Thursday 22nd August 2019

Resource Clips


Posts tagged ‘united states’

The end is still nigh

August 21st, 2019

So James Rickards found time to write another doomsday survival guide

by Greg Klein

So James Rickards found time to write another doomsday survival guide

 

St. John wrote just one Book of the Apocalypse but James Rickards has finished six so far. His most recent, Aftermath: Seven Secrets of Wealth Preservation in the Coming Chaos, offers a warning and advice for the economic end times that he considers imminent. Exactly how and when that’ll happen, he doesn’t say. But this book continues his exposé of the world’s monetary system: “the real system as distinct from the one elites would have you believe exists.”

What Aftermath offers in addition to Rickards’ trademark pitch for gold are some very general tips on investment and asset allocation—so general, however, that they hardly merit a book. This volume’s strength comes in its essays, discussions and digressions on a variety of (usually related) topics.

Among the most important is public debt, primarily that of the U.S. Long unsustainable, the burden groans under a 300% increase over 20 years, currently fuelled by Donald Trump’s revival of trillion-dollar deficits. He gets away with it, though: “Entitlements and defense both get to gorge at the trough, so there’s no dissension in D.C. The only loser is the country.”

So James Rickards found time to write another doomsday survival guide

Among the less-acknowledged causes of American debt are student loans, “now more than 50 percent larger than the junk mortgage pile in the last financial crisis” and growing. Also growing are the default rates, already more than three times that of mortgages at the height of the 2007-to-2008 crisis.

Debt hardly distinguishes the U.S. from other countries, and the entire world remains at risk from contagious sovereign defaults in emerging countries. Rickards’ at-risk list might surprise some readers.

China is a Ponzi like Madoff. China has trillions of dollars in external dollar-denominated debt, wealth management products, bank loans, intercompany loans, and other financially engineered arrangements that can never be repaid. If everyone with a claim on China wanted her money back, China couldn’t come close to satisfying even a small portion of those seeking liquidity.

…. Apart from borrowed money, wasted infrastructure investment, and fictitious accounting, there is no Chinese economic growth miracle.

While the U.S. denominates its debt in U.S.-printable U.S. dollars, money-creation won’t work forever. The only thing supporting fiat currency is confidence, and that can’t last, Rickards argues. History, psychology and common sense demonstrate that “confidence in money is fragile, easily lost, and impossible to regain.”

Spreading to all reserve currencies, “this loss of confidence will be exacerbated by malicious efforts on the part of Russia, China, Turkey, Iran, and others to abandon dollars entirely and to bypass the U.S.-dollar payments system.”

This accumulation of risk factors is entirely new, and outside the experience of any trader or quant.

Contagion demonstrates one danger of interconnected systems, but exceedingly complex technology and financial instruments intensify the peril. Flash crashes only hint at the possibilities, Rickards suggests. “Markets now confront a lethal brew of passivity, product proliferation, automation, and hypersynchronous behavioral responses. This accumulation of risk factors is entirely new, and outside the experience of any trader or quant.”

Getting back to currencies, the author presents intriguing evidence that a gold standard is actually in place. Using research from D.H. Bauer, Rickards says that special drawing rights, the International Monetary Fund reserve asset that’s speculated to replace the U.S. dollar as the world currency, have been pegged to gold. Bauer’s data shows yellow metal hovering around SDR900, fluctuating no more than SDR50 in either direction.

 An important pillar of a global monetary reset seems already in place.

Rickards blames China. “Even if the peg is nonsustainable in the long run, it’s a clear short-run signal that China is betting on the SDR and gold, not the yuan or the dollar. An important pillar of a global monetary reset seems already in place.”

Sometimes digressive in his subject matter, Rickards’ other topics include an interesting perspective on the Uranium One purchase. He served on a CIA advisory board as manoeuvres by Frank Giustra and Bill and Hillary Clinton led to the company’s takeover by Rosatom. “It’s as if the deal were being handled inside the intelligence community on a special track, precisely to avoid the analysis our group was formed to provide.”

Another digression looks at the disturbing prevalence of surveillance, data mining and choice architecture to monitor and manipulate citizens. “Neofascist” China plans 600 million surveillance cameras, digital facial and gait recognition software and internet monitoring to reward its people for good deeds or penalize them for offences ranging from smoking in public to tweeting verboten thoughts.

