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Stimulus Incoming: Economists Warn of Coming Stagflation

2021.09.10
There is an old joke often told about economists: Three economists are hunting ducks. The first shoots 20 meters ahead of the ducks, the second…

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This article was originally published by A Head of the Herd

There is an old joke often told about economists: Three economists are hunting ducks. The first shoots 20 meters ahead of the ducks, the second shoots 20 meters behind the ducks, and the third says, “Great job! We got them!”

Most people think of money as dollars and cents — bills and coins of various denominations that are printed by a mint. The reality is it’s more complicated. Decades ago, the invention of debit cards transformed physical money into digital currency. Remember walking into a bank and filling out a withdrawal or deposit slip? ATMs did away with bank tellers and the cash economy. In retail banking, balances are credited and debited with the click of a mouse, your bricks and mortar bank replaced by a banking app on your phone.

Increasing the money supply no longer involves a printing press, but rather, adding a collection of ones and zeros on a computer screen. Whereas physical money used to be backed by gold and silver, modern economies are based on fiat (paper) currencies, un-tethered to physical metals. The elimination of the gold standard in 1971 meant that citizens had to put their faith in governments, to guarantee that the value of their money was as printed (bills) or embossed (coins), that a dollar bill was indeed worth 100 cents.

(The failure of fiat currencies to maintain their value is a subject we have covered in previous articles. While the gold price in US dollars has increased over 50-fold, from $35 in 1970 to $1,800 today, inflation has eaten away the dollar’s purchasing power by 90% since 1950. In other words, a dollar worth 100 cents in 1950 is today worth just 10 cents.)

Economic history is rife with examples of countries whose citizens lost confidence in their currencies, usually preceding an economic collapse. Three of the most well known are hyperinflation in Weimar Germany and Zimbabwe, and the 2001 bank run in Argentina.

Losing trust

With this historical context in mind, it is worth gauging the level of trust that Americans hold in the US dollar, and their government more generally.

The results from a recent New Yorker article that did exactly that, are less than sanguine.

Starting with the statement, The dominant tenor of contemporary American politics would seem to be mistrust, the article finds that Democracy’s most basic currency is trust, and, to judge by the usual indicators, we seem to be running out of it. Back in 1964, more than three-quarters of Americans said that they trusted the federal government; today, according to the Pew Research Center, only a quarter of Americans do.

If only 25% of US citizens trust the government, the dollar is also on shaky ground. As the article reminds us, since coming off the gold standard in 1971, the thing you’re trusting is the full faith and credit of the United States government. Fractional-reserve banking, which allows a bank to lend far more in credit than it has in deposits, has driven capitalism for centuries. Many economic crises, when examined closely, turn out to be crises of confidence. This is obviously true of a bank run, when depositors lose faith in the fractional-reserve system, but it’s also true of hyperinflationary spirals, when worries about a country’s handling of monetary policy yank down the value of its currency. There is a reason that the core language of commerce—of bonds and credits—is all about belief.

In this way trust, or the lack thereof, is similar to religion — it’s all about faith. In response to state-sponsored atheism in the USSR during the Cold War, the 84th Congress of 1956 passed a joint resolution declaring “In God we Trust” the national motto of the United States. From that point forward, these words have appeared on all forms of US currency.

Stagflation looms

Stagflation is what happens when rising inflation occurs amid a recession.

The US Federal Reserve’s official line is that inflation is only temporary, however we see things differently.

In June the US consumer price index (CPI) surged by 5.4%, the most since 2008, as economic activity picked up but was constrained in some sectors by supply bottlenecks.

The pandemic has put tremendous pressure on supply chains, and the prices of many agricultural commodities such as grain, corn and soybeans, have skyrocketed. Several industrial metals have enjoyed significant price gains, too, including copper, zinc and lead.

This is due to a number of reasons including demand from China, the world’s largest consumer of commodities whose economy grew at a blistering 18% in the first quarter and 7.9% in Q2.

Supply constraints in certain industries plus greater demand for goods and services is a recipe for higher inflation. To the question of whether inflation is temporary, we are seeing increasing evidence it is not, ie., that rising prices are becoming a permanent fixture of the economy.

The term “recession” is jarring because to most observers, the US economy has been doing well, growing at around 6.5% as virus-related restrictions are lifted amid a relatively successful vaccination campaign of around 60% fully inoculated.

However, recent numbers suggest there is no “V-shaped recovery” and that the economy is slowing. As the Wall Street Journal reports, elevated covid-19 cases and hospitalizations especially the highly contagious delta variant, has the nation “tapping the brakes” in September, with businesses and consumers having to adjust to renewed mask mandates, travel restrictions and event cancelations.

The pace of hiring plummeted in August, with employers adding just 235,000 jobs, compared to about a million in each of June and July. The Department of Labor was expecting 720,000. New restrictions saw restaurants and stores cut staff.

The Mises Institute chimed in with more depressing stats. Mises Wire reported consumer confidence fell to its lowest level since 2011 in July, with the Atlanta Fed reducing its Q3 forecast from 6% growth to 3.7%. Total nonfarm employment is 5.3 million jobs below February 2020’s peak and labor force participation — the number employed or actively seeking employment divided by the working-age population — is well down from 2019 in the 25-54 age bracket.

