Bill Cara’s Blog for May 26, 2010 [See post-close report]

ALOHA!!

More upside on this one ...

The latest drill results hit 11m @ 59g/t Au around the 250m depth with a few more much shallower high grades around the MAGIC open pit. The drilling continues as the company has designated some $18MIL to expand their JORC compliant resources by July 2010.

This has been a phenomenal money maker for me ever since buying in at $0.17AUD over a year ago. I like their prospects going forward and it seems the POG in AUD will make for higher profits for Q2/2010. On the 26th the SLR share price closed at a record high of $1.39AUD, as only the intraday was higher at $1.44AUD per share earlier this month.

Here is a research report done by HARTLEYS on SLR at the end of Q1/2010, dated April 12th, which showed then a base case valuation of $1.50 per share and an upside case valuation of $2.03.

LINK: http://tinyurl.com/2dhnnvr

This report rated SLR a "speculative buy", but what isn't "speculative" these days?

Speculative Buy
Share price appreciation anticipated but it is higher risk than a “Buy”. For the share price to rise it may be contingent on the outcome of an uncertain or distant event.

Hummmm, "uncertain or distant event" ... Now with the SUPER TAX on the 2012 horizon its all "speculative"! But then again in this FIAT WORLD what isn't?

Hartleys will also sponsor the IPO later this year for PMI GOLD(TSXV:PMV) on the ASX. I have a large holding in this company, which has gold properties based in Ghana, West Africa. Also Macquarie Bank Group owns 34 million shares of PMV. There seems to be a love affair going with the Aussies and Ghana gold mining as there are a number of ASX listed companies in Ghana with large shareholding support. The new SUPER TAX would seem to make buying a Canadian based gold miner, listed on the ASX, with strong Aussie shareholder support whose main properties are on two of the most prolific gold belts in Africa a distinct advantage over Aussie based gold miners.

Thank you JIMMY RUDD!

Mr Cara, who ever wrote up last night's "CTA Trading Desk Post-Close Report" did a very good job.

So this is odd. After watching the euro moves pretty much drive equity movies here in the US over the past few weeks, now I'm seeing the euro dropping while the SPX is rising. Something odd is happening. Perhaps Forces At Work want that gap up open today regardless of where the Euro goes?

The divergence is pretty striking, but only over the past half hour.

Dear Bill, me too find your morning report very insightful before the start of the day and Patrick's unpack of the day a great learning tools. Thank you both for all you do.

"instead of getting an audit of the Fed, the Fed gets to audit us."

http://www.cnsnews.com/news/article/66439

I like it Kaimu. Missed the early May pullback but today's action looking like a breakout forming.

Would like to find entry. Will check in tomorrow before the ASX closes to see if potential breakout forming occurs, or as Bill points out a sucker punch is waiting. Hopefully a pullback.

Electrical needs will increase, as more populations gravitate to urban areas. Seems the choices available in the next 10 - 20 years are coal, gas, nuclear, solar and wind, with a dash of hydrothermal. Sorting out the leaders is tricky. Just listening to what the major growth areas are saying, the slant is toward coal. Access at several mine areas is difficult and enviromentally sensitive ( re: mee ).. The powder river basin is the most accessible ( extraction and transportation ) with the better thermal grades.. got to keep an eye on those in the area...

ALOHA!!

As soon as I mention "Ghana" look what happens!

Ghana says mining royalty hike has been applied
Wed May 26, 2010 8:22am EDT

"The royalty is now five percent as of March 19 this year," Joyce Aryee, Chief Executive of the Ghana Chamber of Mines, told Reuters on the sidelines of a conference in Accra. The levy earlier stood at three percent.

Aryee said the royalty hike does not immediately apply to AngloGold Ashanti (ANGJ.J) and U.S.-based Newmont (NEM.N). AngloGold said in in November that it had a stability agreement with the previous government, excusing it from any changes. END

Okay a 66% increase ... Thanks Joyce!!!

100 million financing and the stock drops?

lets consider what the share offering was for and if those shares were sold short after the run up, noting the massive volume spike to the downside, i suspect that large blocks of shares were thrown out the window.

announcements of financing are to me a small red flag without specifics of the offering and the groups taking on the responsibility of such a large float for a smaller mining outfit.

my feeling personally is that messing around too much with precious metals is a mug's game. if we enter an environment where gold goes ballistic we should own gold, and at worst silver. the other side of the precious metals complex are still the wild west of investment stories imho, subject to much more than the already taxing physical market for gold.

rare earth metals are being played like well tuned fiddles to give the impression of scarcity where none really exists. the usual claims of "china is running out, they are buying" are my red flag.

if you believe gold is going higher, then you likely believe the debt crisis will hit a crescendo of some sort, is palladium or platinum really the place to be or gold?

