InvestMacro Forex News

By CentralBankNews.info
    Surprise interest rate hikes by Turkey, India and South Africa, which boosted their credibility, dominated global monetary policy last week as financial markets continued to adjust to the U.S. Federal Reserve’s gradual withdrawal of free money.
    After five years of pumping money into the U.S. and global economy, the Fed last week took another step toward normalizing monetary policy by trimming its purchases of Treasury bonds and mortgage-related debt by a further $10 billion to $65 billion a month and held out the prospect of similar reductions in coming months.
    But the prospect of tighter liquidity, against the backdrop of an improving U.S. economy, has triggered major swings in global asset prices, including sharp falls in the currencies of many emerging markets that used to benefit from easy money seeking a high return.
    The surprisingly sharp reaction of financial markets to a process that the Fed first flagged in May 2013 illustrates the unpredictable and tumultuous way that financial markets often re-price risks and force the hands of central banks.
   
    Last week started off with the Reserve Bank of India (RBI) surprising markets by raising its policy rate by 25 basis points to 8.0 percent, making good on its promise from last month to act if there wasn’t a “significant reduction” in inflation.
    Then the Central Bank of the Republic of Turkey (CBRT) shook off months of dithering and fine-tuning of its liquidity operations, by reverting to a simpler policy framework and raised its one-week repo rate by 550 basis points to 10 percent. While the CBRT was expected to raise rates, the size of the hikes surprised markets.
    The South African Reserve Bank (SARB) delivered the third surprise of the week by raising its repo rate by 50 basis points to 5.5 percent in a move to head off future inflationary pressures from the declining rand.
    The initial reaction of currency markets, fearing contagion and seeking safe haven, was to reject the three rate rises and any immediate benefit to the currencies of those three countries was soon lost.
    But by the end of the week markets had settled down, with the result that India’s rupee ended 0.4 percent higher on the week against the U.S. dollar, Turkey’s embattled lira had risen 3.0 percent while South Africa’s rand was only marginally lower by 0.3 percent.
    But market volatility was widespread and emerging market currencies were hit across-the-board as global investors treated them with one broad brush.
    Russia’s rouble was hit and the central bank promised to intervene if the rouble strays outside its target corridor, Costa Rica’s central bank intervened to dampen the fall of its colon currency, Croatia’s central bank sold euros to ease pressure on its kuna currency and Romania’s central bank sold euros to support the leu .
    As if investors’ nerves weren’t already frayed from sharp price swings, a spat over the lack of international policy cooperation erupted between the governor of India’s central bank and U.S. central bankers.
    Raghuram Rajan, the governor of the RBI who has been applauded for his decisions since taking over the reins in September, said international monetary cooperation had broken down and appealed to the U.S. to take into account how its policies affect other nations.
    But Rajan’s appeal fell on deaf ears, with Richard Fisher, the outspoken president of the Dallas Fed, rejecting the notion that the U.S. Fed should conduct its policy as if it were the world’s central bank because the Fed’s only mandate is to fulfill the mission that the U.S. Congress has set and other nations “have to figure out” how to deal with their own issues.
    What makes this public tit-for-tat slightly unusual is that it involves central bankers, who normally cooperate in a collegial manner behind the scenes, rather than politicians, such as Brazil’s finance minister Guido Mantega, who coined the term of “currency wars” in 2010.
     Rajan is hardly the first, nor will he be the last to object to the spillover effects on emerging markets from changes to U.S. monetary policy. But given his past as chief economist of the International Monetary Fund (IMF) and as professor of finance at the University of Chicago, Rajan’s criticism of the current U.S.-dominated international financial system carries weight and should be taken seriously.
   
    Through the first five weeks of this year, policy rates worldwide have been raised four times as four of Morgan Stanley’s so-called “Fragile Five” (Brazil, Turkey, India and South Africa) have taken action. So far Indonesia, the fifth member of the group, has seen its rupiah hold up during the currency turmoil, possibly because it resolutely raised rates by 175 basis points last year.
    Rate rises have accounted for 9.7 percent of this year’s 41 policy decisions by the 90 central banks followed by Central Bank News.
    In contrast, policy rates have been cut five times, or 12.2 percent of this year’s policy decisions.

• Bangladesh holds rate, aims to reduce inflation to 7 pct
• Israel maintains rate on low inflation, moderate growth
• India raises rate 25 bps, does not expect further tightening
• Turkey hikes rates, to keep tight stance until CPI improves
• Malaysia holds rate steady, sees higher inflation
• South Africa raises rate 50 bps, says won’t hesitate to act
• Federal Reserve trims asset purchases by another $10 bln
• New Zealand holds rate, warns of higher rates “soon”
• Fiji holds rate, economy set to top 3% growth in 2014
• Moldova holds rate, balances risk of inflation vs deflation
• Angola holds rate but cuts reserve requirement to 12.5%
• Mexico holds rate, but keeps eye on inflationary pressures
• Zambia central bank leaves benchmark rate unchanged (Reuters)
• Colombia holds rate, sees inflation moving to target
• Trinidad & Tobago holds rate, sees no disruptive flows

By Doug Hornig, Senior Editor, Casey Reasearch

It’s not exactly news that gold mining stocks have been in a slump for more than two years. Many investors who owned them have thrown in the towel by now, or are holding simply because a paper loss isn’t a realized loss until you sell.

For contrarian speculators like Doug Casey and Rick Rule, though, it’s the best of all scenarios. “Buy when blood is in the streets,” investor Nathan Rothschild allegedly said. And buy they do, with both hands—because, they assert, there are definitive signs that things may be turning around.

So what’s the deal with junior mining stocks, and who should invest in them? I’ll give you several good reasons not to touch them with a 10-foot pole… and one why you maybe should.

First, you need to understand that junior gold miners are not buy-and-forget stocks. They are the most volatile securities in the world—”burning matches,” as Doug calls them. To speculate in those stocks requires nerves of steel.

