24 March 2013
Jim Willie CB,  “the Golden Jackass”


ENERGY CHESSBOARD & PRODUCER
FAULT LINES

* China Aids the Iran-Pakistan Pipeline
* Iran Moves Forward, Limping
* The Bakken Ponzi Game
* Keystone of Cronies
* Imminent Asian Energy Pacts
* Amateur Hour at Mining Firms



Special Report #2

ENERGY CHESSBOARD & PRODUCER FAULT LINES

As preface, touch on some corruption of an unusual variety. Exxon-Mobil reserves received a recent boost, but they are the work of pure fiction. They are based upon inefficient fields with exaggerated future output. The energy giant recently announced that it replaced 115% of its total 2012 production by adding proved oil & gas reserves of 1.8 billion barrels. The typical calculation is in terms of oil equivalent barrels, as natural gas is translated so as to report in comparable units. The revision suggested an increase of 174% in replacement ratio of crude oil & other liquids. However, 750 million barrels of reserve additions were from the Woodford & Bakken shale plays. So 40% of the Exxon-Mobil replacement reserves stated for 2012, accounting for 750 million of the 1.8 billion, were from shale oil fields. Not part of their report, is how those fields are sustaining high decline rates and wells with very short durations. They are like moths in the energy field, short lived. The Woodford Shale had 84 rigs working several years ago. At last count only has 4 drilling rigs working, hardly a sign of future output, more a sign of rapid depletion. In time the market will figure out the huge Ponzi scheme in oil companies, for their reported oil reserves founded in fiction.

## CHINA AIDS THE IRAN-PAKISTAN PIPELINE

◄$$$ CHINA HAS EXTENDED A CRITICAL $500 MILLION LOAN TO PAKISTAN FOR THE COMPLETION OF THE IRAN-PAKISTAN GAS PIPELINE. THE DEAL GOES AGAINST USGOVT PRESSURES. THE ENERGY NEEDS OF PAKISTAN PREVAIL. BUT ALSO, CHINA WISHES TO FIRM ITS TRADE PARTNERSHIP WITH IRAN. THE ENTIRE WESTERN ASIA REGION OF IRAN, PAKISTAN, AND TURKEY IS FORMING A CORE IN TRADE, BASED IN IRANIAN NATGAS. CHINA SEES THE PROGRESS AND ENCOURAGES IT, SINCE IT REINFORCES THE REGIONAL ECONOMIC GROWTH AND SERVES AS A POTENTIAL ANTI-USDOLLAR PLATFORM. $$$

Pakistan is the neighbor to Iran's east. Pakistan is also China's neighbor to the west. They have ample trade, and good relations. China has offered Pakistan a $500 million loan to complete its joint gas pipeline project with Iran, despite threats by the United States to impose sanctions against Islamabad. Before long, the USGovt will have slapped sanctions on the entire world, or at least all Eastern nations. China has offered Islamabad the urgently needed loan to complete the stalled Iran-Pakistan (IP) gas pipeline project. The loan would be facilitated through the Gas Infrastructure Devmt Cess Act. On March 11th, the USDept State threatened Islamabad with sanctions if Pakistan worked to complete its joint gas pipeline project with Iran. No evidence of global leadership there.

The 1996 Iran Sanctions Act allows the USGovt to ban imports from any non-American company that invests more than $20 million per year in the Iranian oil & natural gas sector. The two feisty nations Iran and Pakistan inaugurated the final construction phase of the Iran-Pakistan gas pipeline. A massive designed flow is expected to supply gas from Iran to its eastern neighbor. With some hooplah, the Iran President Ahmadinejad and the Pakistani President Asif Ali Zardari attended the ceremony on their border. Imagine the audacity for the Pakistan leaders to insist on adequate energy supply to satisfy their growing economy with 180 million citizens. The burgeoning nation contends with an energy shortage. Nazis object since the USDollar is vulnerable to rejection.

