needed to bring a Measured
and Indicated Mineral Resource Estimate forward as quickly as possible.
Walter Storm, President and CEO, stated: “These
new gold equivalents are extremely encouraging as our technical team
continues to take positive steps advancing Tudor Gold’s flagship Treaty
Creek Au-Ag-Cu project. During the following months our geologist and
engineers will continue to work with the geological model and begin to
prepare the diamond drill hole proposal for 2020 .”
Darren Blaney, President and CEO of American Creek, stated:“The
Goldstorm deposit on Treaty Creek continues to amaze us. Its scale has
grown exponentially over the last two years to close to a billion tonnes
and these recent calculations are giving us a more accurate indication
of the grades within the system. The focus has been on the 300 zone as
it’s a gold enriched area just below the surface giving it great
potential to be open pitted, and now we’re starting to see the
tremendous potential at depth in the CS 600 zone. The Goldstorm is open
at depth and to the north and east which is where these pulses of copper
and silver are becoming more concentrated. With power and the highway
only 20km down the valley, and the deposit increasing in size
exponentially, the Goldstorm truly has the potential to be a world class
deposit.”
The Treaty Creek Project is a Joint Venture with Tudor Gold owning
3/5th and acting as operator. American Creek and Teuton Resources each
have a 1/5th interest in the project. American Creek and Teuton are both
fully carried until such time as a Production Notice is issued, at
which time they are required to contribute their respective 20% share of
development costs. Until such time, Tudor is required to fund all
exploration and development costs while both American Creek and Teuton
have “free rides”.
The Treaty Creek Project lies in the same hydrothermal system as
Pretium’s Brucejack mine and Seabridge’s KSM deposits with far better
logistics.
Drill core samples were prepared at MSA Labs’ Preparation Laboratory
in Terrace, BC and assayed at MSA Labs’ Geochemical Laboratory in
Langley, BC. Analytical accuracy and precision are monitored by the
submission of blanks, certified standards and duplicate samples inserted
at regular intervals into the sample stream by Tudor Gold personnel.
MSA Laboratories quality system complies with the requirements for the
International Standards ISO 17025 and ISO 9001. MSA Labs is independent
of the Company.
Qualified Person
The Qualified Person for this news release for the purposes of
National Instrument 43-101 is the Company’s Vice President of Project
Development, Ken Konkin, P.Geo. He has read and approved the scientific
and technical information that forms the basis for the disclosure
contained in this news release.
American Creek is a Canadian junior mineral exploration company with a
strong portfolio of gold and silver properties in British Columbia.
Three of those properties are located in the prolific “Golden Triangle”;
the Treaty Creek and Electrum joint venture projects with Tudor
Gold/Walter Storm as well as the 100% owned past producing Dunwell Mine.
The Corporation also holds the Gold Hill, Austruck-Bonanza, Ample
Goldmax, Silver Side, and Glitter King properties located in other
prospective areas of the province.
For further information please contact Kelvin Burton at: Phone: 403 752-4040 or Email: [email protected]. Information relating to the Corporation is available on its website at www.americancreek.com
Posted by AGORACOM
at 3:03 PM on Wednesday, December 18th, 2019
Sprott is eager to believe junior gold miners are on the verge of striking the motherlode, but skeptical of nearly everything else related to the industry
One week before Halloween, Canada’s biggest gold enthusiast,
the septuagenarian billionaire Eric Sprott, wearing a neatly pressed tuxedo,
bounded onto a stage in a downtown Toronto ballroom and accepted his induction
into Canada’s Investment Industry Hall of Fame.
He declared himself both humbled and honoured, and then
rollicked into the wee hours of the night at his home in a nearby tower with
expansive views of the city’s sparkling skyline. The next morning, though 75
and technically retired, he showed up at his office, grumbling about a lack of
sleep, but dressed in a magenta-coloured, paisley button-up, ready for a 9 a.m.
meeting with a penny stock exploration company.