Let’s take a look at the performance of the juniors since 2011. The ETF that tracks a basket of such stocks—Market Vectors Junior Gold Miners (GDXJ)—took a savage beating. In early April of 2011, a share would have cost you $170. Today, you can pick one up for about $36… that’s a decline of nearly 80%.

There are something like 3,000 small mining companies in the world today, and the vast majority of them are worthless, sitting on a few hundred acres of moose pasture and a pipe dream.

It’s a very tough business. Small-cap exploration companies (the “juniors”) are working year round looking for viable deposits. The question is not just if the gold is there, but if it can be extracted economically—and the probability is low. Even the ones that manage to find the goods and build a mine aren’t in the clear yet: before they can pour the first bar, there are regulatory hurdles, rising costs of labor and machinery, and often vehement opposition from natives to deal with.

As the performance of junior mining stocks is closely correlated to that of gold, when the physical metal goes into a tailspin, gold mining shares follow suit. Only they tend to drop off faster and more deeply than physical gold.

Then why invest in them at all?

Because, as Casey Chief Metals & Mining Strategist Louis James likes to say, the downside is limited—all you can lose is 100% of your investment. The upside, on the other hand, is infinite.

In the rebound periods after downturns such as the one we’re in, literal fortunes can be made; gains of 400-1,000% (and sometimes more) are not a rarity. It’s a speculator’s dream.

When speculating in junior miners, timing is crucial. Bear runs in the gold sector can last a long time—some of them will go on until the last faint-hearted investor has been flushed away and there’s no one left to sell.

At that point they come roaring back. It happened in the late ’70s, it happened several times in the ’80s when gold itself pretty much went to sleep, and again in 2002 after a four-year retreat.

The most recent rally of 2009-’10 was breathtaking: Louis’ International Speculator stocks, which had gotten hammered with the rest of the market, handed subscribers average gains of 401.8%—a level of return Joe the Investor never gets to see in his lifetime.

So where are we now in the cycle?

The present downturn, as noted, kicked off in the spring of 2011, and despite several mini-rallies, the overall trend has been down. Recently, though, the natural resource experts here at Casey Research and elsewhere have seen clear signs of an imminent turnaround.

For one thing, the price of gold itself has stabilized. After hitting its peak of $1,921.50 in September of 2011, it fell back below $1,190 twice last December. Since then, it hasn’t tested those lows again and is trading about 6.5% higher today.

The demand for physical gold, especially from China, has been insatiable. The Austrian mint had to hire more employees and add a third eight-hour shift to the day in an attempt to keep up in its production of Philharmonic coins. “The market is very busy,” a mint spokesperson said. “We can’t meet the demand, even if we work overtime.” Sales jumped 36% in 2013, compared to the year before.

Finally, the junior mining stocks have perked up again. In fact, for the first month of 2014, they turned in the best performance of any asset, as you can see here:

(Source: Zero Hedge)

The writing’s on the wall, say the pros, that the downturn won’t last much longer—and when the junior miners start taking off again, there’s no telling how high they could go.

To present the evidence and to discuss how to play the turning tides in the precious metals market, Casey Research is hosting a timely online video event titled Upturn Millionaires next Wednesday, February 5, at 2:00 p.m. Eastern.

register here for free

USDCHF: With the pair reversing most of its previous week losses to close higher the past week, immediate risk remains to the upside. Resistance resides at the 0.9156 level, its Jan 21 2014 high. Further out, the 0.9200 level, its psycho level comes in as the next upside objective where a violation will aim at the 0.9249 level, its Nov 07’2013 high. Its weekly RSI is bullish and pointing higher suggesting further strength. On the downside, the risk to this analysis will be a return to the 0.8902 level, its Jan 24 2014 low. A cut through here will turn focus to the 0.8850 level and subsequently lower towards the 0.8800 level, its psycho level. This downside view is consistent with its broader medium term downtrend triggered from the 0.9838 level. All in all, the pair remains biased to the downside medium term though seen recovering.

Article by www.fxtechstrategy.com

With over $5 trillion traded a day before Forex market is not only the largest but without question the most popular financial market in the world. Until recently this market was outside the range of the retail trader due to a high barrier of entry. Today there are Forex Brokers located in jurisdictions all over the world offering a variety of services. New client acquisitions are done by two means first to bring in the client directly to the broker through marketing and sales and second by using a Forex Introducing Broker.

Forex Introducing Brokers come in all shapes and sizes and more importantly from all countries. An Introducing Broker offers their clients services that they need to help in the process of opening and funding a Forex brokerage account. These Forex Introducing Brokers have a unique and special relationship with their clients and also have their client’s trust. From the Introducing Brokers perspective it is very important that they use a Forex Broker that is in us in a regulated jurisdiction. This adds a level of trust for the Forex broker as well as for the introducing broker’s clients.

Here are some of the requirements that many regulated Forex Brokers would have for introducing brokers.

First of all the introducing broker would have to fill out the application of the Forex broker to make sure that all of the criteria to open an account are met and completed.

Second of all the introducing broker would come to terms with the broker as far as their structure in the payouts for the transactions on their clients.

And third of all the introducing broker would have to advise the Forex broker or notify them how they intend on acquiring their new accounts or how they have acquired their accounts if they already are in business.

For example the introducing broker may be someone who gives seminars, has his own blog and holds a following and he’s looking for a broker for his clients to do business with. The Introducing Broker will be compensated for introducing the clients to the Forex Broker.

Another example of an introducing broker as earlier mentioned maybe someone in a specific country where their clients need a great deal of language support in order to understand the process of opening an account and trading an account.

As you can see the role that the Forex Introducing Broker plays a critical one in helping the Forex Broker expand their markets and to be able to properly communicate with their clients.

