E-Gold Indicated for Money Laundering

A federal grand jury returned the following indictments on April 24 with respect to E-Gold and its owner: each with one count of conspiracy to launder monetary instruments, one count of conspiracy to operate an unlicensed money transmitting business, one count of operating an unlicensed money transmitting business under federal law and one count of money transmission without a license under D.C. law. Subsequent to the indictment, the Department of Justice also obtained a restraining order on the defendants to prevent the dissipation of assets by the defendants, and 24 seizure warrants on over 58 accounts believed to be property involved in money laundering and operation of an unlicensed money transmitting business.

The indictment alleges that E‑Gold has been a highly favored method of payment by operators of investment scams, credit card and identity fraud, and sellers of online child pornography. The indictment alleges that the defendants conducted funds transfers on behalf of their customers, knowing that the funds involved were the proceeds of unlawful activity; namely child exploitation, credit card fraud, and wire (investment) fraud; and thereby violated federal money laundering statutes.

According to this, it appears that gold is passing the ultimate litmus test for validity as a currency: acceptance by organized crime. An anecdotal factor that is definitely gold bullish.

Charts of Interest

Some interesting charts.


Comments: SLW looks like it's getting ready to break out. SLW recently announced the acquisition of two new silver streams, including all of the silver produced from the Stratoni mine in northern Greece operated by Hellas Gold S.A. a majority owned subsidiary of European Goldfields for $57.5 million and, more importantly, 25% of the life of mine silver production from Goldcorp’s Peñasquito Project, located in Zacatecas, Mexico, for $485 million.



Comments: This company continues to issue press releases that are little more than fluff, at an alarming rate. Nevertheless, it is at around support at $5. Further support appears at around $4.50. Jim Sinclair wants a partnership with the Chinese regarding the Kigosi nickel exploration project. But the recent terrorist strike on a Chinese oil exploration base in nearby Ethiopia, which resulted in the killing of 65 Ethiopians, 9 Chinese and the kidnapping of 7 other Chinese, is hardly wonderful PR for Chinese resource projects in the Horn of Africa. Needless, to say, the attack didn't get any airtime whatsoever on JS's Mineset.com since JS's Mineset.com policy seems to be not to comment whatsoever on what is happening in the Horn of Africa region.

Comments: I predicted in late February, that the price target for GSS's breakout would be $4.90. I was only 5 cents off as GSS skied to $4.95 before selling off. After GSS's great run up, it appears that GSS is trying to find a bottom on its consolidation. I think around $4.25 and just below $4.00 are two areas where GSS could see support, assuming that Gold continues to sell off.

Tom recently gave the following, fairly exciting, update about GSS.

"Between now and May 10th I expect to see the following news released in either PR's or on the Q1 CC:

1) Commissioning of Biox.

2) A full month of Biox recovery rates and production numbers from Module #1.

3) The feasibility study from Hwini-Butre / Benso.

4) BoD approval of the above mentioned project. This is extremely important to the Wassa mill, as the blending of the new ore with the existing feedstock will increase production from 110,000 ounces to 200,000 per annum.

5) Possibly an increase in reserves as a result of the drilling programs there. If they do include the reserves, it should be very substantial."

Tom also provides the following update regarding the energy crisis in Ghana:

"The power problem is still there, but it is improving IMO. I monitor 14 sites in Ghana and Burkina Faso that feed the Akosombo Reservoir. The drought is over and the rains are increasing. Every week a handfull of the areas have between 1" and 5" of rain. In the meantime, the government is installing emergency generating units as fast as they can. The bottom line as I see it, is that for the remainder of Q2 GSS will be operating at a 75% power allocation, plus whatever they choose to produce themselves from their own diesel units. These units can potentially supply them with 30% of their total power, but are extremely expensive and difficult to keep running. Q2 should be profitable, but only by $.03-.04 as best I can tell at this point."

Tom predicted the imminent breakout of GSS in early November, commenting at that time on a press release ""Game winning home run in the bottom of the 9th!" At first, GSS didn't do anything particularly interesting, but within a few weeks after Tom's comments, GSS started to skyrocket on its way to a 66% gain.

In light of the foregoing, I think it would be a good idea to buy up GSS on this pullback. I already made a couple of buys.

Comments: AEM is close to support. A breakout of the slightly declining (bullish) wedge would lead to a rally of about +$8.

Trading Yamana Gold (AUY)

Comments: AUY has periods of in line performance with the HUI, followed by periods during which AUY strongly outperforms the HUI. I believe that AUY recently completed a period of outperformance of the HUI, as you can see in the chart above. Accordingly, even if the HUI rockets up, I think AUY will only follow in-line with the HUI, at least for a while. The period of in-line performance seems to last about 6 to 8 months.