“I keep reading that people are never making (gold)
discoveries, the rate of discoveries is going down,†he said, occasionally
rubbing his temples and closing his eyes. “The funny thing, well, I guess I’m
the sucker then because I keep buying guys who say they’re making discoveries.â€
Just as the price of gold often moves in the opposite
direction of the stock market, Sprott has a strong contrarian streak that means
he also often moves in the opposite direction of the market. For example, this
past spring, after years of middling precious metal prices and declining
discoveries had led most investors to abandon Canada’s gold and silver
explorers, he decided to go all-in.
Sprott launched an investment blitz, the likes of which the
junior mining precious metals sector had seldom seen, doling out somewhere
between $200 and $300 million in a matter of just a few months to acquire large
stakes in about two dozen companies, most of which have never earned a dollar
of revenue
His investments between May and July accounted for about one
in every four dollars raised by junior miners, according to Vancouver-based
market research firm Oreninc. During that time, gold prices started to rise,
breaking through US$1,400 in June for the first time in six years, bringing
some investors back to the major miners — exactly where Sprott doesn’t want to
be.
“They’re the worst place to put money, okay?†he said.
Putting his money where his mouth is, he has been selling his position in Kirkland Lake Gold Ltd., one of, if
not the lowest-cost gold producers and one of the best-performing stocks on the
S&P/TSX Composite Index since 2016.
Sprott was an early investor in Kirkland Lake, was appointed
chairman in 2015, and one year later helped engineer its merger with Newmarket
Gold Inc., a small gold producer in Australia. Not long after, the newly merged
company discovered high-grade veins at two mines, which propelled its stock
upwards to $63 per share.
Many investors pride themselves on not selling when a stock
hits a bump, but Sprott said it is equally important to not sell when the stock
rises, at least not until it’s gone up five or even 10 times, a so-called
tenbagger.
“I’ve had lots of tenbaggers and the important thing is to
stay in it,†he said.
But when his stake in Kirkland Lake reached about $1.3
billion earlier this year, and it looked like gold prices would keep rising,
Sprott said he decided it was time to sell.
“Here’s what I say to the management of Kirkland Lake: you
will not be the No. 1 performing stock this year,†he said during an interview
in October. “You will not be, because companies like Eldorado (Gold Corp.) and
Detour (Gold Corp.) are going to kick your butt.â€
And yet, Sprott — who found out about the deal on a day he
was meeting with a junior mining company seeking investment — elected to
support the deal, and waxes enthusiastic about Detour.
It’s one of the reasons why Sprott doesn’t much care about Canada’s major gold miners.
The
best-run companies might provide 20- or 30-per-cent returns, or maybe
100 per cent in a few cases, but Sprott would rather invest in a company
that might strike gold and give him a 500-per-cent return, or even a
coveted 1,000-per-cent return.
In
July, Sprott had bought about 10 million shares at $3.10, meaning he
made about $25 million or a 75-per-cent return in just a few months. But
he was nonplussed, saying the buyout may have come a little early.
“You’ve got to have the dream, right?†he said. “You’ve got to have the dream you’re going to find something.â€
Therein
lies Sprott’s biggest paradox: he’s eager to believe that junior gold
miners are on the verge of striking the motherlode, but skeptical of
nearly everything else related to the gold industry.
You’ve got to have the dream, right? You’ve got to have the dream you’re going to find somethingEric Sprott
After a five-decade career in the financial
services industry, during which he worked as an investment banker and
founded an eponymous empire that includes fund and asset management
firms, a brokerage firm, bullion storage and more businesses, he is
skeptical of commercial banks, major precious metals miners, central
banks, the stated rate of annual inflation and, perhaps above all, gold
and silver prices.
“One of the things about the media, they never
talk about the gold conspiracy,†he said. “Look at the guys who are
paying fines for spoofing the precious metals markets. Every two weeks
some guy’s paying a fine.â€
Case in point, U.S. prosecutors in
September filed criminal charges against three JPMorgan Chase & Co.
bankers for allegedly spoofing the precious metals market, which means
placing fake orders and then quickly cancelling them to manipulate the
price. The indictment alleged a decade-long conspiracy.
Sprott
believes the futures market — where investors can buy options that
essentially allow them to place bets on the price of gold or silver
without actually having to own any of the metals — allows commercial
banks to exert way too much influence on the market for physical metals.
