…OK, folks, let’s get some popcorn and watch “The Debt Ceiling Farce 2021” as it unfolds! Everyone knows how this farce will end. Since 1960, the farce played 78 times. Each time, after everyone got through extorting concessions from the other side, Congress either raised the debt ceiling, extended it, suspended it, or changed the definition of “debt.” That’s how it ends.
…During the debt-ceiling farce, the Treasury Department is allowed to use certain “extraordinary means” – more on those in a moment – to keep the government from defaulting. After the debt ceiling is lifted, new debt gets issued and those entities are made whole. In the end, everything gets caught up and nothing changes.
The suspense doesn’t lie in how it ends, because we know that, but how long they drag it out, and how close “we” get to the out-of-money day and, this time around, the out-of-money-day is in October or November, according to estimates by the Congressional Budget Office.
…It’s a farce because Congress told the Administration to spend this money but then doesn’t allow the Administration to raise the money via debt sales to spend this money as Congress had told it to. It’s just nuts, and foreigners scratch their heads every time, and so do we, but that’s how the system works.
The one thing the debt ceiling never ever does is reduce deficit spending. It just temporarily limits borrowing until default moves into view, and then the floodgates are opened again.
Were Congress to fail to extend the debt ceiling, the U.S. government would not be able to pay its bills and would default causing financial markets around the world to crash, in turn causing every member of Congress to lose half or more of their assets in no time – and that’s exactly why this will never happen.
As of August 1, 2021, the gross national debt outstanding on July 31 became the debt ceiling, $28.43 trillion, and that’s where the debt now sits. The U.S. government cannot add to it, but it can roll over its maturing debts.
On August 2, Yellen spelled out in her letter to Congress the first “extraordinary measures,” as they’re called, she will take to keep the U.S. from defaulting, as authorized by law – initially raiding the contributions made by members of three big federal retirement systems: The Civil Service Retirement and Disability Fund, The Postal Service Retiree Health Benefits Fund and the Government Securities Investment Fund (G Fund) of the Thrift Savings Fund that are part of the Federal Employees’ Retirement System, and when that has reached the limits, Yellen will inform Congress of other “extraordinary measures” she will take.
The government has $390 billion in its TGA, and it can take some “extraordinary measures” but it is burning a huge amount of money every day, and at some point, it needs to issue new debt, or it’s going to default….If the TGA account gets drawn down…close to zero before Congress votes to lift the debt ceiling, a 10,000-point drop by the Dow will motivate Congress to do anything, even lift the debt ceiling, after which every entity that the government has wrung out will be made whole.
Editor’s Note: The above version of theoriginal article by Wolf Richter, has been edited ([ ]) and abridged (…) for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor. Also note that this complete paragraph must be included in any re-posting to avoid copyright infringement.
The debt ceiling is of course a total farce. Why? Because it has been raised 95 times since 1940 and 14 times in this century. As a result, there is now a clear disconnect between the credit expansion and the lagging gold price which will soon be rectified as gold not only catches up with the debt expansion – but overtakes it.
The rise of the national debt and the gold price are intertwined and the gold price has fallen behind. A huge catch-up may be on the horizon given issues over the debt limit and [with] the Fed and the President potentially on a collision course.
Many novice observers may wonder why we have a debt ceiling at all when our government has never shown the slightest inclination to respect its prior self-imposed limits [and, as such, why all the] seeming urgency to Congressional negotiations to raise the debt ceiling. [Let me explain in no uncertain terms.] Words: 1073
Going over the debt ceiling would mean the US government legally can’t pay its bills and would default on the national debt. This would be catastrophic in ways that would make Lehman Bros look like a walk in the park.
Out of control spending by a government is always the cause of hyperinflation. The debt ceiling had been the last remaining roadblock to unlimited federal government spending. By suspending the debt ceiling, the U.S. government has given itself a blank cheque, taking one giant leap down the road leading to the hyperinflation of the US dollar. Words: 632
The “debt ceiling” has replaced the “fiscal cliff” as the new crisis of the month. The gargantuan debt of the U.S. which – as of this writing – stands at an astounding $16,450,981,484,618 is now slightly above our current national debt ceiling of $16.394 trillion and growing. Let’s take a closer look at what the debt ceiling is and why it is important. Words: 1020
Since 1962 Congress has voted to raise the debt ceiling 75 times without a single reduction so, practically speaking, a ceiling that is raised automatically is no ceiling at all so why not dispense with the pretense of a debt “ceiling”?
