From time to time we may post articles of interest, or comment on the news, markets are world around us.
January 15th, 2018 (Vancouver) – Canada has been home to a few gold rushes over the years. The Klondike, the Cariboo, and others lead lured prospectors, miners and people from all walks of life from countries near and far to stake their claims and future fortunes. Gold fever has infected many over the centuries but in today’s rapid change world, technology has lead to a modern day version. Bitcoin fever. And its Bitcoin fever that has lead to a rush in Bitcoin mining.
Bitcoin (“BTC”) was created in 2008, by Satoshi Nakamoto – the name used by the person or group that created it. It was based on Blockchain a new technology that used a distributed ledger for security and confirmation of transactions. When it was created, Bitcoin it was very much by intent that it was based on the concept of gold and gold mining. Bitcoin was to be digital gold in a rare limited supply to be mined by those willing to work for it.
So in many regards, it seams quite natural that since Vancouver is the global capital of exploration mining, and financing, that the resourceful entrepreneurs and creative financiers would find their way into Bitcoin mining. Canada has been a key contributor to Blockchain technologies and crypto currencies. Ethereum and Ripple – just to mention two. It now appears Canada may emerge as a global leader in Bitcoin mining as China clamps down.
Reuters reported on Friday that privately held Bitmain, the world’s biggest blockchain mining company, is now looking at moving operations to Canada. The article also does on to say that Hydro Quebec is in talks with around 30 large cryptocurrency miners about potential moves to the Province. Of course China points to the huge amounts of power it takes to mine bitcoin as the main concern when the real reason may be more connect to capital account control. Bitcoin, and other crypto currencies have been used to transfer more money out of China then is legally allowed. Regardless, China has been clamping down on all things cryptocurrency – first the ICO, then the traders (who all moved to South Korea and Japan) and now the massive Chinese Bitcoin miners are under government pressure.
Canada knows mining. There are a number of smaller miners in Canada. In June 2017, Frank Giustra – a hugely successful Canadian financer, promoter, miner, movie maker, philanthropist, and close friend to Bill Clinton – jumped into the the Bitcoin mining arena with HIVE Blockchain Technologies. Its this kind of celebrity and financial clout that was needed to make the public markets take note of what was happening in the crypto currency sector. Mr. Giustra set out and nominated Frank Holmes as the Chairman of HIVE. Mr. Holmes is the CEO of US Global Investors which specializes in natural resources. He is gold pro and has studied and promoted the yellow metal for years. That’s not a coincidence. Why not make a gold expert the chairman of a digital gold mining company. The only difference is there is no geological or mining risk. He is there to speak to the virtues of gold, and digital gold. HIVE currently has a market cap of ~$458 million (as of Jan 15, 2018).
Now smaller Bitcoin miners in Canada are looking to expand and new companies companies running around Vancouver, and elsewhere in Canada looking to get financing for their gold mine – or Bitcoin mine. And in the coming days and months you will see more new Bitcoin Mining companies listing on the CSE, and TSX Venture Exchange.
So it would appear that Vancouver, and Canada will become well known for a mining of digital sorts and appear to hold on to their title of Mining Capital of the World while perhaps adding the title of Bitcoin Mining Capital of the World.
See also: Reuters: Chinese bitcoin miners eye sites in energy-rich Canada
Note: January 13th, marked a milestone in Bitcoin history as it passed the 80% mark for Bitcoins being mined. That means only 20% or 4.2million of the 21 million Bitcoins available remain for the miners to chase after. In addition, the protocol also requires that the reward of 12.5 BTC mining reward is halved every 210,000 blocks or approximately every four years. The next halving will be in June 2020 bringing the mining reward down to 6.25 BTC. What will Bitcoin miners do then? And what becomes of all those Bitcoin mining rigs? What would traditional miner do if it was to be confirmed there was no more gold to be mined?
(PS. Its important to also note that Canada is home to some of the most promising and advanced blockchain and cryptocurrency companies, namely Ethereum (Waterloo, Ontario) and Ripple (Vancouver, BC.). The core value of the Blockchain’s distributed ledger is much more then just Bitcoin, and Bitcoin mining.)
According to Coindesk, China’s recent ban on Initial Coin Offerings is only temporary until regulators come up with a suitable framework that will likely involve some sort of licensing. It is suggested by many analysts that Bitcoin and ICOs have been a major channel for moving money out of China. Chinese authorities have implemented a policy of closed capital accounts which limits the amounts and types of investments individuals and corporations can make outside of China. A regulatory framework around ICOs could provide policies and procedures that would assist in managing and controlling the ICOs.
Like many established mining conferences Mines & Money Asia 2016 was down in the number of attendees and the number of exhibiting companies. However, this did not deter the core participants in this industry nor the investors that understand the cyclical nature of the mining sector. In fact, like any sector the conferences that are slow during the bottom of the cycle will present the strongest opportunities and management. These are the survivors. The Companies that will emerge and enter into the up cycle stronger, wiser and more attentive.
Every sector that goes through a severe downturn fuels the argument between “Things will never be the same” and “Things never change”. Is the mining industry forever changed or will the next bull market bring back the same irrational exuberance and belief that prices in both commodities and stocks will go up forever? Time will tell.
Regardless, one thing that is forever true, lessons are learned in failure. Hopefully the mining sector, and mining investors have learned a few new lessons but not at the expense of taking risk. It is risk taking that leads to new discoveries, new ideas and new opportunities.
