To Bail Out Or Not?

The global finance landscape seems to have dropped into another chasm after yesterday. With the DOW down a historical 778 points and TSX 840+, it felt like the 1929 Black Tuesday, except on a Monday.

Dow's historic drop reflects financial system's challenges

After 778-point plunge, markets need private investment and bank restructuring for a recovery.

Even if the $700 billion bailout had succeeded, as massive as it would have been, it would have provided just one new leg for weakened credit markets to stand on. A recovery of the financial system will also depend on reviving the flow of private investment money, closing or consolidating weak banks, and a continuation of the extraordinary efforts by the Federal Reserve. Those may be the lessons of a rocky Monday in markets, as Congress wrestled with a Treasury-backed proposal to buy up bad debts that have clogged the banking system.

After the House of Representatives failed to approve the measure, already gloomy markets nose-dived:

The Dow Jones Industrial Average saw its largest point-drop ever ‐ 778 points ‐ and a nearly 7 percent decline, its 18th worst ever percentage decline, just under the market's drop after 9/11. The broader S&P 500 market lost 8.8 percent and the technology-heavy Nasdaq, 9.1 percent.

The "flight to safety" showed no significant easing, with Treasury bills retaining a highly unusual yield of nearly zero percent. It's the investment equivalent of putting cash under a mattress.

This certainly help explain gold's triumphant return to the $900/ounce level yesterday.

With anticipation for earnings from major players such as Pepsi and unemployment data to come still, this week looks to be an very interesting one as we watch the events unfold.

Gold's down $20/ounce so far to below $900 again in early trading. DOW has recovered nicely with TSX (almost up 500 so far), but shrewd investors will recognize that nothing has changed and the market continues in a largely downward slide - time to pick up some more gold shares if you haven't already.

Delegates polled today at the London Bullion Market Association’s (LBMA) annual meeting in Kyoto, predicted that 2009 will see a significant rise in gold prices as more investors continue to seek safe haven investments. Jeremy Charles, chairman of the LBMA, told delegates that gold’s role as a safe haven asset has returned with a vengeance amid Wall Streets woes.

”High bullion prices are here to stay,” he said. His bullish comments came as many delegates said that they forecast gold prices reaching between $700 to $1,200 an ounce in 2009. Mr Charles, who is also head of precious metals at HSBC in London, said that investors were returning to gold as confidence in the US dollar and many other asset classes was shaky. He said that the change was likely to be a structural change, rather than a short-term phenomenon that will fade away with calmer markets.

Charles said ”Gold will be looked at in a different way even when the credit crisis ends”

Jonathan Spall, the head of commodities sales at Barclays Capital, said that the gold markets were witnessing a “sea change” as bullion was attracting new players, such as hedge funds who had previously considered gold as a relic from the past. The bankers at the Kyoto meeting said that nervous investors were so concerned about the stability of the financial system that rather than simply just investing in gold as part of their job, they were placing their own physical money into gold, taking delivery of bullion and coins and effectively placing their investments outside of the financial system.

Current demand for gold coins, one of the more popular bullion investments during a financial crisis because of its portability and ability to be kept in vaults outside the financial sector, is now so intense that LBMA delegates reported that dealers around the world were running out of stock of popular coins such as South Africa’s Krugerrand.

If you’re looking for a way to move your investments into gold and a simple process that enables you to complete the transactions securely online, we personally recommend BullionVault — the Financial Times concur and have said: “buy gold online at BullionVault and you’ll cut the costs of gold ownership dramatically”.

WaMu's Out, JPMorgan JPM Huge deal at 1.9B$ for 2000+ branches, $700B Bailout Stalls, Gold, TNR, MAI, SST, MTS - CZX

First things first. Remember WaMu?

Of course you do, we just spoke of how desperate it was on yesterday's entry. Well, today, we will have to remember WM, as it has been acquired by JP Morgan in a firesale deal of a paltry $1.9 billion.
Let's take a look at what JP Morgan is getting in this last minute no-details until complete deal. Is it realisitic that this was done the same day, or has this been arranged through government assistance all along?

JPMorgan Chase Acquires the Deposits, Assets and Certain Liabilities of Washington Mutual's Banking Operations

Highly attractive, strategic transaction significantly strengthens consumer franchise.

Deal expected to be accretive to earnings immediately.Adds large, stable deposit base and recurring earnings stream to company.

Company intends to raise additional capital in conjunction with this transaction to maintain strong capital position.

• Acquisition creates largest U.S. depository institution, with over $900 billion of customer deposits
• Expansion into attractive California, Florida and Washington State markets creates nation’s second-largest branch network; also strengthens existing presence in New York, Texas, Illinois, Arizona, New Jersey, Colorado, Connecticut and Utah
• Larger branch footprint will allow company to further extend and grow commercial banking, business banking, credit card, consumer lending and wealth management efforts

NEW YORK -- (Business Wire)

JPMorgan Chase & Co. (NYSE: JPM) tonight announced it has acquired all deposits, assets and certain liabilities of Washington Mutual’s banking operations from the Federal Deposit Insurance Corporation (FDIC), effective immediately. Excluded from the transaction are the senior unsecured debt, subordinated debt, and preferred stock of Washington Mutual’s banks. JPMorgan Chase will not be acquiring any assets or liabilities of the banks’ parent holding company (WM) or the holding company’s non-bank subsidiaries. As part of this transaction, JPMorgan Chase will make a payment of approximately $1.9 billion to the FDIC.