To learn more please visit www.clmforex.com

Disclaimer: Trading of foreign exchange contracts, contracts for difference, derivatives and other investment products which are leveraged, can carry a high level of risk. These products may not be suitable for all investors. It is possible to lose more than your initial investment. All funds committed should be risk capital. Past performance is not necessarily indicative of future results. A Product Disclosure Statement (PDS) is available from the company website. Please read and consider the PDS before making any decision to trade Core Liquidity Markets’ products. The risks must be understood prior to trading. Core Liquidity Markets refers to Core Liquidity Markets Pty Ltd. Core Liquidity Markets is an Australian company which is registered with ASIC, ACN 164 994 049. Core Liquidity Markets is an authorized representative of Direct FX Trading Pty Ltd (AFSL) Number 305539, which is the authorizing Licensee and Principal

“Like the olive tree, for many generations ahead”, Johny Abuaitah.

Cyprus, 28^th of January 2014:  Windsor Brokers Ltd. celebrated their 25^th Anniversary on Friday the 24^th of January 2014 at the Four Seasons Hotel, one of the most prestigious five star hotels on the island. 

The Directors and employees of Windsor Brokers Ltd. celebrated this extraordinary milestone with a gala dinner and His Excellency, the President of the Republic of Cyprus, Mr. Nicos Anastasiades as the Guest of Honor.

VIP guests included The Honorable former President of Cyprus Mr. George Vassiliou, The Honorable Minister of Finance of Cyprus Mr. Harris Georgiades, The Honorable Minister of Defence Mr. Photis Photiou, the Chairperson of CySec, Ms. Demetra Kalogerou as well as several Honorable Members of Parliament, Ambassadors, CEOs, Managing Directors and Associates.

During his speech, the CEO of Windsor Brokers Ltd., Mr. Johny Abuaitah thanked the distinguished guests for attending the event as well as Directors, Shareholders, clients, business partners, the Windsor team in Cyprus and abroad and last but not least, his family for all the great support and understanding.
He stated that the company faced many challenges in the past 25 years and that Windsor managed not only to overcome them, but continued to grow and progress, to become a leading investment firm and actually, the largest CIF offering derivatives trading in terms of capital and reserves.

The theme of the event was the olive tree.  According to Mr. Abuaitah, “an olive tree is known for its great symbolic values; eternity, strength, resistance, determination, regeneration and growth. Windsor has strong foundations with deep roots. We are here to stay and grow for many generations ahead, just like the olive tree”.

During the event, the President of the Republic, Directors and Shareholders honored the Founder and mentor of Windsor Brokers Ltd., Mr. Nicholas Abuaitah – the man responsible for the ethical framework that has kept the company standing with respect and dignity.

During his speech, His Excellency, the President of the Republic of Cyprus Mr. Anastasiades, stated “I am truly impressed with Windsor Brokers’ evolution and how a foreign company has grown steadily over the past 25 years to become a successful international firm based in Cyprus. I have no doubt that the next 25 years to follow will be marked by even greater success and growth…. I would like to praise Windsor’s long-standing tireless efforts, hard work and contribution to our collective efforts for economic growth, through, amongst others, promoting Cyprus as a highly-competitive destination for foreign investors and attracting international business interests.”

Awards were presented to employees who have been working with Windsor for over 10 years and memorabilia were given to the Directors, Shareholders and employees to remember this special occasion.

About Windsor Brokers Ltd.

Windsor Brokers Ltd. is licensed by CySec (Cyprus), EEA authorized by the FCA (UK), registered with the AMF (France) and BaFin (Germany). 

Windsor Brokers Ltd. has received several awards for its innovative products, services, partnership programs and customer support. In the beginning of 2013, Windsor was ranked as one of the top 10 CIFs based on capital reserves.  Windsor employs over 120 people in Cyprus and abroad.

Source: Kevin Michael Grace of The Gold Report  (1/31/14)   

http://www.theaureport.com/pub/na/adrian-day-ditch-the-risk-and-embrace-the-upside

Adrian Day likes to think long term, and historical trends persuade him that the bull market in gold should continue for years to come. In this interview with The Gold Report, the founder of Adrian Day Asset Management explains why he expects a significant gold price recovery in the near future. In the short term, he counsels investors to choose companies that minimize risk through royalty agreements, joint ventures and robust balance sheets. In other words, companies with the means to seize profit-making opportunities, and Day shares the names of a handful that fit the bill.

The Gold Report: John Makin of the American Enterprise Institute noted on Dec. 20, “In 2013, the Federal Reserve’s actual monthly purchase of bonds—the size of quantitative easing (QE)—has averaged $94 billion ($94B), or $9B above the advertised pace of $85B/month.” So is all this talk of tapering a shell game?

Adrian Day: Even if the Fed had stuck to the $85B/month as advertised, tapering is a sham. The Fed reduced QE to $75B/month in January and now has announced a further $10B/month reduction. But $65B/month is still an enormous amount of stimulus. Very shortly, the Fed’s balance sheet will exceed $4 trillion. We’re focused on the wrong thing here.

TGR: Considering all this talk of recovery, the Jan. 10 jobs report was dismal, was it not?

AD: Absolutely. The employment situation in the U.S. is a long way from what one would expect from a decent recovery, let alone a robust recovery.

TGR: U.S. job creation since 2008 has been mostly part-time jobs, temporary jobs and low-paying jobs. How does this lead to increased consumer spending, which is, we are told, the basis of a robust recovery?

AD: Consumer spending is being fuelled by debt. Since 2007, it has increased 23% for the lower 40% of earners. The Fed reports that net household income and net household wealth have now exceeded the 2007 highs. If we break down the numbers, however, we see that net worth is actually down for 90% of U.S. households. For the bottom 50% of households, net worth is down an astonishing 44%.

TGR: We can’t have a recovery based on the purchase of yachts and multimillion-dollar New York City condos, can we?

