Gold Price Breakout

The gold price in US$ may be poised to breakout in the next few days. If this breakout is realised, we could be looking at a very similar or better run the same as this time last year. $1000/oz plus is looking very achievable.

For previous gold price tips see below or the ”the gold price” in the catergories on the right. We have been on the money for over 5 years.

www.goldreport.com.au

Free Gold Conference

Resourceful Events, will host the Gold Day investor series in association with Gold Report Australia, on Monday 2^nd of April 2007 at the Sydney Harbour Marriott Hotel, in Pitt St. Sydney.  

The conference is free to attend, with lunch included and follows the format of the successful 20/20 series held in London each year.

To attend all you need to do is register on-line by clicking on the link below. 

Companies presenting this year are Gold Report Australia, Kingsgate Consolidated, Midas Resources, Echo Resources, Avoca Resources, Citigold, Northwest Resources and Mundo Minerals.  

To register go to http://www.resourcefulevents.com/investor_series/register_attend.asp  

For more information call Resourceful Events on (02) 9279 2222 or email Kerry at kerry@resourcefulevents.com. 

Look forward to seeing you there.  

Best regards 

Rod Holden

 

Managing Director,
Gold Report Australia Pty Ltd,
PO Box 205, Launceston,
Tasmania, Australia, 7250.
Ph: +61 3 63311327
Web: www.goldreport.com.au
Blog: www.goldxreportxaustralia.wordpress.com

The Weekly Gold Report

The following are the top 5 announcements for the week ending the 16th of march 2007.

Resourceful Events, will host the Gold Day investor series in association with Gold Report Australia, on the Monday 2^nd of April 2007 at the Sydney Harbour Marriott Hotel, in Pitt St. Sydney. The conference is free to attend, with lunch included and follows the format of the successful 20/20 series held in London each year. Companies presenting this year are Gold Report Australia, Kingsgate Consolidated, Wedgetail Mining, Midas Resources, Echo Resources, Avoca Resources, Citigold, Northwest Resources and Mundo Minerals.  

Perseus Mining Ltd (PPP) has exercised its option to acquire 100% of the issued shares in Stratsys Investment Ltd (Stratsys). Stratsys has the rights to a project area of approximately 500 sq km located south west of Obuasi, on the Ashanti Gold Belt in Ghana. 

Republic Gold Ltd announced that it would make an all share takeover bid for Luzon Minerals of Canada, Republics strategic partner in Bolivia. It is also the intention of Republic to seek listing on the Toronto Stock Exchange as soon as practicable.  

Centamin Egypt Ltd has completed a C$140 placement and has commenced its listing on the Toronto Stock Exchange. The offering will be placed primary with Canadian, US and UK interests. This placement will satisfy the equity component of the project finance to bring the Sukari project to production, with the debt component underway. 

Emperor Mines are in the process of finalising an agreement for the sale of its Fijian assets, including the Vatukoula mine to Westech International Ltd, a company incorporated in Australia. The intention is that all shares in companies that hold the Fijian assets, including liabilities, will be transferred to Westech with immediate effect.

Gold Report Australia – www.goldreport.com.au

The Gold Price

The recent gold price volitity, along with international markets, has created a buying opportunity. Recent activity, over the last 6 months, shows that a move of about $40 in the gold price will produce about 100% return on warrants. Currently the gold price appears to have posted a bottom, within the recent trading range, of about $40 below the previous high.

Gold Report Australia – www.goldreport.com.au

Weekly Gold Report

These are the top 5 announcements for the week ending 23 Feb 2007

Goldstar Resources NL (GDR) has announced a 110% increase in tonnage of the Tubal Cain reef system to 2.3 million tonnes, following an upgrade of the geological model of the dyke system and the potential high-grade reef/breccia zone contained within the dyke to a depth of 600 metres. The company also said that recent drilling has increased the number of identified potential high-grade reefs from 15 to 27. 

Centamin Egypt Ltd (CNT) has approved the development of Egypt’s first modern gold mine at the Sukari Gold Project, following the completion of the feasibility study. With a capital cost of $US216m, the mine is expected to produce around 200,000 ounces p/a for 15 years at an average cash operating cost of $US$290 per oz. The 8.06 Moz resource has not been closed off and the 10 drill rigs currently operating are expected to increase resources and the production profile. 

Ballarat Goldfields NL (BGF) has advised shareholders that the supreme court of Victoria issued and order approving the scheme of arrangement to merge the company with Lihir Gold Ltd. The scheme will become effective on the 26^th of Feb 2007 and shares in BGF will be suspended after close of trading on that day. 

Emperor Mines Ltd (EMP) has received notice from Barrick, managers of the Porgera Joint Venture, confirming the upgrade to the mineral Reserve at the Porgera mine. The total Reserve has increased to 9.40Moz, of which EMP’s share is 1.88Moz. 

Iamgold Corporation (IGD) has established a share sale facility to assist shareholders in selling their shares when IGD delists from the ASX, expected to be the 30^th of March 2007. This facility provides a way for IGD shareholders to sell their shares on the Toronto Stock Exchange (TSX) during the three-month period immediately following the delisting from the ASX.

