Gold – Back to Support

After gold tagged $1392.60 on Sunday evening we warned that conditions were ripe for a pullback after such a large upside move. Since then we have seen gold suffer a sharp downside reversal and there is even the potential for gold to print a large bearish engulfing candlestick on the weekly chart:

Click to enlarge


The current sell-off is also offering an important test of the uptrend which began in early January:


While this week’s sharp turnaround offers ample cause for concern, price is now back to an area of major support near $1320:


While there could definitely be some more near term downside volatility ahead, we are fast approaching an attractive buying opportunity on multiple time-frames in gold.

Three Reasons Why Gold Might be Due for a Pullback

After a $211 rally from the New Year’s Eve low of $1181.40 gold may finally be running out of steam. Here are 3 reasons why a pullback in gold is imminent:

1. The latest COT data shows much of the recent rally has been fueled by short covering among speculators:


This is more than a 50,000 contract reduction in speculative short positions since December 31st, 2013 and the smallest speculative short interest in gold futures since January 2013 (right before gold entered a steep decline):


2. The gold miners just completed a bearish candlestick pattern as they flirt with a false breakout from the multi-month cup & handle pattern:


3. ~$1400 is major resistance that is unlikely to be breached with ease:


Today’s bearish outside reversal in gold signals that the pullback may have already begun:


However, the previous resistance zone $1340-$1350 should offer ample support if price pulls back further over the coming days.

Why nickel may continue to outperform gold

Gold has bounced off the $1180 level twice in the last year, most recently in late December. Since then, it’s had a fantastic run and, at the time of writing, was trading at $1380. That’s nearly a 17% gain in less than 3 months.

Gold Price


Nickel’s up nearly 20% off its 52-week low of $5.97 with a majority of those gains also experienced in the last 3 months.



As nickel doesn’t have quite the fan following that gold does, these price climbs have gone unnoticed by many. When I notice a 20% price gain in any commodity in such a short period of time, I ask myself if there’s something happening here; has there been a fundamental change that will continue to drive price upwards or, alternatively, is it time to initiate a short position and fade the rally.

Before we can get a feel for where nickel may be going, we have to take a quick look at where it has been.

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CGT – Columbus Gold signs $30 million joint venture with Nord Gold

Paul Isnard is located in French Guiana which hosts numerous high-grade gold deposits (Image: Columbus Gold Corp.)

Paul Isnard is located in French Guiana which hosts numerous high-grade gold deposits (Image: Columbus Gold Corp.)

Nord Gold has agreed to option an initial 50.01% interest in Columbus Gold’s (CGT:TSXV) Paul Isnard project for $30 million.  Nord Gold is listed in London, but is 85% owned by the Russian billionaire owner of conglomerate Severstal, Alexei Mordashov (net worth ~$12 billion).  Nord Gold operates nine mines globally and produced 924,000 ounces of gold in 2013.

Under the terms of the agreement, Nord Gold can earn 50.01% of the Paul Isnard project by spending at least $30 million over the next 3 years and by completing a bankable feasibility study.  Nord Gold will pay $4.2 million cash by May 21, 2014.

nord gold

Nord Gold expects to spend $11.8 million on the project this year alone (combined with their $4.2 million cash payment, this represents nearly half of the total work commitments within the first year).

Robert Giustra, CEO of Columbus Gold: “This agreement is exceptional not only by its requirement for an experienced and world class mine developer to fund a considerable amount of spending but also for the fact that Columbus Gold shareholders retain half the project at feasibility. In addition, the deal provides Columbus Gold with the option to participate in mine construction or to delegate it to Nord Gold for a resulting significant and valuable equity interest for Columbus Gold shareholders in a large producing mine.”

Columbus has the option to fund its pro-rata (49.99%) of the mine construction if elected by Nord Gold to do so.  Alternatively, they can allow Nord Gold to solely fund the capex and will be diluted to 25% based on a straight-line formula depending on the 2P reserves.

Nord Gold has agreed to pay Columbus a 10% management fee as operator of the project (roughly $1 million to be paid to Columbus over 2014 based on budget).  The London-listed gold producer has also agreed to a standstill agreement whereby they will limit their ownership to less than 20% of Columbus and will not solicit proxies over the option period.

