 Risk Free Gold
Bob Moriarty
Archives
Oct 8, 2007
From the $252 low in gold in
late August of 1999 until the 18th of September of 2007 there
has been risk to owning gold. But when Ben S. Bernanke lowered
the Federal Funds rate by a full 50 basis points to 4.75% on
the 18th of September, he removed all risk to gold. Yes, gold
will continue to correct now and again but in his panic, Bernanke
showed the only real risk is to savers of dollars. The dollar
is dead, long live the dollar.
I was on another trip to Alaska
and British Columbia, trying to see a few more projects before
being cut off by winter. I saw some great ones and I want to
bring them to your attention.
But first I think I should
bring you up to date on what I think the most important events
of the day are. There are two earth-shaking events in progress,
one barely visible to most investors and the other so unthinkable
that the public simply stick their heads in the sand.
We are in a liquidity crisis
and the reaction of Fed Chairman Ben Bernanke should give you
a clue as to how you should react. Ben Bernanke panicked
and when Ben panics, so should you. Those who should know better
call it a sub-prime crisis. It's nothing of the kind. We have
a $460 trillion dollar pile of used toilet paper and the first
smelly piece sticking to the bottom of our shoes is the sub-prime
sector. But just because it's the first piece showing up hardly
means it's the last.
Derivatives grew wildly out
of control starting about 2001 when the stock market should have
crashed. Greenspan saved the day by flooding the market with
cheap paper. Derivatives were about $100 trillion six years ago
and are somewhere north of $460 trillion dollars today. That's
$76,666 per man, woman and tiny tot on earth. It's out of control
and it's all fraud. Half a dozen people on earth understand the
issue and Ben Bernanke isn't one of them. Derivatives are out
of control because they allow "hedge funds" to speculate
on what should be zero sum investments, yet they themselves determine
if they have made a profit and when they have made a profit,
they keep 20% of the take. It's gone on for years and much of
the $460 trillion dollars worth of notional value is fraud.
It showed up first in the sub-prime
market but hedge funds are exploding all over the world like
Christmas crackers. At the end of the day, most of the 8,500
funds will be history, as will the paper assets of pension funds
and all the major banks.
It's this simple. We have a
worldwide crisis of confidence in paper assets caused
by cheap money hurled to the masses by Alan Greenspan. We are
not going to fix the problem by having Ben Bernanke hurl more
cheap money to the masses. Ben can destroy the dollar and all
the savers in the world by bailing out malinvesting but if cheap
money was the basic problem, it simply cannot be the solution.
As nasty as that sounds, that
isn't the biggest issue the world faces today. The Gang of Fools
in the White House is determined to attack Iran with nuclear
weapons. For 15 years Zionists have pushed the "Iran is
the Nuclear Boogie Man" concept. It's all part of the "Clean
Break from the Peace Plan," part and parcel of the NeoCon
agenda. Well, nuking your neighbors is certainly part of breaking
from a peace plan.
Bush and the rest of the Chicken
Hawks have lost three wars in a row. Our military has been destroyed.
The average Girl Scout troop is better equipped to handle combat
than the tattered remains of our Marines and Army soldiers. We
are going to nuke Iran because we don't have a fighting force
left. We are going to attack a country that hasn't conducted
a war of aggression in 2,000 years on the thin premise that they
might.
Needless to say, we are going
to lose. We aren't going to be fighting a bunch of leaderless
rag-tag guerrillas such as we face in Iraq. We will be fighting
a country with 65 million people and a trained army that went
through a decade-long war with Iraq. We will kill hundreds of
thousands of innocent people before we are through but in the
end, the United States and Israel will disappear from the sands
of times. It's that dangerous.
Iran is not the enemy of the
United States. Any attack on them will convince all sane people
in the world that the United States is a rogue state. There will
be consequences that most Americans simply refuse to face.
Bush, Cheney, all the Zionist
fools in Israel have lost three wars in a row. Betting on those
folks in combat is probably the worst idea I have ever heard.
We are going to lose.
That cheerful message aside,
owning gold and gold mining shares is now the safest investment
in history.
Little Squaw
My first trip was to a 100-year-old
mining district well north of the Artic Circle called the Chandalar
Mining District as the guest of the President and CEO of the
Little Squaw Gold Mining Company, Dick Walters.
The Little Squaw Gold Mining
Company was formed in 1959 but its origins go back to 1906 when
a partnership made up of Thomas Carter from Montana, a Japanese
immigrant to Alaska named Frank Yasuda and Frank's Eskimo wife,
Nevelo, discovered gold in the Chandalar River Basin where they
found gold at Little Squaw Creek named for Frank Yasuda and Nevelo's
little girl.
The group mined a rich placer
deposit and later, while picking berries, Nevelo and young daughter
Hana discovered a series of rich gold-quartz veins on the hills
overlooking the creek, the hard rock source of the placer gold.