Gold Report Australia – www.goldreport.com.au

Weekly Gold Report

The following is the top 5 announcements for the week ending the 16th of Feb 2007.

Allstate Exploration NL (ALX) has reached an agreement with Beaconsfield Gold NL on the form of a proposal aimed at allowing Allstate and its subsidiary companies to emerge from deed of company arrangement. Under the proposal the Allstate group would immediately cease to be subject to the deed upon creditors voting in favour of the proposal and BGNL paying the first instalment. A creditors meeting is to be convened for the 27^th of February. 

Ballarat Goldfields NL (BGF) shareholders have voted in favour of the merger of Ballarat and Lihir Gold Ltd. 94.1% of Ballarat shareholders voted in favour of the merger that will create one of Australia’s most substantial gold companies. The merged company is hoping to be producing at least 1.25 million ounces by 2010. 

Haoma Mining NL (HAO) has put the Bamboo Creek plant on care and maintenance due to problems with reaching full production capacity. The processing plant requires significant funding for an up-grade and repairs and the Chairman, Mr. Gary Morgan, has advised the board that he will not advance further funds to the company after funding all of Hoama’s activities to the extent of $17 million to December 31^st 2006. 

Highlands Pacific Ltd (HIG) is restructuring of its hedge book and is raising US$20 million for working capital. The company’s current forward sales program comprising 250,000oz by December 2008 will be rescheduled out to December 2010. Resources Capital Funds (RCF) is a private equity funds manager based in the USA and has agreed to a placement representing 13.22% of Highlands. RCF will also receive 4 options for every 8 ordinary shares issued to RCF. 

Gryphon Minerals Ltd (GRY) has announced high-grade drill results from the Banfora Gold Project in Burkina Faso – West Africa. The step-out RC drilling program, targeting the northern zone of the Nogbele prospect, has returned significant drill intersections including 4m @ 65.45 g/t Au, 4m @ 11.01 g/t and 3m @ 11.15 g/t Au from shallow drilling. The company has also commenced a soil-sampling programme to cover a significant portion of the Banfora project.

Gold Report Australia – www.goldreport.com.au

Weekly Gold Report

The top 5 announcements for the week ending the 2nd of February 2007

Oxiana Ltd (OXR) announced a script offer for Agincourt Resources Ltd, which values Agincourt at $415 million. Oxiana is offering 0.65 Oxiana shares for each Agincourt share. The Agincourt board has recommended that shareholders accept the offer and Newmont Mining Corporation (Agincourts major shareholder), has signed an option and pre-bid acceptance deed in respect of its 19.9% holding in Agincourt. 

BMA Gold Ltd (BMO) has dramatically down-graded resources after underground infill drilling led to a significant re-interpretation of ore geology. Area 2 has been down-graded from 193,000oz @ 21.6 g/t Au to 75,000oz @ 10.9g/t Au. The company will wind down production, sell assets including the Rishton plant, reduce share capital and is planning to recapitalise the company. Administrators have now been appointed. 

Conquest Mining Ltd (CQT) has announced high-grade drill intersections at the Silver Hills deposit, on the Mt Carlton Project. Intersections include 109m @ 8.16 g/t Au, 44.7m @ 4.8 g/t Au and 30m @ 4.13 g/t Au. Drilling and exploration is continuing on 50m and 100m spaced sections to extend the deposit. 

Sub-Sahara Resources Ltd (SBS) has announced high-grade drill intersections at the Koka prospect in Eritrea (Africa). Drill intersections of 13m @ 24.75 g/t Au, 11m @ 14.72 g/t Au and 6m @ 42.36 g/t Au were returned to 200m vertical depth and over a distance of 450m. Drilling has intersected two offset parallel zones and mineralisation is open along strike in both directions and at depth. 

CGA Mining Ltd (CGX) (previously Central Asia Gold Ltd) has entered into a sale and purchase agreement for 100% interest in the Masbate gold project in the Philippines. The Masbate gold project contains resources of 5.071Moz of gold at a cut-off of 0.7 g/t Au. CGA has a production target of 200,000 oz per annum. CGA will pay US$51m for the project.

Gold Report Australia – www.goldreport.com.au

Gold Price

The gold price has broken out to the upside on a long term triangle. I would have expected a much larger rise, based on the diamond pattern last week. If the price breaks out above the $650-$660 range we could see a $750 broken very quickly.

Gold Report Australia – www.goldreport.com.au

Weekly Gold Report

The top 5 announcements for the week ending the 26th of Jan 2007

Goldstar Resources NL has notified the ASX that EPIC Pacific Rim LLC has acquired almost 21 million shares in Goldstar, on market, for $13.45m. This purchase gives EPIC Pacific Rim LLC a 16.78% shareholding and voting right. 

Highlands Pacific Ltd has been notified that Xstrata will exercise their option to acquire 81.81% of Highlands stake in the Freda River Project in PNG. The project will operate as a Joint Venture and exclude the Nena Deposit. Xstrata still has an option over the Nena Deposit, which it can exercise for payment of $10.8m, plus other terms and conditions. 

