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The centre cannot hold

December 9th, 2015

Those who realize it are best able to adapt, says Michael Campbell

by Greg Klein

Maybe it’s a sense of the absurd that drives his humour. Michael Campbell says we live in a time of momentous change that few people, let alone governments, really understand. Not only has Chinese economic growth slowed but the West staggers under high unemployment, migrants threaten to swamp Europe and terrorists slaughtered over 32,600 people last year alone, he says. Then there’s the demographic conundrum. But how does Campbell illustrate it? By relaying comments from Dave Barry.

“Nowdays there’s more money being spent on breast implants and Viagra than on Alzheimer’s research. This means that by 2030 there should be a large elderly population with perky boobs, huge erections and absolutely no recollection about what to do with them.”

Those who realize this can adapt best to change, says Michael Campbell

Michael Campbell: “The status quo
in government cannot be maintained.”

Campbell’s funny but he’s an analyst to be reckoned with, judging by a bio that claims credit for “advocating picking up blue-chip dividend-paying stocks in every major dip since 2011, getting out of gold in September of 2012, recommending U.S. dollar-denominated assets in December of 2013 and getting out of oil stocks in January of 2014.” The man behind Money Talks regaled a December 8 lunchtime audience by interspersing grim news with humour and hope for the future. Hosted by the Association for Mineral Exploration British Columbia, the 100-strong crowd heard less about their own industry than about wider economic issues affecting everyone.

“We’re living in the demise of the welfare state,” Campbell maintains. “Governments have made promises they’re never going to keep.” In Canada, all three levels of government persist with tax increases while cutting services.

Getting back to demographics, the problem wasn’t acknowledged during our recent federal election. Yet Campbell says we’re stuck with an unfunded $244-billion liability for public sector pensions. “Twelve hundred Canadians turn 65 every day, 10,000 every day in the States. We’ve got more people over the age of 65 than under 15…. Health care costs are growing faster than government revenues.”

France, an especial bête noir of the Campbell worldview, hasn’t balanced its budget since 1974, he says. Its socialist government raised taxes 87 times in its first two years. Tax-and-spend governments ultimately face financial collapse, as is already happening in some countries and municipalities. “The status quo in government cannot be maintained.” The demise will last a few more decades but is already underway, he says.

Campbell says taxaholic governments act on “the Willie Sutton mandate.”

According to the story, the serial thief once answered simply when asked why he robbed banks: “Because that’s where the money is.” Hence governments go after successful businesses and individuals.

That policy won’t go down without a fight, Campbell says. “And the impact on economic growth and personal finances will be huge.”

[Governments show] no sign that they understand it’s not business as usual…. They don’t get it.

Yet governments show “no sign that they understand it’s not business as usual…. They don’t get it.”

They’re not the only ones. Campbell quotes investment analyst John Mauldin as saying, “We believe what we want to believe because to do otherwise would upset our world. The potential emotional stress of a contrary opinion is too much for us to deal with. So we go along with the least stressful emotional choice.”

Campbell says in September 2012 he advised a few major gold miner CEOs to hedge some production. “But they didn’t do it.” He thinks they found the warning “too emotionally painful.”

“Oil is even more blatant,” he says. “I don’t know how they could miss this incredible supply increase coming out of fracking, coming out of the oilsands. Those numbers were really readily available. You couldn’t think that oil would be able to withstand that, then you add two more components,” a rising U.S. dollar and dropping demand.

Looking at currencies, he says the key to comprehension is that “confidence moves money” and the U.S. dollar still maintains confidence. Of its closest competitors, Japan suffers severe demographic and debt-to-GDP problems. “I personally think the euro is going to go much lower.” Canadian, Australian and New Zealand dollars will continue to fall.

[The Canadian dollar’s] next number’s 66, the next number’s 62, the next number’s 55.

Having predicted a 70-cent Canuck buck for three and a half years, he says, “the next number’s 66, the next number’s 62, the next number’s 55.” Against that, he foresees a spike in the U.S. dollar.

