Will We Have Enough New Mines? — Richard Schodde

Sprott's Thoughts

By Henry Bonner (hbonner@sprottglobal.com)
Read On Sprott >

As metals prices boomed during the last decade, small explorers and big miners spent billions of shareholder dollars seeking new deposits. Investors wanted the high rewards of a discovery as metals soared in price. At $1,900 per ounce of gold, even mediocre finds could make money.

Richard Schodde, of MinEx Consulting, has studied past exploration cycles in detail. He says we are seeing a tightening of the sector, as the availability of capital has plummeted. Costs of exploration are coming down as companies cut back on high-salaried employees and reduce operating costs.

The following chart from MinEx shows exploration expenditures rising quickly during the boom years:

The amount of money spent exploring rose during the last decade from $2.9 in 2002 to $29.4 billion in 2012, before falling back to $21 billion in 2013 says Mr. Schodde. Over the time-frame 2002-12 $136 billion was spent world-wide on non-bulk exploration, resulting in 647 significant new discoveries, of which only 18 are considered to be ‘top tier.’

Despite a 10-fold increase in the amount of money spent on exploration over the last decade, the amount of new discoveries was relatively unchanged – meaning that more money was spent per new discovery. Mr. Schodde explains that as more money went into the sector, expenses related to exploring went up. Geologists and engineers demanded higher salaries. Drilling equipment and operators became more expensive, and money was spent liberally on general and administrative expenses.

As an ebullient market sentiment took hold, money was also wasted on projects with negligible odds of success or likelihood of development and often incompetent management. So despite high expenditures of capital, the pace of discoveries remained relatively tame.

Mr. Schodde notes that today, salaries and G&A expenses have come down since 2012, and he believes that this trend will continue as capital remains scarce.

Adding to the challenge, finding new deposits will become much tougher for the exploration industry, he says, because most ‘easy-to-find’ deposits have already been discovered. Explorers will have to drill deeper in known mineral-rich locations, such as Western Australia, or look in problematic jurisdictions, such as Central Africa. Making discoveries should become more costly for these reasons.

Already, new discoveries are barely keeping pace with depletion, says Mr. Schodde.

As he explains, only about half of new decently-sized deposits will later become a mine.1 Depending on the commodity and location it will take 10-15 years on average for a discovery to become a mine. So we must discover about twice as much metal today as we will be using in a decade from now in order to maintain supply.

Looking ahead to expected production rates in 2020, gold is being discovered at 1.5 times the expected depletion rate. New copper deposits are being discovered at 1.7 times the projected consumption rate in 2020, which is also below the ‘replacement rate’ for the metal.

The exploration sector is contracting — spending less money and pursuing fewer projects – and is being forced to be more efficient, Mr. Schodde explains.

While exploration expenses have come down, the need for new deposits is strong. The exploration industry will need to make more new discoveries, despite decreasing capital available, or the supply of mined metals is likely to decline in coming years.

Richard Schodde has over 30 years of experience in a wide variety of project analysis and strategic planning roles within the international resources industry – including 15 years at WMC (in its Business Development Group and as Strategic Planning Manager for the Exploration Division) and more recently, 4 years at BHP Billiton (as Minerals Economist in their Global Exploration Team). In 2008 he founded MinEx Consulting to provide strategic and economic advice to mining and exploration companies.

http://www.minexconsulting.com/publications.html  Invest with Sprott

This information is for information purposes only and is not intended to be an offer or solicitation for the sale of any financial product or service or a recommendation or determination by Sprott Global Resource Investments Ltd. that any investment strategy is suitable for a specific investor. Investors should seek financial advice regarding the suitability of any investment strategy based on the objectives of the investor, financial situation, investment horizon, and their particular needs. This information is not intended to provide financial, tax, legal, accounting or other professional advice since such advice always requires consideration of individual circumstances. The products discussed herein are not insured by the FDIC or any other governmental agency, are subject to risks, including a possible loss of the principal amount invested.

Generally, natural resources investments are more volatile on a daily basis and have higher headline risk than other sectors as they tend to be more sensitive to economic data, political and regulatory events as well as underlying commodity prices. Natural resource investments are influenced by the price of underlying commodities like oil, gas, metals, coal, etc.; several of which trade on various exchanges and have price fluctuations based on short-term dynamics partly driven by demand/supply and nowadays also by investment flows. Natural resource investments tend to react more sensitively to global events and economic data than other sectors, whether it is a natural disaster like an earthquake, political upheaval in the Middle East or release of employment data in the U.S. Low priced securities can be very risky and may result in the loss of part or all of your investment. Because of significant volatility, large dealer spreads and very limited market liquidity, typically you will not be able to sell a low priced security immediately back to the dealer at the same price it sold the stock to you. In some cases, the stock may fall quickly in value. Investing in foreign markets may entail greater risks than those normally associated with domestic markets, such as political, currency, economic and market risks. You should carefully consider whether trading in low priced and international securities is suitable for you in light of your circumstances and financial resources. Past performance is no guarantee of future returns. Sprott Global, entities that it controls, family, friends, employees, associates, and others may hold positions in the securities it recommends to clients, and may sell the same at any time.

ExpoPlaza Latina – April 30th

 

Special CAMBRIDGE HOUSE Rate:
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Western Canada – Gateway to Asia Pacific & Latin America

Ever thought of doing business in Latin America? Latincouver brings you ExpoPlaza Latina 2014, the only business conference in Western Canada which explores opportunities in Asia Pacific & Latin American trade focusing on the mining, oil & gas, energy, innovation and cleantech industries with discussions on The Pacific Alliance. The Pacific Alliance summit binds Colombia-Mexico-Chile-Peru and represents a huge 50% of all trade flows in LatAm with USD $556 billion in exports in 2012.