Beaconsfield Gold NL has agreed to pay Macquarie Bank $2.85m for the inter-company debts of Allstate Exploration NL and has also reached agreement with Newmont Australia Ltd to buy their interest in Allstate for $1.4m. Macquarie Bank will gift the payment “to the benefit of the employees of the mine”. The Beaconsfield/Macquarie payment will be made in two stages, with the first $700,000 on execution of documentation and the remaining payment of $2.15m once the mine has re-opened and reached commercial production levels. 

View Resources Ltd has announced the completion of the full hedge book program for the Brozewing deposit. View has locked in 175,000 oz at a flat forward price of $900/oz and also acquired 150,000 put options at a strike price of $830/oz. This gives the company an average margin of around $300/oz and significant upside for about 60% of production, if the gold prices goes over $830/oz. 

Lihir Gold Ltd has added an extra 4.4 Moz of gold reserves to the Lihir gold deposit in Papua New Guinea. The gold mine now has a Proven and Probable Reserve base of 258.5 Million tonnes @ 2.83 g/t gold for 23.6 Million oz (Moz). The increase has been due to the increase in the gold price assumption to $475/oz, lowering the cut-off grade, adjustments to cots assumptions and enhanced pit shell design that incorporates new mineralisation.

Gold Report Australia – www.goldreport.com.au

GRA Weekly Report

These are the top 5 announcements for the week ending the 19th of Jan 2007

Bolnisi Gold NL has announced an initial gold/silver resource at the La Patricia prospect in Mexico. The Non-JORC compliant Inferred resource is stated to contain 3.6Mt @ 1.49 g/t Au and 35 g/t Ag for 171,000oz gold and 4.03Moz silver. A low cut-off of 0.15g/t Au and 10 g/t Ag has been used and been converted to a gold equivalent of 0.8 g/t. 

Lihir Gold Ltd announced an update to the market regarding the merger between Lihir Gold Ltd and Ballarat Goldfields NL. The merger is to be achieved through a scheme of arrangement, requiring Ballart shareholder approval through a vote to be conducted on the 12^th of February 2007. Lihir Gold is offering 5 shares for every 54 shares in Ballarat Goldfields. 

Oxiana Ltd evaluated recent drilling at the Prominent Hill project and has concluded that the drilling clearly demonstrates that the Copper-gold system extends at least twice as far as previously outlined and that there is high potential to significantly expand the Prominent Hill resource. 

PlatSearch NL have signed a Joint Venture with Newcrest Operations Ltd (Newcrest) over the Mirikata project in the Gawler Craton, located approximately 20 SW of Oxiana’s Prominent Hill project. The basic earn-in terms are for Newcrest to spend $2m over 5 years to earn 70%, with a minimum of $100,000 to be spent by 30 June 2007. 

Norton Goldfields Ltd have entered into an agreement to acquire the Mount Morgan Gold Mine Tailings Project. The project contains about 4 million tonnes of tailings and mullock containing 225,000oz of gold at an average grade of 1.69 g/t Au. About 180,000 oz is expected to be recovered over a four-year period. The project also contains a further 4 million tonnes of low-grade sulphide tailings and 6 million tonnes of slag.

Gold Report Australia – www.goldreport.com.au

Gold Price breakout

The gold price appears to be forming another diamond pattern. This is almost identical to the pattern that formed late last year and which resulted in a $40 upward movement.

GRA Weekly Report

These are the top 5 announcements for thew week ending 12-1-2007

Bendigo Mining Ltd has ceased production to focus on exploration and building reserves in more productive areas of the goldfield. The company achieved a head grade of 4.7 g/t Au for November and December, which was significantly lower than expected results and was attributed to over-estimating the potential of historic areas.  The plan over the next 18 months is to test a 2 million oz Inferred resource target to a depth of 1,200 metres.The Managing Director and CEO, Mr Doug Buerger, and the General Manager Geology, Mr. Garry Johansen, have both ceased employment with the company. The Chief Operating Officer, Mr. Rod Hanson will assume both roles.The company will also write down $90 million of non-current assets, subject to audit opinion, generating a substantial loss for the current financial year.Bendigo shares dropped by 60% on the strategy change and St. Barbara Mines Ltd acquired 10% of the issued shares in Bendigo Mining on Friday. 

Agincourt Resources Ltd have confirmed the presence of the a significant new gold and silver mineralised Epithermal system at the Kapur Gambir district, with mineralisation having been intersected over a strike length of 800 metres and is open in all directions. 

Emperor Mines Ltd has reported that members of the military forces entered parts of the Vatukoula gold mine, claiming that they were acting under orders from the senior commanders in Suva. Soldiers entered the mine, identified themselves, demanded keys, entered company property and occupied parts of the mine complex, claiming they were under orders to secure the mine. 

Beaconsfield Gold NL has asked for shareholders to renew their approval of the issue of 60 million shares to sophisticated and professional investors should the opportunity arise to secure full ownership of the Beaconsfield gold mine. Beaconsfield Gold has made an offer to Macquarie Bank for the unsecured debt of the Allstate group. 

Goldstar Resources NL has confirmed that all major asset of the company were secure and had suffered no damage as a result of the bushfires at Christmas. The company has also commissioned the skip-way haulage system that will be used for the bulk sampling program at the Eureka Project.

