by Greg Klein
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No sugar-coating here—this market’s “probably the worst I’ve ever seen and I’ve seen a lot of cycles in my three-plus decades in this industry,” said Lawrence Roulston. “But this one is different from previous cycles.” Speaking on May 26 at Vancouver’s World Resource Investment Conference 2013, the editor of Resource Opportunities emphasized that “it’s really important to understand why this is different in order to understand what to do moving forward.”
By long-term standards, metal prices remain strong. With “irrational” stock prices, Roulston maintained, investors face the challenge of distinguishing the “grossly undervalued” companies from their “grossly overvalued” peers. Even so, opportunity awaits buyers who are more discerning than sellers.
To offer some perspective, Roulston went over some history. In 2008 “everything around the world was hit at the same time,” he said. “The Venture index lost 75% of its value in a matter of weeks. But that sell-off was driven by external factors.” Recovery started “almost immediately,” in early 2009. “Over the next few years the Venture index tripled.”
Looking back to the years between 1999 and 2001, “the nuclear winter of the resource industry,” Roulston said “mines were built whenever metal prices were high, new supply came onstream at the top of the market, there was an oversupply, the prices collapsed and the market went into a down cycle. These cycles had been going on for decades and decades in the mining industry and a lot of people still see the mining industry in that sense.”
But, he insisted, “we’re no longer in that era. It’s very different this time around.”
In 2001 copper went for about 60 cents a pound, “which is in real terms the lowest price copper has ever traded at.” Gold was $252, “the lowest price in over two decades.” In the midst of that despair “nobody dreamed that China, India, the rest of the developing world were about to take off. They were still just looking at the Western world.”
Over the next decade that nuclear winter transformed into “the biggest bull market in the mining industry ever.”
If anything, today’s malady could be worse than that of 1999 to 2001. Yet demand for metals “is still strong.” Although short-term prices have dropped, “all the metal prices are well above their long-term average prices. And the mining companies are generating big operating profits at the current prices. The industry has prospered, at least on the operating level. You don’t have to be a visionary at this time to understand that there’s outstanding value in these junior companies. Most of the valuations on these companies were done at prices well below the current metal prices. And they still look like attractive valuations, even if those valuations aren’t reflected in the current share prices.”
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by Greg Klein
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Fission/Alpha outdo their best R00E-zone assay at PLS
Having previously announced their best interval yet from Patterson Lake South’s R00E zone on May 16, Fission Uranium TSXV:FCU and Alpha Minerals TSXV:AMW announced an even better assay on May 27: 8.57% U3O8 over 20.5 metres. Results for two closely spaced infill holes show:
Additionally hole PLS13-058, 10 metres north of a hole reported in November, showed:
True widths weren’t available.
The results show mineralization is continuous for 120 metres along strike and open in both directions, the 50/50 joint venture partners reported. “We now have high-grade intersections in both the western and eastern areas of the zone, which demonstrates the expansive nature of the mineralization at R00E,” stated Fission president/COO Ross McElroy. “The spectacular quality of these results is further proof that the zone hosts high grades similar to those we’ve found at zone R390E.”
The previous week the JV partners announced a $6.95-million summer program for their celebrated flagship.
Fission/Alpha bolster their teams
The JV partners expanded their staff too. On May 29 Alpha announced two appointments to its advisory board. Charles E. Roy brings over 30 years of experience with Cameco Corp TSX:CCO, where he helped supervise seven discoveries.
Alan R. Graham, a former New Brunswick minister of natural resources and energy, has served on the Atomic Energy Control Board and the Canadian Nuclear Safety Commission. He was “involved in the permitting and oversight of nearly all of the producing uranium mines in the Athabasca Basin,” Alpha stated.
Fission followed two days later with two appointments of its own. Director William V. Marsh spent 15 years working on drilling programs for Chevron. He was a director of Predator Capital, Wolf Capital and, up to its $35.18-million sale to Green Dragon Gas in 2008, Pacific Asia China Energy.
Executive advisory board member Anthony Milewski is a senior adviser to Reuben Brothers Resources, a principal at Black Vulcan Resources and a director of several private and public resource companies who has “particular interest in physical uranium trading and industry supply and demand dynamics,” Fission stated.