The article notes the numbers should be much better, given the economy is still receiving so much government stimulus, with federal spending into the trillions, the fact that the government can borrow at rock-bottom interest rates, and because quantitative easing at the pandemic rate of $120 billion in asset purchases per month continues apace.

Moreover, some commentators are uttering terms no one wants to hear or read about, including Desmond Lachman who wrote in The Hill:

Today, with inflation rising to levels last seen 30 years ago and with unemployment remaining stubbornly high amid the COVID-19 pandemic despite massive policy stimulus, we may again be entering a prolonged period of stagflation …

Historian Niall Ferguson concurs, resurrecting memories of the low-growth, hyper-inflationary 1970s, when wages and prices grew by double digits. Ferguson told CNBC that “inflation could be repeating the trajectory of the late 1960s, which laid the foundation for sustained high prices the following decade.”

US inflation

Harvard economics professor Ken Rogoff, writing for Project Syndicate, suggests the parallels between the 2020s and the 1970s just keep growing. Has a sustained period of high inflation just become much more likely? Until recently, I would have said the odds were clearly against it. Now, I am not so sure, especially looking ahead a few years.

Rogoff points to a couple of key similarities between the economic situation 50 years ago and the one currently:

  • Supply shocks. In 1973 OPEC cut off the supply of oil, resulting in massive hikes to the international price of crude. Today, protectionism and a retreat from global supply chains are an equally negative supply shock.
  • Government spending sprees. President Lyndon Johnson splashed out big-time during his “Great Society” programs of the 1960s, followed by spending to meet the soaring costs of the Vietnam War. The Trump administration was equally magnanimous, doling out around $4 trillion in pandemic relief, as is the Biden administration whose philosophy of “Modern Monetary Theory” has little regard for fiscal deficits.

Another renowned economist, Nouriel Roubini, believes the stagflation threat is real, having warned for months that the current mix of persistently loose monetary, credit, and fiscal policies will excessively stimulate aggregate demand and lead to inflationary overheating. Compounding the problem, medium-term negative supply shocks will reduce potential growth and increase production costs. Combined, these demand and supply dynamics could lead to 1970s-style stagflation (rising inflation amid a recession) and eventually even to a severe debt crisis.

Roubini identifies nine supply shocks that are likely to keep the prices of goods and services elevated for some time:

  • The trend toward deglobalization and rising protectionism
  • The balkanization and reshoring of far-flung supply chains,
  • the demographic aging of advanced economies and key emerging markets.
  • Tighter immigration restrictions are hampering migration from the poorer Global South to the richer North.
  • The Sino-American cold war is just beginning, threatening to fragment the global economy.
  • Climate change is already disrupting agriculture and causing spikes in food prices.
  • Persistent pandemics will inevitably lead to more national self-reliance and export controls for key goods and materials.
  • Cyber-warfare is increasingly disrupting production, yet remains very costly to control.
  • And finally, the political backlash against income and wealth inequality is driving fiscal and regulatory authorities to implement policies strengthening the power of workers and labor unions, setting the stage for accelerated wage growth. 

Roubini writes:

While these persistent negative supply shocks threaten to reduce potential growth, the continuation of loose monetary and fiscal policies could trigger a de-anchoring of inflation expectations. The resulting wage-price spiral would then usher in a medium-term stagflationary environment worse than the 1970s – when the debt-to-GDP ratios were lower than they are now. That is why the risk of a stagflationary debt crisis will continue to loom over the medium term.

Stephen Roach, formerly an economics prof at Yale, and a previous chairman of Morgan Stanley Asia, summons the ghost of Arthur Burns, the Fed chair during the Nixon administration, in explaining how inflation is actually worse than reported.

In the 1970s, Burns argued that, since a quadrupling of US oil prices had nothing to do with monetary policy, the Fed should exclude oil and energy-related products such as home heating and electricity from the consumer price index (CPI). Burns also dismissed surging food prices in 1972 as an El Nino weather event, before ordering that food prices need also be stripped from the consumer price index.

What we are left with is the “core inflation rate” supposedly free of “volatile” food and energy. Trouble is, after so much tinkering with the CPI, inflation statistics are misleading, and often end up being minimized. Roach explains:

By the time Burns was done, only about 35% of the CPI was left – and it was rising at a double-digit rate! Only at that point, in 1975, did Burns concede – far too late – that the United States had an inflation problem. The painful lesson: ignore so-called transitory factors at great peril.

Fast-forward to today. Evoking an eerie sense of déjà vu, the Fed is insisting that recent increases in the prices of food, construction materials, used cars, personal health products, gasoline, car rentals, and appliances reflect transitory factors that will quickly fade with post-pandemic normalization. Scattered labor shortages and surging home prices are supposedly also transitory. Sound familiar?

Mises Institute senior editor Ryan McMaken, author of the above-mentioned article, believes stagflation could be avoided through major economic growth and big productivity gains, but that’s unlikely because productivity has already been crippled by American governments’ lockdowns and covid stimulus policies in 2020. Logistics and supply chains are in disarray. The workforce is still down 5.3 million workers from its peak eighteen months ago.

Unless something changes soon, this all points toward a scenario of stagflation.

The 1,000-pound debt gorilla

A period of high inflation and low economic growth is clearly against America’s interests, and the rest of the world’s. However at AOTH, we happen to believe that the more serious threat to the financial system, one that is slowly collapsing under its own weight like a poorly built foundation, is global debt.