Most plans for catastrophe will fall apart in the first five minutes of being needed.

He also criticizes some alternative end time strategies. “Most plans for catastrophe will fall apart in the first five minutes of being needed.” Survivalists holed up in bunkers will face “pop-up militias,” he warns. The ultra-rich, with plans to flee to their luxurious New Zealand estates, haven’t considered how they’ll get to the airport, how they’ll refuel their private planes en route, whether they’ll get past the NZ military on arrival, or how they’ll ensure the loyalty of their private security guards. The catastrophe will be worse than they imagine.

Even so, too many of his digressions are unnecessary, such as his tedious account of being locked out of his car, an unnecessarily long rebuttal of behavioural psychology and the rather weird discussion of finite size involving King Kong, Godzilla, skyscrapers and whales.

“Investors should not focus on the cause of the collapse (it’s a long list and the timing is uncertain),” he notes. Certainly the book’s rambling nature belies any sense of urgency. He even hopes to finish another volume before the catastrophe finally hits. That would be his seventh on the subject since 2012.

Update: Lynas responds to Malaysia’s six-month extension for rare earths processing plant

August 16th, 2019

by Greg Klein | August 15, 2019, updated August 16, 2019

Lynas gets a six-month reprieve to continue rare earths processing in Malaysia

Lynas expressed confidence in meeting government-imposed conditions
for its rare earths processing facility in Malaysia. (Photo: Lynas Corp)

 

Even a six-month reprieve augers well for Lynas Corp, the company emphasized on August 16. The Malaysian government granted an extension the previous day after threatening to shut down a plant that refines and separates material from Lynas’ Mount Weld rare earths mine in Western Australia.

The government’s original conditions called for Lynas to render the mine’s output non-radioactive before shipping it to Malaysia and to remove the low-level radioactive waste that has accumulated since 2012. The deadline was September 2, the former licence expiry date.

Lynas said yesterday’s decision was consistent with a science-based government report released last December and the company remains confident of meeting conditions.

The decision’s only significant divergence from the report, Lynas stated, was the requirement that cracking and leaching operations be moved out of Malaysia within four years. Earlier this month CEO Amanda Lacaze said the company hopes to have a C&L facility operating in Western Australia by 2022, part of the company’s $500-million expansion planned by 2025. The new facility would allow Lynas to ship non-radioactive material to Malaysia for further processing and separating.

As for the presence in Malaysia of radioactive water leach purification residue—a reported 580,000 tonnes has piled up so far—the company has six months to find a location and obtain consent for a permanent deposit facility.

Although the government rejected Lynas’ proposal to convert WLP residue into soil conditioner for agricultural use, the company vowed to continue R&D into other possible outcomes.

“While we may have preferred a longer licence … the effect is essentially the same because under either structure there will be an administrative application for renewal,” Lacaze told a briefing for analysts and investors.

In a statement issued earlier that morning, she expressed optimism “that this decision will bring an end to the politicization of Lynas over the past year.”

Last May Lacaze emphasized Lynas’ determination to keep its supply chain separate from the involvement of China, which dominates all aspects of global rare earths production and processing. Considered critical elements by the U.S. for several uses including defence, REs figure prominently in the American-Chinese trade disputes. Consequently the U.S. has implemented policies to encourage production from domestic and allied resources and technology.

Read more about Lynas Corp.

Read more about rare earths, critical elements and the U.S.-China trade dispute.

Lynas gets a six-month reprieve to continue rare earths processing in Malaysia

August 15th, 2019

This story has been updated and moved here.

U.S. continues push for domestic rare earths supply

July 23rd, 2019

by Greg Klein | July 23, 2019

Five presidential memos issued July 22 further show American commitment to develop rare earths deposits and supply chains unbeholden to China. Under Section 303 of the U.S. Defense Production Act, Donald Trump formally declared production capability for a number of critical elements to be essential for national defence:

U.S. continues push for domestic rare earths supply

  • separation and processing of heavy rare earth elements

  • separation and processing of light rare earth elements

  • neodymium-iron-boron-rare earth sintered material and permanent magnets

  • samarium-cobalt-rare earth permanent magnets

  • rare earth metals and alloys

Without presidential action under section 303, Trump stated, American industry “cannot reasonably be expected to provide the production capability [for these elements] adequately and in a timely manner. Further, purchases, purchase commitments or other action pursuant to section 303 of the act are the most cost-effective, expedient and practical alternative method for meeting the need for this critical capability.”