The area has been mined on
and off over the past 100 years. Both as placer mines and as
lode mines. Little Squaw was pretty much quiet, operating as
a land owner and receiving a percentage of the gold found for
years before coming under new management in 2003. Since that
time, Dick Walters and his team have breathed new life into the
old dog.
Dick Walters was the founder
of Yamana, once a $.10 stock, now at $11 with a $4 billion dollar
market cap. He intends much the same at Little Squaw gold with
the Chandalar district as his prime mover.
I really enjoyed my visit and
meeting Dick's well qualified team. Dick began talking
to us three years ago when the company was basically in dead
man's corner. The stock was selling for peanuts. Without results
they couldn't raise money and without money they couldn't deliver
results.
Somehow, Dick managed the almost
impossible. He increased the number of shares four-fold but the
market value of the company eighty-fold. His team is in the midst
of conducting a two-pronged exploration of the Little Squaw region.
One team, headed by Jeff Keener
has completed 4700 meters of RC drilling to outline a placer
resource in a fan area at the base of Little Squaw Creek. Jeff
is probably one of the top three placer experts in Alaska. If
you want to understand and model a deposit, he's the guy.
I know "Placer" is
a four-letter word in the mining finance business but it's an
absurd view. Almost half the gold ever produced came from placer
operations; it was the standard for most of history. But there
have been so many scams around placer operations over the last
30 years that by and large Vancouver and Toronto financial wizards
refuse to consider placer mining for investment.
They are missing the boat.
It is far cheaper and far faster to get into production. With
$730 gold, are you interested in a company that could be in placer
production in 18 months or a hard rock company looking at 6 years?
Little Squaw is playing both
angles. They have announced a 189,000-ounce placer resource as
I write this piece and indicate the potential for five times
as much. They have drilled out 7.5 million yards of placer material
worth $17 per yard at $700 gold. As a rule of thumb, all placer
mining consists of is moving dirt. They can move and process
a yard of material for anywhere from $3-$5 a yard even flying
in their fuel. In my view, management needs to be planning on
placer production as soon as possible. I'd like to see a few
million put into equipment and get it cranking out gold. The
placer operation can provide all the cash necessary to prove
up some hard rock ounces.
This area is rich in gold but
due to its location, has been way under explored. The property
was tied up in litigation for years and has simply been bypassed
by the industry in general.
Saying they need to get into
production on the placer side does not do justice to the hard
rock potential. There are numerous outcrops on the hills overlooking
the various drainages. The hard rock exploration is under the
control of Rodney Blakestad, VP of Exploration for Little Squaw.
The 2007 program calls for
1,250 meters of trenching to be done in 30 separate targets.
Due to high demands on labs, drill results and soil samples have
been running months late for a couple of years now. Companies
in the Arctic such as LITS are particularly crippled
by a lack of data due to their short working season. Results
to date are encouraging but there are a lot more assays to be
announced over the next few months.
I'm going to crawl right out
on a limb and make some wild predictions but lack of data from
assay results would really prevent a reasonable investor from
understanding what Little Squaw really has on their hands. This
region has a lot of history mining in various areas. Grades underground
run anywhere from a third of an ounce up to over half an ounce,
well economic, even this far north.
I crawled down into the trenches,
took samples and panned them. I got down and dirty and I saw
the rocks and the area. LITS has multi-million ounce gold potential
in a number of showings. I'd guess you would really want a minimum
of 2-3 million ounces of hard rock above 10 gram to have a viable
hard rock mine. LITS will have it easily.
I am interested in production.
At these prices, if you don't have a mine, you have a moose pasture.
LITS should make a production decision just as soon as possible.
They could be blasting and moving the barren gravel cover as
early as 4th quarter 2008 and they should. You can look at the
placer fan and shove a wetted finger in the air and see which
way the wind is blowing. Gold is going higher, much, much higher
and the fastest way to profit is to be producing placer.
I hate dilution and if Little
Squaw wants to get another few seasons under their belt before
making a production decision, there will be a lot more shares
outstanding. Dick Walters has done a brilliant job of resurrecting
the dead. He has brought Little Squaw an incredible distance
in four years. It's time to make a production decision on the
placer and with the profit from that, the company will have all
the time and money in the world to do a hard rock mine right.
We don't own shares and it's
not because I don't like the company. I really like them and
the team Dick has put together. But companies in the North Arctic
go through a boom and bust cycle every year as they go through
six months of no news at all. The company is reasonably priced
today but when three months goes by with no news, it will be
cheaper. Little Squaw is soon going to be an advertiser and I
am biased. You must do your own due diligence.
Little Squaw Gold Mining
LITS-OTCBB US$.96 (Oct
5, 2007)
36.3 million shares
Little Squaw website
Bob Moriarty
President: 321gold
Archives
321gold Ltd
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