Martin Armstrong: New Supply Could "Crush Gold"

I read Martin Armstrong's blog on a near daily basis (I have his site bookmarked in my Feedly reading list). Sometimes he has interesting predictions and theories to share, sometimes he adds some historical perspective, other times he pumps out some absolute garbage. Here is one example of the latter:

"Well, when it rains it pours. A new discovery of gold has been made and the quantity expected is up to 46,000 tons of gold, whose market value is estimated to 298 billion US dollars if the market stays the same. The entire USA gold reserve is 8,000 tons. So we are talking about a sizable discovery in the Sudan. From a supply-demand perspective, this could crush gold." - Martin Armstrong

Armstrong's source? Sputnik News, the BuzzFeed of Russian propaganda. Here are some key points from the Sputnik article and a couple more sites I found carrying the news (none of which I would have any confidence in).

- Feb 2014 Sudan grants 9 Russian companies permission to explore for minerals.

- Sudan's total Gold production during first half of this year reached 43 tons.

- Russian company Siberian for Mining discovers Gold reserves of 46,000 tonnes.

- The market value of this gold is U.S. $298 billion.

- Zhukov (CEO), plant will be €240M and have production capacity of 50t/pa.

A few things I see wrong with this picture.

It would not be possible to firm up 46,000 tonnes of (proven) Gold reserves in 18 months. The mobilisation of drill rigs, geological expertise and utilisation of laboratories for testing would have been breathtaking, like no other mining and exploration venture you had seen before. After all, 46,000 tonnes of Gold is roughly 25% of estimated above ground Gold that we've mined through all history and would almost double the proven Gold reserves we already have waiting to be extracted. Exploration for Gold reserves is an expensive and time consuming process, Gold mining and exploration companies often take years to firm up a 1-2 million ounce (30-60 tonnes) deposit, let alone something of this scale.

Furthermore 46,000 tonnes of Gold (in above ground form) is worth far more than US$298 billion at market value. Try $1.6 Trillion.

My initial though was that perhaps the 46,000 tonnes was a reference to the total volume of dirt containing the $298B in Gold, but that still doesn't make sense as Gold content of the earth would be way too high... maybe the figure was supposed to be $298M (not billion) worth of Gold, but even that by my calculation would have required Gold content of around 200g/t (not a chance, most miners these days operate on mining ore around 1-2g/t).

If anyone else can make sense of the figures or find another source with better information about the find, I'd welcome your input in the comments below.

But just for a moment lets imagine that Martin Armstrong wasn't spreading nonsense that has no basis in reality and that this company had proven up 46,000 of actual reserves ready to mine and "crush Gold" as Armstrong so eloquently puts it... I have had other commentators say "what if" about a massive Gold find in the past.

This company is spending €240M (US$263M) on a Gold plant with production capacity of 50t/pa. How fast are they going to bring that 46,000 tonnes of Gold to the surface and what would the cost be to do so? Even if they spent billions of dollars building new massive plants with the intention of bringing 1,000 tonnes of Gold to the surface each year from this one find (increasing current annual mine supply by around 35%) and assuming global Gold infrastructure expanded to process this additional capacity, it would only add a little over 0.5% to total above ground supply each year.

Meanwhile, global debt has increased by an astounding 40% since 2007, despite having a Global Financial Crisis during the same period.

Somehow I don't think Gold has much to worry about from the discovery of a massive new deposit. Of more concern is the supply / demand of and for existing above ground Gold.

[postscript]

Martin Armstrong has since edited his article. Google cache had most of that I quoted above so took a screenshot comparing old with new (though the old version I found was still missing some paragraphs from the end, so presumably has been edited a couple of times over the last day or two).

So it appears that Sudan will be mining only an additional 20 tonnes of Gold in 2016 (100 tonnes, versus 80 tonnes in 2015). Will that be enough to crush Gold (or "crush gold psychologically" as Armstrong rewrote)? Probably not if sold as mined, although Bron notes in a recent article that it only took 22 tonnes on the Futures market to knock $48 off spot price in the recent price smash.

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Russia Buying Up Global Gold Companies & Assets: Stratfor via Global Intelligence Files

For those not familiar with the Global Intelligence Files, here is the description provided by WikiLeaks:

The Global Intelligence Files, over five million e-mails from the Texas headquartered "global intelligence" company Stratfor. The e-mails date between July 2004 and late December 2011. They reveal the inner workings of a company that fronts as an intelligence publisher, but provides confidential intelligence services to large corporations, such as Bhopal's Dow Chemical Co., Lockheed Martin, Northrop Grumman, Raytheon and government agencies, including the US Department of Homeland Security, the US Marines and the US Defence Intelligence Agency. The emails show Stratfor's web of informers, pay-off structure, payment laundering techniques and psychological methods.

They have been staggering the release of these emails over time and there are some interesting emails that I found in one of the latest batches (released February 13th, 2013). While the conversations in these emails were not held recently I have not yet seen any discussion of this information on Gold news sites and blogs, so this is potentially breaking news despite the age of the emails themselves. The millions of emails are no easy feat to search and digest, I have cut and paste excerpts to provide the core message and you can hit the links to read the emails in full.

5514250     2010-11-09 19:52:41

The gold Russia takes from Kazakhstan and Kyrgyzstan is sold on the open market. Russia only hordes its own supplies, that way they can keep it secret on how much they are actually putting in their mountain caves.

So I would assume that Russia will sell what it extracts in Venezuela too. I'll ask around to see if anyone has estimates on how much VZ is making out of this deal, if anything.

