A mining and exploration retrospect for February 16 to 22, 2013

by Greg Klein

Next Page 1 | 2

What’s behind the scenes for graphene?

Graphene may have sparked an explosion of patents but results of the boffins’ brainstorms “remain shrouded in secrecy,” according to Friday’s Industrial Minerals. CambridgeIP chairman Quentin Tannock told the journal, “Some companies will never publish their patents and … there are probably many very valuable ideas out there that haven’t been disclosed.”

Graphene’s unique properties suggest a host of possibilities,
but much recent research has focused on touch screen technology.

That could be the case even if only a small fraction of last year’s 5,000-plus patent applications pan out. On February 13 CambridgeIP, which encourages “development, deployment and dissemination of valuable technologies,” released its top 10 list of companies and agencies that filed patents for graphite’s wonder-derivative. A January CambridgeIP report prompted the BBC to speak of “an intensifying global contest to lead a potential industrial revolution.”

But regardless of whether some research stays secret, Focus Graphite TSXV:FMS president/CEO Gary Economo told IM, “We see 2013 as a breakout year.” Focus holds a 40% interest in Grafoid Inc, a company with its own top-secret graphene laboratory. IM said Economo “[predicted] the first raft of graphene-based consumer products will emerge on the market within months.”

Much of the research so far has been on touch screens and bio-sensors, Tannock added.

Rule of law lost in Canadian resource shakedowns

“What is the message being sent to the world” when “five or six disgruntled ex-employees … can shut down a business of 500 people at a cost of millions? That there is no law in northern Ontario?”

That’s how Wednesday’s Timmins Daily Press quoted Neal Smitheman, a lawyer representing De Beers, which faces a native blockade to its Victor diamond mine. The company has now lost nearly three weeks of an approximately 45-day season to transport heavy equipment and supplies over a winter ice road. This week only about half a dozen protestors were in place, apparently ex-employees who want to renegotiate an existing impact benefit agreement. Police refused to intervene, forcing the company to apply for a court injunction. On February 15 Judge Robert Riopelle issued an order that specifically “required” police to act. They still refused. De Beers went back to court on Wednesday.

If Smitheman sounded exasperated, a lawyer representing the Ontario Provincial Police seemed infinitely patient as he explained that the OPP takes a more “measured approach” towards natives than other people. Plus the weather was cold, he said.

Thursday’s Daily Press reported a plea to the demonstrators from two local politicians. “We have hundreds of families across James Bay and the Timmins region who rely on work at the Victor mine to pay their bills and save for their kids’ college education,” said MP Charlie Angus.

Next Page 1 | 2

The Association for Mineral Exploration British Columbia embarks on its second century

by Greg Klein

Next Page 1 | 2

When Gavin Dirom talks about drawing on the past to address future challenges, he might be speaking from personal experience. The president/CEO of the Association for Mineral Exploration British Columbia is actually Gavin Dirom III, named after his father and grandfather. They both held senior positions with the organization. “My grandfather was the association’s president in the ’60s, my father was a director in the late ’80s and early ’90s,” he explains. Now, with AME BC celebrating its 100th anniversary, Dirom might hold an ideal position to appreciate the group’s past and help guide its future.

“All this grew from somebody’s idea in 1912, just a few people to start. Then it became an organization that’s still going strong a hundred years later,” he says.

“It’s a big part of our history. It’s province-building history that prospecting, mineral exploration and mining has contributed to in a major way. Most of the province was opened up through the efforts of those early pioneers.”

This 2008 photo from the Ball Creek Project in northwestern B.C. has an almost timeless quality, suggesting continuity between the past, present and future. (Photo: John Fleishman, courtesy AME BC)

It’s a colourful story too. Douglas Fetherling’s book The Gold Crusades: A Social History of Gold Rushes 1849 to 1929 relates how mining transformed what was a land of native settlements, Hudson Bay Company posts and, on Vancouver Island, a few colonial officials. By 1852, as the California gold rush played out, over 500 prospectors wandered north. A major strike was found on the Fraser River in 1856. The following year, hundreds more would-be miners, mostly American, showed up en masse, transforming the isolated outpost of Victoria and threatening British sovereignty. Then in 1858 Governor James Douglas, who by no means wanted more Americans cluttering up his colony, made the mistake of shipping 800 gold ounces to the San Francisco Mint for refining. Word spread quickly and about 30,000 additional adventurers arrived that year. The Fraser River Gold Rush was on. But by 1862 even that was superseded by Billy Barker’s spectacular find, sparking the Cariboo Gold Rush of Barkerville fame. And that was just another stepping stone towards the granddaddy of all gold rushes at the mother of all motherlodes, the Klondike of Dawson City fame in 1898.

Prospectors fanned out to other regions too. Margaret Ormsby’s definitive work British Columbia: A History lists some of the deposits found by the 1880s in southeastern B.C. “Silver-lead and zinc had been discovered in Slocan, coal in East Kootenay, copper near Phoenix and lode gold at Camp McKinney, Fairview and Hedley.” Rising silver prices in 1895 sparked a regional boom in 1896. Ormsby quotes an historic source describing the town of Nelson as “short of frills, boiled shirts, parsons, lawyers and prohibition orators” but not “mule skinners, packers, trail blazers, remittance men and producers, with a slight trace of tenderfeet.”

The region, Ormsby writes,

had something of the character of the rushes to the placer mines of Cariboo [in central B.C.], Omineca [north-central B.C.] and Cassiar [far-northern B.C.]. In its first years, Rossland had as colourful a floating population of Americans, “Cousin Jacks” (Cornishmen), Irish, Croats and Scandinavians as ever graced the camps of Idaho and Colorado. For these flamboyant and roistering prospectors, claim-jumpers and stock-manipulators, Sourdough Alley provided every kind of entertainment: prize fights in theatres, keno tables in gaming-houses; boa-feathered dance-hall girls; bars; and orchestras and bands which played round the clock.