The Islamabad capital helm object in turn to legions of their civilians killed by USMilitary drones, which are supposedly aimed at terrorists. Let's call it a loose aim with eager arms. The basis of a new formidable enemy is in the making with Pakistan, which has nuclear capability. See the PressTV article (CLICK HERE). As footnote, Turkey has also agreed to buy more natural gas from Iran, but unclear how payment to be made. Probably in gold carried by mules over the hills. Turkey is Iran's neighbor to the north. The entire Western Asia region is aligning itself to be supplied by plentiful Iranian natgas, which is great for economic growth, great for trade, and critical for the potential of gold finance in facilitation. See the PressTV article (CLICK HERE). Gold trade finance is the new terrorist threat.

## IRAN MOVES FORWARD, LIMPING

◄$$$ THE USGOVT-LED SANCTIONS AGAINST IRAN ARE AN ABSOLUTE AND TOTAL DISASTER, INEFFECTIVE IN HALTING THEIR ENERGY TRADE. THE BASIS IS FALSE, SINCE THE NUCLEAR THREAT IS NIL COMPARED TO THE ANTI-USDOLLAR TRADE THREAT. THE OIL EXPORTS FROM IRAN ARE FORECASTED ON THE RISE EVEN AS SANCTIONS WIDEN. THEIR NET EXPORT REVENUE FELL HARD IN 2011 AND 2012, BUT THE TREND HAS REVERSED. $$$

According to the Paris-based Intl Energy Agency, the Iranian oil shipments grew by 13% percent in February even while sanctions continue. The sanctions have rendered deep damage to Iran, with over $150 billion less in standard fare annual cash flow on record, but some of that amount is compensated in Indian Rupees and Gold bullion below the SWIFT-ly falling radar. Exports from Iran rose to 1.28 million barrels per day in February from 1.13 million bbl/day in January. The rules have turned strange and obtrusive, especially since the United States is not the global cop in trade. US rules took effect last month that require importers to pay in local currencies kept in escrow accounts. The US makes the rules, since it controls the SWIFT banking flow. The story has grown old, a tired saw, about enriched uranium for weapon grade. Like Iraq, the energy rich nation of Iran began trade settlement outside the USDollar, which is financial terrorism in the Yankee Book of Hoyle. The US and European allies have been restricting the neck of Iran's oil & natgas exports, their largest source of revenue. The Iranian Economy is flush with nasty fierce price inflation, along with grand infusion of narcotics from the northern border of Afghanistan, courtesy of the USMilitary.

On the negotiation table at Kazakhstan in April talks is some odd road toward appeasement and reconciliation, which will give the USGovt saved face. The IEA agency, long a mouthpiece for the USGovt on energy policy in reinforcement to the Petro-Dollar platforms, made a curious statement that sounded like capitulation to the experienced ear. It stated, "The only thing clear is that the current stalemate between Iran and the West is unsustainable. Sooner or later, something has to give." Exactly, and it will be the USDollar discarded from trade settlement on the eastern side of the world. The workarounds are impressive, fully reported by the Hat Trick Letter for many months.

The daily and annual impact of the sanctions seems damaging, very real indeed. But the damage to the US prestige is much worse, and the damage to the USDollar is potentially fatal. The cost to the US will be a plunge into the Third World. That in my opinion is a big reason for removing guns from the streets of the nation. The thud in the Third World will cause riots beyond belief and description, especially if bank accounts are taxes (seized). The entire sanctions have been disastrous, since they galvanized the Eastern hemisphere into forming non-USDollar alternatives for trade settlement. The climax of their efforts will be the isolation, then trapping, then killing of the USDollar, and obsolescence of the USTreasury Bond.

Iranian exports were an average 2.5 million barrels per day in 2011, before the impact from the sanctions. The next year in 2012, they had fallen further to an average 1.5 million bbl/day. Before the misrepresented conflict, the nation Iran boasted the second highest oil output among OPEC nations. The trend has changed direction, although still quite early. The February output expanded by 2.6% to reach 2.72 million bbl/day, still lower than the 3.0 mb/d output in February a year ago, but on the rise. On the macro side, the data matches stride for stride the decline. Iranian net oil export revenue fell to $64 billion for the first eleven months of 2012, compared with $95 billion for all of 2011, according to the Energy Information Admin, a US-based group.