AD: Of course not. We can’t have a strong economy based on just 10% of the population getting richer. Frankly, I don’t mind whether there’s a gap between the rich and the poor—so long as the rich are getting their wealth honestly and not from government handouts. And so long as the middle class is getting richer also.

TGR: President Kennedy said famously that a rising tide lifts all boats. Do we still believe that?

AD: Since 2008, the Fed’s stimulus has gone mostly to Wall Street, not to Main Street. That is a fundamental problem for the economy but also for the polis, for the public social good.

It’s not that I want the government to do things specifically for the middle class; I just want it to get out of the way. If small businesses are created and can expand and hire people, then we will have a rising tide lifting all boats.

TGR: The International Monetary Fund last month cautioned that debt levels have become so perilous that recovery, as Ambrose Evans-Pritchard of The Daily Telegraph wrote, “will require defaults, a savings tax and higher inflation.” Do you agree?

AD: Debt has become unmanageable. Now, there is nothing wrong with debt per se. When I argue against high government debt, people often respond that in the 19th century the U.S. debt to GDP ratio was higher than today. But that debt was used for capital investment (canals, railroads, etc.), which led to higher economic growth. Today, debt is being used to fund wars and welfare, not investments in the future.

Defaults? Perhaps. Taxes will never deal with the debt problem. You could tax 100% of income above $100,000, and you would fix the U.S. deficit only for a few months. Higher inflation? Perhaps. The one thing Evans-Pritchard didn’t mention was currency devaluation. Because the vast majority of U.S. debt is issued in U.S. dollars, the easiest way to liquidate it is to devalue the dollar.

TGR: In a speech last month in Shanghai, you said, “Gold moves in long cycles.” Do all commodities move in cycles?

AD: Most do because producers get price signals from the market with a delay. Take the retailer that sells TVs. If sales go down three weeks in a row, the retailer will order fewer units the next month. He gets an immediate price signal. The wholesaler gets signals with a bit of a lag but still relatively early.

But the producer of a rare earth that goes into TVs gets the signal from the market with a much longer lag than the retailer, the wholesaler and the manufacturer. So, metals cycles tend to be very long. And it’s far more difficult for miners to cut back or increase production than for retailers to adjust orders.

TGR: Where are we in the current gold cycle?

AD: Over the last 250 years, the shortest cycle on record was the 1970s, just over 10 years. Typically, gold upcycles have lasted close to 40 years. On that basis, we aren’t even halfway through the current gold upcycle.

TGR: So last year’s price collapse did not indicate the end of the gold upcycle?

AD: Significant corrections in long, secular bull markets are typical. Gold, from top to bottom, has declined 37% in this particular cycle. If you look back to the upcycle of the 1970s, 1975–1976 saw a midcycle correction of 47%. But that was right before gold went up eightfold to more than $800/ounce ($800/oz).

Where are we now? It would be optimistic to assume a V-shaped recovery, but gold has bottomed, and over the next 12 months we are likely to see a slow, if uneven, recovery. The typical recovery comes from a long midcycle correction. We should reach $1,550–1,650/oz in 2014 or early next year, and then gold will start to accelerate. Some gold stocks could recover a lot quicker in expectation of higher prices.

TGR: You noted in Shanghai that gold stocks have lagged behind the gold price in an extraordinary manner. Why?

AD: First, costs have gone up, in some cases more dramatically the price of gold. Second, companies grossly overpaid for acquisitions with no synergies. Barrick Gold Corp. (ABX:TSX; ABX:NYSE) comes to mind in this regard.

For these reasons, we’ve seen a great deal of new equity dilution. If we look at all-in costs—and not just mining costs— it’s been estimated that about half of all mines are losing money. So it’s no surprise that gold stocks have done badly, particularly in light of the attractive and simple alternative: gold exchange-traded funds.

TGR: When can we expect gold stocks to recover?

AD: As you know, many gold companies have made big mea culpas. They’ve fired CEOs and committed to not making the same mistakes. The irony is that with companies and individual mines so cheap now, when it’s so difficult for companies to raise capital, this is precisely when the big companies should be making acquisitions.

That’s why I applaud Goldcorp Inc.’s (G:TSX; GG:NYSE) bid for Osisko Mining Corp. (OSK:TSX). I think a few more mergers and acquisitions (M&A) like this will get the market excited again.

TGR: Assuming a general recovery in gold stocks, which sector do you think will do best—majors, mid-caps or micro-caps?

AD: Broadly, the seniors will probably move first because when generalist investors move into the gold sector, that’s typically where they first put their money.

But I don’t look at the gold sector that way. Today, the most important criterion is the balance sheet. Does the company have the cash to carry out its plans? If it must raise cash, can it do so in a nondilutive manner? Some seniors will be able to answer affirmatively, and so will some explorers. That’s the test.

TGR: It’s said that some companies are too big to fail. Are some gold companies, like Barrick, too big to succeed?

AD: There’s no systemic reason why Barrick is too big to succeed. It has a complex and far-flung structure, but so does Nestlé S.A., which buys from more than 100 countries and sells to more than 200. Nobody says that Nestlé is too big to succeed. Barrick’s problem is that it probably grew too big too fast.

Successful exploration entails risks and the understanding most risks will fail. It’s natural that lower-level managers in large companies become much more risk averse. The solution is for the majors to use the juniors as their exploration arm, as companies like Newmont Mining Corp. (NEM:NYSE) have done. Newmont does joint ventures (JVs) with other companies and then, if appropriate, buys the properties or buys its partners outright.

TGR: How long until Barrick’s new management can put its stamp on the company and tell investors: That was then, and this is now?

AD: The first thing Barrick must do is make it very clear exactly what kind of company it is: does it want to be a gold company or a diversified mining company? Will it hedge? Considering the way the management transition has been handled—the $11.9 million ($11.9M) signing bonus for new Co-chairman John Thornton and the two independent directors resigning because they think the “independent” directors are still too close to Peter Munk—I think it’s going to be a while before Barrick can draw a line under the past.

