VANCOUVER – Burin Gold Corp. said Friday it expects to raise $6.9 million from an initial public offering. It said the shares will be listed for trading on the TSX Venture Exchange on November 22, 2021.
Burin Gold is a junior exploration company with a focus on the exploration and development of precious metal resources in Newfoundland and Labrador.
The company is actively engaged in exploring mineral properties in the underexplored Avalonian terrane in the Burin Peninsula, in the southeastern part of the island of Newfoundland.
The company has said limited historical exploration, including the lack of diamond drilling by previous explorers, combined with comprehensive documentation of the overall alteration system by government and academic workers, creates a compelling opportunity for the potential discovery of Newfoundland’s next multi-million-ounce gold system.
The company’s Hickey’s Pond – Paradise Gold Project hosts several historical high-sulphidation gold showings over at least 20 kilometres of prospective geology, including the Hickey’s Pond showing. Last year, diamond drilling yielded very prospective gold mineralisation in six of the seven holes drilled. Highlight assays include 10.8 metres of 4.43 g/t gold in HP-20-002
An IP-geophysical anomaly over the Hickey’s Pond area shows a significant chargeability anomaly over a strike length of at least 2.0 kilometres and is open in all directions.
The company said six diamond drill holes covering 951 metres were completed in 2020 across 750-metres of strike length on the Hickey’s Pond showing and IP anomaly. All holes intersected alteration and mineralisation typical of high-sulphidation epithermal systems.
On Friday the company said the IPO consists of 3.26 million flow-through common shares priced at 69 cents each and 7.8 million units priced at 60 cents. Each unit consists of one common share and one half of one common share purchase warrant. Each whole warrant entitles the holder to buy an additional common share for 85 cents at any time before 5:00 p.m. (ET) before November 22, 2023.
The company said its IPO long form prospectus, dated November 10, 2021, has been filed with and accepted by the TSX Venture Exchange, and filed and accepted by securities regulators across Canada.
Burin is led by founder, President and CEO David Clark. He has over 20 years of mineral exploration experience across Canada, Mexico, Central America, the U.S.A., and Europe. Prior to his involvement with Burin, David was chief geologist at MED-TSXV, MGLDF-OTC].and consulting geologist to [
His founding partner Daniel James was previously President with Medgold Resources, taking the company public and leading exploration teams to the discovery of the Tlamino deposit in Serbia. He is a fellow of the Society of Economic Geologists and earned an B.Sc. (Hons) in Geology from Portsmouth University.
On November 3, 2021, Medgold said it had granted MetalsTech Ltd. [MTC-ASX] the option to acquire 100% interest in the Tlamino project for A$3 million.
Graphite prices heading higher on market tightness
As expected, the electrification of the global transportation system is creating strong tailwinds for the EV market.
Power Technology, known…
As expected, the electrification of the global transportation system is creating strong tailwinds for the EV market.
Power Technology, known for its research on the energy sector, reports that EV sales more than doubled in the first half of 2021, increasing by 160% compared to H1 2020. The 2.6 million units sold, 1.1 million of which were in China, represent 26% of total new car and truck sales globally.
An analysis from IDTechEx quoted by the publication forecasts EV sales in 2021 are on track to surpass 5 million passenger cars. “If they do, it will mean an astonishing growth rate of ~86% CAGR since 2011,” the report reads.
Virta, which claims to be the fastest-growing electric vehicle charging platform in Europe, operating in over 30 countries, is more aggressive in its 2021 EV sales forecast.
“Carried by a decarbonization challenge most leading nations now take seriously, 2021 is a game changer in the history of EV sales and it is expected that 6.4 million vehicles (EVs and PHEVs combined) will be sold globally by the end of the year. It would then represent a 98% year over year increase,” the company states in a report titled ‘The Global Electric Vehicle Overview in 2022: Statistics and Forecasts’.
Projecting further out, Virta cites the International Energy Agency’s (IEA) Global EV Outlook 2021, whose Stated Policies Scenario suggests that by 2030, the global EV stock (excluding two- and three-wheelers) could reach nearly 145 million and account for 7% of the total vehicle fleet.
The more ambitious [email protected] campaign envisions, plainly, 30% of all vehicles becoming electric by 2030, putting global sales at 43 million, or almost double that of the Stated Policies Scenario.
