Ben Kramer-Miller Dec. 27, 2014 3:01 AM ET
Disclosure: The author is long AUMN.
Golden Minerals provided an update regarding the restart of its Velardena Project.
The performance has been worse than my expectations given the lower ore grades, although I was conservative in my own estimates.
Investors should consider Golden Minerals as a silver optionality play, although it is likely losing money in the current market environment.
Golden Minerals (NYSEMKT:AUMN) announced some data regarding the recent restart of its flagship Velardena Mine which it shut down last summer due to low gold and silver prices. So far, the performance has been worse than expected as ore grades are ~10% below expectations.
Investors will recall my skepticism with respect to the company's optimistic expectations regarding the (then) future performance of the Velardena restart. I felt that the company's optimistic $12-$15/oz. of silver cost estimates would balloon higher and that the company would have trouble achieving profitability even at $21/oz. silver. With silver down to $16, I still think that this is the case, and the recent announcement bolsters this claim's validity.
With that being said, Golden Minerals is incredibly inexpensive, and I think it is a compelling way for investors to get silver leverage. The company has over 120 million silver equivalent ounces in the ground with a market capitalization of $26 million and working capital of $13 million and no debt. So you're basically paying about a dime for each in-ground silver equivalent ounce. Since the company cannot extract it profitably at the current silver price, these ounces aren't worth much now, but if you are expecting a much higher silver price, we could easily see a re-rating that could send shares of Golden Minerals soaring.
December 22, 2014 by Martin Armstrong
About 82 percent of the derivatives market in the United States relates to the interest rate derivatives. This reflect the real Debt Bubble that is brewing. Why did the banks need to repeal Dodd-Frank and the Volcker Rule to get taxpayer backing for their losses again? One need not look beyond the oil derivatives. The bank expected oil to rise, not fall. They are on the other-side of the hedging by oil companies. What exactly is their risk in energy can be very difficult to determined. Oil Derivatives is but a tiny fraction of the share of the 280-trillion dollar derivative market. It is not enough to trigger a financial crisis 2.0 just yet. However, a year-end closing below $57 will set in motion a cascade effect. How, this will start to impact the Credit Default Swaps in debt. Why? The Middle East, Russia, and many other nations rely upon energy revenue. As that revenue collapses, we will see more and more problems emerge in the interest rate sector. Keep in mind that this is by no means an exclusive US banking problem. The money-center banks in Britain, Germany and Switzerland are also exposed since they followed the lead of New York.
Prometheus writes: I think the real oil pros already looking for the new middle pricing range.
Some pros are calling it a tax cut.
Jim Rickards @JamesGRickards · 3 hours ago
#Yellen calls the oil price decline "like a tax cut." Yeah, except for the trillion dollars of bond defaults coming.
CALGARY, ALBERTA--(Marketwired - Dec. 15, 2014) - Pengrowth Energy Corporation (TSX:PGF) (NYSE:PGH) is pleased to announce that it has commenced steam operations at the Lindbergh Thermal Project located in the Cold Lake area of eastern Alberta.
"First steam is a significant milestone for the Lindbergh Project as it represents the completion of construction and commissioning of the facilities and is the last major milestone before first oil," said Derek Evans, President and Chief Executive Officer of Pengrowth. "We are pleased that the Lindbergh facilities have been successfully commissioned and that first steam was delivered on-time. We look forward to the production and associated funds flow growth from this project in 2015 and beyond."
Pengrowth has been operating a two well pair pilot at Lindbergh for the last 34 months, which has produced approximately 1.6 million barrels to date with a cumulative steam oil ratio of 2.1x. November production from the pilot averaged approximately 1,760 bbl/d with an instantaneous steam oil ratio of 2.3x.
Lindbergh, Pengrowth's 100 percent owned and operated thermal project, is located in the Cold Lake area of eastern Alberta. The project offers Pengrowth the potential to develop annual production of up to 50,000 bbl/d. Lindbergh's robust economics make it a viable project that is able to generate positive cash flow, even in a low oil price environment. With strong netbacks, low decline rates, long reserve life and low sustaining capital requirements, Lindbergh is expected to be the foundation of Pengrowth's sustainable model, supporting future growth in production and funds flow.