The data on oil trade with their important partner China has turned into a spy novel game. The US strictures has made for a comedy of Keystone Cops on the surface, yet currency prestige erosion underneath. Iran bought second-hand tankers to transport oil to China, as per industry reports. The Iran officials have ordered vessels to turn off transponders that signal ship locations, destinations, and depths in the water, thus complicating the exports data collection. The recorded data on Iran shipment is based upon import data submitted by nations in the OECD, data from customs agencies, and data from news reports at destination ports. The sanctions are intended to strangle the Iranian leaders, the mullahs. Instead, it has strangled the people. Nothing learned from the Cuba experience.

The United States is running out of friends. Its hostile actions will eventually result in the US being isolated. Enemies will gird their defenses, while allies will protect themselves from the financial cancer and toxic USTBond agent. The ruse of Iran in nuclear development for producing a nuclear bomb arsenal is in all likelihood rubbish, a phony rubric to cover the real motive for keeping Iran down. The energy rich nation with 75 million people refuses to conform to the Anglo-American game that centers on USDollar dominance. Like Iraq, the energy giant prefered to sell its crude oil and natural gas in Euros, Yuan, and Gold. This refusal angers the USGovt, which controls the media spin and deep propaganda speaker boxes. Their actions are viewed as financial terrorism. With the Goebbels spin, the nuclear terror card is produced and played. It is getting very old.

## THE BAKKEN PONZI GAME

◄$$$ THE BAKKEN OUTPUT DECLINES ARE SLOWLY COMING INTO THE OPEN. A TREMENDOUS GROWTH IN NEW WELLS IS REQUIRED TO OVERCOME THE NATURALLY HIGH DEPLETION RATES. $$$

The data is clear. The December 2012 total in the Bakken shale oil region was 705,426 barrels per day. The January 2013 total was 673,015 bbl/day, a difference showing a decline of 32,411 bbl/day. A robust 1773 new wells were added in 2012 in the Dakota region known as Bakken, the smoking gun. The combined projects will need at least 130 to 140 wells each month just to keep the game going, the Ponzi Scheme. Anything endorsed by the USGovt is highly suspect, including their scam-ridden green energy to promote the shoddy companies owned by Obama with defaulted loan frauds. The media is blaming one of the worst monthly declines in the Bakken on inclement weather, very lame. Watch the propaganda play out as shale oil production falls off a cliff unless the drilling managers keep increasing more wells. There will be natural limits as the project advances. They will exhaust the fertile areas.

◄$$$ THE MUKESH AMBANI STORY COULD CONTAIN HIDDEN MESSAGES ON THE PONZI BAKKEN SHALE PROJECT, AND THE NEW VENEZUELA. WRITEDOWNS IN RESERVES ARE THE NORM FOR THE BAKKEN REGION. READ BETWEEN THE LINES AND THE PONZI IS EVIDENT. $$$

Mukesh Ambani is the richest man in India, and the most influential man in India. He is chairman and owner of Reliance Industries, the largest oil refinery on the planet. Ambani will withdraw from service as director at Bank of America, and will move to a non-fiduciary post on the advisory board. The story is short on details, but long on implications. His decision to depart the Bank of Ameica Board is very likely linked to shale gas. See the Money Control article (CLICK HERE).

The US bankers sold him the shale gas story. He bit with a $3.5 billion investment by Reliance, which is not working out. A leading Indian broker warned Reliance Industries may be forced to write down a portion of its US shale assets because of low natural gas and natural gas liquids prices and increased production costs. Such a writedown on the shale assets represents another blow to the Reliance upstream performance, which adds to the repeated disappointments at its largest deepwater natural gas field in the Bay of Bengal. The research is negative by implication. The writedowns of British Petroleum ($2.1bn), BG Group ($1.3bn), Encana ($1.1bn), and Pioneer ($0.44bn) indicate the disappointing path Reliance is to follow. The research report by Dikshit Mittal at SBI Capital Markets indicated that shale economics have become unviable at current low prices of gas and natgas liquid (NGLs) which will force Reliance to cut their reserve estimates. If low natgas prices reverse, then they can write back those same reserves. On the other hand, Ambani is putting $8 billion into Venezuela for energy projects. Rest assured that Bank of America will not provide any loans. It would be political putrid practice for BOA to have a director investing in Venezuela. To be sure, Amani sees the Bakken as a sham. See the Financial Times article (CLICK HERE).