The acquisition expands Chase’s consumer branch network into the attractive states of California, Florida and Washington State and creates the nation’s second-largest branch network – with locations reaching 42% of the U.S. population. The combined 5,400 branches in 23 states will also serve as an excellent base to extend the reach of the business banking, commercial banking, credit card, consumer lending and wealth management businesses. The acquisition also extends Chase’s retail branch network to additional states, including Georgia, Idaho, Nevada and Oregon.

As of 6/30/08
($ billions)		JPMorgan Chase		Washington Mutual		Combined
Select Business Metrics
Footprint (states)		17		15		23 states
Total Assets		$1776		$310		$2,036
Total Managed Loans		$617		$231		$848
Branches1		3,203		2,207		5,410
Total Deposits		$722.9		$181.9		$904.8
Checking Accounts		11.3mm		12.7mm		24.0mm
ATMs		9,310		4,962		14,272
Managed Credit Card Loans		$154.7		$26.4		$181.1
Credit Cards Issued		157.6mm		12.7mm		170.3mm
Employees		195,594		43,198		238,792
Network Comparisons
U.S. Households		25.0%		30.3%		42.3%
Average Income		$71,595		$74,747		$72,332
Businesses		26.5%		33.0%		45.6%
US Population in Footprint		75.0mm		94.1mm		129.9mm
5yr US Population Growth Rate (‘07-‘12)		3.3%		5.6%		4.9%
% of Population Growth in Footprint		18.0%		37.9%		46.2%

¹ Branch data is as of September 18, 2008

If that's not an incredible deal I don't know what is!! $1.9 billion is what most Canadian banks lose in a quarter, in another words it's pocket change! Outstanding deal making (and likely well connected) Jamie Dimon.

The ones left in the cold are the loyal shareholders, many of whom are employees with stock options, long time pensioners, and more from around Seattle area. Who is going to stick up for their losses?

On a lighter side... maybe the newly appointed CEO Alan H. Fishman who was on the job for a demoralizing oh...17 days will pitch in a bit of his lunch money for some well-deserved relief?

The virtual collapse of Washington Mutual was a tragedy for many thousands of customers and clients. Everyone, however, is breathing a sigh of relief: he recently hired CEO Alan H. Fishman has landed on his feet. He only worked at WaMu for 17 days and will receive roughly $20 million. Thinking on the bright side, just think how much he would have cost to fire if he ran a successful company.

Lest anyone would object to this compensation package, it is only a little over a million dollars a day to ride a company into the dust of financial ruin.

This includes a $7.5 million bonus but a $11.6 severance package for his many days of loyal service. My question is whether, after only two weeks in the job, Fishman actually knows where the payment office is in the headquarters.

Thanks to presidential McCain's political plot to get credit for alterring the highly unpopular $700 Billion plan, today's market plunged once again on failed anticipation of the bailout before the grim weekend. Not surprisingly, many blame McCain for the stall and the subsequent drop on the market today.

In US political circles, there have been accusations that Republican presidential candidate John McCain has ruined the original bailout deal.

Earlier on Thursday, US legislators appeared close to finalizing an agreement on the bailout, but a White House meeting between the presidential candidates, Congressional leaders and US President George Bush was left unresolved.

After the session, a group of conservative Republican legislators proposed an alternative mortgage insurance plan, as an alternative to the Bush administration's Wall Street bailout.

Democrats have alleged that Republican presidential candidate, John McCain, spoiled the anticipated White House plan by throwing his support behind the new scheme.

While McCain’s campaign staff have denied Senator McCain’s involvement, Democratic candidate, Barrack Obama, has referred to the episode as an example of presidential politics in a delicate negotiation “creating more problems rather than less."

Gold is up along with other commodities today, no surprise there!

Los Azules property has another record announcement of costing and feasibility report by December 2008, along with a specatacular recovery rate on the existing resource of 11 billion lbs of Copper.

Minera recovers up to 93% Cu in Los Azules testing

2008-09-25 13:38 ET - News Release

Mr. Art Johnson reports

MINERA ANDES ANNOUNCES EXCELLENT METALLURGICAL TESTING RESULTS FOR LOS AZULES

Minera Andes Inc. has received excellent results from the metallurgical testing program completed as part of the Los Azules project National Instrument 43-101 preliminary assessment (scoping study) planned for completion by year-end. The test results show that the Los Azules ore material is amenable to conventional flotation recovery methods and that the overall metal recoveries and the copper concentrate grades are high.

The table shows the metal recoveries and the amount of metal recovered into concentrate in the locked-cycle flotation tests for all three composite samples.

                                               Metal in
                                              copper
Sample      Ore type            Head grade   concentrate    Metal recovery

Composite                    Cu     Au    Ag  Cu    Au    Ag  Cu  Au  Ag
                           (%)  (g/t) (g/t) (%) (g/t) (g/t) (%) (%) (%)
1         Strong enriched
        sulphide          0.85  0.094  2.7   34  2.7   101  92  56  70

2         Weak enriched
        sulphide          0.55  0.087  1.7   30  3.9    80  93  66  62

3         High-grade
        primary sulphide  1.55  0.125  4.0   33  2.4    84  93  74  84

Allen Ambrose, president of Minera Andes, said: "The positive metallurgical testing program shows that standard reagents and flotation methods can be used at Los Azules to produce a high-quality saleable concentrate. Copper recoveries over 92 per cent and copper concentrate grades over 30 per cent copper indicate that flotation concentration would be the preferred process for all ore types, which are of medium hardness for grinding. Gold and silver grades are also sufficient to contribute payable precious metals to the concentrate."