Ellen Brown, recently featured by Greg Hunter, "Bail-In and the Financial Stability Board: The Global Bankers' Coup."
On December 11, 2014, the US House passed a bill repealing the Dodd-Frank requirement that risky derivatives be pushed into big-bank subsidiaries, leaving our deposits and pensions exposed to massive derivatives losses.
The bill was vigorously challenged by Senator Elizabeth Warren; but the tide turned when Jamie Dimon, CEO of JPMorganChase, stepped into the ring.
Perhaps what prompted his intervention was the unanticipated $40 drop in the price of oil. As financial blogger Michael Snyder points out, that drop could trigger a derivatives payout that could bankrupt the biggest banks. And if the G20's new "bail-in" rules are formalized, depositors and pensioners could be on the hook.
Armstrong -Enough is Enough – Shut the Gov’t Down Rather The Repeal Dodd-Frank
Jamie Dimon, head of JP Morgan, personally telephoned individual lawmakers to urge them to vote for the repeal of Dodd Frank. This is getting really out of hand. Let us make this very clear. Besides the fact that these banks LACK the models to prevent them from blowing up every single time running to government with their hand out asking can they spare a trillion, the sheer fact that they can make heaps of money from trading means they are NOT lending. Spain converted itself from the richest nation in Europe to the poorest by doing precisely this short-term type planning.
Tyler Durden on 12/10/2014 09:20 -0500
While we were expecting that one-time "god of crude oil trading" would have a poor year as a result of his consistent bullishness on the crude space, we were quite astounded to learn, as Bloomberg first reported yesterday, that Andy Hall – the man whose name was for a decade legendary in the commodity space -would call it a day. And yet that pales in comparison to the WSJ report overnight than Phibro itself, Andy Hall’s 113 year old employer currently owned by Occidental Petroleum after its sale by Citigroup, would liquidate in the US after it failed to buy a buyer, marking the end of an era.
What is paradoxical, and as we reported yesterday, Hall’s hedge fund Astenbeck, has not done badly in 2014. In fact, it was up another 1.2% in November and was up 7.2% year to date despite a roaring bear market in commodities.
Alas, that is cold comfort for Phibro. As the WSJ reports, "the 113-year-old company, founded in Germany by two scrap-metal dealers, is winding down its U.S. operations after it failed to find a buyer, according to a person familiar with the situation. The sale process for units in London and Singapore continues, the person said. Phibro specialized in physical trading of oil and other raw materials, seeking to profit by moving actual barrels.ZH
thereby heavily diluting shareholders - the shares had incredible upside potential.
With this in mind, and with a scenario very similar to the one I put forth in November, I think now is an excellent time for investors to add to their positions. Shares can certainly trade lower from here, but the upside potential at this point - especially in a bullish gold scenario - makes this a risk worth taking at $0.95/share.
Dec. 9, 2014 11:31 AM ET Ben Kramer-Miller
Allied Nevada issued 21.5 million shares at $1 each.
Each share comes with half a warrant to purchase a share at $1.10 for 5 years.
I had anticipated the secondary although it is smaller than I thought.
Shares traded down to support before bouncing - liquidity is not an issue for now and shares offer incredible value.
As expected Allied Nevada (ANV) just announced a secondary offering. The company is issuing 21.5 million shares at $1 each. Each share comes with half a warrant that entitles the warrant holder to purchase a share at $1.10 for a period of five years.
The price of the secondary was substantially lower than the closing price Monday of $1.39/share and as a result shares plunged. However investors should note that the stock did not trade below the lows reached in early November. This is good news.
More importantly the company now has sufficient capital to get it through the next few months.
At first I was surprised that the offering was so small as management only raised $21.5 million. However I suspect that the decision was made to raise just a little bit now in the hope that additional capital will not be needed (in case the gold price rises). Should the company need more capital in the future it can still raise it.