One week earlier the U.S. reportedly began an inventory of rare earth deposits and facilities, asking that companies respond to a Request for Information by July 31, “a short time frame that underscores the Pentagon’s urgency,” according to Reuters.

With China supplying 93% of U.S. rare earths supply for these defence necessities, military dependency on a geopolitical rival has given REEs top priority out of an official list of 35 critical minerals. In June, after the U.S. unveiled a new critical minerals strategy calling for closer co-operation with allies, Trump and Prime Minister Justin Trudeau agreed “to develop a joint action plan on critical minerals collaboration,” according to another Reuters report.

The U.S. Department of Commerce announces a strategy to ensure critical minerals supply

July 16th, 2019

…Read more

Washington continues critical inquiries into rare earths and uranium supply chains

July 15th, 2019

by Greg Klein | July 15, 2019

While somewhat relaxing its concern about uranium, the U.S. appears increasingly worried about rare earths supply. A Reuters exclusive says Washington has begun an inventory to itemize domestic RE projects.

Washington continues critical inquiries into rare earths and uranium supply chains

With an inventory of domestic RE projects
already underway, the U.S. called for a study
of uranium supply chain potential.

“The Pentagon wants miners to describe plans to develop U.S. rare earths mines and processing facilities, and asked manufacturers to detail their needs for the minerals, according to the document, which is dated June 27,” the news agency reported. “Responses are required by July 31, a short time frame that underscores the Pentagon’s urgency.”

The request mentions the possibility of investment by the military, Reuters added.

The move marks another development in American plans to reduce the country’s dependency on critical minerals from economic and geopolitical rivals. Last month the U.S. announced a new critical minerals strategy calling for closer co-operation with allies. Out of an official list of 35 critical minerals, rare earths repeatedly come up for special attention. China supplies 80% of American demand for this economic and military essential, with more imports coming indirectly from China. Compounding the conundrum is the fact that America’s only rare earths mine, Mountain Pass in California, ships its entire output to China.

Last month Reuters stated that U.S. President Donald Trump and Prime Minister Justin Trudeau instructed their officials “to develop a joint action plan on critical minerals collaboration.”

But if heightened American urgency about some critical minerals looks positive for Canadian projects, so does a reduction in urgency about U.S. uranium supplies.

Cameco Corp TSX:CCO expressed itself pleased with Trump’s decision not to introduce new trade restrictions on uranium imports.

The president disagreed with a July 12 report stating that the country’s heavy reliance on imports threaten to impair U.S. national security. The secretary of commerce found the country’s foreign dependency now accounts for 93% of American uranium supply, up from 85.8% in 2009. The secretary attributed the number to “increased production by foreign state-owned enterprises, which have distorted global prices and made it more difficult for domestic mines to compete,” the White House stated.

But, citing significant concerns nonetheless, Trump called for the creation of a nuclear fuel working group “to develop recommendations for reviving and expanding domestic nuclear fuel production” within 90 days.

Cameco president/CEO Tim Gitzel said the company “also sees tremendous value in increasing co-operation between the United States and Canada to address critical mineral issues and strengthen security of supply on a North American, rather than strictly national, basis.”

Trump and Trudeau’s commitment to a joint action plan “is an excellent initiative, and we see uranium being a key component of that strategy,” Gitzel added.

The U.S. report results from a petition by Energy Fuels TSX:EFR and Ur-Energy TSX:URE, who together took credit for over half of U.S. uranium production in 2017. Yet their estimates for last year showed total domestic production supplied only about 2% of U.S. demand.

The companies called for a 25% domestic quota on uranium purchases in the U.S., suggesting state-owned companies in Russia, Kazakhstan and Uzbekistan keep prices below a profitable threshold for American producers. The Eurasian trio provided about one-third of U.S. demand in 2017.

“If Russia and its allies take control of this critical fuel, the threat to U.S. national and energy security would be incalculable,” the companies maintained.