Russian billionaire oligarch Alexey Mordashov is the 85% shareholder of Nord Gold (Image: Severstal)

Russian billionaire Alexey Mordashov owns 85% of Nord Gold (Image: Severstal)

The Paul Isnard project hosts the Montagne d’Or deposit which currently hosts a 5.37 million ounce gold deposit in the Inferred category (117.1Mt at 1.43g/t gold).  Columbus is currently working on a 26,600m, 135 hole drill program at the project, mainly to bring upgrade the Inferred resource.  The deposit has been drilled from surface to a vertical depth of 250m.  A strike length of 2.3km has been identified and trends east-west and dips steeply to the south.

The gold here is associated with disseminated, stringer and semi-massive sulphide mineralization of volcanic origin. The higher grade gold is found in chlorite bands with pyrite-pyrrhotite-chalcopyrite seams and stringers.

Investors like these types of deals whereby a larger company comes in to a fund a project for reasonable option terms.  We view this as positive for Columbus shareholders given the current cash balance (pre-Nord Gold transaction) of less than $1 million and the fact the dilution they face for the value that gets added to the project is fair.

Nord Gold is a sophisticated group which successfully put a gold mine into production on time and on budget in Burkina Faso recently.

Shares in Columbus performed well last year, despite the weak gold environment as the company continued to de-risk their Paul Isnard project.  Here’s the 12-month chart:

CGT Chart
CGT data by YCharts

Read: Columbus Gold signs $30 million definitive option agreement with Nord Gold

5 gold development stocks from the Great White North to watch


The Northern Lights (Visual Capitalist photo)

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The North is interesting from a mining exploration perspective in several ways. First, because it is vast and unexplored, the potential for finding a mega discovery is certainly a possibility. It is no secret that millions of ounces of placer gold have been mined in the Yukon since the gold rushes of days of yore.  Alaska has also proved to contain some of the biggest deposits known to man. This includes Donlin Creek and Pebble – projects that almost boggle the mind in terms of potential. Donlin Creek, a 50/50 joint venture between Barrick and NovaGold, has 34 million oz of Au at 2.1 g/t in proven and probable reserves. The Pebble deposit, currently 100% owned by Northern Dynasty, is one of the biggest sources of mineral wealth ever discovered, with about 80 billion pounds of copper and over 100 million oz of gold in a massive porphyry system.

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Minsky Moment in China?

Fairfax Holdings recent annual letter to shareholders offers many nuggets of wisdom including this excerpt on China (emphasis our own):

In the last few years we have discussed the huge real estate bubble in China. In case you continue to be a skeptic, here are a few observations from Anne Stevenson Yang, an American who has been in China for over 20 years and is the founder of JCapital Research in Beijing:

1. China added 5.9 billion square metres of commercial buildings between 2008 and 2012 – the equivalent of more than 50 Manhattans – in just five years!

2. In 2012, China completed about 2 billion square metres of residential floor space – approximately 20 million units. For perspective, the U.S. at its peak built 2 million homes in a year.

3. At the end of 2013, China had about 6.6 billion square metres of new residential space under construction, around 60 million units.

4. Yinchuan, a city of 1.2 million people including the suburbs, has 30 million square metres of available apartments – roughly 300,000 units that could house 900,000 people. This is in addition to the delivered but unoccupied units. The city of Guiyang, capital of Guizhou Province, has roughly 5.5 million extra units for a city of 5 million.

5. In almost every city Anne has visited, pretty much the whole existing housing stock has been replicated and is empty.

6. Home ownership rates in China are estimated to be over 100% versus 65% in the U.S. Many cities report ownership over 200%. Tangshan, near Beijing, is one.

7. This real estate boom could only be financed through unrestrained credit growth. Since 2009, the Chinese banks have grown by the equivalent of the entire U.S. banking system or 15% of world GDP.

8. The real estate bubble has resulted in companies extensively borrowing and investing in real estate or lending on real estate in the shadow banking system. This is exactly what happened in Japan in the late 1980s.

9. And one observation of our own: Since 2009, the easing by the Federal Reserve combined with the explosive growth in China, backed by higher interest rates, has resulted in huge inflows (‘‘hot money’’) into China. The near unanimous view that the renminbi would strengthen has resulted in a massive carry trade where speculators have borrowed at low rates across the world and invested in China, almost always backed by real estate. The shadow banking system in China – i.e., assets not on the books of the major Chinese banks – is estimated by Bank of America Merrill Lynch to be approximately $4.7 trillion or 51% of Chinese GDP. Oddly enough, prior to the credit crisis, the U.S. had $4.5 trillion in asset-backed securities outstanding or approximately 31% of U.S. GDP. You know what happened then. When the flows reverse in China, watch out!