Investors will recall that I recently came out with a bullish article on Allied Nevada in which I argued that sentiment in the name had become absurdly bearish. Investors were overly focused on the company's near-term capital shortfall and failed to appreciate the enormous value of the Hycroft Project, which is one of the largest gold/silver mines in one of the world's least risky mining jurisdictions. I suggested that the liquidity issues were disconcerting but then showed how various capital raising scenarios could play out and what it would mean for the company's valuation. It became evident that even if the company raised a substantial amount of capital at a low share price -
Silver to gold ratio at 72.0 is creating a bargain for stackers.
Steve St. Angelo, SRSrocco Report Tuesday, December 9th
After the U.S. Mint updated its bullion figures on Monday, 2014 Silver Eagle sales reached a new annual record surpassing last years total by nearly 200,000. Not only was 2014 a banner year for world’s most sought after official coin, the Silver-Gold Eagle ratio also hit a new record high.
The U.S. Mint sold nearly a half million Silver Eagles over the weekend, putting the total for December at 1,317,000. This strong weekend demand pushed total annual Silver Eagle sales to 42,864,000 over last years previous record of 42,765,000. Furthermore, there are still a few more weeks remaining in the month.
As I have said for years I will pay attention when all of the cartel rules are consistently violated. As of right now I am definitely paying attention. A follow-through rally tomorrow would to say the least be more impressive.
Lemetropole cafe snippet-
This is another gigantic cartel rule violation day. The rally on the Comex pit open, and the subsequent follow through rally on the NYSE open was impressive. Equally impressive was the PM fix coming in at a stellar +$20.50 to the AM fix. Gold even rallied after the PM fix, yet another rule violation biggie. Oh, I almost forgot, add another 2% rule violation. As I type we are bearing down on +4% for the day! I just hope I’m not dreaming this is all happening. You can count on one hand the times in the past three years when gold has had a spirited rally during New York trading hours. Two of those have now come in the past week. You can also practically count on one hand the times when gold gained 4% over the last TEN years. Along with the big cartel rule violation day on Dec. 1st the tremors are accelerating. As you know there have been many times when a few rules were violated, and even when all the rules were violated it proved to be a one-off situation. To have two within a week, along with several Friday rallies is very impressive. FWIW the Dow is currently being heavily supported at -1%, the mirror reverse of what normally happens to gold.
The cartel has made it impossible for gold to act intuitively, and be a safe haven. Today is one of those rare days when paper instruments are under pressure and the PM’s are flying. In other words gold is acting rational. Defying MOPE is cartel rule violation numero uno. The only reason for MOPE to not be in force is because something has changed and they CAN’T. The scramble for physical could be on. You can’t have violent dislocations in markets (like crude oil) without unintended consequences. While it is thrilling to see gold act fairly normal this is just "jacks for starters" as you say to what it should be doing going forward. There’s three years of suppression to unwind, and hell to pay for the ruthless shorts. May their stomachs be churning all through the holiday season.
Allied Nevada -28% after pricing public offering of stock, warrants • 8:40 AM
Allied Nevada (NYSEMKT:ANV) -28% premarket after pricing a public offering of common stock and warrants.
Investors will receive one common share and one-half warrant to purchase common stock for $1; each whole warrant entitles the holder to purchase one common share at an exercise price of $1.10.
ANV expects the offering to provide ~$21.5M in gross proceeds.
Great timing! Nothing like getting the least bang for the buck during tax loss selling.
Can't forget those warrants.
December 8, 2014 | Reno, Nevada - Allied Nevada Gold Corp. (“Allied Nevada”, “us”, “we”, “our” or the “Company”) (TSX: ANV; NYSE MKT: ANV) today announced that it intends to offer shares of common stock together with warrants in a public offering. H.C. Wainwright & Co., LLC will serve as the sole lead placement agent for the offering and Canaccord Genuity Corp. shall act as co-placement agent for the offering. While the offering is expected to price before 9:30 am EST on December 9, 2014, the offering is subject to market conditions, and there can be no assurance as to whether or when the offering may be completed, or as to the actual size or terms of the offering.
