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Eric Coffin

 
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  • 'Tis the Season for Junior Gold Stocks Gains [View article]
    You're reading too much into the comment Marco. The vast majority of what we have always covered is Juniors - we merely see enough price leverage that seniors will underperform less. Most seniors on our list got there because they took over juniors we followed and the effective cost to our subscribers of those shares is a tiny fraction of where they currently trade.. I would not disagree that Goldcorp is overpaying for Andean but I undersand why they are. There will be many more ounces on that project before its anywhere near drilled off. Majors price based on internal models. Most couldn't care less what a 43-101 says, strictly speaking.

    Good luck with your list. We've followed USA for a while and are happy to see them getting their act together.
    Oct 13 04:59 PM | 1 Like Like |Link to Comment
  • Smelling Smoke in the Copper and Gold Markets [View article]
    We think that the inflation hedge argument for gold buying is overdone in some areas like India, though you are right that inflation is higher there than North America or Europe. While gold has been a good inflation hedge (copper too) there are a number of areas where it is simply more trusted and traditional. It's a value store, yes, but more like a savings account than an inflation hedge per se. There does seem to be stronger demand in India again, which we see positively as acceptance of a new price range. Indian buyers are smart and not prone to overpay for gold.

    One other important factor for gold is that its quite portable and easily tradable. That means it has a lot of appeal as a "stuff your pockets with it and run!" asset. This tends to get downplayed in the press but I know a number of Asians and Southeast Asians that have significant gold holdings for just that reason. More straight savings and an insurance asset than an investment really.
    Aug 19 06:35 PM | 3 Likes Like |Link to Comment
  • Smelling Smoke in the Copper and Gold Markets [View article]
    Not paranoid - just cautiously realistic. We're a lot happier now that both Shanghai and LME inventories are moving lower and the move in copper inventories is one reason we haven't been generally bearish. The stuff is selling for $3.35 though. We said nine years ago that we fully expected to see prices for most metals we would not believe ourselves before the secular bull market for metals (which we are still in) ends but that doesn't mean we think everything will go up every day. We don't get paid by subscribers to be cheerleaders.
    Aug 19 02:46 PM | 1 Like Like |Link to Comment
  • Smelling Smoke in the Copper and Gold Markets [View article]
    TC/RC charges have been trending down for some time now. They are historically quite low according to industry sources, with recent contracts written at $10/tn +10 cents per pound and rumours of offers as low as $5-6/tn and 5-6 cents per pound. At either of these levels its very unlikely a smelter would be making any money processing concentrate.

    The reason for the fall is that sulphide copper production has been growing more slowly than smelter capacity. China, not surprisingly, has been the biggest builder of new smelters and demand has been pushing some of the large traditional smelter locations, like Japan, to cut prices to stay in the game. You really can't make money running a smelter at half capacity so the competition has been fierce.

    The sulphide concentrate deficit is running at about 0.5 to 1 million tonnes per year and there isn't anything in the pipeline to change that within the next couple of years. A lot of the development activity has been in SX/EW (oxide deposits) which creates more copper supply but is no help to smelters since it bypasses them. In terms of looking at copper deals its worth noting that while brokers and promoters tend to focus on oxide deposits most large producers are interested in the sulphide ones. You can generate much higher throughput in a sulphide operation.

    The low charges are supportive for copper prices. One thing that may help the smelters over the medium term is that China will increasingly be shutting the older smaller operations because they are horrendous polluters. Beijing has been warning them their days are numbered and most of the smaller ones can't afford to upgrade to cleaner systems, especially with TC/RC charges as low as they are.

    We do track TC/RC and you're right it's important, but it does only apply to sulphide deposits so its not a perfect indicator.
    Aug 19 02:41 PM | 1 Like Like |Link to Comment
  • Indisposable Income and the Long Road Out of Debt [View article]
    Sorry for the late response Ben:

    We agree. We think the yaun should go up mainly to help induce more consumer spending in China which would be good for everyone. We're as skeptical as you that it will have the impact on the US trade deficit that a large chunk of the US Congress thinks. Let's face it; who cares if the $2 products in Walmart from Shenzen end up costing $3 instead? Its likely they will still get bought. Besides, enough movement in the sectors with thin margins will simply see production move offshore from China to Vietnam, Cambodia and a couple of other lower wage countries.
    Aug 18 06:51 PM | Likes Like |Link to Comment
  • Smelling Smoke in the Copper and Gold Markets [View article]
    Well, that went to subscribers a week ago, and we were commenting on market activity, rather than saying we agreed with it. We're both contrarians at heart so we're actually happier when "the usual suspects" start getting paranoid!
    Aug 17 02:46 PM | 3 Likes Like |Link to Comment
  • It's a Bird, It's a Plane...It's Euro TARP [View article]
    I don't disagree. In fact, we wonder why the ECB doesn't just get it over with and do what the Fed did - get the top 20-30 banks in Euroland to fess up and buy the sovereign paper off them for say 70 cents on the dollar and just get (this phase) of the crisis behind them. We think a lot of those purchases will happen eventually so why not take the uncertainty - other then the uncertainty about how the ECB eventually pays for this stuff - out of the market. The situation was not that different in the US after the Latin American debt crisis. Most of the US money center banks were technically bankrupt for a while and everyone just agreed to look the other way, steepen the yield curve and let them earn their way out of it.
    May 25 06:50 PM | Likes Like |Link to Comment
  • Will Bonds Spoil the Commodities Stock Rally? [View article]
    Well, rather than doing it piecemeal I'll respond at a general level to the comments so far.