The metallurgical tests were conducted on three composite samples collected from recent drilling campaigns at Los Azules, including core from the latest 2007-2008 season. The three composites were identified as strong enriched sulphide ore, weak enriched sulphide ore and high-grade primary sulphide ore. The strong enriched sulphide composite showed potential for recovery of 75 per cent of the copper by acid leach. Concentrate arsenic content was 0.22 per cent or below for all ore types. Concentrate from the strong enriched sulphide composite contained 2.4 per cent zinc compared with less than 1 per cent for the other ore types. Other metals in the concentrates were below penalty limits.

The metallurgical testwork was carried out by laboratory C.H. Plenge & Cia in Lima, Peru, under the direction of Samuel Engineering. The program was designed to determine the crushing, grinding and flotation characteristics of the primary and secondary (enriched) sulphide ore types found at Los Azules that are representative of the current National Instrument 43-101-compliant resource estimate. The test data will be used by Samuel Engineering to develop a process flow sheet, to identify further testing requirements, and to develop capital and operating costs for the scoping study that is scheduled to be completed in December of this year.

Mr. Ambrose, president of Minera Andes, an appropriately qualified person as defined by NI 43-101, for the Los Azules project, has reviewed and approved the content of this press release.

Minera Andes is advancing the Los Azules project under an option agreement (see news in Stockwatch dated Nov. 14, 2007), with Xstrata Copper, one of the commodity business units within Xstrata PLC (London Stock Exchange: XTA.L and Zurich Stock Exchange: XTRZn.S). The scope and size potential of the project increased dramatically in 2006 when the Minera Andes drilling discovered a near-surface high-grade area of copper mineralization, when AZ-06-19 encountered 221 metres of mineralization averaging 1.62 per cent copper that was 200 metres from hole AZ-06-20 containing 173 metres of 1 per cent copper.

This news is submitted by Mr. Ambrose, president and director of Minera Andes.

Consider some shares of TNR around $0.20 and at $1.10_ for Minera Andes. Longterm valuation still looks very bullish for the commodities, if not even more than before.

Before we sign off for the weekend just a reminder, Mantle Energy has changed their ticker to CZX Canadian Zinc Metals as of yesterday.

$700 Billion Approved - Gold Slips, MAI High Recovery Copper %, Confused Market, WaMu desperate for Capital (WM), Coal JUMPS Gold Source (GXS)

Huge News of the day certainly goes out to the unprecedented bailout - essentially approved by Congress.

$700 billion. Wow.

Lawmakers reach deal on rescue-plan principles

The deal includes limits on executive compensation and oversight of the $700 billion plan to bail out strapped markets and kick-start the flow of credit.

The $700 billion to buy up troubled assets from financial firms would be paid out in installments, The Wall Street Journal reported, citing people familiar with the matter. The Journal reported that $250 billion in bailout funds would be available immediately.

Several lawmakers predicted that the unprecedented plan would be approved by Congress, but they remained tight-lipped on specifics, which would have to go back to congressional leadership and the White House for ultimate approval. Congressional leaders are meeting with President Bush at 4 p.m. Eastern to discuss the plan. The meeting will also include presidential hopefuls John McCain and Barack Obama.

Sen. Chris Dodd, D-Conn., chairman of the Senate Banking Committee, said "a fundamental agreement on a set of principles" had been reached.

"I now expect we will indeed have a plan that will pass the House, pass the Senate, be signed by the president and bring a sense of certainty to this crisis that is still roiling in the markets," said Sen. Robert Bennett, Republican of Utah, following an hours-long meeting on Capitol Hill with Dodd and others.

While specifics and details have not been worked out, the initial approval is enough to send a shockwave to the Dow / S&P which remained in the black/green for the first time in number of days.

The implication here is enormous - and the usual gold rebound on additional national debt is not seen today. In fact gold and most juniors are down even more, possibly from more institutional selling on further financial companies drop...banks like Washington Mutual (WM) seems to have reached its last legs, with potential buyers passing up the WaMu logo one after another...

How bad is it getting? Try Cash Deposit rates of 5% (locked GIC) as advertised on WAMU websites today and 4% Saving Account interest rates, both of which are nearly double any other FI in North America today...

Just an evidence of the madness that drives the market, rumors has it permits are starting to pick up again for the Sask Coal area plays... which National Post reported took a huge hit (led by the one that started it all, Gold Source GXS) few months back:

Goldsource Mines Inc. and the rest of the Sasktachewan coal play gang are in freefall Monday after Goldsource said that results of its first drill hole following its discovery of coal earlier this year, uncovered less coal than hoped for.

Goldsource shares are down a whopping 50% to $6.45 in morning trading. The price is a far cry from the stock's $19.60 record high on June 25, but on the bright side, it still represents a huge premium on the company's 30¢ share value before the initial discovery was made in April.

So far today it is up 45% on no new. The rumors are working quite well it seems and the adage goes... "buy on the rumors, sell on the news!"

Onto Copper as we wrapped up the other day on expected copper shortages, Minera Andes came out with an excellent news release keeping shareholders updated on the developments at Los Azueles.