The business conference attracts speakers, delegates and Consulate representatives from Latin America and Western Canada, this is the event to find high-profile business contacts and really get involved in the discussion. Watch the VIDEO.

Don’t miss ExpoPlaza Latina April 30th, 2014 at The Wosk Centre for Dialogue, SFU in Vancouver!

Topics to be covered this year include:

  • * Investment Opportunities in the Pacific Alliance Region
  • * Successful CSR Initiatives in Latin America
  • * Mining Medium Term Forecast
  • * Startup Incubation in the Americas
  • * SMEs Accessing the Latin American Market – Tips and Case Studies

For the latest news release: http://latincouver.ca/images/News_Release_2014.pdf

For more information: www.expoplazalatina.com

 

 

What India’s 815 Million Voters Have on Their Minds

 

By Frank Holmes
Read on usfunds.com here

April 10, 2014

India has kicked off the world’s largest election this week, with its national elections that will run fromApril 7 through May 12. The second-most populous country, India is home to 1.2 billion people. The size of the voting population is a staggering 815 million.

The election will decide the parliament and ultimately determine the next Prime Minister of the country.

India is a fascinating country that I have written about many times in relation to gold’s Love Trade. The love for gold is a cultural phenomenon that is shown in gifts given for weddings and festivals, and the idea that one’s wealth is defined by ownership of physical gold jewelry and coins.

In my travels I have seen this love for gold first-hand, and witnessed the vast population that makes up the energy of India. Did you know that half of India’s population is under the age of 25? This youthful group makes up 600 million people, equating to twice the population of the U.S.!

India’s young population cares about jobs and economic opportunities. This will likely be the focus on their minds when they go to the voting polls. The candidate who seems favored to win the office of prime minister is Narendra Modi, of the Bharatiya Janata Party (BJP).  Modi has a complicated past, with connections to violent, sectarian events. But as The Economist describes him, he is also known as “a man who, by his own efforts, rose from humble beginnings as a tea-seller.”   This boot-straps tale resonates with the voters who are reaching to improve their own economic situations.

Modi is known as a business-friendly candidate. In his home state, he has a history of being open to foreign investment, and has pursued economic relationships with Europe and the U.S.

Over the past decade, a great shift has taken place in India. Urbanization trends show that about half of the population lives in urban areas. Although official government definitions of rural and urban areas don’t quite match what we think of in the West, the trend shows that the number of urban dwellers could double in the next 25 years.

Urban dwelling usually is paired with an increase in wealth as city residents have more regular incomes. We’ve seen this increase in wealth with the rise in cell phone usage in India and television ownership. Now, 65 percent of Indian households own a TV set. With Internet-enabled phones and televisions, the people are connected and share ideas across the country.

These people are striving for the American Dream. As I’ve mentioned, every American born will need whopping 2.9 million pounds of minerals, metals and fuels in their lifetime. When you think about babies born in India, aspiring to the American lifestyle, you can begin to recognize the implications for resources demand in this part of the world.

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. By clicking the links above, you will be directed to third-party websites. U.S. Global Investors does not endorse all information supplied by these websites and is not responsible for their content.

A New Industry Was Born Today–and so far it’s a Monopoly

 

There is a multi-billion dollar problem in the oil patch just looking for a solution—get oil to flow better along the horizontal leg of a well.

A small Canadian company called Raise Production Inc. (RPC-TSXv; GLKFF-PINK) thinks it may have the answer.

They have developed a way to place many small motors down the horizontal leg of a well bore and have them fire in parallel—that means right after each along the well—creating multiple draw down points for oil to be hurried along the well to the vertical part of the well bore.

This beta technology is not yet commercial, but on April 10 they announced their first test well increased production by 300%, and the stock has moved 100% today—a double. The Market believes it will work.

They’ve created an entire new industry—horizontal leg engineering. There is reservoir engineering, and now this. This management team had an idea that oil reservoirs are all very different, and should not decline at the same rate. They assumed that the reason most decline rates are so similar is because of a mechanical issue in the horizontal leg.

And they believed they could fix that. Their little motor system appears does that.

The potential is enormous. Over the next three to five years there will be 26,000 horizontal oil wells drilled in the United States alone just to meet the drilling requirements of land leases.

In the five years that follow that, the energy industry is still going to be making “swiss cheese” of the North American landscape drilling thousands of wells.

There are billions and billions of barrels in the ground in these horizontal plays that we still can’t get at with the current methods of horizontal drilling.

Five years ago this horizontal drilling revolution was barely on anyone’s radar. Today millions and millions of barrels of oil are being produced from horizontal wells.
Precipitous Decline Curves – The Curse Of Horizontal Oil Production

At this point everyone knows about the horizontal oil boom that has transformed North American oil production. But North American horizontal oil wells today likely needs an oil price of $85 or higher to generate any positive return.

What makes these horizontal oil wells require such high oil prices is their production profile. The current nature of a horizontal oil well is an initial surge of “flush” production. That flush production is followed by a first year decline curve that is incredibly steep.

yearly declines

The major horizontal oil fields in Canada and the United States all have similarly high rates of first year declines:

 

horizontal flow II

Every one of the major oil fields in North America loses more than half of their initial rate of production after just one year.