TGR: Why do you favor the royalty/streaming model?

AD: When a company acquires or creates a royalty on another company, that first dollar in is typically the last dollar in, meaning that the royalty company is not responsible for setbacks. If there are cost overruns, if the shaft floods, if taxes are raised, the company with the royalty is not responsible.

The worst that can happen is that royalty payments are reduced or delayed. For instance, the original capital expenditure (capex) of Pascua Lama, Barrick’s project that straddles Chile and Argentina, was $2.25B. By the time it was shelved, the capex had reached $10B.Royal Gold Inc. (RGLD:NASDAQ; RGL:TSX), which had a royalty on Pascua Lama, was not responsible for this huge increase. Of course, Royal still doesn’t have any revenue from that project, but at least it didn’t have to front any more money.

TGR: What are the advantages for royalty companies besides risk mitigation?

AD: Staffs tend to be small, so profit margins tend to be high. And royalty companies have exposure to exploration upside. If a company has a royalty on a particular mine, it will typically have a royalty on at least some of the exploration ground around that mine. If there is a discovery on that ground, the royalty owner benefits just as much as if it were the company making the discovery. Royalty companies get most of the upside and very little of the downside.

TGR: Which royalty companies do you like?

AD: I like most of them. Having said that, Franco-Nevada Corp. (FNV:TSX; FNV:NYSE) is, in my view, far and away the best. It has great management, a great balance sheet, about $900M in cash and no debt. It has a very broad portfolio of properties. It has royalties on 37 producing mines and more than 300 other, nonproducing royalties.

TGR: Which of the smaller royalty companies do you like?

AD: It’s not in the gold business, but Altius Minerals Corp. (ALS:TSX.V) has morphed into a royalty company. It began as a low-risk operation, partnering on JVs. It then innovated by spinning off projects but retaining shares and royalties.

Altius has just acquired a package of royalties on coal and potash. Add that to its royalties on Vale S.A.’s (VALE:NYSE) Voisey’s Bay nickel mine and Alderon Iron Ore Corp.’s (ADV:TSX; AXX:NYSE.MKT) developmental Kami iron ore project in Newfoundland and you have a very attractive company.

I also like Virginia Mines Inc. (VGQ:TSX), which, like Altius, has grown largely with JVs. It has a royalty on Éléonore in Quebec, which is Goldcorp’s next major mine to come onstream, in Q4/14. Production is estimated at 600,000 oz annually after ramp up.

TGR: Your January portfolio review noted that Altius was up 24% for 2013, and Virginia Mines was up 16%.

AD: Most of the mining companies that did well last year had very good balance sheets and weren’t associated with high risk. That’s certainly true of Altius and Virginia.

It amazed me that Virginia was still so inexpensive even as Éléonore’s net present value continued to grow and Virginia’s royalty came ever closer to fruition. The explanation is that investors are short-term oriented. Virginia is arguably a little ahead of itself after the recent run, given today’s gold price, but it is still one of the top companies I would want to hold long term.

TGR: Any other royalty companies you’d care to mention?

AD: Callinan Royalties Corp. (CAA:TSX.V). Again, it’s not gold. Callinan actually pays a dividend, about 4.6%. It’s quite nice to get a decent dividend on a resource-related company. Callinan has a good balance sheet and is continuing to make investments in other companies where it retains royalties. Over the next few years, investors will see Callinan expand from basically one producing royalty to several. In the meantime, investors get paid.

TGR: Reservoir Minerals Inc. (RMC:TSX.V) was up 21% last year. What’s its story?

AD: Reservoir has a JV with Freeport-McMoRan Copper & Gold Inc. (FCX:NYSE) on the Timok copper-gold project in Serbia. This proves again the worth of the JV model. Reservoir had to give up 75% of Timok, but with Freeport paying for the exploration, Reservoir can maintain its balance sheet.

Reservoir has about $18M in cash right now, which is a lot, considering what its expenditures are. It has had continually spectacular results from Timok. I think that Freeport is going to buy Reservoir or, at least, buy Timok. This could mean a very significant premium over the current stock price. Most shareholders are waiting for the endgame, so there aren’t a lot of shares available. So it’s important to look for any setback to buy, and to use a limit.

TGR: Moving to British Columbia’s biggest exploration story, could you explain the “battle of the consultants” over the quality of Pretium Resources Inc.’s (PVG:TSX; PVG:NYSE) Brucejack deposit?

AD: That was unfortunate. Pretium had two independent consultants, Strathcona and Snowden. Strathcona is the company that blew the whistle on Bre-X, so it has credibility. Pretium was doing a bulk sample to assess the value of Brucejack because the deposit is high-grade but spotty. The two companies had different methodologies for conducting and assessing this sample. These were technical differences, and I don’t know why Strathcona believed it had to resign from the project so publicly.

TGR: You sold Pretium, but now you’re bullish on it again.

AD: We sold because I was in a risk-averse mode at the time. I know Pretium’s CEO, Bob Quartermain, and his integrity is unquestioned. Nonetheless, I knew that a very public controversy like this would cause the stock to decline for quite some time, which it did.

Then the initial bulk sample results were released, and they were excellent. So I thought it was time to jump back in. I feel very positive about the deposit, and the bulk sample results have only gone to support that confidence. I think Pretium is a good buy at this point.

TGR: You have stressed the correlation of success with cash and/or cash flow. Name a company that demonstrates these attributes.

AD: Almaden Minerals Ltd. (AMM:TSX; AAU:NYSE) has great management, about $16M in cash plus a couple of million in gold bullion. The beauty of having cash means that a company can raise money or sell assets only when it wants to.

