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April 26, 2016

Tocqueville #Gold Strategy Investor Letter $XAU $GLD

The dollar price of gold rallied 16.14 percent during the first quarter while gold mining equities rallied 53.45 percent $XAU.

Tocqueville Gold Strategy Investor Letter
April 16, 2016

The dollar price of gold rallied 16.14 percent during the first quarter while gold mining equities rallied 53.45 percent (XAU Gold & Silver Index). It appears to us that the nearly five-year decline in the precious metals sector has concluded, and that the stage is set for a renewed advance towards all-time highs. What is the investment rationale to support our view?  
1. The war on savings and capital being conducted by central banks seems likely to drive investors towards alternative safe assets. We believe that prominent among the available options is gold.
2. At the zero interest-rate boundary, bonds are no longer capable of providing a stability hedge for equity portfolios; investors may look to gold to fill that vacuum.
3. A deepening shortage of physical gold means that even modest capital inflows into precious metals should drive an outsized price response.

War on Savings and Capital

Two percent inflation has become a stated objective of Fed and ECB monetary policy. Inflation diminishes the purchasing power of cash. The central bank rationale for creating inflation is to encourage households to spend and not to save, thereby paving a magical path towards economic growth. However, inflation is the archenemy of thrift. Currency debasement is an attack on saving and traditional channels of capital formation.   
Until inflation germinates, financial repression (or zero interest rates) is the central bankers’ weapon of choice. Miniscule returns on safe assets such as savings accounts and short-duration treasuries are meant to force savers, investors, and financial institutions into riskier investments, namely long-duration bonds, equities, or worse. In our view, financial repression is a major explanation for the seven-year bull market in equities and bonds. While investors have benefitted, the real economy remains stagnant. The levitation of bond and equity prices that has resulted from financial repression in the absence of meaningful economic growth over the past several years means that risky assets have become even riskier, and more dependent than ever on perpetual monetary stimulus.  
Central bankers and policy makers appear to be doubling down on easy money as they now discuss more radical variations. There is serious consideration for the elimination of large denomination cash notes (Mario Draghi, Lawrence Summers). Savers are being charged to hold money in banks instead of receiving interest in several European countries. Similar ideas are being considered in Japan and the US at high policy levels. $7 trillion of sovereign debt trades at negative nominal interest rates. Holders of what was formerly regarded as the safest of all liquid assets are guaranteed to lose money.  
Andrew Haldane, chief economist of the Bank of England, along with others, floats the idea of digital cash to compete with bank deposits: “[Digital cash] would allow negative interest rates to be levied on currency easily and speedily” (Ben Dyson, “Positive Money,” 9/2015), giving policymakers more control over the actions of savers and investors. We continue to receive numerous anecdotal reports of increased restrictions and paperwork that must accompany cash transactions, even at relatively low thresholds.  
The potential elimination of cash and the repression of interest rates on other safe assets assault the notion of unconstrained liquidity and maximum optionality, hitherto the principal attraction of these assets. “It appears that the one remaining escape hatch for private citizens is being closed…. The cashless society which appears over the horizon may come sooner that the demise of the penny!” (Bill Gross, Janus Capital, 3/16 Investment Outlook)  