Compare that to a vertical oil well that is drilled into a conventional reservoir. Those wells decline at much slower rates which allows for much stronger cash flow for a longer period of time.

The solution proposed by Raise Production could turn the decline curve of a horizontal well into something that looks more like a conventional vertical well.

Any decrease in the rate of decline would increase the return on capital invested drilling a well. It would mean that every single horizontal well that is drilled going forward using this technology would make more money for the driller than it would without it.

Such a significant increase in the rate of decline would mean tens of billions of dollars of value to the energy industry.

Therefore, a patented solution that significantly changes the decline curve on horizontal oil production would also be worth billions.

Raise Production Inc’s Novel Production Management System

Raise Production believes that problem with horizontal wells that creates the steep declines is the lack of flow management. A horizontal well goes straight down vertically and, over quite a distance, turns at a right angle and continues straight sideways.

Raise Production’s technology aims move oil along the horizontal section of the well much better to the vertical section where it is “lifted” to the surface.

raise II
According Raise Production current horizontal wells suffer from the following:
  •        Isolation of the oil at the toe (the far end) of the horizontal well
  •        An increase in gas to oil ratios
  •        Inefficient mobilization of fluids
Raise Production’s patented technology addresses these challenges.

The Raise Production system is designed to go to work in the horizontal section of the wellbore.  The system places multiple pumps along the horizontal section of the well.

The system “sweeps” the oil along the horizontal section of the well and toward the vertical section.   This helps the oil reach a point where the normal artificial lift in the vertical portion of the well can influence the flow of oil to the surface.

The result of all of this should be that more oil gets to the vertical section of the well, and oil that would have eventually gotten there on its own arrives faster.

More oil sooner equals higher profit per well and higher rates of production.
First Field Testing Is Complete

Raise Production has spent two and a half years and lots of blood, sweat and tears developing the system.

The company has gone from the conceptual design phase, to industry focus groups, to detailed design, to securing patent protection and finally construction of a proto-type.

All of that work culminated last August with the deployment of the first proto-type system into the field.

On October 21 of last year Raise announced the completion of that initial 60 day field test.

The company was pleased with the results which indicated that the system worked as designed, is stable and that it can have a meaningful impact on horizontal flow.

Raise also announced that through the testing some additional things were learned that can lead to improvements in the system and additional patents.

Based on the results of this field test Raise and its industry partner agreed to try a second deployment of the system at the end of November on the same wellbore.

Those next set of test results were announced last night from a well in the Viking play in Saskatchewan—and showed increases in well bore production of 300%

If this second field test also yields positive results Raise intends to roll out a commercial version of the system in the Viking light oil play in 2014.

The potential is huge, but it’s early, early days. But the Market believes.

DISCLOSURE–I do not own this stock.

PS–Global Cooling Part III is coming Monday!

PPS–The OGIB rate increase happens on April 23–beat the rush and save money! http://oilandgas-investments.com/subscribe-here/

Rick Rule: Platinum, Palladium Supply Squeeze Will Turn Ugly – Sprotts Thoughts

Friday, April 4, 2014
Henry Bonner

 

Strikes at South African mines have caused a massive drop in platinum and palladium production. And the world’s palladium supply could decline by 41% overnight if the West imposes export sanctions on Russia1.  Speculators are betting that these events will reduce supply of the metals and drive up prices.Rick Rule, Chairman and Founder of Sprott Global Resource Investments Ltd., recently weighed in. He believes platinum and palladium could go lower in the near-term, as fears of a sudden crunch dissipate.

The real reason platinum and palladium should rise over the coming years has nothing to do with geopolitics or labor issues, he believes. Rick begins:

The political dispute with Russia is not particularly relevant to the platinum and palladium industry, except in the extremely short term. Cutting off exports from Russia is not in the West’s interest, and certainly not in Russia’s interest. So I doubt that a politically-motivated ban on exporting the metals will arise.

As these fears subside, it could take the metals’ prices lower, as speculators focus on short-term effects. Meanwhile, Russia’s exports are likely to decrease for other reasons, which many investors might miss:

The supply of platinum and palladium from Russia is threatened by decreasing ore grades at depth in the Norilsk mines, where most of the metals are mined. These mines have been in operation since the early 20th century, so they are likely nearly depleted.

New mines in Russia are probably 10 years away. So at least for the next decade, production should continue to decrease as deposits are increasingly mined out. Continue reading

Q1 Economic and Energy Metals Review – Chris Berry

 

Editors Note: Chris Berry will be speaking at the upcoming Canadian Investors Conference June 1 & 2

Good Morning Everyone,

This morning we offer a Q1 2014 review of the major macroeconomic events of the past quarter as well as a review of select Energy Metals including uranium, rare earths, graphite, lithium, cobalt, fertilizers, tin, and titanium.

Despite the uncertainty which overhangs much of the global economy, select commodities are off to a solid start. We offer our insights as to why and positioning for a way forward.

View the Q1 Report here

UrtheCast releases its first images of Earth from space

 

Editors Note: UrtheCast Corp. will be exhibiting at the Canadian Investors Conference June 1 & 2 in Vancouver.

Read on CBC Here 

Vancouver-based UrtheCast Corp. released an image of 300 square kilometres around Moneague, Jamaica, captured by its medium-resolution camera on March 28.

Russian cosmonauts reattached both that camera and an ultra HD video camera to the outside of the Russian segment of the International Space Station during a spacewalk in January, following a previous unsuccessful installation attempt.

The video camera is still being calibrated and tested.