Earlier this year, the Institute of International Finance (IIF) found that governments, companies and households borrowed $24 trillion last year to offset the pandemic’s economic toll, bringing total global debt to an all-time high, at the end of 2020, of $281 trillion.

It more than doubled from US$116 trillion in 2007 to $244 trillion in 2019.

The IIF estimates that governments with large budget deficits are expected to add another $10 trillion in 2021.

According to the IMF, the public debt of advanced economies has climbed nearly 27% since January 2020, and now sits beyond the greater than 120% of GDP reached after World War II. The United States and Japan are the two most indebted economies accounting for half of total global government debt (see the pie chart below).

According to usdebtclock.org, the current national debt sits at $28.7 trillion, and it is increasing with each tick of the clock.

Source: usdebtclock.org

The next round of government spending involves President Joe Biden’s $1 trillion infrastructure bill, just passed by the Senate but not yet approved by the House; and a $3.5 trillion anti-poverty and climate plan Senate Democrats hope to get passed this fall.

Debt is a major limitation on a growing economy.

According to the World Bank, if the debt to GDP ratio exceeds 77% for an extended period of time, every percentage point of debt above this level costs a country 0.017 percentage points in economic growth. The US is currently at 125.7%, so that is 48.7 basis points multiplied by 0.017 = 0.82, nearly a full percentage point of economic growth!

The Fed is severely constrained in how much it can raise interest rates, to quell rising inflation, due to ballooning debt. Following $4.5 trillion spent on pandemic relief, and trillions more to come, through Biden administration spending, along with the continuation of quantitative easing (what I like to call “quantifornication”) to the tune of $120 billion in asset purchases per month, the Fed has in one year doubled its balance sheet to around $8.3 trillion.

Source: US Federal Reserve

According to the Committee for a Responsible Federal Budget, the federal government this year will spend $300 billion on interest on the national debt. This is the equivalent of 9% of all federal revenues collected or more than $2,400 per household.

At today’s debt levels, each 1% rise in the interest rate would increase interest expenditures by roughly $225 billion. On a per-household basis, a 1% interest rate hike would increase interest costs by $1,805, to $4,210.

The Fed used quantitative easing in the wake of the 2008-09 financial crisis and it did so again in 2020 to deal with the coronavirus pandemic. (QE continues although the Fed has stated it wants to start “tapering” its monthly asset purchases) QE was successful in preventing a financial meltdown during 2008 and 2020, but the effect has been a reliance on cheap credit that has fueled both a stock market bubble and a real estate bubble that many observers believe is in danger of popping. Bond investors have also become addicted to Fed stimulus.

Excessive money-printing not only in the United States, but Britain and the EU, is continuing to devalue currencies at an alarming rate (this, by definition, is inflation, because it takes more units of currency to buy the same amount of goods as before) — for which precious metals, namely gold and silver, are the best defence.

Conclusion

There was a time when comparing the United States to Italy, whose political culture involves multiple parties holding power in fragile coalition governments, would be a joke. The indomitable power of the US president dwarfs that of the Italian prime minister. The president can and does veto laws, and may issue executive orders without Congress, whereas the Italian prime minister must govern by consensus. The strength of the US economy is symbolized by the dollar, the world’s reserve currency and the most coveted safe haven asset, besides gold, during times of crisis. Financially stable, a beacon of free markets, and up to recently, fiscally responsible, by contrast Italy has been caught in an endless cycle of economic stagnation and debt.

A tax on work forces employers to pay out twice what an employee takes home, Italy’s pension system pays defined benefits pension to people who retire at 40, and there is a 75% tax on gasoline.

Financial analyst Edoardo Cicchella, writing for Mises Institute, argues the United States started down the same road as Italy, what he describes as a growing “Europization”, in 2015:

[T]he Obama administration had just managed to introduce extremely costly and inefficient expansion of Medicare and Social Security, bailed out morally and financially bankrupt Wall Street banks with public money and fueled income inequality with multiple rounds of QE.

Back then, the US debt to GDP ratio was around 70% of GDP, compared to 120% for “financially ruined Italy”. Today, debt to GDP in the United States sits at 125%, with the national debt approaching $29 trillion. (Italy’s ratio is currently 155%). Cichella continues:

Fast forward to the present, a deadly combination of a pandemic and the most leftist U.S. government in history have created long term economic imbalances that will and can not be solved in a couple of years (despite assurance of the “temporary” nature of the interventions by the Government and the Fed). The extremely high level of public spending and government benefits (entitlements) will create huge pockets of the population completely dependent on government support for survival. This can already be observed from the recent difficulty of filling a lot of job vacancies in the U.S. at entry level positions. Why would anybody get a job anyway? People can now make the equivalent of a $25/hr salary by staying at home. (More than that if one is also “informally” employed on the side). In most states you can now make even more than twice your former salary if you were making $10.

It is as if the law of demand and supply does not exist. For sure It does not look like it exists in Washington State, where the breakeven for making more on unemployment benefits is now at $30 an hour, or about $62,000 per year.

In the United States, trust in the government is at an all-time low, a sentiment that played out during the Trump presidency, and the persistent anti-vax movement that has crossed over into Biden’s. Trusting US money means putting your faith in the United States government, the only thing backing the dollar in the absence of a gold standard, and fractional-reserve banking, which allows a bank to lend far more than it has in deposits.

