How to Find Success with Latin American Miners

-- Posted Friday, 14 December 2012 | Share this article | Source: GoldSeek.com

Source: Brian Sylvester of The Gold Report   

Miners in Latin America are facing both growth and challenges. Heiko Ihle, senior research analyst with Euro Pacific Capital, examines the factors behind these trends. In this Gold Report interview, Ihle urges investors to evaluate mining companies based on three important features rather than on the performance of others in the region.

The Gold Report: Heiko, you cover many companies in Latin America. One silver miner in Mexico is challenging an eviction notice from its property in Chihuahua, Mexico, which is causing a stir in the mining industry. Does that give you cause to reevaluate Mexico as a mining jurisdiction or is this an isolated incident?

Heiko Ihle: Mexico is a more challenging mining jurisdiction than the United States or Canada, but it's also a much easier place than Bolivia, for example. There are some common challenges with mining there. One of the companies I cover has some issues with the community in Oaxaca. This sort of thing happens all the time, and it's mostly business as usual.

TGR: What sort of gold and silver prices are you using in your models to evaluate these companies?

HI: I'm a stock analyst, as opposed to a macroanalyst, so I use conservative numbers: $1,600/ounce (oz) long-term gold prices and $34/oz long-term silver prices. In the long term, those numbers are likely to be a little too low, but they produce a margin of safety to our net asset value (NAV) and cash-flow models.

TGR: The silver companies you cover in Latin America are for the most part outperforming your gold companies. Does this make you more bullish on silver than gold, or are you evaluating specific cases and what those specific equities offer?

HI: I look at specific cases because the best gold company can't prosper if it can't get gold out of the ground at a decent cash cost. Similarly, the best silver company won't flourish if a community demonstration shuts down its plant. Again, I am an individual equity analyst; I look at the microeconomic company-specific factors and make my decisions accordingly.

TGR: What are three must-haves for the companies you cover?

HI: The number one thing is good management. Bad management can run the best company into the ground. I've seen it in stocks that I covered and in stocks that I owned.

TGR: How do you quantify good management?

HI: If I speak with a management team and I get the sense that it doesn't understand what's going on, then that would put it into the bad management category. If it continuously disappoints, if it continuously over-promises and under-delivers, that would put it into the bad management category. I worry, too, if there is no coherent team—even if the CEO, CFO and chief geologist are great people, there is a chance that they do not work well together. It sounds simplistic, but I always pay close attention.

TGR: What are the other must-haves?

HI: A company must have a good asset. Even if it has great management, if a company doesn't have a good asset, nothing's going to be pulled out of the ground. It needs to have a decent land package with room for expansion. The grades need to be right. The type of ore needs to be right. It needs to be permitted or have decent progress toward permitting. The third must-have is a functional mill with potential for expansion. The chain is only as strong as its weakest link, and if one of these factors is broken, the whole system is going to crumble.

I do a lot of site visits to evaluate the mills. I look for spare capacity, and I go through all the geological reports for permitting.

TGR: What segment of the precious metals market is going to provide retail investors with the best bang for their buck in 2013?

HI: I suggest people figure out what area they want to invest in, then narrow it down to a couple of companies. Go back to those three must-haves that I mentioned. Look into management, look into the assets and look into the permitting and the operational phase of the firm.

I would also say people should diversify. And if they just go across base metals, gold and silver, they will be doing themselves a favor.

TGR: So your advice is to evaluate individual companies and divide the portfolio up by commodity.

HI: Yes, and commodities shouldn't be your full portfolio.

TGR: Thank you so much, Heiko.

Heiko Ihle joined Euro Pacific Capital in November 2011 as a senior research analyst covering companies in the mining and engineering and construction (E&C) industries. Prior to joining Euro Pacific, Ihle spent over six years with Gabelli & Company, more than five of which as a research analyst. While at Gabelli, he was awarded second place in the 2010 Financial Times/StarMine Top Analyst Awards for the Engineering & Construction space. A native of Germany, Ihle received his bachelor's degree in finance and management from the University of Illinois at Chicago in 2004, and his Master of Business Administration from the University of Miami in 2006. He has been a CFA Charterholder since 2010 and is currently a member of the CFA Institute and the Stamford CFA Society.

