Monday, 6 December 2010

Silver reaches 30-year high!

Silver reached $ 29.91 an ounce this week, making that the highest price since March 1980. The metal is up 75% this year increasing its role as a substitution product for the expensive metal gold. Investors are continuing to see more value in silver, which proves my previous prediction from my last post in October when the price of Silver was at
$ 23 per ounce.
With the Euro zone debt crisis still in play, the support for Gold and Silver is very strong. Furthermore the recent comments from Ben Bernanke on quantitive easing are keeping the liquidity tap well open!

Monday, 25 October 2010

Hyperinflation in 2012?

A recent development at the Bank of England has caught my attention. The BOE announced that it will increase its emergency bond-purchase plan by a staggering 100 billion pounds ($ 160 billion) to aid the economy as the government cuts spending. The central bank will also keep its benchmark interest rate at a record low of 0.5% until at least late 2012. The UK is facing the largest public spending cuts since World War II. Its soaring record deficit is a major problem for the country.

With other economies following a similar path and reducing interest rates to record lows, to stilmulte economic growth, high inflation is going to be inevitable in the near future.
Since the introduction of the Euro in 2002 the European Union has seen an average inflation rate of 9%. A 100 EUROS received in 2002 are only worth 46 EUROS today! So any investment that hasn't yielded a min. of 9% p.a. has effectively lost you money!
The next years are going to continue to be difficult for people holding cash, life insurances or money market bonds. Silver will be one of the best hedges in the future for investors. Besides its monetary status, it also has an industrial purpose. Silver could hit the $ 100 mark in the near term, when investors look for an alternative hedging investment for Gold.
When Gold hit its last peak in the 1980s, the silver price rocketed and investors started to trigger a buying panic!

Wednesday, 1 September 2010

Second Euro bailout inevitable

Former Bank of England policy maker David Blanchflower recently announced that a second EU bailout package “inevitably is going to come”. My prediction from February has unfortunately come true and the Euro is in an unstoppable decline.

Furthermore we are going to face major inflationary pressures, which are going to add to our woes.
The European "lifesaver", as I call it, of $1 trillion to stop contagion from Greece is not going to last very long and the banks are going to soon face even bigger problems.

I am sure this package is going to bite us back, sooner or later....

Saturday, 21 August 2010

Gold, the next bubble?

George Soros, the billionaire global investor and fund manager, has recently been making some very unsettling comments about the price of gold. The whole bullion market across the world turned panicky when Soros made the loud comment that the gold price is the ultimate bubble.
However for some reasons he has still been investing heavily in the commodity with his SPDR Gold Trust fund. The biggest global gold-backed exchange fund increased its position in Gold by a whopping 152 percent in the last quarter of 2009.
So why is one of the greatest investors of all time buying into gold even as he continues to harp on the gold bubble talk?
I think Soros knows that the bubble won't burst at the current price of $ 1.125. The uncertainty in the Eurozone and the ballooning deficits in the U.S. will encourage investors to buy into gold for the next 3 months or so. The price of an ounce could easily go up to $1500. However Soros is right in a way that during times of very low interest rates, certain assets have developed bubbles. He strongly believes that Gold is the next one to burst. But until then, a lot of money can be made during this period, if one buys gold diligently. The only question that remains is when will it burst....

Sunday, 14 February 2010

The Euro conundrum

As most of you are probably well aware, the Euro has recently become under immense pressure due to Greece's huge 12.7% budget deficit.

Now at the moment there are many talks about what to do with Greece. The two main proposals are either to simply provide government aid or to revoke the country's membership from the European Monetary Union, which seems to me to be a very drastic measure.
The European Maastricht contract has a 'no bail-out' clause, stating that fellow EU countries are not allowed to provide financial support for struggling countries. This is probably not going to hold anyway, as I am pretty sure that Greece will not be excluded by the EU committee and will receive in some form or other financial aid. Until then however, the situation will remain unstable.

The reason why everybody is getting a little tense is due to the fact that many European banks are exposed in Greece. German banks alone have over 30 bn. Euros exposure. The four PIGS all together (Portugal, Italy, Greece, Spain) have over $ 1100 bn. debt with other European banks. A possible default scenario would cause a new chain reaction and put more pressure on banks and governments. Although Personally I don't think we will come to that point, but I do believe that the Euro will suffer over the next 3 - 6 months.