The recent decline in copper might be a major shot across the bow that the Chinese real estate bubble and shadow banking ponzi finance game may be finally coming to an end:


The sharp bearish reversals in other economically sensitive commodities such as crude oil and iron ore add further confirmation that all is not well out there. The Shanghai composite also remains mired in a bear market as it flirts with major long-term support near 1950-2000:


China has clearly caught a cold, the question now becomes whether it will catch a flu……

Lowell Copper to take a pass at new New Mexico exploration project


J. David Lowell (Photo: Adam Humphreys)

Dave Lowell’s Lowell Copper announced an option to earn up to 70% in the TC property in the Hillsboro – Bisbee mineral trend in New Mexico from Rose Petroleum PLC and a subsidiary.

The deal appears to have been structured in a way that allows Lowell Copper to back out if results aren’t promising. The company can earn 25% by spending US $250,000 in exploration, an additional 26% by spending another US $2.5 million, and an additional 19% by spending another $3.5 million, for a total of 70% for $6.25 million.

Mr. Lowell, Chairman and CEO of Lowell Copper remarked, “The size of the covered area is such that one to two drill holes could very quickly reveal whether there is the potential for buried mineralization.”

Mr. Lowell is credited with the discovery of 18 ore bodies, including Escondida, the world’s largest copper mine. He was the subject of a January, 2013 CEO.CA video interview.

Read: Lowell Copper Enters Into Option Agreement, Related: Rose Petroleum PLC Joint venture agreement with Lowell Copper Ltd.

Disclosure: We own a few shares and warrants in Lowell Copper as a speculation. This is certainly not investment advice. Do your own due diligence.

The Only Metal Shinier Than Gold Is……

While gold continues to form a bullish consolidation pattern just below resistance ($1355-$1360):

Click to enlarge


Another precious metal, albeit a less popular one, is shining brightly after breaking out from a 3-year symmetrical triangle last week:


This breakout has all the makings of one that investors should not take lightly (volume, duration, and price action) – A 4-digit price tag for an ounce of palladium during 2014 is well within the realm of possibility.

There are a few ways to play a rally in platinum group metals – here are a few of our favorite names:

Stillwater Mining (SWC)


Similar to the palladium chart in terms of the recent breakout with strong volume confirmation. Pullbacks are likely to represent buying opportunities with a $20+ intermediate term price target for SWC.

Ivanhoe Mines (IVN.TO)


Recent pullback to support ($1.50-$1.70) – $2.00 is still the big upside nut to crack.

Wellgreen Platinum (WG.V)


Energy building as price nears apex of large symmetrical triangle – upside breakout easily targets $1.25+

See also: Palladium – a new bull market

Continental Gold (T.CNL): Cash in hand, expanding resource, getting it done

Ari Sussman, Continental, Gold

Ari Sussman is the CEO of Continental Gold.

Continental Gold logoToronto-based Continental Gold (TSX:CNL) released a corporate update Thursday afternoon showing strong operating results for the year 2013, including 59,109 metres of drilling (adding to 215,300 metres for the project total), discovery of several new veins, four new precious metal-mineralized systems and – oh yeah – $117.5 million in hand with no debt to service.

In times like these, when so many gold explorers are under water (some literally), Continental’s situation is an ‘up times’ level of rosy, which may explain why their shares have doubled in value since December 1 of last year.

The company is focused on its Buritica project in Antioquia, Colombia, where it has recently discovered a new mineralized vein system it calls San Agustin. From the company, that spot is generating the following results:

  • BUSY329: intersected 0.4 metres @ 49.7 g/t gold and 163 g/t silver
  • BUUY093: intersected 3.0 metres @ 7.2 g/t gold, 43 g/t silver and 8% zinc
  • BUSY340: intersected 0.72 metres @ 31.0 g/t gold and 3 g/t silver, and 0.5 metres @ 12.0 g/t gold and 31 g/t silver.

That’s fun side stuff while the company works on infrastructure, having bought 99% of the surrounding infrastructure-based land around their property, while developing the main access tunnel, new ramps, and waiting for the final environmental permits required to build out a mine, which are in process now.

