Barrick Comes Home

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Barrick Comes Home 
 

Richard (Rick) Mills

Ahead of the Herd

Page 1 of 3

 

As a general rule, the most successful man in life is the man who has the best information

 

As part of his plan to prevent a run on the dollar, stabilize the US economy, and decrease US unemployment and inflation rates, on August 15, 1971, U.S. President Richard Nixon directed Treasury Secretary Connally to, among other things, suspend with certain exceptions the convertibility of the dollar into gold or other reserve assets and ordered the gold window to be closed so that foreign governments could no longer exchange their dollars for gold.

 

For the very first time in our history, all money, all currencies, were fiat – the US dollar use to be gold backed and it was the rock all the worlds currencies were anchored to – when the US dollar became fiat, all the worlds currencies became fiat.

 

Hindsight - Inflation v. Gold

 

When a currency loses value it’s called inflation – prices seem inflated as each dollar is able to buy less and less.

 

If in 1971 I purchased an item for US$1.00 then in 2014 purchased that very same item it would cost $5.87 a cumulative rate of inflation of 487.3%.

 

Gold has gone from $35.00 an ounce (when Nixon closed the window) to, at the time I’m writing this, $1240.50. And was as high as $1900.00 oz for a short period.

 

My hindsight is 20/20 so I can clearly see that holding gold was a better move, over the ’71-2014 time period then owning dollars.

 

Foresight – U.S. $’s Future

 

Fact - The global economy, and that includes the U.S.’s, is dependent on life support in the form of exceptionally low interest rates.

 

Fact - We now have is a global wide QE happening, every central bank is now creating, or will soon be creating money as fast as they can and buying assets denominated in dollars. Every country is beggaring their neighbor by printing its own currency in a bid to keep their exports cheaper than their competitors. It’s a race to not just worth less but to worthless.

 

Q - What do you think is going to happen when the U.S. rejoins the race to worthless, the Fed restarts the printing presses and doesn’t raise interest rates? 

 

Hint - Since the Federal Reserve was created in 1913 the U.S. dollar has lost more than 95 percent of its purchasing power.

 

Worrisome Things

 

In our immediate future there are a lot of serious issues including; currency devaluation, continual war, deteriorating geo-politics, religious genocide, China and its faltering relations with other China Sea stakeholders, Ebola, resource nationalism, climate change, possible bond market implosion, social unrest, very weak global macroeconomic data, resource wars, scarcity of fresh water for drinking, sanitary purposes and irrigation.

 

Investors need to own some precious metal bullion and the shares of gold/silver exploration/development companies.  

  

Country Risk

 

One of the most serious and unpredictable risks facing mining operations and investor interests is “country risk” – where the political and economic stability of the host country is questionable and abrupt changes in the business environment could adversely affect profits or the value of the company’s assets.

 

Many countries might come to mind as places where shareholders could, without warning, receive news that their operations have been taken over by the government and/or its friends, or that permits are suddenly suffering delays or have been cancelled outright.

 

There’s not a lot of country risk in Nevada, U.S.A. And that’s good because Nevada produces more gold then South Africa and Chile combined – the state of Nevada accounts for six percent of global gold production.

 

Barrick Gold Corp.

 

Barrick Gold Corp., the world’s largest gold miner, knows all about Nevada.

 

And perhaps that’s why Barrick is ‘coming home’ to the state that helped make the company – Nevada is home to some of Barrick’s largest operations, including its massive Goldstrike and Cortez mines.

 

According to many of Barrick’s senior officers Nevada is the most prospective place on earth to explore for gold. Strange that much of the company’s attention, to its great detriment, has been globally focused in recent years.

 

But now Barrick is shuffling management, cutting costs (for 2013, Barrick produced 7.2 million ounces of gold at all-in sustaining costs of US $915/ounce and 539 million pounds of copper at C1 cash costs of $1.92/pound) and refocusing its operations. This renewed focus comes following billions in impairment charges in 2013 (and half a billion more in early 2014) related to the value of many of its ‘not in Nevada’ projects.

 

In an effort to cut costs, the company has sold its portfolio of mines down to 19 compared to the 27 it had in 2012.

 

Spring Valley

 

Yet in Nevada Barrick is advancing its South Arturo project, extending the ore body at Cortez Hills and expanding its Turquoise Ridge mine. It’s also fact tracking its Spring Valley joint venture (JV) with Midway Gold.

 

2014 Updated Spring Valley Resource Estimate

 

Barrick is coming home to Nevada. Top company executives have repeatedly said Nevada is the primary focus of the company’s gold mining ventures.

 

Barrick completed its 70 percent earn in on the Spring Valley project by spending US$38 million a year ahead of schedule.

 

After Midway opted to be carried to production (will pay back its share of development capital from production) Barrick raised its interest in Spring Valley to 75 percent.

 

Barricks going to spend US$17.4 million on Spring Valley in 2014 – twice the amount that was spent in 2013.

 

Barrick has publicly stated that Spring Valley “could potentially be a new stand-alone gold mine.”

 

Barrick even highlighted the project in the company’s most recent investor presentation.

 

 

After reading all of the above you’d have to think Barrick, the world’s largest gold miner, is pretty serious about fast tracking development of the Spring Valley project.

 

 

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