Gold Report Australia

GRA Weekly Report

These are the top 5 announcements for the week ending 5-1-07

Oceana Gold Ltd announced that dry commissioning of their plant at the Reefton Gold Project, on the south island of New Zealand, has started. The Reefton project is a surface deposit of 6.65 Mt @ 2.56 g/t Au and the 1Mtpa plant is expected to produce about 500,000 oz over a 7 year mine life. 

Diatreme Resources Ltd is in the process of spinning out its 13 gold tenements and it’s interest in the Tick Hill Gold Project into a new company called Xtreme Resources Ltd. A prospectus is being prepared with a view to applying for admission to a recognised stock exchange. 

Haoma Mining NL has begun production from its Bamboo Creek plant, with 1.75kg gold and 4.4kg of silver were produced from stripping 2.5 tonnes of carbon. The plant is currently operating 24 hours per day and processing an average of 700 tonnes of low-grade ore per day and is cash positive at the current rate of production. 

Intrepid Mines Ltd has completed drilling to test the down dip extension of the Paulsens orebody to 490 metres below surface, with the best drill results being 10.7m @ 15.8 g/t Au and 4.8m @ 68.4 g/t Au. The deepest significant intersection was 150m below the base of the current reserve. 

Perseverance Corporation Ltd has reached the 90% ownership of Leviathan Resources Ltd, which has now triggered the compulsory acquisition of the remaining shares in Leviathan.

Gold Report Australia – www.goldreport.com.au

GRA Weekly Report

These are the top 5 announcements for the week ending 15-12-06.

Conquest Mining Ltd has extended the Silver Hills Gold mineralisation to the East and is still open, with hole 60 intersecting 85m @ 3.39 g/t Au. The company has completed 45 RC holes and 11 diamond drill holes, with a resource estimate expected to be completed by the end of January 2007.

Oxiana Ltd has signed a new employment contract with Managing Director Owen Hegarty. The $1.3m per annum contract with short & long term and retention incentives is designed to see Mr. Hegarty remain with the company, where he’s played a major role in the expansion of the market capitalisation from $20m in 2000 to $4.4 Billion in 2006.

Wedgetail Mining Ltd has announced further high to medium grade, near surface drill results from four prospects at the Nullagine Gold Project. Drilling at the Falcon, Buzzard, Condor and Angela prospects continue to deliver good results and are all located within reasonable distance from the Golden Gate proposed pit.

Avoca Resources Ltd will proceed with the development of the underground Trident gold mine at the Higginsville project. The resource of 3.5Mt @ 5.8 g/t Au (655,000oz) is expected to be mined at 160,000-190,000 oz per annum at a cash operating cost of A$369/oz for four years. It is expected that further resources will be defined to expand the mine life beyond 4 years.

Centamin Egypt Ltd has returned further spectacular high-grade drill intersections at the Sukari Gold Project. The result of 8m @ 101.71 g/t Au was interpreted as the continuation of the previous intersection of 111m @ 15.05 g/t Au.

Gold Report Australia – www.goldreport.com.au

Gold Price

We expect to see the gold price continue to move up slowly, with some pull backs. This pattern is similar to Feb - March 06 which preceeded the April – May 06 uplift.

We expect to see the same pattern emerge as we did in Feb – May 06, with Jan – Feb 07 as the peak. See previous gold price articles.

 Gold Report Australia

Why Gold ?

Gold has held a special, almost subliminal, place in the heart of the human population for thousands of years, since the Egyptians started stamping gold bars with the symbol of the Pharaoh of the time from about 4000 BC. 

Before the development of coinage, gold was held and used by priests and monarchs to demonstrate power and wealth, with smaller amounts used for jewellery and other forms of personal adornment. 

As a metal, its physical properties and that fact that it isn’t very abundant in the earths crust makes it an almost useless metal for common practical usage. Paradoxically, these same properties also made gold, along with silver, the most common sense substance as a store of wealth and medium of exchange.  

In simple terms, gold has been money ever since the first recorded account of using gold to simplify financial transactions and has been widely accepted as a global currency ever since the Lydians started using it about 700 BC and king Croesus firmly established an efficient coinage system around 550 BC 

The Lydian people of Asia Minor (Turkey) were said to be the first people to mint and use gold and silver coins and they were also the first retailers to use gold and silver as a medium of exchange.  

The Lydians developed the touchstone, as a purity test, which was a local stone that gold objects were rubbed against and the mark left on the stone was compared to 24 needles containing varying degrees of gold and silver, gold and copper and all three metals. The 24^th needle was 24 carat pure gold. 

The Lydian people also created the state monopoly of the issuance of coinage to control wealth and power. This state monopoly system has continued to this day with every country around the world having the power to coin, or create and control, money. 

Other items of value have been forms of money in the past with varying degrees of success due to terms of exchange. Items like cattle, slaves, spices and shells were classed as money in different societies, but gold, due to its physical properties was easy to standardise and it also simplified exchange, once testing of weights and purity could be carried out. 

Paper money was development in the Middle Ages to replace gold as inflation created increasingly larger transactions, making the transporting of large amounts of gold risky and cumbersome. As an insurance measure, a country’s paper money was backed by the amount of physical gold held in reserve. This gold backed, paper monetary system, was called the Gold Standard. 

