The Mansfield Letter
Bi-Monthly Newsletter from MansfieldLetter.com
March 28, 2021
Gold reclassified as a Tier 1 asset: A step in the right direction.
On the 28th June 2021 Basel III will change the spectrum of how gold is valued. This event has been described by some precious metals analysts as the most significant in their careers. You see under Basel III rules, banks require a provable 1:1 ratio of physical gold. This changes everything.
If un-allocated paper gold will soon be incredibly risky and incredibly expensive then this could be the end of the naked shorting and manipulation we have seen over the years. The London Bullion Market (LBMA) for one have been pushing back and trying to delay this rule change stating it could be the end of some banks.
So this prompts a quantum of very, very serious questions: Has the Gold price been manipulated down while banks (who have had years to prepare for this upcoming date) load up on cheap physical Gold before the approaching Basel III deadline?
Is this in other words, the monetary reset that has been muted for years? More worryingly if these short positions are not gently unwound soon, could this lead to another Lehman Brothers scenario, albeit potentially on a bigger scale?
So from 28th June 2021, Europe will no longer classify unallocated Gold as a Tier 1 asset. It has to be a provable 1:1 ratio which should lead to a physical Gold market. This just has to be viewed as bullish for Gold, and all other precious metals.
Last chance to load up on these price levels? It could well be. Excited? You should be.
But, do we know for sure that the banks really have massive naked short positions in precious metals?
Well, actually no. We do not know that for sure. However, many heavy weights in the industry, like Eric Sprott, have been saying so for many years. There is even a whole organization dedicated to this cause called the Gold Anti-Trust Action Committee.
One of the arguments used is the data from the commitment of traders reports, which show ever growing commercial short positions in precious metals. Other arguments used are that the banks in recent years have been caught red handed by the regulators guilty of spoofing and other market manipulation techniques.
But still, does spoofing and front running prove that the banks are risking their very existence by being massively naked short precious metals? Well, again, the answer is no. It does not prove anything. In order to know for sure, we would have to take into consideration all other dealings the banks are involved in.
Eric Townsend from Macro Voices, for example, says that the banks are only hedging the physical metal that they hold in their vaults. Others, like billionaire Pierre Lassonde, say that the banks short positions in precious metals are covered by various balance sheet items, and the idea that the banks are naked short is ridiculous.
Personally I think that the truth is probably somewhere in the middle. The banks are probably somewhat naked short, and the rest is real hedging. I find it hard to believe that the banks would be disciplined enough to be fully hedged. I also find it hard to believe that they would not be hedged at all. In the end, even if we do not see a massive short squeeze in the precious metals, any decline will also be short lived. I think they will still trend up over time and will do a good enough job of protecting us from central bank insanity.
If the FED announces yield curve control, precious metals could sky rocket…
So, both Basel III, and the possible short squeeze, have been widely talked about for years. But what about something that not many have seen coming until recently?
In recent weeks treasury yields have suddenly and unexpectedly started moving up. Some analysts are saying that we may be witnessing the end of a 40 year bull market in bonds.
Historically when real bond yields become attractive, it causes capital to start flowing away from the precious metals market and into bonds. This is what has been happening as of late and precious metals have been moving down somewhat, while treasury yields have stabilized at an elevated level.
But what if inflation expectations keep increasing and bond yields start moving up again? Will the FED be forced to issue yield curve control in order to be able to continue money printing?
If that happens… well, better get your space suit ready, because we could be going to the moon!
Oroco Resources: worth looking into.
Copper prices have doubled in the last year which lit a fire under stocks like Oroco Resources. Even though this company is already a 10 bagger in the last year alone, I think it’s still worth looking into. If it seems too expensive at the moment, it’s still good to do the research now and be ready in case a pull back in copper prices presents a buying opportunity.
What makes this company interesting is it’s Santo Tomas project in Mexico. A few decades ago there was about a hundred holes drilled on that property. However the geologists at that time were looking for a totally different type of deposit, not copper. So, on each hole when they hit copper, they did not drill any deeper. Therefore the play here is that we know there is copper but we do not know how deep it goes.
The Santo Tomás Project hosts a porphyry copper deposit comprised of fracture and disseminated Cu and Mo sulphides with significant Au and Ag credits. The Project lies within the Laramide Belt, a NW-SE trending copper belt extending from southwestern USA into southern Mexico that includes numerous world-class copper deposits, including the Cananea district, which hosts one of the largest copper deposits in the world.
In 2019, the Company began rehabilitating access to the property and the construction of camp and support facilities on site. In September of 2020, the company commenced a full 3-D resistivity and induced polarization (IP) survey. This survey is targeted to cover an area of approximately 10 square kilometers of the property, encompassing the mineralized South Zone, North Zone and Brasiles Zone at Santo Tomas.
The survey is now approximately 80% complete, and Oroco has received preliminary inversion data for all stations surveyed to date. The preliminary inversion model has successfully mapped the resistivity and chargeability characteristics along a swath 2.1 km wide by 4.3 km along strike over the South Zone, North Zone and part of the Brasiles Zone. The survey has reached the southern fringe of the prominent Brasiles zone gossans. Geophysical crews have now re-mobilized to complete the planned program and to prepare additional survey lines to enlarge the north and south-east extents of the current survey area. The Company has high confidence in the survey results.
The company said the following in a January 27, 2021 news release: “The preliminary 3D IP inversion modeling has revealed an extensive area of strong chargeability response that encloses the known North Zone deposit and extends beyond the historical drilling to the north, the west and to depth,” said Craig Dalziel, Oroco’s CEO. “The response broadens below the North Zone and extends northward under the Brasiles limestone cap. It is particularly informative and instructive. The first 800 m of modelling of the Brasiles Zone indicates that the North and Brasiles Zones are a contiguous exploration target spanning an average of one kilometer in width and a minimum of two kilometers along strike at the 100 m level elevation. The model remains open to the north. In addition, the survey very importantly demonstrates a strong correlation between the chargeability features and the historical drill results in the South and North Zones as well as significant exploration potential lateral to both. In short, we are extremely pleased with the survey results.”
Vital Metals to become Canada’s first rare earths miner.
Australia’s Vital Metals (ASX: VML) is getting ready to kick off mining operations at its Nechalacho rare earths project in Canada’s Northwest Territories, which will make it the country’s first producer of the elements used in magnets for electric vehicles, aerospace, defense and electronics.
The Sydney-based company, which will also be the second rare earths miner in North America, said that the mining fleet had been mobilized to the site this week. It noted that mining contractor Det’on Cho Nahanni Construction will start operations at the North T zone within the next few days.
“We have been progressively achieving all the steps necessary to commence mining and rare earths production at Nechalacho over the past 12 months, and mobilization of the mining fleet is another important milestone,” Vital Metals’ managing director Geoff Atkins said in the statement.
The company plans to build the rare earths mine in two stages, focusing on the North T zone resource first. In a second stage, Vital will target the much larger Tardiff deposit.
The North T zone will be mined as a small open-pit operation, with the material then transported to the company’s on-site ore sorter. The product will then be sent for further processing at a rare earth extraction plant to be built in Saskatoon, Saskatchewan.
The contractor is expected to undertake mining and crushing in a single campaign between March and September this year, with mined ore to be stockpiled for use in ore sorting operations between 2021 and 2023.
A second mining campaign will be required in 2024 to replenish stockpiles, the company said.