Minera recovers up to 93% Cu in Los Azules testing

2008-09-25 13:38 ET - News Release

Mr. Art Johnson reports

MINERA ANDES ANNOUNCES EXCELLENT METALLURGICAL TESTING RESULTS FOR LOS AZULES

Minera Andes Inc. has received excellent results from the metallurgical testing program completed as part of the Los Azules project National Instrument 43-101 preliminary assessment (scoping study) planned for completion by year-end. The test results show that the Los Azules ore material is amenable to conventional flotation recovery methods and that the overall metal recoveries and the copper concentrate grades are high.

The table shows the metal recoveries and the amount of metal recovered into concentrate in the locked-cycle flotation tests for all three composite samples.

                                               Metal in
                                               copper
Sample      Ore type            Head grade   concentrate    Metal recovery

Composite                    Cu     Au    Ag  Cu    Au    Ag  Cu  Au  Ag
                            (%)  (g/t) (g/t) (%) (g/t) (g/t) (%) (%) (%)
1         Strong enriched
         sulphide          0.85  0.094  2.7   34  2.7   101  92  56  70

2         Weak enriched
         sulphide          0.55  0.087  1.7   30  3.9    80  93  66  62

3         High-grade
         primary sulphide  1.55  0.125  4.0   33  2.4    84  93  74  84

Allen Ambrose, president of Minera Andes, said: "The positive metallurgical testing program shows that standard reagents and flotation methods can be used at Los Azules to produce a high-quality saleable concentrate. Copper recoveries over 92 per cent and copper concentrate grades over 30 per cent copper indicate that flotation concentration would be the preferred process for all ore types, which are of medium hardness for grinding. Gold and silver grades are also sufficient to contribute payable precious metals to the concentrate."

The metallurgical tests were conducted on three composite samples collected from recent drilling campaigns at Los Azules, including core from the latest 2007-2008 season. The three composites were identified as strong enriched sulphide ore, weak enriched sulphide ore and high-grade primary sulphide ore. The strong enriched sulphide composite showed potential for recovery of 75 per cent of the copper by acid leach. Concentrate arsenic content was 0.22 per cent or below for all ore types. Concentrate from the strong enriched sulphide composite contained 2.4 per cent zinc compared with less than 1 per cent for the other ore types. Other metals in the concentrates were below penalty limits.

The metallurgical testwork was carried out by laboratory C.H. Plenge & Cia in Lima, Peru, under the direction of Samuel Engineering. The program was designed to determine the crushing, grinding and flotation characteristics of the primary and secondary (enriched) sulphide ore types found at Los Azules that are representative of the current National Instrument 43-101-compliant resource estimate. The test data will be used by Samuel Engineering to develop a process flow sheet, to identify further testing requirements, and to develop capital and operating costs for the scoping study that is scheduled to be completed in December of this year.

Mr. Ambrose, president of Minera Andes, an appropriately qualified person as defined by NI 43-101, for the Los Azules project, has reviewed and approved the content of this press release.

Minera Andes is advancing the Los Azules project under an option agreement (see news in Stockwatch dated Nov. 14, 2007), with Xstrata Copper, one of the commodity business units within Xstrata PLC (London Stock Exchange: XTA.L and Zurich Stock Exchange: XTRZn.S). The scope and size potential of the project increased dramatically in 2006 when the Minera Andes drilling discovered a near-surface high-grade area of copper mineralization, when AZ-06-19 encountered 221 metres of mineralization averaging 1.62 per cent copper that was 200 metres from hole AZ-06-20 containing 173 metres of 1 per cent copper.

Of course, MAI is flat so far today, TNR is climbing back nicely to $0.22, as I advised earlier look into TNR at the low $0.20's. Great stable company with portfolio of properties with huge potentials.

TNR Announces Spectacular Results, MAI and other Jr.s down further, Continual Slide and Loss of Faith in the Equity Markets...

Even Warren Buffet is worried about the economy in US, are you? As a vote of confidence he's putting some money in Goldman, hoping the general public will follow...what do you think?

Warren Buffett to the rescue: His Berkshire Hathaway Inc. agreed today to invest $5 billion in Goldman Sachs Group via a purchase of preferred stock.

Berkshire also will get warrants to buy up to $5 billion of Goldman common shares.

The deal, announced after markets closed, amounts to a huge vote of confidence by Buffett in the investment banking titan, at a time when investors remain spooked about the future of Wall Street.

"Goldman Sachs is an exceptional institution," Buffett said in a statement. "It has an unrivaled global franchise, a proven and deep management team and the intellectual and financial capital to continue its track record of outperformance."

Goldman CEO Lloyd Blankfein said the firm considered Buffett’s capital infusion "a strong validation of our client franchise and future prospects." Goldman also said it would raise another $2.5 billion by selling more common stock to the public.

Buffett will earn a hefty 10% dividend yield on his preferred shares. The warrants, which are immediately exercisable, have a strike price of $115 a share.

The deal has given Goldman’s shares a pop in after-hours trading, to $135.87. The stock had gained $4.27 to $125.05 in regular trading, after falling as low as $113.

After the harrowing turmoil in the financial system last week, the Federal Reserve late Sunday announced that it had granted bank holding company status to Goldman and Morgan Stanley -- a move that essentially ended the era of the giant standalone investment bank.

Anyone reading what I'm reading? Dividend yield of 10%. Last I checked the free market shares didn't feature this... having the name Buffett might help even if its' a drop in the bucket in the grand scheme of things.

My point is, unless you're Buffet and you get a 10% dividend on GS, it might not be the brighest idea jumping in now.

