Nov 10 Gold: What's The Score, Baby? Demeadville

Welcome to our Fifth Anniversary Edition of The Gold Update: 260 of these weekly writings are now in the can, as is by our valuation, the price of Gold. When it comes to the beat-down of Gold during these last two years, we say "Enough is Enough!" Therefore, in order to shake up the joint a bit, dare I say,"knock a few heads together", we've decided to ramp up our part in championing rightly higher Gold prices with the above "in your face" new opening staple to these updates for the foreseeable future. And as we look at the scoreboard, with $1,179/oz. as the present Price, 'tis trailing Value -- $2,457/oz. -- by $1,278/oz. In fact, if you check in your Gold Press Guide, $1,179/oz. was the low for 2013.

Our sense is that if there is one money manager poised on the edge of the chair to materially delve back into Gold for one's clients, then there are thousands of like-minded money managers. Problematic is that they're all looking at one another to see who leaps first, for no one really knows "how low may become low". As an esteemed member of our Investors Roundtable exclaimed last Sunday, "Hell, it could go to 600!" That's were 'twas back in 1980, which if price was further diluted to account for the increased supply in Gold's tonnage over these last 34 years, essentially halves that level to 300.

Fortunately, we've not lost our common sense. Given that Gold unequivocally has been money forever, indeed that it has provably increased in value in its role as the de facto offset to accelerating foundationless currency supplies, let's commence with the following two charts. They both cover the last 34 years-to-date of weekly data for these three elements: 1) the change in the supply of the Federal Reserve Bank's M2 money supply, 2) the price of what we now refer to as "Gold D&D" -- its valuationDiluted for its increase in tonnage supply as adjusted for the Debasing of the Dollar by the increase in M2 -- and 3) the price of Gold itself.

The first chart (Price Level) puts M2 on the left-hand axis vs. both "Gold D&D" and Gold itself on the right-hand axis. Thus as displayed in our opening scoreboard, even diluting the price of Gold to account for its increased tonnage supply over these better than three decades, as offset by the level of M2, price today "ought" be $2,457/oz.:

The second chart below (Percentage Change) tracks the same three elements, but all on the same scale. Even given Gold's supply increase, such diluted percentage change when including accounting for the debasing of the money supply is only half of that of M2's percentage change, making all the more absolute the fact that Gold today "ought" be double what presently 'tis:

I know, 'tis all too logical, even as supported by mathematical science, (aka "Truth"). But because at the end of the day, Gold's actual price is demand driven, for which there is a complete dearth, 'tis therefore apathetically -- and thus pathetically -- priced at about half its value. And yet, when the great game of Money Manager Chicken suddenly stops and they all start piling back into Gold funds, Gold stocks, Gold derivatives and Gold bars/ingots/coins, Gold shall, per our favourite of market technical analysis expressions, go Upside Gonzo Nuts ("UGN").

And maybe, just maybe, 'twill be our Swiss friends that get Gold a-rallyin'. For as you studied readers are likely aware, the Swiss in taking to the polls on 30 November have a ballot measure, which if victorious, would charge Die Schweizerische Nationalbank with maintaining at least 20% of its assets in Gold, moreover that Die Bank be forbidden to sell any Gold, and further that Die Bank repatriate any Gold that its owns outside of God's Country. We have to think that passage of this measure surely would be a global reminder toward again valuing Gold as real money, in turn launching it back into First Place in our BEGOS Markets Standings, which year-to-date are as follows and really reflect the short-sighted yearn for Dollar-based paper assets, rather than for Gold:

And speaking of Switzerland, I heard their Marc Faber (via Bloomy) this past week referring to "foolish analysts" pointing to economic strength when the reality is that Oil's plummeting -- as you can see in the above standings 'tis in last place -- is telling us anything but. Then couple that with the Bond leading the BEGOS bunch -- but the S&P's just having closed yesterday (Friday) for the 38th time this year at an all-time high -- and you don't think we're on absolute "crash watch"? Oh yes.