First, UXG has turned into a highly successful trading vehicle for me this past year, over 50% profits to date. For some reason, I can't seem to hold on to a long position. Why? Every new press release seems to be a "teaser". The price rises and then reality sets in. We know that there is lots of silver in Mexico. But until a report is issued on the economic quantity, it remains cyclical buy and sell which has been great so far. If it suddenly takes off without me having a position in it, so be it. I won't chase.
Second, RBY, which has a very high grade find adjacent to Goldcorp's mine in Ontario is sitting there like watching paint dry! Little movement since it's downward cycle apparently is over. The trouble is, the upward cycle has not started. They are having their annual meeting on Memorial Day. Maybe a Q & A will follow. I was going to go but I have some other commitments.
My latest acquisition involves a company named Exeter Resource which I met at the Hard Assets Conference. They have a resource of over 24.3 million ounces of high grade gold in Chile and this is expanding as drilling continues. Right now drilling is stopping as the South American winter sets in. They are located between Barrick and Kinross on top of a mountain. There are only 75 million shares outstanding and a market cap around$575 million. This company could easily be a target of the big boys due to the astonishing amount of gold on their property.
A few other companies I have my eye on do not have much volume so I won;t mention them.
Taxes are rising all over the place, Nevada taxing all mining claims, Mexico talking about adding a 5% profit tax, etc., etc.
Someone asked me to check out Altius. I have their annual report but haven't read it yet. I also have a research report from Dundee capital Markets titled "Focus on the Juniors-2010" and the World Gold Analyst report "West Africa 2010" I went to a luncheon where mining companies with West African interests described their resources. The countries include Ghana, Mali, Guinea, Burkina Faso Mauritania and Cote d'Ivoire. Growth is strong but I need to do more research.
That's it for now!

May 26, 2010 11:06:29 AM
American International Group, Inc (US) Fed General Counsel Alvarez: Unlikely AIG will require more funds from the Fed, is on the path of sustainability - congressional hearing
- Federal Reserve anticipates that the loans under the Revolving Credit Facility, including interest and commitment fees under the modified terms of the Facility, will be fully repaid

FWIW, some junior AIG debt can be publicly traded through AVF and AFF.

7.7% bonds (AVF) and 6.45% bonds (AFF) now yield about 10% at current prices. These bonds also benefit from being senior to the Treasury’s $47 billion stock investment in AIG.

Not a recommendation. Bond prices can flucuate. As always, DOYDD.

I seem to have sparked some debate on PAL. I wanted to clarify - the position I took was small, knowingly speculative, and comprises a tiny portion of my total precious metals and miners investments in precious metals and miners (sub 5%). FYI, my largest single miner position is in Randgold (GOLD). In addition, PAL is the only stock I own that is levered to the price of palladium.

Financings happen all the time and stocks often drop as they close due to various types of hedging employed by those who are participating. This happens to good companies and bad. Those who put up cash to finance are often are rewarded with warrants that they use to arb against their equity position. And in this specific case, the drop was also largely due to palladium prices getting smacked by about 25% almost immediately after the financing.

North American Palladium has two mines. One is palladium (Lac De Isles - 140k/oz yr) and the other is gold (Sleeping Giant - 50,000 oz.yr). The company has a market cap of about $480m US and holds cash of appx $180m following the recent financing. They are actively drilling and plan to expand the palladium mine to potentially double annual output by accessing a new zone. They are also purchasing the Vezza gold project from Agnico which they plan to develop to more fully utilize the Sleeping Giant mill. They also have an anchored shareholder - Kaiser Francis Oil company (private) who owns a 26% interest in PAL.

So, I have done my due diligence and I know what I purchased. Do I expect a 10-bagger? No. This is not a tiny exploration company with an amazingly prospective land package. But at the same time, they have a nice cash cushion now, 2 operating mines in safe jurisdiction with ongoing drilling and potential for expansion (Canada). And they won't be needing to raise capital for awhile which is a legit fear when trading in illiquid exploration/development companies.

And if there is a debt crescendo, I would want to be largely in gold/silver, however, but I would expect all hard commodity assets to flourish, platinum and palladium included.

EUR/GBP is consolidating losses to a two-week low of 0.8472 as the market digests a rumour that a downgrade of Spain”s sovereign credit rating might be in the pipeline.

SOURCE: http://bit.ly/aMoeoE

Thanks professor! That couldn't be more picture perfect.

kaimu,

I wondered about that too... but this is not the first time I see scattered here and there affirmations that AIG managed to unwind most of its derivatives... Who knows what kind of paper-shuffling happens behind the scenes, in the room where we are not allowed, LOL

I just checked the rolling US DEBT Clock and the US debt is now $13.001 TRILLION.