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In Protecting Your Currency Protection

-- Posted Friday, 14 December 2012 | Share this article | Source: GoldSeek.com

By Tekoa Da Silva

How many times have we seen a bank robber movie in which the clever thieves hoist a locked safe deposit box onto a truck before driving away, or simply drill holes into it to get the goodies inside? Many times. In fact, such movies are usually shot in a way to make us root for the criminal to get away with the crime!

But what if it was your gold and silver inside that safe being stolen? What protections could you take to prevent such thefts (both internal and external) from occurring?

One idea is to get a combination safe and physically place it inside another, much larger safe. I won't ever be trying that, but you can if you wish.

Another idea is to resign to the fact that there is never a guarantee on "guaranteed safety". Your best bet is to create onion-like layers of financial security in your life that are very difficult to get through.

What might some of those layers be?

Physical Gold & Silver

The metals are your protection against currency devaluation, but once you have them, you're saddled with the responsibility of protecting that protection. All storage locations carry different types of risk. You can bury metals in your garden or back yard, or under a special tree from your childhood.

Risks: You forget where you buried it, or, you tell the wrong person where you buried it, OR, your nephew, in using the metal detector you gave him for Christmas last year, discovers and unearths the treasure for himself.

There is also the option of having other people store the metals for you. In this instance, your metal is only as safe as the person with whom you've given it too. Regardless of the fact of whether they tell you it's stored in London, Zurich, Amsterdam, of Anaheim...it's in "their pocket" in a metaphorical sense, and they always reserve the right to head to Vegas and "put it all on red" (if you don't believe me, just wait until the bull market matures, we'll see stories like this).

Mining Stocks/Stock Investments

I hear many people in the precious metals community decry the stock market to be rigged, it's a paper game which will all end up worthless, with everyone losing their money. All the precious metals ETF's will be worthless, so on, and so on. The fact is, billionaires are upping their antes in the precious metals stock investment space, and are doing so in incremental blocks of $50mm and $100mm. It always amuses me that those who claim to know more about investing than billionaires, never seem to share a financial statement and investment track record to back their arguments up.

The "worthlessness" story is a rattle used by the embittered who have already lost and no longer have skin in the game.

What the smart investors are doing is using legal methods to protect their assets to the furthest extent possible---of which you can do as well. Corporations are not reserved for the oligarchs of the world, anyone can create one and consult with an attorney and an accountant on the advantages they offer.

What also comes to mind (and I keep telling people this) is a conversation I had with ComputerShare Inc. transfer agent company. In researching direct registration and paper share certification for a recent report, I asked the service agent, "Why don't more people call up and use these methods?" Service agent response: "Well, most people simply don't know we exist. It's usually corporations and investment funds that call us."

Direct registration and paper share certification are stock ownership methods in which stocks are recorded in your name, rather than in the default name of the stock broker. The utility of said methods, is that if the stock broker who purchased your stocks for you ever goes bankrupt---your stocks are out of their reach, and cannot be harmed (see my website for recent report on this).

Real Assets 

I've told many friends over the years that gold and silver are not the cure-all for everything financial. They're just check boxes. You pick some up, check off a box, and move on. Owning other types of assets are just as (if not more important than) owning physical gold and silver. Things like a home, an apartment building which produces rent, a farm, water, gas, or oil production...and more importantly, people and community.

In extreme times, a community will be far more valuable to you than your gold and silver. Why not have a "community day" with everyone who lives on your street/building, and create a weather/event support plan for everyone to follow if the need ever arose? Just having those relationships in place is worth gold bullion in the bank (placed in a safe inside a larger safe, no doubt).

The smart money didn't get to where it is without creating layers of security around investments and assets. If the first layer gets blown out---that's fine, there's 2-3 more layers underneath that are even stronger. Additionally, many of the excuses emanating from the precious metals community about not investing in such in such an asset, are derived from a complete ignorance of basic accounting practices.

The smart money preempts those risks by spending the money and time on education and building communities---of which the returns are usually in the very high multiples.

Market's Fed Reaction "Could Be Worrying Sign for Gold" as "Bear Stance Supported by Price Move"

By: Ben Traynor, BullionVault

-- Posted Friday, 14 December 2012 | Share this article | Source: GoldSeek.com

London Gold Market Report

SPOT MARKET gold prices looked to be headed for a third weekly loss in a row Friday lunchtime in London, after failing to break above $1700 an ounce, while stocks and US Treasuries were little changed on the day, with no signs of progress from Washington on the so-called fiscal cliff.

Silver was also headed for a third losing week in a row, trading around $32.60 an ounce for most of this morning, as other commodity prices gained slightly.

