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May 26, 2016

An Inside Look at the World's Biggest Paper #Gold Market

More gold is traded in London each day than what is stored at Fort Knox (4,176 tonnes). On a higher volume day, amounts closer to total U.S. gold reserves (8,133.5 tonnes) can change hands.

Everything you need to know about the secretive London gold trade, where 5,500 tonnes of paper gold are exchanged each day and spot prices are set.

An Inside Look at the World's Biggest Paper Gold Market

May 25, 2016

How does the #Gold Business Work?

How the Gold Business Operates
Here is a brief overview of how the Gold business works. 

How the Gold Business Operates

CNBCGold Bars

Gold mines produce rough gold, called a dore bar. These bars are typically about 80 percent pure gold. The gold is then sent to a refinery, where it is refined into gold of different forms and purity.

Perhaps the most widely produced gold bars are the London Good Delivery bars. Under rules established by the London Bullion Market Association, LBMA, these bars — the gold standard of the gold world — must be at least 99.5 percent pure gold, weigh between 350 and 430 ounces (most weigh about 400 ounces), and be stamped with a unique serial number, the fineness, and the seal of the refiner.

Who can make these bars?

Only refiners approved by the LBMA. They have to maintain excellent laboratory and production facilities, and there is a proactive monitoring of these refineries on the good delivery list. These are usually the only bars that are used for vaulting and storing purposes by bullion banks.

Up until this point, the gold will likely be owned by the mining company (in some cases a gold bullion bank may finance the mine's activities as well). Once the gold is refined, ownership is often transferred to gold bullion banks.

What happens from there?

Depending on where the gold is mined, it will typically be flown by plane to a bank vault in another country: the U.S., the U.K., Dubai, India, China, Australia, anywhere gold may be needed.

The role of bullion banks.

Bullion banks are the middleman of the gold world. Miners produce gold, but they might not produce it at the same time that consumers want to buy the metal. So the banks play a sort of clearing role: when producers want to sell, they can sell to the bank. When consumers want to buy, they can buy from the bank.

In a sense, a bullion bank does many of the things that a traditional bank does. They provide services to the entire wholesale gold industry: big miners, big consumers such as the jewelry and industrial businesses, central banks, and major investors like ETFs. They supply huge amounts of wholesale metal to the primary consumer markets: China, India, the Middle East, Turkey.

They provide, for example, financing and delivery of the physical metal. So if an Indian manufacturer is making a product in, say, Turkey or Switzerland, gold bullion banks can advance the metal in those locations for them.

The bullion banks provide many different types of trading services as well: spot trading, forwards, options, vaulting, etc.

Setting the price for gold.

The price of gold is determined by supply and demand. There isn't one gold market; there are many. The most important include:

  • The primary over-the-counter market, OTC, where the "spot" or cash price of gold is determined, is in London, but there are also OTC markets in New York, Dubai, and even in Turkey. Much of the trading in gold occurs in the over-the-counter market on gold trading desks around the world. What do these desks do? They facilitate trading. They trade gold on behalf of their clients (miners, central banks, ETFs, jewelry and industrial manufacturers, etc.) and in some cases trade for their own accounts. Some clients also want to borrow or lend the physical metal.
  • The gold futures market, the largest of which is in the United States;
  • The London fix, which is the primary benchmark price for gold. The purpose of the fixing is to provide a tradable benchmark price.

How the London fix works: There are two daily "fixings", a fix at 10:30 in the morning, and a PM fix at 3 o'clock in the afternoon. The fixing is actually a company, called the London Gold Fixing Limited, and the 5 members of the fixing are HSBC, Deutsche Bank, Barclay's, Societe Generaleand ScotiaMocatta. There is a chairman, and each one of the fixing members has a line to other dealers. Think of it like a pyramid structure: the chairman nominates a price, and the five members pass this information down to their clients, who pass it to other interested parties.