As for the consumer, whose spending drives the lion's share of the economy, a retail analyst noted this week that holiday budgets are tight and that they'll be spent earlier in the shopping season rather than later. Indeed, 'twas reported yesterday that Consumer Credit rose in September for the 26th consecutive month -- and the Fed's mulling over raising rates next year? Woe to those in variable debt throes.

As for the Stateside Baro, 'tis essentially noodling about sideways as the S&P seemingly ignores it...

...whilst across the pond the European Commission cut its growth forecasts for the EuroZone, with added anxiety from the German economy teetering on tipping into recession and the European Central Bank ready to increase stimulus; the Bank of England, too, sees the UK's economic recovery as ebbing; a week ago we discussed Japan's rising sun as sinking; and now we've China's factory output slowing. So, this being a landmark edition for The Gold Update, we again justifiably quote the sole recipient of the very first missive five years ago, JGS: "Sumpthin's gonna happen..." Exactly right, my friend. And I sense the ever-illusive When is streaking toward us.

As for Gold, which after leading the BEGOS standings through the first two quarters of 2014 has now dropped into third place to be -2.2% year-to-date, it put on quite the resilient display yesterday in making back four days of flailing below last year's low, (as we'll later see into newly treacherous territory for our Gold Structure chart). But specific below to this next graphic, although the week's overall change was immaterially higher, yesterday alone was Gold's strongest up day since 19 June, rising better than 3% or 37 points. And given the week's contract volume was the heaviest since that ending 19 April2013, we may well look back on this as Gold's capitulative low. After all, you may recall, last week's missive was entitled: “Gold Is Now WAY Oversold”:

"Well, mmb, you did show us how far away gold got from that magnet thing. Happy 5th by the way..."

Thank you, Squire, 'tis grand to have you aboard in this anniversary edition. And yes, Gold was attracted back to its Market Magnet in full yesterday, as we see below in the left-hand panel's three month chart. Also below in the right-hand panel's one year chart of Gold's "expected daily trading range", we finallysee Gold getting into the seasonal spirit of volatility, the box indicating 20 points expected between the daily high and low prices, and thus quite the Golden playing field for you traders out there:

Next, we've another double-barrel Gold Display. Below on the left are Gold's daily bars for the last three months-to-date with the "Baby Blues" dropping like a stone; but should yesterday's "power bar" mark a capitulative low, the Blues shall soon turn up in tow. Below on the right is the 10-day Market Profile for Gold, the current 1179 price essentially centered between two major trading resistors above at 1204 and 1229, and two major trading supporters beneath at 1168 and 1144:

And now for the grand finale. When we last posted the Gold Structure graphic, (20 September edition), 'twas noted as follows: "...we don't wish to have to create a further sub-structure for the chart in orangy-red defined as Gold having gone to 'you-know-where'..." To so do would require Gold busting its low for 2013 of 1179, which it did one week ago. And thus as we turn to the updated Gold Structure of price's weekly bars since the All-Time High of 1923 on 06 September 2011, we've dutifully added the devilish layer:

In closing, we can't wrap up this anniversary edition without a mention for poor ole Sister Silver, who as you saw above in the BEGOS Market Standings has been absolutely clobbered this year, (-18.6% vs. just -2.2% for Gold). In fact, you may recall from a week ago that she'd been seen hocking her precious metal pinstripes at the local pawnbroker, just to get lunch money. Well, cheer up Sis, per this "above the fold" headline that ran in the FinMedia on Thursday: "American Eagle Silver Coins Sold Out as Demand Jumps ... The U.S. Mint ran out of American Eagle silver coins after selling 1.26 million ounces since the start of the month as futures in New York slumped to the lowest in more than four years." You've got a lot of smart folks routin' for ya, Baby! Clearly by our reckonin', 'tis time for you to join Gold in putting some more points up on the scoreboard!

Cheers and Thanks to You ~The Readers~ for your Interest these Five Years! Onwards and UPWARDS!

...m...

