Guy on Rocks: Do you know what’s good for gold? A debauched American dollar

Guy on Rocks is a Stockhead series that reviews important resource market events weekly. Former geologist and seasoned stockbroker Guy Le Page, director and senior executive at Perth-based financial services provider RM Corporate Finance, shares his strong views on the market and “stocks to watch”.

Market discounts

Figure 1: US national debt (Source: www.usdebtclock.org, October 1, 2021).

To properly forecast precious and base metal prices, you need to have an eye on the global economy and one on supply and demand metrics.

As we enter unprecedented debt levels (Figure 1) in the United States (126% of GDP or $ 229,000 per taxpayer) which compares to a projection of 45% in Australia by June 30, 2022 , I thought it would be appropriate to someday search for preparers in the United States such as Robert Kiyosaki (author of “Rich Dad, Poor Dad”) whose YouTube interview titled “The Biggest Crash of world history ”asserts that there is no correlation between the US economy and the actions of Powell and Yellen.

Kiyosaki is 74, looks 42, is a good friend of Donald Trump, and identifies as a capitalist rather than a Republican or Democrat. Kiyosaki’s next book, “The Capitalist Manifesto,” which will appear later this year, asserts that the US government is exercising more totalitarian control measures over the population.

It’s time to grant this man Western Australian citizenship.

Where it all went wrong, according to Kiyosaki, is that M2 (or the money supply) has grown without a corresponding increase in spending. What does it all mean? A booming stock market and real estate sector.

He compares the creation of the central bank to “90% of the communization of a nation”. As Vladimir Illyich Lenin pointed out, the best way to destroy a capitalist system is to poach money, so it looks like the Fed is on track to achieve that.

So, the biggest “crash of all time”, besides leading to massive social and geopolitical unrest, may present a good opportunity to buy gold (to save), silver (to spend) and bullets (for protection), according to Kiyosaki.

A number of economic luminaries have suggested that the Federal Reserve create a trillion dollar platinum coin and borrow against it. The US Treasury could strike a $ 1,000 billion platinum coin under commemorative clauses and deposit it with the Federal Reserve, giving the United States an additional $ 1,000 billion to cover existing debts and pay bills without increasing or suspend the debt ceiling. It would be a “fascist” gesture according to Kiyosaki.

Clearly, the markets didn’t think this would happen, with platinum closing around US $ 971 / ounce last week (Figure 2).

Figure 2: Platinum price table over 5 years (Source: www.kitco.com, October 1, 2021).

For South African scholars among the Storer True, I thought I would show you a copy of the one hundred trillion dollar note from Zimbabwe that I bought in Cape Town in 2012 for around US $ 20 (main image, above).

The devaluation of the currency, among other things, ultimately led to the collapse of the economy. I’m not sure if my North American readers would appreciate a comparison to an African economy, but it happened in Germany in the 1930s.

The real question is, could this happen in the United States? Looking at the clowns running the Fed right now, anything is possible.

In other news, gold took a mid-week hit based on Powell’s comments, closing at US $ 1,760 / oz up $ 13 for the week with silver closing at 22.48 US $ / ounce up 15 cents, palladium dipped to low of US $ 1,700 / oz before closing at US $ 1,846 / ounce down 2.5% for the week and US $ 500 / oz over the past month.

Copper was down 2.5% to close at $ 4.13 / lb (Chinese imports were down 4.5% month-on-month and 12.4% year-on-year in September) with continued sales of Chinese reserves of all base metal stocks amid severe national economic problems (eg Evergrande), energy supply problems and skyrocketing prices.

While there are short-term economic headwinds for base metals (or hurricane winds if you take Kiyosaki’s perspective), the expected sharp increase in EV sales (Figure 4) is bullish. longer term for battery metals.

Figure 4 suggests that there has been a sharp increase in the share of the high chemical nickel battery NCM 811 (nickel, cobalt, manganese in a ratio of 8: 1: 1), (7.9% in January-May 2020 at 12.3% in January-July 2021).

Another trend is the sharp increase in cheaper LFP batteries (lithium iron phosphate – containing neither nickel nor cobalt) (figure 5) going from 20.9% to 24.7% on January-July 2020 and 2021 respectively. This is mainly driven by China, and I question the stability of these batteries. Despite this, the Tesla Model 3, BYD Han, and SAIC GM Wuling all use the LFP. Buyer, beware!

Many commentators are calling for a short-term softening of battery metals due to increasing cost pressures, as shown in Figure 6.

In the third quarter of 2021, the average Chinese nickel sulfate price rose 48% from the first quarter of 2020, with cobalt sulfate prices up 67%, lithium carbonate prices up 143% % and lithium hydroxide prices up 128%.

Figure 4: Global sales of electric vehicles (Source: Rho Motion, Macquarie Strategy, September 2021).
Figure 5: Share of battery types in electric vehicle sales as of July 21 (Source: Rho Motion, Macquarie Strategy, September 2021).