As for commodities, he thinks they’re still headed toward a bottom in U.S. dollars. But there’s good news. “In Canadian dollar terms, we may have already been there.”

The resemblance to his brother, former B.C. premier Gordon Campbell, helps prompt the question of how he’d fare in politics. As he moves back and forth across the stage, irreverently castigating the status quo, one can’t help thinking he’d bring a refreshing change to public discourse. But eventually it becomes clear that our chattering classes would have no place for him.

Anyway, the ideological outsider evidently sees himself on the winning side. Pointing out that people are increasingly turning to business for education, security and health care, among other services long associated with government, Campbell says, “As government goes down, recovery will come from the private sector.”

Canadian mining groups welcome Trans-Pacific Partnership

October 5th, 2015

by Greg Klein | October 5, 2015

In a deal supported by associations representing the country’s mining and exploration sector, Canada will become a founder of the 12-nation Trans-Pacific Partnership. Ottawa announced the agreement on October 5 as a federal election loomed two weeks in the future.

The Canadian government says the TPP will cut tariffs and other barriers, broadening markets for a range of Canadian industries that include metals and mining. The deal also offers Canadian investors in mining and other areas “transparent and predictable access to TPP markets,” the feds added.

Canada’s mining industry has been a strong advocate for liberalized trade and investment flows for many years…. TPP, representing such a massive trade bloc, including critical emerging markets, is a trading partnership Canada must not risk being left out of.—Pierre Gratton, president/CEO of the Mining Association of Canada

In a declaration of support six days previously, the Mining Association of Canada said the country’s metals and minerals exports to TPP members averaged $158.6 billion per year from 2012 to 2014. The group noted, however, pre-TPP tariffs of up to 5% in Australia, up to 7.9% in Japan, up to 10% in New Zealand, up to 20% in Brunei, up to 40% in Vietnam and up to 50% in Malaysia.

TPP negotiations also addressed “numerous challenges that companies currently face in getting products, people and services across borders on a day-to-day basis,” MAC added. “As one of Canada’s largest outward investing sectors—accounting for 10% ($81.5 billion) of the 2013 total—benefiting from the greater certainty, transparency and foreign investment protection that the TPP will enable is important for the mining industry to remain competitive on the global stage.”

The Prospectors and Developers Association of Canada stated its “8,000 members invest significant financial assets across the Asia-Pacific region to explore for and develop mineral deposits. PDAC is particularly supportive of aspects of the TPP that will facilitate two-way investment, including protection for investors that provides greater clarity, certainty and transparency.”

The world’s largest trading bloc, the TPP partners Canada with Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam. Conspicuous for its absence is China, the world’s second-largest economy.

Even so, TPP membership represents nearly 800 million people and a combined GDP of $28.5 trillion, the Canadian government stated. The 12 include some of the world’s fastest-growing economies “and this is expected to continue to be the case” as the bloc’s expected to comprise two-thirds of the world’s middle class by 2030 and half of global GDP by 2050. Some 81% of Canada’s total exports already go to TPP countries.

Canada now has free trade agreements with 51 nations which “will give Canadian businesses preferential access to over 60% of the world’s economy and more than 1.3 billion consumers,” according to Ottawa.

Despite the downturn

January 31st, 2014

Roundup 2014 speakers discuss how investors can profit and companies thrive

by Greg Klein

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We’re near bottom, we’ve hit bottom, the worst is behind us—over the last few wretched years those comments have come repeatedly from speakers at industry conferences. So maybe Victoria Yehl put it best in her January 30 closing remarks at Roundup 2014: “You, as the attendees and the delegates, let us know what’s going on in this industry … almost every evening at the Seawall Bar and Grill. It was certainly a higher level of enthusiasm than we’ve seen for a number of years.”

As chairperson of the Association for Mineral Exploration British Columbia’s annual event, Yehl was referring to the evening get-togethers, known for a non-market type of liquidity. But boozy as it might have been, can so much enthusiasm be dismissed?

Roundup 2014 speakers discuss how investors can profit and companies thrive

Near-record attendance and growing optimism characterized
AME BC’s Roundup 2014, “the world’s premier technical
mineral exploration conference.”