Consulting firm McKinsey & Company believes EV sales will continue increasing, fueled by government policies including the Biden administration’s stated goal that half of all new vehicle sales by 2030 be zero-emission; state-level adoption of credit programs; tougher emissions standards; and increasing electrification commitments from OEMs.
Second-quarter EV sales in the US increased by nearly 200% compared to Q2 2020, contributing to a domestic penetration rate of 3.6% during the pandemic. The next report should deliver similar or even better growth figures.
Li-ion battery demand
A lithium-ion (Li-ion) battery is a type of rechargeable battery technology common to portable electronics, electric vehicles and large grid-scale storage systems for renewable energy.
These batteries consist of an anode, cathode, separator, electrolyte and two current collectors (positive and negative).
The cathode contains lithium, either in the form of lithium carbonate or lithium hydroxide, while the anode is made up of graphite. There are no substitutes for either in a Li-ion battery.
While there are several obstacles to increasing the penetration rate of EVs to regular vehicles, including charging station infrastructure and lowering their sticker prices, recent research suggests the battery storage market is growing in leaps and bounds.
According to an analysis by Adamas Intelligence, in 2020 a total of 134.5 gigawatt hours (GWh) of battery capacity was deployed globally into newly sold passenger BEVs, PHEVs and HEVs, an increase of 39.6% compared to 2019.
The added capacity is on trend with a report last year from Roskill, which found that lithium-ion battery demand is expected to increase more than 10-fold.
“The pipeline capacity of battery Gigafactories is reported by Roskill to exceed 2,000GWh in 2029, at over 145 facilities globally,” the report reads. “Driven by demand from the automotive and energy storage markets, NCM/NCA type cathode materials are expected to remain dominant, though other cathode types will take market share in niche environments or applications.”
In March of this year, Benchmark Mineral Intelligence said it is tracking 200 “super-sized” lithium-ion battery cell plants in the pipeline to 2030, bringing total global capacity to 3.4 terawatt-hours, a massive increase from the 755 gigawatt-hours in 2020. (1TWh = 1,000 GWh)
The bulk of these sprawling new battery-making facilities are likely to be in China, which currently produces around three-quarters of the world’s lithium-ion batteries.
Of the 200 plants that BMI is tracking, 148 are in China, compared to 21 in Europe and 11 in the United States.
However, new energy storage systems in the US are sprouting up. According to a 2020 report by commodities consultancy Wood Mackenzie, and the US Energy Storage Association, over 2,000 megawatt-hours (MWh) were brought online in the fourth quarter of last year.
And there’s more to come. The firm’s head of energy storage, Dan Finn-Foley, predicts the US energy storage market will add five times more megawatts of storage in 2025 than was added in 2020, with front of the meter (FTM) storage continuing to contribute between 75-85% of new MW each year.
There are a number of battery plants in the works to join Tesla, whose first gigafactory in Nevada started production of battery cells in 2017. The company has a plant in Buffalo, New York, and plans to open a third (US plant) in Texas by the end of this year. Tesla also has a “pilot line” at its facility in Fremont, California, for R&D technologies.
In 2020 General Motors announced plans to install its first battery cell factory in Ohio, a project called Ultium Cells launched with its Korean partner LG Chem. The latter opened a plant in Holland, Michigan in 2013.
Another South Korean company, SK Innovation, is planning on opening the first of two battery plants in Georgia early next year; the company is a supplier to Volkswagen and Ford.
The latter along with American auto icon GM have big plans to electrify their fleets. Ford announced plans to boost spending on electrification by more than a third, and aims to have 40% of its global volume electric by 2030, which translates to more than 1.5 million EVs based on last year’s sales.
GM reportedly aspires to halt all sales of gas-powered vehicles by 2035, with plans to invest $27 billion in electric and autonomous vehicles over the next five years.
In October Toyota said it will invest about $3.4 billion on American battery development and production through 2030.
There are currently 11 EV start-ups racing to catch up with market leader Tesla, fueled by money from Wall Street. They include Rivian out of Irvine, California, Lucid Motors based in Newark, CA, Lordstown Motors from Ohio, Nikola Corp (Phoenix), Fisker (Los Angeles), Faraday & Future (Los Angeles), Canoo (Torrance), NIO, Li Auto and XPing from China, and Arrival, based in London.