We have seen a continued strength of the Dollar against the Euro and very encouraging figures from the U.S. economy in terms of growth and unemployment rates. I also mentioned in a previous post that U.S. factory payrolls picked up for the first time since 2007. The manufacturing rebound probably accelerated in January and homebuilding bounced back too. According to the median estimate of 65 economists surveyed by Bloomberg News, production climbed 0.8 percent last month, the biggest gain since August. Europe’s recovery almost stalled in the fourth quarter as waning spending and investment in Germany unexpectedly brought growth in the region’s largest economy to a halt.
Looking at the 1 year Eur/USD chart I can't see any sign of a turnaround in the next months. And by the way things are going, I don't think Greece will be the only country to announce problems with a rising deficit!
I would definitely jump on the occasion and go short on the EUR/USD.

Wednesday, 10 February 2010

Thompson Creek Metals on the look-out for acquisitions

Kevin Loughrey, CEO of Thompson Creek, said in a presentation at a mining conference in New York last November that they are seeking to buy Moly projects that are close to production in the near future.
He said that the company is looking primarily in North America but would also consider assets in South America. The company expects global demand for the metal to rise to 600 million lbs by 2015 from about 460 million lbs in 2009.

After my recent post about TCM's outlook, I felt it would interesting to post a list of potential take-over candidates, which are either close to production or are already producing.

Company Location Metals Production Market Cap. $CAD Price $CAD

1. Avanti Mining ++ Mo - $36.98 m CAD 0.23
2. General Moly + Mo - $167.33 m CAD 2.31
3. Mercator Minerals + Mo, Cu, Ag + $442.25 m CAD 2.48
4. Roca Mines ++ Mo, Cu, Ag, Au + $55.86 m CAD 0.61

1. Avanti Mining is in a relatively early stage, but geographically it is near to TCM properties. Additionally one of the directors is the former Chief Operating Officer of TCM, which gives the two companies an interesting connection! Maybe a company to watch in the long-term.

2. General Moly owns two Moly properties in Nevada; Mt.Hope and The Liberty Project. Mt.Hope is its most advanced project and contains over 1.3 billion pounds of proven and probable Moly reserves, which makes it one of the largest Moly properties in the world. They expect to produce 40m lbs per year and their anticipated direct operating costs will be $5.29/lb. This is in comparison to other projects very low. The company has significant cash holdings and strategic partnerships with ArcelorMittal and POSCO (South Korean Steel Company) that already makes General Moly well positioned. And by looking at the market cap. a very affordable acquisition for TCM.

3. Mercator Minerals has quite a hefty price tag on it, but it is definitely on the same level than TCM in terms of production rates. Mercator's open pit copper-molybdenum mine located in northwestern Arizona, is expecting to average in the next 10 years, a production rate of 56.4m lbs of Copper per year, 10.3 million lbs of molybdenum and 600,000 ounces of silver. The Company achieved commercial production in the second quarter of 2009, with a production capacity of 25,000 tons of ore per day through the mill. Mercator plan to increase their capacity to 50,000 tons per day of ore in late 2010.

4. Roca Mines is like General Moly a low cost producer with its Max Molybdenum mine in British Columbia. They expect an operating cash cost of $5 per pound. The company also owns other interests in Gold and Silver projects. Roca intends to complete back-to-back production runs resulting in the production of approximately 3.0 million lbs of contained molybdenum, which in my opinion is probably a too "smaller" investment for TCM.

Both General Moly and Mercator Minerals seem like ideal candidates for Thompson Creek Metals and with cash positions of more then $500m, quite affordable for TCM too. If I had to put my money on one, I would go for General Moly.

Monday, 8 February 2010

The stock to watch in 2010!

I have been following Thompson Creek Metals for some time now and the company has taken quite a beating over the past two years. TCM is the 2nd largest Molybdenum producer in the world and it is therefore highly correlated with the Moly price.


In 2008 the Moly price reached its peak at US$ 36/lb and TCM was generating over $1.2 bn in revenues with $341 m in net profits. Due the financial crisis the price of the steel-hardening agent dropped rapidly to almost $7 in March 2009. TCM's profits dived as a result and the company's mining operations were scaled back.

Moly has recovered somewhat and TCM is benefiting big time.
The company will soon announce its full year 2009 numbers and although they won't be very exciting, expecting $ 90 m profit compared with $ 341 m in the previous year, the outlook remains very promising.

The current moly price stands at $15.10/lb and the board sees a much stronger demand for the metal in 2010. With production targets set between 29 to 32 million pounds, we can expect Sales in excess of $600 million and profits of $ 100 m to $ 200m this year.

Furthermore the company has more than $ 500 million cash with almost no debts and TCM's Price/Book ratio is just 1.48. So probably a stock to buy rather then a stock to watch!