◄$$$ SHALE AS WONDROUS SOLUTION IS EXPOSED AS A SHAM. THE BAKKEN TYPICAL WELL DECLINE IS ENORMOUS, ENOUGH TO CREATE AN IMPOSSIBLE HEADWIND FOR THE REGIONAL DEVELOPMENT. BAKKEN IS A CUSTOMER BASE FOR TOXIC FRACKING CHEMICALS SOLD BY HALLIBURTON, ENABLED BY RELAXED ENVIRONMENTAL LAWS. $$$

Before the Great Shale Gas Bonanza came on the horizon, the gas industry had to replace 12 billion cubic feet per day (bcf) of supply. Now with the surprisingly high decline rates apparent in shale gas, the industry now has to replace 22 bcf/day to stay alive. In the last year, the situation has only become worse, even with Bakken region having been in production for at least two years, in volume. The implied theme in the propaganda is that Bakken and shale oil, including shale gas, are inherently American, therefore the solution to the national energy needs. Rubbish! The clowns in the USGovt cannot even make the ethanol solution work. It has been oppressive.

The Great American shale revolution to launch the United States into energy independence is as much a lie as the sluggish economic recovery and low price inflation and wondrous housing boom and claimed strength from consumption excess. The US is not on a path to become the new Saudi Arabia. The hype is egregious. The desperation is thick. The President from the State of the Union address misled the public, proclaiming a 100-year supply of natural gas. William Engdahl disputes the new age claims by the Wall Street shamans, and is in full agreement with Steve StAngelo. The veteran expert Engdahl said, "There is only one thing wrong with all the predictions of a revitalized United States energy superpower flooding the world with its shale oil and shale gas. It is based on a bubble, on hype from the usual Wall Street spin doctors. In reality it is becoming increasingly clear that the shale revolution is a short-term flash in the energy pan, a new Ponzi fraud, carefully built with the aid of the same Wall Street banks and their market analyst friends, many of whom brought us the 2000 dot.com bubble and, more spectacularly, the 2002-2007 US real estate securitization bubble. A more careful look at the actual performance of the shale revolution and its true costs is instructive."

Overlooked by the usually thorough Engdahl was the required yearly volume of gas output in order to compensate for decline in output. The entire Bakken region is well known, well documented, but not stressed for its very rapid decline and depletion rates. That is the dirty secret that exposes the fraudulent story. The wells go into decline often in the first year, which necessitates a new well to be drilled and put online to compensate. The Ponzi is revealed when well sites are exhausted. If Bakken was on a promising path, the replacement requirements would be pointing down.

A big reason for the recent expansion, although temporary and fleeting as it will prove to be, is the critical exemption in regulatory oversight. It was won by former VP Cheney from Halliburton. Engdahl wrote, "Why have we just now seen the boom in fracking shale rock to get gas and oil? Thank then-Vice president Dick Cheney and friends. The real reason for the recent explosion of fracking in the United States was passage of legislation in 2005 by the US Congress that exempted the oil industry's hydraulic fracking, astonishing as it sounds, from any regulatory supervision by the US Environmental Protection Agency (EPA) under the Safe Drinking Water Act. The oil & gas industry is the only industry in America that is allowed by EPA to inject known hazardous materials (unchecked) directly into or adjacent to underground drinking water supplies. The 2005 law is known as the Halliburton Loophole. That is because it was introduced on massive lobbying pressure from the company that produces the lion's share of chemical hydraulic fracking fluids, Dick Cheney's old company Halliburton. The Halliburton Loophole is no minor affair. The process of hydraulic fracking to extract gas involves staggering volumes of water and of some of the most toxic chemicals known. Water is essential to shale gas fracking. Hydraulic fracturing uses between 1.2 and 3.5 million US gallons (4.5 and 13 million liters) of water per well, with large projects using up to 5 million US gallons (19 Million liters). Additional water is used when wells are refractured; this may be done several times. An average well requires 3 to 8 million US gallons of water over its lifetime. Entire farm regions of Pennsylvania and other states with widespread hydraulic fracking report their well water sources have become so toxic as to make the water undrinkable. In some cases fracked gas seeps into the home via the normal water faucet."

