I can't believe my lying eyes
This last month has been a real barnburner. I though I had seen everything until I found a couple of new pieces today. The first tells of the Fed supplying new lines of credit to Brazil, Mexico, South Korea and Singapore to, now get this, "help those countries deal with the global credit crisis." The Fed will start off with $30 billion apiece and will make a maximum of $100 billion, per country, available.
They talk about helping countries facing liquidity problems but they aren't telling the real story. The Fed is pouring $120 billion into those countries so they can dump the dollar. The dollar has been going too high as a result of the deleveraging going on and the world has determined that what we really need to do is destroy the dollar. They will sell dollars so they can buy their local currency. Bye, bye dollar.
Don't stand under that particular knife when it falls. The dollar index was up from 77 to 87.5 in less than a month. The Fed's new program of dumping on the dollar seems to be working; the dollar is down from 87.5 to 83.5 in less than 24 hours from yesterday to today. Did I remind you not to try to catch that particular falling blade?
That wasn't the dumbest thing I have ever heard of. The dumbest thing I have ever heard of comes from Goldman Sachs. Remember the $10 billion dollars we just gave them compliments of the US Congress and their $850 billion dollar bailout?
They are going to hand out bonuses to the tune of an average £3 million for each of the firm's 443 partners. In total, they are going to hand out £7 billion in salary and bonuses out of the £6 billion handed to them by the treasury. I'm not sure exactly how that is going to help the economy other than the sales of new Ferraris. You aren't going to read about this in the US press, they are too busy lying about everything they report. We have to read about it in a British newspaper.
If you can't see where the dollar and gold are headed, I'll tell you. The dollar is going the way of the Mexican peso and Zimbabwe dollar. Between the last two devaluations of the peso, it lost 99.9%. Don't bother asking what the price of gold is in old pesos, if you have to ask, you can't afford it. Just multiply gold by 100,000 times. Or is it 1 million times? Those sorts of numbers confuse.
Meanwhile back at the ranch, gold shares are on the discount rack. If I were you, I'd own some physical gold and some good gold shares. My favorites right now are the production stories but some pre-production stories are so good I need to mention them.
How would you like one of the best-run companies in the industry, with AngloGold as a 19.9% partner and Tocqueville as the largest shareholder? I reported on International Tower Hill (ITH) a couple of years ago. The price was $3 a share and they had some promising projects. Now you can buy gold for $7 an ounce in the ground and the stock is $1.04.
ITH just announced doubling the 43-101 resources as Livengood. As of last year, they had a total 43-101 resource of 3.2 million ounces at a .3-gram cutoff. With only half the drill holes from this year's program released, they are up to 6.37 million ounces. President and CEO Jeff Pontius expects to add substantially more ounces in February as a result of the other half of this year's program, assays pending. It might be as high as another 3 million ounces. And the company has 550,000 gold equivalent 43-101 ounces in their other projects. That works out to .158 ounces of gold per share or about $6.58 US per ounce.
That's so insane I can't tell you. This is the kind of deposit majors kill for; there are only 4 exploration juniors with over 4 million ounces of gold.
To give you an idea of how good this is we can compare the Fort Knox mine some 80 kilometers to the Southeast of Livengood. Kinross expects to increase production of gold at Fort Knox to 370,000 ounces a year at a cost of $370 per ounce. Livengood is on a main paved road, with all year access, the ore is closer to the surface, and the tonnage is greater as is the grade.
I can't keep track of every story, there are dozens and dozens of precious metals juniors selling for less than the cash on hand but I know of no company selling gold at a lower price. I have always thought ITH was one of the best stories around and today it got twice as good. In a takeover in a hot market, gold in the ground ounces are worth anywhere from $50 to $100 an ounce and higher depending on how attractive it is. Take my word; this is going to be attractive.
AngloGold has until the end of the year to take their ownership back up to 19.99% in a private placement done at market prices. So guess that another couple of million shares will be issued to AngloGold. ITH is sitting on $8 million in cash now and will pick up another $5 million or so in the PP to AngloGold. With 50 million shares outstanding and doing a deal on 9 million ounces of gold at $50 an ounce, you could have a $9 stock. At $100 an ounce, you could have an $18 stock. In any case, it's cheap now, the cheapest it's ever been. That won't last long once the market realizes what today's news release means.
Hint; buy it in American dollars on the Amex. You are getting it at a 20% discount to the Canadian dollar. Every silly thing the Fed and Treasury has done has backfired on them, almost at once. What if their latest blunder is the last nail in the coffin of the US dollar? What if once they dump it, they can't stop it falling?
This is a real good time to own resource shares and gold. I may have mentioned that before.
International Tower Hill is an advertiser and we have participated in private placements in the past. We are biased as we can be.
Oct 30, 2008