From what I am starting to gather is that Russia wants to control global supplies. As for VZ, I would assume this means controlling how much is extracted and where the gold can be sold. But there is that possibility that Russia may not want to extract any gold in the first place. My assumption is that they are determined to be in the driver seat on world gold prices, letting them skyrocket.

Kevin is looking into this part to see if it is possible to impact the gold markets this way. Rodger and Mark both said they are hearing similar rumblings of Russians in their region's gold sectors. So they are poking into what Russia is doing in South Africa, Angola, Guinea, Mongolia, Indonesia, Malaysia & Vietnam's gold groups.

5411465     2010-11-09 20:07:26

So the only way Russia can really drive the gold markets is if it is sitting on a huge chunk of global supplies. Do we know roughly what percentage Russia has and how much they are trying to take over in all these places?

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We are not sure they can impact supplies this way. It is a conspiracy theory thus far that Kevin is looking into. He had heard rumors of being able to do this, but no one ever has, so he is looking more into it. We don't know what Russia has really taken over yet. It is a massive research project we're just starting to form between your info, me, Kevin, Mark & Rodger that will most likely take a few months, bc it seems like the Russians are:

* buying a large set of 2nd tier companies under a hundred different non-Russian entities in order to not tip anyone off
* using private Russian firms to buy foreign firms and assets
* buying up gold traders
* buying up gold assets (mines, networks)

So each has to be researched and broken down & you know how shady and tangled Russia can be.

5489729     2010-11-03 19:12:45

Attached are my thoughts, notes & the intel-ling I did yesterday and today....
Then we can map out the holes...
I think we may have a larger issue once we're done with Russia-Venezuela as I am learning that Russia is buying up gold companies & assets around the world. But this is something I am really going to have to do some heavy lifting research and intel-ling on.

In attachment: 9524_Russia - Gold.doc

Table of Contents:

1) How Russia's gold and diamond sectors domestically work
a. Diamonds
b. Gold
c. The Kremlin's secret gold and diamond stockpiles
d. Kremlin folklore on gold (for fun)
2) Rusoro - Russia's gold company in Venezuela
a. Who, what, where, etc.
b. How Rusoro works
c. Crystallex & Russia
3) Russia's other moves in Gold

Selections from above document (9524_Russia - Gold.doc), I would recommend reading in it's entirety as quite interesting:

Russia’s gold industry is also all over the place. Russia most likely has the largest gold reserves in the world – but no one knows for sure (supposedly even the Kremlin, which I doubt). There are estimates that Russia has between 25-40% of the world’s reserves – so estimates are all over the place. But Russia is only the 6th largest producer.

Russia uses gold very differently than most governments. Gold + diamonds does not make up 1% of the budget or revenues.

The Kremlin started in 2008 diversifying its reserves portfolio (meaning its piggy bank funds) with Gold, so that their reserves were mostly dollars and euros with 10% gold.

However, it is rumored that the Kremlin holds incredibly massive amounts of gold and diamonds in stockpiles – I mean seriously huge amounts.

This allows the Kremlin to sell it to make cash when needed or have the “doom’s day” threat where it could flood both markets should it want to.

For example, when the government needed some cash on very short notice, they sold $1b worth of gold they had lying in the stockpiles… but this is a “secret”

It is an incredibly high-level state secret to how much they have in stockpiles.

For those interested in searching for more Gold (or Silver!) related content in the Stratfor emails, you can have a play with the search page here.

Finally, here's another email that I found which asks some interesting questions for which I couldn't find a response in the email database:
 
2321975     1970-01-01 01:00:00 Date wrong (from August 2011)

Hey Jacob

Not sure if you are the person to pester with this - but I think this could make a really interesting piece for s4. Gold is shooting through the roof right now and VZ's move is to bring the gold home (and the cash, but let's focus on the gold for now). How is this gold used in the European banks who have had it for forever? I'm certain that unless Bank of England just locked it in a dusty vault and forgot about it, the gold has been used on deposit for outside loans. How leveraged is the gold in its European hands? VZ is small potatoes, but a rich oil country. What would be the exposure risk for European banks if everybody did as VZ is doing?

If everybody (or just enough somebodies) pulled their gold home, how would European banks recover? (and how much money would they need to borrow from Berlin and Brussels to meet that withdrawal call?) What would be the long term geopolitical dangers/changes?
Maybe Research could find out where most of the world's sovereign gold is deposited - see where the exposure is most great (my guess is Europe, shaky, shaky government-dictated European banks). Sovereign gold is interesting (to me, at least) and I'm not sure there is much out there about that. It fits into G's economic guidance in that it's about commodities trading and transport. Does the global economy benefit from having sovereign gold stored in European vaults or will a mass exodus of gold from Europe cause a realignment of world banking?

May be totally off base but this is a really interesting article and thought I'd toss the thought your way, solo OpsCenter Man!

Cheers,

Bonnie

FYI- I'm more interested in sovereign gold deposits as a whole, not VZ specifically. As the rest of this article highlights beautifully, VZ's move could signal everything from escaping Libya-like sanctions, collateral for Moscow and China to easy cash for the pillaging that comes with a coup. VZ is just what made me think about sovereign gold and what it means for the global markets and who will be vulnerable to a run on this. It'd been small beans for Russia or China to have 3-4 or maybe 5-6 small-to-medium sized countries to start withdrawing their gold, slowly and surely, bleeding Europe liquidity when it's already hemorrhaging Spanish and Italian blood. Perhaps China is stockpiling gold as a bulwark for the yuan, moving it towards a reserve currency (long way to go with that, I know).

It would seem that speculation over leasing foreign owned Gold held by the Bank of England isn't only the concern of Gold Bugs, but also members of the global intelligence community! And you wonder why I'm campaigning to bring home Australia's Gold from the Bank of England?

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