Despite weak economic data, new record highs continue to be set on Wall Street as the stock market bull is fueled by record stock buybacks now amounting to $337 Billion, 34% increase over last year. It has been years since there has been a true market correction and such resilience builds confidence into investors’ mindsets creating a surreal complacency.
It will likely be many months before investors get a harsh reality check. A glance at the Wall Street Journal on Oct. 28 1929 gives us a good reminder. The day before the market crash, "Sound conditions” were being reported. Very few were and are willing to consider the alternative, especially at bubble peaks.
In such a complacent environment, the main street investor does not consider gold. This is despite the monetary and financial insurance policy is increasingly less expensive relative to rising stock valuations. Yet there is no reason to assume the typical North American investor will be turning to gold anytime soon with many other parts of the world that continue to buy gold with or near record pace.
DJIA to gold ratio – back to 2005 levels.
It is a mathematical certainty that gold, what I believe to be "King Money" will reign again. The McKinsey Institute issued a report showing global debt is just $1 trillion shy of $200 TRILLION (as of February so debt levels currently exceeds $200 trillion). That translates into $27,204 of debt servitude per human on this planet.
Even more disturbing is the pace of debt growth. $57 trillion of this debt has been added in the prior 8 years! It is not just the United States heavily in debt. China’s debt has skyrocketed to $28 trillion since 2007, or 282% of GDP. China is no Greece economy-wise, but GDP to debt wise, they exceed Greece’s levels as do other major economies, like the US.
The credit-debt fueled bubbles will pop. It will either be an economic collapse or a currency collapse… or both. Debt will be resolved by default or by ongoing market manipulation by the global money printers. Those who trust in a beautiful outcome from all this debt live in a world of denial. When that denial falls away, fear and a flood to safety will return into gold and silver.
Technically speaking, the last month has been favorable for gold and silver prices. Specifically the silver price broke a 4+ year downtrend under $17 an ounce. The price spiked a $1 after this event, but has since returned back to this support area. Silver could be making a significant turn here so will be watching closely over the coming weeks to see if the price rallies back above $20.
Technical silver price alert – upside breakout underway?
FORTUNA SILVER MINES produced 1.6 million oz. silver and 9,739 oz. gold in the first quarter of 2015, keeping the company on track to reach 6.5 million oz. silver and 35,300 oz. gold production, or 8.6 million AgEq oz., in 2015.
The company increased production of all metals thanks to increased throughput at its San Jose mine in Mexico, while production dropped slightly at its Caylloma mine in Peru. Cash costs were US$59.8/t at San Jose and US$84.0/t at Caylloma, both below annual guidance numbers of US$62.7 and US$90.3 respectively.
Fortuna’s quarterly number further strengthens the company’s financial position. This is on top of an expanded credit facility giving the company access to over $130 million in liquidity. Such strong financial positioning continues to make Fortuna a market outperformer.
SEABRIDGE GOLD closed a C$16.4 million bought deal flow-through equity financing, issuing 1.6 million shares at $10.17 for a 27% premium over the price of the stock the day the deal was announced.
The company plans to use the money for exploration programs at its KSM project in northwestern British Columbia. Exploration at the project is focused on discovering and expanding higher grade core zones.
This past week Seabridge announced their 2015 exploration plans at KSM. With the summer drilling program starting soon, the company looks to conclude a three year effort which has yielded significant higher grade results. Rudi Fronk, Chairman and CEO, noted that “We believe we have left the best to last. The potential under Mitchell has been our top exploration target for more than four years.”
With the company fully funded through 2015, anticipation grows with June’s program at the Mitchell deposit. It contains the largest porphyry on the project, already containing 1.4B tonnes of gold-copper. The Deep Kerr work program will focus on expanding the block cave shapes and its potential for significant economic benefit to the project. At Iron Cap, plans are to seek the limits of the Lower Zone deposit.
SILVERCREST MINES reached record production in the first quarter at its Santa Elena mine in Sonora, Mexico. Silver production increased 131% over first quarter 2014 to 465,391 oz. silver, and gold production increased 76% to 13,255 oz. gold. Overall silver equivalent production increased 92% over Q1 2014, and 35% over Q4 2014 numbers.
Company CEO Eric Fier stated that the company has achieved dramatic improvements in underground stope mining, with operations substantially de-risked. The company did have challenges with silver recoveries, which averaged 60%, but Fier stated that he anticipates achieving the 2015 target of 70% recoveries. Gold recoveries were 91%.
SilverCrest continues to taper production in the open pit at Santa Elena, with a complete transition to underground mining anticipated in the second quarter.
Last week the company announced their financial results and reinforced their strong production numbers. Cash flow from operations for the quarter rose by 10% to $7.3 million. Net earnings came in at $2.5 million or two cents a share.
The most notable result from the quarter was cash operating cost of $8.49 silver/ounce equivalent, $11.25 all-in sustaining. The stock price responded well on the news.
INCA ONE GOLD recovered 1,665 oz. gold and 1,119 oz. silver between February 25 and April 8 at its Chala One processing plant in Peru. In the period the company processed 2,303 tonnes of material, brining total throughput to 4,196 tonnes and gold produced to since early December. The company has averaged roughly 50 tonnes per day since February 1 and continues to ramp up to 100 tpd.
The company also closed the first tranche of its previously announced convertible loan, for proceeds of US$600,000. The loan has a 15% annual interest rate and the company is expecting to draw down US$900,000 more over the next two months.
GOLD RESOURCE CORP. announced it had discovered new high grade polymetallic veins at its Arista operation in Oaxaca, Mexico. Drill results on the newly discovered Viridiana vein, which sits roughly 50 meters from the currently production Vein 3, included a 7-meter intercept in hole 511733 that carried 9.29 g/t gold, 957 g/t silver, 1.70% copper, 4.15% lead, and 5.6% zinc. The vein remains open on strike and at depth. Drilling on Vein 1 included hole 515006 that hit a 7.2-meter intercept grading 2.02 g/t gold, 182 g/t silver, 0.21% copper, 3.02% lead, and 7.42% zinc.
Gold Resource produced 19,300 AuEq oz. in the first quarter, compared with 23,700 AuEq oz. in the same quarter last year. The 2015 production is, however, in line with the company’s 2015 outlook of 80,000 to 90,000 AuEq oz. of production.
The company also maintained its monthly dividend of a penny, and announced that two class action lawsuits against the company are closed in favor of Gold Resource.
TIMMINS GOLD’s takeover of NEWSTRIKE CAPITAL took a big step closer after shareholders of both companies approved the deal at their respective shareholder meetings. The takeover, which gives Timmins control of the Ana Paula gold project in Guerrero, Mexico, is expected to close in May.
On the production side, lower grades meant lower production at Timmins Gold’s San Francisco heap leach mine in Mexico. The average grade dropped 30% compared with the same quarter in 2014 to 0.53 g/t Au, which translated to a 32% drop in gold production and 43% drop in silver. Actual production was 35,413 oz. gold and 26,648 oz. silver. Company president Arturo Bonillas said grades are projected to trend upwards through the year.
Peter Spina
President, GoldSeek.com & SilverSeek.com
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