Paper money was basically the first widespread monetary derivative. 

The Gold Standard worked well for hundreds of years as the monetary system was expanded to include various other forms of derivatives, currencies and stores of wealth like shares, cheques and bank accounts. 

After the 1929 stock market crash countries needed to boost consumer spending to invigorate their economies, but with the restriction of only being able to have in circulation paper money to the same value as bullion stored, countries soon abandoned the Gold Standard and by 1934 countries were printing money as fast as they needed. This policy continues today. 

As each country was able to create its own money, at whatever level the rulers wished, other derivatives were also developed with many dramatically surpassing their under-lying value. Today the value of the gold derivatives market alone is around 20 times larger than the physical market in the metal. 

Gold, in its physical form, has been in use as the primary basis of money and wealth for around 6000 years and in less than 80 years, since the abolition of the gold standard, the rulers of power have developed ways to replace gold with other, more easily manipulated forms of money. 

Gold is extremely durable, it doesn’t rust or rot, it can’t be reproduced at will or counterfeited, it can take many forms and it’s relatively scarce in nature. These basic intrinsic properties create the real value of gold that exists today, at the very least and if not more than ever. 

The basis of the value of gold underlines the message that every Australian with an interest in the continued prosperity of this country should have a stake in the Australian gold sector.

This is one of a series of articles on gold and the Australian gold sector.

Copyright  2006 – Gold Report Australia – All rights reserved

Purchase physical bullion

In Australia, these are the two main (safest) ways to purchase physical bullion.

West coast of Australia – Perth Mint – http://www.perthmint.com.au/gc/

East coast of Australia – Australian Bullion Company – http://www.ausbullion.com.au/

You can also purchase gold from jewellers and successful prospectors, if you can find one. Look at a local pub in a town near an old goldfield, as some great specimens can be bought from prospectors and people with metal detectors

The Australian gold sector – the trains leaving

The average person doesn’t realise that the Australian gold sector is the fourth largest export earner for the country, at $6 billion per year, behind oil & gas, coal and iron ore and that the future of the gold sector has essentially been ignored by the Federal government. 

The treasurer, Peter Costello, wasn’t interested in the introduction of a Flow Through Share Scheme to ensure the gold sector would remain strong and continue to add significantly to GDP, but instead decided to introduce the Managed Investment Scheme, a similar product giving tax benefits to investors, that has led to companies, especially in the forestry industry, seeing exceptional growth since it’s inception. 

The massive wealth creator, that is a countries gold sector, has been embraced by China, which is set to take the lead as the top gold producing country in the world through the dramatic liberalisation of their sector over the last four years. China is already the world’s fourth largest gold producer behind America, Australia and South Africa and the top three have essentially remained stagnant due to the lack of large-scale exploration in the past 10 years. 

Since the gold price started to move upwards in 2001, China put measures in place that allowed large-scale foreign investment in China’s gold sector, removed bans on private ownership of bullion and more recently started marketing gold as an investment category and store of wealth to the Chinese people. 

The Chinese government also realised that modern exploration, development and management techniques were the key to the successful development of their gold sector and have put systems in place that is producing a quantum leap in its development.With Australian companies being rated as some of the best in the world when it comes to finding and developing mineral resources, it’s no accident that the best performing foreign gold company in China is Australian. 

What has the federal government done to ensure that one of Australia’s largest export industry’s remained strong? Absolutely nothing! 

Throughout the late 1990’s when exploration funding had declined to critically low levels, professionals and the skilled labour force were leaving in droves to pursue more lucrative careers. At the same time the industry was constantly lobbying the government about the need for support, to at least retain status quo with its labour force. Now the costs associated with finding and developing resources have blown out dramatically because of labour shortages. 

So, what’s ahead for the Australian gold sector?

It’s a good bet that share prices in Australian gold companies will see more growth as the gold price continues to climb. Fund managers entering the market again in the same fashion as in Q2 this year, could see US$1000/oz broken for the first time signalling an increase in demand for shares in both producers and explorers as retail investors scramble to take advantage of rising profit margins and exploration success.

It’s no doubt that the Australian gold sector will survive, but the days of this country being one of the top three largest gold producing countries in the world, including the economic benefits and steady growth in research and development of technologies that made the Australian gold sector what it is today, looks set to decline rapidly over the next 10 years.

If the Australian federal government had taken the initiative, as China did four to five years ago, the benefits that will be gained in the paper boom to come could have been exponentially greater and the future of the industry would have been ensured for generations to come.

Australia didn’t become the nation it is today on the back of a sheep. It was the minerals industry in general, with the Australian gold sector playing a major role in our development and we shouldn’t forget it.

Gold Report Australia

Gold Price

We expect short term consolidation around the current level and a new upward movement late this week or early next week.

Gold Report Australia

Gold Grades

The following are considered break even and high grade for each type of operation

Open cut – A break even grade is about 1.5 grams per tonne gold (g/t Au), depending on the tonnage, depth and amount of over burden. Above 3.5 g/t Au would be considered high grade also taking into consideration the same factors.

Underground – A breakeven grade would be around 8 g/t Au, also taking into consideration mining dilution and depth. Above 10 g/t Au would be considered high grade.