The latest car company to commit to EVs is Nissan, which plans to spend 2 trillion yen (US$17.6 billion) over the next five years. The Japanese automaker is hoping to launch 23 electrified models including 15 EVs, aiming for 50% electrification by 2030 through its Ambition 30 strategy.
This gives you a sense of the extent to which the EV lithium battery market in the US is growing.
Need for graphite
For all the talk of electrification and battery plant growth, nothing can be achieved without ensuring there is enough supply of the metals used to power these vehicles.
A 2020 World Bank report entitled ‘The Mineral Intensity of the Clean Energy Transition’, estimated that production of minerals underpinning the clean energy shift would have to increase by nearly 500% by 2050 to meet global demand for renewable energy.
Lithium, obviously a key ingredient for making EV batteries, is set to endure an unprecedented shortage of supply in the coming years. Global miner Rio Tinto has said even if they had another 60 lithium mines, that wouldn’t fill the supply-demand gap. Bloomberg NEF research shows that over five times more lithium is needed in 2030 compared to current levels.
Another battery metal less in the spotlight but also facing severe supply concerns is graphite. Graphite is the only material that can be used in the lithium-ion battery anode, there are no substitutes. This is due to the fact that, with high natural strength and stiffness, graphite is an excellent conductor of heat and electricity. The only other natural form of carbon besides diamonds is also stable over a wide range of temperatures.
According to the World Bank, graphite accounts for nearly 53.8% of the mineral demand in batteries, the most of any. Lithium, despite being a staple across all Li-ion batteries, accounts for only 4% of total demand.
An electric car contains more than 200 pounds (>90 kg) of coated spherical graphite (CSPG), meaning it takes 10 to 15 times more graphite than lithium to make a Li-ion battery.
For every million electric vehicles, which is only about 1% of the new car market, we need in the order of 75,000 tonnes of natural graphite, representing a 10% increase in flake graphite demand.
The EV battery market alone is projected to consume well over 1.6 million tonnes of flake graphite per year, resulting in a 10-fold increase in demand by 2030. This is worrisome considering that total graphite mined in 2020 for all uses, including lump graphite for pencils and graphite used in nuclear reactors, was only 1.1 million tonnes.
It is estimated that the natural flake graphite market could reach a deficit as soon as 2023, with few new sources being developed around the world.
At the moment, nearly all graphite processing takes place in China because of the ready availability of graphite there, weak environmental standards and low costs. Nearly 60% of the world’s mined production last year came from China, making it a dominant player in every stage of the supply chain.
After China, the next leading graphite producers are Mozambique, Brazil, Madagascar, Canada and India. The United States does not produce any natural graphite and therefore must rely solely on imports to satisfy domestic demand.
The level of foreign dependence has increased over the years. The US imported 38,900 tonnes of graphite in 2016 and 70,700t in 2018.
According to the USGS, in 2020 the US imported 42,000 tons, of which 71% was high-purity flake graphite, 28% was amorphous, and 1% was lump and chip graphite. The top importers were China (33%), Mexico (23%), Canada (17%) and India (9%). But remember, the US is not 33% dependent on China for its battery-grade graphite, but 100%, since China controls all spherical graphite processing.
It’s thought that the increased use of lithium-ion batteries could gobble up well over 1.6 million tonnes of flake graphite per year (out of a total 2020 market, all uses, of 1.1Mt) — only flake graphite, upgraded to 99.9% purity, and synthetic graphite (made from petroleum coke, a very expensive process) can be used in lithium-ion batteries.
The USGS believes that large-scale fuel cell applications are being developed that could consume as much graphite as all other uses combined.
Can the mining industry crank out more graphite every year to match this demand? Call me skeptical. Between 2018 and 2019, world mine production actually declined by 20,000 tonnes, or 1.8%. Global production in 2019 and 2020 was exactly the same, 1.1 million tonnes.
Currently there are no producing graphite mines in the United States, and only 10,000 tonnes a year is being mined from two facilities in Canada. The fact is, for the United States to develop a “mine to battery” supply chain at home, it currently has no choice but to import its raw materials from foreign countries.
For battery-grade graphite, that means China, which is growing increasingly adversarial, in terms of trade, foreign policy and militarily.
Even if the US wants to keep importing its graphite, doubts have been raised over whether China could keep up with surging global demand. The top producer has already taken steps to retain its graphite resources by restricting its export quota and imposed a 20% export duty.