In the newly released image, you can make out streets, buildings, fields and waterways, surrounded by a bumpy landscape of round, green hills. Each pixel in the image represents six metres by six metres.

That is quite a bit lower than high-resolution imagery from commercial satellites operated by some other companies such as U.S.-based DigitalGlobe that allow you to distinguish objects as small as 50 centimetres by 50 centimetres, and clearly show objects such as vehicles.

However, UrtheCast says it will make images from both cameras available just a few hours after they’re captured, providing a unique “near realtime flyover view” of the planet as the space station orbits the Earth 16 times a day.

UrtheCast’s video camera is expected to be able to resolve objects as small as one metre wide.

That camera is pointable via the internet, and UrtheCast plans to charge customers for control over it.

The company expects customers to include governments, non-governmental organizations and corporations that would like particular types of live and archival images for purposes such as monitoring the environment.

4 Areas Revved Up for a Resources Boom – Frank Holmes

 

Original article here

By Frank Holmes

Frank Holmes is CEO and chief investment officer of U.S. Global Investors, Inc. He is also a regular speaker and friend of Cambridge House International 

Commodity returns vary wildly, as experienced resource investors can attest and our popularperiodic table illustrates. This inherent volatility can spell opportunity for the nimble investor who can look past the mainstream headlines to identify hot spots. Our global resources expert, Brian Hicks, CFA, identified four we believe are revved up for a resources boom.

1. Plenty in the Tank for Energy Stocks

Because of the previously low expectations of global growth and oil demand, energy stocks have been shunned by investors and have languished in recent years. In fact, according to Goldman Sachs, oil equities held in the Energy Select Sector SPDR ETF have underperformed the broader market by 32 percent since 2008!

Global energy stocks have also suffered: In a comparison of the price-to-book valuations of the MSCI World Energy Index to that of the MSCI World Index, the ratio is at a level we haven’t seen since the late 1990s and early 2000s. Back then, crude oil plummeted to a very low price of $10 per barrel.

Today, with oil hovering around $100 a barrel and improved economic conditions in the U.S., energy stocks appear to be a tremendous bargain compared to overall stocks.

Relative Valuation of Energy Sector

When it comes to natural gas, the cold, snowy winter has caused inventories of the commodity to rapidly decline. As the U.S. is experiencing the coldest winter in 13 years – some parts of the country have had the coldest weather in nearly three decades – natural gas inventories have been drawn down to levels we haven’t seen in 10 years.

Still, Old Man Winter hasn’t been persuasive enough for companies to respond with supply.

Based on data from the research firm IHS, 384 gas-directed rigs were online in the lower 48 states to refill storage and meet new demand coming online from the industrial sector in 2013. However, looking ahead over the next few years, the rig count is going to have to rise dramatically “as the gas market tightens in late 2014 and 2015,” which is a tremendous opportunity for investors, says IHS.

Rig Count

Before rig counts can increase, higher natural gas prices are needed to incentivize operators to invest in natural gas. Based on last quarter’s earnings reports, many major producers, such as EOG, Southwestern or Pioneer Natural Resources, are not planning on increasing their natural gas budgets. Bill Thomas, Chairman and CEO of EOG Resources, explained his reasoning that is part of the collective thought process across the industry:

“For the sixth year in a row we are not [trying to] grow EOG’s North American natural gas production. This is reflective of our view of low returns on natural gas investments. We won’t drill any dry gas wells in North America during 2014 because we don’t see a change in the gas oversupply picture until the 2017-2018 time frame.”

As we come out of this winter season, the complacency toward adding to rig counts may amplify the deficit in natural gas inventories.

2. U.S. Chemical Industry Has a Competitive Edge

One upside to the low natural gas prices in North America is that it equates to relatively cheap feed stock for U.S. chemical companies. Whether it’s Asia or Europe, gas prices outside of the U.S. tend to be benchmarked to the higher price of crude oil.

North American natural Gas is a Global Bargain

Along with the global economic recovery, natural gas is giving the U.S. a competitive advantage. We’re seeing chemical companies coming back to the states, creating jobs, expanding exports out of the U.S., and helping the nation’s current account deficit.

3. Shipping Companies at a Possible Inflection Point

The prices to ship commodities around the world have been hovering around the lowest we’ve seen in five years. However, demand for shipping is starting to overtake the supply of new ships, which bodes well for shipping companies.

Take a look at the chart showing the Baltic Dry Index over the past five years. The index is made up of various sizes of carriers including the Baltic Capesize, Panamax, Handysize and Supramax indices and measures the price of moving raw materials by sea. Primarily, these vessels transport iron ore and grains, i.e., wheat, corn and soybeans, which are especially vital goods for China.

To keep its population of 1.3 billion fed, China needs to import millions of tonnes of wheat, corn, rice and soybeans. As this demand is recognized, shipping companies should benefit.

=Baltic Dry Index Poised for a rebound

4. Alternative Energy Could Get You More Green

In China, residents have been dealing with increasing cancer-causing pollutants and vehicle congestion on roads, and public discontent is rising. This winter, as pollution grew to be 10 times higher than the acceptable rate, Beijing University students protested the conditions by putting masks on iconic statues.

The effect that pollution is having on China’s economy benefits certain industries, including renewable energy or clean energy, whether it’s solar or wind power

You can see just how dramatic the investment has been over the last five years. Specifically, wind power and solar look especially attractive. Take a look at CLSA data: In 2009, the country had about 0.2 percent of the global market. By 2014, it’s estimated to grow to one-third of the global market.