As someone who stockpiles bullion, and often gives it out as
a gift, he watches the prices of silver and gold so closely it often
colours his mood.
This fall, Sprott was out fishing for grouper on
a staffed boat somewhere warm on a Friday when he normally records his
podcast. In spite of his idyllic circumstances, he sounded distinctly
downtrodden when he called in to the podcast.
“I’ve had better days, you know, it’s a bit of a tough one,†he said.
As
the podcast progressed, it soon became clear that gold and silver
prices were both down, about four and six per cent, respectively, and
options market manipulation appeared to be the reason to him.
Juan
Carlos Artega, director of investment research at the World Gold
Council, is skeptical that banks are having a significant effect on gold
or silver prices through the futures market, but believes options do
have an impact on short-term prices.
As
someone who stockpiles bullion, and often gives it out as a gift, he
watches the prices of silver and gold so closely it often colours his
mood
“What you find is that the gold price is
responding to demand-and-supply dynamics including those on the
(options) market, but it’s only one component,†he said.
Artega
said central bank and consumer buying, production numbers, recycling,
investment in gold-backed exchange-traded funds and a host of other
factors play a role in determining long-term prices.
Sprott would
hear none of it, and said he’s long disagreed with the World Gold
Council about many things. His skepticism of the futures market ties in
to his skepticism of the financial market writ large.
“We have a weird financial system; it doesn’t make any sense to a rational thinker,†he said.
Gene
McBurney, co-founder of GMP Securities LP, once a competitor of Sprott
Inc. in the investment business and now a friend, said part of the key
to understanding Sprott is that he enjoys entertaining other people with
provocative comments.
“He’s told people there’s no gold in Fort Knox; that kicks off an interesting conversation,†he said.
But
McBurney added that he believes Sprott is extremely well versed in the
companies in which he invests, and he has even given some of his
personal money to Sprott to manage.
Peter Grosskopf, chief
executive of Sprott Inc., the asset management firm Sprott founded and a
mentee, said Sprott is always covered as being this “unbelievable gold
bug,†but there’s a lot more to it than that.
“I mean, he’s a savant at what he does,†said Grosskopf, who added that it’s not easy to explain how Sprott does what he does.
That’s
mainly because Sprott is investing in companies that have no revenue,
which means standard investment metrics, such as internal rate of
return, aren’t necessarily useful, never mind that he said they’re not
something he would use.
He’s a savant at what he doesPeter Grosskopf, chief executive of Sprott Inc.
Instead, he attempts to value companies based on whether they are likely to discover a deposit of precious metals.
Of
course, even if a company discovers a deposit, it would still need to
figure out whether it makes economic sense to extract the deposit,
including how much it would cost to build and operate a mine, which
requires further calculations about energy costs, transportation,
processing and refining, and so on.
Sprott said he focuses solely
on the deposit and how big it could be. Though he has no education in
geology, he said he has devised his own valuation method, which involves
looking at a few variables to determine the potential size of a
deposit.
“I want to turn it into numbers, like, okay, what could
this thing earn?†he said. “You know, you multiply the strike by the
depth by the width by 2.7 specific gravity times the ounces — it’s just
four or five things you’ve got to multiply, five things.â€
People
close to him said he studies junior mining companies and can recall the
details of his investments better than most fund managers.
“The
guy gets up at ungodly hours, he might get up at 2 a.m. studying,†said
Conor O’Brien, a former capital markets manager who joined Sprott in May
to help with the investment blitz. “Neither one of us are geologists,
we’re just financial people that can do mathematics, as opposed to the
geology. We more kind of conceptualize, and dream and kind of multiply.â€
Putting
his latest investment spree of more than $200 million in perspective,
the TSX Venture Exchange’s junior mining sector through August was on
course to raise $2 billion for all of 2019, about 27 per cent less than
it did in 2009.
Sprott takes a birdshot approach to investment
that spreads his money far and wide, so that his portfolio contains
companies exploring for high-grade and low-grade mines, potential
open-pit and potential underground mines, and so on.