The Jackass would choose not to live and drink water in the Dakotas in the northern plain states. Costa Rican water seems much higher quality, where the main industry is hydro-electric generation. Also worthy of note, the Deepwater Horizon sabotage in the Gulf of Mexico was in all likelihood a project run by Halliburton that involved the murder of eleven people. The company owned land-based leases that rose tremendously in value, when the strange Gulf ban took effect on over 2000 offshore platforms. Almost all were safe, unlike the great offender BP Deepwater. Combine the loophole above and the lease ownership with the reported visits by Halliburton employees immediately before the explosion, and a prima facie criminal case appears. The employees were reported not to be the typical engineers. They had several visits in the two to three days before the BP platform was demolished, behaving strangely secretly and arrogantly. Conclude the shale revolution is the icing on the Gulf sabotage cake. See the Global Research article (CLICK HERE).

The acceleration in net new wells accompanies a flat line in output, more Ponzi proof in the above graph. Engdahl addresses the depletion and price effects. He concluded, "The reason for the full-throttle extraction is telling. Shale gas, unlike conventional gas, depletes dramatically faster owing to its specific geological location. It diffuses and becomes impossible to extract without the drilling of costly new wells. The result of the rapidly rising volumes of shale gas suddenly on the market was a devastating collapse in the market price of that same gas. In 2005 when Cheney got the EPA exemption that began the shale boom, the marker US gas price measured at Henry Hub in Louisiana, at the intersection of nine interstate pipelines, was some $14 per thousand cubic feet. By February 2011 it had plunged amid a gas glut to $3.88. Currently prices hover around $3.50 per tcf." Hence the Halliburton Loophole has one success, reduced natgas prices by 75%. But the success is undermining the business at the margin.

The shale oil business must sustain a gigantic upward spiral in production well growth count in order to offset the substantial quick decline in output often seen in the first and second years for the wells themselves. Most conventional successful wells have at least five years in lifespan, even 10 to 15 years before depletion sets in. The Ponzi is maintained by new wells, which cannot keep the pace. In a year or two, the reality will be quite clear since the well growth will halt. A financial Ponzi like Madoff's requires by fresh new money coming in to sustain the asset bubble. When the client growth halted, it became clear. Same concept, except Bakken has presidential approval.

## KEYSTONE OF CRONIES

◄$$$ THE KEYSTONE PIPELINE WAS REJECTED BY THE OBAMA ADMIN TO BENEFIT WARREN BUFFETT AND BURLINGTON NORTHERN. COMPETITION IS NOT FOSTERED, YIELDING TO CRONY CAPITALISM INSTEAD. MEANWHILE, THE COMMODITY BUSINESS ON WALL STREET IS COLLAPSING. GOLDMAN SACHS IS THE BIG LOSER. THE DROUGHT AND PROPRIETARY TRADING RESTRICTIONS ARE OTHER FACTORS. $$$

Warren Buffet and his recently adopted railway strategy has an assist coming from the USGovt. One must wonder if he was promised the obstruction from the start. He has been aggressively attempting to corner the railroad market, while the Obama Admin refuses to allow assorted competitive petroleum pipelines from Canada to reach the important Oklahoma terminals. The decision to reject the permit for the TransCanada Corp Keystone XL oil pipeline is steeped with corruption and crony interests. Club membership has its privileges in the Fascist Business Model, certainly not capitalism and basic competition. US business is the most corrupt in the entire Western world. The railroad transport traffic in petroleum is up 120% since mid-2011, and up 144% in the last twelve months. The Berkshire Hathway company Burlington Northern carries about 25% of the oil from the Bakken. The environmental card is another ruse. See the Zero Hedge article (CLICK HERE and HERE).

Meanwhile, on Wall Street the revenues from the commodity business crashed in 2012 to their lowest on record. Such is the high cost of tighter meddlesome regulations and controlled price movment. The Wall Street firms are not trusted anymore. The losers are the usual suspects at Goldman Sachs, JPMorgan Chase, and Morgan Stanley. All three firms reported over 10% declines in revenues for oil, grains, and copper trading in 2012, with the drought a factor to be sure, even the hurricane. Restrictions on proprietary trading have been another factor. The decline is most severe at GSax, where commodity revenues collapsed by more than 60% on a year basis in 2012 to the $575 million level. Their revenues have fallen by almost 90% since 2009 when they totaled more than $4.5 billion as king of the hill. Morgan Stanley reported a 20% decline in commodity revenues in 2012. See the Reuters article (CLICK HERE). Do not settle for such pedestrian explanations. A major wrinkle in the commodity blanket is the vanished trust by commodity suppliers. They distrust the Wall Street villains after the MF-Global theft, which hit them squarely in blatant direct manner. They look elsewhere, either with broader contracts with their customers or other innovative price hedging.