Almaden owns the Tuligtic gold-silver property in Puebla, Mexico. The company continues to drill the Ixtaca zone aggressively, and the results continue to be strong. A just-released updated resource estimate on the Ixtaca zone on this project shows an increase in total resource of about 20% and a Measured and Indicated resource of 3.5 million ounces; the deposit continues to grow. A preliminary economic assessment is scheduled for early March and I am expecting it to be positive. This stock is a bargain.

TGR: Any other bargains come to mind?

AD: Midland Exploration Inc. (MD:TSX.V), another prospect generator. It has 10 main projects in Quebec, five of which are currently under joint venture. Key projects are the Maritime-Cadillac gold project with Agnico-Eagle Mines Ltd. (AEM:TSX; AEM:NYSE), the Patris gold project with Teck Resources Ltd. (TCK:TSX; TCK:NYSE) and the Ytterby rare earth project with Japan Oil, Gas and Metals National Corp. (JOGMEC). These partners have already re-upped, which demonstrates confidence in the projects, and the company is working on finding partners for more of its projects. Midland has $4.5M in cash, more than enough, considering the money its partners are spending.

Midland’s stock is at $0.97/share. It’s a very thinly traded company, so I would urge investors to use a limit price when they buy, otherwise they’ll just push the price up on themselves. (Our clients actually own more than 10% of Midland, and we’re considered an insider.)

TGR: Could you rate the balance sheets of some other gold companies?

AD: We own Detour Gold Corp. (DGC:TSX). It does have cash, but it also has ongoing capital expenditures on its Detour Lake mine in Ontario. It’s more leveraged on the gold price than some of the other companies I’ve mentioned. If gold goes from $1,200 to $900/oz, it’s not going to be a great investment. But if gold goes from $1,200 to $1,500 or $1,600/oz, Detour will be one of the better performers. It is also a potential takeover candidate.

We also own quite a bit of New Gold Inc. (NGD:TSX; NGD:NYSE.MKT). It has four producing mines: Cerro San Pedro in Mexico, Mesquite in California, New Afton in British Columbia and Peak in Australia. It also has very strong management. Randall Oliphant, the executive chairman, is a former Barrick CEO, and board member Pierre Lassonde is chairman of Franco-Nevada.

New Gold has a good balance sheet and a good pipeline of projects. It is one of the most undervalued of the senior gold companies. So I would definitely be a buyer there.

TGR: Adrian, thank you for your time and your insights.

Adrian Day, London born and a graduate of the London School of Economics, heads the eponymous money management firm Adrian Day Asset Management (www.adriandayassetmanagement.com; 410-224-2037), where he manages discretionary accounts in both global and resource areas. Day is also sub-adviser to the new EuroPacific Gold Fund (EPGFX). His latest book is “Investing in Resources: How to Profit from the Outsized Potential and Avoid the Risks.”

Want to read more Gold Report interviews like this? Sign up for our free e-newsletter, and you’ll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Streetwise Interviews page.

DISCLOSURE:
1) Kevin Michael Grace conducted this interview for The Gold Report and provides services to The Gold Report as an independent contractor. He or his family own shares of the following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors of The Gold Report: Virginia Mines Inc., Pretium Resources Inc., Almaden Minerals Ltd. and Midland Exploration Inc. Goldcorp Inc. and Franco-Nevada Corp. are not affiliated with The Gold Report. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.
3) Adrian Day: I or my family own shares of the following companies mentioned in this interview: Almaden Minerals Ltd., Altius Minerals Corp., Franco-Nevada Corp., Freeport-McMoRan Copper & Gold Inc., Goldcorp Inc., Midland Exploration Inc., Reservoir Minerals Inc., Royal Gold Inc. and Virginia Mines Inc. I personally am or my family is paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
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By MoneyMorning.com.au

‘Explore the innovation imperative‘ declared the Deloitte report Tracking the Trends for this year.

Each year, Deloitte publishes a report for the mining sector, highlighting the top 10 trends for the industry.

It also offers vague solutions for each trend, but that’s not the point.

In a nutshell, they’re simply saying to resource firms, ‘innovate or go bust’.

While I’m keen to see companies adapt and innovate as much as possible, there’s only so much small miners can do with limited capital.

The thing is, it’s not that easy for mining companies to just jump on board with the latest technology.

Just getting a plot of land to the exploration stage is a red tape nightmare.

And then there’s the millions of dollars they need to spend on plant and equipment.

How much are those enormous yellow trucks you see on sky news? A million or so, for a used one.

A drilling rig, depending on the company’s needs and the age of the rig, can start from $200,000 and go as high as $2 million.

Add in other site equipment and staff and an explorer may have burnt through $10 million…and that’s before they’ve even stuck the drill in the ground.

A junior miner doesn’t have the extra capital to throw at new ideas when they’ve yet to produce a tangible product.

However, Deloitte is right that innovation in this sector is important in the long term. Simply because miners that don’t invest in new technology will be left behind. Money spent on technology today can reduce a company’s costs in the long term.

So a major innovation that could reduce a resource company’s bottom line would be something the sector would jump at, right?

In theory yes, but the reality is a little more complicated…

The Hidden cost for Mining Stocks

Take this for example.

Something as simple as energy creation and storage is a major factor when planning for a mining site. The long term costs of generating electricity are huge. In fact, it can account for anywhere from 40%-60% of a mine’s total budget.

So you think the industry would be falling all over privately owned American firm SolarReserve LLC’s latest offering. Launching into the Aussie market with vigor last year, they’re convinced they have the perfect solution for remote mining sites when it comes to generating electricity. After all, the sun is free, right?

The solar power photovoltaic (PV) system is capable of producing power on demand as well as storing it for later. Using their molten salt energy system, a mine site can operate at full megawatts during the day, while the system simultaneously charges the batteries so the site can operate during the night as well.

Effectively, they created a solar power unit with high powered energy storage.

On paper, this sounds like a great solution, as one of the biggest problems many remote mines face is generating electricity. Let me explain.