A Few Last Words:
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The quarterly silver production had an average grade of 242 g/t silver, compared to last quarter’s 297 g/t silver and last year’s 217 g/t silver.
“The better than anticipated operational performance and execution gives us the confidence to increase Zgounder’s production guidance by 29% to 1.55 million ounces for the year,” said Aya Gold & Silver CEO Benoit La Salle.
The mining company also noted a dip in the silver recovery rate, reaching 81% this quarter from 82% last quarter. The firm said this is primarily due to due to lower freshwater intake and excess evaporation in the tailings dam during the summer months. The plant availabilities for the flotation and cyanidation plants are at 87% and 89% this quarter, respectively.
Information for this briefing was found via Sedar and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
Last week, Endeavour Silver Corp. (TSX: EDR) announced their third quarter production highlights. For the third quarter, ending September 30th, 2021, the company produced 1,305,399 silver ounces and 10,541 gold ounces, up 39% and 3% year over year respectively. Third quarter 2021 throughput also increased by 8% to 222,461 tonnes.
The company also increased management production guidance for 2021 to 7.7 to 8.0 million ounces of silver equivalents due to higher than expected grades and tonnage milled, saying that “Silver equivalent production at each mine is on track to meet or exceed 2021 production plans.”
Endeavour Silver has 7 analysts covering the stock with an average 12-month price target of C$7.05, or a 33% upside. Out of the 7 analysts, 2 have buy ratings while the other 5 have hold ratings. The street high sits at C$8.78 from H.C Wainwright, while the lowest comes in at C$5.25.
BMO Capital Markets in their note reiterated their C$5.25 12-month price target and Market Perform rating on Endeavor Silver, saying that the third quarter showed solid production numbers out of the Bolanitos and Guanacevi mines.
For the quarter, BMO forecasted silver production would come in at 1 million ounces. Both gold and silver production was beaten by roughly 30%, thanks to higher than expected tonnage, and grades at Guanacevi.
BMO notes that the company selling 699 thousand ounces of silver, is “well below” their production which is forecasted to impact third quarter sales, but BMO believes this will help the company’s fourth quarter results.
Below you can see BMO’s updated estimates.
Information for this briefing was found via Sedar and Refinitiv. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
The mining industry has been headlined by several major deals involving lithium firms over the past week.
This should be of no surprise as the battery metal has been trending up since the beginning of the year. Following a second rally at the onset of the third quarter, lithium prices have shot up to their highest since 2018.
In China, the #1 electric vehicle market globally, lithium carbonate prices have shot up nearly five-fold over the past year and are trading near record highs.
Price of the key battery ingredient held around 165,000 yuan (~$25,000) per tonne in October, not far from the all-time high of 177,000 hit in late September, due to tight supply and stable battery demand.
Year-to-date, lithium prices are up a stunning 160%, based on the price index (including lithium carbonate and hydroxide) tracked by Benchmark Mineral Intelligence (BMI), the world’s leading battery supply chain researcher and price reporting agency.
The rally comes amid a global push for less polluting energy sources, which has automakers and battery manufacturers racing to secure supplies of so-called ‘future-facing commodities’ such as lithium.
China’s Lithium Buy Spree
China in particular has been actively and aggressively pursuing deals to secure battery materials as it looks to establish a dominant position in the global EV supply chain.
The nation’s top battery maker, Contemporary Amperex Technology Co. (CATL), recently outbid Ganfeng Lithium to acquire Canadian miner Millennial Lithium Corp., which holds lithium assets in Argentina.
As China’s largest lithium compounds producer and the world’s biggest lithium company by market value, Ganfeng has gone on an acquisition spree over the years, having invested in several lithium projects in Argentina (Caucharí-Olaroz, Mariana), Australia and China.
In August, Ganfeng proceeded with a takeover of Mexico-focused lithium developer Bacanora, and in the same month, inked a four-year supply deal with Australia’s Core Lithium for 300,000 tonnes of spodumene concentrate, a partly processed form of the battery material.
“We have and will continue to see the Chinese looking to buy lithium,” Matthew Hind, head of global mining at Bank of Nova Scotia’s investment banking division, said in a recent Reuters report, adding that “there will also be small-cap consolidation as well as EV companies buying stakes in mines with strategic partners in order to secure supply.”