These can only be considered a ‘rule of thumb’ as a lot of other factors also need to be taken into consideration to reach a final break even figure.

Gold Report Australia

GRA Portfolio

The GRA portfolio for the week ending 10-11-06 (after about 6 weeks)

Investment 1 - even at 17 c

Investment 2 – Up to 83 c, from 54 c

Investment 3 – up to $1.49, from $1.13

Investment 4 – up to 34 c from 27 c

Investment 5 – up to 35 c from 31.5 c

Our bullion warrant position is up almost 80% for 2 weeks

Gold Report Australia

Gold price winner

Well we got another win on the gold price, with it passing the test…just. We expect $650 will be passed quickly and maybe even $700 in a week or so.

We expect it to keep going now that the Chinese central bank has announced that they will be buyers of gold. For China to lift their bullion holding to the international average, they need to buy 2 years of global production

Gold Report Australia

The three asset classes in the gold sector

There are three asset classes in the gold sector and the potential gains that can be made with these can be measured in their percentage upside.

1. Bullion and related products (% gains = 10′s)

2. Quality gold mining companies (% gains = 100′s)

3. Quality gold exploration companies (% gains = 1000′s)

Gold Report Australia

Gold price being tested now

We were spot on with the last price rise. About $30 in three days.

Wait and see what happens tonight as it needs to stay up above $618 for another day

 Gold Report Australia

Gold breakout?

It looks like gold may have broken the resistenance line. Keep watch for an explosion in the price.

Gold Report Australia – GRA website

The GRA website is a specialised information system and research tool to help investors interested in the ASX listed gold sector. It was designed and built by Gold Report Australia Pty Ltd.

Gold Report Australia Pty Ltd is a private investment company specialising in all levels of the Australian gold sector.

Members use the website to conduct their own research and to also see how Gold Report Australia Pty Ltd uses the system for investing in ASX listed gold companies through access to its portfolio and investment briefs.

The basic information system allows members to evaluate the listed Australian gold sector within 15 minutes everyday and helps to focus on the best investment opportunites through a simple daily comparison of the whole sector, backed up by an easy to use research database.

GRA has made its information system available to the general public to hopefully increase:

1. The number of investors in the sector;

2. Volitility in the market;

3. Supply and demand on shares;

4. Profit for everyone.

Gold Report Australia

Australian gold companies are greatly undervalued

Media Release

“Quality ASX-listed gold companies are undervalued by up to 50%, and for some junior explorers in the sector the figure may be 100% or more”, according to Rod Holden, managing director of Gold Report Australia (GRA), a private investment company specialising in the Australian gold sector since 2001. 

GRA expects to see a massive re-rating of Australian gold companies, starting in Q4 2006, as investor interest returns to the sector on the back of renewed buying of bullion by funds, which GRA believes will push the price to new levels – similar to the highs of Q2 2006.

“Based on our assessments of gold price movements over the last four years, technically, once the gold spot price re-breaks US$600/oz and stays above US$618/oz we should see a new high of US$787/oz reached by the end of this calendar year, and this may be only the beginning,” says GRA.

GRA believes that fund managers entering the market again this quarter, similar to Q2, could easily see US$1000/oz broken for the first time signalling massive demand for shares in both producers and explorers as retail investors scramble to take advantage of rising profit margins and exploration success.

“Of the 442 ASX listed resource companies that we watch, 365 have gold projects and we believe the ones with quality projects, a good management team and board, will be massively re-rated over the next three to twelve months, based on the market cycle and where these companies sit within that cycle.”

GRA also expects to see further consolidation of the Australian gold sector over the next year as the larger producers struggle to maintain their resource base due to the lack of large-scale exploration in the past 10 years.

Apart from being an investment company Gold Report Australia operate a research and information system specific to the ASX-listed gold sector, available to the public through its website at www.goldreport.com.au

Is the RBA gold vault empty?

From unofficial statements made by various RBA staff, all of the gold is out on loan.

How did the RBA get into a position where the gold holding on their financial statements, stated to be 79.8 tonnes, doesn’t really physically exist?

As usual for central banks, in the past the RBA have been loaning their gold to fund things like mine development with the view that the lender would deliver the gold back to the bank at a later date.

If the gold price goes up, the lender is better off to repay the loan in cash rather than bullion.

For accounting reasons, the RBA still has almost 80 tonnes of gold, but it’s really only paper gold

Example:

In 1999, ABC mining needs $30 million to fund the development of their new mine.

The RBA lends ABC Mining $30 million worth of physical bullion from their vault (100,000 oz) at $300 per ounce plus interest (usually about 1.5%) for 5 years.

ABC Mining takes delivery of the bullion (100,000 oz) and sells it on the market at the spot price ($300/oz in 1999) to raise $30 million and fund their mine development.

In 2004 ABC Mining needs to repay the gold loan, but the spot price for gold has risen to $600 per ounce. Instead of delivering 100,000 oz of bullion back to the bank (value $60 million) they pay the loan out with cash, plus the interest.

The World Gold Council states that in countries around the world, the official gold holding of central banks is almost 30,000 tonnes of gold in reserve, but the question remains, how much is really there (physical gold not paper gold for accounting reasons)?