Bonds Can No Longer Serve as an Effective Hedge for Equity Portfolios

If central bank policies that have boosted financial asset prices since 2008 are beginning to lose effectiveness – leading central bankers to consider even more radical measures – what is the possible upside for bonds and equities? Bonds have been a traditional hedge to balance risk of long-only equity portfolios, a basic tenet of Modern Portfolio Theory (“MPT”) since the 1950’s. However, over the last five years, returns on bonds and equities have been highly correlated. The chart below overlays the performance of TLT (ETF of 20-year treasuries) vs. the S&P:  
Source: Bloomberg
In MPT theory, observes Dan Tapiero (founding partner of Gold Bullion International, Gold as the New Government Bonds, 2/21/16), bonds provide a stabilizing influence to equity portfolios, because recessionary periods that negatively affect equity valuations have historically boosted bond prices. That is because monetary stimulus applied by central banking to combat recessions results in lower interest rates, and therefore higher bond prices.  
At nominal interest rates near or below zero, there seems to be no possible way that bonds can offer investors their traditional effect of stabilizing portfolio returns. At the zero interest rate boundary (“ZIRB”), nominal interest rates have little room to decline and boost bond prices. We thus believe that radical monetary policies have undermined the potency of sovereign debt to balance portfolio risk.  
Investors therefore must look elsewhere for portfolio balance. There are few alternatives that offer the ease of access, safety, and liquidity once offered by sovereign debt. We believe that the search for portfolio balance may well lead the investment community to stumble upon gold to replace or augment the stabilizing influence once provided by bonds.  
Since 2000, gold has provided a compound annual growth rate (“CAGR”) of roughly 10 percent, greater than stocks or bonds over that same period. Gold is liquid, high quality, easily accessed, and provides unquestioned portfolio-diversification properties. According to the World Gold Council, the current investment allocation of world institutional portfolios to gold is a miniscule .55 percent. The flows resulting from a return of investment interest in gold for hedging purposes only, and in the best of all possible worlds (robust economic growth, world peace, etc.), would seem to have a potentially powerful impact on gold prices.  

There Is a Deepening Shortage of Physical Gold

The outlook for future gold mine production is clouded by the roughly 40 percent decline in gold prices over the past five years. This decline has hobbled the gold mining industry in such a way that we expect the supply of newly mined gold to plateau at current levels in a best-case scenario, or decline by as much as 25 percent by 2020 in the absence of a sustained rise in the gold price of at least 50 percent. The reasons are discussed in detail in our website article “Synthetic Gold: Utopia for Alchemists.”
In addition to the dim prospects for increasing mine supply, the liquid inventories of physical gold vaulted in western financial centers (London, NY, and Switzerland) have been severely depleted by demand from Asian investors. As documented in our website article “Synthetic Gold” (1/7/2016), the “float” of easily accessed allocated physical gold has declined by approximately 67 percent since 2011. Much of the gold that has moved to Asia will not return to circulation in the absence of a sustained move higher. That is because it has been refined into levels of purity and bar shapes favored in Asian markets that are not readily accepted in Western capital markets. The chart below shows the 67% decline in private vault holdings. Central bank gold held at the Band of England is not in play for purposes of this discussion.  
Resurgence in the current negligible investment interest in gold by Western investors will most likely be expressed in the form of capital inflows into gold ETFs such as GLD. In the first quarter, inflows into GLD were 5,687,970 Troy ounces, the highest since 2010, 18 months prior to the run-up of gold prices to all-time highs. GLD and other similar synthetic instruments are required by charter to have 100 percent backing by physical metal.  
A continuation of first quarter strong inflows into gold-backed ETFs seems likely to exert a powerful marginal impact on gold prices. We estimate the demand for a 1-percent increase in gold allocations (from .55 to 1.55 percent) would equate to 56,075 tonnes of gold (chart below), much more than exists in the known float. Under this reallocation scenario, the scarcity of physical gold will most likely generate capital flows into synthetic instruments such as derivatives, structured notes, managed futures, and options, all of which entail high levels of fees and introduce heightened and varying levels of counterparty risk. However, investor scrutiny of these arrangements will in our opinion intensify in a rising gold-price environment. Substitutes for allocated physical gold will become decreasingly acceptable, leading to a scramble for the real thing.  