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Nov 10 FYI Markets Open Veterans & Remembrance Day Ron Nicklas

Markets Open Veterans & Remembrance Day Dear PennTrader, The Veterans Day Holiday this year in the USA is on Tuesday... and Remembrance Day is observed in Canada on the same day. These holidays honor the nations' military veterans.  In both countries banks and government offices are closed -- but not the stock markets. So all US and Canadian stock markets will be open on Tuesday for trading as usual.  And PennTrade will be open too. Enjoy your holiday, if you have one. And if you're a vet: Thank you, We owe you big time. Nov 10, 2014 Ron Nicklas and The PennTrade Team

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Nov 10 Novo’s Latest News Bob Moriarty

Novo’s Latest News

Bob Moriarty
Archives
Nov 10, 2014
I have written at some considerable length about Novo’s Witwatersrandlookalike gold project in Western Australia. Rather than rehash what I have repeated again and again, I suggest interested readers go back and read what I have written before.
I went to visit the Nullagine gold project of Novo at the end of September. The company is finishing up a series of 353 RC holes. In addition they have completed over 400 surface samples. When Novo ran the last set of drill holes a year ago, management was disappointed with the results because they didn’t correlate with the results they had been getting from prior drilling and had expected.
Novo and Newmont put their heads together to figure out what the problem was. Results from 115 years ago in the Nullagine gold district showed between 10 g/t up to 60 g/t gold. Novo was doing something wrong to get the results they got.

(Click on images to enlarge)

Novo is drilling through conglomerate. The conglomerate consists of both cobbles that contain no gold and the matrix that is gold rich. If Novo drills through a lot of cobbles, they get low-grade results. If they drill through a lot of matrix they get much higher grades.
At the end of the brainstorming between Novo and Newmont, they concluded the low grades were a result of the “nugget effect” and for more accurate results, hopefully higher, they needed to be assaying much larger samples. The drill samples will be 20 kilos; the surface or costean samples will total 40 kilos.
Bigger samples require far more work on the part of the assay lab. I wanted to do a piece as soon as I saw the progress at Nullagine but all I could really say was it was going to take another two months to see any results. Results from the assays now look as if they will start coming out in the next two to three weeks. Expect results from the two deep drilling holes around the beginning of January.
The surface samples are far more important than they would be at most deposits. They represent exactly what will be mined and are large enough to represent exactly the grade Novo will be mining. They do not measure indications of gold; they measure what will be produced.
On this trip to a much greater extent than I had seen on my first two trips to the Pilbara, I saw the impact of the bacterial remobilization of gold as reflected in the amount of buckshot pyrite.
Quinton’s theory basically holds that due to the chemical composition of water 2.8 billion years ago when the Witwatersrand and the Pilbara basin were formed, all surface gold would have been in solution. As the chemistry of the water changed around 2.3 billion years ago due to theGOE (Great Oxygenation Event) gold began to precipitate out of solution through both chemical and biological action. The GOE affected the chemistry of the earth and of the gold in solution but bacterial action was just as important.
Certain bacteria or microorganisms attract sulfides and gold associated with those sulfides and cause the gold to precipitate out of solution. This happened 2.3 billion years ago as the Pilbara conglomerates were creating the basin and it happens today.
The photos above were taken on my recent trips to Columbus Gold andCalifornia Gold Mining. Hard working bacteria create the oily scum on top of the water as they reduce the sulfur in solution and concentrate the gold as free gold. With sulfide gold you never see the gold, it’s too small, but often with oxide gold, you do.
This paper talks about the action of the bacteria. It’s written in Sanskrit but is a lot more readable than most reports.

Microorganisms capable of actively solubilizing and precipitating gold appear to play a larger role in the biogeochemical cycling of gold than previously believed. Recent research suggests that bacteria and archaea are involved in every step of the biogeochemical cycle of gold, from the formation of primary mineralization in hydrothermal and deep subsurface systems to its solubilization, dispersion and re concentration as secondary gold under surface conditions.

Enzymatically catalysed precipitation of gold has been observed in thermophilic and hyperthermophilic bacteria and archaea (for example, Thermotoga maritime, Pyrobaculum islandicum), and their activity led to the formation of gold- and silver-bearing sinters in New Zealand’s hot spring systems. Sulphatereducing bacteria (SRB), for example, Desulfovibrio sp., may be involved in the formation of goldbearing sulphide minerals in deep subsurface environments; over geological timescales this may contribute to the formation of economic deposits. Iron- and sulphur-oxidizing bacteria (for example, Acidothiobacillus ferrooxidans, A. thiooxidans) are known to breakdown gold-hosting sulphide minerals in zones of primary mineralization, and release associated gold in the process. These and other bacteria (for example, actinobacteria) produce thiosulphate, which is known to oxidize gold and form stable, transportable complexes.