The above-cited economists are right to point out the threat of stagflation in the US economy, where supply shocks are bidding up the prices of good and services, just like the 1973 OPEC oil crisis, and where money-printing “out the wazoo” combined with trillions more in federal spending being pursued by the Democratic left, keeps adding to the sky-high national debt.

The Fed is severely constrained in how much it can raise interest rates, to quell rising inflation, due to ballooning debt. At today’s debt levels, each 1% rise in the interest rate would increase interest expenditures by roughly $225 billion.

The people supposedly represented by the government can’t afford that level of interest (they will suffer higher interest payments on their own debt), same as businesses cannot afford higher interest payments on their loans. Corporations will simply pass on the higher interest obligations to their customers, cut dividends or in the worst cases, lay off staff.

The global debt overhang which has more than doubled since 2007, has severely curtailed governments’ ability to deal with a major financial crisis such as the coronavirus. Interest rates are already so low, that central banks are limited in how much they can cut (the Fed has already “used up all its bullets” in setting interest rates at 0 to 0.25%).

People are being misled into believing that the US Federal Reserve is going to scale back its $120 billion per month asset purchase program (QE) and raise interest rates. The Fed can telegraph its intentions all it wants, the fact remains that at such unsustainably high debt levels, the interest payments will eventually cripple the federal government. 

The only way to avoid this impending disaster is a global debt reset — a Debt Jubilee, if you will. Imagine what could be achieved if all the central banks acted together in retiring all the world’s debt — all $281 trillion of government, corporate and consumer loans. Of course the financial institutions would balk; their hand would need forcing. But the effects on the economy would be immediate and profound.

The benefits of a Debt Jubilee would accrue to governments of all stripes, no longer bound to austerity programs; businesses that could invest in their operations instead of paying interest and principal to corporate bondholders; and taxpayers, who would benefit from increased social spending and higher household disposable income.

Because we live in a fiat monetary system, currencies are not backed by anything physical; the reserve currency, the US dollar, was de-coupled from the gold standard in the early 1970s. It’s not like a raid on vaults full of gold, which have an inherent, physical store of value.

In reality there is nothing preventing central bankers from doing a complete global reset, putting all debt back to zero. 

Richard (Rick) Mills
aheadoftheherd.com
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Can Deep-Sea Mining Solve The Battery Metals Supply Crisis?

Can Deep-Sea Mining Solve The Battery Metals Supply Crisis?

Authored by Tsvetana Paraskova via OilPrice.com,

The key metals necessary to…

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Can Deep-Sea Mining Solve The Battery Metals Supply Crisis?

Authored by Tsvetana Paraskova via OilPrice.com,

The key metals necessary to advance the global energy transition will likely drive the next commodity supercycle.

Soaring demand for lithium, copper, nickel, cobalt, and aluminum could lead to a battery metal supply crunch as early as this decade, while surging prices could reverse a decade of cost declines, analysts say.  In a world increasingly focused on sustainability and ethically-sourced raw materials, some players in the metal mining industry believe that deep seabed mining operations in remote ocean areas could have a lower impact and lower costs than the land mining of key battery minerals - minerals associated with child labor in the Democratic Republic of Congo, for example, the world’s top producer of cobalt.  

However, deep seabed mining is years away from commercial operations, at best, due to a lack of international regulations and concerns about the environmental impact of mineral extraction from the seabed in areas and ecosystems that are yet to be studied by marine biologists. 

Some companies are betting on starting deep-sea mining in a couple of years. The Metals Company, for example, which just began trading on the NASDAQ, said last week it is working to “move the world’s largest estimated source of battery metals into production.” 

“We believe we have a solution that is more scalable, secure, lower cost and lower impact than mining these minerals on land: We can produce battery metals from high-grade polymetallic nodules found on the seafloor in the international waters of the Clarion-Clipperton Zone,” Gerard Barron, Chairman and CEO of The Metals Company, said. 

Polymetallic nodules contain four essential battery metals—cobalt, nickel, copper, and manganese—in a single ore, and they have been formed over millions of years by absorbing metals from seawater. Those nodules lie unattached to the seafloor, and The Metals Company plans to use a robotic collector to gently dislodge the metal-containing rocks from the seabed with minimal disturbance to the ocean floor. 

TMC has exploration and commercial rights to three contract areas which host an estimated 1.6 billion tons (wet) of polymetallic nodules containing high-grade nickel, copper, cobalt, and manganese, in the Clarion Clipperton Zone of the Pacific Ocean—between Mexico and Hawaii—regulated by the International Seabed Authority.  

The company says its studies have estimated that the polymetallic nodules within its exploration areas are enough to electrify a quarter of the world’s passenger vehicle fleet, or would be enough for around 280 million EVs.

TMC says its proposed method of retrieving battery metals generates much less carbon dioxide than conventional mining and is more environmentally friendly. 

“It’s like picking up golf balls on a driving range,” CFO Craig Shesky told the IEEE Spectrum magazine edited by the Institute of Electrical and Electronics Engineers. 

With access to funding and the listing on the NASDAQ, TMC expects to be able to complete pilot nodule collection trials in 2022, complete environmental impact studies by 2023, and file to move from exploration phase to exploitation phase in the third quarter of 2023, CEO Barron said in the statement last week. 

Yet, TMC and other companies vying for deep-sea mining face strong opposition from environmental organizations that say disrupting the ocean would lead to losses of biodiversity and change the carbon cycle in the waters. 