Rate cuts, bubble-like stock valuations and possible QE with “new non-traditional” interventions look good for gold: WGC

July 11th, 2019

by Greg Klein | July 11, 2019

Some recent dips below $1,400 notwithstanding, yellow metal’s forecast looks positive for the next six to 12 months, according to the World Gold Council. While long-term performance depends on jewelry, technology and savings, shorter-term prices respond to other factors that the WGC considers positive for its favourite element.

Chief among them are interest rates, reflecting an about-face in global monetary policy. Less than a year ago the U.S. Federal Reserve and investors alike expected continued rate increases, the council stated. “Now, the market expects the Fed to cut rates two or three times before the end of the year. And while statements by board members, including Chairman Powell, are signaling a wait-and-see approach, the market has barely changed its forecast. The Fed may not do what the market asks, but it generally doesn’t like to surprise it either.”

The WGC expects Europe’s and Japan’s central banks to follow suit in a global environment of competing tariffs, U.S.-Iran conflict and the ever-looming Brexit. But, the WGC emphasizes, low rates have “the perverse effect of fueling a decade-long stock market rally with only temporary pullbacks. This has pushed stock valuations to levels not seen since the dot-com bubble.”

Should recession strike, central banks might respond with strategies almost guaranteed to bolster goldbugs’ hoarding instincts: “quantitative easing and, possibly, new non-traditional measures to reinvigorate the global economy.”

With over $13 trillion of global debt now offering nominal negative yields, “our analysis shows that 70% of all developed market debt is trading with negative real yields, with the remaining 30% close to or below 1%.”

As for central bank purchases, they came to about $10 billion during the year’s first five months, with continued buying expected. But a 10-year average shows central banks responsible for only 10% of gold demand. Jewelry commands the lead with 51%, followed by 27% for bars and coins, 9% for technology, and 3% for ETFs and similar products.

Positive economic performance, especially in China and India, would likely enhance the top category.

With a mandate to “stimulate and sustain demand for gold,” the WGC represents some of the world’s biggest gold miners.

Download the WGC’s Mid-Year Gold Outlook 2019.

Commerce Resources to provide rare earths and byproduct samples to potential customers

July 5th, 2019

by Greg Klein | July 5, 2019

Commerce Resources to provide rare earths and byproduct samples to potential customers

 

With trade tensions once again demonstrating the need for rare earths supply outside China, Commerce Resources TSXV:CCE announced plans for its advanced-stage Ashram deposit in northern Quebec. The company intends to resume pilot plant metallurgical work, provide rare earths samples to interested parties and also upgrade its potential fluorspar byproduct.

Using lab facilities in Colorado, Commerce plans to produce several kilograms of material for companies that have requested samples. The lab will also work on upgrading the deposit’s fluorspar from metallurgical grade to the usually more expensive acid grade.

An essential ingredient for coolants used in refrigerators, freezers and air conditioners, acid grade fluorspar is also integral to processing uranium and aluminum. Like rare earths, fluorspar ranks among the 35 critical minerals listed by the United States. Over 60% of 2018 global production came from China, according to U.S. Geological Survey data. NorFalco Sales, a division of Glencore Canada Corp, has requested the fluorspar sample.

The pilot plant work will complement Commerce’s pre-feasibility studies as the Ashram deposit progresses.

Using Ashram material, the Colorado plant has already produced high-grade concentrates above 45% total rare earth oxides with recovery surpassing 70%, “comparable to current and past hard rock producers,” Commerce noted.

Separate, Quebec-funded studies at l’Université Laval produced a mixed rare earth oxide concentrate from Ashram material, showing the deposit’s versatility to processing procedures.

A key advantage of Ashram lies in its carbonatite-hosted mineralization and relatively simple monazite, bastnasite and xenotime mineralogy, amenable to conventional rare earths processing.

The near-surface deposit hosts a 2012 resource estimate using a 1.25% cutoff to show:

  • measured: 1.59 million tonnes averaging 1.77% total rare earth oxides

  • indicated: 27.67 million tonnes averaging 1.9% TREO

  • inferred: 219.8 million tonnes averaging 1.88% TREO

Ashram also features strong distribution of the high-demand magnet feed elements neodymium, praseodymium, dysprosium and terbium.

In a report issued last month, Adamas Intelligence stated that permanent magnets accounted for over 90% of TREO consumption by value last year. “This share is poised to expand further as demand (and prices) for neodymium, praseodymium, dysprosium and terbium continue to rise strongly in the years ahead.”