Metal Bulletin reported in October that Chinese graphite prices are likely heading higher in the last quarter of this year due to rising electricity costs and reduced power supply, as well as insufficient inventories and inadequate availability of feedstock for spherical graphite processing.
High power costs and limits on energy consumption in China may make it increasingly difficult for graphite producers to stockpile material to serve customers during the winter months. Graphite producers typically halt production from mid-November/December until March.
Prohibitively cold temperatures in northern China’s Heilongjiang province, where the majority of natural flake graphite production is centered, typically prompt extended graphite production stoppages, with producers supplying customers from inventory during the outage period.
If natural graphite producers in Heilongjiang are unable to produce sufficient volumes of material for their stockpiles, given power shortages and elevated electricity costs, we may see natural graphite shortages emerge in the coming months, lending upward support to prices.
In short, the days of affordable, abundant graphite from China are numbered, adding further urgency for the US to develop its own supply.
The demand for graphite is only headed in one direction. A White House report on critical supply chains showed that graphite demand for clean energy applications will require 25 times more graphite by 2040 than was produced worldwide in 2020.
We have clearly reached a point when much more graphite needs to be discovered and mined.
This is why the US is looking to develop its own “mine to battery” supply chain, which would include a cost-competitive and environmentally sustainable source of graphite.
In February of this year, President Joe Biden signed an executive order (EO) aimed at strengthening critical US supply chains. Graphite was specifically identified as one of four minerals considered essential to the nation’s “national security, foreign policy and economy.”
Fortunately there are a growing number of US politicians who like the idea of developing domestic critical metal mines, and are working with the mining industry to achieve results.
Among the most vocal is Alaska Republican Senator Lisa Murkowsi. Murkowski helped draft the bipartisan infrastructure bill recently passed by Congress. The $1.2 trillion package includes money for research and demonstration projects and other efforts aimed at lessening the reliance on China for the supply of critical minerals like lithium and graphite.
In discussing America’s dependence on foreign nations such as Russia and China to meet its resource needs, Murkoswski said:
“We need a rational, clear-headed, eyes-wide-open approach to energy and mineral development. We don’t want to go back on energy, and we can’t be caught flat-footed on minerals. We have the resources, and we have the highest labor standards in the world, the highest environmental standards in the world. Our energy workers, our miners, they hold themselves to that standard. So instead of importing more from places like Russia and China, we need to free ourselves from them to the extent that we can and establish ourselves as this global alternative.”
Fortunately, there is plenty of North American graphite for local consumption, if industry and government can find the collective will to make it happen.
The Kigluaik Mountains on Alaska’s Seward Peninsula hosts a deposit with the size and grade to meet the nation’s growing need for graphite in Li-ion batteries.
Earlier this year, the Federal Permitting Improvement Steering Committee (FPISC) granted High-Priority Infrastructure Project (HPIP) status to( , OTCQX:GPHOF), which is aiming to develop America’s first high-grade producer of coated spherical graphite (CSG) integrated with a domestic graphite resource at Graphite Creek, Alaska.
The HPIP designation allows Graphite One to list on the US government’s Federal Permitting Dashboard, which ensures that the various federal permitting agencies coordinate their reviews of projects as a means of streamlining the approval process.
Graphite Creek is the highest-grade and largest known flake graphite deposit in North America, spanning a distance of 18 km.
The project is envisioned as a vertically integrated enterprise to mine, process and manufacture high-quality CSPG for the lithium-ion electric vehicle battery market. Graphite One aims to become the first US vertically integrated domestic producer to do so.
The latest resource estimate (March 2019) for Graphite Creek showed 10.95 million tonnes of measured and indicated resources at a graphite grade of 7.8% Cg (graphitic carbon), for some 850,000 tonnes of contained graphite. Another 91.9 million tonnes were tagged as inferred resources, with an average grade of 8.0% Cg containing 7.3 million tonnes.
A Preliminary Economic Assessment (PEA) supports a 40-year operation with a mineral processing plant capable of producing 60,000 tonnes of graphite concentrate (at 95% purity) per year. On a pre-tax basis, the project has a net present value of $1.03 billion using a 10% discount rate, with an internal rate of return (IRR) of 27%.