## IMMINENT ASIAN ENERGY PACTS

◄$$$ ASIAN ENERGY PACTS ARE NEAR TO COMPLETION. A SUMMIT MEETING IN MOSCOW HINTS OF BIG DEALS TO BE STRUCK BETWEEN RUSSIA AND CHINA. TREMENDOUS INCOME STREAM, SHARED PROJECT COSTS, FOLLOW-ON PROJECTS, TRADE ZONE ISSUES, AND INDUSTRIAL DEVELOPMENT ARE BEING NEGOTIATED. $$$

The visit by President Xi Jinping to Moscow raised prospects of very large scale energy deals between China and Russia, sufficient to tip the global balance. The implications are staggering enormous toward creating the basis of the Eurasian Trade Zone. The two nations are haggling over final terms of a gas supply deal that has been in the works for more than six years. Gazprom sees the burgeoning Chinese market as critical to its plan to globalize the Russian gas trade. For its part, China wants reduced gas prices. The agent of change is the group of other rival Russian gas producers like Rosneft, who suddenly are courting China. The other Russian giant energy firms are courting the Chinese companies to participate in gas developments off Sakhalin Island in the Russian Far East. Good old fashioned competition. Gazprom has been in a dominant position for years in the energy market, with a monopoly position over Russia's foreign gas trade. But with Rosneft and Novatek pushing the Kremlin to liberalize LNG exports, Gazprom now faces the prospect of a bidding courtship for access to the prized Chinese gas market. In Arctic West Siberia, Novatek has teamed up with French Total in the vast remote Yamal LNG project, but is looking for additional partners to help finance the $20 billion project.

Gazprom is expected to give ground on price and cut the deal. A parade of Russian officials has visited Beijing in February in a flurry of energy diplomacy ahead of the Moscow visit by the new Chinese leader. Among them was Alexander Medvedev, deputy head of Gazprom, who met the Sinopec (Chinese National Petroleum Corp) officials in an attempt to break a deadlock in negotiations. The deal between Gazprom and Sinopec would have Russia supply up to 68 billion cubic meters per year of natural gas to China through new pipelines across Siberia. The goal has emerged toward a contract for natgas purchase with sales by the end of 2013. Medvedev has moved to broaden the scope of Gazprom's partnership with CNPC beyond pipeline gas. The offer is for the Chinese company to join in the Vladivostok LNG project on the Russian Pacific coast. Gazprom has plans to liquefy gas from vast new fields in East Siberia for export to markets in the Asia Pacific. China is a natural customer by proximity.

The Kremlin is eager to see Russian gas trade diversified beyond Europe. Another deal on liquified natural gas (LNG) with the Chinese is also being hammered out. China has secured LNG supply from Australia, the Middle East (Qatar), and South America as well as pipeline gas supplies from central Asia. The deals struck between Russia and China will make great theater, as each is ambitious and great wealth is involved on energy income and industrial supply. The two nations will form the nucleus of the Eurasian Trade Zone. It is the underlying but often unspoken core issue where tariffs and regulations and standards will be made simple. See the Financial Times article (CLICK HERE).

◄$$$ THE AFGHAN MINING STAKE IS UP FOR GRABS. THE CHINESE AND BRITISH WILL COMPETE. GIVEN THE AGGRESSIVE TACTICS FROM THE WEST USED FOR CENTURIES, EXPECT CHINA TO PREVAIL, SINCE BEIJING RARELY IMPOSES BANK, TRADE, AND POLICY RESTRICTIONS LIKE THE ANGLOS. A DAY LATE AND LINE OF HEROIN SHORT FOR THE ANGLO BID, AFTER TEN YEARS OF NON-EXISTENT DEVELOPMENT OF ANYTHING BUT THE VERTICALLY INTEGRATED INDUSTRIALIZATION OF THE HEROIN INDUSTRY TOWARD GLOBAL MONOPOLY ESTABLISHMENT. $$$