Commodity prices have enjoyed upward performance year to date which has lead to many positive turnarounds in stock prices. Are we off the bottom? Its too early to call a trend. The position here is that we have scene the worst but may not see a strong, sustainable recovery for another year. Again. Time will tell.
PDAC 2016 was attended by over 22,000 people from all over the mining world. At this year’s show the sentiment remained somewhat cautious but more upbeat then last year’s conference. A noticeable drop in the number of companies attended was a reflection of the expected clean-up of companies that were under capitalized, and or under managed. The weak have been culled and the strong remain.
Despite the relatively positive performance in commodities, and upticks in many of the major mine companies, there was a noticeable absence of retail investors whom remain cautious. Many booths were hosted by the C-level management a clear sign of cost cutting (though C-level management should always make themselves available in good and bad times).
Most major companies are well off their lows for the year. Perhaps short covering, or insider buying contributing the most. Concerns for over supply and weaker demand in China remain and supply demand balances have yet to settle the market price.
This may be the key year for accumulating positions in strong balance sheets and management. Taking a long term approach to the mining sector. Deals are getting done and the market has cut back on production in most commodities. Further downward pressures on commodity prices may be coming but most equities have not been drafted up with the run in commodity prices and may not be impacted by a future decrease.
The gold price continues to defy gravity.
Received wisdom has it that gold falls in price when interest rates rise – and this cycle was set in motion by the Federal Reserve’s raising of interest rates last week. Higher rates boost income-generating alternatives and tend to spur the dollar, against which gold is a hedge.
But gold has not followed the script. It did slump the day after the Fed’s decision last Thursday, hitting a new six-year low of around $1,050, but it has since been gradually rising and was this morning trading at around $1,080 an ounce. The question now is where it goes from here.
Most investment banks predict that gold will fall below $1,000 an ounce, probably in the early months of next year. A second interest rate rise would bring home the reality of monetary policy tightening, while the dollar would surge from its already historically high levels. Inflation, another key gold hedge, is likely to stay depressed as oil prices tumble.
(Reuters) – Gold fell toward a three-month low on Tuesday as the dollar hit a seven-month peak on prospects the U.S. Federal Reserve will raise interest rates in December, while silver and platinum extended losses to multi-week troughs.
A forecast-beating U.S. October employment report on Friday pushed up bets the Fed will increase rates for the first time in almost a decade, sending non-interest paying gold to $1,084.90 an ounce, the lowest level since August.
(Source) Oil prices are likely to remain low over the next five years because of plentiful supply and falling demand in developed countries, the International Energy Agency said Tuesday in its annual forecast.
The Paris-based body, which advises developed countries on energy policy, says it expects oil prices to return to $80 per barrel in 2020, with further increases after that.
Oil prices are down more than 50 per cent since the middle of last year. On Tuesday, the U.S. crude oil contract closed up 26 cents at $44.13 US a barrel.
In its World Energy Outlook, IEA warned members not to become complacent about low cost oil from a handful of producers as that could be a threat to energy security.
And it urged countries to move more quickly towards reducing greenhouse gas emissions.
(Source) Oil edged below $44 US a barrel on Monday, after another bearish outlook for crude from Goldman Sachs.
Goldman said in a research report that oil prices could go “sharply lower” as storage tanks hit capacity, predicting the oil market would not balance itself in 2016.
West Texas Intermediate oil closed down 78 cents at $43.81 US a barrel on Monday afternoon, while Brent, the main international contract, was down 59 cents at $47.42 US a barrel.
Western Canada Select, a Canadian oilsands contract, had fallen below $30 again to $29.23 US a barrel.
The oversupply of oil worldwide has had storage tanks in Cushing, Oklahoma, at record levels for most of the year. It’s not just crude that is in oversupply, but also refined products.
Goldman Sachs sees further risk to crude prices which are already down 60 per cent from a year ago.
“Distillate storage utilization in the U.S. and Europe is nearing historically high levels, following near record refinery utilization, only modest demand growth (especially relative to gasoline), and increased imports from the East on refinery expansion and Chinese exports,” it said in its report.
Continue to read complete article: Europe also has a storage problem
Statistics South Africa recently released data stating gold production during the last three months declined 5.9%. The report goes on to discuss the diminishing importance of gold mining in South Africa, and warns that depletion rates say gold resources will be exhausted in just 33 years and if the estimates hold true the country will take “on a much reduced role on the global gold mining stage.”
Read the complete report here: Statistics South Africa: The decreasing importance of gold mining in Africa
(Source) West Texas Intermediate oil fell below $50 a barrel for the first time since April 2009 as surging supply signalled that the global glut that drove crude into a bear market will persist.
Futures slid as much as 5.2 per cent in New York. Brent futures earlier slid below $55 in London for the first time since May 2009. Russia’s output rose to a post-Soviet high in December, preliminary Energy Ministry data showed. Iraq, the second-largest producer in the Organization of Petroleum Exporting Countries, plans to boost crude exports to a record this month, the Oil Ministry said.
“This bearish market is being fed by a combination of surging supply and shaky demand,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by phone. “We now have Russian production at a post-Soviet high and the Iraqis planning to add even more supply to the market. This just adds to negative market sentiment.”
Read More Financial Post