It didn’t take long for Hind’s prediction to come true either.
In somewhat of a surprise move, China’s Zijin Mining Group Co., known for its status as a major gold and copper producer, announced last week its first foray into the lithium sector with a $770 million purchase of Neo Lithium Corp., outbidding many other Chinese bidders.
Neo Lithium’s main asset is a high-grade brine operation in Argentina, with CATL already being one of its backers.
“As Zijin is a gold-copper producer and Neo Lithium is still some years from commercial production, this deal exemplifies how hot the market is for independent lithium assets, and how eager the Chinese are,” Chris Berry, president of House Mountain Partners, a Washington-based industry consultancy, told Bloomberg.
In total, Bloomberg Intelligence analyst Christopher Perrella estimates five companies essentially control the $4 billion global lithium market, two of which are Chinese.
Battery Metals Race
The race to secure battery materials is taking place outside of China as well.
Rock Tech Lithium Inc., which is backed by venture capitalist Peter Thiel, plans to locate its first battery metals smelter within a 90-minute drive of Tesla’s gigafactory under construction outside Berlin, in a bet that Germany will take the lead in Europe’s electric vehicle transition.
South Korea’s LG Energy Solution, one of the biggest EV battery makers globally, recently agreed to buy as much as 100,000 tonnes of lithium a year as part of a six-year “take-or-pay” deal with Vancouver-based Sigma Lithium Corp., which controls a hard rock lithium deposit in Brazil.
In Australia, the world’s biggest lithium exporter, Prime Minister Scott Morrison plans to establish a A$2 billion ($1.5 billion) loan facility for the development of critical minerals projects, with the mining powerhouse aiming to win a bigger market share for materials used in electric cars.
In short, demand for lithium is accelerating around the world, with sales of electric vehicles growing at a faster pace than previously thought.
According to SQM, one of the top producers of the battery ingredient, EV demand surged more than 150% in the first half of 2021 from a year ago. As a result, the Santiago-based firm estimates that global lithium demand could increase more than 40% this year, translating into a sales volume of more than 95,000 tonnes, up by 10,000 tonnes from its previous forecast.
Data from battery consultancy Rho Motion shows global EV sales were up 150% in the seven months to July to over 3 million units compared to the same period in 2020, with about 1.3 million sold in China alone. For 2021, Rho Motion expects sales to reach as high as 5.8 million.
Longer-term, BloombergNEF estimates that the green energy transition will result in a five-fold increase in global lithium consumption by the end of this decade.
In light of a global race for battery minerals, a recent World Economic Forum report forecasts that the global market for lithium-ion batteries will reach $300 billion annually by 2030.
The EV boom has naturally depleted stocks of battery materials such as lithium, causing the supply to tighten in major markets.
In China, lithium carbonate output in August rose 19% year-on-year to almost 20,000 tonnes, according to state-backed research house Antaike, but this output would be easily outstripped by demand from the EV sector.
BMI estimates that demand for lithium is expected to jump 26.1%, or about 100,000 tonnes LCE, to a total of 450,000 tonnes this year, more than enough to flip the entire market into a deficit.
Prices are already climbing across the supply chain. Pilbara Minerals Ltd.’s second auction of spodumene concentrate attracted a top bid of $2,240/tonne for a cargo of 8,000 tonnes, up from $1,250 in its inaugural tender in July.
China’s lithium carbonate has almost doubled in just two months, and lithium hydroxide is up more than 70% in the period, according to Asian Metal Inc. data.
Exacerbating the lithium supply crunch are the high production costs arising from the global energy crisis.
Ganfeng has already told customers that it is raising prices for lithium metal products by 100,000 yuan ($15,500) per tonne for the next month, partly because of China’s power supply shortages.
However, even before the reduced industrial output, BMI analyst George Miller had previously forecast an LCE deficit of 25,000 tonnes this year, with acute deficits expected in 2022 and beyond.
Given China represents more than 60% of the world’s processing capacity, the actual supply deficit is likely to exceed estimates by the end of this year.
“Unless we see significant and imminent investment into large, commercially viable lithium deposits, these shortages will extend out to the end of the decade,” Miller added.
A lengthy slump since 2018’s peak meant investment in the sector slowed, and the pandemic has since exacerbated global supply constraints.
“The financing for lithium projects is still too little, too late,” Cameron Perks, a Melbourne-based analyst at BMI, said in a Bloomberg report. “The market deficit is already occurring.”