Yes, exploration and mining brought civilization—in a manner of speaking. It also helped bring about settlement, law, infrastructure and economic diversification. Overall it played a profound role in shaping Canada’s most westerly province.

Meanwhile, that small group in 1912 has grown to 4,800 AME BC members categorized as junior and major companies, geoscientists, prospectors, engineers, entrepreneurs, suppliers, mineral producers and associations. They also hold expertise in law, accounting and public policy, all mutually beneficial vocations that support the sector. They work in about 100 countries, with Vancouver boasting the world’s highest concentration of exploration and mining professionals. “That’s what the evolution of exploration and mining in B.C. has led to,” says Dirom. “We’re fortunate to be the centre of mineral exploration excellence in the world.”

Next Page 1 | 2

A mining and exploration retrospect for September 29 to October 5, 2012

by Greg Klein

So much for the environmental review

Monday’s news from British Columbia indicates another level of uncertainty has hit the province’s mining sector. Two B.C. cabinet ministers refused an environmental assessment certificate for Pacific Booker Minerals TSXV:BKM, even though the company passed a provincial environmental review. As a result, the half-billion-dollar Morrison copper-gold-molybdenum proposal has been put on hold.

A new development at the provincial level, it does have similarities to a federal decision to reject Taseko Mines’ TSX:TKO Prosperity gold-copper mine proposal for B.C. A November 2010 report from the Canadian Environmental Assessment Authority convinced the federal government to reject the $800-million proposal. The three-member CEAA panel found few significant adverse environmental effects but emphasized significant adverse effects on established native rights, potential rights, potential title, tradition and culture.

Now B.C. has taken a comparable approach, although the supposedly “environmental” arguments come from politicians, not the people who conducted the environmental review. In fact the provincial review repeatedly stated that, with successful implementation of mitigation measures and conditions, the Morrison mine is “not likely to have significant adverse effects.”

Nevertheless Derek Sturko, who’s both executive director of B.C.’s Environmental Assessment Office and an associate deputy minister of the environment, seemed to reject his own department’s 270-page report. He suggested instead that the government take a “risk/benefit approach.” Sturko also emphasized strong native opposition and a “moderate to strong prima facie case for aboriginal title.” On that basis, two cabinet ministers representing mining and the environment nixed the proposal.

The decision might be related to the pre-election BC Liberal government’s prevaricating but currently negative stance towards the proposed Northern Gateway pipeline. But the province’s decision, like the federal decision regarding Taseko, also raises the question of whether native rights are handled according to the principle of law or appeasement.

Taseko submitted a revised $1.1-billion New Prosperity proposal to the feds on September 20. On Tuesday Business in Vancouver cited analysts, for some reason speaking anonymously, who said Taseko’s $300-million revision remains viable despite a drop in copper prices. But “with a large question mark as to whether the federal government will approve the project on a second go-round, they’re currently ascribing no value to the project in their target stock prices for the company,” BIV reported.

On Tuesday Pacific Booker Director Erik Tornquist told ResourceClips his company is reviewing its options.

Confiscation without compensation

If miners haven’t given up on B.C., it might be a case of the devil they know. Wednesday’s announcement that the Bolivian government would not provide compensation for nationalizing the Malku Khota Project followed months of uncertainty for South American Silver TSX:SAC. Since 2007, the company had spent over $16 million building a resource of 158 million ounces silver and 1,184 tonnes indium with lead, zinc and copper credits.

The company claimed the support of 43 out of 46 land-owning indigenous groups. SAC blamed illegal artisanal miners and activists from outside the region for intense opposition from the three dissident communities.

But last May, the company said, Mining Minister Mario Virreira signed an agreement with the 43 supportive groups stating that the government will not reverse the mining concession and that the company should continue exploration.

Protests turned violent in June, with one death and several injuries. Later that month seven people were taken hostage, including three drill contractors, two SAC employees, a government prosecutor and a police officer. The final three hostages were released unharmed after 11 days, when the government decreed that it would nationalize Malku Khota.

Reuters quoted a confident-sounding Vice-President Alvaro Garcia saying, “If we have to invest $500 million or $700 million or even $1 billion for a large-scale project at Malku Khota, which benefits Bolivia, the state is prepared and has the capacity to do that.”

At the time he added that government might pay compensation of $2 million or $3 million. Then came Wednesday’s decree. In an Agence France-Presse dispatch printed in the Globe and Mail, Virreira stated, “The nation has no financial obligation to South American Silver.”

By press time South American hadn’t responded. In an August 2 statement Greg Johnson, then the company’s president/CEO, said the company is prepared to go to international arbitration.

But, as Financial Times correspondent Andres Schipani pointed out, “Getting fair compensation, or any for that matter, from Bolivia has proved tricky since 2007. A year after [President Evo] Morales took office, the Andean country pulled out of the World Bank body that conducts arbitration between businesses and governments …”

Schipani noted other troubled nationalizations in Bolivia, including the Colquiri tin mine taken from Glencore in June. The government rationalized the move by saying it could then end disputes between independent and unionized miners. But the conflict flared up again with more violent clashes which shut down operations. On September 14 Reuters quoted Hector Cordova, president of the state-owned mining company, who said, “We’re losing more than $250,000 per day through lost production and this has been going on for two weeks. That means an accumulated loss of almost $4 million.”

Last Sunday the government said it solved the dispute by dividing the mine’s richest vein between the rival groups.

Friends and foes in the Kyrgyz Republic

On Friday three Kyrgyzstan MPs faced criminal charges while political unrest focused on Centerra Gold’s TSX:CG Kumtor Gold Mine. Prosecutors say the three attempted to overthrow the government by leading a mob that stormed the parliament building on Wednesday, Reuters reported. The incident grew out of a protest demanding that Kumtor be nationalized.

Violence has turfed previous Kyrgyzstan governments in 2005 and 2010. Last June a motion to nationalize Kumtor failed to pass parliament but MPs did pass a motion to consider increasing the country’s 33% stake in the Centerra subsidiary that owns the mine, as well as redefining the concession and boosting taxes.