Gold Report Australia

NB: the gold price in the example has been estimated for ease of understanding

GRA portfolio

Week ending the 20th of October 2006

Our portfolio is up by 12% after the first few weeks. We expect a price run starting next week, in conjunction with the gold price run.

Gold Report Australia

The GRA gold price tip

We expect that the gold price will reach US$650 by the end of October 2006 (currently US$599/oz on the 20th of October 2006) and US$780/oz by the end of December 2006….as long as we get through the all important US$600/oz barrier, followed by the US$618/oz and US$650/oz barriers

Gold Report Australia

It’s nation building and a great investment

Every Australian who has money available for investment should have a stake in the Australian gold sector !

What is the RBA doing with our bullion

In 1997 the Reserve Bank of Australia (RBA) sold 197 tonnes of bullion, which at the time was about two thirds of their holding and retained just under 80 tonnes. The holding since then has remained static at this figure.

Apparently, in the last year, they’re selling some gold coins into the spot market and having them melted down to also sell into the market.

 They sold a large percentage of their (our) holding at almost the bottom of the market 

Possible diamond formation

The gold price chart appears to be forming a diamond pattern. The formation of a diamond pattern can sometimes be an indication of an explosive price movement.

 

GRA Portfolio

Week ending 13th of Oct 2006 

The Gold Report Australia (GRA) portfolio is still in the money. The timing of entry has proven to be important and companies that we recently purchased should outperform the general market next week.

Gold Report Australia

Flow through share scheme

The Flow Through Share Sceme (or”FTSS”) is about to be put to the National Party, as Mr Costello wouldn’t have a bar of it.

The FTSS is where investors in a company get the tax deductions for exploration, instead of being carried forward by the company.

This investment system was responsible for Canada becoming the top country for exploration and about 80% of the world’s exploration money flows through Canada and on to fund exploration in places like Australia.

The introduction of a FTSS into Australia would slow the international holdings of Australian companies…they’re taking over quietly!

The Australian gold sector is now about 65% foreign owned….that’s 65% of $6 BILLION per year (and our 4th largest export) leaving the country

Citigroup – US$700

Citigroup expects the gold price to hit US$700 per ounce by year end 2006….at GRA we expect higher

Look out for 1.

Lesson #1

Be aware of companies that the “vend” or current shareholders is above 40% in an Initial Public Offering or “IPO”. Why should investors put most of the money up (usually between 50% and 70% of the total) without getting the appropriate percentage of the listed company in return?

Having said that you also need to take into consideration the project valuation and corporate structure, but generally speaking the small cap companies floating at 20 cents, with free attaching options are what we’re talking about.

Gold Report Australia

Investing in the Australian Gold Sector

This post is a copy of my presentation  at the Excellence in Mining and Exploration conference at the Hilton Hotel in Sydney on the 8th of October 2006.

“Thank you Mr Chairman for the introduction, OK, why the gold sector as an investment category? 

Over the last 2,500 years, gold has always been a great investment when times are tough. With the huge debt issue in the US, terrorism uncertainty, energy, water and environmental issues, rising interest rates and inflation……gold as an investment category in its own right has been increasing in popularity since 2001, but especially in the last year.

 So, lets have look at the global gold sector: 

1. On the supply and demand front the global supply/demand tonnage for 2006 has been about 820 tonnes per quarter; therefore supply and demand are reasonably even.
2. Gold Derivative turnover is very hard to estimate but figures indicate the physical market (i.e. supply/demand) is only about 5% of the derivatives market, making derivatives by far the biggest factor affecting the bullion market in general, with real potential for price manipulation.
3. The Central banks are said to be holding about 30,000 tonnes of bullion, but some say due to gold loans it’s more like 10,000 tonnes. In fact I rang the Reserve Bank of Australia in 2002 to ask if I could take a photos of bullion for our website and they told me that the gold was out on loan and that the vault was empty, even though for accounting reasons the bank officially holds about 80 tonnes of gold.
4. China has been deregulating its gold market over the past couple of years and we have all seen the potential of China to affect commodity prices when they decide that they want to increase demand.
5. On the spot price we’ve seen a price high of $716 US on the 12^th of May this year, which was $922 per oz in Australian dollars…a new Australian record. We still haven’t reached the all time high of $800 US per oz that was reached on the 21^st of January 1980 and at that time the price of gold in Australian dollar terms was $744 per ounce. So, we still have some way to go to reach a new international gold price.
6. Market sentiment, which has always been a driver of the gold price, has changed to the positive now and the general investment population is just starting to pick up on gold as an investment, or at the very least as a hedge against financial uncertainty.

  So, that’s the global scene, now let’s have a look at the Australian gold sector 

The Australian gold sector is the 4^th largest export earner for the country at about $6 billion per annum. The top three are oil/gas, (grouped as one) coal and Iron Ore. The Australian gold sector is about 65% foreign owned. 

Australia is the third largest producer of gold behind the US and South Africa, but that will probably change over the next few years. As a country we missed out on the opportunity to introduce a flow through share scheme, which would have been a great to kick-start the exploration industry from say 2001 to 2003, but we basically got managed investment schemes for the forestry industry instead. The introduction of the flow through share scheme could have possibly seen Australia hold its global production ranking for years to come and keep those important export dollars. 