"A lack of activity has kept precious metals largely unchanged this morning," says today's commodities note from Standard Bank.

A day earlier, gold dropped back below $1700 an ounce Thursday, despite the US Federal Reserve committing to $45 billion a month in Treasury purchases the day before.

"The bulls were making the argument that the central bank would remain easy, at least until 2015, helping provide an element of support for gold," says a note from Ed Meir, analyst at brokerage INTL FCStone.

"The bears countered that there would not be any additional easing in the pipeline between now and 2015, and also pointed out that the Fed did, after all, outline specific targets at which point it would start shrinking its bloated balance sheet...Thursday's action seems to have supported the bearish stance."

"It is perhaps a worrying sign that the latest installment of QE has had no positive impact on gold prices at all," says a note from investment bank Natixis.

"No matter which side of the Fed argument one is on," says INTL FCStone's Meir, "we suspect that much of Thursday’s selling was also triggered by the fact that investors are becoming increasingly nervous about the lack of progress emanating from the fiscal cliff talks."

President Obama and Republican House of Representatives speaker John Boehner had what statements from both parties called a "frank" meeting about the so-called fiscal cliff Thursday, adding that "lines of communication remain open" between the two.

No agreement has been reached on deficit reduction measures. Unless Congress passes new legislation, tax cut expiries and spending cuts worth an estimated $600 billion are due to kick in starting at the end of this month.

Barclays Capital meantime has cut its gold price forecast for 2013. BarCap forecasts gold will average $1815 an ounce next year, 2.4% down on the previous projection, while the investment bank's forecast for silver is unchanged at $32.50 an ounce.

"We retain a positive view on the gold market," a note from BarCap says, "but given gold's outperformance during risk on intervals and our [foreign exchange] strategists' expectation for the Dollar to strengthen beyond three months, we are revising down our forecast for 2013 modestly."

Over in Europe, discussions on a common Eurozone budget and coordination of economic reforms among Euro members were put back until June next year Friday. 

European Council president Herman van Rompuy issued a statement from the European Union summit in Brussels saying he will "present possible measures and a time-bound road map" at a summit in June next year.

Eurozone inflation meantime fell to 2.2% last month, down from 2.5% in October, according to official figures published this morning. US consumer inflation data are due to be published at 08.30 EST.

Demand to buy gold in physical bullion form has seen a resurgence in recent weeks, according to Standard Bank's proprietary Gold Physical Flows Index.

Gold importers in the world's biggest gold buying nation India continued to stock up Friday, newswire Reuters reports, to ensure adequate supplies for the wedding season.

"People feel this is a good buying opportunity as prices could jump another 1000 Rupees [per 10 grams]," says Harshad Ajmera at JJ Gold House.

Activity in China's manufacturing sector meantime looks set to expand at a stronger pace this month compared to November, according to the provisional 'flash' purchasing managers index published by HSBC Friday.

China's silver market meantime is "expected to achieve even further growth in coming years" on both the demand and supply side following a decade of rapid expansion, according to a report produced by precious metals consultancy Thomson Reuters GFMS and published by the Silver Institute Thursday.

"China is now the world's second largest silver fabricator and is likely to become the second largest producer, with its share of global demand and supply standing at 17% and 14% respectively," the report says.

Ben Traynor

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK's longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics. Ben writes and presents BullionVault's weekly gold market summary on YouTube and can be found on Google+

(c) BullionVault 2012

Gold & Silver Market Morning

By: Julian D. W. Phillips, Gold/Silver Forecaster - Global Watch - GoldForecaster.com

---

-- Posted Tuesday, 4 December 2012 | Share this article | Source: GoldSeek.com

Gold Today –New York closed at $1,715.20 yesterday. This morning, Asian dealers pushed prices down, unusually, to $1,705 before London opened. It was Fixed at $1,706.75 down $11.50 on yesterday’s Fix. In the euro it was Fixed at €1,305.354 down €11.5, while the euro was stronger at €1: $1.3075 and strengthening.  Ahead of New York’s opening, gold was almost the same as Friday morning’s level at $1,706.75 the same as the Fixing and in the euro at €1,304.61 down €23 as the euro continued to strengthen.

Silver Today – Silver closed in New York at $33.59 yesterday. In Asia and London’s start to the week, silver slipped to $33.33 in London, ahead of New York’s opening falling slower than gold.