“As prices increase now, there will be unknown yet-to-be-announced projects and expansions that will help to increase supply to meet demand. That is almost a certainty. What is not certain is just how many unknown projects there are out there,” Perks added.
“There’s also a possibility that not enough lithium can be mined, then it could risk a slower EV roll-out.”
All signs are pointing towards a sustained market shortage for the battery metal in the coming years. China, seeking to maintain a dominant position in the EV industry, has perhaps triggered a flurry of deals and new investments in the lithium sector, which could soon be followed by many others.
Sooner or later, the big players in the EV battery space (i.e. China) will turn to projects outside South America’s Lithium Triangle, as political factors are most likely to influence mining decisions in these countries in the future.
One place we’ve previously discussed in detail is the Clayton Valley of Nevada, whose lithium deposits contain favorable characteristics such as arid climate, closed basin containing a playa or salar, tectonically driven subsidence, associated igneous or geothermal activity, and suitable lithium source rocks.
The Clayton Valley is also where Albemarle’s Silver Peak mine, the only lithium-producing site in North America, is found.
Leveraging Nevada’s favorable geology and rich mining history, several companies have begun exploring its claystones and brines over recent years, with the goal of developing the next lithium source for the EV battery supply chain.
Among those lithium explorers in Nevada, we are particularly intrigued by Victory Resources Corporation (CSE: VR) (FWB: VR61) (OTC: VRCFF), which is anticipating further advancement on its Smokey lithium project in the near term to benefit from the EV revolution.
Victory’s Smokey lithium project is located about 35 km west of Tonopah, Nevada, within the famous Big Smokey Valley that traverses three counties across the state.
Esmeralda County — where the project is situated — is one of the world’s most prolific regions for lithium clay deposits (Noram, Cypress, American Lithium, Spearmint, Enertopia, Jindalee). These deposits all have proven large tonnages with acceptable lithium grades in excess of 900 ppm.
The Smokey lithium property lies approximately 35 km north of Clayton Valley, adjacent to and possibly on trend with the Clayton North project (930 ppm Li) held by Australia’s Jindalee Resources Ltd.
Farther away, Noram’s Zeus lithium project (900 ppm Li) is about 25 km to the southeast, while 35 km to the northeast is American Lithium’s flagship Tonopah Lithium Claims property (1,000 ppm Li).
In this prolific lithium region hosting, Victory’s Smokey project covers a total of 350 claims covering 7,000 acres of land with excellent access and relatively flat ground.
The property shares similar geologic settings to the Clayton Valley and the many exploration projects nearby. It is located in the Walker Lane trans tensional corridor on the western margin of the Basin and Range province.
The property’s geology consists of Miocene – Pliocene tuff deposits, claystones and siliciclastic beds (Esmeralda Formation) with overlying younger alluvium deposits and desert pavement formation. The claystone, which can carry high lithium concentrations, is observed as highly weathered light grey to tan mounds of unconsolidated clay from 0.10-1.50m thick.
The flat-lying nature of the claystones, together with the frequent occurrence of transported cover, requires drilling to fully validate and assess the Smokey project’s lithium potential.
Based on strong results from this summer’s geological sampling, which indicated several areas of high lithium values (up to 1,500 ppm Li), Victory is now fast-racking a drill permit application for the Smokey lithium property.
Victory’s progress at its Smokey project comes just as when lithium is in the midst of another record-setting rally.
The BMI lithium index has already shot up by 160% year to date, with prices averaging $10,800 during the first half of 2021 versus over $17,000 in 2018.
Strong demand for lithium-ion batteries for EVs and other applications is expected to put a strain on the global supply of battery raw materials, which will likely invoke a string of new investments.
China’s biggest battery makers and miners are already gobbling up lithium assets left, center and right, with more deals still left to be done. Lithium has gotten so hot in China that even the gold miners now want to join in on the act.
With the global race to secure minerals in full throttle, there will be calls made to companies holding lithium projects within the most prolific regions of the world.
In the Clayton Valley of Nevada, best known for its affluence of lithium clay deposits, Victory Resources, with a strategic focus on serving the EV sector, is gearing up for drilling at its highly prospective Smokey lithium property, and just one discovery hole from that could be a game-changer for the company.
Seeing many others have previously found success in this area, we expect Victory to deliver more exciting news later this year.
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