We believe that the stage is set for powerful new advance in gold prices. The extreme monetary policies responsible for boosting financial-asset prices in recent years seem to be running out of steam. There seems to be growing evidence that investor confidence in these policies is fading. Policymakers appear to be grasping at straws such as digital cash, negative nominal rates, and the elimination of large-denomination cash notes. In his just-published book, The New Case For Gold (Penguin, April 2016), James Rickards identifies 13 policy shifts by the Fed since the first round of QE. It seems clear to us that this continuing reinvention of policy is a never-ending experiment; and there appears to be no clear path for reversal or policy normalization.  
We believe that a decline in financial-market asset values is all that is needed to destroy whatever fragile confidence remains in paper currency and present-day financial conventions. Such a decline could come about for many reasons and at any time due to the buildup of systemic risk. Ray Dalio, iconic founder of Bridgewater Associates, has stated, “…most people should have roughly 10 percent of their assets in gold, not only as a good long-term investment, but also for its effectiveness in diversifying the other 90 percent of assets people hold.” It would not take a reallocation of 10 percent, or even 1 percent, to send the dollar gold price to all-time highs, in our opinion. Only .1 percent, requiring 5600 tonnes, would do the trick, as it would represent a demand increment that would swamp the supply of physical gold.  
We continue to recommend exposure to physical gold and gold mining stocks, which would be the prime beneficiary of a renewed advance in precious-metals prices. Despite their substantial rally in the most recent quarter, we believe that gold mining equities remain severely undervalued long-term options on the potential increase in the gold price that we foresee.  
John Hathaway
Senior Portfolio Manager
© Tocqueville Asset Management L.P.
April 12, 2016
This article reflects the views of the author as of the date or dates cited and may change at any time. The information should not be construed as investment advice. No representation is made concerning the accuracy of cited data, nor is there any guarantee that any projection, forecast or opinion will be realized.
References to stocks, securities or investments should not be considered recommendations to buy or sell. Past performance is not a guide to future performance. Securities that are referenced may be held in portfolios managed by Tocqueville or by principals, employees and associates of Tocqueville, and such references should not be deemed as an understanding of any future position, buying or selling, that may be taken by Tocqueville. We will periodically reprint charts or quote extensively from articles published by other sources. When we do, we will provide appropriate source information. The quotes and material that we reproduce are selected because, in our view, they provide an interesting, provocative or enlightening perspective on current events. Their reproduction in no way implies that we endorse any part of the material or investment recommendations published on those sites.

April 25, 2016

#Nevsun Resources and #ReservoirMinerals Combine and Consolidate #Timok #Copper Project Ownership

Transaction Highlights
  • Strategic US$1.1 billion combination creates a diversified mid-tier base metals company
  • Transaction consolidates a 100% ownership of the high grade upper zone of the Timok Copper Project
  • Timok development is underpinned by Nevsun's strong balance sheet and operating cash flow
  • Combined company has significant exploration exposure in two prolific mining districts
  • Significant benefits to both Nevsun and Reservoir shareholders
Nevsun Resources and Reservoir Minerals Combine and Consolidate Timok Copper Project Ownership

Vancouver, British Columbia – Nevsun Resources Ltd. ("Nevsun") (TSX: NSU) (NYSE MKT: NSU) and Reservoir Minerals Inc. ("Reservoir") (TSX Venture: RMC) today announced that they have entered into a definitive agreement to combine their respective companies. The combination creates a diversified mid-tier base metals company with a cash producing operating asset in Bisha, a high grade open pit copper-zinc mine, and 100% ownership in the upper zone of the Timok Copper Project in Serbia ("Upper Zone"), a high grade copper and gold development project.   The combined company will be well funded with Nevsun's existing strong balance sheet and operating cash flow and positioned to deliver value via Nevsun's highly successful development team.

Under the terms of the arrangement agreement announced today, Nevsun has agreed to acquire all of the outstanding common shares,  and restricted share units of Reservoir on the basis of two (2) common shares and $0.001 in cash for each Reservoir common share pursuant to a Plan of Arrangement under the British Columbia Business Corporations Act for a total value of approximately US$365 million. Based on the closing price of Nevsun common shares on April 22, 2016, the consideration represents a premium of 35% to Reservoir's 20-day volume weighted average price (VWAP). The transaction will allow both Reservoir and Nevsun shareholders to participate in the ongoing cash flow generation of the Bisha mine, the growth potential of the Timok Copper Project, and significant exploration potential at both Bisha and Timok.  Upon completion of the arrangement, current Nevsun shareholders will own approximately 67% of the combined company and current Reservoir shareholders will own the remaining 33%.