Once in full production, Graphite One’s proposed graphite products manufacturing plant — the second link in its proposed supply chain strategy — is expected to turn graphite concentrates into 41,850 tonnes of battery-grade coated spherical graphite and 13,500 tonnes of graphite powders per year. A location in the Pacific Northwest is being considered.
There are no substitutes for lithium and graphite; these critical metals are expected to remain the foundation of all lithium-ion EV battery chemistries for the foreseeable future.
Lithium is in the battery cathode and graphite, or more precisely, coated spherical graphite, is in the anode.
Graphite has long been used in the aviation, automotive, sports, steel and plastic industries, as well as in the manufacture of bearings and lubricants. Graphite is an excellent conductor of heat and electricity, corrosion- and heat-resistant, as well as strong and light.
Lithium-ion batteries contain 10 to 15 times more graphite than lithium. The need for lithium batteries not only for EVs, but energy storage, handheld tools like drills, and an array of consumer electronics like cell phones and laptops, is almost certain to outstrip supply.
In fact, the lithium-ion battery manufacturing capacity currently under construction would require flake graphite production to more than double.
(BMI estimates the major automakers have committed over $300 billion to developing EVs, and more than 2 terawatts of lithium battery production capacity, equating to 800,000 tonnes of new annual graphite demand by 2023 and 1.4Mt by 2028.)
To meet this demand, 12 battery factories are being built in the United States, including Tesla’s Texas “Terafactory”, which would have an annual battery production capacity of 1 terawatt-hour, or 1,000 gigawatt-hours (GWh).
According to BMI, just one 30 GWh per year lithium-ion battery factory needs roughly 33,000 tonnes of graphite anode material per year. The Texas Terafactory would demand more than 1 million tonnes of graphite per year, about one year’s worth of current mined graphite output for all uses.
If all 12 factories are built, they will require about 396,000 tonnes of graphite, every year. This is nearly two-thirds the amount of graphite produced by China, by far the largest graphite producer in the world, in 2020. Remember, the US currently produces NO natural graphite, yet it is consumed by roughly 90 American companies.
According to MINING.com’s EV Metal Index, graphite prices have held steady above $700 a tonne in 2021. But the more important number is the dramatically higher amount of graphite being used for EV batteries. MINING.com states:
In April 2021, just over 14,000 tonnes of synthetic and natural graphite were deployed globally in batteries of all newly-sold passenger EVs combined, a 233% jump over the same month last year.
The evidence piling up here leads to only one conclusion: if we continue to rely on China and other foreign source for graphite, the price of this indispensable EV battery ingredient is going to go through the roof.
Explosive EV demand + tight supply especially from China, which dominates the production of coated spherical graphite needed for Li-ion batteries = supply insecurity and higher prices.
There is however a happier ending to this story, and that is taking steps to secure a domestic supply of graphite with enough tonnage for America to reduce and even eliminate its dependence on foreign suppliers.
In my opinion, we can build a North American “mine to battery to EV” supply chain, using graphite mined and processed from Graphite One’s Graphite Creek deposit.
If we’re going to spend hundreds of billions trying to electrify and decarbonize, it just makes sense to us at AOTH that the mining is done in-country. Leaving it up to foreigners only weakens the supply chain, leaving it vulnerable to breakage.
US critical minerals have been ignored for decades but they are finally getting the attention they deserve. Graphite One is a company on the move with the largest and highest-grade flake graphite deposit in the United States.
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St-Georges Announces the Closing of the $5.57M Offering
Montréal – November 30, 2021 – St-Georges Eco-Mining Corp. (CSE:SX) (OTC:SXOOF) (FSE:85G1) (CNSX:SX.CN) is pleased to announce the closing of its…
Montréal – November 30, 2021 –( ) (OTC:SXOOF) (FSE:85G1) (CNSX:SX.CN) is pleased to announce the closing of its previously announced non-brokered private placement offering of 10,127,273 “flow-through” units at a price of $0.55 for total gross proceeds of $5,570,000.15. A total of 11 subscribers participated, including 4 insiders for $305,000 and 3 institutional investors in Sprott Assets, Maple Leaf and Marquest for $3,725,000 or 66.8%.
Each FT Unit is comprised of one (1) common share in the capital of the Company on a “flow-through” basis (each, a “FT Share”) and one half (0.5) FT Share purchase warrant (each, a “FT Warrant”). Each full FT Warrant entitles the holder thereof to purchase one (1) Share at an exercise price of $0.65 for a period of 24 months (the “Warrant Expiry Date”).