So, for example, a customer could tell one of the fixing members, "I'd like to buy 10 bars at this price, but I won't buy 10 bars at this price; or I'd like to sell 10 bars or 20 bars at this price." So at every point of the fixing process, until the chairman declares the price is fixed, all of the customers down that pyramid have an opportunity to do a transaction.

Eventually each one of the five fixing members declares his interest as either buyer, seller, or no interest. When the members reach a point where there is some equilibrium between buyers and sellers, the chairman will then ask each member to declare the number of bars they want to sell or buy based on the buying and selling interest of their clients, and the chairman will declare the price "fixed."

Why have a fixing at all?

It provides a tradable benchmark price. Where gold is part of a portfolio, you need to have a way to value those assets. The fixing is a price at which buyers and sellers are matched at a particular time of day, and because it's open, transparent and tradable it represents a very credible benchmark price.

There are lots of different gold prices around the world, so why doesn't gold trade at wildly different prices? Because arbitrageurs (often on gold trading desks) step in to buy gold in one place, and sell it in another.

How does it get to the consumer?

While much of the gold supply is vaulted (held for investors like ETFs, or central banks), about half of the world's gold ends up as jewelry.

Let's take the example of India, the largest consumer of gold in the world. A wholesaler in the India market would typically be a bank. They will have a relationship with a bullion bank and say, for example, "I would like 2 tons of one-kilo gold bars at a 99.5 purity level." The bullion bank, if they have that size and purity of gold, can forward it to the Indian bank. If they do not have that type of gold immediately available, but in another form (different size bars, or different purity level), they can forward the gold they have to a refinery who is capable of refining the gold to the specifications the bank requires, and then ship it out from the refinery to the bank in India. The bank will then typically forward the gold (often on consignment) to a major jewelry manufacturer.

Much of the gold used for jewelry is leased. Users borrow gold to avoid the risk that gold prices may move against them. They pay a fee to borrow the gold and the title remains with the bank. Ownership is transferred when a final product is manufactured.

May 10, 2016

Technical Levels on #Gold Stocks

From Paradigm Capital:

·         Yesterday's weakness in the gold equities has been on relatively low volume and stocks have yet to break any key technical levels.


·         The On Balance Volume indicator continues to strengthen in most gold stocks, signalling that the volume on up days continues to outweigh the volume on down days.


·         The US Dollar has been strengthening since last week's lows but remains in a downtrend from the January highs. It is important to note that May is one of the seasonally strongest months for the Dixie and as such there is still potential for further upside. However given the weakness in the monthly and weekly charts, including monthly and weekly MACD sell signals, we think the rally will be shallow.


·         With the potential for further USD strength in the near-term there is still risk of weakness in gold equities, however unless we see technical levels start to break we remain buyers of the dips.


·         Below we highlight some key levels to watch on a number of gold names:

o   Seniors: ABX, G

o   Intermediates: AEM, DGC, ASR

o   Juniors: KDX, OGC

o   Royalties: RGLD, SSL



Barrick Gold Corp:



Goldcorp Inc.:



Agnico-Eagle Mines Ltd.:



Detour Gold Corp.:



Alacer Gold Corp.:



Klondex Mines Ltd.:



OceanaGold Corp.:



Royal Gold, Inc.:



Sandstorm Gold Ltd.:



#Gold Hedging is back, in Q1 amount hedged is >2.5x am't hedged in all of 2015


   Exhibit 1: Global gold producer hedging/de-hedging in tonnes 

Source: Metal Focus, J.P. Morgan Commodities Research

 The return of gold hedging

With gold prices rallying over 20% since the end of last year, a fast-growing number of gold mining companies have been locking in profit margins through hedging.  In 1Q16, gold producers hedged almost 2.6 million ounces (79.6 tonnes) of their future gold production, by our estimates (Exhibit 1). This compares to 28 tonnes hedged in 2015 and 116 tonnes in all of 2014 (Exhibit 2)The move back towards hedging has been broad-based with producers from Australia, Canada, Russia and Africa hedging through a combination of forward contracts and zero-cost collars. 