Gold _{(very short-term)}

Gold is expected to consolidate with a negative bias, in New York today.

Silver _{(very short-term)}

Silver is expected to consolidate with a negative bias, in New York today.

Price Drivers

Gold & Silver – With the Technical picture still favoring the downside, traders and speculators in Tokyo pushed the gold price down to nearly $1,700 at the quietest time of gold’s day. Again traders and speculators are relying on the downwards pointing Technical picture. But this still leaves the gold price within a tightening trading range. A clear direction can only be given once the pennant is fully formed. As we said yesterday, as this narrows so we must again prepare ourselves for a strong move, either way likely later in the week.

Perhaps the most important factor affecting traders and speculators [not long term holders of gold, Asian demand or central bank demand] is the turn the “Fiscal Cliff” negotiations are taking.  [Subscribe to our newsletters at www.GoldForecaster.com and www.SilverForecaster.com] These are, we believe taking a turn for the worse as President Obama and the Republicans harden their stances and demand more from the other side. A question about to be contemplated is, “Which side has the most to gain, if the U.S. falls over the Fiscal Cliff?” It seems that the President will! If this is the case and he is actually prepared to blame the Republicans as the recession is approached, then all markets will begin to discount this shortly, precious metals included. But as gold has so many other supportive factors behind it we cannot see speculators or traders dominating the gold or silver markets for long.

It seems that the bad effects of a fall over the cliff are resulting in businesses now acting as though it’s already happening and laying off workers as well as conserving cash!

Silver – Silver is being pushed to follow the gold price but is doing so in a small way and seemingly unwillingly.

Regards,

Julian D.W. Phillips for the Gold & Silver Forecasters

Global Gold Price (1 ounce)
	Today	3 days ago
Franc	Sf1,581.73	Sf1,601.04
US	$1,729.55	$1,729.55
EU	1,304.61	€1,327.67
India	Rs.93,333.62	Rs.94,701.51

-- Posted Tuesday, 4 December 2012 | Digg This Article | Source: GoldSeek.com

Gold Seeker Closing Report: Gold and Silver End Modestly Higher

By: Chris Mullen, Gold-Seeker.com

--Posted Monday, 3 December 2012 | Share this article | Source: GoldSeek.com

	Close	Gain/Loss
Gold	$1715.20	+$2.00
Silver	$33.59	+$0.22
XAU	166.85	-1.97%
HUI	439.84	-2.33%
GDM	1281.06	-2.23%
JSE Gold	2300.48	-74.08
USD	79.90	-0.23
Euro	130.53	+0.65
Yen	121.60	+0.34
Oil	$89.09	+$0.18
10-Year	1.628%	+0.022
T-Bond	151.0625	-0.34375
Dow	12965.60	-0.46%
Nasdaq	3002.19	-0.27%
S&P	1409.46	-0.47%

 

Buy Gold Online

 

The Metals:

Gold dropped back to $1712.80 by a little after 9AM EST before it jumped to as high as $1721.60 in the next hour of trade and then chopped back lower midday, but it still ended with a gain of 0.12%.  Silver slipped to $33.38 before it rose to as high as $33.821 and then also fell back off, but it still ended with a gain of 0.66%.

Euro gold fell to about €1314, platinum gained $10.50 to $1606, and copper rose slightly to about $3.63.

Gold and silver equities drifted lower throughout most of trade and ended with about 2% losses.

The Economy:

Report	For	Reading	Expected	Previous
ISM Index	Nov	49.5	51.2	51.7
Construction Spending	Oct	1.4%	0.4%	0.5%

There are no major economic reports due out tomorrow.

GOP issues new 'fiscal cliff' offer to Obama Yahoo

Republicans offer tax revenue in cliff plan MarketWatch

Fed officials laud stimulus, quibble over future plans Reuters

Fed's Bullard urges smaller bond buys to replace Twist Reuters

The Markets:

Charts Courtesy of http://finance.yahoo.com/

Oil rose along with the Dow, Nasdaq, and S&P in early trade as the U.S. dollar index and treasuries fell after Spain formally asked for European funds to recapitalize its banking sector.  Stronger than expected Chinese manufacturing data and a buyback offer by Greece also supported those moves, but persistent worries about the fiscal cliff dragged stocks back lower midday and the major indices ended with decent losses on the day.

Among the big names making news in the market today were Dell, News Corp., Ford, Chrysler, and UBS.

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