But reassuring news came on Monday when Kyrgyzstan’s new president Zhantoro Satybaldiyev declared, “Kumtor will not be nationalized.” He told Reuters, “Problems will be resolved. I asked [the Kumtor venture] to keep up its output.” He added, “The way they extract gold, it’s really a state-of-the-art job. To be honest, I am jealous of their skills.”

The news agency pointed out, however, that the government had cancelled a televised auction of mining licences on August 28 after protesters stormed the TV studio.

Kumtor produced 583,156 gold ounces in 2011 at $482 an ounce. But in August the company blamed its $54.6-million Q2 loss largely on Kumtor’s “abnormal mining costs.”

Last September Kyrgyzstan ordered Stans Energy Corp TSXV:HRE to suspend drilling at its Kutessay II REE Deposit. According to the company, the government wanted “a firm proposal for the gratuitous transfer of a percentage of ownership” of a company subsidiary to the state. The stop-work order ended as the company met with Satybaldiyev and Economic Minister Temir Sariev.

In a statement issued Monday, Stans quoted Sariev saying, “Our state does not have the necessary financial and technical resources for the development of deposits and we have, so far, no such specialists. Development of the mining industry of our country at this stage is only possible by attracting investment. And the investors will come to our country when they will be confident in the safety of their financial investments.”

South Africa: A tragic outcome from a positive move?

Another striking miner was killed in South Africa Thursday night. On Friday Anglo-American Platinum fired 12,000 strikers. A Reuters dispatch in the Globe and Mail stated, “When rival Impala Platinum fired 17,000 workers in January to squash a union turf war, it led to a six-week stoppage in which three people were killed, the company lost 80,000 ounces in output and platinum prices jumped 21%.”

One disturbing aspect of the crisis is that a generous pay hike in a poor country can cause so much controversy. In last month’s “Lonmin settlement,” the platinum producer raised miners’ wages between 11% and 22%. Nic Borain, described as “an independent political analyst,” told Reuters, “Amplats had been giving signals that it was going to hold the line after Lonmin had folded—but it’s a huge gamble. Someone had to take it on the chin or this would have kept on unravelling and spread through the economy. It’s difficult to know whether this causes the unrest to spread or whether it takes some of the sting out of it. It could go either way.”

But was the government decision environmental or political?

by Greg Klein

Another British Columbia mine proposal has flunked its environmental review for reasons that might not be environmental. But the company, Pacific Booker Minerals TSXV:BKM, vows to continue with its Morrison copper-gold-molybdenum proposal for north-central B.C.

It was back in 1998 that the company began drilling the property, which is directly east of Morrison Lake, home to a genetically distinct type of sockeye salmon. The environmental assessment process began in 2003 and in 2009 the company applied for an environmental assessment certificate. On October 1 Pacific Booker announced that two B.C. government ministries refused to grant the certificate. They based their decision largely on the possible failure of environmental mitigation and opposition from local natives.

“We plan to move forward,” company Director Erik Tornquist tells ResourceClips. “We were required by law to do an effects assessment to determine whether there were any significant adverse environmental, social, heritage, economic and health effects, which we did. Our findings were supported by three third-party reviews. The environmental assessment concluded there were no significant adverse effects. The report that went to the minister from the EAO [Environmental Assessment Office] and dealt with the various components, like water, fish, wildlife, etc., determined that there were no significant adverse effects. Well [the government says], ‘What about the risk?’ But it’s not a risk assessment, it’s an effects assessment.”

Indeed the EAO’s August 21 207-page report addressed some 16 concerns, mostly related to the environment but also issues such as heritage, economic effects, social effects, cultural foods and native land title. The conclusions repeatedly stated that, with successful implementation of mitigation measures and conditions, the mine is “not likely to have significant adverse effects.”

A September 20 report by EAO Executive Director Derek Sturko reiterated those conclusions. But he recommended the government take a “risk/benefit approach” that considers what might happen if mitigation measures, especially those affecting Morrison Lake, prove unsuccessful. Sturko also emphasized strong native opposition and a “moderate to strong prima facie case for aboriginal title.” He recommended the government reject the proposal. Environment Minister Terry Lake and Energy, Mines and Natural Gas Minister Rich Coleman did just that in a September 28 letter which was publicly released October 1.

An October 2 statement from the Lake Babine Nation said that two former copper-gold mines “continue to leach toxic acid and metals into the lake. Concern that the Morrison Mine would add to the cumulative discharges from the two closed mines was a recurring theme raised during the assessment process.”

The government decision was only the second time a mine has been rejected in the history of B.C. environmental reviews. In 2008 Northgate Minerals (now AuRico Gold TSX:AUQ) failed at both the federal and provincial level to get approval for a $200-million open-pit expansion to the now-closed Kemess South Gold-Copper Mine. In 2010 the Canadian Environmental Assessment Authority rejected Taseko Mines’ TSX:TKO Prosperity Gold-Copper Project, even though it passed B.C.’s environmental review. The federal agency expressed concerns about Prosperity’s potential effects on established native rights, potential rights, potential title and culture. In September Taseko re-applied with a $300-million revision for what is now the $1.1-billion New Prosperity proposal.

But currently the most controversial proposal in the always controversial subject of B.C. resources is the Enbridge Northern Gateway pipeline.

In an October 2 column, Vancouver Province writer Michael Smyth suggested the provincial government’s opposition to Enbridge is purely political: “With the pipeline so unpopular in B.C. right now, it seems [Premier Christy Clark] was determined to pick a fight, and hope that earns her points with B.C. voters.”

Clark’s BC Liberal party is trailing far behind the opposition New Democratic Party, which is generally expected to win the provincial election next May. The NDP’s 1991 to 2001 period in office, however, was rated a disaster by the mining industry.