Moreover, the International Seabed Authority (ISA) has not yet agreed upon regulations on how to manage and supervise the exploration and extraction of minerals from the ocean floor. 

The Clarion-Clipperton Zone (CCZ) is a “biodiversity hotspot,” Craig Smith, an oceanography professor at the University of Hawaii at Manoa, told IEEE.

Smith has led research expeditions to the CCZ, which have found species new to science. It’s not possible to mine polymetallic nodules without causing ecological damage “over tens of thousands of kilometers,” the oceanography professor says. 

“Deep-sea mining may irreparably harm ocean ecosystems before we even have a chance to fully study its impacts,” the Center for Biological Diversity says

Even some potential customers of metals extracted from the ocean supported earlier this year a call for a moratorium on deep seabed mining.  

Automakers BMW and Volvo, as well as Google and Samsung SDI, vowed not to buy metals produced from deep-sea mining until the environmental risks of the activity are “comprehensively understood.” 

Tyler Durden Sun, 09/19/2021 - 08:10
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Falcon Gold continues acquisition spree around central Newfoundland’s mineral belts

2021.09.18
Area plays, where one company makes a discovery then other companies rush in to stake ground nearby, are often the main driver of growth in…

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2021.09.18

Area plays, where one company makes a discovery then other companies rush in to stake ground nearby, are often the main driver of growth in junior resource markets.

Noteworthy Canadian area plays in recent history include Eskay Creek in 1990, Voisey’s Bay in 1995 and the Yukon’s White Gold Rush in 2010, just to name a few.

At present, the central Newfoundland region is making a strong case for the next area play of the 21st Century. Specifically, the Exploits gold belt area has become the hunting ground for Canada’s next major discovery of gold and other important metals.

Ever since New Found Gold made a blockbuster discovery in late 2019 (one of Newfoundland’s best drill intercepts ever) at its Queensway project, the Exploits Subzone has turned into an attractive destination for gold explorers, with many having found exploration success within a short period of time. NFG, too, continues to report significant drill results to this day.

One up-and-coming explorer that is continuously expanding its land position in central Newfoundland is Falcon Gold (TSXV: FG, Frankfurt: 3FA.G, OTC: FGLDF), which recently acquired two additional properties in the province, both located in strategic locations close to known mineral zones and/or producing mines.

Baie Verte Property

The first deal, announced on August 18, comprises the staking of 548 claims totaling 13,700 hectares located along the Baie Verte Brompton Line (BVBL) of the central Newfoundland belt, home to some of the province’s largest defined gold deposits.

Regional location of Falcon’s claim groups

There are more than 100 gold prospects and zones, many of which are orogenic-style, related to major splays and associated second-order structures linked to the BVBL. Falcon’s new property covers a 50 km corridor along the BVBL.

The Baie Verte Peninsula currently hosts all of Newfoundland’s gold production.

Producing mines in the region are headlined by Anaconda Mining Inc.’s Point Rousse gold mine and Rambler Metals & Mining operations. Former producing mines include the Terra Nova mine, and deposits of the Rambler mining camp. All of these mines are in close proximity to the BVBL.

Falcon’s new claims are also 13 km southwest of the Glover Island Trend, an 11 km mineralized corridor that hosts 17 base metal and polymetallic mineral prospects as well as numerous gold showings and anomalies.

These include the Lunch Pond South Extension (LPSE) deposit owned by Mountain Lake Resources, which has indicated and inferred resources of 120,000 ounces of gold (June 2017).

The new land acquisition is also proximal to the Four Corners project held by Triple Nine Resources (see map below).

Location of the new Falcon Gold land along the BVBL

The Four Corners project consists of iron-titanium-vanadium mineralized rock that has been outlined for 3,000m in strike with intercepts 200m wide and 600m vertically. This project is said to contain sufficient tonnage and grades to warrant developing a world-class mineral resource.

Great Burnt Property

Then, in early September, Falcon announced it has acquired through staking 91 claims totaling 2,275 hectares in the Great Burnt greenstone belt of central Newfoundland, which is rich in base metals.

Regional location of Falcon’s Great Burnt copper property

The Great Burnt greenstone belt is host to the Great Burnt copper zone that contains an indicated resource of 381,300 tonnes at 2.68% Cu and inferred resources of 663,100 tonnes at 2.10% Cu.

Recent drilling by Spruce Ridge Resources in the area has returned some of the best copper results across the board, highlighted by 8.0% Cu over 27.2m and 6.9% Cu over 22.7m.

The Great Burnt greenstone belt also hosts the South Pond A and B copper-gold zones and the End Zone copper prospect within a 14 km mineralized corridor.

The greenstone belt is characterized by Besshi-type massive sulphide deposits, which generally occur in thick sequences of marine sedimentary rocks. Sulphide lenses can be several metres thick and extend for several kilometres. Besshi-type massive sulphide deposits are generally copper dominant and can contain precious metals such as gold and often cobalt.

As shown in the map below, Falcon’s Great Burnt property is located right in the middle of Spruce Ridge’s land package. It is also situated 4 km west of the Crest Resources-Exploits Discovery joint venture project within the Exploits Subzone.

Location of the Falcon Gold acquisition proximal to Spruce Ridge Resources

The Exploits Subzone is known to contain deep-seated gold-bearing structures of the Dog Bay-Appleton Fault — GRUB Line deformation corridor, and is home to the high-grade Keats gold zone of New Found Gold. Falcon’s new property is located just 20 km west of the Queensway project held by NFG.