Ashram’s distinctions suggest the project could require a relatively smaller metallurgical plant, along with potentially lower capex and opex, Commerce stated.

Last May Commerce and two Inuit organizations signed a letter of intent to ensure participation as the project moves forward.

At another critical minerals project just a few kilometres away, Saville Resources TSXV:SRE works towards a 75% earn-in from Commerce on the Niobium Claim Group. Following a spring drill program that found high-grade, near-surface niobium along with tantalum and phosphate, Saville looks forward to a Phase II campaign.

In southern British Columbia, Commerce also holds the advanced-stage Blue River tantalum-niobium deposit.

Read more about China’s dominance in global rare earths supply.

Crediting Vivian Krause, Alberta calls inquiry into foreign-funded anti-oilsands campaign

July 4th, 2019

by Greg Klein | July 4, 2019

Forsaking a slingshot to work “from my dining room table, using Google on my own nickel,” independent researcher Vivian Krause took on an extremely well-funded Goliath. Now her findings and the questions they raise should come to light in a formal inquiry. Alberta’s United Conservative Party government, elected last April, has ordered an examination of what Premier Jason Kenney said “amounts to a premeditated, internationally planned and financed operation to put Alberta energy out of business.”

Crediting Vivian Krause, Alberta calls inquiry into foreign-funded anti-oilsands campaign

After years of Quixotic efforts, Vivian Krause’s
research comes to prominence.

At risk for foreign-funded Canadian activist groups will be their eligibility for government grants or charitable status. But their credibility also faces challenges. Kenney directed the commission to determine whether foreign groups “provide financial assistance to a Canadian organization which has disseminated incomplete, misleading or false information about the Alberta oil and gas industry.”

Kenney questioned activists’ focus on Alberta while doing “little or nothing” about American oil production doubling over the last decade and global production rising from 90 million to 100 million barrels per day during the same period.

“We’ve seen huge increases in production and consumption from OPEC countries, from the Russian autocracy, from the Venezuelan dictatorship and even from our neighbours to the south but almost all of this political pressure [targets] this liberal democracy with the highest human rights, labour and environmental standards. And we want to know why, who and how much. We want to know what exactly lies behind this campaign to defame and landlock Canadian energy.”

Kenney blamed the campaign for the loss of tens of thousands of Albertan jobs, thousands of business closures, negative economic growth and a massive increase in public debt.

Headed by forensic accountant Steve Allan, the commission will interview witnesses as well as review existing info and conduct further research. A public hearing may follow. Backed by a $2.5-million budget, the commission must deliver an interim report by January 31 and a final report with recommendations by July 2, 2020.

The premier emphasized the inquiry comprises one aspect “of a comprehensive plan to fight back against those seeking to hurt our prosperity and kill our jobs while applying a hypocritical double standard to other energy producers.” His government also plans an “energy war room” to counter disinformation, legal action against bills C-48 and C-69, and the creation of a coalition of provincial and territorial governments, first nations and business groups to encourage resource development.

Crediting Vivian Krause, Alberta calls inquiry into foreign-funded anti-oilsands campaign

Along with energy minister Sonya Savage,
Kenney announces the inquiry on July 4.
(Photo: Government of Alberta)

Kenney praised Krause’s “valiant research” in tracing over half a billion dollars from American foundations to Canadian activists. He also noted U.S. and NATO evidence that Russia provided money and used social media tactics to encourage opposition to North American and European oil and gas projects.

On the same day as the Alberta announcement, the Calgary Herald reported a recent speech in which Krause accused Prime Minister Justin Trudeau of preventing the Canada Revenue Agency from auditing politically active charities and then having retroactively changed legislation to allow political activism. One week after she testified before a House of Commons committee on the subject, she said, the CRA deleted 14 years of tax records from its online database, leaving only the last five years on the Web.

According to the Herald, Krause also alleged that the CRA had been concerned about an approximately $400,000 severance payment from the World Wildlife Fund to Gerald Butts when he left the charity to become Trudeau’s principal secretary.

Exactly what power Alberta might have to counter anti-oilsands funding remains to be seen. But “sunlight makes the best disinfectant,” Kenney said. Additionally, Krause’s years of research now gain considerable attention as the country faces a federal election.

Read more about Vivian Krause.