Yellowjacket now Athabasca Nuclear Corp, raises $310,160
The company previously known as Yellowjacket Resources TSXV:YJK announced AGM results on May 30, including a new name: Athabasca Nuclear Corp TSXV:ASC. In addition, shareholders appointed Ryan Kalt chairman, with director Tim Termuende taking his place on the audit committee.
The company also completed the first tranche of a $600,000 private placement announced April 30, raising $310,160 through 2.58 million units at $0.12. Each unit consists of one share and a warrant for a half share. Each entire warrant allows a share purchase for $0.20 for 18 months. Kalt nabbed 1.6 million units, increasing his stake to about 22.3% of the company’s outstanding shares.
Allied forces airborne over PLS region
[Lucky Strike and Noka Resources] bring valuable technical expertise, proven management teams and financial capital to help create synergies in the field and corporately. Our geological teams plan to employ the refined exploration methodology that led to the Alpha/Fission PLS discovery to further increase our chances of making a new discovery while saving costs and time.—Jim Pettit, director of
Following the May 24 announcement from then-Yellowjacket/now-Athabasca Nuclear, three more companies announced their participation in a joint geophysical survey on their contiguous PLS-area properties. Skyharbour Resources TSXV:SYH, Aldrin Resource TSXV:ALN and Forum Uranium TSXV:FDC each issued separate statements this week saying the VTEM-Plus system/magnetic gradiometer survey was underway. Citing Alpha’s 43-101 technical report filed in April, Aldrin stated the Alpha/Fission team used a similar survey to define conductors associated with their high-grade, near-surface PLS intercepts.
In a statement accompanying his May 27 news release, Skyharbour director Jim Pettit referred to recently announced earn-ins with Lucky Strike Resources TSXV:LKY and Noka Resources TSXV:NX. The partners “bring valuable technical expertise, proven management teams and financial capital to help create synergies in the field and corporately,” Pettit explained. “Our geological teams plan to employ the refined exploration methodology that led to the Alpha/Fission PLS discovery to further increase our chances of making a new discovery while saving costs and time. We believe this partnership and structure offer the best prospects for vectoring in on a new uranium discovery in the Athabasca region while at the same time mitigating company-specific risk.”
Zadar options five more projects, appoints adviser
In a deal including over $15 million in exploration data, Zadar Ventures TSXV:ZAD optioned an additional five Basin properties from a subsidiary of Canterra Minerals TSXV:CTM. The package totals 67,561 hectares, Zadar stated on May 29. Four projects called Pasfield Lake, Stony Road, Riverlake and Highrock live in the eastern Basin, while the west-side West Carswell property lies 11 kilometres from Shea Creek, the Basin’s third-largest resource, a 49% UEX Corp TSX:UEX and 51% AREVA Resources Canada project. All five properties have seen geophysical work and drilling.
On May 30 Zadar announced the appointment of Jeremy Brett to its advisory board. A senior geophysicist with MPH Consulting, Brett’s 18 years of experience includes uranium exploration in the Athabasca, Thelon, Baker Lake and Otish basins.
Ashburton readies Sienna North and West campaign, drops CanAlaska option
Ashburton Ventures TSXV:ABR announced on May 30 Phase I plans for its Sienna North and West projects in the PLS area. The program calls for surveying and cutting grids, scintillometer tests, soil sampling, radon surveys and float prospecting. Work is expected to begin within weeks.
Not solely fixated with uranium, on May 28 Ashburton announced it staked claims adjacent to Doubleview Capital’s TSXV:DBV Hat copper-gold property in northwestern British Columbia. At the same time Ashburton said it was pulling out of an option to acquire two more PLS-area properties from CanAlaska Uranium TSX:CVV.
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Some spectacular failures notwithstanding, green tech shows signs of hope. So said Chris Berry in his May 26 presentation at Vancouver’s World Resource Investment Conference 2013. Although his talk focused on uranium, the House Mountain Partners founder, Morning Notes co-editor and energy metals expert contrasted one green success story with some more widely publicized failures.
