Peter Brimelow: Radical gold bugs vindicated? Theory is getting mainstream media attention

Section:

By Peter Brimelow
MarketWatch.com
Monday, July 16, 2012

http://www.marketwatch.com/story/radical-gold-bugs-vindicated-2012-07-16

Gold rebounds -- and the radical bugs are on a roll.

First, a proprietary purr. Let the record show that MarketWatch's Mark Hulbert wrote before Friday's bounce: "Someday, gold will wake up from its dreary, listless state and take off. And if contrarian analysis is right, that day will come sooner rather than later":

http://www.marketwatch.com/story/intelligent-bet-remains-on-gold-2012-07...

Hulbert reported that the average reading over the last four months of the Hulbert Gold Newsletter Sentiment Index (HGNSI), which reflects the average recommended gold market exposure of a subset of short-term gold timers tracked by the Hulbert Financial Digest, was minus 3.3%.

He noted: "You have to go back as far as 1991 to find another four-month period in which the average HGNSI reading was this negative. Gold at that time was trading around $360 per ounce -- or around $1,200 an ounce lower than where it stands today."

... Dispatch continues below ...



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Sona Discovers Potential High-Grade Gold Mineralization
at Blackdome in British Columbia -- 13.6g over 1.5 Meters

From a Company Press Release
November 22, 2011

VANCOUVER, British Columbia -- With its latest surface diamond drilling program at its 100-percent-owned, formerly producing Blackdome gold mine in southern British Columbia, Sona Resources Corp. has discovered a potentially high-grade gold-mineralized area, with one hole intersecting 13.6 grams of gold in 1.5 meters of core drilling.

"We intersected a promising new mineralized zone, and we feel optimistic about the assay results," says Sona's president and CEO, John P. Thompson. "We have undertaken an aggressive exploration program that has tested a number of target zones. Our discovery of this new gold-bearing structure is significant, and it represents a positive development for the company."

Sona aims to bring its permitted Blackdome mill back into production over the next year and a half, at a rate of 200 tonnes per day, with feed from the formerly producing Blackdome mine and the nearby Elizabeth gold deposit property. A positive preliminary economic assessment by Micon International Ltd., based on a gold price of $950 per ounce over eight years, has estimated a cash cost of $208 per tonne milled, or $686 per gold ounce recovered.

For the company's complete press release, please visit:

http://www.sonaresources.com/_resources/news/SONA_NR18_2011-opt.pdf



Gold for August delivery obliged by jumping $26.70 or 1.71% on Friday to $1,592 basis. That meant gold actually made a gain on the week. (But the HGNSI remained 2.3% negative as of Friday night.)

When Hulbert wrote on Thursday night, things were looking pretty dismal. At its low of $1,554.40, the August gold contract looked headed to a new low for the year.

Gold shares were doing even worse. On Thursday, a chart on Trader Dan's Market Views --

http://www.traderdannorcini.blogspot.com/

-- demonstrated that the ratio between gold and the NYSE Arca Gold BUGS Index was almost back to its May low, which in turn was the lowest since the lows seen in the late 2008 global financial meltdown.

Junior mining shares were atrocious. In a comment emailed out on Sunday afternoon, the Got Gold Report --

http://www.gotgoldreport.com/

-- grimly noted: "As of July 13 the S&P/TSX Venture Composite Index has retreated even further, to levels first reached way back a decade ago, in 2002. That's right: back when gold was struggling to hit $350 and silver was well under $5 the ounce."

But GotGold announced the courageous decision to sell more gold from its model portfolio to buy shares.

In fact, signs that a turn was coming started appearing on Thursday. The eagle-eyed Bill Murphy at LeMetropole Cafe --

http://www.lemetropolecafe.com

-- spotted that "with gold still in the weeds, and not far from its lows, silver began to quietly make new high after new high. It was so noticeable I even put out a 'tweet'. ..."

Silver finished up on the day, unlike gold. Murphy also pointed out that, while the gold shares closed down on the day, they recovered hugely from their deepest losses -- usually a very healthy sign.

LeMetropole Cafe and its ally the Gold Trust Anti-Trust Committee (GATA) had an excellent week (except, possibly, financially). They are part of a group I call the radical gold bugs, who have long argued that gold prices have been systematically suppressed by a combination of public and private interests.

The LIBOR manipulation scandal obviously makes this theory of gold look more plausible. Expositions of the gold price manipulation theory appeared on CNBC and the Daily Telegraph in the United Kingdom, as happily noted in the invaluable Daily Dispatches of the GATA website.

Of course other factors came to gold's assistance too. As a LeMetropole Cafe correspondent reported, the Indian rupee jumped 1.41% on Friday. A 14% slide in the rupee in the second quarter has been crucial to weakening demand from the world's largest physical buyer.

If the match has indeed been struck, there is plenty of flammable material about.

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Prophecy Platinum Announces Wellgreen Preliminary Economic Assessment:
38% Pre-Tax IRR, $3.0 Billion NPV, and a 37-Year Mine Life

Company Press Release

VANCOUVER, British Columbia, Canada -- Prophecy Platinum Corp. (TSX-V: NKL, OTC-QX: PNIKF, Frankfurt: P94P) reports the results of an independent NI 43-101-compliant preliminary economic assessment for its fully owned Wellgreen nickel-copper-platinum group metals project in the Yukon Territory.

The independent assessment, prepared by Tetra Tech, evaluated a base case of an open-pit mine (with a mining rate of 111,500 tonnes per day), an on-site concentrator (with a milling rate of 32,000 tonnes per day), and an initial capital cost of $863 million. The project is expected to produce (in concentrate) 1.959 billion pounds of nickel, 2.058 billion pounds of copper, and 7.119 million ounces of platinum, palladium, and gold during a mine life of 37 years with an average strip ratio of 2.57.

The financial highlights of the preliminary economic assessment, shown in U.S. dollars, are as follows:

Payback period: 3.55 years
Initial capital investment: $863 million
IRR pre-tax (100% equity): 38 percent
NPV pre-tax (8% discount): $3 billion
Mine life: 37 years
Total mill feed: 405.3 million tonnes
Mill throughput: 32,000 tonnes per day

Prophecy Chairman John Lee says: "We are pleased with the preliminary economic assessment results. The numbers indicate that Wellgreen is one of most exciting mineral projects in the Yukon. The company is drilling to upgrade and expand the resource base. The infrastructure is excellent as the project is only 1,400 meters in altitude and 14 kilometers from the paved Alaska Highway, which leads to the Haines deep seaport. Discussions are under way with support from local stakeholders regarding permitting and logistics."

For the complete press release, please visit:

http://prophecyplat.com/news_2012_june18_prophecy_platinum_announces_res...