Exhibit 2: Global gold producer hedging/de-hedging




Source: GFMS, Metal Focus, J.P. Morgan Commodities Research


May 9, 2016

#Lucara Diamond $LUC.TO - 813 carat exceptional diamond sold for US$ 63 Mio


Lucara Sells Its 813 Carat Diamond for US$63 Million, the Highest Price Ever Achieved for the Sale of a Rough Diamond.  On June 29, 2016, Sotheby,'s will auction the 1,109 carat diamond called "Lesedi La Rona" (our light) in London. It is anticipated that this second largest ever found diamond could achieve a price between US$ 70 to US$ 100 Mio.

VANCOUVER, BRITISH COLUMBIA--(Marketwired - May 9, 2016) - (TSX:LUC)(BOTSWANA:LUC)(NASDAQ OMX Stockholm:LUC), Lucara Diamond Corp. ("Lucara" or the "Company"), is pleased to announce that the exceptional 812.77 carat, Type IIa diamond recovered from the Karowe mine in Botswana in November 2015 (see news release dated November 19, 2015), has been sold for US$63,111,111 (US$77,649 per carat). As part of the sale, Lucara has partnered with Nemesis International DMCC, and retains a 10% interest in the net profit received from the sale of the resultant polished diamonds.

The 813 carat diamond has been named, "The Constellation", in collaboration with our partner.

William Lamb, President and CEO, commented, "We are very pleased with the result from the sale of this magnificent 813 carat diamond as well as the opportunity to further participate in profits earned when the polished product is sold. The sale of the 813 carat diamond is the highest price ever achieved for a rough diamond, breaking all records. This achievement solidifies our reputation in the jewelry industry as one of the most important sources of diamonds of the very highest quality. We look forward to the next stage of Lucara's development with the sale of the spectacular 1,109 carat, Lesedi La Rona diamond which will take place at Sotheby's London on June 29, 2016."


May 3, 2016

Cantor: #Gold target raised to $1,425/oz; initial resistance @ $1,338/oz -$1,383/oz.

Cantor Fitzgerald ups it's price target to US$1,425/oz with resistance levels set at US$1,338/oz to US$1,383/oz.

Update: Positive Gold set up

Bullish continuation pattern complete. $1,338/$1,383 near term resistance levels. Longer term trend reversal remains in play.

·         Gold completed a bullish symmetrical triangle pattern last week <chart#1>.

o   This pattern projects a minimum price objective to $1,425.

·         Spot Gold traded with a negative price series for 2.5 years until the move above $1178/$1200 and the pivotal 50WMA in the first half of February this year <chart#2>.

·         Above $1,383 is a historic low volume trade zone which lacks significant resistance levels.

·         Cross asset focus: €/$ in breakout mode above 1.1530. Negative correlation to the US$ remains.


Chart#1. Spot Gold $/Oz Daily. Including 50DMA.

·         Key focus: Bullish symmetrical triangle pattern.



Chart#2. Spot Gold $/Oz Weekly. Including 50WMA, Volume at Price indicators.

·         Key focus: Resistance levels at $1,338 and $1,383.


 Previous emails RE Positive Gold Outlook 11th February and 11th April below:

From: O'Leary, Guy
Sent: 11 April 2016 11:35
Subject: Update: Positive Gold set up


Remain positive above $1178/$1200 breakout zone targeting resistance levels $1295/$1338/$1383. Positive price action and momentum now in play.  Key range in the near term $1208 to $1272.

·         Spot Gold traded with a negative price series for 2.5 years until the move above $1178/$1200 and the pivotal 50WMA in the first half of February this year <chart#1>.

·         Price posted a near term 'higher low' in March <chart#2>.

·         Momentum indicators have turned to positive mode while Gold Price Volatility continues to fall with the %age daily Average True Range is now 1.5% vs 2% twelve month high / 1% twelve month low <chart#3&4>.