“Most of them won’t make it,†he said. “But what about the ones that do? If I’m in early and I stay the ground, I press the bet. It’s like being at a table with a winning run, you keep doubling down.â€
Grosskopf said Sprott calls it “stealing value,†not because he’s
conning anyone, but because he’s investing in assets the market has
mispriced. He said the billionaire is an expert trader, adept at sizing
up an opportunity and timing his entrance and exit.
And because of
his outsized profile, recently juiced by his epic returns while
chairman of Kirkland Lake, there are hordes of investors who will follow
his lead, Grosskopf said.
Not all of Sprott’s bets work out, of course. In 2017, Sprott said he invested in Garibaldi Resources Corp., a nickel explorer, based on comments he read on an online chat board.
Its
stock surged 1,731 per cent that year, and Sprott has continued to
invest even though two years later, its stock has declined from a peak
above $4 in late 2017 to 87 cents today.
“They’re for sure
drilling, we know that, and they’ve announced some holes, and they’ve
got more to go,†Sprott said. “They haven’t found the motherlode they’re
looking for. Even I’ll say that.â€
Sprott’s vast ownership may
also have a downside: It’s not easy to liquidate his positions in
companies without attracting attention. But his vast wealth also means
he’s relatively insulated from a lot of threats, such as dilutive
financings or litigation, that smaller investors can’t afford to
participate in.
He also owns a private gold mining company in
Nevada called Jerritt Canyon Gold LLC, which he said made its first
profit in the third quarter.
Kevin Small, vice-president of
operations at that mine, said Sprott likes to be generous. In April, he
said Sprott showed up at the site and handed out silver coins to several
hundred people who work there.
“He said when you guys make lots of money, I’ll give you each a gold coin, but he hasn’t been back yet,†Small said.
But he added that Sprott has been investing heavily in the
operation, which has a capacity to produce 280,000 ounces of gold per
year, and predicted the company would soon be well known.
Colleagues
also add that he can be unrelenting when judging a company’s financial
performance. Case in point, one of his biggest gripes with Kirkland Lake
is that he wants it to increase its dividend, an issue he once again
raised in October after the miner posted solid quarterly results.
Kirkland
Lake pays a quarterly dividend of four cents, and chief executive Tony
Makuch said he may consider raising it, but the company still needs to
spend money on exploration so it can improve its reserves of gold.
“We’re
not an industry people should be buying for dividends,†Makuch said.
“You should be buying bank stocks or something else. If you look at our
share price, that comes from investing in new projects.â€
It’s a sentiment that Sprott would likely agree with.
“I still have a lot of money in Kirkland and it’s a great company, but it’s not a tenbagger from here,†he said. “And I like tenbaggers as opposed to 100 per cent. It’s just my nature.â€
Posted by AGORACOM
at 3:06 PM on Thursday, December 12th, 2019
Ken Konkin Discusses the Goldstorm Deposit at Treaty Creek (including recent outstanding drill results like 0.725 g/t over 838.5m), it’s Potential, and 2020 Development Plans
American
Creek is a Canadian junior mineral exploration company with a strong
portfolio of gold and silver properties in British Columbia.
Three
of those properties are located in the prolific “Golden Triangleâ€; the
Treaty Creek and Electrum joint venture projects with Tudor Gold/Walter
Storm as well as the 100% owned past producing Dunwell Mine.
The
Treaty Creek Project is a Joint Venture with Tudor Gold owning 60% and
acting as operator. American Creek and Teuton Resources each have 20%
interests in the project. American Creek and Teuton are both fully
carried until such time as a Production Notice is issued, at which time
they are required to contribute their respective 20% share of
development costs. Until such time, Tudor is required to fund all
exploration and development costs while both American Creek and Teuton
have “free ridesâ€.
The Corporation also holds the Gold Hill, Austruck-Bonanza, Ample Goldmax, Silver Side, and Glitter King properties located in other prospective areas of the province.
For further information please contact Kelvin Burton at: Phone: 403 752-4040 or Email: [email protected]. Information relating to the Corporation is available on its website at www.americancreek.com.
Hub on Agoracom FULL DISCLOSURE: American Creek is an advertising client of AGORA Internet Relations Corp.