B.C.’s environment minister denied any connection between the government’s Enbridge stance and his Pacific Booker decision. Lake told Canadian Press (in a story published by CBC), “It would send a very negative message to the investor community if we were to pick things to say ‘No’ to just to make a point.”

Speaking to ResourceClips, Pacific Booker’s Tornquist says, “We’re at a loss on how you can have a project with no significant environmental effects yet a certificate is denied. We have to look at our options here. It’s a bit early. The phone’s been ringing off the hook. On the federal side, I talked to the federal government yesterday [October 1] and they’re continuing with their process and their decisions are made independently.”

Stuart Bertrand, a Public Affairs Officer with B.C.’s Ministry of Environment, informs ResourceClips that the decision can’t be appealed. A judicial review may be possible if there are perceived violations of the environmental assessment act. Otherwise the company can submit a new application “with a new project design, as a decision has now been made that the current design is not acceptable.”

The Morrison proposal had proven and probable reserves of 1.37 billion pounds copper, 658,090 ounces gold and 10.05 million pounds molybdenum. A February 2009 feasibility study projected a conventional open pit with a 30,000-tonne-per-day mill for a capex of $516.68 million, with a pre-tax IRR of 20.05%, an NPV of $495.9 million at an 8% discount rate and payback in 4.2 years.

Pacific Booker shares opened and closed October 1 at $14.95, just five cents short of its 52-week high. But on October 2 they opened at $5.11 and closed at $4.95, a 52-week low.

A round-up of exploration and mining news for September 15 to 21, 2012

By Greg Klein

Next Page 1 | 2

The elephant in B.C. boardrooms
On Thursday the long, long process of advancing Taseko Mines’ TSX:TKO $1.1-billion New Prosperity Gold-Copper Project crept forward—or, according to the company, reached a “major milestone”—when Taseko formally filed its Environmental Impact Statement to the Canadian Environmental Assessment Authority. A three-member panel will review the submission and conduct public hearings over the next year.

Although the project passed a British Columbia environmental review, a federal panel rejected it in November 2010, condemning a plan to convert Fish Lake into a tailings dump. Taseko then came up with a $300-million plan to preserve the 118-hectare lake by positioning the tailings two kilometres north.

In a Vancouver Sun op-ed on Friday, Taseko President/CEO Russell Hallbauer sells the project’s economic benefits. But no one in the industry seems willing to speak openly about the previous CEAA decision, which often used subjective and non-environmental reasoning to pan the proposal. The report described Fish Lake as “a place of spiritual power and healing” for the Tsilhqot’in native band, concluding that the mine would have “a significant adverse effect” on established native rights, potential rights, potential title, and traditional and cultural uses.

The controversy highlights the uncertainty resource companies face in B.C. In September 2011 Stewart Phillip, president of the Union of B.C. Indian Chiefs, stated Taseko’s plan “will trigger a province-wide and nation-wide backlash that will severely jeopardize relationships between First Nations and the mining industry for years to come.”

Read more about New Prosperity here, here and here.

Young miners make more than Harvard grads
“Harvard University’s graduates are earning less than those from the South Dakota School of Mines and Technology,” Bloomberg reported on Tuesday. The story adds, “Demand for mining-school graduates is exceptional in the U.S., where the unemployment rate for 20- to 24-year-olds with bachelor’s degrees was 11.8% in July.” The U.S. will need some 78,000 additional mining personnel by 2019 to replace retirees, while Australia will need 1,700 mine engineers, 3,000 geoscientists and 36,000 others by 2015, the report states.

Last March Aurizon Mines TSX:ARZ President/CEO George Paspalas told ResourceClips, “Recruiting new employees is, I believe, one of the biggest issues facing the industry globally. A lot of development and operational plans hinge on the human resource, not the resource in the ground. There’s a lot of very experienced people coming up to retirement. There’s a gap where people didn’t go into the industry when metal prices were depressed in the mid- and late-1990s. That’s the age group from about 35 or 40 years to about 50 years. The industry was depressed, and the dot-com boom was on, so people wanted to get into the sexy stuff.”

Lack of expertise can subject projects to delays and disappointments. Bloomberg quotes Robin Adams, a managing consultant with research company CRU, who attributes setbacks to “haste, inexperience, lack of properly done mining studies [which reflect] the fact that mining is missing a generation. They are learning though, so that problem is going to go away in a few years.”

Honoured and pleased, despite the misunderstanding
For a few days this week Belo Sun Mining’s TSX:BSX stock hit enough turbulence to induce airsickness. The cause, according to President/CEO Mark Eaton, was a misunderstanding about what Brazilian public prosecutors mean by an “investigation.” As he suggested to the Globe and Mail, it’s more of a routine inquiry. Even if someone just wants to build “a cow shed, the federal prosecutor has to open an ‘investigation’,” Eaton told the G&M.

But when news reports stated that a federal prosecutor was “investigating” the company’s Volta Grande Gold Project, the misunderstanding almost sank a $50-million private placement.

Belo Sun opened at $1.50 on Monday, and that afternoon the company announced a bought deal of 35.72 million shares at $1.40. The stock closed that day at $1.54.

Come Tuesday morning, however, it opened at $1.40 and plummeted to $1.27, before closing at $1.37. That evening the company tried to clear things up: “The federal Public Prosecutor Office in the state of Pará opens an investigation proceeding for each and every environmental licensing process in the state. The investigation proceeding regarding the project does not imply any irregularity or particular concern regarding the environmental licensing process for the project.”

About 28 minutes later, the company cancelled the private placement.

By Wednesday the stock opened a bit higher at $1.40. That afternoon the company re-announced the private placement on the previous terms, including a share price of $1.40. The share closed the day at $1.39.

In his Tuesday statement, Eaton said he was “honoured and pleased with the participation and interest of the Public Prosecutor Office.” Should all go well, Volta Grande will begin its feasibility study in Q1 2013.