In the event that, during the period of 4 months following the closing date of the Offering, the trading price of the Shares on the Canadian Securities Exchange (the “CSE”) reaches $1.25 per Share on any single day, the Corporation may, at its option, accelerate the Warrant Expiry Date by delivery of notice to the registered holders (an “Acceleration Notice”) thereof and issuing a press release (a “Warrant Acceleration Press Release”, and, in such case, the Warrant Expiry Date shall be deemed to be 5:00 p.m. (Montreal time) on the 30th day following the later of (i) the date on which the Acceleration Notice is sent to warrant holders, and (ii) the date of issuance of the Warrant Acceleration Press Release.
The Corporation will use the proceeds of the Offering to further advance the exploration effort on its wholly owned Manicouagan Project following important recent developments.
The Corporation paid finder fees of $302,700.01 in cash and issued: (i) 557,273 non-transferable Finder’s warrants entitling the holder thereof to purchase at an exercise price of $0.65.
All securities issued pursuant to this Offering are subject to the applicable statutory hold period ending March 31, 2022. The Offering is subject to the approval of the CSE.
Related Party Transaction
Certain insiders of the Corporation subscribed for a total of 554,545 FT Units under the Offering, which is a “related party transaction” within the meaning of Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions (“MI 61-101”). The issuances to the insiders are exempt from the valuation requirement of MI 61-101 by virtue of the exemption contained in section 5.5(b) as the Corporation’s shares are not listed on a specified market and from the minority shareholder approval requirements of MI 61-101 by virtue of the exemption contained in section 5.7(a) of MI 61-101 in that the fair market value of the consideration of the securities issued to the related parties did not exceed 25% of the Corporation’s market capitalization. The Corporation did not file a material change report more than 21 days before the expected closing of the Offering as the details of the Offering and the participation therein by related parties of the Corporation were not settled until shortly prior to closing and the Corporation wished to close on an expedited basis for sound business reasons.
ON BEHALF OF THE BOARD OF DIRECTORS
“Neha E. Tally”
NEHA EDAH TALLY
St-Georges develops new technologies to solve some of the most common environmental problems in the mining sector, including maximizing metal recovery and full circle EV battery recycling. The Company explores for nickel & PGEs on the Julie Nickel Project and the Manicougan Palladium Project on Quebec’s North Shore and has multiple exploration projects in Iceland, including the Thor Gold Project. Headquartered in Montreal, St-Georges’ stock is listed on the CSE under the symbol SX and trades on the Frankfurt Stock Exchange under the symbol 85G1 and on the OTCQB Venture Market for early stage and developing U.S. and international companies. Companies are current in their reporting and undergo an annual verification and management certification process. Investors can find Real-Time quotes and market information for the company on www.otcmarkets.com.
The Canadian Securities Exchange (CSE) has not reviewed and does not accept responsibility for the adequacy or the accuracy of the contents of this release.
Government Handling Of COVID Has Been “A Crime”, Expect More Selloffs: Trader
Government Handling Of COVID Has Been "A Crime", Expect More Selloffs: Trader
Submitted by QTR’s Fringe Finance
This is Part 1 of an exclusive…
Government Handling Of COVID Has Been “A Crime”, Expect More Selloffs: Trader
Submitted by QTR’s Fringe Finance
This is Part 1 of an exclusive interview with Rosemont Seneca, a U.S. based professional trader focused on event-driven and distressed situations. Rosemont spent their career on the buy-side working as a financials analyst and their investing/trading style is inspired in equal parts by Icahn and Druckenmiller.
Like me, Rosemont is not an RIA and does not hold licenses. Market commentary and opinion expressed in this interview are personal views, not investment advice or solicitation for business.
QTR’s Note: The point of this blog is to bring to the reader information and perspectives they, or the mainstream media, may not otherwise find on their own. The cool thing about FinTwit is that you get to meet people based on their ideas and investing acumen and not their identities. I have been following Rosemont on Twitter for years and love their perspective and takes on the market – their takes often stand at odds with my own and they have helped me broaden my horizon and be less bearish on markets, while still maintaining my skepticism about monetary policy. They have chosen to remain completely anonymous with me, which I respect, and I have never personally met or otherwise know anything about the identity of Rosemont. That doesn’t matter, however, because I like their ideas and their commentary. You can follow Rosemont on Twitter here.
