From the $252 low in gold in late August of 1999 until the 18th of September of 2007 there has been risk to owning gold. But when Ben S. Bernanke lowered the Federal Funds rate by a full 50 basis points to 4.75% on the 18th of September, he removed all risk to gold. Yes, gold will continue to correct now and again but in his panic, Bernanke showed the only real risk is to savers of dollars. The dollar is dead, long live the dollar.
I was on another trip to Alaska and British Columbia, trying to see a few more projects before being cut off by winter. I saw some great ones and I want to bring them to your attention.
But first I think I should bring you up to date on what I think the most important events of the day are. There are two earth-shaking events in progress, one barely visible to most investors and the other so unthinkable that the public simply stick their heads in the sand.
We are in a liquidity crisis and the reaction of Fed Chairman Ben Bernanke should give you a clue as to how you should react. Ben Bernanke panicked and when Ben panics, so should you. Those who should know better call it a sub-prime crisis. It's nothing of the kind. We have a $460 trillion dollar pile of used toilet paper and the first smelly piece sticking to the bottom of our shoes is the sub-prime sector. But just because it's the first piece showing up hardly means it's the last.
Derivatives grew wildly out of control starting about 2001 when the stock market should have crashed. Greenspan saved the day by flooding the market with cheap paper. Derivatives were about $100 trillion six years ago and are somewhere north of $460 trillion dollars today. That's $76,666 per man, woman and tiny tot on earth. It's out of control and it's all fraud. Half a dozen people on earth understand the issue and Ben Bernanke isn't one of them. Derivatives are out of control because they allow "hedge funds" to speculate on what should be zero sum investments, yet they themselves determine if they have made a profit and when they have made a profit, they keep 20% of the take. It's gone on for years and much of the $460 trillion dollars worth of notional value is fraud.
It showed up first in the sub-prime market but hedge funds are exploding all over the world like Christmas crackers. At the end of the day, most of the 8,500 funds will be history, as will the paper assets of pension funds and all the major banks.
It's this simple. We have a worldwide crisis of confidence in paper assets caused by cheap money hurled to the masses by Alan Greenspan. We are not going to fix the problem by having Ben Bernanke hurl more cheap money to the masses. Ben can destroy the dollar and all the savers in the world by bailing out malinvesting but if cheap money was the basic problem, it simply cannot be the solution.
As nasty as that sounds, that isn't the biggest issue the world faces today. The Gang of Fools in the White House is determined to attack Iran with nuclear weapons. For 15 years Zionists have pushed the "Iran is the Nuclear Boogie Man" concept. It's all part of the "Clean Break from the Peace Plan," part and parcel of the NeoCon agenda. Well, nuking your neighbors is certainly part of breaking from a peace plan.
Bush and the rest of the Chicken Hawks have lost three wars in a row. Our military has been destroyed. The average Girl Scout troop is better equipped to handle combat than the tattered remains of our Marines and Army soldiers. We are going to nuke Iran because we don't have a fighting force left. We are going to attack a country that hasn't conducted a war of aggression in 2,000 years on the thin premise that they might.
Needless to say, we are going to lose. We aren't going to be fighting a bunch of leaderless rag-tag guerrillas such as we face in Iraq. We will be fighting a country with 65 million people and a trained army that went through a decade-long war with Iraq. We will kill hundreds of thousands of innocent people before we are through but in the end, the United States and Israel will disappear from the sands of times. It's that dangerous.
Iran is not the enemy of the United States. Any attack on them will convince all sane people in the world that the United States is a rogue state. There will be consequences that most Americans simply refuse to face.
Bush, Cheney, all the Zionist fools in Israel have lost three wars in a row. Betting on those folks in combat is probably the worst idea I have ever heard. We are going to lose.
That cheerful message aside, owning gold and gold mining shares is now the safest investment in history.
My first trip was to a 100-year-old mining district well north of the Artic Circle called the Chandalar Mining District as the guest of the President and CEO of the Little Squaw Gold Mining Company, Dick Walters.
The Little Squaw Gold Mining Company was formed in 1959 but its origins go back to 1906 when a partnership made up of Thomas Carter from Montana, a Japanese immigrant to Alaska named Frank Yasuda and Frank's Eskimo wife, Nevelo, discovered gold in the Chandalar River Basin where they found gold at Little Squaw Creek named for Frank Yasuda and Nevelo's little girl.
The group mined a rich placer deposit and later, while picking berries, Nevelo and young daughter Hana discovered a series of rich gold-quartz veins on the hills overlooking the creek, the hard rock source of the placer gold.