“This property not only has the potential to host important Exploits Subzone orogenic gold mineralization but also copper-rich massive sulphides that contain gold,“ Karim Rayani, CEO of Falcon Gold, stated in a news release.

Since acquiring the claims, the company has received two joint venture offers, both of which were turned down as it believes the value of the property could only go up, seeing as most of the land in the Great Burnt belt has already been tied up.

“If right next door on the same fault line these guys are hitting up to 90% Cu, and this is a VMS system, Newfoundfound is going to have multiple discoveries,”  Rayani stated in a Proactive interview.

Falcon now intends to perform a high-resolution airborne magnetic and electromagnetic survey over the entire property, integrating mineralization trends and historical results to vector its exploration efforts.

As the company tends to do extensive research before picking up a project, there’s a good chance that multiple areas of interest could emerge from exploration work.

Flagship Gold Project

Central Newfoundland is just one of the many mineral-rich areas in Canada where Falcon holds a prominent land position.

With a total area of 10,392 hectares, Falcon presently has the largest land position in Ontario’s Atikokan gold camp — bested only by Agnico Eagle and its 32,070-hectare Hammond Reef exploration project.

Central Canada project and surrounding properties

The company’s flagship project — known as the Central Canada gold mine — is located approximately 20 km southeast of Agnico’s Hammond Reef gold deposit, which has an estimated 3.32 million ounces of gold (123.5Mt grading 0.84 g/t Au) in mineral reserves, and 2.3 million ounces of measured and indicated mineral resources (133.4Mt grading 0.54 g/t Au).

The Hammond Reef property lies on the Hammond shear zone, which is a northeast-trending splay off of the Quetico Fault Zone (QFZ), and may be the control for the gold deposit. Falcon’s Central Canada property lies on a similar major northeast-trending splay of the QFZ.

The Central Canada gold mine has an interesting mining history dating back to the beginning of the 20th Century.

Between 1901-1907, a shaft was sunk to a depth of 12m, and 27 ounces of gold from 18 tonnes were mined using a stamp mill. During the 1930s, the shaft was deepened to 40m, with about 42m of crosscuts, and a 75 t/d gold mill was installed.

Diamond drilling by Anjamin Mines in 1965 returned a 0.6m intersection of 37 g/t Au. Another hole assayed 44 g/t Au over 2.1m.

A more aggressive drill program in 1985 saw Interquest Resources punch in 13 holes for a total of 1,840m, the highlight being a 1.1m intercept of 30 g/t Au.

In 2012, further diamond drilling was completed by TerraX Minerals, consisting of three holes totaling 363m, spaced 55m apart to test a 110m strike length of the main Central Canada structure. The first hole of that program cut 10.61m averaging 1.32 g/t Au, including 1.82m of 4.77 g/t Au.

Central Canada Exploration Plans

Under Falcon Gold’s ownership, an initial seven-hole, 1,055m program completed in July 2020 featured a 3m interval of 10.17 g/t Au at 67m downhole. Falcon also intersected a new mineralized zone, untested by previous operators, at 104m depth, which sampled 18.6 g/t Au over 1m.

A second round of drilling took place in November-December, with another 10 holes totalling 1,890m to complement the previous seven holes plus the three holes done in 2012 by TerraX.

By March 2021, all assays from Falcon’s inaugural drill program have been received, from which continuity of the mineralized trend containing the historical shaft was confirmed.

Encouraged by these results, the company has undertaken additional work programs on the property this year, with initial focus on the outcrop exposures and trench areas. There, the geological team will be conducting detailed structural mapping along the 275m long strike of the Central Canada mine trend. The team will also expand its attention onto the other high-priority gold targets along strike and paralleling the mine trend.

For the 2021 drill program, Falcon is planning to complete up to 20 diamond drill holes for approximately 2,000m of core. The goal is to target gold mineralization in the shaft area, and to test other excellent gold zones such as mineralized quartz-feldspar porphyries and the northern vein, also known as the No. 2 vein.

Other Properties

In addition to the Central Canada gold mine and the two newly acquired projects in Central Newfoundland, Falcon currently has five additional projects across Canada, plus one project in Argentina.

In Ontario’s Red Lake mining camp, the company has acquired a strategic land package at the Springpole West project. This property is directly tied onto First Mining Gold Corp.’s Springpole gold deposit, reported as one of the largest undeveloped gold projects in Canada, and Falcon’s property contains the same geological terrain as that world-class gold deposit.

Near Sudbury, Ontario, Falcon also has a 49% interest in the Burton gold property, located 38 km northwest of IAMGOLD’s Cote Lake deposit, which has an indicated resource of 35 million tonnes averaging 0.82 g/t for 930,000 oz of contained gold, plus an inferred resource of 204 million tonnes averaging 0.91 g/t for 5.94 million ounces of contained gold.

Falcon’s first land position in central Newfoundland was established in July 2021 with its acquisition of the Hope Brook gold property. This property is hosted within the Exploits Subzone of the central Newfoundland gold belt, contiguous to First Mining Gold, the Sokoman Minerals-Benton joint venture and Marvel Discovery Corp.

In British Columbia, the company has further work planned for the Spitfire-Sunny Boy project and the Gaspard gold claims, the latter was acquired earlier this year.