Part 2 of this interview can be found here.
Q: Hi Rosemont. Thanks for agreeing to an interview for my readers despite wanting to stay anonymous. Right off the bat: why do you use Bernard Baruch for your Twitter profile photo?
Baruch is one of the most fascinating Wall Street characters of 20th Century. He has tremendous intuition and gut instinct for the markets, macro economics and politics and he reminds us that the three are intertwined at all times
That’s a great segue to my next question: you recently got very bullish on gold when you hadn’t been in the past – what caused that shift in attitude?
We saw a global risk contagion event in capital markets today (11/26); Bitcoin lost over 8.0% of its value, the S&P dropped -2.2% and gold ended the session flat on the day after a mostly positive session. We expect more days like this in 2022.
This is the first time since the post-GFC period in 2009 that we’ve purchased or held gold instruments in our portfolios. At present we own an 8.0% position in the GLD ETF and periodically traffic in Barrick Gold and Newmont equities. Recall that during the Q4 2018 ‘Taper Tantrum’ and most acute phase of the COVID dislocation in Q1-Q2 2020, gold futures, ETFs, and gold miner equities protected your wealth from severe capital market drawdowns.
Gold is an umbrella we hope will keep us dry if it rains very hard next year.
Holding gold in a portfolio today is a pragmatic ‘TINA’ bet borne of healthy caution in the wake of a multi-year equity bubble that has begun to run amok.
The reality is gold is not an optimal investment for compounding wealth in the long-run; owning the GLD ETF since inception in 2004 has returned a roughly 8.0% CAGR which is adequate for a pension fund or retiree but relatively mediocre vs. the alternatives.
Investors are better off owning Walmart, Costco, McDonald’s or Starbucks and grow our capital tax-efficiently with high-ROE/RoIC ‘compounders’ that pay dividends. The gold ‘streamers’ such as Wheaton and Franco-Nevada however happen to be very interesting investments with compelling business models that have generated compounder-like returns for Shareholders over the last two to three decades.
We’ve come a long way from the market depths of March 2020 and perhaps it’s time to take a more cautious stance going into year-end. We are currently operating on the premise that the Nasdaq and S&P could see negative returns in 2022. If the indices see a drawdown of 10-20% (or greater) we expect gold to appreciate or hold its value in real terms next year. There are labor and supply chain shortages globally that will definitely impact the gold mining industry. If CPI hits escape velocity and reaches 8-10% higher next year, we’ll be content with a 10% allocation in gold as we expect institutional and speculator capital flows to put a firm bid behind the yellow metal.
You’re one of the very few out there calling the entire crypto space a bubble. What’s the key argument in differentiating crypto from other assets? Is crypto worth zero or is there a value and, if there is, where does the value come from?
In the last few years market participants have adopted a pseudo-religious attitude towards Bitcoin, Ethereum, and a whole host of crypto currencies. People have come to either ‘believe’ or ‘not believe’ in the asset class and its prospects.
What we can definitely say today is that there are over 14,850 different crypto currencies trading on over 430 venues with a combined ‘market capitalization’ of roughly $2.5 trillion dollars. To our best knowledge these assets produce zero cash flow or dividends, exhibit very high volatility, remain subject to boom-bust sequences, and are used as an apparatus for elaborate criminal hacking schemes.
The average daily volume of these 14,000+ crypto currencies is roughly $150 billion per day. We estimate that approximately 90% of this turnover is driven by purely speculative or gambling capital flows from small retail traders. If we assume that roughly 2-3% of average daily volume consists of bona fide commercial transactions (including portfolio investment), this leaves almost $10 billion of daily volume that derives from money laundering, fraud and other illicit schemes etc.
Some governments have rushed to legalize, adopt or allow for crypto currencies to proliferate in their economy for fear of stymieing or not supporting innovation. Others have taken a hardline stance and begun to outlaw the usage of crypto in their banking and financial system. We are of the view that Bitcoin-like protocols present a clear & present danger to many emerging market countries’ ability to issue currency and sovereign debt over the next decade. As the true nature of these crypto assets become more evident, we’ll see more and more countries outright ban and prosecute their usage in their economies.