‘The money-conjurers’

July 3rd, 2019

Only a radical reset can solve the central bank problem, says Nomi Prins

by Greg Klein

Only a radical reset can solve the central bank problem, says Nomi Prins

 

Imagine the power—unchecked power, at that—to create money. Then imagine the disaster such power could unleash. While that scenario looms in the foreseeable future, Nomi Prins argues, its precursors have made themselves obvious since 2008. They’re the result of central bank policies and the system that sustains them, institutions absolutely bereft of a Plan B. A mess so manifestly dangerous calls for radical solutions, she maintains.

That’s the perspective of an insider, or at least an ex-insider. A veteran of Lehman Brothers, Bear Stearns and Goldman Sachs, Prins dedicated herself “to exposing the intersections of money and power and deciphering the impact of the relationships between governments and central and private bankers on the citizens of the world.” Six books later came Collusion: How Central Bankers Rigged the World, recently released in paperback.

This is a work of extensive detail, recounting who did what to interest rates, inflation rates, currency valuations and other economic interventions, focusing on quantitative easing and the other euphemisms for her preferred term: “money conjuring.” Collusion also answers a key question: Cui bono?

Only a radical reset can solve the central bank problem, says Nomi Prins

The U.S. responded to the sub-prime crisis by “subsidizing private banks (in particular, the Big Six US banks that were key toxic asset creators). The Fed fashioned an historic bailout program that invoked zero interest rate policy (ZIRP), initiated a strategy of quantitative easing by which the central bank fabricated money to purchase government bonds and other securities, and created massive lending programs for banks with relaxed collateral rules. The Fed coerced central banks worldwide to adopt similar strategies.”

With little or no trickle-down effect, she emphasizes. If the too-big-to-fail rationale claimed to protect the wider economy, the wider economy didn’t notice. Through share buy-backs and other strategies, banks used the largesse to enrich themselves instead of providing loans or investments that would put more people to work. G7 banks also used conjured money to “speculate globally, especially in developing countries, in markets rather than in direct economic investment that benefited populations.”

Only in isolated incidents were malefactors called to account. That happened in late 2016, for example, when the U.S. Justice Department hit European Central Bank beneficiary Deutsche Bank with $7.2 billion in fines “for crimes committed during the financial crisis—a sign of all that conjured-money policy had plastered over…. All the cheap-money subterfuge had not addressed the prevailing and alarming codependencies among too-big-to-fail banks the world over. That meant systemic risk had not been extinguished, it had only been camouflaged. The fine was just that, a fine, not a shift to prevent any of the looming hazards the financial system could still unleash.”

Facing even less scrutiny than private banks are central banks, rarely required to explain their machinations. “They vacillate between taking credit for what they deem are positive results in the world economy and remaining silent in the wake of catastrophic failures that result from their policies.”

While G7 central banks collaborated with the Fed, some of their G20 counterparts resisted. Regardless, globalization globalized America’s crisis. But despite U.S. efforts to reinforce world influence, the country inadvertently helped China rise to second-greatest economy status with a currency that challenges dollar supremacy. Contributing to the Middle Kingdom’s stature were some emerging economies, distrustful not only of America’s ambitions but its economic stability.

The Fed has allowed the biggest banks on Wall Street to essentially double the risk that devastated the system in 2008.—Nomi Prins

Current and future stability, more than past misconduct, remains Prins’ greatest concern. “The Fed has allowed the biggest banks on Wall Street to essentially double the risk that devastated the system in 2008.”

She attributes to manufactured money a global debt equal to three times global GDP, a peril that could itself crash the economy or seriously aggravate a crisis of geopolitical origin. As for solutions, she insists that desperate times call for very desperate measures:

“We could write off all the public debt incurred since 2008 that hasn’t been redirected to the real economy—that is, take a deep breath and cancel it out globally.”

Prins also advocates oversight of the money-conjurers, as well as forcing them to channel their money into constructive investments. She wants the big banks dismantled “so that they can’t hold people’s deposits hostage during the next crisis.”

But, assuming her proposals are sound, where’s the will to carry them out? She depicts G7 countries and central banks as stuck in conventional attitudes and clinging to privilege with no impetus for reform. Emerging economies, meanwhile, might be watching with cautious detachment. China, quite likely, looks on expectantly.