A U.S. Bankruptcy Court completed its post-mortem into lithium-ion battery disaster A123 Systems on May 20. Following a $256.6-million sale to China’s Wanxiang Group, creditors will get 65 cents on the dollar, the Wall Street Journal reported. Shareholders were wiped out. Nor will taxpayers see a dime of their $132-million subsidy. The sale had “more than two dozen lawmakers and retired military officials voicing concerns that A123’s military contracts and taxpayer-funded technology could wind up in the hands of a foreign buyer,” the WSJ stated. The paper added that the bankruptcy ruling “closes an embarrassing chapter in the Obama administration’s efforts to nurture the market for electric vehicles and develop a ready supply of advanced batteries. The U.S. government, in an effort to jump-start the electric-car battery industry, has provided more than $1.2 billion to battery makers in the past three years.”
Fisker Automotive spent $192 million of a $529-million U.S. government loan before shutting down operations and laying off its staff. The company’s expected to file for bankruptcy after selling only 2,000 cars. American taxpayers got just $21 million back last month.
Solar panel fiasco Solyndra declared bankruptcy in 2011 after wiping out another government loan. “That’s $535 million that the U.S. taxpayers are never going to see again,” Berry said.
Those examples show the “dark side of green tech,” he pointed out. Nevertheless Berry maintains there’s “a reasonably compelling case for green technology and clean energy and what you don’t hear about is what’s happening in universities like Simon Fraser or the University of Western Ontario or any research lab in the United States or Canada, or China for that matter. There’s hundreds of billions of dollars going into next-generation battery storage technology, clean technology, etc. In my opinion you can’t have so much money and so much intellectual capital and firepower going into figuring out these sustainable technologies without the dam eventually breaking and a scalable battery storage technology, for example, coming to the fore.”
While some other e-v ventures failed, Tesla Motors paid off the last of a 2010 loan on May 22, when it wired $451.8 million to the U.S. government. The company posted an $11.2-million Q1 profit and increased the year’s sales forecast by 5% to 21,000 cars.
The loan repayment came nine years early. “This is a profitable electric car company,” Berry said. “Obviously that has been an oxymoron thus far and we’ll see if it remains. But I’m actually watching Tesla as sort of a bellwether or benchmark for green technology and by extension energy metals…. despite the rough time we have now.”
by Greg Klein
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It’s through his work with House Mountain Partners that Chris Berry came to his niche, energy metals. His presentations and Morning Notes articles show fascination with the interplay of macro-economic forces, geo-politics and the natural resource sector, “especially the junior mining natural resource sector because that’s where we see so much wealth-generation and wealth-creating opportunity, the current market notwithstanding.” On May 26 he focused on uranium, its growing demand and jurisdictional risk at Vancouver’s World Resource Investment Conference 2013.
Berry sees two opposing global forces putting the West at a disadvantage to the East, but not without potential for Western companies and their investors. He describes Western economies as “treading water” with sagging employment, industrial production, purchasing power, capital utilization and GDP growth. If the “largesse” of money-printing ended, “you would essentially pull the rug out from under these industrialized economies.”
Contrast that with the emerging economies, not just Brazil, Russia, India and China, but also countries like Indonesia and Colombia. Their middle classes keep growing. Even so, they’re increasingly aware that their standard of living doesn’t compare to that of the developed world. Essential to their aspirations is cheap, reliable energy, Berry maintains. That makes a “long-term case for commodity demand, in particular energy metals.”
As he explains, there’s “hundreds of millions, if not billions of people who live at say 10% to 20% of our quality of life and they want what we have. They want iPads, they want iPods, they want refrigerators… that implies infinite demand for finite resources. I’m not going to tell you that all trees grow to the sky and copper’s going to go to $9 a pound and lithium’s going to go to the roof. That’s not how markets work.”
But the world’s witnessing a phenomenon “that we call convergence. Emerging countries understand what we have and how we got there and they’re tailoring their economies to join us.”
That leads him to “four metals that I’m focusing on right now—scandium, cobalt, tungsten and uranium.” He emphasized the latter. “I think uranium is, across the entire commodity complex, one of the only true contrarian plays I see out there.”
Media coverage following Fukushima, however, has “clouded the longer-term issue.”
The very considerable nuclear infrastructure already in place provides very considerable incentive to maintain existing capacity. “Decommissioning any of these reactors comes at a very steep cost,” Berry explains. Citing info from the Nuclear Energy Institute, he said decommissioning can take years and could cost up to $1 billion per reactor. With about 436 reactors in operation, he asks whether governments and taxpayers would foot the bill to shut them down and build wind, solar or natural gas infrastructure instead.