Yehl thanked company sponsors who came through despite tough times and noted a near-record crowd of 6,643 people from 37 countries, a possible indication of not-so-tough times ahead. Roundup 2014’s five last speakers further developed that sentiment.

The guardedly optimistic group included Rick Rule, who told investors they can be contrarians or victims: “The choice is yours.” Discussing some potential “fire sale prices” in resource stocks, the chairman of Sprott US Holdings said, “When I talk about coal now people say, ‘Global warming, you’re the culprit.’ I love it when people aren’t merely bored, they’re hostile.”

Uranium, he added, “is cheap. Zinc is cheap. People hate nickel…. Until three or four months ago natural gas was cheap, cheap, cheap.”

Bull markets follow bear markets “as day follows night,” Rule argued. But he warned that although a valuation’s increase might be inevitable, it isn’t necessarily imminent. Profits require time and patience, he emphasized.

Turning the forum’s attention from investors to companies, Silver Wheaton TSX:SLW president/CEO Randy Smallwood said most financing has been coming from various types of debt. The streaming model, he maintained, allows companies to optimize their portfolios through deals on non-core assets. “Seventy percent of silver does not come from silver mines,” he pointed out. About 40% comes from copper mines, another 15% from lead-zinc operations. Those miners “aren’t interested in silver. They’re driven by copper, they’re driven by lead-zinc.”

A new type of deal announced in November offers some juniors additional hope, Smallwood said. Silver Wheaton stepped in earlier than usual to give Sandspring Resources TSXV:SSP an initial $13.5 million to take its Toroparu gold project in Guyana to feasibility.

“If they had gone out and raised $13.5 million in the market, their current shareholders would have lost 33% of the value of that project…. What they did was give us 10% of the gold, if we fund them another $135 million when they get to the point of construction. It’s pretty attractive for their shareholders. It makes a lot of sense for juniors to consider this.”

But with prefeasibility in place, Toroparu was already quite advanced. Exploration geologist Miles Thompson discussed earlier-stage projects and the “bizarre disconnect between markets and the time needed to find and develop mines.”

“Unfortunately the easy stuff has already been found and our job is becoming increasingly harder,” said the director of Reservoir Minerals TSXV:RMC and CEO/chairman of Lara Exploration TSXV:LRA. For all that, Reservoir has been successfully raising money and spending it in Serbia for over 10 years. “We follow the prospect generator business model, which means we work the same way the pharmaceutical industry works, the software industry…. We see ourselves as R&D teams. We build projects, we define targets, we work out projects for mining companies and investors.”

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Graphite Digest

April 20th, 2012

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OceanaGold reports NZ Gold Assays up to 11.52 g/t over 3m

March 30th, 2011

OceanaGold Corporation TSX:OGC announced assays from its Frasers Underground Mine in Otago, New Zealand. Results include 1.94 g/t gold over 5 metres, 3.61 g/t over 4 metres, 3.14 g/t over 9 metres, 2.76 g/t over 8 metres, 3.03 g/t over 6 metres, 5.57 g/t over 6 metres, 2.45 g/t over 6 metres, 3.19 g/t over 10 metres, 3.83 g/t over 5.2 metres, 3.19 g/t over 9 metres, 2.35 g/t over 7.5 metres, 4 g/t over 3 metres, 6.72 g/t over 8 metres, 4.5 g/t over 11 metres, 11.52 g/t over 3 metres and 5.38 g/t over 8 metres.

CEO Mick Wilkes said, “The continued extension of mineralisation at the Frasers underground mine demonstrates the tremendous prospectivity that the Macraes goldfield holds even today after 21 years of production. We are investing another $5 to $6 million in resource drilling at the mine this year with the objective of further extending the reserve down dip and to the north of the current mining area. Some of the focus will also target the new lower zone that was discovered last year and is shaping up to be additional reserves that we expect to work into the mine plan in 2012.”

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Darren Klinck
VP Corporate and Investor Relations
+61(3) 9656 5300

by Ted Niles