Next Page 1 | 2

August 17, 2012

By Kevin Michael Grace

Next Page 1 | 2

Gold was up (at press time) $1.70 (+0.1%) for the week to $1,616.70, and silver was up $0.29 (+1%) to $28.23. According to Business Recorder August 16, “Gold prices firmed on Thursday on speculation that central banks may be set to launch more bullion-friendly stimulus measures to boost growth, though mixed US data that dampened expectations for imminent Federal Reserve action kept prices in a range [just over $1,600].”

According to economists surveyed by Reuters, the odds of QE3 are “about three in five.” Ambrose Evans-Pritchard writes, “Markets are pricing in an 80% chance of yet more printing by the US Federal Reserve in September or soon after.” And “China is sufficiently alarmed by the flint hardness of its ‘soft-landing’ to talk up trillions of fresh stimulus. The European Central Bank is preparing to print ‘whatever it takes’ to save Spain and Italy.” Meanwhile, “Five years on, the Great Recession is turning into a life sentence.”

What about the US “recovery” that Vice President Joe Biden is raving on about? (Watch this video, and you will see that the word “raving” is used advisedly.) According to Gary Shilling, “We’ve had three consecutive months of declines in retail sales. That’s happened 29 times since they started collecting the data in 1947, and in 27 of the 29 we were either in a recession or within three months of it.” The Daily Ticker reports, “Shilling expects this recession will last about a year and shave about 3.5% from growth from peak to trough.”

Tweedledum and Tweedledee: "If you think we're alive, you ought to speak."

As noted in this space a year ago, Bernancus Magnus will be forced to resort to QE3 because, based on his own Bernanke Doctrine, that’s all he can do. Actually, there is one final trick left up his sleeve, “dollar depreciation by stealth: wholesale purchases of foreign currencies.” Evans-Pritchard concludes, ominously, “Much of [our] debt will have to be written off. Whether this is done by inflation (1945-1952) or default (1930-1934) will be the great political battle of this decade. Pick your side. Pick your history.”

Do you hear our politicians speaking about this? Not a bit of it. In the United States, the presidential election is once again solely a contest of personalities: Barack Obama, who represents New America (yay!) versus Mitt Romney, who represents Old America (boo!).

Biden, who represents Crazy America, thunders that Romney is “gonna let the big banks again write their own rules. Unchain Wall Street!” According to Jean-Claude Groulx in the American Thinker, Wall Street has been remarkably unfettered under Biden’s boss. He notes that the Government Accountability Institute has reported that the George W Bush administration “obtained over 1,300 corporate fraud convictions, including those of over 130 corporate vice presidents and over 200 CEOs and corporate presidents,” and the Bill Clinton administration “prosecuted over 1,800 S&L (savings and loans) executives, senior officials, and directors, and over 1,000 of them were sent to jail.” The Obama administration, in contrast, “has not brought criminal charges against a single major Wall Street executive.”

Certainly not Jon Corzine. The New York Times reports August 15, “A criminal investigation into the collapse of the brokerage firm MF Global and the disappearance of about $1 billion in customer money is now heading into its final stage without charges expected against any top executives.” Why so? “Chaos and porous risk controls at the firm, rather than fraud, allowed the money to disappear.” Hey presto! Now you see it; now you don’t.

Of course that decision has nothing to do with the following: “Corzine is not only a former Senator (and Governor of New Jersey) but is also a former CEO of Goldman Sachs (where he employed Gary Gensler, current Chairman of the Commodity Futures Trading Commission), is ascloseasthis to the Democratic Party and is the man President Obama called ‘our Wall Street guy.’” And he’s still Obama’s guy… Corzine has raised at least $500,000 for [the Obama-Biden] re-election campaign, funds that President Hope and Change does not regard as at all tainted.”

Don’t expect Romney to make anything of this. If he did, he would have to answer questions about his VP pick, Paul Ryan, who trousered a tidy sum based on insider information he garnered as a congressman during the 2008 meltdown.

Of all the binary divisions in life—cats vs dogs, Coke vs Pepsi, Yankees vs Red Sox, Microsoft vs Apple, etc—Democrat vs Republican (or insert national variation here) is the least important. The politicians of all parties belong primarily to the Government Party. Their loyalties are not to classes, factions, regions or (ha! ha!) the commonweal; their only loyalty is to themselves—and the bankers like Jon Corzine who fund their hegemony. To speak of the calamities that threaten their nations would suggest that they have been consistently and woefully wrong in their policies, and they can’t have that. So pick your poison, inflation or default. Either is excellent news for gold.

Stock Tips and Joke of the Week

Next Page 1 | 2

July 12, 2012

By Kevin Michael Grace

Next Page 1 | 2

Gold was down (at press time) $33.10 (-2.1%) for the week to $1,571.20, and silver was down $0.54 (-2%) to $27.13. Kitco attributed gold’s decline to “Wednesday afternoon’s FOMC minutes from the Federal Reserve [meeting June 19 to 20] that confirmed a sluggish US economy but provided no fresh clues on any upcoming Fed monetary-policy-easing moves.”

Last week, this space noted Jim Sinclair’s “total intellectual and spiritual certainty” that “The battle to stop gold has been lost.” This remains to be seen. And yet Stein’s Law informs us that “If something cannot go on forever, it will stop.”

Thomas Pascoe, writing in the Telegraph, informs us why goldrigging cannot go on forever. “The price of gold is traditionally a proxy for the value of money. A soaring bullion price is indicative of a lack of faith in fiat currency. Our financial system is predicated on the notion that money stands as a proxy for the factors of production—capital, labour, land and enterprise. In short, the abundance of money in the economy should be related to the abundance of those factors.”

Up in flames: "Paper money has been stripped of meaning."

Instead, “Twentieth- and 21st-century economics appears to have done away with this. Money is now created ex nihilo to feed both the top and bottom ends of society. Money printing or quantitative easing is mainly of benefit to two parties.” First, governments, which borrow more, more cheaply “to finance both existing debt and an expansive welfare state.” And second, bankers, “who are able to sell their government bonds at a profit. In theory, they may use this to even up their balance sheet. In reality, they frequently use it as stake money at riskier tables.” As a result, “Paper money has been stripped of meaning.”