Concurrently, the two companies have also entered into a funding transaction comprised of a private placement for 19.99% of Reservoir's outstanding common shares and a loan transaction. Nevsun has subscribed for 12,174,928 common shares of Reservoir at a price of C$9.40 per share, for a total subscription price of CAD$114,444,323 (US$90,296,571), increasing Reservoir's total shares outstanding to 60,905,093, and provided an unsecured cash loan of US$44,703,429 to Reservoir.  The combined funding transaction provides US$135,000,000 in financing to enable Global Reservoir Mineral (BVI) Inc. ("Global Reservoir"), a wholly owned subsidiary of Reservoir to exercise its right of first offer ("ROFO") in respect of its joint venture with Freeport International Holdings (BVI) Inc. ("Freeport") in the Timok Copper Project. Upon Global Reservoir closing the exercise of the ROFO, Global Reservoir will have a 100% interest in the Upper Zone and a 60.4% interest in the lower zone of the Timok Copper Project ("Lower Zone") under two joint venture agreements with Freeport and will become the operator of the project. Freeport may increase its ownership in the Lower Zone to 54% under the terms of the original Timok JV agreement, with Global Reservoir holding the remaining 46%. Upon completion of the combination, Global Reservoir will be a wholly owned subsidiary of the combined company.

"This transaction diversifies Nevsun's asset base, putting our cash balance to work in a strategic and high return investment that will deliver significant value to our shareholders," said Mr. Cliff Davis, Nevsun's President and Chief Executive Officer. "The Upper Zone, with its high grade copper-gold resource and nearby infrastructure in a mining friendly jurisdiction, adds significant growth to Nevsun. With ongoing cash flow generation from our Bisha mine, we have the financial strength and proven technical ability to move the Timok project forward in a timely manner. We look forward to working with all stakeholders and Timok's highly capable partner in bringing the project into production."

"This is an excellent outcome for Reservoir and its shareholders, delivering premium value, and most importantly will expedite the development of the Timok Copper-Gold Project to the benefit of all stakeholders," said Dr. Simon Ingram, Reservoir's President and Chief Executive Officer. "Reservoir's Board of Directors determined that this transaction is the best funding alternative for our shareholders to fund the Timok ROFO.  Nevsun is a proven mine developer with the technical experience and strong balance sheet to enable Timok development. Reservoir shareholders retain exposure to the development potential of Timok and also gain exposure to the operating Bisha mine's cash flow and additional exploration potential.  The combined company will be in a strong position to efficiently advance the Timok project to production."

Benefits to Reservoir Shareholders

  • Expedited Development of Timok. The Timok Project will be expedited to production for the benefit of all stakeholders.
  • Premium value. Based on the closing price of Nevsun common shares on April 22, 2016, the consideration represents a premium of 124% over the trading price of Reservoir shares on March 2, 2016, the day prior to receiving notification of the ROFO and a 35% premium to the 20 day VWAP.
  • Increases long-term exposure in Timok. Through Nevsun's funding of Global Reservoir's ROFO, Global Reservoir will have a 100% stake and operatorship of the Upper Zone.
  • Strong balance sheet and cash generation to fund Timok's growth potential. The transaction offers shareholders exposure to cash generated from the Bisha mine, a high grade mine which generated US$120 million of operating cash flow in 2015, and pro-forma US$300 million in cash to fund development.
  • Strong operating team to advance the Timok project. Nevsun's management team has demonstrated the ability to develop and bring a mining project into production on time and under budget. Nevsun has invested over US$430 million in a three-phase development of the Bisha mine, all on-time and under budget.
  • Increased capital market profile. Nevsun's shares are liquid with a strong institutional shareholder base. Completion of the arrangement should result in further increases in trading liquidity and a broader depth of major institutional shareholders.

Benefits to Nevsun Shareholders

  • On strategy for diversification. ­The transaction delivers on the company's stated goal to diversify geographically through a strategic transaction.
  • Attractive deployment of capital. The transaction puts Nevsun's cash balance and ongoing cash flow generation capacity to use in an attractive development project with a high projected return.
  • High quality asset. The Upper Zone, a high grade copper-gold development project, is in a historic mining jurisdiction with excellent local and regional infrastructure.
  • Increased growth potential. The Upper Zone significantly increases Nevsun's growth profile. In addition, the Lower Zone, a joint venture with Freeport, represents further upside in the potential large-tonnage porphyry style mineralization.
  • Strategic partner. The combined company forms a strategic long-term partnership with Freeport, a leading copper and gold producer.