We should all take our hats off and bow our heads and have a moment of silence.

In a wide-ranging report on the global economy, the Organization for Economic Cooperation and Development said that the Bank faces the "challenge of preserving credibility", as prices across the economy head higher.

With inflation far exceeding its official target of 2pc, the Bank must lift rates by the end of this year and raise them to 3.5pc by the end of 2011, the OECD said. The prescription comes at an awkward time for the Bank, which has seen inflation rise steadily so far this year.

Bank of England governor Mervyn King has tolerated the rise in prices, arguing that the greater risks remain around the strength of the UK recovery. And while the Bank admitted this month that inflation is proving more resilient than expected, it has kept interest rates at a record low level of 0.5pc to nurture growth.

http://www.telegraph.co.uk/finance/economics/77674...

I am curious to understand this phenomena. My understanding was that deflation was the greater risk, as govts. and consumer spending contracts. Seems a weaker British pound isn't always helpful. Wondering if/when market pushes BoE's hand as British debt is rejected. Or is Cameron going to put the squeeze on inflation with austerity budgets?

There's divergence inside the Fed about this. Those Fed guys representing areas that only have smaller regional banks often say things that are not at all aligned with the rescue of the big money banks. Yet they do not seem to either have the ability (or possibly the guts) to actually vote against the bailout actions.

China, which boasts the world’s largest foreign exchange reserves, is reviewing its holdings of eurozone debt in the wake of the crisis that has swept through the region’s bond markets.

Representatives of China’s State Administration of Foreign Exchange, or Safe, which manages the reserves under the country’s central bank, has been meeting with foreign bankers in Beijing in recent days to discuss the issue.

Safe, which holds an estimated $630bn of eurozone bonds in its reserves, has expressed concern about its exposure to the five so-called peripheral eurozone markets of Greece, Ireland, Italy, Portugal and Spain.

http://bit.ly/c67lep

I think we could use a little inflation. I am worried about deflation as the dollar grows stronger.

Bill,

Concerns noted. I will keep an eye out for your response. I do appreciate that you have the time and resources required perform full due diligence and are willing to share info on these smaller names.

Hi All - Nice discourse today ,,,,,spirited. I hope Lehman wins this one / might see some good stuff in the interogatories. Lehman's Aurora Loan Service Unit - doing stated income, no income and lower categories of mortgage loan approval (under strict credit, asset and loan to value analysis) did it right up until the elevation of Rangel to honcho of the Ways & Means in 2006, when standards for mortgage backed's went in the toilet. Rangel is a solid guy for the people represented initially - just not the rest of us. These kind of mortgages initially brought to you by Aurora represented a solid investment until the changing of the "grease my palm" guard in congress. My hound of the day was Greystar - GSL. Happy Trading

Does anyone have insight as to why big beta AAPL, MSFT, GOOG etc has belted up in after hours trading?

In Sundays WIR, Bill mentioned the importance of holding the S&P 500 @ 1066 and included this bit of history.
"Students of history know 1066 as the Battle of Hastings, the ensuing Norman conquest of England under King William 1, closer linkage of England to Europe, and the end of the Dark Ages."

The battle rages: Momentarily the S&P 500 is 1064.00 and had been lower. For live play by play action see http://tinyurl.com/2umk74b

From Fleck today... " The current level of skepticism ( of gold ) is nicely illustrated by the recent short-interest surge in the GLD exchange traded fund. Its now Doubled, standing at about 30 million shares ( around 3 million ounces ). Meanwhile, when the gold market recently fell out of bed, ETF holders at the margin liquidated No ounces, and in the last couple of days, they added at whopping 50 tons ( a phenomenon occurring in other places around the planet as well ). As a wise commodity trading friend said many years ago, you can be with the trend and still be contrary ".....

Pz- You made an excellent move, exiting VTI at yesterday's high. You may even have bought back in at the close.

I posted this (elsewhere) last night-

I expected we would close in the red today. I also 'sensed' that FIDSX/FSENX would close in the green, which they did.

There's a market law that mandates a shakedown of weak hands prior to taking off. If we do take off tomorrow, it should be with a gap up.

It's uncanny how often the market moves either way with as few on board as possible.

I'm still wary of a bull trap.

http://www.telegraph.co.uk/finance/economics/77691...

2nd-
In fact I was able to buy back yesterday near the end of the day VTI @55 again. I also picked up ULE @21.79. However, just to show how trading success can very day to day, I proceeded to get stopped out quickly in both. As Bill/Patrick have noted, risk is high,-keep tight stops. I did and my pain was very small, much smaller than the gains I made yesterday. Overall, a successful 24hour stretch. It has taken me plenty of years to actually learn to take my losses quickly, but I think I have finally learned. Thank you Bill, Patrick, Vad and 2nd!