Sprott bearish on base metals, positive on gold and oil

Section:

By Frank Tang
Reuters
Thursday, January 19, 2012

http://www.reuters.com/article/2012/01/19/us-precious-sprott-idUSTRE80I1...

Prominent Canadian fund manager Eric Sprott said on Wednesday he was bearish on cyclical commodities such as industrial metals because of the economic slowdown, though he remained positive on gold and crude oil.

Sprott, a long-time gold bull who last week filed to launch a platinum and palladium product allowing investors to redeem the physical metals, said he expects that business to grow in the wake of MF Global's collapse.

"I am not bullish on cyclical commodities such as iron ore, coal, steel, lead, and zinc because I am worried about this economic contraction that everybody is talking about," Sprott told Reuters in a phone interview from his Toronto office.

... Dispatch continues below ...



ADVERTISEMENT

Sona Discovers Potential High-Grade Gold Mineralization
at Blackdome in British Columbia -- 13.6g over 1.5 Meters

From a Company Press Release
November 22, 2011

VANCOUVER, British Columbia -- With its latest surface diamond drilling program at its 100-percent-owned, formerly producing Blackdome gold mine in southern British Columbia, Sona Resources Corp. has discovered a potentially high-grade gold-mineralized area, with one hole intersecting 13.6 grams of gold in 1.5 meters of core drilling.

"We intersected a promising new mineralized zone, and we feel optimistic about the assay results," says Sona's president and CEO, John P. Thompson. "We have undertaken an aggressive exploration program that has tested a number of target zones. Our discovery of this new gold-bearing structure is significant, and it represents a positive development for the company."

Sona aims to bring its permitted Blackdome mill back into production over the next year and a half, at a rate of 200 tonnes per day, with feed from the formerly producing Blackdome mine and the nearby Elizabeth gold deposit property. A positive preliminary economic assessment by Micon International Ltd., based on a gold price of $950 per ounce over eight years, has estimated a cash cost of $208 per tonne milled, or $686 per gold ounce recovered.

For the company's complete press release, please visit:

http://www.sonaresources.com/_resources/news/SONA_NR18_2011-opt.pdf



He expects gold to hit a record above $2,000 an ounce this year, with silver also rallying to an all-time high at more than $50 an ounce. On Wednesday, gold traded at $1,660 an ounce and silver at $30.50.

Sprott, whose parent company Sprott Inc. manages around C$9 billion in assets, has been bearish on cyclical commodities since the 2008 global economic crisis and has maintained the gold and silver forecasts throughout last year.

"I think there is more upside to the gold-mining stocks. Last year the stocks were absolutely crushed when the price of gold went down. But when gold goes back up, the stocks will provide a better return."

Bullion lost 10 percent in December and briefly entered a bear market, as it struggled to regain its safe-haven appeal even though investors questioned the viability of the euro.

Year to date, spot gold was up 6 percent, largely tracking equity markets' gains. It posted a 10 percent gain in 2011 that sealed its 11th consecutive year of gains.

Sprott cited strong physical gold demand, indicated by encouraging imports by China and Turkey late last year.

In addition, he was positive on the outlook of the energy market because of relatively inelastic demand and depleting output.

"It's getting tougher and more expensive all the time to produce energy. I think that's a pretty good foundation for the oil prices hanging in there."

Last Friday, Sprott filed regulatory papers for a planned launch of a physical platinum and palladium trust initially worth $115 million on the New York Stock Exchange and the Toronto Stock Exchange. The firm already runs two physical gold (PHYu.TO) and silver (PHSu.TO) trusts.

Investors in Sprott's funds have the option to redeem physical metals, something that not all ETFs offer.

"A lot of people thought they owned gold and silver before MF Global went bankrupt. And all of a sudden they found out that they didn't own anything at all," he said. "We like people who own the units to know that they have the ability of getting the physical gold and silver."

Sprott said investors rarely redeem physical metals, but that could change if economic conditions worsen.

"In certain circumstances, we could see a lot of redemption. I am talking about financial meltdown circumstances. So, hypothetically it could happen," he said.

* * *

Join GATA here:

Vancouver Resource Investment Conference
Sunday-Monday, January 22-23, 2012
Vancouver Convention Centre West
Vancouver, British Columbia, Canada

http://cambridgehouse.com/conference-details/vancouver-resource-investme...

California Investment Conference
Saturday-Sunday, February 11-12, 2012
Hyatt Grand Champions Resort
Indian Wells, California, USA

http://cambridgehouse.com/conference-details/california-investment-confe...

Support GATA by purchasing gold and silver commemorative coins:

https://www.amsterdamgold.eu/gata/index.asp?BiD=12

Or by purchasing a colorful GATA T-shirt:

http://gata.org/tshirts

Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009:

http://gata.org/node/wallstreetjournal

Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon:

http://www.goldrush21.com/

Help keep GATA going

GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at:

http://www.gata.org

To contribute to GATA, please visit:

http://www.gata.org/node/16



ADVERTISEMENT

Prophecy Coal (TSX: PCY) Wins Positive Feasibility Study
for the 600-MW Chandgana Power Plant in Mongolia

Company Press Release
January 17, 2012

VANCOUVER, British Columbia, Canada -- Prophecy Coal Corp. (TSX: PCY, OTCQX: PRPCF, Frankfurt: 1P2) has received a positive feasibility study for the company's 600-megawatt Chandgana Mine-Mouth Power Project in central Mongolia. The report was independently prepared by Ralf Thomsen, project manager at Steag, a German firm specializing in the planning, financing, construction, and operation of highly efficient thermal power plants for fossil fuels.

The study covers technical specifications, deployment, and financial analysis of a 4x150-mw thermal power plant to be built adjacent to Prophecy's Chandgana Tal coal deposit, which contains 140 million tonnes of measured coal. Last year the power plant received a construction license and the coal deposit received a mining license. Engineering, procurement, and construction management selection and project financing discussion have begun and are expected to be concluded this year.

Construction is planned to start in April 2013, with the first 150-mw unit being commissioned in October 2015 and subsequent units to start in April 2016, October 2016, and April 2017. With proper maintenance the project will have 30 years of commercial operation.

For the complete statement from the company, including maps and charts, please visit:

http://www.prophecycoal.com/news_2011_jan17_prophecy_receives_power_plan...