Gold is staying steady and copper and zinc are holding their ground, but all anyone’s talking about are cryptocurrencies. I am among the many who (1) wish I had bought in ages ago, (2) would have exited well below current levels, and (3) know this is undoubtedly a bubble, but as with all bubbles it’s impossible to know how large it will grow before it bursts.
Is Bitcoin stealing gold’s thunder? Yes. Certainly some of the funds that have flowed into cryptos over the last year came from investors seeking diversification, an investment that balanced the risk of a major market crash, a safe haven. And those investors would likely have put their money into gold had cryptocurrencies not been born.
But I think safe haven buying is only a drop in the Bitcoin bucket. Investors are being drawn in far more for the novelty, for wanting to be involved in the next big thing, and simply for the profits than they are for conventional safe haven arguments. In other words, I think only a small fraction of the funds invested in cryptos would otherwise have landed in gold.
There is also, though, the competition factor. When gold does go on a run, its gains stand out. From 2005 to 2011 gold gained 375%. Sure, Bitcoin has that well and truly beat – but Bitcoin aside, it’s a phenomenal run, especially when you consider that gold stocks provided multiples of that gain.
For gold to really go again it would need that kind of attention again. Its gains would need to attract investors from across the market. And that will be difficult as long as cryptos are using up all of that spotlight.
Gold doesn’t need outperformance to get started on a good run. That requires fundamentals to align. They aren’t there right now – the yield curve is flattening, for one – but they aren’t far off and it’s easy to see the setup falling into place. I guess I just hope the Bitcoin bubble bursts before then!
Below is an excerpt from last week’s Maven Letter. More specifically, it’s a rant about Garibaldi Resources.
Have a good week everyone!
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From The Maven Letter: November 24, 2017...
A Short GGI Rant
So Garibaldi Resources (TSXV: GGI) finally put out results – real numbers, not visual descriptions – for its first four holes. The numbers themselves were ok. The highlight intercept came from hole 4, which cut 48 metres grading 1.1% nickel, 0.69% copper, 0.38 g/t palladium, 0.23 g/t platinum, and sniffs of gold, silver, and cobalt from 108 metres depth. The hit includes 4.8 metres of 7.2% nickel and 3.4% copper.
The other three holes returned intervals 18 to 60 metres grading 0.54% to 0.91% nickel.
That’s all fine. It may even be geologically interesting. But there is such a lack of information that I can’t tell.
The project information on GGI’s website hasn’t been updated since May. The only explanation of its geologic theory is an image with a large purple blob that supposedly models the conceptual magma chamber based on magnetics, mapping, trenching, and a few historic holes. With a complete absence of further information or proof, the ‘blob’ is unsubstantiated geophysical arm waving.
So I look for the corporate presentation for more information. Corporate presentations are the go-to source of information on a company, the package of slides that summarizes where, why, what, and how the story works, from corporate structure and management bios to geophysics, drilling, mapping, trenching, modeling, project history, and exploration thesis.
Except that GGI doesn’t have one. There is no corporate presentation. I looked and looked. It’s a stunning gap.
The news release itself is a piece of work. This is a stock that gained 550% over 2.5 months based on visual descriptions of nickel-copper sulphides in core. Over those 2.5 months the company didn’t hold back from promoting those descriptions, in fact using them to raise no less than $21 million.
Clearly the one piece of information now needed, the one thing the market had to see, was a result. An assay showing that their geologists had described the minerals accurately. A single piece of hard data.
So what does GGI do when it has that data in hand? It spends the first 13 paragraphs of its news release talking up another visual description from a newly completed, unassayed hole. It uses words like massive sulphide as often as possible and the ninth paragraph even says Nickel Mountain is showing similarities to Noril’sk, the largest deposit in the world of the kind GGI seeks.
And there were no maps. This is a drill results news release and there were NO maps of where the holes were drilled, let alone cross sections showing how the intercepts relate. It is impossible to understand the significance of an intercept without a map.
They did spend a few paragraphs talking about how the good intercept, from hole 4, “is in the immediate vicinity” of the massive sulphides in hole 14, the newly drilled hole that they describe as choc-a-bloc with massive sulphides. But without a map I have no idea what they mean by proximal.
The structure of the news release is nothing less than shocking. I am shocked that a management team would frame its results in such a promotional manner in any circumstance, but it is especially alarming in this situation, when so many eyes are on the stock.
Moreover, the information that I want clearly exists. The company is drilling. They have drill maps and are developing cross sections, because that’s the basic work an explorer does with its data to piece together a geologic picture.
And I would guess that some people have seen the maps, cross sections, and so on. Eric Sprott invested $5 million in this deal. He would not have done so based on the highly limited publicly available information. In fact I was recently chatting with another company exec who had pitched Eric Sprott on investing in his deal. Sprott’s answer was that he is only investing in projects where he sees clear potential for 10 million ounces, or the equivalent in base metals. He thinks he’s got one in Novo and another in Garibaldi.
That statement had to be grounded in information that the rest of us aren’t seeing, cause what we are seeing is little more than arm waving and promotion.
I am even more shocked – and dismayed – that regulators approved Garibaldi’s news release. These are the same regulators that will back-and-forth with a company for weeks over detailed wording in a technical report out of concern it is too promotional, or that won’t allow a company to even disclose that a resource exists if it was calculated under London or Johannesburg regulations. And yet somehow this GGI insanity is ok?
There are some very good names associated with Garibaldi. Raymond Goldie is on the board; he had a long distinguished career as a mining analyst. Peter Lightfoot is a highly regarded geologist in academic circles and is an advisor. (Peter Megaw, the genius behind MAG Silver’s Juanicipio discovery, is also listed as an advisor but tells me he has only advised on GGI’s Mexican projects and has nothing to do with Nickel Mountain). John Buckle has a record of discoveries and is listed as a consultant.
These names would usually lend credibility, but in this case the lack of information and crazy promotional approach are too much to be balanced by a few good names.
I’m not here to say there’s nothing at Nickel Mountain. There might be. Those first few holes included some interesting numbers. But the way this story is being presented is scandalous.
In her letter, Resource Maven explains what she is buying and selling, and why. Maven has bought into several of the markets best - performing stocks well ahead of the curve. She regularly identifies exciting new exploration opportunities and manages the inherent risk by selling some into speculative gains. And the mine builder and operator stocks that form the basis of the portfolio give strong, ongoing leverage to the rising prices of gold and silver. She has your precious metal bases covered.
Great job Gwen... you are becoming the most credible in the world at this... Bravo
BTW - I really enjoy reading your newsletter - very comprehensive and you do an excellent job of integrating a macro perspective into your analysis.