While that’s happening, it’s also drilled in other places:

In the Veta Sur vein system:

  • BUUY121: intersected 16.7 metres @ 58.7 g/t gold and 233 g/t silver, including 5.15 metres @ 184 g/t gold and 671 g/t silver
  • BUUY118: intersected 18.7 metres @ 22.4 g/t gold and 80 g/t silver, including 3.8 metres @ 99.6 g/t gold and 254 g/t silver
  • BUUY126: intersected 28.4 metres @ 20.5 g/t gold and 135 g/t silver, including 2.15 metres @ 135.3 g/t gold and 921 g/t silver and 10.9 metres @ 10.8 g/t gold and 85 g/t silver
  • BUUY149: intersected 0.5 metres @ 101.5 g/t gold and 20 g/t silver

Or maybe you like the Yaraguá vein system:

  • BUUY083: intersected 22.3 metres @ 23.9 g/t gold and 255 g/t silver
  • BUUY086: intersected 20.2 metres @ 11.4 g/t gold and 59 g/t silver
  • BUUY114: intersected 10.5 metres @ 108 g/t gold and 96 g/t silver
  • BUUY170: intersected 2.7 metres @ 830.6 g/t gold and 65 g/t silver and 3.45 metres @ 27.1 g/t gold and 11 g/t silver
  • BUUY120: intersected 1 metre @ 329.5 g/t gold and 52 g/t silver.

Also, underground channel sampling in the Yaraguá vein system resulted in significant intervals including 56.3 g/t gold and 112 g/t silver across 1.34 metres along 32 metres and 121.4 g/t gold and 775 g/t silver across 0.45 metres along 60 metres.

There’s more, but it’s really a case of more of the same. Lots of veins, lots of metres of solid gold per tonne.

You like metallurgy?

The preferred recovery process selected is gravity concentration followed by cyanidation of gravity tails. Overall metallurgical recoveries on all four 150 kilogram samples yielded 95.4% and 48.6% for gold and silver, respectively. In addition, a large proportion of the gold can be extracted using gravity separation with an average recovery rate of 73.8%.

Brothers and sisters, if Continental Gold didn’t already have the treasure of the Sierra Madre in cash in hand, I’d be giving it to them and saying, “Yeah, build this mine if you wouldn’t mind, thanks.”

I’m not going to tell you to buy Continental, mostly because I’m not your investment advisor. And I’ll admit I don’t own any of it, mostly because I like ‘em cheap and risky, and this stock has already gone through its pubescent growth spurt. Now it wants its first car, it wants to be allowed out until 2am, and it wants its girlfriend Brittany to be allowed to sleep over.

Granted, there’s still a little growth to go. It’s going to ding the Buick at least once before college.

But you’ve got to like a company that has hit its milestones, removed a bunch of risk, found a nice upward trajectory and has been saving its allowance.

NI 43-101 to come. Gold prices rising. They grow up so quick, don’t they?

CNL, Continental Gold, Stock

CEO Technician: Lovely chart: Bull flag – breakout over 5.43 targets ~$6.00 (

Disclaimer: Continental Gold is an advertiser and we own shares which means we are biased. Please read our full Disclaimer and Continental Gold’s Cautionary Note Regarding Forward Looking Statements.

The Root’s Timeline To Success: 3 Weeks

Bitterroot Resources Ltd. (BTT, TSX-V) has closed a non-brokered private placement of 5,200,000 units priced at C$0.05 in a non-brokered private placement for gross proceeds of C$260,000.

Each unit consists of one common share and one common share purchase warrant which is exercisable at C$0.10 until March 4, 2015.

The common shares, plus any common shares acquired through the exercise of warrants or broker warrants, are subject to a hold period expiring July 4, 2014.

Proceeds are being used to fund 1,500 met ers of drilling in approximately six holes on the “Target H” nickel/copper/PGM target in Michigan and for working capital. Management expects the drilling program will take approximately three weeks to complete.


Michael Carr, Bitterroot’s CEO, founder, qualifying person and what-not, has been at this thing for maybe the better part of two decades. I have been following the Vancouver minerals hound for at least 10 years.

I vouch for Mike’s integrity and work ethic. He tells the truth all the time to all the people. Alas, he is not what I would call a headline seeker. He declines to jump up and shout EUREKA when he sees good a$$ay$.

Mike plods along.

I made money on BTT shares back when just the dream of a drill-rig propelled market valuations.

Maybe those days are returning. Or maybe Mike and his backers have other ideas.

As (you all) know, I have been purchasing Bitterroot shares again. But I asked Mike, when he announced this smidgen of a financing a month or so ago, whether this was a “desperation” act — a couple hundred grand to keep the Vancouver, Canada, company running on a bit more than empty.