One of our favorite stocks here, TNR Gold Corp, announced spectacular results on first pass at El Tapau. Next day showed a nice gain but pared back so far today to low $0.20 range, great time to get in before it's noticed by majors (of which many already know of the junior mine/explorer, BHP Billiton, Barrick, etc)

TNR Gold drills 82.25 m of 0.49% Cu at El Tapau

2008-09-22 17:57 ET - News Release

Mr. Gary Schellenberg reports

TNR GOLD DRILLS 82.25 METRES OF 0.49% COPPER AT EL TAPAU

TNR Gold Corp. has released preliminary copper results from the first hole of a seven-hole diamond drilling program at the El Tapau project in Argentina. Interpretation and analysis of precious metals and other elements are pending.

Drill hole ET-08-01 was angled at 060/60 degrees and drilled to a depth of 440.40 metres. Drill hole ET-08-01 was collared proximal to a tourmaline breccia hosted within granodiorite intrusion. It intersected variably mineralized (pyrite chalcopyrite) both breccia and tourmalinized granodiorite host. The best mineralized intercept has returned the results in the table.

Hole depth   From      To   Length  Copper
(metre)    (metre) (metre)  (metre)     (%)

440.4       97.25  179.50    82.25   0.49
Including   98.40  171.20    72.80    0.54
And        111.30  144.95    33.65    0.87

The entire core for hole ET-08-01 was sampled and cut in half with a diamond saw which was then processed, analyzed and reported from an ISO-9001 fully accredited analytical facility, Alexis Stewart Assayers, in Mendoza, Argentina.

TNR is encouraged with the initial results obtained from this hole with the best copper grades coming from what appears to be a zone of enrichment.

Gary Schellenberg, chief executive officer and president of TNR, said: "The presence of native copper and chalcocite mineralization in our first hole is very encouraging. Given these new results, we will reinterpret our geophysics and complete detailed mapping over the area to pinpoint the location of additional drill holes."

Ike Osmani, PGeo, chief geologist of TNR, is the designated qualified person for the El Tapau project, and has prepared and approved the technical information contained in this news release.

El Tapau

The El Tapau copper-gold property, occurring within the eastern Andes of the San Juan province, is strategically located approximately 50 kilometres north-northwest of TNR's El Salto property. El Tapau has had historical gold and copper production from numerous underground workings. However, complete records do not exist regarding quantities and grades.

In 2007, a 3-D induced polarization survey and limited mapping and lithogeochemical sampling were conducted in selected areas of the property. A second phase of the geological survey, consisting of mapping and sampling programs, was initiated in early 2008. Systemic bedrock sampling by Petra Gold in 2006 outlined a 2,500-metre-by-1,000-metre area with values ranging from trace to 19 grams per tonne gold, averaging 2.2 g/t gold from 157 rock sample sites.

The current drill program is testing several main targets including the gold vein area in the west-central portion of the property and the porphyry copper-gold targets in the northeastern corner, of which assays results are pending.

As with all good news in this difficult and confusing market with funds liquidating, TNR (TNR.v) is a down a bit today, but if anything has shown us for this resilient junior miner, it should bounce back nicely, and you should probably get in at a basement price of around $0.20-0.22.

Well known technical analyst Clif Droke who is regularly on Kitco Gold and Financial Sense network of sites, likes TNR Gold and publishes a regular update for his premium paid suscribers. He's a well read publisher himself with several books on Technical Analysis under his belt. See his August 2008 and more recommendation on TNR here. Other notable mention is Minera Andes (MAI.to) , which was recently recommended by Doug Casey as a great pick at bottom fishing (not KaiserBottomFish!) at the low $1.00 range... I hate beating on a dead horse but for a company that makes $9million a quarter whose last News Release said they just added 11 billion lbs of Copper to their reserves... it deserves another look.

Focusing more on Copper today, there's word that Copper production is lowering next year, all the while demand is going up, up, up. Trading at around $3/lb still, it won't take much for copper to make another run soon, I'd pick up MAI and TNR for their copper prospects - with 30% McEwan ownership in MAI, I'd wager production is the keywrd of the day for the Argentinean miner. Scoping/Costing for Los Azules soon, by end of 2008.

‘Everything that could go wrong is going wrong’ for new global copper mine production
London-based Bloomsburg Minerals Economics foresees a reduction in copper mine production as new copper projects are failing to meet production forecasts.

Author: Dorothy Kosich
Posted: Wednesday , 24 Sep 2008

LAS VEGAS -


Bloomsbury Metals Economics Christopher Welch warned Tuesday that "everything that could go wrong is going wrong" in copper mine production, as new copper projects are not meeting production expectations.

In a presentation to MINExpo in Las Vegas, Welch forecast a reduction in copper mine production, as well as a deficit of refined global copper this year.

Welch noted that supply chain stocks are still at multi-year lows, which copper mine development and operation has become more difficult due to high input costs and low equipment availability.

"We're pretty much in a trough of physical [copper] stocks," he advised.

Among the current copper production constraints are the following:

· 10% of total mine copper production is linked to power problems currently experienced in Chile

· Severe lack of trained personnel

· Dramatic development cost increases

· Environmental costs including regeneration bonds, baseline study costs, and water use constraints

· Equipment production bottleneck

· Production cost increases including a high oil price, high sulphuric acid price, and high staff costs

Welch suggested that "rising production costs are underpinning the long-term metals price."

In his presentation, Welch highlighted that base metals mining has been getting a "wall of money from pension funds," beginning in 2005. As a result Welch asserted that a new economic model for base metals should require consideration of commodity index funds' demand for metal futures in addition to currency market fluctuations, price per tonne, as well as stock cycles.