China isn’t the only country with a growing renewable energy market. With the Fukushima nuclear reactors incident after the massive earthquake in Japan, the solar market is taking off there too.

Chinese Solar

The Diverse Approach of the Global Resources Fund (PSPFX)

We believe these areas of the market offer the most exciting opportunities today. They have the wind at their back, giving us the confidence to overweight the companies within these areas of the market that are also showing extremely robust fundamentals.

Because of the diversity and volatility of each commodity, we believe investors benefit by holding a diversified selection of commodity stocks actively managed by professionals who understand these specialized assets and the global trends affecting them.

I just flew back from Asia, where I spoke at Robert Friedland’s Asia Mining Club and Mines and Money Hong Kong, with a special stop in Carslbad, CA on my way home to speak at the Investment U Conference. It has been an exhilarating week meeting with global entrepreneurs, mining executives and curious investors. I look forward to sharing their advice and insights with you next week.

 


P.s. It’s not too late to join me for an investment adventure in Turkey in May.

Please consider carefully a fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.

Fund portfolios are actively managed, and holdings may change daily. Holdings are reported as of the most recent quarter-end. Holdings in the Global Resources as a percentage of net assets as of 12/31/13: Energy Select Sector SPDR ETF 0.00%; EOG 0.00%; Pioneer Natural Resources (2.18%); Southwestern 0.00%

Because the Global Resources Fund concentrates its investments in a specific industry, the fund may be subject to greater risks and fluctuations than a portfolio representing a broader range of industries.

Bitcoin: An Evolution in Money and Banking w/ Jeff Berwick

Bitcoin came out like a rogue wave. Slowly building in the horizon and before we knew it was over are heads and crashing down all around us. Now that the froth seems to have receded the waters have calmed and looks to have temporally found peace between $500 – $600 usd. (View the chart here)

Jeff Berwick, regular speaker at Cambridge conferences and self proclaimed financial freedom fighter, has been an advocate of the crypto currency since it’s early days. Jeff played a roll in getting Bitcoin ATM’s into the public and has boasted six figure USD transactions using the crypto-currency.

Jeff talked on “Let’s Talk Bitcoin” about the crypto, the coming end of modern finanical systems, how governments should approach the concept and his favourite, freedom.

Enjoy,

Will the East or West Be Right About Precious Metals?

Via regular Cambridge speaker and member of Casey Research, Jeff Clark.

Original post here

In a very informative interview with Financial Survival Network, Jeff Clark explains why he’s convinced the bottom for gold is about 90% in at present; how China may get a voice in setting the London Fix price; and what the divergent views of gold and silver between the East and West might lead to in the very long term.

While gold and silver’s trend shift is lifting many mining stocks, not all miners are worthy of the boost. As Jeff points out in the interview, political risk is an often ignored element in assessing a mine’s soundness… but it’s only one of many variables that need to be thoroughly checked before buying any mining stock. Learn how to become a savvy gold investor—now’s the best time to get started.

$2 Billion for Cambridge House Exhibitor Oculus

Congratulations to Oculus Rift on their $2 Billion acquisition by Facebook!

Cambridge House President, Jay Martin, strapped in to the Oculus Rift virtual reality roller coaster at the Cantech Investment Conference in Toronto – January 16, 2014.

“Oculus has the chance to create the most social platform ever, and change the way we work, play and communicate.” – Facebook CEO, Mark Zuckerberg.

View Facebook’s press release here

Cambridge House will be showcasing the next round of up and comers on June 1/2, 2014 in Vancouver at the Canadian Investor Conference. Over 100 companies will be exhibiting and presenting.

ExpoPlaza Latina 2014

 

BC – the Gateway to Asia Pacific & Latin America

Ever thought of doing business in Latin America? Latincouver brings you ExpoPlaza Latina 2014, the only business conference in Western Canada which explores opportunities in Asia Pacific & Latin American trade focusing on the mining, oil & gas, energy, innovation and cleantech industries with discussions on The Pacific Alliance. The Pacific Alliance summit binds Colombia-Mexico-Chile-Peru and represents a huge 50% of all trade flows in LatAm with USD $556 billion in exports in 2012.

This business conference attracts speakers   and delegates from Latin America and Western Canada, including executive decision makers, industry experts and high level government and trade organization officials.  T  his is the event to find high-profile business contacts and really get involved in the discussion.

Don’t miss - ExpoPlaza Latina March 24-25th
Fairmont Waterfront, Vancouver
In partnership with GLOBE 2014 (March 26-28th)

REGISTER HERE

· EPL 2014 Event Overview- English: Click HERE

· Full Sponsorship Package: Click HERE

· Exhibitor Info: Click HERE  $1000

· GLOBE Conference Program- English: Click HERE

· REGISTER AS AN ATTENDEE: Click HERE  $350 (2 days conference and workshops)

Video -> http://youtu.be/Ddsb2gChpps

Marc Faber: “Emerging Economies Will Be Submerging Soon; May Lead To Devaluations & Higher Gold Demand”

Full Video Interview Available Here. 

During a time of stagnating emerging market growth and increasing Asian gold demand, Marc Faber, Director of Sprott Inc. and Publisher of The Gloom, Boom and Doom Report, was kind enough to share a few comments.

According to Marc, “if the Chinese economy imploded, it is likely that…the government would implement a devaluation of the yuan,” leading to similar currency moves in the region.

Here are his full interview comments with Sprott Global Resource Investment Ltd.’s Tekoa Da Silva:

TD: Marc, the narrative on natural resources involves Asian demand. You live in Asia. So what’s happening on the ground there and can we rely on continued growth in the region?