He said, “Desperation ? No. Bitterroot’s major shareholders want me to drill our best Ni-Cu-PGM targets in Michigan asap, and they are prepared to put up the funds to help me do it. ”

Poor sods, rich sods.

There we have it. Mike hits Michigan targets that put him in a PTM belt, with the assays to delineate continued mineralization, decent thickness and well-wishes from the governor of the state of Michigan, and the shares, maybe in 5 weeks’ time when the results are in, rise to 20 cents a share Canadian from 5 cents. I have seen BTT go to a dollar from a tenth that amount on less.

This brings The Root to a $20 million market size. Yow.

Miss? Well, at this point, with the da ta spool Mr. Carr owns, and the time that Mr. Carr, a lifelong geologist, 56, has invested in The Root, I cannot imagine that happening. Yet failure happens as easily as success. Whimper.

I own a bunch of shares at 4 cents and 5 cents Canadian. It also trades at BITTF in USA. Having fun? I’m not.


Silver Bull stands out at the 2014 PDAC

Silver Bull Resources Stock

CEO Technician: Like a lot of other charts in the sector… 14 month plus basing process and the last three weeks have demonstrated signs of accumulation as it has risen from $.31 to $.39 on decent volume. We really want to see above $.45 to give confirmation that we’ve printed a double bottom. (Chart:

Silver miners have failed to replace reserves over the past three years.

Tim Barry

Tim Barry

This from Tim Barry, President and CEO of Silver Bull Resources (TSX:SVB, NYSE:SVBL).

Barry and I met at his Vancouver office Friday, before the New Zealand born geologist, 37, flew to Toronto to present at this week’s PDAC, where 25,000+ are set to gather for the world’s largest annual mining show.

Tim told us his key messages for this year’s PDAC conference.

“Our Sierra Mojada project continues to move forward. We are well funded and we are de-risking the project through securing the permits required to proceed with mine construction, if warranted. The market is starting to understand that Mexico is still the best silver mining jurisdiction, despite recent tax changes.”

Silver Bull’s Sierra Mojada is a large project with 163 million ounces of silver and 2.1 billion pounds of zinc in the indicated category.

The project is capable of producing an average of 5.5 million ounces of silver per year with an 18 year mine life, according to a recently filed PEA. This is significant in that Coeur Mining, the largest silver miner in the U.S. by market, produces 17 million ounces per year.

“This is a project that clearly moves the needle for any of the twelve large silver miners and any of the intermediates as well.”

Sierra Mojada will cost $297 million to build with a 23% rate of return after taxes at $23.50 silver and $.95 zinc, the PEA states.

Recently the project received its water permits which provides 3.5 million cubic meters of water per annum and will be more than enough to meet the proposed mine’s needs.

Tim tells me surface rights acquisitions are expected in the near term.

Based on market conditions, Silver Bull will look to proceed with a Pre-Feasibility Study on the Sierra Mojada project in late 2014 or early 2015.

The Pre-Feasibility Study may envision a higher grade, lower capex, smaller mine scenario compared to last year’s PEA.

Roughly 5000 people live in the surrounding region to Sierra Mojada, a mining district in Northern Mexico for well over 100 years.

There will be roughly 800 jobs created during construction, and 250 ongoing after the mine is in production, Barry said.

“This will be the largest employer in the area by far.”

Barry thanked the local communities for welcoming Silver Bull and contributing their expertise to its development. For example, the company used local talent and inherited equipment to drill exploration core for $50 per meter, versus $120 per meter had Silver Bull brought in outside drillers to do the job (note the company’s consultants are still brought in to review the work in short bursts).

In addition to community support, Sierra Mojada has infrastructure advantages, with paved roads, rail, power and water right to site. The power grid will require minor upgrades, however.

The main criticism to Sierra Mojada has always been metallurgy. The deposit is in oxides, which can be more difficult to process, however Barry says the proposed SART solution is sound and that the company has had successful test results to date. The next step is to conduct a bench scale SART test under a continuous flow.

Silver Bull has approximately $4 million in the bank and could see an additional $1.5 million from the sale of a non-core African asset. This will be enough capital to last well into 2015, Barry said.

In 2013 the company was recognized for the prudent management of its treasury in a report by Visual Capitalist.

Barry says he is looking forward to a more optimistic tone at this year’s PDAC.

“This is a time to be very productive with meetings. The market is starting to show signs of life and this is when companies like Silver Bull stand out from the crowd.”