The traditional corrective to this debasement has been commodities, particularly gold, which “holds its value when paper money loses value, because it is beyond the gift of the government to simply will gold into being and give it to friends in high places or voters in low ones.”

However, “If gold has been manipulated downwards, and if that process continues, then all recourse to a store of value (other than land and property) has been taken from the individual. The value of our money is falling thanks to quantitative easing. Fixing in the gold market takes away one of the key hedges for those with cash assets but no property.”

Pascoe concludes, “It would appear that the Libor scandal at Barclays has acted to draw out more market figures willing to claim openly that organized price-fixing has occurred in gold.”

This is indeed good news. And yet one hardly expects our rulers to admit that they are engaged in a massive fraud to facilitate mass impoverishment in order to sustain a failed system (and ensure that the superrich grow ever richer).

Pat Buchanan asks, “How many more such blows to their credibility can the financial elites sustain before people turn on the capitalist system itself?” He concludes, “Where vast wealth accrues to people whose actions seem unrelated to any contribution to society or country, and to have come simply from rigging the system for their own benefit, that system will not endure. Our casino capitalists are playing with fire.”

As Buchanan reminds us, Franklin Roosevelt responded to an earlier crisis of capitalism by railing against “moneychangers in the temple of our civilization,” with the result he became “the century’s most successful politician.” But as James Burnham informs us, political change is wrought not by ideas but by a change in elites. Today, unlike 1932, there is no alternative elite in sight. The politics of 2012 are ironclad proof of “the iron law of oligarchy.”

Consider Spain. In 2007, “Madrid ran a primary surplus of 3% of GDP, [and] public debt fell to 42% (Germany was 65% at the time).” A model economy, in other words. Spain’s reward was to be flooded by Euros stripped of their meaning, blowing up its real-estate market and its banks. The bankers aren’t about to be punished for their greed, and so the Spanish people are to be crucified instead. After all, “There is no alternative.”

Stock Tips and Joke of the Week

Next Page 1 | 2

Spanish Mountain Gold Bolsters Viability Toward 2015 Production

By Kevin Michael Grace

Next Page 1 | 2

Spanish Mountain Gold TSXV:SPA President/CEO Brian Groves was in a good mood when Resource Clips last spoke to him. He had every right to be. The price of gold was high, and his company was well on its way to proving a significant deposit at its eponymous BC gold project. Ten months later, gold is still high, but the market is in a historic downturn, and his shares trade at a 50% discount. On the other hand, the project is considerably richer than before, with every indication it will become richer still.

Today, Spanish Mountain is, in Groves’ words, “a project with several million ounces in gold in what I consider still a very safe environment in BC, with a board that has an enormous network of connections globally.”

Spanish Mountain Project: 2.17 million ounces gold M&I and rising

The Spanish Mountain Project is located 70 kilometres northeast of Williams Lake in Cariboo Country, the scene of one of Canada’s most-famous goldrushes. The area has produced 3.8 million ounces historically. Prominent neighbours are Imperial Metals’ TSX:III Mount Polley Mine, which has 2012 planned production of 34 million pounds copper, 46,800 ounces gold and 90,000 ounces silver, and Taseko’s TSX:TKO Gibraltar Mine, which has 2012 planned production of 115 million pounds copper.

According to a November 2011 resource estimate, Spanish Mountain hosts measured and indicated resources of 138 million tonnes grading 0.49 grams per tonne gold and 0.64 g/t silver (at a 0.2 g/t gold cutoff) and inferred resources of 339.6 million tonnes grading 0.37 g/t gold and 0.65 g/t silver. This translates to 2.17 million ounces gold and 2.84 million ounces silver measured and indicated and 4.04 million ounces gold and 7.1 million ounces silver inferred. Compared to the November 2010 preliminary economic assessment, these figures constitute a 59% increase in gold measured and indicated and a 561% increase in inferred.

Since November, the project has seen four additional assay result releases at its Main Zone and the announcement of a new gold zone, the Phoenix.

Highlights of the December 11 Phoenix assays include

• 0.58 g/t gold over 92.5 metres (including 4.12 g/t over 7.5 metres)
• 0.82 g/t over 55.4 metres
• 0.35 g/t over 47.5 metres
• 0.5 g/t over 56.7 metres
• 0.48 g/t over 15.8 metres

Highlights from the most recent Main Zone assays (May 29) include

• 3.25 g/t gold over 64 metres (including 10.73 g/t gold over 18 metres)
• 1.14 g/t gold over 31.5 metres
• 0.79 g/t gold over 63 metres
• 0.52 g/t gold over 89 metres
• 0.51 g/t gold over 62.5 metres
• 0.75 g/t gold over 52.6 metres
• 1.88 g/t gold over 21.5 metres
• 0.7 g/t gold over 53.9 metres
• 1.05 g/t gold over 43.5 metres

The result from Hole DH-1060 (3.25 g/t over 64 metres) is a much higher grade than seen previously. Is this an anomaly? Groves responds, “We do know there are pods within the Main Zone that have displayed higher grades than what we see on our resource table. That’s why we’ve talked about the potential of optimizing starter pits in the first few years of any potential operation.

“[DH-1060] doesn’t necessarily mean that there is potential at depth for higher grade material; we just don’t know. We are probably looking at another, let’s say, 20 holes still to come in the final batch of holes that represent the infill drilling in the Main Zone. We expect to have those results out possibly by the end of this month. And some of the holes that remain to be disclosed are in this general area, so we’ll see if there is any support. Having said that, that sort of width and thickness is very promising because what it will do is force the pit. We believe it will end up with the pit flaw potentially capturing some of this material where before it would have been below the pit flaw. So it is encouraging that there is potential to add ounces to a pit-constrained resource estimate.”

