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FOMC to keep rates low, Perpetual Debt for Perpetual Prosperity, Gold and Silver Update

Gold and Silver Stock Updates:



The FOMC met this week and informed the markets to lower their growth expectations and be more liberal with the much anticipated rate hike from the historic 0-0.25% target. The Fed was able to buy more time and appease shaky bond markets but sacrificed the dollar’s strength some.


The news is supporting gold and silver prices, which are near recent lows and well supported. The short-term picture is now tilted back in gold and silver's favor supported by the weakened US Dollar along with the recent COT report tiling to a “wildly bullish” stance.


US economic data in the coming months will strongly dictate what the markets believe the Fed will and can do next. What the Fed can do is raise rates insignificantly but rates will never return historical norms – as long as the Fed remains in control.


What would happen if rates moved higher? The power of compounding interest rates would finalize the debt-leveraged bubble a lot sooner!


The U.S. national debt alone well over $18 trillion dollars, each 1% increase in financing costs would be $180 Billion in additional interest owed. If rates went back to year 2001 levels of around 6+%, interest on national debt payments would balloon to well over $1.1+ trillion/year!



Currently the Fed has manipulated the average interest-bearing rate on Treasury debt to historic lows of 2.36%. This artifically low rate has resulted in a reduction of hundreds of billions in interest fees.


Perhaps at the next crisis junction the Fed can finance the next $18 trillion at zero percent? Why not? Anything seems possible in a system functioning around the belief of perpetual debt = perpetual prosperity.


There is no way that the global debt loaded system can accommodate a significant rate increase without triggering a DEBT-flationary implosion. The alternative is to try and keep rates at historic lows for many more years. At best this buys more time. At worst it incentivizes more debt, more credit and a bigger credit bubble that eventually will be repaid at much higher costs.


Bill Bonner wrote that he met with a top central banker who also agrees the final outcome is inevitable. But it will be 20-30 years before the day of reckoning arrives. I would be surprised if we get anywhere near that very optimistic target. Central bankers must be feeling mighty confident at the moment. There are many financial bubbles they can be proud of pumping.


Greece took the spotlight last month as negotiations continue to falter and growing concerns of an exit out of the Eurozone destabilizing credit markets. Spreads between lower-risk German and higher-risk Italian or Spanish debt has risen sharply as a quick drop in bond prices were amplified in higher risk Euro areas. Fear is slowly returning after a long break.


Greece has learned what debt can create. An unsustainable debt servitude and control which means the loss of valuable assets that are forced to be sold-off during distressed times. Meaning national assets sold at fire sale prices which makes Greece even less wealthy and capable of repaying future debt. It is a pit of debt a sovereign-less nation will be stuck in for generations.


Ukranians should pay attention and learn what is coming their way. as they plunge deeper into IMF-debt. Greece will be debt servants for many decades, a nation under the control of their lenders. If only Greece could print Euros. If only Greece had its own money and its debt priced in its currency, it could print its debt away!


A small country like Greece would not end well printing this amount of debt away but it would end its misery much sooner. Pay a harsh price in the short-term but survive for the long-term. Greece would be nothing different than other nations who print more units of currency to guarantee their debt payments.


Greenspan said it himself, the US will never default. “US can pay any debt it has.” “We can always print money.”


Until the next inevitable debt-money crisis hits, gold and silver remain at excellent price levels to accumulate. Buy when everyone else is distracted by bread and circuses! The easy-money, easy-credit game is unsustainable.


When Wall Street comes screaming back into gold and silver, scarcity of physical precious metals from these masses seeking safety will result in prices exploding. Many gold and silver stocks will leverage those returns. Even better is that the gold-silver stock sector is full of investor discouragement. You can accumulate their discouragement on the cheap. Contrarian investing at its most exciting!


FORTUNA SILVER MINES earned $3.9 million, or $0.03 a share in the first quarter of 2015 on sales of $39.8 million. The company produced earnings despite the low silver price, which was down 18% compared to the same quarter in 2014. Earnings were, down compared to a year ago, when the company made $4.9 million in the first quarter of 2014.


Silver and gold production were up from a the same time last year, with silver up 6% to 1.6 million oz., and gold up 19% to 9,739 oz. The increased production came thanks largely to the successful commissioning of the San Jose mill expansion from 1,800 to 2,000 tpd. The company continues to work towards expanding the mill to 3,000 tpd by mid-2016.


Cash costs were down 10% year over year to $59.79 per tonne thanks to higher throughput, a drop in the peso, and lower energy rates. Forunta continues to outperform the sector and its share price has performed very well relative to other miners.