MF: Well, that’s a very good question because we have an economic slowdown in emerging economies that is very pronounced and I think some emerging economies may be submerging soon, and have actually significant economic problems. Then the question arises, “Will they continue to buy gold?” Say if there was a recession in China, in the downturn, would people buy gold?

I think if the Chinese economy imploded, it is likely that the currency would begin to weaken, the yuan. Or the government would implement even a devaluation of the yuan. It could be the case. If that were the case, then I think that Chinese individual investors would rather shift some of their money into gold which they can buy in China nowadays than keep their funds in the local currency. So I think that’s actually a trouble in Asia and also geopolitical problems in Asia and in other regions of the world may actually lead to rather higher gold demand than lower gold demand.

TD: Marc, what are your thoughts on the regional Asian conflicts going forward and how might that impact natural resources?

MF: Actually, my view is this; we wouldn’t have a conflict in Asia if there was no intervention by the U.S. The U.S. has a security pact with Japan and has military bases and naval basis all over Asia.

The Chinese economy is highly vulnerable to interruptions in the supply of metals and of oil, because 47% of global metals consumption is nowadays from China[i]. It’s up from 4% in 1990 and 10% in year 2000. So they have become a huge factor. For their industrial production, they need resources; they need iron ore from Australia, copper from Australia and elsewhere, and oil from the Middle East. That’s their only source of oil, the Middle East, compared to say the U.S. that can source oil from Canada, from Mexico and who have a rising domestic production.

So the Chinese are very concerned about interruptions of supplies and I think that over time, the Chinese will want to control the East and South China Sea. I do not think that they have any aggression plans, but the U.S. wouldn’t be particularly happy if the Chinese or the Russians had military bases in the Caribbean, in Mexico, in Canada and so forth. The Chinese cannot accept to be encircled by military bases by the U.S. in Central Asia, South East Asia, and North Asia. I think the tensions will actually increase over time.

TD: Marc, when we look at gold, it has been sideways to –

MF: It has been down.

TD: Right, over the last three years. But when you look at the fundamentals today as compared to 2011, how would you describe the difference?

MF: Well basically, we had a huge run-up in prices between 1999, from $255 oz. to $1921 oz., in early September 2011. We’ve been in a correction period.

Now, I think the correction period was partly justified because there was too much enthusiasm and too much speculation leading to the peak in September 2011. But I think that there may have been some market manipulation as well, could be. My sense is that the correction has probably come to an end, because if anything, the fundamentals are much better today than they were at that time, but the price is down.

I always tell investors, that every investor understands the principle “buy low and sell high,” but when prices are low, nobody wants to buy. We had very negative sentiment recently.  I’m not so sure about asset markets, because we could one day, after this colossal asset inflation of the last 20, 30 years, also have asset deflation.

But when I compare say gold shares and the price of gold to the S&P, the S&P is up substantially since 2011 and gold is down substantially. So if you compare say the performance of gold shares to the S&P, I think it has been a disaster for gold shares.

When I look around at asset prices; real estate, bonds, equities, paintings, collectibles, vintage cars, I think the price of gold is actually one of the few assets that are relatively cheap, relatively inexpensive. In particular, as my friend Eric Sprott always says, “Gold shares now are at a very low level.”

TD: Marc, given your world travel experience, how would you characterize the value of water as a natural resource and what do you think might be some of the opportunities and pitfalls in investing in that resource?

MF: Well, as you know, we still have colossal poverty in the world. Usually extreme poverty occurs in areas where you have no water. Water is very important, it’s a scarce resource. Countries that are endowed with a lot of water like Canada, or even the U.S., or some European countries like Switzerland (we have a lot of water), and are very fortunate.

Countries that have no water like the Sub-Saharan Africa, they are very unfortunate. So I believe that one should invest in water. I suppose there is an execution risk but I think water would be, if you want to have development aid, if you want to improve the standard of living of people, I would rather address the water problem, the proper water distribution, the irrigation, than to give them vaccines and gifts.

TD: Marc, what drew you to be a Sprott Inc. board member?

MF: Well, a while ago, I think 5 or 6 years ago, Eric Sprott asked me if I would consider being a board member and I supposed that the reason I was asked is Eric is a subscriber to my newsletter to The Gloom, Boom And Doom Report.

I had written a book in 2001, called Tomorrow’s Gold: Asia’s Age of Discovery, which was not specifically about gold, but it was about the coming bull market in commodities driven by the incremental demand from China. So I think that he saw a fit at least philosophically, and that he also considered my abilities as an administrator and so he asked me to join the board.

TD: Marc, in your dealings with people around the world, what have you noticed are some of the characteristics that lead to the building of wealth as an outcome?

MF: Well, it’s a funny story. I went to a high class school in Switzerland. Not that we were rich, but I was in this class, and in the class there were several very well-to-do Swiss family members. The children of these families, most of them have no more money. One still has a lot of money because his grandmother in her youth was studying in Paris and she took a liking in the 1910-1920s impressionists. So they have Van Goghs and Renoirs and Matisse, even in the toilet they have so many of them. The appreciation of these paintings was fantastic.

Another one is well-to-do because he inherited money from an uncle of his. So it’s funny that some entrepreneurial families that were – especially at that time, in either construction or in the textile industry, they are all essentially gone. But the largest wealth of my school friends came from inheritances.