    By the way, We're Canadian and so quite unaffiliated with either US political movement. And no, I haven't noted a surfeit of common sense on the part of either of them from where I'm standing.

    While I wouldn't disagree with some of the points muoio and Kramer made I would be interested in seeing their case studies of countries that had managed to build the sort of tariff walls that would be required to actually repatriate all those jobs and generate sufficient growth in a mature economy. Does China have a long way to go? Yep, but that is standard fare at their level of development and things like wage rates reflect productivity levels and labor markets locally. They are rising rapidly because of high investment levels and internal market growth but from a low base. We happen to agree that its time to let the Yuan rise but we suspect the effect on US jobs from even a large gain would be much less than many assume.

    As for slave labour, environmental etc comments. Partially true at best, biased and outdated. We've been there several times over the course of the past 16 years. Make trips over a period that long and see the changes each time and you'll see they are getting serious about changing things. Even things like the environment. The guys in Beijing don't want anything like democracy, though it will come too eventually.

    As for the market setting rates muoio. Yeah, I kind of knew that. Yes, China's overall trade surplus is dropping fast as is its current account surplus. The fact is that China does not have a big trade surplus issue. The US has a big trade deficit issue, which it likes to blame on China, at least this decade. Its similar to the ridiculous comments about "excess savings" elsewhere coming from Bush administration. If not for those excess savings US rates would have already gone through the roof.

    As for currency manipulation. I noted above and in the article that we think the Yuan should rise, but it is one of those "be careful what you wish for" things. Beijing could not move all its money overnight but it could move it, and its got $1 trillion plus in Treasuries to roll. Don't underestimate the effect on rates if it starts going elsewhere. Keep in mind too that the US has been manipulating its currency for years. Having the world's reserve currency has been an immense gift that I truly don't think most Americans appreciate. Its the reason Washington has been able to spend so far beyond its means while engineering two long periods of negative real rates in the past decade. The trade weighted value of the USD has fallen about 40% in the past decade and all the while rates have been falling (and, until recently, it wasn't helping manufacturing much) which would have been a tough trick to pull off without reserve currency status. Personally, I hope the US can continue doing that while it heals its collective balance sheet but I think we all need to keep an eye on early warning signs like the TNX just in case the market decides it doesn't want to play along any more.

    I happen to completely agree with richjoy's closing comments. We follow and have been involved with resources for three decades. That is the way things are going. Not overnight but the movement appears inevitable and yes, all the domestic political fusses will have little or no impact on the course of that change.
    Apr 24 02:34 AM | Likes Like |Link to Comment
  • Will Bonds Spoil the Commodities Stock Rally? [View article]
    The chart was somewhat out of date because the article is a reprint from one of our publications. We write for subscribers - most of what we do is company specific and not reprinted and we generally wait a few days before we submit anything elsewhere. For what its worth I was aware of what the TNX had done in the meantime, and happy to see the pullback.
    Apr 24 01:57 AM | Likes Like |Link to Comment
  • Gold Is Not in a Bull Market [View article]
    I don't generally make comments, but someone pointed this out to me and I thought I would add a little perspective. Jon is a friend of mine. While I don't always agree with Jon, people let this stuff get way too personal, including Jon himself at times. Kitco is not a "bullion bank" - it's a bullion dealer and, as such, the money they would make on a trade does not change appreciably whether gold is $500 or $1500 an ounce. They are however concerned that the market does not get crazy and leave them with a bunch of upset gold buyers who bought the top. They will get that anyway of course (markets are like that) but at least if Jon and Kitco are "playing defense" they can't have any fingers pointed at them. They are interested in people buying in an orderly market and keeping it rather than flipping it three days later. In building a long term business in other words, which they have done a great job at so far.

    I sympathize with Jon's point of view, even if I don't agree with it. The US dollar is in a classic "end of empire" trading pattern. Yes, a lot of the trade is anti Dollar, but the swings in the past year across all markets were so violent that its disingenuous to take a nine month slice of history and call it the whole story. Go back and take a look a pound or euro gold charts through 2008 - I know plenty of people in Euroland that were happy they owned gold when the markets were falling apart. If you look at charts from the start of the gold bull market it has gone up significantly in virtually every major currency. I won't go into the details as we have written about it long since but these currency moves also had a major negative impact of costs for the mining sector. Jon's quote about gold production increasing recently is right - but only part of the story. He didn't point out that this is the first increase in almost a decade and gold production world wide is lower now than it was 10 years ago. Increasing production of gold or any other metal rapidly is all but impossible and even doing it at a rate that would match recent demand increases is a hell of a lot harder than people with no mining industry experience think it is.

    Jon's right about the spec positions but its too early to tell if this will turn out to be more of a semantic argument than anything else. Just because its a "fund" buying doesn't mean it will get flipped in a week. People are concerned about the Dollar getting permanently debased and its a good trade as long as those concerns last. Those "spec" positions could stay put for a long time and the commercial shorts could keep getting stopped out. That's what happened the last time gold had a $300 move and, if anything, the case for an upside move is stronger now, not weaker.

    All that said, good interview Jon.
    Nov 3 03:16 PM | 3 Likes Like |Link to Comment
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