About the Timok Project Joint Venture

The Timok project represents four exploration permits in the highly prospective Timok Magmatic Complex in eastern Serbia, near the world class Bor and Majdenpek mines. The Timok project centres on the Cukaru Peki deposit, which includes the Upper Zone (characterized by massive and semi-massive sulphide mineralization) and the Lower Zone (characterized by porphyry-style mineralization). Refer to Reservoir's April 19, 2016 news release announcing the results of the Preliminary Economic Assessment on the Timok JV Project and Cukaru Peki deposit. The Timok project is a joint venture with Freeport governed by a joint venture shareholders agreement.

Freeport is currently the Timok Project operator and is fully funding the project. Following exercise of the ROFO, Global Reservoir will be appointed the operator until completion of the combination and until the occurrence of certain events, will advance the development of both the Upper Zone and the Lower Zone in accordance with approved budgets and work programs. Global Reservoir will have the sole right to propose budgets and work programs relating to the Upper Zone and for certain agreed Lower Zone work, and Freeport will have the sole right to propose budgets and work programs relating to the Lower Zone, subject to specified exceptions. Until the delivery of a feasibility study, Global Reservoir will fund 100% of the Upper Zone development costs, as well as US$20 million of agreed Lower Zone work. Global Reservoir and Freeport will fund 28% and 72% of all other Lower Zone development costs, respectively.  

Additional Transaction Details

The directors and management of both Nevsun and Reservoir have entered into agreements pursuant to which they have committed to vote their respective common shares, in favour of the arrangement. In addition, Nevsun, following completion of its subscription for Reservoir common shares will own 19.99% of Reservoir's outstanding common shares.

Major shareholders of Nevsun have expressed support for the transaction.

The arrangement has been unanimously approved by the Boards of Directors of both Reservoir and Nevsun.

The Boards of both Nevsun and Reservoir have received fairness opinions from independent financial advisors, and recommend their respective shareholders vote in favour of the arrangement.

The implementation of the arrangement is subject to certain customary closing conditions, including the approval of two-thirds of the votes cast by Reservoir's common shareholders and option holders at a special meeting, approval by a majority of votes cast by Nevsun shareholders at a special meeting, approval of the TSX Venture Exchange, the Toronto Stock Exchange and the New York Stock Exchange and court approval. Completion of the arrangement is also conditional on the successful exercise by Global Reservoir of its ROFO in respect of the original Timok joint venture agreement.

Post closing, the Nevsun Board will include two directors from Reservoir. The arrangement is expected to close late in the second quarter of 2016.

The terms and conditions of the arrangement will be disclosed in a further detail in an information circular to be mailed to Reservoir shareholders in advance of the special meeting of Reservoir common shareholders to approve the arrangement. A copy of the arrangement agreement, the information circular and related documents will be filed with the Canadian securities regulatory authorities and will be available under Reservoir's profile at


Scotia Capital Inc. is acting as financial advisor to Nevsun and has provided a fairness opinion to the board of directors of Nevsun that the arrangement is fair from a financial point of view to Nevsun shareholders. Stikeman Elliott LLP is acting as legal advisor to Nevsun and Gibson, Dunn & Crutcher LLP is advising Nevsun with respect to U.S. securities matters. Canaccord Genuity and Natural Resources Global Capital Partners are acting as financial advisor to Reservoir and Canaccord Genuity has provided a fairness opinion to the board of directors of Reservoir that the arrangement is fair from a financial point of view to Reservoir shareholders. Blake, Cassels & Graydon LLP is acting as legal advisor to Reservoir.

Conference call details

Nevsun and Reservoir will hold an investment community conference call and webcast April 25, 2016 at 6:00 a.m. Vancouver / 9:00 a.m. Toronto, New York / 2:00 p.m. London. Conference call details are as follows:

North America: 1 888-231-8191 / 1 866-865-3087 / 1 647 427-7450
UK: 0800 051-7107 (toll free)
Other International: +1 647 427-7450
Conference ID: 99383803
To Access Webcast:

Please call/log-in 10 to 15 minutes before the conference call starts.