Then when I came to Asia, I liked Asia in 1973. I went to Hong Kong because people were very entrepreneurial and risk takers. It’s like they like to gamble and they’re not afraid. In Switzerland everybody is always afraid to lose money, but in Asia they take risks and some of the entrepreneurs became immensely rich. Immensely rich starting from zero.

These are people that were frugal with themselves. They worked very hard and they were also benefiting from asset inflations. In Hong Kong property prices have gone ballistic over the last 30, 40 years. So anyone who owned properties became automatically very rich. I’m saying this because I am of course completely against money printing as the central banks do, because they enrich basically people that own assets. And the people that don’t own assets, their wealth or their standards of living are going down. That creates then a growing wealth and income inequality that then leads to social unrest or geopolitical problems.

TD: As an extension of that last question Marc, as an administrator of assets, what are the characteristics you look for before deciding to give money to other people?

MF: Well, most of the money that I look after, I manage. But I believe that we don’t know about the future, and I may have my views about investments and maybe someone else has a different view or a different skill set or a different niche of expertise.

For example, I don’t know anything about biology. I also don’t understand social media. But maybe there is someone out there who is specialized in those sectors, and to him I would allocate some money. Or for instance I’m familiar with Russia because my partners and I founded either the first or second Russia fund, Firebird, at the time in 1993.

But I’m not today an expert on each Russian company. So for investments in Eastern Europe and in Russia, I would give my money to somebody else, or even in Asia. I don’t have the time to visit every company. I know lots of families that own businesses and so forth, but I’m interested also to see what other fund managers are doing.

So if I know a fund manager that is specialized in Asian shares and value oriented, I give him some money and I can also see a little bit what he’s doing. So I allocate some money to different managers.

TD: Now what about a CEO? What are the characteristics you might look for in a resource exploration or development company CEO that meets with you and says, “Marc, we’re looking for financing”?

MF: Well, I think in every company you want management that is skillful. Obviously that has talent, and preferably, you have management that has their interest aligned with yours as a shareholder.

In other words, they ideally own a lot of shares in the company you invest in. Good management is management that can adapt to change.

That is the key because when I started to work on Wall Street, the favorite stocks among institutional investors were companies like Sears, JC Penney, Kodak, Xerox, Polaroid, and so forth. Most of these companies have disappeared because management was not able to adjust to the changes in the world.

I mean there was at the time an analyst at who followed the photographic industry, Polaroid and Kodak. They were these two companies and on the periphery she followed Fuji photo film.

Her projections were how many people in the world would buy a Polaroid camera over the years, and how many pictures the world would take with Kodak cameras, and then how many films eventually Kodak would sell.

Her projections were eventually all exceeded—but not with Kodak films and not with Polaroid cameras. But with mobile phones that were taking pictures electronically. I mean you see every idiot nowadays taking pictures all the time to put on Facebook, to look at himself or herself. Nobody is interested in these pictures except themselves. But it didn’t benefit Kodak and Polaroid.

So there are these changes that occur in the world of investments and that is why I always say when you have these studies about, for example by Jeremy Siegel, on how the Dow Jones has performed between 1800 and today. I once told Jeremy, “Look Jeremy, if you invested in 1800, in stocks in the U.S., 80% of the companies at that time were canal companies and banks. In the first big bust, the Depression of 1840, 1841, most of them went bankrupt and eventually all the canal companies in America went bankrupt, all of them, even the most profitable ones, like Erie Canal.”

Then people invested in railroads in the 19th century. By 1895, 95% of the railroads went bankrupt. So the studies don’t take these statistics into account; how many companies fail if you invested in stocks in 1929. Most of them no longer exist.

TD: Marc, your fellow board member at Sprott Inc., Rick Rule, commonly notes that bull markets are the authors of bear markets and bear markets are the authors of bull markets. When you look at the general equities market here today, how does it strike you?

MF: In a free market economy, you will always have price fluctuations. The Federal Reserve today artificially manipulates asset prices up. It’s a huge mistake but that’s what they do. To answer your question specifically, we had a bear market that ended March 6th, 2009, at S&P 666. We are now over 1800, up almost three times. Over the last two years, most equity markets around the world, emerging market stock markets have been down or moving sideways, they’re no longer following on the upside. In the U.S., an increasing number of shares are breaking down.

We had extremely optimistic sentiment just before Christmas. We had very heavy insider selling and we have high valuations and extremely high corporate profits by historical standards if you look at margins and so forth.

So my view is in a month’s time, the bull market will be five years old. This is the second longest bull market in the last 100 years. I wouldn’t buy shares here. I’m not interested.

Now can the market go up another 20 percent? I wasn’t interested to buy the NASDAQ in late 1999, but between January 2000 to March 2000, the NASDAQ went up another 30%. Afterwards people were crying when they realized their losses.

So I think yeah, the markets go up and down. I think that the upside potential now is very limited and there is considerable downside risk, considerable. Probably more downside risk than investors realize.

TD: Marc Faber, Director of Sprott Inc. and Publisher of The Gloom, Boom and Doom Report, thank you for sharing your comments.

MF: My pleasure. Thank you.

For more information about Sprott Global Resource Investment Ltd.’s investment professionals and their market insights, visit www.sprottglobal.com or contact tdasilva@sprott.com.

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Eric Sprott: We’re Looking For Ways To Survive “[The] Counterfeiting Of Money”

During a time of rebounding precious metals and mining equity prices, Eric Sprott, Chief Executive Officer and Senior Portfolio Manager of Sprott Asset Management, was kind enough to share a few comments.

According to Eric, we’ve reached an inflection point in the precious metals, where he believes a prudent speculator may find great opportunity.