Falcon’s acquisition of the Esperanza gold-silver-copper property in La Rioja province, Argentina, was announced around the same time as the Gaspard project. Consisting of 10 mineral concessions covering 11,768 hectares, the Esperanza property is located within the Sierra de Las Minas district, which hosts a number of past-producing gold and silver mines.

Conclusion

Falcon Gold has all the elements we like to see in an exploration-stage gold junior. The company is a large landowner in a past-producing mining district, with a mid-tier gold producer, Agnico-Eagle Mines, exploring just off its northern boundary.

We also like the recent acquisitions, especially the recently staked claims in central Newfoundland. The properties are all strategically located near areas with potential to grow into a world-class gold resource, and thus could well be a game-changer.

With projects also in BC and Argentina, Falcon has a diversified portfolio of projects with a rich mining history and potentially even richer endowment of mineral resources that can be rapidly generated.

Falcon Gold Corp.
TSXV:FG, OTC:FGLDF, FSE:3FA.G
Cdn$0.105, 2021.09.16
Shares Outstanding 100.2m
Market cap Cdn$10.5m
FG website

Richard (Rick) Mills
aheadoftheherd.com
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Marvel expands land position in Central Newfoundland, next to 4Moz Valentine gold project

2021.09.18
Marvel Discovery Corp (TSXV:MARV, Frankfurt:O4T1, OTCQB:MARVF) is a junior gold explorer active in the Central Newfoundland Gold Area Play.
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2021.09.18

Marvel Discovery Corp (TSXV:MARV, Frankfurt:O4T1, OTCQB:MARVF) is a junior gold explorer active in the Central Newfoundland Gold Area Play.

The Vancouver-based company has assembled a sizeable land position, over 60,000 hectares, right in the thick of the Exploits Subzone of Central Newfoundland — potentially one of the world’s last easily accessible, district-scale gold camps. 

See below for Marvel’s map of the area including the major faults shown as heavy black lines.

This summer, Marvel has been busy snapping up claims and adding to its land package.

Exploits Subzone

The Exploits Subzone of Central Newfoundland

Running from Dog Bay southwest for 200 km to Bay d’Espoir, Newfoundland’s Exploits Subzone has been neglected since the last major exploration campaigns in the 1980s. However, the last 40 years have seen incremental advancements in the understanding of gold mineralization in the camp.

The sum of this knowledge is now coming together in effective exploration models that have delivered new discoveries.

What makes the Exploits Subzone such a prime target for gold discovery? Prominent regional thrust faulting shows evidence of a long tectonic history including fluid migration.

During a period known as the Taconic orogeny that lasted from 480-430 million years ago, the continental plates of Laurentia and Gondwana collided, closing the Iapetus Ocean between them. The islands we now know as Newfoundland, Ireland and Great Britain, were crushed between the continental plates, and deep crustal breaks were created that remained as active fluid conduits for millions of years. These five major tectonic breaks are important mineralizing structures for numerous multi-million-ounce gold deposits, including Marathon Gold’s (TSX:MOZ) Valentine Lake deposit, which lies just southwest of New Found Gold’s (TSXV:NFG) Queensway discovery.

Consider that the majority of Newfoundland’s gold occurrences and exploration lie within the Exploits Subzone and are in the vicinity of the Gander River Ultramafic Belt, better known as the GRUB Line.

Fact is, to stand out from among the 30-odd gold juniors that are presently combing the island, your property had better overlie one of the deep-seated structures Newfoundland is famous for, and have a secondary structure that provides a trap for the gold mineralization. 

Victoria Lake project

The Victoria Lake project is among the most prospective of Marvel Discovery Corp’s seven Newfoundland properties.

Located within the Exploits Subzone, the property is bolted onto Marathon Gold’s 4-million-ounce Valentine gold project, which is Atlantic Canada’s largest undeveloped gold resource.

Victoria Lake and Valentine exhibit a similar style of gold-bearing veins and have structural and geological settings in common. Preliminary work on Victoria Lake identified several quartz-arsenopyrite veins returning grab samples ranging from 15.5 to 24.9 g/t gold and 18.6 to 139.3 g/t silver.

In 1995, grab samples from Vein #3 featured 162.7 g/t gold and 220 g/t silver.

Regional geological and structural location of the Victoria Lake gold project.

This week Marvel announced it has acquired an additional 53 mining claims at Victoria Lake comprising 1,325 ha, increasing its land position to 7,650 ha. The company says the acquisition is located along the Exploits Subzone and covers a large, highly prospective structural zone proximal to the Valentine Lake Shear Zone hosting Marathon Gold’s (TSXV:MOZ) Valentine Gold Project with resources of 4M oz. of gold…

Victoria Lake Gold Project is host to interpreted extensions of the Valentine Lake Shear Zone and two major thrust faults, a wide structural corridor interpreted to play an integral part in the Marathon Gold Deposit.

The project is contiguous to Marathon’s Valentine gold project which has a 4Moz resource.

In fact the claims, acquired via an option agreement with a vendor, contain the highest regional gold-in-till sample — 785 parts per billion (ppb) Au. This high-grade surface gold area was never followed up with additional exploration, making it a juicy target for Marvel Discovery Corp.

“These claim additions were a strategic move, not only in expanding the size and potential, but tying up ground with the highest gold till-in-soil samples in the province of Newfoundland,” Marvel CEO Karim Rayani commented in the Sept. 14 news release. “This shows we are in the right place for a potential discovery adjacent to what will likely become Newfoundland’s next and largest gold mine.”