The area has been mined on and off over the past 100 years. Both as placer mines and as lode mines. Little Squaw was pretty much quiet, operating as a land owner and receiving a percentage of the gold found for years before coming under new management in 2003. Since that time, Dick Walters and his team have breathed new life into the old dog.
Dick Walters was the founder of Yamana, once a $.10 stock, now at $11 with a $4 billion dollar market cap. He intends much the same at Little Squaw gold with the Chandalar district as his prime mover.
I really enjoyed my visit and meeting Dick's well qualified team. Dick began talking to us three years ago when the company was basically in dead man's corner. The stock was selling for peanuts. Without results they couldn't raise money and without money they couldn't deliver results.
Somehow, Dick managed the almost impossible. He increased the number of shares four-fold but the market value of the company eighty-fold. His team is in the midst of conducting a two-pronged exploration of the Little Squaw region.
One team, headed by Jeff Keener has completed 4700 meters of RC drilling to outline a placer resource in a fan area at the base of Little Squaw Creek. Jeff is probably one of the top three placer experts in Alaska. If you want to understand and model a deposit, he's the guy.
I know "Placer" is a four-letter word in the mining finance business but it's an absurd view. Almost half the gold ever produced came from placer operations; it was the standard for most of history. But there have been so many scams around placer operations over the last 30 years that by and large Vancouver and Toronto financial wizards refuse to consider placer mining for investment.
They are missing the boat. It is far cheaper and far faster to get into production. With $730 gold, are you interested in a company that could be in placer production in 18 months or a hard rock company looking at 6 years?
Little Squaw is playing both angles. They have announced a 189,000-ounce placer resource as I write this piece and indicate the potential for five times as much. They have drilled out 7.5 million yards of placer material worth $17 per yard at $700 gold. As a rule of thumb, all placer mining consists of is moving dirt. They can move and process a yard of material for anywhere from $3-$5 a yard even flying in their fuel. In my view, management needs to be planning on placer production as soon as possible. I'd like to see a few million put into equipment and get it cranking out gold. The placer operation can provide all the cash necessary to prove up some hard rock ounces.
This area is rich in gold but due to its location, has been way under explored. The property was tied up in litigation for years and has simply been bypassed by the industry in general.
Saying they need to get into production on the placer side does not do justice to the hard rock potential. There are numerous outcrops on the hills overlooking the various drainages. The hard rock exploration is under the control of Rodney Blakestad, VP of Exploration for Little Squaw.
The 2007 program calls for 1,250 meters of trenching to be done in 30 separate targets. Due to high demands on labs, drill results and soil samples have been running months late for a couple of years now. Companies in the Arctic such as LITS are particularly crippled by a lack of data due to their short working season. Results to date are encouraging but there are a lot more assays to be announced over the next few months.
I'm going to crawl right out on a limb and make some wild predictions but lack of data from assay results would really prevent a reasonable investor from understanding what Little Squaw really has on their hands. This region has a lot of history mining in various areas. Grades underground run anywhere from a third of an ounce up to over half an ounce, well economic, even this far north.
I crawled down into the trenches, took samples and panned them. I got down and dirty and I saw the rocks and the area. LITS has multi-million ounce gold potential in a number of showings. I'd guess you would really want a minimum of 2-3 million ounces of hard rock above 10 gram to have a viable hard rock mine. LITS will have it easily.
I am interested in production. At these prices, if you don't have a mine, you have a moose pasture. LITS should make a production decision just as soon as possible. They could be blasting and moving the barren gravel cover as early as 4th quarter 2008 and they should. You can look at the placer fan and shove a wetted finger in the air and see which way the wind is blowing. Gold is going higher, much, much higher and the fastest way to profit is to be producing placer.
I hate dilution and if Little Squaw wants to get another few seasons under their belt before making a production decision, there will be a lot more shares outstanding. Dick Walters has done a brilliant job of resurrecting the dead. He has brought Little Squaw an incredible distance in four years. It's time to make a production decision on the placer and with the profit from that, the company will have all the time and money in the world to do a hard rock mine right.
We don't own shares and it's not because I don't like the company. I really like them and the team Dick has put together. But companies in the North Arctic go through a boom and bust cycle every year as they go through six months of no news at all. The company is reasonably priced today but when three months goes by with no news, it will be cheaper. Little Squaw is soon going to be an advertiser and I am biased. You must do your own due diligence.
Little Squaw Gold Mining