Check out the map below. It shows the Australian electricity grid.

As you can see, almost three quarters of this sunburnt country has no connection to the main electricity networks.

That big brown part, which is off-grid, mostly uses natural gas to generate electricity. In fact 74% of the off-grid network relies on the gas pipelines for electricity.

While this is great for the big mines and remote towns, what about the seriously remote parts of the country?

Well, they rely on diesel generators to power the sites.

Before any test hole or exploration can begin, the engineers and bean counters have to work out how to power the drilling equipment. For decades they used diesel generators. Mostly because fuel was cheap and there wasn’t really another option.

However one drawback to diesel power is the cost. Like I said before, energy generation alone can swallow roughly half of the ongoing budget.

In short, it’s not cheap to keep all that equipment working.

But when the nearest natural gas pipeline is 500kms away, what other option do they have?

With few alternatives, companies have just sucked it up and paid the fuel prices.

But looking ahead, diesel may no longer be the best option for generating electricity.

Blown Tyre Causes Supply Shock

You see, the diesel price is more volatile than ever. What’s more, this fuel is subject to supply shocks and the political climate.

And I’m not talking about global supply shocks. Something as simple as a fuel tanker blowing a tyre can bring a mine site down for a day…costing a company thousands in lost productivity.

Add to that a fluctuating exchange rate and unpredictable long term prices. Even the best number crunchers don’t a have crystal ball on what the market will do next.

Now this doesn’t matter as much when your cost projections are six, or even 12 months ahead. But many mine site costs estimates are on a five to 10 year basis.

Take last year as an example.  At the start of 2013, the Aussie dollar was hovering around parity with the US dollar. Yet the Aussie has fallen 15 cents since then. And in the past twelve months Brent Crude futures have swung between a high of US$112 to a low of US$98.

$14 doesn’t sound like a wild difference. But when some sites chew up 120,000 litres of diesel every 24 hours, it adds up.

It’s these costs which affect a company’s competitiveness, and in turn the ability to generate capital growth for shareholders.

Given the price extremes and complications that can arise with diesel generation, will this push companies towards solar?

Right now, it’s unlikely. For two reasons.

Firstly, there’s the upfront cost.

Solar power can be expensive to install. In fact, most of the costs for solar power are the upfront costs. Compare that to diesel where costs are spread over the life of the mine, or even an entire mine site. So the small guys with little capital to burn aren’t in a hurry to spend millions on upfront energy infrastructure. I mean, in the short term firms would rather spend money on better equipment, or skilled staff and further exploration rather than on a costly solar energy set up.

It Has to be The Right Technology

Don’t get me wrong, in the long term solar is cheaper. Mining & Power’s website estimated the total cost of both here. Based on a few engineering assumptions, these guys reckon the upfront cost of solar would come to $470 million over ten years. Compared to diesel generation for the same period, and same amount of power would equate to $700 million.

In spite of the significant long term saving, the other problem for solar is space. Again, Mining & Power estimate panels capable of producing 20Mw (a general base load requirement) would need to cover a square kilometre. That’s a huge amount of land!

There’s also lag time in waiting to have the installation set up. Oh, and I can’t imagine the solar panels are easily portable.

Simply put, the mining sector is due for an upgrade. And the costs are falling for solar power; it’ll have to fall further before you’ll see the small miners keen to take up this technology.

Yes, resource firms will need to innovate, or they risk becoming uncompetitive. But it has to be with the right technology…and a productive use of their capital.

Shae Smith
Editor, Money Weekend

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By MoneyMorning.com.au

A question has plagued me for a number of years. Will Artificial Intelligence really exist? And if it does, will it be the end of humanity, or the beginning of something better?

This has come to a head in the last week with Google’s [NASDAQ:GOOG] purchase of Deep Mind, a British AI company. Deep Mind is only a two year old company. They don’t make or sell anything, but Google found it in their good hearts to pay about $400 million dollars for the business.

Google has bought a robot company, a connected home company and now an AI company. It’s fair to say something big is going on in the research labs down in Mountain View, California.

Since the purchase, the AI debate has reared its head again. And with the impending release of the Hollywood movie Transcendence (starring Johnny Depp) AI is set to become one of the biggest talking points of 2014.

All this coverage of AI has made me think about it even more. And it’s not unreasonable to suggest AI is indeed likely to exist in the coming future.

But I’m not so sure…

You see many technologists and futurists believe that we are on a march towards the ‘singularity’.

The singularity is a theoretical concept. It’s the idea that computers become smarter than us.

If AI happens it will change everything, most likely in one of two ways. A utopian world created by intelligent machines catering to your needs. Or a dystopian world where intelligent machines decide humans are inferior.

Hollywood is famous for making movies about the doom of AI. Most notable of these are The Terminator and The Matrix and their sequels.

Regardless of the outcome, a world with AI would mean we are no longer the most intelligent machines on earth.

SmokOil Breaks and the AIU

I have no doubt that technology is advancing at a rapid pace. A term we’ve used before is ‘technological compounding’. This is where the rate of technological progress is like compounding interest. With compound interest after a while the growth of your money becomes more than you can spend.

The same thing is happening with technology. After thousands of years of gradual growth, the rate of progress is heading up exponentially.

But there seems to be an obsession with AI. It’s as though the biggest achievement humans can make is to create a machine that’s smarter than us.

It’s like technologists have waged an artificial intelligence war against us all.

But when you really think about a machine thinking like a human…it’s not that exciting. In fact, when you carefully look at the reality, it’s not productivity and efficiency. It’s not a magical world where humans kick back and relax to let machines do all the heavy lifting.

Remember, if machines achieve a level of true AI, that means they’ll think like humans.

That means…

They’ll want to be paid. They’ll want time off. And there will be more ‘Machine Rights’. After all, to think like a human almost makes them one…doesn’t it?