A presentation accompanying the conference call will be available from the Nevsun ( and Reservoir ( websites.

The conference call will be available for replay until June 30, 2016, by calling 1 855-859-2056 / +1 778-371-8506 and entering passcode 99383803.

About Nevsun Resources Ltd.
Nevsun Resources Ltd. is the 60% owner of the high grade Bisha Mine in Eritrea.  Bisha has over 9 years of reserve life, generating revenue from both copper and zinc concentrates containing gold and silver by-products.  Nevsun has a strong balance sheet with over US$400 million in cash, no debt and pays a peer leading quarterly dividend.  Nevsun is well positioned to grow shareholder value through exploration at Bisha and acquisition of additional mining assets.

About Reservoir Minerals Inc.
Reservoir Minerals Inc. is an international mineral exploration and development company run by an experienced technical and management team, with a portfolio of precious and base metal exploration properties in Europe and Africa. The Company operates an exploration partnership business model to leverage its expertise through to discovery.

Forward Looking Statements

This news release contains forward-looking statements and/or forward-looking information within the meaning of the United States Private Securities Litigation Reform Act of 1995, and applicable Canadian securities laws. Forward-looking statements are frequently, but not always, identified by words such as "expects," "anticipates," "believes," "intends," "estimated," "potential," "possible" and similar expressions, or statements that events, conditions or results "will," "may," "could" or "should" occur or be achieved.  Forward-looking statements are statements concerning the Nevsun's and Reservoir's current beliefs, plans and expectations about the future including but not limited to the arrangement and related transactions, Nevsun's commercial production, Bisha's future production of copper and related cash flows, and development of the Timok project and related costs.  These statements are by their very nature inherently uncertain. The actual achievements of the combined company or other future events or conditions may differ materially from those reflected in the forward-looking statements due to a variety of risks, uncertainties and other factors, including, without limitation, the risks that: (i) the conditions to completion of the arrangement will not be satisfied, including approval by Reservoir's and Nevsun's shareholders, court approval and successful exercise by Reservoir of the ROFO; (ii) an event, change or other circumstance that could give rise to the termination of the arrangement agreement will occur; (iii) the retention of employees and other personnel will be adversely affected by uncertainty surrounding the arrangement; (iv) the companies will be unable to successfully integrate their operations following completion of the arrangement; (v) any of the assumptions in the historical resource estimates turn out to be incorrect, incomplete, or flawed in any respect; (vi) the methodologies and models used to prepare the resource and reserve estimates either underestimate or overestimate the resources or reserves due to hidden or unknown conditions, (vii) exploration activities or the mine operations are disrupted or suspended due to acts of god, internal conflicts in the country of Eritrea or Serbia, unforeseen government actions or other events; (viii) operations will be disrupted due to equipment or power failures, uncertainties in the copper minerology, metallurgical recoveries or concentrate grades, or other or other events; (ix) Nevsun is subjected to any hostile takeover or other unsolicited attempts to acquire control of Nevsun; or (x) are associated with the speculative nature of exploration activities, periodic interruptions to exploration, failure of drilling, processing and mining equipment, the interpretation of drill results and the estimation of mineral resources and reserves, changes to exploration and project plans and parameters and other risks are more fully described in the Nevsun's Annual Information Form for the fiscal year ended December 31, 2015, which is incorporated herein by reference.  Nevsun's and Reservoir's forward-looking statements are based on the beliefs, expectations and opinions of management on the date the statements are made, and neither Nevsun nor Reservoir assume any obligation to update such forward-looking statements in the future, except as required by law.  For the reasons set forth above, investors should not place undue reliance on Nevsun's or Reservoir's forward-looking statements and the forward-looking information presented here.

Further information concerning risks and uncertainties associated with these forward-looking statements and Nevsun's business can be found in Nevsun's  Annual Information Form for the year ended December 31, 2015, which is available on the Company's website (, filed under Nevsun's profile on SEDAR ( and on EDGAR ( under cover of Form 40-F. Further information concerning risks and uncertainties associated with the forward-looking statements related to Reservoir and its business can be found in Reservoir's Management Discussion and Analysis for the year ended November 30, 2015, which is available on the Company's website ( and filed under Reservoir's profile on SEDAR (

Neither TSX Exchange, TSX Venture Exchange nor the Investment Industry Regulatory Organization of Canada accepts responsibility for the adequacy or accuracy of this release.