Groves says that any future project drilling will target the Phoenix Zone. The completion of the Main Zone infill program (the purpose of which was to move inferred ounces to measured and indicated) will suffice to improve the project’s economic viability. Groves explains, “As you understand, feasibility level ounces have to have measured and indicated ounces.”

Next Page 1 | 2

Quantum’s Nebraska Niobium Resource Project Will Reduce Foreign Dependence

By Ted Niles

That the US imports 100% of its niobium—indeed, that 85% of the world’s niobium is produced by just one Brazilian company—doesn’t inspire panic in the average person. While familiarity with the metal and its uses is not widespread, the US National Academy of Sciences has deemed it a “critical” metal, and the absence of a domestic producer troubles Washington. Particularly as worldwide demand is predicted to outstrip supply by 2018. Enter Quantum Rare Earth Developments TSXV:QRE, whose Elk Creek Project in Nebraska boasts America’s only NI 43-101-compliant niobium resource.

The 3,802-hectare property was acquired in 2010 by Quantum, which was quick to take advantage of the work carried out by Molycorp in the 1970s and 1980s. “They did over 150,000 feet of drilling,” reports Quantum President/CEO Peter Dickie. “Molycorp walked away from a lot of their exploration projects as they put their Mountain Pass Mine into production, and this was one of them.”

Niobium is both a strategic and a critical metal

Based on a reanalysis of Molycorp‘s historical work, Quantum released an initial inferred resource for the property in March 2011. The company undertook a drill program the same year—the first the site had seen in 25 years—which was used towards an updated estimate announced April 2, 2012. It reported indicated resources of 19.32 million tonnes grading 0.67% niobium and inferred resources of 83.29 million tonnes grading 0.63%, both at a 0.4% cutoff.

While the new resource reflects increases in tonnage and grade, Dickie notes, “We’re realizing that the more drilling we do, the [greater] likelihood we’re going to see improvement in not only overall tonnage but grade and category as well. If you look at our drill results, we had substantial intercepts of well over 1% material. Obviously, the more drilling we do in that vicinity, the more we’ll be able to elevate our resource and our grade.”

Niobium is used in small quantities to both strengthen and reduce the weight of steel. In the form of ferro-niobium it is used in the automotive, pipeline and construction industries. It is also used in superalloys by the aerospace and defense industries. It has been estimated that demand for the metal has grown at a 10% compound annual growth rate over the last 10 years and that future demand is likely to increase at the same rate.

As mentioned above, about 85% of world supply is produced by Companhia Brasileira de Metalurgia e Mineração. Anglo American’s Catalão Mine, also in Brazil, produces approximately 6%, while IAMGOLD’s TSX:IMG Quebec Niobec Mine produces most of the rest. Dickie points out that there is only one other North American niobium producer in the wings—Taseko’s TSX:TKO Aley project in BC. Aley has inferred resources of 159 million tonnes grading 0.43%, at a 0.2% cutoff. “Obviously our grade and tonnage is quite significant from a North American standpoint,” Dickie says. “Elk Creek is likely the largest deposit with that kind of grade. And it’s the only one we know of in the US, where niobium is considered a strategic metal and subject to potential stockpiling.”

Quantum will next undertake a preliminary economic assessment. A metallurgical test program is ongoing, and Dickie hopes to see “some concrete numbers within the next few months. [The PEA] is about a four- to six-month process following receipt of the metallurgy.”

Quantum intends taking Elk Creek to production, but between the resource and the infrastructural advantages offered by the American heartland, Dickie admits that the project now entices larger companies. “We have had some discussions ourselves and been made aware of others who have had their eyes on this project. I would suspect that one or more may act on it prior to us getting into production.” He adds, “Potentially we’ll have a partner involved by the time we start drilling on this project again.”

While it has been a difficult year for mining equities generally, Dickie believes Quantum is undervalued more as a consequence of niobium’s obscurity. He explains, “Close to 90% of the market comes from a private mine in Brazil. A lot of the transactions are dealt with between a private company and the end user, so they’re never reported. It’s not as widely known a market as other commodities.”

He concludes, “It’s not normally done on smaller-market materials such as niobium, but certainly if you want to look at the in situ value at [Elk Creek], it’s very valuable. Our indicated resource contains just under 129 million kilograms of niobium. Our inferred resource has another 523 million kilograms. The current price for niobium in the form of ferro-niobium is about $43 a kilogram. So the numbers are very big on this.”

At press time, Quantum had 86 million shares trading at $0.205 for a market cap of $17.6 million. Its other projects include the Archie Lake REE property in Saskatchewan and the Jungle Well and Laverton rare earth projects in Western Australia.

Miners Calibrate the Costs of Operating in Lawless Lands

By Greg Klein

Part 1 of this story here

The Democratic Republic of the Congo is famously rich in mineral deposits. It is also notorious for destitution, corruption, sectarian violence, child soldiers and atrocities. Last November, election violence forced African Metals TSXV:AFR to evacuate expatriate personnel constructing its Luisha South Copper-Cobalt Property in Katanga Province. The workers have since returned following the re-election of Joseph Kabila, although his record of expropriation can hardly be reassuring to miners. Luisha’s plant is slated for production early this year.

Last October, in South Kivu Province, on the DRC’s eastern border with Tanzania, Burundi and Rwanda, Banro Corp TSX:BAA opened the country’s first gold mine in 50 years. Banro plans to use cash flow from the Twangiza Mine to open a second operation within 18 months, the Namoya Gold Mine in Maniema Province, immediately east of South Kivu.

Both provinces have suffered some of the country’s worst atrocities, including mass rapes by soldiers. However, Banro IR Manager Naomi Nemeth emphasizes, “We are not one of the pockets of disturbances that you do see in the northeast. The area that we’re in, having no incidents over the last however-many years, is not a concern. We have successfully built a mine, gotten it into production and built a road to it with no incidents. I don’t think we would expect them to start at this point.