When asked if major copper deposits remain awaiting discovering, Welch responded, "The low-hanging fruit for copper mining has all gone."

$700 Billion added to debt = Oil back at $130, Welcome back to $900 Gold

It would be nice if things were simpler like that again, wouldn't it?

1. Given a finite supply of bread, price of bread stays flat according to stable demand.

• : loaf of bread = 1 kg of ham
• : loaf of bread = 1 jug of milk

2. Now all of a sudden an effective fertilizer is used and 30% additional amount of grain was produced the next year - resulting in an oversupply of bread.
3. What would happen?
4. Here's what usually happens...

Oversupply meant people preferred having hams and milk to bread. Because of all the extra bread leftover, stores are discounting the price to sell more so they can clear the inventory.

Sound familiar? (don't worry Mining101 isn't going to become a farming analogy blog anytime soon...)

Let's take a look at today's headlines.

WASHINGTON -- Unveiling its plan to rescue the nation's financial system from near-paralysis, the Bush administration is asking Congress for the authority to spend $700 billion and for powers to intervene in the economy so sweeping that they have virtually no precedent in U.S. history.

The proposal, set out in a spare 2 1/2 -page document sent to congressional leaders Saturday, would in effect allow the Treasury secretary to set up a government investment bank to buy up the billions of dollars of the mortgage-backed securities now clogging the arteries of the global financial system.

The dollar figure alone is remarkable, amounting to 5% of the nation's gross domestic product. But the most distinctive -- and potentially most controversial -- element of the plan is the extent to which it would allow Treasury to act unilaterally: Its decisions could not be reviewed by any court or administrative body and, once the emergency legislation was approved, the administration could raise the $700 billion through government borrowing and would not be subject to Congress' traditional power of the purse.

"Nothing quite of this scale has happened since the early years of the country when Alexander Hamilton wrote the Treasury act to give him the power to borrow and intervene in markets," said New York University financial historian Richard Sylla. And in Hamilton's case, Congress quickly clipped his wings, and no successor -- not even under President Franklin D. Roosevelt at the height of the Depression -- exercised quite such unfettered power again.

Simiply substitute US $Dollars for bread and voila... instant dollar deflating news. Which also means *drum rolls* commodities are up accordingly. Don't you wish everyday can be this simple?

Oil spikes $25 a barrel on anxiety over US bailout
Monday September 22, 2:24 pm ET Oil prices shoot up over $25 a barrel as anxiety over US bailout weighs on dollar NEW YORK (AP) -- Oil prices are spiking more than $25 a barrel as rising anxiety over the U.S. government's proposed bailout of the financial system batters the dollar and sends investors scrambling for safe-haven assets.

Investors worried Monday that the mammoth $700 billion rescue proposal will dramatically ramp up U.S. borrowing, an inflationary move that sent the dollar sharply lower versus its rivals.

Light, sweet crude for October delivery was up $25.45 to $130.00 on the New York Mercantile Exchange.

That's not all, our favorite commodities which guard against inflation, gold is up nicely. We would like to welcome the royal commodity back to the lofty $900/ounce levels.

Since our last few posts, our favorite Mining Juniors have all be reacting positively despite the overall grim economic pictures.

Minera Ande's (MAI.to) is now trading at $1.10-20 range - averaging 10%-20% for those who bought into it. Now that 43-101 is out for Los Azules would be interesting to see scoping study and prefeasibility (engineering) study to estimate cost of getting that 11 billion lbs copper from the ground! Another reminder this is a company that makes money - $9 MILLION last quarter, and now they just added a copper reserve. Jump on it if you can. Now for the related company on that Copper reserve and many more...

TNR Gold Corp (TNR.v) one of the best deal for 17 huge properties at $0.24 with large volume likely from institutional holders liquidating on any market strengths. Longterm fundamentals look positive with ongoing developments.

San Gold Corporation (SGR.v) a great deal at $1.34- small production in Quebec Canada. Very little press but loyal retail following, solid company with little shares outstanding and aggressive developments. J. Taylor pick several times in 2007-2008, he has since them dropped the company as he recommended it at $1.75+. Much better deal, same company but more difficult credit market. For a near term producer this is a good deal, not as good as MAI/TNR for potential gains though!

As Doug Casey has been around for awhile, I think it's worthwhile to visit some of his thoughts of all this debacle.

I spent six years as a business turnaround consultant. I've seen the good that comes from letting private companies deal with their own problems - either face up to mistakes or suffer as they get worse. After bankruptcy, if that's what happens, comes a fresh start. But government rescue efforts sabotage that painful but healthy process. The longer the government delays the unwinding of the current financial bubble, the greater will be the cost and uncertainty for our country, its economy and its taxpayers.

Keep in mind that the government isn't run by wizards, geniuses or even people with ordinary, practical experience. It was our government that sponsored the disastrous housing bubble by forcing interest rates to artificially low levels (negative real rates), by deregulating financial institutions while continuing to guarantee their liabilities and, finally, by encouraging the FHLB, Fannie Mae & Freddy Mac to loosen credit standards and make it easy for a homebuyer to get in over his head.

Without knowing what it was doing, the federal government offered irresistible incentives for crafty financiers to use dare-devil leverage to pile up huge profits for as long as the government could keep the system going.

The game and bubble show is ending fast for the US. The intelligent and prudent investors are piling onto Gold, commodities, quality junior miners, big major producers, whatever tangible they can hold onto.

As evident by the sub 1% Treasury Note rates - there is no faith in the US anymore.

Take a look at the 30-days treasury note rates. If that's not an indication that people would rather lose money on inflation but at least have the US Government's guarantee that their money will at least keep its face value, I don't know what is.

The trouble is not just at home here in US and North America, either.

Even the touted cash-rich nation of double digit record GDP, China, has seen its Shanghai Index drop nearly 40%+ since last year. So has Russia's markets.

The risk now is that sagging stockmarkets (inevitable after the failure to bailout Lehman) and a weakening dollar (equally inevitable) will affect the capital adequacy ratios of even the healthy commercial banks in the US. This will force them to reduce lending, worsening the credit squeeze, and condemning the US economy to further pain.

Effects on emerging markets will also be severe. Russia's stockmarket has lost 50% of its value since its May peak, at least partly due to foreign investors having moved their capital to safer havens. About $1 billion has left Russian private equities since July, according to the FT. Sharp reductions in the price of gold and oil over the past few days also suggests a serious flagging in global demand which blow-ups in the financial system will aggravate.

What would you rather have, a tangible asset in bullions and combination of high potential juniors, or a increasingly worthless dollar bill? This is the question you should be asking yourself today.

The Dead Cat Bounce, MS, Short Selling Halted, Worldwide Market Fluctuations, and

A great man once told me the analogy of "Dead Cat Bounce", or what some technical traders would consider a technical head fake.

When you drop a dead cat from 20th floor, it will undoubtly hit the floor with great splat and bounce from the pavement. Unfortunately even after such a bounce the cat, well, remains dead.

We've clearly seen the next-day optimism overrun the market quite a few times in the last year or so. Let's recount some of them.

September 2007 - Rate Cut announcement from Feds (series of annoucements)

If you plotted out all the dates of the announced Overnight Lending Rate cuts, you would've seen a nice recovery on the market on the day following.

Unfortunately in each of the cases the temporarily rise faded quickly with other less than stellar earning news and expected losses. It was good while it lasted, throughout 2007 rates had been cut from 4% all the way down to where we are now, 2% overnight.

It's been said this week 30-day Treasury Notes hit 0% Interest.

0%.

Let's take a second and figure out the implications there. It does not take a rocket scientist to figure out something is wrong with the system.

What this means is at one point this week, people were so desperate for some sense of security thaty they would rather lose money to inflation than to keep cash around. Hey, at least the government will back us up with these fancy certificates, right??

I think that might be a bit too short sighted, like most of the markets today.

The Feds announced further drastic action in light of another Investment Bank Morgan Stanley and WashingtonMutual in talks of illiquidity(where have we heard that before?).

Morgan Stanley may sell stake to Chinese sovereign fund

MORGAN Stanley, the second-biggest independent US securities company, may sell a larger stake to China Investment Corporation and is in talks about a possible merger with Wachovia, a source familiar with the matter says.

China's state-controlled fund may buy as much as 49% of the New York-based investment bank, said the source, who declined to be identified because the talks aren't public and may end in no agreement.

Morgan Stanley resumed its decline on the New York Stock Exchange, falling as much as 22%.

To quell the anxious investors, the US Government has a few initiatives, do you think they would work?

1) US Treasury to guarantee money market mutual funds up to $50 billion

The Treasury Department says it will tap into a Depression-era fund to provide guarantees for U.S. money market mutual funds. Seeking to deal with a severe financial crisis, the department said Friday that for the next year the U.S. Treasury will insure the holdings of eligible money market mutual funds. The money to insure the mutual funds will come from the Treasury Department's Exchange Stabilization Fund which was created in 1934 to provide support for the dollar. Treasury took the action to stabilize the giant money market mutual fund industry after fears were raised about their investments earlier this week when Primary Fund announced that the value of its fund's assets had dropped to 97 cents for each $1 put in by investors, exposing them to losses. This instance of "breaking the buck" marked only the second time since money market mutual funds were begun in the United States in 1970 that a fund couldn't assure clients of the full value of their investments. President George W. Bush has authorized Treasury Secretary Henry Paulson to use up to $50 billion from the Exchange Stabilization Fund to provide the guarantees, Treasury said in a statement

Oh great, that's more money out of the taxpayer's pockets. It's not unexpected the $USD is dropping versus everything else... more capital injection means more M3/Money Supply = dilution of the dollar's value!!

2) Part 2 of this massive Friday Initiative included the Short Selling Ban.

To help limit the freefall in financial stocks, the Securities and Exchange Commission on Friday enacted a temporary ban on the short-selling of nearly 800 financial stocks. Short-selling is the common practice of betting against a stock by borrowing shares and then selling them in the open market. A short-seller's hope is the stock will fall; if it does, the stock can be bought back at the lower price. Those cheaper shares can be returned to the lender, allowing the investor to pocket the profits. Traders can lose, however, if the stock rises.

Wall Street observers have disagreed over the extent to which pressure from all those bets that a stock will fall shaped investor sentiment and strangled some financial stocks, like those of Lehman Brothers last week. Some say the fundamental problems with the financial stocks warranted the pessimism while others say the short selling was a death knell for some financial names.

What this means is that speculators can no longer hedge their bets against businesses (read: banks) that have commited an error in calculation and got too aggressive. In most cases, simply not enough due dilligence were done before commiting to billion-dollar-deals.

Last I checked, capitalism meant a free market.