Additional Information

This announcement is for informational purposes only and is neither an offer to buy nor the solicitation of an offer to sell any securities.  Nevsun expects that the securities to be offered in the arrangement will be issued in a transaction exempt from the registration requirements of the United States Securities Act of 1933, as amended (the "U.S. Securities Act") pursuant to Section 3(a)(10) of the U.S. Securities Act.


For further information, Reservoir shareholders should contact:

Nevsun Resources Ltd.
Scott A. Trebicock
Chief Development Officer
Tel +1 604 623-4700
Reservoir Minerals Inc. 
Chris MacIntyre
VP, Corporate Development
Tel +1 416 346-7660

Media Inquiries:
Longview Communications
Trevor Zeck
Tel +1 604 694-6037

Click Here for a complete listing of Reservoir press releases. 

April 12, 2016

Fortune Hunters Endanger #Africa’s Abandoned #Mines @wsj

Illegal miners across Africa are clambering down mining shafts closed by some of the world’s biggest producers, fueling dystopian conflicts between companies waiting out a commodity rout and poor villagers, creating an environment of desperate scavengers and extreme lawlessness. 

Fortune Hunters Endanger Africa’s Abandoned Mines

Artisanal miners outside a gold-mine tunnel in the Democratic Republic of Congo, in a 2104 photo.ENLARGE
Artisanal miners outside a gold-mine tunnel in the Democratic Republic of Congo, in a 2104 photo. Photo: Kenny Katombe/Reuters
Fortune seekers across Africa are clambering down gold shafts closed by some of the world’s biggest miners, fueling dystopian conflicts between companies waiting out a commodity rout and poor villagers with little to lose. 
The result is a chaotic and often deadly tableau playing out deep underground across the mineral-rich continent. Dozens of miners have been killed in subterranean gunfights over turf ceded by mining companies, many of whom fear the collateral damage to shaft walls and winches could make it impossible to open them again.
In Ghana, AngloGold Ashanti Ltd., the world’s No. 3 gold producer, closed shafts at its Obuasi mine in late 2014, as the mine hemorrhaged cash amid sinking metals prices. Early this year, hundreds of men broke through the 13-mile fence around Obuasi and started hunting for gold there on their own.
One artisanal miner, Borin Rufus, said he needs the work even though he knows it is illegal. In a good month, he earns about $1,000 to support his family of seven, more than twice what he was making by legally mining deposits just beyond Obuasi’s perimeter.
“There are no jobs and no other means of survival, ”said Mr. Rufus, who leads a group representing illegal miners picking over Obuasi’s ore. Some of the group’s members are licensed to prospect near the mine, but he acknowledges that a majority aren't, due largely to costs associated with acquiring a license.
The incursions of illegal miners into mothballed sites are another costly headache for an industry struggling to right itself as a global commodities rout decimates their profits. Some of the world’s largest miners, including Glencore PLC and Anglo American PLC, are shedding jobs and operations across the globe. 
Now, prospectors are invading the sites many of these companies are leaving behind, especially gold mines, creating an environment of desperate scavengers where it isn’t uncommon for gunfights to erupt thousands of feet underground. South African police in September found the bodies of 15 illegal miners who had been shot during a three-day turf war at a mine east of Johannesburg.
To be sure, violence at mines on the continent isn’t new or restricted to abandoned shafts. In August 2012, a wildcat strike that started at the world’s No. 3 platinum producer Lonmin PLC’s Marikana mine in South Africa left dozens of people dead. Illegal miners in the country, who are called zama zamas, which is Zulu for “those who try their luck,” sometimes slip into shafts that are in operation at the country’s biggest gold producer Sibanye Gold Ltd., as well as others.
Authorities in Tanzania are battling to control an influx of illegal miners, the numbers of whom has more than doubled over the past five years. Over the past two years, 103 miners have died in accidents at artisanal mines in Tanzania, compared with just two at large-scale operations, the country’s minerals ministry says. Tanzania’s largest miner, Acacia Mining PLC, has cut more than a quarter of its workforce to counter rising costs.
In the Democratic Republic of the Congo, illegal mining has spread from the embattled Kivu region to the mining stronghold of Katanga, where as many as 150,000 illegal miners now work alongside larger industrial operations.
Still, “we believe we can coexist with AngloGold Ashanti,” said Mr. Rufus, whose group broke into AngloGold’s Obuasi mine in Ghana earlier this year. In March, the company relinquished about two-thirds of its Obuasi license area that it deemed not worth mining to the government, which can then hand out licenses to artisanal operators as it sees fit.
But coexistence sometimes devolves into violent clashes: In February, AngloGold’s head of corporate affairs in Ghana, John Owusu, was killed during a confrontation at the mine.
While Mr. Owusu and others were inspecting holes in Obuasi’s fence, some illegal miners gathered on a nearby hilltop and hurled rocks at him and his companions. Others brandished machetes. 
Mr. Owusu was runover as he tried to flee in the ensuing mayhem. AngloGold subsequently withdrew 175 nonessential employees from the site.