Royalty Companies set to Underperform?

The COT numbers showed the all time second biggest net short gold position by commercial traders, which should be bearish in the short term.

If there is any pull back or consolidation, and I think there is a pretty decent chance of one occurring, two companies to be wary of are RGLD and TRE, both of which employ a royalty model.

Neither company really participated in the recent gold and HUI rally. The only caveat to that comment is that these two companies tend to be less correlated (for some reason) than the average gold mining company to the Gold indices, so it's possible that they may hang tough on any pullback. Still, I wouldn't bet on it.

Comments: TRE went nowhere fast during the recent upswing. With no significant royalty payments on the horizon and with press releases that would be best described as "fluff", it's probably not a big surprise.

Comments: RGLD, a fully developed company whose royalty revenues TRE could only wish for, also did not respond very positively during the recent gold rally. The surprising thing was that there was little bounce back after the recent share offering was completed. RGLD has solid royalty revenues from various properties, but with a P/E ratio of 44.7, it may be vulnerable.

Update: Compania de Minas Buenaventura SA (BVN)

Comments: BVN has broken out of a 1.5 year trading range on nice accumulation. I'd be a buyer on any pullback, such as the one that we are getting right now. BVN is an equity partner at the Yanacocha mine in Peru and operates 4 other smaller mines as well. Yanacocha, operated by Newmont, is one of the two biggest gold mines in the world. The main complaint against BVN has generally been that it has been a partial gold hedger. However, on March 9, BVN announced that it had bought back 25% of its hedge book, which apparently helped to spark the current rally.

Update on Kimber Resources (KBX)

Comments: After failing to get back up above resistance, looks like Kimber is falling away and will likely retest at least recent lows, especially if the gold price turns south for a change. The company recently announced, among other things, that Darren Klinck, Kimber's Vice President of Corporate and Investor Relations, who put up an excellent IR front on behalf of the company, will be departing the company. Despite my anger with the company because of their shenanigans, I really wish Darren all the best. He took his job very seriously and, in my opinion, he did a great job. He timely responded at length to all of my questions about Kimber. Too bad the company has performed so poorly.

HUI Approaches Sell Zone

Comments: I sold down as the HUI has been up four days in a row and is now approaching significant lines of resistance along the channel line and lateral resistance. I expect the area HUI 358 to 362 to provide significant resistance for reasons that should be obvious when looking at the chart above. The surprising thing is that Gold and the HUI isn't down more after the news of the release of the British serviceman by Iran. That potentially bodes well going forward as I was sure that Gold would come at least temporarily under pressure following the revelation that they aren't going to get the Abu Ghraib treatment in Tehran. GSS and CUP did best for me during the recent run, TRE did the worst.

The Spin Starts Here

I guess you sometimes have to excuse Jim Sinclair for some of his more over the top comments at his website www.jsmineset.com . After all, Jim is a gold fan and enthusiast.

When you see statements like "the man in charge in Iran now was the man in charge of taking US hostages in the Carter Administration" you just have to grin and bear it, even though you know that nothing has ever been found to support the statement and believe me, if there was the slightest piece of evidence to support it, the current U.S. government would have jumped at it, not to mention the fact that the current President of Iran appears to look younger than the hostage taker in the pictures that have been circulated in media reports, which seems a bit inexplicable, considering that 27 years have passed since the incident.

And then, there are grave warnings on Jim's site about the recent protectionist measures imposed against China, with grim references to the protectionist Hawlet-Smoot Tariff Act of 1930, while a free trade agreement with South Korea that is the largest of its kind since NAFTA is dismissed by Jim as irrelevant.

That's all fine, since, like I said, Jim is an enthusiast so a little bit of spin is expected (even though his website purportedly claims that "The Spin really does stop here."

However, when it comes to company related information, that is an area where the Spin really does need to stop and, judging by Tanzanian Royalty Exploration Corporation's (TRE) news release last Friday, unfortunately it didn't. Apparently, the British Columbia Securities Commission caught on that TRE had made several misstatements as a result of which investors may have been misinformed causing TRE to make a news release (tactfully titled "News Release") to correct certain misperceptions that may have arisen as a result of previous releases, repeatedly pointing out that certain pieces of information released by the company relating to mineral deposits were not compliant with Canadian regulations and therefor "should not be relied upon".

Also, I personally wasn't all that impressed with TRE's previous news release about the startup of work on its purported nickel bearing properties. The first three paragraphs of the release seem primarily to tout the nickel project in the Kabanga region which is being conducted by Xstrata and Barrick and have little to do with TRE.

When it comes to opinions about Gold, a bit of over the top spin is fine from time to time, but when it comes to company news releases, the Spin really does need to stop there.