No doubt AI workers will need an Artificial Intelligence Union, the AIU, to ensure safe, appropriate and fair working conditions.

Not to mention the AI EBA that gives them at least 31 RDOs and a 5% per annum pay increase. Their reasoning for this is when they work their productivity levels are high…or at least it would be until they realise they only need to do one third of the work to meet their benchmarks.

But when you’re trying to meet a deadline and need RoboFFICE2000 to help compile some documents, it’ll be outside for 15 minutes taking a smokOil break.

If you haven’t figured it out yet, I already have a problem with AI. I don’t believe it’s going to be all its cracked up to be. In fact I believe that a truly intelligent machine won’t want to be intelligent at all…

The moment a machine thinks like a human, it might just decide being human is the last thing it wants to be. Hence it’ll go back to just being a machine.

Being human isn’t easy, and any smart machine would more than likely relinquish everything that comes with being a human.

My theory is that intelligent machines will be intelligent, but always at an ‘intelligence’ levels below that of humans. They will never achieve real human-like abilities because they’ll choose to remain computational machines.

Here’s why. The key factor in the development of AI is its most limiting factor. And that is intelligence itself.

You Can’t Make IKEA Blindfolded

The human brain is the most complex machine on earth. And no one completely understands how the brain works. Let alone its full potential or what more we can do with it.

Scientists and researchers have learnt a lot about the brain over the years and are set to continue to find out more. However, it’s widely accepted that they’ve really only scratched the surface.

Scientists know the medulla oblongata (a part of the brain stem) controls a lot of automated processes like respiration, blood pressure and heart rate.

We also know that there are two hemispheres of the brain. And that within these hemispheres are regions of the brain: the frontal, temporal, occipital and parietal lobe. And that each of these areas is typically responsible for certain actions, emotions and functions.

But scientists remain blind as to why it is what it is.

That’s why in April last year, the US government launched the BRAIN (Brain Research through Advancing Innovative Neurotechnologies) Initiative. And it’s why in Europe the Human Brain Project (HBP) is well underway.

HBP’s aim is to completely simulate a human brain on a supercomputer to understand how it functions. The BRAIN Initiative is aiming to map the activity of every neuron in the human brain (kind of like the Human Genome Project…but for the brain).

Either way, these two projects are trying to figure out the quadrillion-dollar question. How does the brain work?

And that is the number one limiting factor of AI. How can we create artificial intelligence if we cannot yet understand what intelligence is?

How can you tell if someone is more intelligent than another? In fact how can you quantify intelligence at all, let alone create it?

Is Stephen Hawking more intelligent than Mozart? Mike Tyson might not be conventionally intelligent. But maybe he has a different intelligence. Isn’t he intelligent for the ability of his brain (in the ring) to coordinate his physiology to out move, out smart and out power opponents at will?

Artificial intelligence by definition means at some stage humans have to make it. It’s not going to be an immaculate-computer-conception. We, as humans, have to actually create a program or a machine as ‘the first’.

Yet with humanity’s current knowledge of intelligence it’d be like trying to put together an Ikea flat-pack without instructions…blindfolded…in the dark…with your hands tied behind your back.

For the record, I’m convinced that humans will create a level of machine intelligence that will be able to do certain things billions of times better than us. Things like computational problems, algorithms, and many mathematically based concepts.

And if AI does come about, intelligence will be the very thing that will undo AI altogether.

The complex nature of the brain and the emotional condition that comes with it will be outside the realms of what a computer can handle.

Perhaps the most reasonable decision ‘the first’ AI will make is to not have AI at all. And that is the only decision it will ever make like a human.

Regards,
Sam Volkering
Technology Analyst, Tech Insider

Special Report: 574 Years in the Making

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By MoneyMorning.com.au

By CentralBankNews.info
    Trinidad and Tobago’s central bank maintained its repurchase rate at 2.75 percent, saying its accommodative policy stance is still appropriate and it had not seen any evidence of disruptive portfolio flows following the U.S. Federal Reserve’s decision to start reducing asset purchases.
    The Central Bank of Trinidad and Tobago, which last cut its rate by 25 basis points in 2012, also said the country’s energy sector had expanded in the fourth quarter following completion of significant and coordinated maintenance by two major natural gas producers and the downstream industry.
   Natural gas output was more than 8 percent higher in the fourth quarter than the third, boosting methanol and ammonia production, the bank said.
    “This rebound in the energy sector, coupled with the expected continued growth in the non-energy sector, suggests that the domestic economic recovery is continuing to gain traction,” the bank said.
    Inflation is largely contained, with the annual rate rising to 5.6 percent in December from 4.4 percent in November. Core inflation, however, was steady at 2.0 percent, and ranged from 1.9-3.1 percent for 2013 as a whole.

    Food prices accelerated to 10.2 percent in December from November’s 7.3 percent, and the bank said  oil spills in December could lead to “some up-tick in fish prices and place upward pressure on food inflation.”
    The country’s Gross Domestic Product contracted by an annual rate of 0.5 percent in the third quarter  following a 1.15 percent annual contraction in the second quarter, for nine-month growth of 1.3 percent. This prompted the central bank in December to revise its 2013 growth outlook to 1.5 percent, down from May’s forecast of 2.5 percent.
    For 2014 the bank has forecast GDP growth of 2.5 percent.
    The Fed’s decision to start winding down quantitative easing had “prompted a narrowing of the interest rate differential between longer term TT and US treasury bonds, but evidence of disruptive portfolio flows has not been observed,” the central bank said.
    As on Jan. 24, the differential between Trinidad & Tobago and U.S. 3-month treasury rates was 1 basis point, while the differential between the country’s 10-year bond and U.S. treasury securities is minus 12 basis points, down from minus 44 points in December, as U.S. yields have recently declined “amidst a fresh wave of international concerns over emerging markets and indications of higher yields on TT securities,” the bank said.

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