“Silver Bull is very cheap. I think the viable jurisdiction, size of the deposit, infrastructure, and very strong community support makes it a very rare scenario in today’s day and age.”

Silver Bull has a $65.2 million market cap with 159.1 million shares outstanding at press time.

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Silver Bull Presentation

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Disclaimer: Silver Bull is an advertiser and we own shares in the company. Please read Silver Bull Resources Inc.’s Cautionary Statement Regarding Forward-Looking Statements carefully. Continue reading

ECB Set to Launch QE on Thursday

Growing disinflationary headwinds are likely to push the European Central Bank (ECB) toward launching a 300-500 billion euro asset purchase program on Thursday morning. Such a monumental shift in monetary policy posture from the ECB could deliver an outsized impact to global financial markets (although we have clearly seen some front running of this announcement in recent weeks).

An announcement at the upper end of the 300-500 billion euro range along with open ended language (alluding to the possibility that the ECB could increase asset purchases past the 1 trillion market if needed) from ECB President Draghi could send global stocks and precious metals skyward. A few key charts from BNP Paribas help to illustrate why a QE announcement from the ECB on Thursday is quite likely:

Click to enlarge


While the Fed has spent the last year and a half aggressively expanding its balance sheet, the ECB has allowed its balance sheet to shrink.


M3 money supply growth has consistently fallen short of ECB target levels and private sector bank lending remains anemic.

All of this adds up to a powerful set of disinflationary/deflationary forces throughout much of the eurozone. Only Germany appears to be immune from the eurozone disinflation plague, whereas, much of the eurozone periphery suffers with extraordinarily high rates of unemployment and stagnant economies.

Here’s the money shot from BNP Paribas:

“Asset purchases are increasingly necessary in order for the ECB to meet its primary objective of maintaining price stability. Inflation in the euro area has persistently surprised to the downside, eroding the safety margin against deflation. „ Additional conventional policy easing will not deliver sufficient monetary accommodation for the price stability mandate to be met. Thus, the ECB will reluctantly have to follow other central banks into balance sheet expansion via asset purchases.” (Reuters – ECB to take the QE plunge this year…finally)

Mining tycoon Ross Beaty is back and he’s funding gold exploration in Brazil

Ross Beaty

Ross Beaty

Canadian mining legend Ross Beaty, who founded Pan American Silver and the Lumina Copper Franchise, and made fortunes during the last decade’s resource bull market, is quietly making moves in the junior mining sector again.

Earlier today Magellan Minerals announced a deal to sell to Ross its Pocone gold belt exploration projects in Western Brazil for $1.25 million. Magellan’s partner in the Pocone belt, a private group called ECI Exploration and Mining (ECI), will also sell their interest to Ross under the same terms. Magellan and ECI will retain 20% each in NewCo, which Ross will seed with $5 million, and own 60%. No other details were provided on NewCo, such as whether it will be a private or a public company.

According to Magellan’s press release, “The Pocone gold belt extends for at least 90km and is located in the southern part of the state of Mato Grosso. It is characterized by a series of highly deformed schists that are cut by gold-bearing vein swarms. Approximately 50 small open pit gold mines are currently in operation throughout the belt which has an estimated historic production of 6-12Moz of gold.”

We called Ross for comment this morning and he told us that this is an interesting early stage gold play, however he said it was not a significant investment for him and he doesn’t want to make a big deal about it.

So this is us not making a big deal about it… But we are pretty excited to see Ross making moves in the junior resource sector again.

Let the bull run!

Related: Tommy and the Titans, Ross Beaty: You say impossible, I say possible

Augusta shareholders at risk in ‘essentially insolvent’ company: HudBay

By Peter Koven, Financial Post


David Garofalo, chief executive officer of HudBay Minerals Inc.
(Norm Betts/Bloomberg)

TORONTO • Augusta Resource Corp. is “essentially insolvent” and facing severe financial risks in the coming months, according to the company that wants to take it over.

David Garofalo, the chief executive of HudBay Minerals Inc., tore into Augusta’s management in an interview on Thursday as the $428-million hostile takeover battle continues to heat up. His key message was that Augusta shareholders could be in deep trouble if the company does not wrap up permitting for its Arizona-based Rosemont copper project in short order.

The permitting question is at the heart of this takeover battle. This week, Augusta said it expects to receive its final required permit in the first half of this year. After that, it is set to begin construction.

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