·         Negative correlation to the US$ remains. Key range support in DXY = 93.13. Key range resistance in €/$ = 1.1534.

·         Key support Gold: $1208 near term range support, $1200/$1178 February breakout zone.

·         Key resistance Gold: $1272 near term range resistance, $1295, $1338 and $1383.


Chart#1. Spot Gold $/oz. Weekly chart. April 2012 to present day. Inc 50WMA.


Chart#2. Spot Gold $/oz. Daily chart. July 2015 to present. Inc 50DMA.


Chart#3. Daily momentum dynamic Spot Gold. Weekly and Monthly readings remain positive.


Chart#4. Volatility. Average True Range %age. Spot Gold.




From: O'Leary, Guy
Sent: 11 February 2016 09:46
Subject: Gold breaks above $1200. Bullish.


Spot Gold broke above its $1200 major resistance level today, if price remains above $1200 (currently $1216) for the weekly close tomorrow look for a direct move toward $1295 (Q1/2015 highs).

·         Gold has traded with a series of lower highs and lower lows since a bearish triangle completed in September 2014.

·         $1200 marked the previous high (October 2015) in the negative sequence.

·         Positive Gold move during extreme equity selloffs as per DM Government Bonds (US10 year yield now 1.6% from 2.28% on 4th Jan).

·         Primary resistance is $1295 with secondary resistance at $1339 and R3 at $1383.


Spot Gold $/oz. Weekly chart. May 2012 to present day.



Gold vs S&P500. Daily Chart. November 2015 to present day.

·         Panel 1: Gold vs S&P500 price.

·         Panel 2: Gold vs S&P500 ratio spread.

·         Panel 3: Gold S&P500 40 day correlation.



Guy O'Leary  MA, MBS, MSTA, APA

Global Macro Strategy Team

#Timok: #ReservoirMinerals $RMC.V $RVRLF Acquires 55% Interest from Freeport $FCX; Consolidates Cukaru Peki Upper Zone

Reservoir Minerals has added a new press release to its web site. For full details please visit the Reservoir web site at:

Reservoir Consolidates the Cukaru Peki Upper Zone Acquiring 55% Interest from Freeport

VANCOUVER, BRITISH COLUMBIA--(Marketwired - May 2, 2016) - Reservoir Minerals Inc. ("Reservoir" or the "Company") (TSX VENTURE:RMC)(OTC PINK:RVRLF)(BERLIN:9RE) is pleased to advise that it has exercised its Right of First Offer ("ROFO") with Freeport-McMoRan Exploration Corporation ("Freeport") to acquire Freeport's 55% interest in the Timok Project Upper Zone of the Cukaru Peki copper-gold deposit, and increase its interest in the Lower Zone, by payment of US$135 million to Freeport.

Reservoir completed an equity placement to Nevsun Resources Ltd. ("Nevsun") for US$90,296,571 (C$114,444,323) at a subscription price of C$9.40, and agreed a bridge loan with Nevsun for a total of US$44,703,429 (C$56,658,338). The proceeds of the equity placement and the bridge loan have been used to exercise the ROFO. Reservoir and Nevsun have previously announced that they have entered into a definitive agreement to combine their respective companies (News release dated April 24th, 2016).

Dr. Simon Ingram, President and CEO of Reservoir Minerals Inc., commented: "The Company is pleased to report the consolidation of the Timok Project Cukaru Peki copper-gold deposit Upper Zone. The recent PEA results highlight that this project has the potential to generate extremely robust economics even at spot prices and can be fast-tracked towards early production. Reservoirs' board believes that the business combination previously announced with Nevsun presents the best option for Reservoir shareholders to gain long term exposure to this exciting project."