Here are his full interview comments with Sprott Global Resource Investment Ltd.’s Tekoa Da Silva:

TD: Eric, you’ve indicated that we’ve reached an inflection point in the precious metals as of about six weeks ago. What are the signs you’re seeing in the marketplace right now that give you that conviction?

ES: Well, there have been some very interesting developments in the precious metals markets. I would say the most interesting one is the fact that the equivalent to the SEC in Germany, the acronym is BaFin, came out on – I think it was January 17th, and said that the main regulator said that precious metals are manipulated worse than LIBOR and that word “worse” is a very significant word in my mind.

Then when you think about some of the chronology for BaFin, they announced in the middle of November that they were going to investigate the possible fixing of gold prices or manipulating of gold prices on the London gold fix.

In the middle of December, they were said to have gone into Deutsche Bank’s offices to review their trading records. As I’ve said on January 17th, the head of that regulator said that it’s worse than LIBOR and on the next day, Deutsche Bank declined to continue being a member of the fixing of the London bullion market. When you think about what must have happened, my own feeling is that the regulator probably went back to Deutsche Bank having looked at their records and said, “Do you know what your boys in London have been doing here?” And of course the next day they quit the LBMA.

Then when I reflect on that regulator saying, “Okay, well let’s look at what happened last year.” First of all, if you think about manipulation, there’s only one reason in my mind that bankers manipulate things. They don’t manipulate them for the bank to make money. They manipulate them for the employees to make bonuses.

When are bonuses determined? They’re determined June and December, at the end of the month. When did the gold price hit its lows last year? The last trading day of June and the last trading day of December.

If you can accept that it was manipulated, then you therefore would come to the conclusion, “Oh, it has been discovered, so maybe they won’t manipulate anymore.” Where can we go from here knowing that we won’t have this kind of repressive forces on the gold price?

So I think when you look at what has been made public about manipulation and what we have analyzed over the years, the flows of physical metals, which has suggested to us that there’s so much buying of physical metals that the central banks must be active in this market on the sell side not declaring their sales because I honestly think that demand for gold is twice the annual mine supply.

So I think we have lots of exciting things to look forward to in 2014. I think we could see a massive run up in the price of silver and gold, both to new highs and of course the impact on stocks would be incredibly dramatic.

TD: Eric, as a matter of record, you sold some bullion recently to which the proceeds have been reallocated into the producers. If this is true, can you explain that strategy? Is it time-sensitive and if so, why now?

ES: Sure. Well, I’ve always believed that the price was manipulated. We know that the producers got just massacred in 2013 as they were also weak in 2012. They got down to probably in some cases $.10 cents on the dollar or less, compared to what their highs were. In fact I think I bought a stock at $.12 cents that had been as high as $5.00 when the price of gold was $1920. It’s a producer, and I have a simple formula; if the price of gold goes to $2000, the average gold producer probably has a cost of production all-in of $1000.

So you take his production, and in the case of this $.12 cent company, he had about 85,000 ounces of production. Again, make $1000 an ounce. You would be making $85 million. I think the market cap at $.12 cents was something like $30 million.

Well, if you can make pretax $85 million, ($60 million after tax) and you trade at 10 times earnings, you become a $600 million market cap company that was trading for $30 million.

So that’s why I was a seller of metals to buy the stocks.

TD: Eric, Forbes magazine added you to their list of billionaires in 2012 indicating that you started out as a research analyst, now having built the multibillion dollar Sprott Inc. group of companies. So I’d like to ask; what has been your secret to success in being able to build this company throughout your life?

ES: Well, I think the secret to success is being an analyst, recognizing value, wanting to buy things that can go up a very large amount. I always thought I will never buy a stock unless I think it can go up at least 100% within the first two years. Of course opportunities do come along where you can imagine, “Well, this could go up 1000%  or 2000%,” because you’re really early.

It’s interesting that we just talked about situations where I’m imagining the stock could go up 2000% here. That’s the sort of thing I’m looking for and it’s not an easy path because some of the companies don’t do as well as you expect. Some economic developments come along that affect how people treat the stock market. But when it wins, it’s such a huge payoff that it’s not that difficult to increase your wealth exponentially and I think maybe that’s the reason my wealth has increased exponentially.

TD: What do you feel makes Sprott Asset Management unique as a firm?

ES: Sure. Well, I think we’re pretty strident in our views about what’s going on in the world economy. When I think of all the partners that I have, whether it’s Rick Rule, John Embry, Marc Faber (who’s on our board), we’ve all been very outspoken about what’s going on in the financial system.

I don’t want to put words in everyone’s mouth but I would generally say we think of it as a ponzi scheme or as Rick Rule would call it, “counterfeiting of money,” and so we’re looking for ways to survive that situation. I think that’s what we bring to clients. We’re willing to believe in ourselves and not withstanding for example the huge declines that we’ve experienced in precious metals in the last two years. We’re still staying the course because obviously we think when we come out of this and all the truth is known, that that’s the place to be in the financial situation we find ourselves.

TD: Eric Sprott, Chief Executive Officer and Senior Portfolio Manager of Sprott Asset Management. Thanks for sharing your comments.

ES: My pleasure Tekoa.

For more information about Sprott Global Resource Investment Ltd.’s investment professionals and their market insights, visit www.sprottglobal.com or contact tdasilva@sprott.com.

Enjoy the interview? Please support the site by sharing this URL page link with friends, family, and your favorite chat forum.

Thanks,
Tekoa Da Silva