Peter Brimelow: Gold fizzles -- or gold fixed?


By Peter Brimelow
Monday, August 6, 2012

NEW YORK -- Last week was a dud for gold. The radical gold bugs are divided, but regrouping.

The technical set-up had seemed extremely promising.

See June 30 column:

But gold fizzled even before it became clear that the Fed and the ECB were not going to make reflationary, gold-stimulating moves. Measured by the active December CME contract floor close, the metal lost 0.54% on the week, while the NYSE Arca Gold Bugs Index was down 1.07%.

To be sure, this involved a considerable recovery from the alarming lows of mid-week.

But the damage done was still very severe. The thoughtful website The Golden Truth published an essay on Friday titled "Chart Porn: Value Play Of The Decade," featuring a chart from 1984 comparing the PHLX Gold/Silver Index against gold. Gold shares have fallen to a new low: 2012 has been ghastly. From the peak in 1996, the ratio is down 70%.

... Dispatch continues below ...


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:

The Golden Truth annotated its chart: "Are mining companies going out of business ... or absurdly cheap?":

There is unusual division among what I call the "Radical Gold Bugs" as to what is happening. These are generally intellectual descendents of Bill Murphy’s LeMetropoleCafe. All are strongly inclined to see conspiratorial action by governments and their chosen instruments in precious-metal moves. Needless to say, after the Crash of 2008 and subsequent bailouts, this looks a less bizarre opinion than it once did.

Over at Trader Dan's Market Views, Dan Norcini offered a more orthodox technical explanation in a thoughtful essay headed "Gold and Silver Continue Marking Time."

Noting that he is "a firm believer in the view that the feds have a vested interest in keeping the gold price under wraps," Norcini nevertheless stressed the big decline in open interest (total contracts outstanding) recently: "The gold and silver markets are currently moving lower because the hot-money crowd has currently lost interest in them and is putting its money to work in other markets for the time being as they chase profits. Markets in sideways patterns do not make money for hedge funds."

See article:

Over at the LeMetropoleCafe mother ship, one correspondent expresses sympathy for this technical explanation, but nevertheless still grumbled in the old conspiratorial style that the awkward short positions noted last week appear to have escaped suspiciously easily:

"This raises suspicions of accommodation being offered to exiting specs, an event frequently seen in the Bad Old Days." (This refers to the decade before the current rise in gold began in 2001, which radical gold bugs believe was heavily manipulated to the benefit of insiders.)

And just to make things really creepy, LeMetropoleCafe has produced anther correspondent, "James Mc," who on Thursday did very accurately predict Friday's gold action, based on a concept of close price management and permitted percentage gains.

But on a more gold-friendly note, LeMetropoleCafe also says that there have been three dramatically positive news items from the physical world.

On Wednesday the South Korean central bank announced a 16-tonne purchase of gold in July, the third in what seems to be an acquisition program for the country's still-small foreign-exchange reserves.

On Friday, Turkey reported July gold imports of 35 tonnes, the third highest on record and 46% above June. (Ominously for Middle East peace prospects, most of this is thought to be headed for Iran.)

And on Sunday evening, Hong Kong reported June was another month of startlingly heavy net shipments of gold to China.

Maybe it is too soon to write August off.

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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: