Is this the right move? MAI, ABX, KGC, Paulson from Goldman Sachs...

After a historic 11.8+% S&P, NASDAQ, and DOW -moving additional bailout press release yesterday by the Federal Reserve Board saying they will buy whatever debts the US banks are selling - essentially opening the tap to more irrational rally, today we are seeing some pullback on the DOW and NASDAQ.

Those unfamiliar with the scale of this one day move - it's the largest rebound in a single day since... 1987. And yes, it's that 1987. 

The Canadian exchanges TSX and Venture surged by 1,600 and now back to 800 - expected volatility is still at an all-time high according to VIX. (pictured above)

VIX is the ticker symbol for the Chicago Board Options Exchange Volatility Index, a popular measure of the implied volatility of S&P 500 index options. The VIX measures the cost of using options as insurance against declines in the S&P 500.^[1] Often referred to as the fear index, it represents one measure of the market's expectation of volatility over the next 30 day period.

The VIX is quoted in terms of percentage points and translates, roughly, to the expected movement in the S&P 500 index over the next 30-day period, on an annualized basis. For example, if the VIX is at 15, this represents an expected annual change of 15%; thus one can infer that the index option markets expect the S&P 500 to move up or down over the next 30 day period. 

If you take a look at peaks and dips of the VIX, you will quickly see that the last recent rough patches on the market such as post- September 11 attack and post dot.com crash of 2001, the index sees fluctuation up to 30-40 range. As a confirmation of just how ridiculously volatile these times are - October 2008 is now at an nearly non-sensical 54.99%.

Given that S&P 500 is at 1,000 - a swing of 55% will either be sub-500 or 1500+! Interesting times we're in, no?

With that out of the way, let us take a look at what really at with today's announcements. Even though it may appear similar that other countries have adopted a similar bailout plans - analysts are now confirming the US updated plan may have a much bigger failure likelihood.

The difference is, American banks allowed to fail

Commentary: Bank capitalization plans aren't the same for a reason

 On the surface, the American and British programs on bank capitalization look pretty similar, but key differences are apparent.

In both cases, governments are issuing preferred stock. Sure, the terms are different -- taking on the Brit preferred incurs a steep 12%-a-year payout; Uncle Sam wants 5% a year, unless the holding is still on the books after five years. 

But the real difference is to who it applies. In the U.K., the basic system was, get your capital up to certain thresholds privately -- or take the government money, and strings, to get there.

The US one, by contrast, is voluntary. Other than the "big nine" that got roped into taking the cash, there seems to be a strong incentive for all but the most troubled lender to take a pass.

 The British banking system isn't nearly as large as the U.S., and the Brits -- and for that matter the rest of Europe -- don't have a deposit guarantee program in place that the public trusts as much as the Americans have faith in the FDIC.

Banks in the U.S. can fail in an orderly way. In the U.K. and Europe, that's not the case.

And perhaps that's the real message behind the differing plans: the Americans aren't trying to save the whole banking system.

The Brits don't have a choice.         

Translation - some banks in the US are still slated to fail.

With the temporary relief of this supposely updated rescue package and the increase of FDIC insured bank account limit to $250,000 (from $100,000) - the FDR has certainly bought a bit more lifeline back into the market... you have to ask yourself though, how much longer can this charade go on for?

While Ben Bernanke has studied the Great Depression of 1929 thoroughly and understood that a tightening of credit is certainly the wrong way to go abouts (thousands of banks failed with limited credit to go around) - it remains to be seen if this is the right approach in this case of a systemic failure of depreciating assets, devaluation of $USD versus everything else, which leads to the popular fiat currency argument...

...in a time of crisis, what would you rather have? Printed paper that says $100 on it, or pounds of copper and gold in the ground?

Quality juniors continues to take a beating in the market. Minera Andes dropped to $1.00 earlier, Canadian Zinc Metals just raised $7 million dollars with zinc in the ground on a huge property in secure Canada's British Columbia province with overdemand despite lower zinc prices, and TNR Gold Corp announced excellent copper drill results at El Tapau and is advancing their case against mining giant Xstrata for 25% back-in and adjacent property - 11.2 billion lbs copper 43-101 compliant. 

Gold bullion and silver bullion fluctuated wildly yesterday, dropping from $900 to $830 today. Popular media says the safety haven investors flocked out of gold on news of government promise to secure banks and such - but read between the headlines and think for yourself. If and when more banks start failing (like Washington Mutual) - do you think Gold will catch on again? 

Look at eBay prices - it doesn't get much more retail than that. Compare that to Commodity Exchange and Future prices - an interesting study by a fellow retail investor Mr. Gabriel Gray... do you think there will be a de-coupling of reality and futures paper gold soon? 

Free Fall - Watch Out Below... DOW heading to 7,000 next week, Asia/JAPAN's disappearing, Iceland TAKEN OVER, Global meltdown - Where is your refuge?

Free Fall is a wonderful feeling. 

The feeling of liberty and no constraints - that few seconds of freedom from any attachments during that few seconds of air time jumping into a pool... 

Unfortunately, this week's free fall primarily referred to the economy and the stock market.

Watching the DOW Jones drop below 9,000 and TSX follow below 10,000 must be one of those lifetime moments you just don't forget. Just this week, popular press newspapers are finally publishing "RECESSION" on their front pages - the mass media will have to face up to the fact that the world might be all right this time, after all.

Toqueville Gold Fund John Hathaway and prominent fund managers tend not to like newsletter writers and self-proclaimed analysts that don't work at brokerage firms - saying they tend to be too end-of-the-world and conspiracy-theory... but even Mr. Hathaway has to admit there might be some truth after all after this week... fiat currency is bubbling, gold and gold shares will have their day. 

“The 2008 summer gold panic was a liquidation of paper that never translated into the physical deliveries to satisfy record demand. At the end of the day, the paper shorts represented by hedge funds, banks and their clients fell

into a bear trap of their own making. There was no physical with which to cover.

 

What will drive a further advance in gold? Let’s start with the implausible assumption that the

worst of the credit crunch had been already discounted when gold scaled $1000. Let’s also

assume, an even greater stretch, that the Paulson bailout succeeds in restarting the wheels of

lending and commerce. Finally, let’s toss in an end to the decline of asset prices and the

commencement of a bull market in equities. The unequivocal precondition for these felicitous

events would be the transformation of the dollar and other paper currencies as we know them.

The socialization of credit in the U.S. may well work the miracles as its proponents claim, but

not without stiff costs. We suspect that two inescapable costs will be inflation and negative real

interest rates as far as the eye can see. Both of these outcomes are friendly to gold. Neither is

likely to improve the credit rating of the dollar or increase the desire of non U.S. investors to

increase their holdings of U.S. treasuries.”

Link to Toqueville's site - they are a big investor in high potential juniors we mentioned from time to time such as TNR Gold Corp (TNR.v), Minera Andes (MAI.to), Canada Zinc Metals (CZX.v), amongst others. 

All have metals in the ground - and have strong backers that can bring it to production / buyout stage. Watch for them.

The massive sell off continues today, with media and headlines confused about the cause - as even the supposed safe haven of commodities - Gold, Silver, and Copper are down large gaps.

Gold is currently back down below $900 with a $73 dollar drop. YES you read that correctly.

Silver is no exception at $9.80 - drastic drop from $11.50 earlier this week, but yet local bullions are out of supply?? 

Commodity Exchange and Gold ETF's fair to delivery gold in troubled times - the futures market is running amok with unregulated contract creation. A simple analogy for the readers of this site:

Supposed there was 100 barrels of oil produced a day, sells them at $10, and consumed the very same day in a town.

An oil producing company offers oil futures to hedge against their own bottomline - just incase demand drops they can at least sell it for $8 to cover their costs. 

One day commodity traders come along and creates sophisticated pricing models to predict price of oil - and writes up contracts (futures) which are essentially promisory notes to purchase later at a certain price (up, or down) ... keep in mind this is all without the production of any more oil - just speculation.

Futures trade daily and ends up drastically alterring the perception of price of oil - resulting in spiking costs - as futures predicted price to go up even though production stayed roughly the same. all of a suddden - fiction crossed into reality - and traders buys 10 physical production barrels a day  to hedge against their own predictions.

Now the supply fear is real. There is now only 90 barrel a day to go around when 100 was needed. 

Actual price follows the futures model eventually in this case. See the scary trend here?

_______________

In other scary financial news - Russian's stock market has been halted indefinitely. 

When is it opening again so you can get rid of your stocks to buy some food with the money?

We don't know.

How's that for a scare??

Russia Stocks Plunge, Trading Suspended

Russia halted stock and bond trading on Wednesday amid the worst market falls since the country's 1998 financial collapse and the Finance Ministry pledged a total of $60 billion of funds to help local banks.

Trading in shares, bonds and mutual funds on Russia's MICEX and RTS exchanges was suspended after less than two hours, preventing further selling on top of Tuesday's record-breaking falls.

Russia's two leading stock exchanges were forced to close for several hours on Tuesday, one day after suffering massive falls in value.

Trading on the RTS and Micex bourses was postponed by the country's financial regulator after stocks lost nearly 20% of their value on Monday.

Soon after reopening, the RTS index rose by 0.58% while Micex gained 2.16%.

Meanwhile, Russian President Dmitry Medvedev called for urgent action to deal with the global financial crisis.

In a video clip posted on his website kremlin.ru, Mr Medvedev said: "International political issues and the crisis in the world financial system demand concerted and urgent actions."

"It's absolutely clear that the time has come for new solutions."

He said he would raise the issue at an international conference in France on 8 October.

Monday's falls on the dollar-denominated Russian Trading System (RTS) index and the rouble-denominated Micex (Moscow Interbank Currency Exchange) were the steepest declines for a market that was booming until recently.

Since May, the RTS index has dropped more than 60%. 

Other countries in the world have felt the pain as well - notably as the worst month in stock trading's history on record... the October Crunch has taken over Iceland. With lawsuits pending from across the world, Iceland nationalized banks due to loss thus far.

Iceland nationalises Glitnir bank

The Icelandic government has taken control of the country's third-largest bank, Glitnir, after the company faced short-term funding problems. The government has bought a 75% stake in the bank for 600m euros ($860m; £478m) to ensure stability of the bank during the current financial turmoil. Glitnir is expected to operate as normal and the government said it did not intend to hold the stake for long. It is the first Icelandic banking nationalisation of the current crisis.

A Rational Day on the Irrational Market: MAI on Minesite UK, ABX, KGC, Noront NOT, AUY, NewMont - Miners up 15-20% on Interest Rate Cut

It's nice to see the nice jump on major gold producers yesterday. In a day when swings went from one extreme to another - the only solid rally was in precious metal and producers.

Shares of some top gold companies were up at the close of trading: Barrick Gold rose $5.21 or 17.1 percent, to $35.71. Gold Fields rose $2.17 or 32.1 percent, to $8.94. Goldcorp rose $5.11 or 19.7 percent, to $31.02. Newmont Mining rose $4.82 or 14.8 percent, to $37.33 

Kinross KGC was up almost 20% 

Yamana AUY was up 16%.. yet most of these companies are still at their 52 week lows!

As reality hits closer to home with unemployment rising and the irrefutable facts of rising daily expenses (food, gas, etc) - people are starting to lose trust in the government.

Today Paulson is stating that government may end up investing in banks directly.

Treasury officials say the just-passed $700 billion bailout bill gives them the authority to inject cash directly into banks that request it, and the right to take ownership positions in those banks, the New York Times reported in its online edition in a story citing unnamed government officials.

Such a move would quickly strengthen banks' balance sheets and, officials hope, persuade them to resume lending, the Times said.

The Treasury plan, still preliminary, resembles one announced on Wednesday in the U.K. 

Wasn't that what many already proposed they should have done for the massive bailout plan already? Not only have the FRB trapped themselves and future generations of taxpayers in a downward spiral of debt - the worst part is many of these investments are not being "marked to market" - but instead purchased at a reverse auction process where the original culprits (bankers, insurers, etc) tell the government the lowest price they would be willing to accept. 

There are a lot of issues with reverse auctions.  Bonds aren't stocks; there are a lot more of them, and they're much more idiosyncratic.  The securities that the government is proposing to buy are even more complicated than ordinary bonds.  

This means there's a gigantic asymmetrical information problem:  the owners of these securities know much more about them than the Fed.  And there isn't (obviously) a large liquid market for the Fed to check against.  So the Fed is likely to overpay, because there won't be a lot of bidders in any one auction.

Second, because there are so many different securities, auctions will take a lot of time.  The whole argument in favor of this bailout is that we don't really have a lot of time.

Third, the reverse auction arguably solves one problem--what are these securities worth?--by adding another:  the aid isn't targeted to the institutions that necessarily need it, or can use it the best.  It's targeted towards those who will bid the lowest.  Maybe that will be institutions in distress.  Or maybe it will be solvent firms looking to clean up their balance sheet.

Relatedly, using a price discovery mechanism means that the bailout may not give distressed firms enough capital.  There's no point in buying distressed securities if the banks go bust anyway.

Thus, while reverse auctions may feature in the final plan, they're unsatisfactory, and probably will not be the primary vehicle for recapitalizing banks.  So I still want to know:  what's the plan?

In other words, where's the free market mentality in that? If you are selling something that it has NO bids on it, one would realize perhaps you are asking too much for it. This is what a normal auction or sale should be like.

A reverse auction works against this logic and have the buyer state the lowest price he or she would be willing to accept for a certain item. While in auction scenario the buyer would have the freedom to choose, there's a high degree of doubt that the government would have that much resource to analyze most of the proposed costs of the bailout plan candidates... yikes.

Speaking of the bailout plan bailee's (parties receiving bailout plan budgets!), remember the Terminator Arnold? Well they are really asking the Feds to include California in the list of really needy people - as they can't even afford to keep their doors open until the end of October?

Is California too big to fail? Was Lehman LEH too big to fail? How about Washington Mutual? How about CalPERS, the huge $250 billion pension fund that bought Bear Sterns at $90+ a share?

Even before the vote on the $700 billion bailout bill last week, the wily Terminator of fiscal discipline had a letter on the desk of Treasury Secretary Henry Paulson making the case for a $7 billion loan to keep the nation's most populous state running past October. Arguing that California -- and many other states -- have been frozen out of the credit markets like a subprime homebuyer, Schwarzenegger said the state needs the money to pay teachers, cops, firefighters, nurses, and other state-funded enterprises of some importance.

California was quickly followed by Massachusetts, whose reputation as "Taxachusetts" hasn't seemed to help it stay above water. And now the race is on to see whether any of these states can tap into the bailout frenzy before all the money goes to save Iceland.

It was Jim Willie who said it recently... first it's the rapid inflation speed that the massive billion dollar bailout plans will stimulate, then comes state and possibly municipal level defaults on bonds, what's next? Possibly the worst time to be in the United States, period. Mr. Willie goes on to dramatize some more suggesting even the possibility of the next 3rd world country. 

While we here at Mining 101 are not nearly so pessimistic, some reasonable living supplies, precious metal bullions, and quality mining stocks would be our recommendation for the upcoming long weekend.

What does US Mint, Federal Reserve Bank, & Arnold Schwarzenegger have in common?

Very simple, they all want billions of dollars and liquidity! *Drum Rolls

Apologies about the bad joke, but if you have been following the gradual collapse of the US dollar and markets lately, you would have read about the latest post-BO/RB (do we call it BailOut or the nicer phrase, Rescue Plan?) fiasco - the Feds are now considering buying off balance sheet debt financing and short term debt instruments from companies in liquidity crunch.

WAIT.

So the companies that originally sold debt instruments collateralizedto worthless assets are NOW going to sell more to the Federal Reserve Bank - even after the $700 billion bail out plan. Just how much is $700 billion again?

It is $140 billion more than has been spent on the Iraq war since the invasion.

It is $120 billion more than that spent on social security benefits.

It is almost 3 billion nonrefundable bus fares from Durham to San Francisco, leaving tomorrow.

It is nine times the amount spent on education in 2007.

It could pay for 2,000 McDonalds apple pies for every single American.

It is 35 times the amount spent on all foreign aid in most years.

It is more zeros than the calculator that comes with my computer allows.

Sounds about right, don't you think? It's just another sign of the rapidly deteriorating US dollar $ - head for gold and bullion ASAP.

Another proof that things are coming apart at the seams - STATE level bond defaults.
Don't think it can happen? How about to one of the largest states in the US, California and its superstar governor, the Arnold?

Schwarzenegger to U.S.: State may need $7-billion loan

In a letter obtained by The Times, the governor warns that tight credit has dried up funds California routinely relies on and it may have to seek emergency aid within weeks.

SACRAMENTO -- California Gov. Arnold Schwarzenegger, alarmed by the ongoing national financial crisis, warned Treasury Secretary Henry M. Paulson on Thursday that the state might need an emergency loan of as much as $7 billion from the federal government within weeks.

The warning comes as California is close to running out of cash to fund day-to-day government operations and is unable to access routine short-term loans that it typically relies on to remain solvent.

The state of California is the biggest of several governments nationwide that are being locked out of the bond market by the global credit crunch. If the state is unable to access the cash, administration officials say, payments to schools and other government entities could quickly be suspended and state employees could be laid off.

Plans by several state and local governments to borrow in recent days have been upended by the credit freeze. New Mexico was forced to put off a $500-million bond sale, Massachusetts had to pull the plug halfway into a $400-million offering, and Maine is considering canceling road projects that were to be funded with bonds.

I suppose it could be hasta-la-vista baby for California government if this doesn't come through... do you think things are serious enough yet? Get some gold and listen to the advice from the folks on Financial Sense - especially if you're in the good ol' US of America.

Just on Kitco.com today we see US Mint has halted production of smaller denomination mints. No shortage in gold and silver, right?

NEW YORK, Oct 7 (Reuters) - Unprecedented demand for
precious metals and volatile markets forced the U.S. Mint to cease production for the half-ounce and quarter-ounce popular American Eagle gold coins for the rest of this year and to
supply other bullion coins on an allocation basis.

 "Due to the extreme fluctuating market conditions for 2008,
as well as current market conditions, gold and silver demand is unprecedented and the demand for platinum is unusually high,"
the U.S. Mint said Monday in a memorandum to its authorized
coin dealers.

 "The U.S. Mint has worked diligently to attempt to meet
demand, however, blank supplies are very limited and it is
necessary for the U.S. Mint to focus remaining bullion
production primarily on American Eagle Gold one-ounce and
Silver one-ounce coins," the Mint said.

 The Mint said it would continue to supply one-ounce American Eagle gold coins and one-ounce American Eagle silver coins on an allocation basis to coin dealers.

 For half-ounce and quarter-ounce American Eagles, the Mint said that inventory was depleted last week and no more coins would be produced for the rest of 2008.

 In addition, the Mint said it would produce 1-10th ounce
Eagles based on current coin blank supplies, but would cease
production for the rest of this year once the remaining
inventory was depleted.

The majors are still down today - Kinross KGC around $13, Barrick ABX around $32, Yamana AUY off tremendously at $6.70. Incredible deals all around for companies that are slated to be making record profits AGAIN.

When the revenues trickle in and the majors are reminded they need to replenish their resources - shopping time abounds and the quality juniors should see a nice round of buyout appreciation.

Just to reinforce the facts that safety is in gold and gold shares - look at the premium on the Gold Trust today. If there was adequate supply and people were lining up orderly to purchase something against the deflating US dollar, would there be premium of 12-15%+ on top of the spiking gold prices?

Ask yourself as a rational person - when supply is unlimited with the case of the Federal Reserve Bank - would there still be a demand for US Dollar in 6-12 mo

The Show of a Lifetime - DOW below 10,000, TSX Down 1175, Asian Markets down 5%/daily, Gold SURGES?

If you have been unfortunate enough to be awake the last few hours, you would have seen the terrible bloodbath that is the markets today.

Seemingly everything is in the red with all the major indexes reaching 5 year lows. (read: since recovery from Dot.com Crash...)

NEW YORK - Wall Street tumbled Monday, joining a selloff around the world as fears grew that the financial crisis will cascade through economies globally despite bailout efforts by the U.S. and other governments. The Dow Jones industrials skidded more than 400 points and fell below 10,000 for the first time in four years, while the credit markets remained under strain.

The markets have come to the sobering realization that the Bush administration's $700 billion rescue plan won't work quickly to unfreeze the credit markets, and that many banks are still having difficulty gaining access to cash. That's caused investors to exit stocks and move money into the relative safety of government debt. 

Over the weekend, governments across Europe rushed to prop up failing banks. The German government and financial industry agreed on a $68 billion bailout for commercial-property lender Hypo Real Estate Holding AG, while France's BNP Paribas agreed to acquire a 75 percent stake in Fortis's Belgium bank after a government rescue failed.

What do you think the smart investors are flocking to?  

That's right, Treasury Bills, GIC's, and hard assets such as Gold, Silver, and commodity producing companies. Treasury Bills are essentially IOU's written by the US Government - and its a great indication of US citizen's sentiments on the market and the economy.... when it drops it typically suggests people rather keep their principle safe than to even receive marginal interest. 

Treasury securities are government bonds issued by the United States Department of the Treasury through theBureau of the Public Debt. They are the debt financing instruments of the U.S. Federal government, and they are often referred to simply as Treasuries or Treasurys. There are four types of marketable treasury securities:Treasury bills, Treasury notes, Treasury bonds, and Treasury Inflation Protected Securities (TIPS). There are several types of non-marketable treasury securities including State and Local Government Series (SLGS), Government Account Series debt issued to government-managed trust funds, and savings bonds. All of the marketable Treasury securities are very liquid and are heavily traded on the secondary market. The non-marketable securities (such as savings bonds) are issued to subscribers and cannot be transferred through market sales.  

Let's take a look at where we sit today. Left shows a table of T-bill Rates, as of Oct/1-3 it's dropped from 0.66% for one-month to 0.15%... suggesting short term volatility has risen dramatically.

Gold is up a nice $25-30, I would think a test of $900/ounce this week is likely. Silver remains a bargain at $11 and can easily test the March 2008 highs of $20+/ounce. 

Here at Mining and Investments 101 we remain very bullish on gold producers such as Kinross, Barrick, Yamana... despite the overall negative sentiments of the market - do the math folks!

Producers have the properties / mines

They made record profits last quarter due to escalating prices

Plenty of cash for producers = buyout opportunities for juniors with known connections to majors

For example let's take a look at Barrick's as of July 2008.

- Barrick reported second quarter net income of $485 million ($0.56 per share) and operating cash flow of $531 million ($0.61 per share) compared to net income of $396 million ($0.46 per share) and operating cash flow of $336 million ($0.39 per share) in the prior year period. Net income rose 22% and operating cash flow increased 58% compared to the prior year period.

- Higher gold prices have significantly outpaced year on year cash cost increases from energy and other inflationary pressures. Revenues expanded 20% from the year ago quarter to $2.0 billion and cash margins have increased 68% to $477 per ounce over the same prior year period.

- Subsequent to quarter end, the Company announced an all cash offer to purchase an oil and gas producer in Western Canada which is expected to provide a long term economic hedge of about one-quarter of Barrick's annual direct oil consumption and is intended to mitigate industry-wide energy cost challenges. Barrick has also agreed to sell certain non-core royalties to Royal Gold Inc., in exchange for $150 million in cash and a reduced royalty structure on the Crossroads deposit contiguous to the Cortez mine in Nevada. (NOTE: 1/3 of costs have been analyzed to be of energy/oil related - Barrick buys own oil producer to cut cost... very smart move)

Volume is rather low considering the rapidness of the decline, I would wager the professionals that can hold against the public tide is still holding onto their primary producers... the quality juniors that have the capital access and solid properties will prevail through this consolidation phase. Small time producers such as Minera Andes will get hit hard (if not harder) due to difficulty of securing equipments / rising costs without the economy of scale for big timers - evident today with drop of Energold (EGD.v) and Minera Andes share prices (MAI.to). Still if the revenue can keep up they should make it out from this trial by fire period with a much lower market cap ready for a huge rebound. 

Our favorite here at Mining 101, TNR Gold Corp (TNR.v) has announced last Friday they have sent in the updated legal amendment (writ) against MIM Argentina (aka. Xstrata mining giant). I have highlighted the key parts for your reference... it's not everyday you have a junior company going up against a mining conglomerate, perhaps that 2 billion pounds of copper at Los Azules is closer than we think eh? 

Do the math - 11.2 billion pounds (likely higher with upgraded resource/drilling) divided by 2 = 5.6 billion pounds x 25% = 1.4 billion pounds.

At today's copper prices of $3/lb that's an easy 4.2 billion$ worth!

Sherwood Copper SWC.to is a leading producer / explorer of copper on the TSX (recent merged with Capstone (CS.to) ... as a comparison they trade at $2.50 to $11. Their upgraded resource meant 400 million tonnes Copper at Kutcho and about 600 Measured and Indicated resource copper at Minto. 

TNR closed at $0.18 on Friday. Do the math. 

TNR GOLD AMENDS LEGAL ACTION TO SEEK RECTIFICATION CONFIRMING 25% BACK-IN RIGHT

On Aug. 8, 2008, TNR Gold Corp. amended its writ of summons in the action commenced on June 30, 2008, in the Supreme Court of British Columbia against MIM Argentina Exploraciones SA, a subsidiary of Xstrata PLC. In the amended action TNR is adding:

"Further, the Exploration and Option Agreement, to the extent that it purports to terminate Solitario's (TNR's Argentina subsidiary) right to buy back equity in mining and exploration tenures acquired by MIM pursuant to the Exploration and Option Agreement if MIM fails to complete a feasibility study on any part of the properties within 36 months of exercising its option does not reflect the true agreement and common intention of the parties and was the result of a mutual mistake of the parties. The true agreement of the parties was reflected in the Letter of Understanding which provided that Solitario's back-in right subsists until 120 days after completion by MIM of a feasibility study on any part of the acquired properties. The plaintiffs therefore seek rectification of the Exploration and Option Agreement to accord with the true intentions of the parties.

"Further, or in the alternative, the 36 month provision in the Exploration and Option Agreement was inserted by MIM without consideration and is unenforceable.

"Further, or in the alternative, Solitario says that MIM is in breach of the Exploration and Option Agreement by entering into an agreement or agreement with a third party to undertake exploration work on the acquired properties without requiring the third party to complete a feasibility study on any of the properties within any time frame."

Los Azules/Escorpio IV update

The following is a summary in chronological order of recent events, news releases and developments from Minera Andes Inc. (MAI) pertinent to the Los Azules property that had not been previously released by TNR.

In Stockwatch on Sept. 25, 2008, MAI announces excellent metallurgical testing results at Los Azules, recovering up to 96 per cent copper. In addition a costing and operational cost scoping study is scheduled for completion in December, 2008.

In Stockwatch on Sept. 8, 2008, MAI announces a mineral resource estimate of 922 million tonnes of 0.55 per cent copper as Los Azules, totalling to approximately 11 billion pounds of copper.

For more information about specific news release details, please refer to MAI's news and investor section directly.

How secure is the world?

When the overnight lending rate surpasses that of the day after September 11 attacks, I think it's fair to say there's a small panic brewing on Wall Street. Question is, when will this ridiculous swing of Dow Jone and TSX index turnaround for the better?

AP says Financial companies borrow record amount from Fed

Banks, investment firms push borrowing from Fed's emergency loan program to record

WASHINGTON (AP) -- Banks and investment firms borrowed in record amounts from the Federal Reserve's emergency lending facility over the past week, providing fresh evidence of the credit stresses squeezing the country.

The Fed's report released Thursday said commercial banks averaged a record $44.5 billion in daily borrowing over the past week. That compared with a daily average of $39.36 billion in the previous week. On Wednesday alone, banks borrowed a record $49.5 billion, surpassing the previous high that came one day after the Sept. 11, 2001, terror attacks.

For the week ending Wednesday, investment firms drew a record $147.7 billion. That was up significantly from $88.15 billion in the previous week. This category was broadened last week to include any loans that were made to the U.S. and London-based broker-dealer subsidiaries of Goldman Sachs, Morgan Stanley and Merrill Lynch. On Wednesday alone, investment firms borrowed a record $146.6 billion, breaking the previous record set on Sept. 24.

Well, with the revised Bailout $700 billion plan to a $850 billion rescue plan, the overall market today just seemed doom and gloom overall.

Yesterday's manufacturing index ISM, fell drastically from the month before and caused further deterioration on consumer confidence. In fact this is close to the supposely "repression" level of ISM which is an arbitrary 

Manufacturing index tumbles

Survey of purchasing managers shows factory activity fell more than expected in September.

NEW YORK (CNNMoney.com) -- A key measure of the nation's manufacturing activity fell in September to a nearly seven-year low, nearing a benchmark that indicates a recession, a purchasing manager's group said Wednesday.

The Institute for Supply Management's (ISM) manufacturing index fell to 43.5 in September, down from the August reading of 49.9. It was the lowest reading since the 40.8 measure in October 2001, the month following the terrorist attacks on New York and Washington.

Economists were expecting a reading of 49.5, according to a consensus estimate compiled by Briefing.com.

The tipping point for the index is 50, with a reading below that indicating contraction in factory activity. A reading below 41 marks a recession. The index has hovered around the 50 mark for the past 12 months, with an average of 49.6.

The sharp decline of key indicators such as employment, new orders and production is the most troubling aspect of the report, said John Silvia, economist at Wachovia. The weakness in those sectors will serve to make a 'pretty miserable' outlook for fourth-quarter industrial production, he said.

Employment is especially weak, which will weigh on personal income, further supressing consumer spending. That the index didn't sink to the technical standard indicating a recession doesn't matter, Silvia said.

"We're in a recession. What are you going to do? We're not going to be able to fudge this," he said.

In what could be a portent of Friday's September employment report, ISM's employment indicator tumbled to 41.8 from 49.7, marking the second month of decline in the sector.

If 41 ISM score marks a recession, do you think it feels like we're only 2.5 on the index from a recession then? Is that too optimistic? 

As per our usual simple inflation up = gold up strategy - but as you can can there's a slight change of plans today... silver and gold are flat along with most of the market.

As usual, for those who can stomach the risk, there are so many great deals out there its' frigtening. 

Gold falls 5% after Senate approves bailout plan

Gold's losses followed broad declines in precious metals and other commodities. Silver plunged 13%.

Gold for December delivery lost $43, or 4.8%, to end at $844.30 an ounce on the Comex division of the New York Mercantile Exchange, the lowest closing price since Sept. 17.

"There was some relief buying in the dollar when the Senate passed the latest proposal, which has forced gold lower," said Peter Grant, a senior metals analyst at USAGOLD-Centennial Precious Metals.

In other precious metals, December silver tumbled $1.65 to end at $11.12 an ounce. Platinum for October delivery lost $50.10, or 4.9%, to $979.60 an ounce, falling below the $1,000 level for the first time since early 2006. December palladium slid $7.75, or 3.7%, to $203.20 an ounce.

Commodities moved broadly lower Thursday, with the benchmark crude-oil contract down nearly 4% to below $95 a barrel. See Futures Movers.

The Reuters/Jefferies CRB Index (CRB:

328.42, -14.82, -4.3%) , a benchmark gauging the prices of major commodities, fell 4.3%.