In a recent video interview, Rayani noted that the vendor, Roland Quinlan, is the same owner who sold part of the Queensway project to New Found Gold, the first mover in the Central Newfoundland Gold Area Play. 

“He’s one of the bigger names in the game,” Rayani told Proactive Investors’ Steve Darling, adding that Quinlan is heading up prospecting on Marvel’s Slip property claims and will also be in the field at the Victoria Lake project.

“If we do this right we could be sitting on a very large system. We’re just looking forward to getting crews on the ground as soon as possible,” Rayani said in the video interview. 

Under the option agreement, Marvel will make a series of cash payments over the next three years, and issue the vendor up to 500,000 shares and 300,000 warrants. Marvel also agreed to spend at least $60,000 exploring the property before the three years is up. The vendor retains a 2% NSR, of which Marvel has the right of first refusal to purchase 1% for $1.5 million.

Recent successes

The Central Newfoundland Gold Area Play continues to deliver great results to the market during a busy summer of drilling.

Earlier this year Marathon Gold updated the resource at its Valentine gold project, in a technical report outlining 3.14 million ounces in measured and indicated, and 1.65Moz inferred. (proven and probable reserves of 2.05Moz)

The feasibility study envisions an open-pit mine with average annual gold production of 173,000 ounces, over a 13-year mine life.

Marathon Gold trades on the Toronto main board at $3.23 per share with a market capitalization of $785.1 million. The latest fire assay results from ongoing in-fill drilling at the 1.5-km-long Berry deposit include 22.97 g/t Au over 6m, 25.38 g/t Au over 4m, 2.50 g/t Au over 27m, 1.73 g/t Au over 39m and 3.04 g/t Au over 22m.

Labrador Gold (TSXV:LAB) is another company piquing interest in Newfoundland gold exploration. Earlier this year the Toronto-based company released an impressive half-meter (0.5m) intercept of 276.56 g/t gold at its Kingsway project located near Gander, NL. The company followed that up with a 128.51 g/t over 1.12m hit at the Big Vein zone, part of a collection of assays delivered from the current 50,000m drill program. LAB currently trades at $0.78 per share and has a market value of $118.1 million.

Exploits Discovery Corp (TSXV:NFLD) reported 194 g/t visible gold at its Little Joanna prospect, along with 613 g/t Au and 189 g/t Ag at the Quinlan Veins target of its Dog Bay gold project. A large vein system with historical grab samples (700 g/t Au) containing visible gold is being drill-tested at Jonathan’s Pond, with prospecting, soil and rock sampling taking place at NFLD’s Mount Peyton, Dog Bay and True Grit projects. Results from the initial round of drilling are expected in early October. Exploits Discovery closed on Friday at 64 cents share @ a market cap of $53.4M.

Trading at just 13 cents, MARV has impressive accretive value compared to its peers.

Conclusion

The Exploits Subzone of Central Newfoundland is on its way to becoming the world’s next large gold district.

Companies are busily drilling the area and the first movers, including New Found Gold, Marathon Gold and Labrador Gold, are banking high-grade intercepts worthy of investor interest.

The area’s faults and subfaults have shown a long history of fluid migration. Central Newfoundland’s five major tectonic breaks can be traced back some 400 million years.

These deep crustal breaks are important mineralizing structures for hosting multi-million-ounce gold deposits. The potential is evident in Marathon’s Valentine deposit and at New Found Gold’s Keats, Lotto and Golden Joint zones.

Today, Central Newfoundland is home to a number of up-and-coming gold explorers looking to become the next Marathon or NFG, and competition for land is growing fierce.

Having established itself as a major landowner with seven projects in this highly prolific region, Marvel represents an intriguing opportunity for investors looking for the next gold play in Central Newfoundland.

Marvel Discovery Corp.
TSXV:MARV, Frankfurt:O4T1, OTCQB:MARVF
Cdn$0.13, 2021.09.17
Shares Outstanding 73.8m
Market cap Cdn$10.2m
MARV website 

 Richard (Rick) Mills
aheadoftheherd.com
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Expressions of opinion are those of AOTH/Richard Mills only and are subject to change without notice.

AOTH/Richard Mills assumes no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission.

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You agree that by reading AOTH/Richard Mills articles, you are acting at your OWN RISK. In no event should AOTH/Richard Mills liable for any direct or indirect trading losses caused by any information contained in AOTH/Richard Mills articles. Information in AOTH/Richard Mills articles is not an offer to sell or a solicitation of an offer to buy any security. AOTH/Richard Mills is not suggesting the transacting of any financial instruments.

Our publications are not a recommendation to buy or sell a security – no information posted on this site is to be considered investment advice or a recommendation to do anything involving finance or money aside from performing your own due diligence and consulting with your personal registered broker/financial advisor.

AOTH/Richard Mills recommends that before investing in any securities, you consult with a professional financial planner or advisor, and that you should conduct a complete and independent investigation before investing in any security after prudent consideration of all pertinent risks.  Ahead of the Herd is not a registered broker, dealer, analyst, or advisor. We hold no investment licenses and may not sell, offer to sell, or offer to buy any security. Richard does not own shares of Marvel Discovery Corp. (TSXV:MARV). MARV is a paid sponsor of his site aheadoftheherd.com

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