On March 7, 2016, the Company confirmed that its subsidiary Global Reservoir Minerals (BVI) Inc. had received a notice of sale and offer from Freeport International Holdings (BVI) Ltd. Freeport provided notice to Reservoir of the proposed sale to Lundin Mining Corporation ("Lundin") of an interest in Freeport International Holdings (BVI) Ltd., the entity through which Freeport holds its interest in the Timok Joint Venture in Serbia, under a Joint Venture/Shareholders Agreement dated December 15, 2015 among Freeport, Reservoir and Timok JVSA (BVI) Ltd., and offered to sell to Reservoir on the same terms and conditions as those agreed with Lundin pursuant to Reservoir's right of first refusal under Section 15.04 of the Joint Venture Agreement. Reservoir had until May 3, 2016 to decide whether it would exercise its right of first offer ("ROFO"). Reservoir has now exercised its ROFO by making the payment to Freeport of US$135 million and agreeing to the same terms and conditions as those agreed with Lundin.

Reservoir has acquired 100% of Freeport's interest in the Timok Project Upper Zone of the Cukaru Peki copper-gold deposit, which is characterized by high grade massive and semi-massive sulphide mineralization (the "Upper Zone"), as well as Freeport's interest in all the mineral licenses comprising the Timok project, and 28% of Freeport's interest in the Timok Project Lower Zone of the Cukaru Peki deposit which is characterized by porphyry-style mineralization (the "Lower Zone"). Freeport will retain the remaining interest in the Lower Zone. In addition, Freeport has the option to have any new large mineral deposit containing at least four million tonnes of contained copper equivalent characterized in the same manner as the Lower Zone upon the payment to Reservoir of two times drilling, study and other similar costs plus other direct costs such as land acquisition costs.

Reservoir will be appointed as operator of the Timok Project until the occurrence of certain events and will advance the development of both the Upper Zone and the Lower Zone in accordance with approved budgets and work programs. 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 Reservoir will; own 100% and fund 100% of the Upper Zone development costs, fund $20 million of agreed Lower Zone work and thereafter Reservoir will fund 28% of all other Lower Zone development costs, Reservoir will own 60.4% of the Lower Zone. After the delivery of the feasibility study Reservoir will continue to own 100% and fund 100% of the development of the Upper Zone, and Reservoir and Freeport will fund 46% and 54% respectively of the development of the Lower Zone, and each will be entitled to its pro rata share of economic benefits of the Lower Zone.

Nevsun Equity Placement and Loan Agreements

Reservoir completed an equity placement to Nevsun for US$90,296,571 (C$114,444,323) at a subscription price of C$9.40 issuing 12,174,928 shares, such that Nevsun now owns 19.99% of the outstanding Reservoir common shares. Nevsun has the right to appoint one director to Reservoirs Board of directors.

Reservoir has entered into a Bridge Loan Credit Agreement with Nevsun for a total of US$44,703,429 (C$56,658,338). The Nevsun equity placement and Bridge Loan totalling US$135 million have been used to exercise the ROFO.

Reservoir has also entered into a Loan Agreement with Nevsun for US$850,000 that will be used for immediate Timok project operational expenses.

Qualified Person:

Dr. Tim Fletcher, Chartered Engineer (UK) and VP Exploration for Reservoir Minerals, a Qualified Person under National Instrument 43-101 Standards of Disclosure for Mineral Projects of the Canadian Securities Administrators and a consultant to the Company, approved the technical disclosure in this release and has verified the data disclosed.

About the Company:

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.

For further information on Reservoir Minerals Inc., please consult our website

This news release includes certain "forward-looking statements" under applicable Canadian securities legislation. Such forward-looking statements or information, including but not limited to those with respect to exploration results, involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance or achievements of Reservoir Minerals Inc. to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements or information. Such factors include, among others, the actual prices of commodities, the factual results of current exploration, development and mining activities, changes in project parameters as plans continue to be evaluated, as well as those factors disclosed in documents filed from time to time with the securities regulators in the applicable Provinces of British Columbia and Alberta.

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

Contact Information:
Reservoir Minerals Inc.
Chris MacIntyre
VP Corporate Development

Click Here for a complete listing of Reservoir press releases.