Few geologists actually understand the mobility of gold either through chemical action or through bacterial action. If you go deep in the heart of the Amazon you will find giant gold deposits associated with deeply weathered laterite over less weathered saprolites. The Amazon jungle consists of three types of ground and vegetation, that which is always under water, that which is under water during the rainy season and that which is never under water.
The regular seasonal rains change the chemistry of the soil and gold will precipitate from the sulfides below the saprolites. There will be very coarse visible gold at surface. As the miners went deeper, the visible gold got smaller and smaller. As they go below the laterite layer into the saprolite layer, the gold is only found with sulphides and is so small that it is invisible.
The same is true in Northern California in peach orchards. When farmers pull up dead trees, they often find small gold nuggets at the end of the roots where the cyanide from the tree has attracted gold in the soil to form a nugget. [Editor’s note: Peach farmers might want to put very high fences around their orchards now that Bob’s let the cat out of the bag.]

At Nullagine both the existing buckshot pyrite in the sulfide ore and the holes where the buckshot pyrite has weathered out tell Novo where the best gold will be. In the drill core above, we can see the buckshot pyrite in place. Where surface water and oxygen have weathered the rock, we see where the pyrite used to be but the gold still is.
To test his theory and to see the size of the gold near surface, Quinton shipped a small impact crusher to Nullagine. I got to be there when he first tested it. The “experts” played around with it for 30 minutes before giving up on their ability to start the “bloody contraption.” I saved the day by finding the fuel and choke controls and moving them into the operating position. Then it started on the first pull.

When I was there we broke up a bunch of the near surface conglomerate and fed it into the machine. I’d guess we put in about 25 pounds or around 12 kilos, similar to what Quinton would test later. The machine worked as advertised and we panned the output of the crusher. Granted, we did high grade the material by selecting only the badly pockmarked rock with holes where the buckshot pyrite had been.
I showed right at 1.1 grams in the gold I brought home. If you figure 80 times that to make a tonne, you would have three-ounce material. Even the old-timers would have some dilution so our grade would be similar to what they got 115 years ago.

Quinton tested 12 kilos of material and the photo below is what he got. A side benefit of the test showed the gold to be fairly large for placer so gravity will work. The latest press release showed similar results in the lab ranging from 71% to 92.7% recovery. That makes mining this material very cheap, perhaps one of the cheapest mines in the world.

The Nullagine gold project consists of a number of layers of conglomerate. Quinton wants to select the highest-grade layers, near surface for mining. He wants to scrape off the waste rock and only mine the high grade. By being very selective of what he mines, Novo can produce a lot of gold without milling a lot of material. 115 years ago, the miners were doing one ounce plus material. Quinton doesn’t intend to be quite that selective but it will be high-grade material that can be processed very cheaply.
I view my trip as being very productive. I got to see exactly where the gold was and how it got there. The conditions in the Pilbara right now are abysmal. Quinton was whining about 45-degree temperatures and eventually I realized he was talking centigrade, not Fahrenheit. 45 decrees C is about 113 F in the shade and there isn’t any shade. That’s bloody hot. The shares have gotten hammered due to Pinetree dumping everything in their inventory and the market in general but they are back to being pretty darned cheap.
Quinton’s intentions are to get into production as soon as possible. He intends to have the feasibility study completed by mid-2015. After that, Millennium Minerals has to start kicking in 30%. The BLEG work hasn’t all come in yet but what Newmont has released shows the current area as the most gold productive.
I think the deep holes could be a game changer. Quinton believes the periphery of the basin is where the most biological remobilization would have taken place but I suspect there will have been a lot of chemical remobilization taking place in the deeper sections. Only drilling will tell the whole story. Those results are 6-7 weeks out.

I own shares; I have participated in every PP. I am biased as I can be. Please take some responsibility for your own actions.

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