Figure 6: Increase in calculated Ni / Co / Li costs in electric vehicle batteries from January 2020 to January 2021 (Source: Rho Motion, Macquarie Strategy, September 2021).

Company News

Figure 7: 5-year MOH share price chart (Source: CMC Markets, October 4, 2021).

Moho ‘Resources (ASX: MOH) exploration success over the past two years has resembled the 2021 season of Adelaide Crows.

Having said that, it seems Ministry of Health is finally about to drill some interesting nickel sulfide targets at Silver Swan North (Western Australia) in the form of a few sizeable EM conductors.

The Omrah target extends for about 500 m to a depth of about 155 m (Figure 8). There are also a number of magnetic and nickel geochemical anomalies.

Figure 8: Cross section showing nickel results in historic drilling and the location of drill holes planned to intersect the EM conductive plate at Omrah Nickel Target (Source: MOH ASX announcement, September 29, 2021).
Figure 9: Graph of the 1-year PDI share price (Source: CMC Markets, October 4, 2021).

Predictive Discovery Ltd (ASX: PDI) delivered a first solid JORC resource (Table 1) of 72.8Mt @ 1.56g / t gold for 3.646 Moz of gold at Bankan (Guinea).

Importantly, using a higher cut-off grade of 1g / t Au, the JORC resource reaches 2.82Mt @ 2.82 g / t gold.

Table 1: Bankan Gold Project JORC Resources (Source: PDI ASX announcement, October 4, 2021).

According to PDI, Significantly increase JORC resources along the 35 km long Bankan structure with multiple untested targets (Figure 9).

The Storer devotees will undoubtedly do the pear tree as this chestnut was deployed here around 10 to 11 cents at the beginning of July of this year.

If you are inclined to send a bottle of champagne for that tip, I would find a Perrier Jouet or Crystal acceptable. You can also include a box of Plasencia Alma Fuerte cigars if you’re feeling overly generous. Just make sure the giveaways are under the $ 300 limit so compliance doesn’t need to get involved …

Figure 9: Plan of the Bankan gold project showing the deposits and significant exploration targets (Source: PDI ASX announcement, September 30, 2021).

New ideas

As we approach Armageddon and are sufficiently loaded with short market positions, gold stocks and gold bullion, I thought it would be appropriate to start looking for value on the small one. segment of the gold market.

In addition to wearing a tan all year round and being a very competent lifeguard, Klaus Eckhof has also had a meteoric run with African mining companies including Moto Gold Mines Limited (21Moz gold) which was withdrawn by Randgold in 2009.

So far I haven’t lost any money with him yet, so I will be launching his last gig in the jungle as an African gold explorer Amani Gold Ltd (ASX: ANL).

While the stock took off on Friday after raising $ 7 million at $ 0.001 (with free one-for-one attachment options exercisable at $ 0.0015 no later than 1/15/2024) and with an EV of around $ 73 million (not counting unlisted titles, including $ 2 billion in performing rights) I think there is more to come.

ANL is also starting life with inferred and indicated JORC resources combined with its Giro gold project (Figure 11) of 132Mt @ 1.04g / t Au (Table 2).

Giro covers 497 km² of the highly promising Kilo-Moto belt in DRC, which also includes Randgold’s 17 million ounce group of Kibali deposits located within 35 km of Giro. The Kibali gold project currently produces over 600,000 ounces of gold per year.

The building was the scene of alluvial and primary mining by artisanal miners.

Figure 11: Location map of the Giro project (Source: ANL ASX announcement, September 10, 2021).
Table 2: JORC resources of the Giro project (Source: ANL ASX announcement, September 10, 2021).

The recently completed placement will fund a diamond infill drilling program at Kebigada to further define the Central Kebigada ore body.

Drilling will also target the Eastern Kebigada ore body which has seen limited drilling despite previous RC holes giving impressive results, including GRRC204 with 89 m @ 1.58 g / t Au from 8 m downhole.

The company is also seeking to accelerate development / commercialization options for the project, including an office study in relation to the Kebigada deposit as well as consideration of potential commercial development and business opportunities. I think this action would fit well in the wallet of any doomsday prepper …

At RM Corporate Finance, Guy Le Page is involved in a range of corporate initiatives ranging from mergers and acquisitions, IPOs and valuations, to consulting and corporate advisory roles.

He was head of research at Morgan Stockbroking Limited (Perth) before joining Tolhurst Noall as a corporate advisor in July 1998. Prior to entering the stock exchange industry he spent 10 years as a geologist exploration and mining operations in Australia, Canada and the United States. States. The views, information or opinions expressed in the interview for this article are solely those of the interviewee and do not represent the views of Stockhead.

Stockhead has not provided, endorsed or otherwise assumed responsibility for the advice on financial products contained in this article.

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