A voluntary ban of selection of stocks just because they were indeed businesses that lost money due to their own stupidity and greed while using taxpayer's money to do so, is plain wrong. Unfortunately the scale of the situation is so large it remains to be seen if the Feds will at one point let more companies like Lehman go under just to experiment the after effects. On the news of this, most financial stocks in US jumped 20%-30% today and Dow Jones closed at a convincingly positive 11,388.44 up almost 3.4%.

What we are looking is the end of a 30-year run of fantastic capitalism on the biggest world stage - the era of regulation.

What lies ahead of us remains to be seen - but one thing is certain, commodities like Gold, Copper and Gold Juniors are here to stay.

Gold at $1000 soon? Morgan Stanley Troubles MS, CitiBank C, Washington Mutual WM

Another day, another injection of capital. Seems like the public is waking up to the solid gold hedge against massive inflation in the years to come...

Gold's up a convincing $85 yesterday and continues at $29/ounce so far. 

Back at $890, those who sold to the low flocking away from what is the true value while this unbelievable financial crisis unfolds further must be kicking themselves. 

Words from the wise, trust the fundamentals of the stock market and not the daily fluctuations. Mr. Warren Buffet and his famous mentor Benjamin Graham (the Value Investor from Columbia University):

"To understand the irrationality of stock prices, imagine that you and Mr Market are partners in a private business. Each day without fail, Mr Market quotes a price at which he is willing to either buy your interest or sell you his. The business that you both own is fortunate to have stable economic characteristics, but Mr Market's quotes are anything but. For you see, Mr Market is emotionally unstable. Some days, Mr Market is cheerful and can only see brighter days ahead. On these days, he quotes a very high price for shares in your business. At other times, Mr Market is discouraged and seeing nothing but trouble ahead, and quotes a very low price for your shares in the business."

"Mr. Market has another endearing characteristic, said Graham. He does not mind being snubbed. If Mr Market's quotes are ignored, he will be back again tomorrow with a new quote. Graham warned his students that it is Mr Market's pocketbook, not his wisdom that is useful. If Mr Market shows up in a foolish mood, you are free to ignore him or take advantage of him, but it will be disastrous if you fall under his influence."

Believe in the fundamentals - inflation and USD$ is set to fall. Trends are pointing back to the commodities once again as banks no longer believe what others have on their balance sheet.  

At the time of writing, another Wall Street landscape firm Morgan Stanley appears to be the next big meltdown target. Keep in mind this was a firm that had $779 billion under their asset management just a short 8 months ago.

Listed as the second largest investment dealer in New York Stock Exchange, this news no doubt created more

panic amongst traders. Let's hope MS doesn't make the mistake of turning down offers when/if they are down on their last straw - and end up not being bailed out like Lehman Brothers (when turning down Korean buyers) 

Lehman Brothers' shares rallied Tuesday as the firm's on-again, off-again discussions with the state-owned Korea Development Bank (KDB) switched back to the "on" position.

At issue is both the terms of the deal -- Britain's Sunday Telegraph says $6 billion for a 25% stake in Lehman -- and what other firms are involved. KDB officials want to "form a consortium with private banks as [they] believe it is more desirable to acquire Lehman Brothers jointly rather than alone,'' The New York Times reports.

Also at issue is whether Lehman's embattled CEO Richard Fuld can afford to play hardball over the price -- as is also being reported -- and whether he can survive at Lehman's helm regardless.

Morgan Stanley's perilous news below... what do you think? Another LEH or bailout target? Are they so big that a complete wipeout will shatter more investor's confidences.

Sept. 18 (Bloomberg) -- Morgan Stanley, the second-biggest independent U.S. securities firm, may sell a larger stake to China Investment Corp. and is in talks about a possible merger with Wachovia Corp., a person familiar with the matter said.

China's state-controlled fund may buy as much as 49 percent of the New York-based investment bank, said the person, who declined to be identified because the talks aren't public and may end in no agreement. Morgan Stanley resumed its decline on the New York Stock Exchange, falling as much as 22 percent.

Morgan Stanley, led by Chief Executive Officer John Mack, and Goldman Sachs Group Inc., the biggest U.S. securities firm, tumbled the most ever yesterday as the deepening credit crunch fueled concern their funding sources are drying up. Morgan Stanley shares plunged 42 percent this week through yesterday after Lehman Brothers Holdings Inc. filed for bankruptcy and Merrill Lynch & Co. sold itself to Bank of America Corp.

``Morgan Stanley must be talking to any suitor,'' said Roger Lister, a credit analyst at the DBRS Inc. rating firm in New York. ``But I'm not sure whether a merger with a bank will solve the problems. It's not a deposit-base issue but a crisis of confidence. And getting a capital infusion from the Chinese or somebody else brings huge dilution due to the depressed stock price, which scares investors even more.''

Morgan Stanley fell $4.32, or 20 percent, to $17.43 in New York Stock Exchange composite trading 

If you're unsure, you're not the only one. Silver and gold bullions are up for a reason, retails and institutions alike are flocking back to commodities - perhaps we'll see $900/gold by day's end. By 1980's adjusted inflation figures, $900 gold is still cheap, remember!

With another $150 billion of injections (additional)announced today by USA, gold and gold juniors's time in the spotlight once again is coming sooner than you think. Better get in before this run takes off again like the gold run earlier 2008 to $1000!

People flocked to gold back then thinking things were bad... well subprime may just be the first step. Credit Swaps, defaulting bonds at the municipal level... what do you do when your supposedly safe GIC and Money Market isn't, anymore?