SILVERCREST MINES made $2.5 million in the first quarter of 2015, roughly in line with earnings in the first quarter of 2014. The company accomplished this despite a 28% increases in cash operating costs and the drop in precious metal prices thanks to a jump in silver equivalent oz. sold from 709,000 oz. to 1.2 million oz.


The company continues to work to ramp up underground production at its flagship Santa Elena mine, looking to achieve production of 1,500 tpd by the end of the year and an average rate of 1,320 tpd for fiscal 2015. At the end of Q1 the company had $35.2 million in cash, working capital of $45.5 million, and an undrawn credit facility of $15 million.



GOLDSOURCE MINES reports that construction at its Eagle Mountain Gold project in Guyana is progressing on schedule and on budget. The company expects to commission phase I of the mine by the fourth quarter of the year. Engineering work is already complete, while processing equipment including two Falcon concentrators are on route to the property.


Rehabilitation of necessary roads is 75% complete, mine equipment procurement is 50%, while personnel recruitment, camp rehabilitation, and site preparation are still in the early stages.



TIMMINS GOLD had a challenging first quarter as gold production and sales dropped to roughly 24,000 oz. from roughly 36,000 oz. last year in the same quarter. The drop came from largely from decreased grades that were only somewhat offset by increased throughput. The results led to a $700,000 loss for the quarter, compared with an $8.1 million profit last year.


The company says it is still targeting the lower end of its original guidance, with 55% of production slated for the second half of the year. The company had $25 million at the end of the quarter, which it says is enough for planned advancements of its new projects.


Timmins Gold completed the acquisition of Newstrike Capital in May and now controls the Ana Paula project in Mexico.



SEABRIDGE GOLD outlined its 2015 drill program at its KSM project in British Columbia, where the company will be looking for a third core zone at the project. The company has been looking to test under the Mitchell deposit for four years but technical problems halted testing in the past. The company says it now has a more reliable solution that should allow for testing of the target.


The company will fund the 2015 exploration program with the proceeds of its CDN$16.4 million raise last month. The company will be spending much less on KSM this year now that the project has received its provincial and federal environmental approval.



INCA ONE GOLD continued to shore up its finances with the closure of the second tranche of a convertible loan for proceeds of $500,000 in late May and the final tranche of $400,000 on June 1. The loans bear a 15% annual interest rate and up to 40% of the loan could be converted into common shares of Inca One at a $0.25 conversion price.


Inca One hired Rafael Rossi as its director of finance and administration in Peru to oversee finances in the country. Rossi has significant Peruvian mining experience, including 16 years working in accounting at Barrick Gold’s Pierina and Lagunas Norte operations.


Inca One has also listed its shares on the Santiago Stock Exchange Venture, giving the company access to the Latin American Integrated Markets of Chile, Colombia, Mexico, and Peru.



GOLD RESOURCE CORP. pulled in $5.1 million, or $0.09 in the first quarter on $28.4 million in sales. The revenue came from 19,347 oz. of AuEq mill production and 18,800 AuEq oz. sold. Cash costs per oz., net of significant byproduct credits, came in at $416 per oz. AuEq.


The company paid $1.6 million to shareholders in dividends, or $0.03 per share in the quarter. At the end of the quarter the company had $21.4 million in cash and equivalents.


Gold Resource also appointed John Labate as interim chief financial officer after Joe Rodriguez resigned from the company.


The company also sustained an illegal mine protest involving roughly 90 union members at the end of May that temporarily disrupted operations.



NEW JERSEY MINING COMPANY announced that construction at the Golden Chest Mine in Idaho was effectively complete. NJMC will be processing ore from the Golden Chest mine at its New Jersey Mill, generating cash through milling fees and a 2% NSR royalty on gold production.


In April roughly 6,000 tonnes of material from Golden Chest was delivered to the mill, while the company expectes about 7,500 tonnes per month at capacity production.


Company CEO R. Patrick Highsmith resigned in May, with company Chairman Del Steiner stepping back into the role. Steiner takes the lead role in the company as it transitions into an operating company focused on cash flow.


For those interested in weekly updates, please visit our newsletter services for a more fundamental and technical review on the global gold markets.

I also did an interview a few weeks ago at the gold-silver investment conference in Vanoucver:

"The US Dollar will no longer be the world's reserve currency".

Look forward to my next monthly update in July which you can find on or delivered directly into your inbox,

Peter Spina

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