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by Greg Klein
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Some six weeks after the fact, gold’s dramatic drop made for lively discussion at Vancouver’s World Resource Investment Conference 2013. On May 26 Chris Berry, founder of House Mountain Partners and co-editor of Morning Notes, posed some key questions to a four-person panel of prominent gold-watchers.
Mercenary Geologist editor Mickey Fulp suggested another price drop is looming, if only because gold usually hits a seasonal low in July or August. But he seemed unperturbed by the events of April. “For me as a guy who owns 10% of his net wealth in physical gold in my physical possession, I look at these things as buying opportunities,” he said. “I welcome the volatility in the market.”
I’m encouraged by the amount of buying you see in parts of the world that are always the main buyers and they’re not acting as if they expect significantly lower prices.—Eric Coffin, editor of
Nor was Eric Coffin particularly concerned. The HRA Advisories editor said, “I’m encouraged by the amount of buying you see in parts of the world that are always the main buyers and they’re not acting as if they expect significantly lower prices…. If you look in the press in the last month it’s bearish, bearish, bearish” with references to a 300-tonne sell-off. “They probably bought that much in China last month—at least.”
That remark prompted Berry to ask about the “granny effect,” in which Chinese grandmothers buy the stuff while institutions sell. Jay Taylor, editor of Gold, Energy & Tech Stocks, responded that “gold is increasingly a bipolar market” with a paper market much bigger than its physical counterpart. “This move out of gold was solely a paper phenomenon,” he said. “There was tremendous physical buying, which I think kept the price from going lower.”
He added, “I view gold as a hedge against financial calamity…. If you view gold as speculation and an investment, that’s a much different ball game and that’s a paper market.”
Coffin said his Chinese mother-in-law is “not a gold bug at all.” She’s lived through tough times, like the Japanese occupation of Hong Kong. “When people like her buy jewellery, it’s not the 14-carat crap. It’s the real deal…. She lived through periods where you had to grab what you could, put it in your pockets and run.”
Sounding rather blasé about the sell-off, he added, “Companies like Goldman Sachs do this three or four times a year. They just picked gold this time. I’m not reading too much into it.”
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by Greg Klein
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A conference in the middle of this market? Investors look shell-shocked. Mining and exploration CEOs wonder whether to eat their children. In times like these, why would anyone bother attending the World Resource Investment Conference 2013? Well, according to Rick Rule, it’s the ideal time.
The May 26 and 27 Vancouver event certainly boasts an ambitious agenda. With nearly 150 exhibitors and over 35 corporate presentations, WRIC will also feature talks, seminars, workshops and panel discussions presented by about three dozen experts and analysts with any number of informal spinoff functions taking place as well. Rule will be there with his own talk and workshop, but also in his capacity as chairman of Sprott US Holdings. As a renowned contrarian, his thoughts might be dismissed as outrageous. But they’ve made Rule and his company very, very rich.
So why WRIC—especially in times like these?
“I think it’s precisely in times like these that conferences like this are most appropriate,” he responds. “The truth is that bear markets cause bull markets and bull markets cause bear markets. The paradigm that was present in 2006 and 2010, in other words bull market tops, is present today in global money printing, global deficit spending, global resource consumption—none of those things have changed. What has changed is the market’s outlook and the price of assets. It makes perfect sense that if you’re trying to make money in markets you follow the old adage: Buy low and sell high.
“If nothing else has changed besides the price, and if the prices are 70% off, you would describe the current market conditions as a sale,” Rule adds. “In all goods except financial assets, people look at sales as a good thing. People who begin to shop for financial assets as rationally as they shop for physical assets will do well.
“Simultaneously, companies who exhibit at times like these will show a forward-thinking nature and will be able to build constituencies that will serve them well, both in bear markets and bull markets. I have found in over 30 years of conference participation—and this is going to sound very harsh—the median IQ at a bear market conference is substantially higher than at a bull market conference, and the median net worth among the people who have the good sense to shop for bargains as opposed to shop when it’s popular is much, much higher.
“The set of circumstances that we’re involved in right now is precisely the set of circumstances which caused Sprott to become a $10-billion organization. Having the foresight and courage to invest aggressively in market bottoms set the stage for the performance we enjoyed coming out of the early ’90s bear market and the bear market that lasted from 1998 to 2002. It’s precisely in markets like these that the intelligent and aggressive application of capital builds performance-driven organizations like Sprott.”
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