Bitcoin and Ethereum (combined 60% of total crypto market capitalization) may very well survive and find a way to thrive due to ‘fiat-by-consensus’ adoption. Under that scenario they clearly will not trade to zero. But that doesn’t negate the presence of a current bubble where 99% of cryptos are of near-zero ultimate value. Promoters have come to euphemize cryptocurrencies as ‘projects’ but most cryptocurrencies are outright frauds.
We think it’s time for crypto investors and regulators to have a more honest, empirical framework for discussing the intrinsic value and risks of these crypto assets. If we can handicap real estate on cap rates and LTV ratios and equites on P/E ratios and cashflow yields, we should adopt a framework for Bitcoin and Ethereum etc (Dogecoin?) that doesn’t border on the pseudo-religion.
I wrote an entire article based off your assumption that we are once again in a 1999-2000 style crash setup. What were the signs that helped you recognize this?
In the wake of the COVID crisis and ensuing Monetary/Fiscal stimulus, too many people with very little financial literacy or professional training took up day-trading of equities, options and crypto currencies as a hobby and eventual vocation. The prudent, cautious amongst us (Warren Buffett included) were seemingly left behind in the speculative frenzy that ensued in the summer of 2020.
We’re often reminded to not confuse investing/trading luck with skill. Regardless, many very young people made a lot of money in a very short period and thought that this process was somehow normal or even sustainable. To be perfectly clear: there was nothing normal about the Meme Stock frenzy, SPAC mania, or crypto and NFT bubble that erupted.
When we witnessed trillion-dollar market caps such as Tesla and Nvidia trading like biotechs in the frenzy of Q4 of 2021, we decided we’d seen enough of this equity market mania. It was eerily reminiscent of Cisco, Lucent, Intel in 1999. The equity market today feels bloated and reckless; it’s probably a good time to start taking chips off the table and leave the party while people are still having fun.
November 2021 was a harsh reminder that valuations and capital structures eventually do matter; people will learn the hard way.
What are the most likely catalysts to set the market off moving lower?
Nobody rings the bell at a market top, but negative catalysts include:
– inability to eradicate COVID in Europe & Asia will keep global trade and travel routes shut for another year
– cascade of lingering supply chain woes = potentially very recessionary
– debilitating energy price spikes in 2022-2023 = looming stagflation
– margin loan balances are at historically very high levels
– continuation of the Tech selloff we witnessed in Q4 2021
– fraud & accounting malpractice (always prevalent in manias)
– Fed signaling significantly higher interest rates in the aftermath of inflation
– Geopolitics: a potential Kamala Harris Presidency would see Russia and China turn belligerent overnight
What’s your take on how we’re handling Covid? You’ve mentioned what happened to our economy over the last 18 months was “economic terrorism”. Will we learn – either through people revolting or negative consequences – or will we continue down this Orwellian path?
It’s very disappointing to see how politicized the pandemic became in the United States. It obviously didn’t help that COVID struck in an Election year, but there will be plenty of blame to go around the table when a proper post-mortem analysis is conducted years from now. We hope that Bethany McLean (Enron: The Smartest Guys in the Room) will eventually write a thoroughly unbiased expose on the timeline of policy decisions in 2020. We’re of the firm belief that our Leaders in Washington D.C. did more harm than good in the early months of this pandemic.
We can safely conclude the 2020 COVID shutdowns are the direct cause for the supply chain dislocations and hyperinflation that Americans are about to suffer. The shutdowns that we witnessed in the United States were a flawed policy decision akin to willful pilot error or ‘economic terrorism;’ Federal and State Governments suffocated millions of livelihoods and permanently destroyed hundreds of thousands of perfectly viable small & medium family-owned businesses. The larger, better capitalized multinational corporations capable of accessing capital markets and Government Stimulus Programs not only survived, they eventually thrived.
What happened can only be described as a crime.
Part 2 of this interview, where we discuss inflation, the Biden administration, why China banned crypto and more, can be found here.
It should be assumed I or Rosemont Seneca has positions in any security or commodity mentioned in this article. None of this is a solicitation to buy or sell securities. Neither I nor RS hold licenses or are investing professional. None of this is financial advice. Positions can always change immediately as soon as I publish this, with or without notice. You are on your own. Do not make decisions based on my blog. I exist on the fringe. The publisher does not guarantee the accuracy or completeness of the information provided in this page. These are not the opinions of any of my employers, partners, or associates. I get shit wrong a lot.
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