April 1, 2016

What'd happen if everyone invested 2% of money in #gold?

What'd happen if everyone invested 2% of money in gold
It would mean a shift of $1.5 TRILLION. For some context, this would represent over 12X last year's production, and over 9X total yearly demand... globally.

Here's what would happen if institutional investors put 2% of their money in gold

gold barGetty Images/Michael Gottschalk

Institutional portfolio managers control a lot of money. Lots and lots of money. And their allegiance is not to any particular asset class or sacred-cow portfolio theory. They're in business to safeguard and grow their clients' money.

To that end, we've already started to see the embers of interest in gold from this elite fraternity of market movers.

So, think about what would happen if they decided security markets were too volatile, or bonds too insecure, or currencies too unstable, or central bankers too indecisive, and moved just 2% of their assets into gold.

How much can you buy with $1.5 trillion?

This table from Towers Watson shows the assets under management (AUM) from the 500 largest asset managers in the world.

Check out how much money would be allocated to the sector if just 2% of those assets were moved into gold, and the amount of gold needed to meet this new demand...

goldHard Assets Alliance

If just 2% of global financial assets under active management were to seek a new home in gold, it would mean a shift of $1.5 trillion. For some context, this would represent over 12 times last year's production, and over 9 times total demand... globally.

That would be a space-mission-sized shift, "Gold market, we have a problem." There isn't anywhere near this amount of gold available for investment. Not even close.

Even if our assumption is off by 1,000% and just one-tenth of this dollar amount headed into gold, it would still soak up every ounce of gold mined worldwide last year.

And as big-league fund manager Dan Tapiero points out in this interview, fund managers are indeed likely to direct some of their assets into the gold market. Risk is higher in virtually every major component of the economy—stocks are vulnerable, real estate looks lofty, subpar growth is pervasive, deflation is persistent, and perhaps most troubling is that the Fed and other central bankers are running out of tools to turn things around.

Forget the debate about how much money portfolio managers might move into gold. The issue is simply about when they will begin the process in earnest. Because once they do, even a small allocation would upset this tiny industry. And that would have a major implication on the gold price.

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#SaudiArabia to Sell Stake in #Aramco by 2018 #MasterEnergy

Saudi Arabia plans to sell a stake “of less than 5 percent” in the parent of its state-owned oil company, the kingdom’s deputy crown prince said, revealing details of a listing that could make it the world’s biggest publicly traded firm.
In an interview in Riyadh, Prince Mohammed bin Salman said his advisers were working on a plan to offer shares in all of Saudi Arabian Oil Co. rather than just some of its refining subsidiaries. Saudi Aramco, as the world’s biggest oil exporter is known, would be listed on the domestic stock exchange as early as 2017 and no later than 2018, said the prince, the king’s son and second in line to the throne.

“The mother company will be offered to the public as well as a number of its subsidiaries,” the prince, who heads Aramco’s supreme council, told Bloomberg in a five-hour conversation.