“We have the same level of security there that we’d have anywhere,” she continues. “We don’t have anything over and above what we’ve always had during construction and early production. We hire a mine security service; they’re a Congo firm.”

Security is just one approach. Like Gran Colombia TSX:GCM and other companies, Banro also employs a hearts-and-minds strategy. Since 2005, its registered charity, the Banro Foundation, has built schools for 3,300 students, promoted adult literacy, funded a women’s health centre and provided infrastructure, including a hydroelectricity rehabilitation project.

Alex van Hoeken has worked in the DRC for 12 years. Now President/CEO of Kilo Goldmines TSXV:KGL, he says, “I know my way around; I’ve got my network; my wife is a lawyer there. I’m quite comfortable. It’s not the easiest place to work, but if you know your way around, it’s doable.”

Kilo holds a 71.25% interest in the Somituri Gold Project, with the remainder held by local companies. The drilling program takes place in Orientale Province, bordering the Central African Republic, South Sudan and Uganda in the DRC’s northeast corner.

Kilo’s DRC work has just received a vote of confidence from Rio Tinto, a joint-venture partner along with Suez Holdings Ltd, in the Isiro Iron Ore Project, also in Orientale Province. Last December, Rio acquired a 15% interest from Suez and, one year ahead of schedule, made an option payment to Kilo of US$1.43 million. “The fact that Rio has purchased the option from the local partner and given us the accelerated payment just means that the project is on track and highly prospective,” says van Hoeken.

Apparently unfazed by any frying-pan-to-the-fire comparisons, van Hoeken has gone from the DRC to Afghanistan. As part of a group led by financier David Buckle, van Hoeken is now negotiating with the Afghan Ministry of Mines for rights in the Hajigak Iron Ore Deposit. If the bid is successful, Kilo will hold a 20% interest in a new company created to develop the deposit, located in Bamyan Province, 130 kilometres west of Kabul.

“We’ll be working with locals for security,” van Hoeken explains in an interview from the Afghan capital. “The province where the project is located is considered one of the safest in the country. The need for security probably won’t be as high as you might think.”

This Buckle-led bid concerns one of four Hajigak concessions. A group of Indian state-run and private companies has dibs on the other three. They’re among the trailblazers of what could be a huge minerals rush, danger or no danger. The country has a potential treasure chest of iron, copper, cobalt, gold, lithium and rare earths worth up to $1 trillion, an oft-repeated number first reported in June 2010 by the New York Times, which attributed it to “senior American government officials.”

According to the Afghanistan Support Investment Agency, “The mining sector is crucial to the reconstruction and rehabilitation of Afghanistan.” A government website states, “The country is much less risky than the media portray. Insurgent activities are restricted to limited pockets of the country.” Even so, the Ministry of the Interior has a 1,500-person Mines Protection Unit guarding the Aynak Copper Mine, a $4-billion exploration project operated by China Metallurgical Group and Jiangxi Copper 560 kilometres south of Kabul. To guard future projects, Afghanistan plans to increase its specialized security unit to 7,000 people.

Another omen concerning the possible future of mining companies operating in dangerous lands was revealed January 3, when Afghan police arrested four employees of the Montreal security company GardaWorld, which offers a range of services including risk analysis and protection. The employees were caught in a vehicle with 30 unlicensed AK-47s. That same day the company issued a statement: “They were taking the weapons to be tested at a firing range before being purchased and properly licensed by GardaWorld.”

Brien Lundin, President/CEO of Jefferson Financial, editor of the Gold Newsletter and host of the New Orleans Investment Conference, agrees that crime, violence and social unrest increasingly threaten mineral resource companies. “I think some ways to mitigate risk are to build community support through community relations efforts that are typically not very expensive in the grand scheme of things. But from a purely political standpoint, there’s not a lot a company can do to alter the risk in any particular area.”

From an investor’s standpoint, he says, “You have to look at the potential value of a deposit. In other words, a very large deposit might justify investment in a riskier jurisdiction if the price was right. So there is a value argument to be made there. You’re willing to take greater risk in riskier places for a potentially greater reward. There isn’t an absolute either way. There are a lot of factors that need to be brought into the equation.

“One of the ways an investor can get a relative idea of the risk in any particular regime is through the Index of Economic Freedom, compiled by the Heritage Foundation and the Wall Street Journal,” Lundin says. “The Fraser Institute started this years ago. That has a numerical ranking of every country in the world. I find it’s a fairly good barometer of investment risk. It encompasses ease of doing business in various regimes and also rule of law.”

Is the rule of law threatened only in distant countries? Last November, Taseko Mines TSX:TKO applied for an injunction to prevent aboriginal protestors from blocking the road to its New Prosperity Gold-Copper Project in south-central British Columbia. The company played a video in court showing Marilyn Baptiste, chief of the 400-member Xeni Gwet’in Band, telling a Taseko employee, “The provincial government does not have authority in our territory.”

The Taseko employee responded, “Well, we’ve been asked to come and conduct an exploration drilling program there…. We’re not aware of anything that would stop us from going about this work.”

Baptiste countered, “You do not have our authorization to be into our territory.”

He showed her some papers and declared, “We have a permit, as I’m sure you’ve received a copy of this.”

She responded, “As I advised, BC has no authority.”

He reiterated, “We intend to continue here because we have a permit, and this is a public road.”

“As I advised, your permit does not have any authority on our territory. BC does not have authority in our territory.”

“Unfortunately, we do have a permit, and we believe we’re going about our legal work.”

“We have not authorized you to be in our territory.”

Eventually, he asked, “We wish to bring our equipment out here. Will it be safe?”

“It will not be safe. I cannot guarantee your safety or anything’s safety, anybody’s safety, because as I said you do not have authority to be on our territory.”

In December, the BC Supreme Court turned down Taseko’s application. Instead, it granted the Xeni Gwet’in an injunction to stop the exploration project. The injunction remains while the band applies for a judicial review of the exploration permits.

The New Prosperity Project is located on provincial Crown land.