The offering will be made in the United States only by means of a prospectus supplement and an accompanying prospectus filed as part of an effective shelf registration statement filed with the Securities and Exchange Commission on Form S-3 (File No. 333-200357), which was declared effective by the United States Securities and Exchange Commission, or the SEC, on November 25, 2014.
While management is being blamed for the current downtrend, not all schemes can remain in the dark.
Submitted by Tyler Durden on 12/04/2014 23:41 -0500
From Paul Mylchreest of ADM Investor Service International
Long Nikkei/Short Gold: Profitable, dangerous and missed by everybody?
Has the market completely missed a huge long/short trade which has helped to drive up the Nikkei and drive down the gold price for more than 2 years? One that puts risk-taking and leveraged speculation by our industry in an unfavourable light again.
Posted at Zero Hedge
Keep dreaming...don't forget QE4 next year!
Full-Time Jobs Down 150K, Participation Rate Remains At 35 Year Lows, "No Job Market For Young Men"
Submitted by Tyler Durden on 12/05/2014 - 09:10
While the seasonally-adjusted headline Establishment Survey payroll print reported by the BLS moments ago may be indicative of an economy which the Fed will soon have to temper in an attempt to cool down, a closer read of the November payrolls report shows several other things that were not quite as rosy. First, the Household Survey was nowhere close to confirming the Establishment Survey data, suggesting jobs rose only by 4K from 147,283K to 147,287K, and furthermore, the breakdown was skewed fully in favor of Part-Time jobs, which rose by 77K while Full-Time jobs
And then for those keeping tabs on the composition of the labor force, the same adverse trends indicated over the past 4 years have continued, with the participation rate remaining flat at 62.8%, essentially the lowest print since 1978, driven by a 69K worker increase in people not in the labor force.
The ratio of Civilian employment to the total population, which plunged during the onset of the recession, has still barely budged higher as shown in the chart below:
Finally, anyone hoping that young people, those aged 16-24 are finally entering the workforce in droves, sadly that is not the case once again, with the employed ranks of Americans in that age group down by 169K in the past month. The good news: aged workers, those 55 and over, just rose to a new all time high of 32.814 milllion
PS...don't be surprised if metals turn on Monday.
Sentiment: Strong Buy
This article makes a great case for community banks and credit unions, with a splash of physical G&S.
By Michael Snyder, on December 3rd, 2014
Could rapidly falling oil prices trigger a nightmare scenario for the commodity derivatives market? The big Wall Street banks did not expect plunging home prices to cause a mortgage-backed securities implosion back in 2008, and their models did not anticipate a decline in the price of oil by more than 40 dollars in less than six months this time either. If the price of oil stays at this level or goes down even more, someone out there is going to have to absorb some absolutely massive losses. In some cases, the losses will be absorbed by oil producers, but many of the big players in the industry have already locked in high prices for their oil next year through derivatives contracts. The companies enter into these derivatives contracts for a couple of reasons. Number one, many lenders do not want to give them any money unless they can show that they have locked in a price for their oil that is higher than the cost of production. Secondly, derivatives contracts protect the profits of oil producers from dramatic swings in the marketplace. These dramatic swings rarely happen, but when they do they can be absolutely crippling. So the oil companies that have locked in high prices for their oil in 2015 and 2016 are feeling pretty good right about now. But who is on the other end of those contracts? In many cases, it is the big Wall Street banks, and if the price of oil does not rebound substantially they could be facing absolutely colossal losses.
It has been estimated that the six largest “too big to fail” banks control $3.9 trillion in commodity derivatives contracts. And a very large chunk of that amount is made up of oil derivatives.
By the middle of next year, we could be facing a situation where many of these oil producers have locked in a price of 90 or 100 dollars a barrel on their oil but the price...