Having said that, the gains in commodity prices has seen a substantial flow of capital into the exploration sector generally, especially over the last two years. 

There are a few hundred companies searching for gold in Australia, most of them listed on the ASX, with some duel listed in the UK and Canada because the international markets are structured differently than here and for some companies these markets are easier to raise capital in. I expect that we’ll see changes in the way that the Australian market is structured over the next few years purely for reasons of competition for business. 

It has been widely (and possibly wrongly) stated that the top 200 metres of Australia, from the surface down, has been pretty heavily explored, with some areas having had dozens of companies scratch the same piece of ground over the decades. 

Generally speaking technology and systematic exploration strategies are being used in Australia like never before and we believe that through this some great discoveries will be made over the next few years. 

The investment risk factors can be seen largely as technical and from a purely sovereign risk perspective, Australia is a safe place to explore and develop mineral resources. Relative to the rest of the world, we have very few problems with title and continuing ownership. 

So from an overall viewpoint, the gold sector generally has merit for further price rises and capital gains and we believe that the Australian gold sector mitigates some of the potential risks that faces other countries. Also, Australian gold companies are cheap on an International market.  

So, that’s the reason we’re investing in the Australian gold sector.    So, this brings us to……how do we decide where to invest our funds? 

Apart from the obvious, like unhedged or low-hedged producers and companies close to production, our main area of interest is in the junior exploration sector……as that’s where the best capital gains are to be made, we’ve all seen the massive share prices rises based on a new discovery.

So on that front, we look at the basic business model of a potential investee company and to start off……I’ll tell you what we don’t invest in. 

We don’t invest in companies that conduct most of their business through joint ventures (JV’s), i.e. picking up ground, making a story interesting and getting someone else to take the capital risk on exploration…….as that model is giving away 95% of the risk, but also gives away 95% of any potential reward, so where’s the growth profile. Don’t get me wrong; JV’s are great in the right circumstances 

Exploration is inherently a risky business, so if we invest in a gold exploration company, we expect the company to take on that risk, but put practices in place that will mitigate the risk as much as possible.

We also don’t invest in companies that could be described as milking the market for board, founder and management interests. We expect our investment dollars to be spent on exploration that will best enhance the growth potential of a company, especially through drilling. Drilling holes is the only way to really discover an orebody.  

I don’t apologise for not treading lightly here, as there are some very high quality people and companies in this industry and these companies usually find it hard to get real investor interest and get their message across because investors are swamped so much rubbish from the other end of the market that sounds similar……it’s almost a cry wolf scenario. 

We have a few other factors that will convince us not to invest, but what I have just said are the main ones. 

So what do we look for? 

We look for undervalued companies that understand the basics of successful exploration….which is…..the application of perseverance to a well-funded strategic, systematic exploration program, obviously to a good geological model in the right area.

We look for project focus, a management team that has good board support, a reasonable corporate structure (i.e. how many shares on issue, options, who are the shareholders and how much do they control, etc) and we look at the cash burn rate of a company (i.e. the project versus board and management which gets back to what I just said)  

So, now we come to how we evaluate the data from the hundreds of companies listed on the ASX and make an investment decision. This is where the Gold Report Australia information system comes in to play. 

Some background here is probably relevant  

Myself, having worked in the mining and exploration industry throughout Australia for several years…..and after the gold price bottomed in 2001…….I developed a keen interest in ASX listed gold companies but found it hard to research all of these companies concurrently and I was continually scouring several forms of media for cutting edge information that would allow me to conduct my research before investing, but not to miss out on any potential price rise. So, through necessity, I developed the concept and had some computer programs built that would do this work for me and it made sense to have it as a web application. 

After establishing Gold Report Australia and the information system, the value of our portfolio increased by almost 61%, for 2002, when most fund managers, at the time, were achieving single digit returns at best.  

In late 2002 an opportunity arose that changed my focus and allowed me to put together, a large high quality gold project, which effectively gave us the best risk/reward strategy for taking a substantial position in the Australian gold sector as a private company.  Since then we have grown that project valuation from less than $1m to $12m, achieved in May this year based on the corporate structure of the last capital raising, and we are in the process of exceeding a $25m valuation over the next year or so, before implementing a $45m development strategy. 

As I am now in a position to take a step out of that project, our investment focus has now returned to ASX listed companies and I have put togther a very experienced team that will take the best advantage of the Gold Report Australia information system. 

The Gold Report Australia information system is a research tool designed specifically for the Australian gold sector. It is totally independent as we receive no fees or commisions of any kind what-so-ever from any investee companies, broking or financial houses anywhere. 

We have applied the KISS theory to this web based tool, to just keep it simple, which makes it really easy to use……with no advertising. It is a simple tool that works very effectively. We also show you what we invest in and explain why as I wish to share our knowledge to help investors become educated about the pro’s and cons of the exploration industry. 

So, if you would like to know more, feel free to visit our website at the URL on the screen, which is in it’s final testing mode as we speak. Regardless of last weeks gold price, it’s still trading in the 5 year upward trend and we expect another 5 years before any major correction. Good luck in the market.”