Submitted by Tyler Durden on 12/04/2014 11:35 -0500
ECB head Mario Draghi made it clear where the real battle is taking place in the world this morning. When asked what form QE would take, his response was to the point... "On what sorts of assets should be included in QE... we discussed all assets BUT gold" and gold dropped, right on cue.
Not really sure which assets we discussed but definitley not gold!!
So to summarize, the ECB will willingly take on Greek bank CDOs, Italian 3rd lien espresso shop loans, Spanish condo HELOCs, and Portuguese Used-Car ABS... but not - never - gold.
* * *
It appears we now know who the enemy really is... not deflation but the dreaded barbarous relic, gold.
Perhaps this is why, as Kyle Bass so eloquently noted:
"Buying gold is just buying a put against the idiocy of the political cycle. It's That Simple"
Submitted by Tyler Durden on 12/03/2014 19:30 -0500
Three months ago, we revealed that - with absolute certainty - foreign central banks trade (and by "trade" we mean "buy") S&P 500 futures such as the E-mini, in both futures and option form, as well as full size, and micro versions, in addition to the well-known central bank trading in Interest Rates, TSY and FX products. The reason for the certainty was that one of the world's largest futures exchange, the CME, was quietly peddling a service geared exclusively to central banks, called the Central Bank Incentive Program, whose purpose was to "incentivize" central banks to provide market liquidity, i.e., limit orders, by charging them 34% less than ordinary customers on every E-Mini trade.
Back then we left readers wondering "the next time you sell some E-minis, ask yourself: is the ECB on the other side? Or the BOE? Or, perhaps, you are selling S&P 500 futures to Kuroda. Who knows: there is no paper trail anywhere, although a FOIA request and/or the discovery from a lawsuit, class action or otherwise, of the CME's central bank incentive program would likely yield some stunning results."
Actually no it won't: it is now a national security issue that nobody have proof that the biggest marginal buyer of equities are central banks themselves. Otherwise, "confidence" in central planning may crumble, even if everyone knows all too well that without central banks, the equity market's artificially propped up prices would be obliterated overnight.
There was one small piece of good news: the foreign central bank rigging (because the Fed is still technically not allowed to buy equity derivatives directly: instead it has been doing so via Citadel) would end on December 31, 2014:
The next 2 days have been right back to the wall to wall cartel rules being enforced. Optimistically though Monday was a tremor, as were the unusual Fridays of late. A tremor can often do little or no damage. It can also create a tsunami. Based on the past 3+ years the latter is the most likely outcome.
Lemetropole cafe -
Circled number showed $1211.40 as the 1% cap for the day. So far gold magically laid up right on the mark. Another day, another prediction to the tick. There are a lot of technicians getting paid a lot of money to consistently miss such crucial resistance points. I guess that’s the price you pay to be a cartel ostrich. A hefty 6,000 Feb. contracts traded between 10:29 and 10:34 keeping gold at its first limit-up. Further attempt to escape have so far been repelled. We’re still just a flash crash away from sub-$1200 which is where the cartel likes it. Watching the Comex trade is more like watching a hologram of gold. The price is totally driven by algo systems, and there is no physical gold being traded divorcing it from all reality. The Comex price is, like the Police album, a "Ghost in the Machine".
The no follow through rule serves several vital functions for the cartel, all of which fall under the MOPE category. One is to create the illusion of equilibrium in price. Capping gold after every significant rally makes it look like the buyers are hesitant, and the sellers are eager. Another function of capping gold after a rally is to quickly neutralize all bullish technicals. That can’t be underestimated in the cartel’s bag of tricks, as it stops the momentum buyers dead in their tracks. Of course the Kitco crowd is more than eager to provide narratives like this All Quiet On The Golden Front describing exactly what the cartel wants MOPE to be. As I have said gold has been a bull market that felt more like a great bear market. There are endless proclamations of its demise, and endless Kitco headlines advising caution if not outright fear of further gains. FWIW the MOPE campaign has been terribly effective in keeping ordinary investors scared off.
We know the numbers to hurdle for gold and silver to reach escape velocity. We know that at least for a day they acted like it was possible.