The United Kingdom is pursuing a piece of the Afghan $1 trillion mining pie. Back in 2003, the bogus story was petroleum and minerals in the Afghan region. The old Chevron connection with Rice and Karzai was useful. It was a lie, as the USGovt only wanted the heroin. A new progressive mining law to attract foreign investment was recently rejected by the Afghan Govt as it was considered too generous to Western commercial interests. Naturally, since written by the Western corporations in the land of Afghan puppets. A more workable law will pave the way. China has moved to acquire mining interests in Afghanistan with a successful $3.4 billion bid to build a copper mineby state owned Metallurgical Corp. The Asian giant is also building a $6 billion railway to go with it, which should enter production in 2014. Few realize that Afghanistan is a neighbor of China's to the west, via the Hindu Kush mountain range, but with horrendous natural obstacles. It is the edge of the Himalayas. The history is clear in the modern age. China's focus is primarily on trade and not aggression towards its neighbors. The West is the opposite. So in the next chapter, the West starves while Chinese projects power ahead. See the Mining article (CLICK HERE). The USMilitary duty to protect the lucrative poppy fields is routine. They are not lighting the fields afire. They are patrolling them and protecting them from rival Taliban tribes, photos never seen in the US lapdog subservient press.

No hint of such infrastructure and mining development was evident from the US-British warmongering crew in the last ten disgusting hidden narco motivated years. As foonote, former NFL player Pat Tillman was executed by the USMilitary high command in Afghanistan in 2003, in order to prevent him from going public about the narcotics business with multiple levels that he objected to protecting. He told numerous Army Ranger buddies of his plans, with ample cross-talk to the Marines. He should have shut up and proceeded with the US stateside opportunity arose. The Jackass has two Ranger contacts, with identical independently derived accounts of the events. Tillman wanted to become the poster boy against the narco war, but they killed him and covered it up, but not too well. It is amazing that the Tillman parents have not met with a fatal car accident running over a cliff or bridge.

## AMATEUR HOUR AT MINING FIRMS

◄$$$ GOLD MINERS PLAYED GAMES IN REPORTING COSTS. NET PROFIT AND NOT GROSS PROFIT NOT THE SAME, UTTERLY BASIC IN DIFFERENCE. THE NEW FOCUS IS TO REPORT ON PROJECT DEVELOPMENT. ACCOUNTING REFORM WILL REVEAL 50% HIGHER COSTS THAN PREVIOUSLY STATED. MANY PROJECTS ARE ABOVE BUDGET, SLOW IN OUTPUT, AND PLAGUED BY LOCAL DISPUTES. THE MINING INDUSTRY MUST WIN BACK INVESTOR CONFIDENCE. THE MISMANAGEMENT IS GROTESQUE. $$$

The Gold miners have decided to come clean on costs after six lost years of poor performance. They pledge to report costs more accurately as part of efforts to win back investor confidence. Barrick Gold and Goldcorp, the two biggest producers by market value, have begun reformed cost reporting, the all-in sustaining costs as an initial step. The new measure averaged $941 per ounce in cost between the two companies in 4Q2012, fully 50% higher than the $626 average disclosed in the preceding three months. Refer to the so-called cash cost. The largest gold companies are seeking to lure investors back to the $300 billion industry after a string of money losing multi-$billion acquisitions and projects over budget. Barrick and its competitors plan to focus on profit margins and to control production costs, rather than simply to increase output. Joseph Wickwire is manager of Fidelity Investments in Boston for the $2.9 billion Select Gold Portfolio fund. He said, "Producers have really done themselves a huge disservice by effectively walking around for the last twelve years promoting the gross margin as opposed to the net or the operating margin. The managements and the boards of the gold companies really have no one to blame but themselves for some of the negative sentiment and disappointment." He is too soft in the criticism. The shoddy accounting cuts across the entire mining sector, to the smaller firms as well. See the Bloomberg article (CLICK HERE).

The cost management story is only part of the entire story. The other critical reason that the miners are doing so poorly is that JPMorgan and other large US banks have their collective thumbs on the price of all four precious metals. But of course you will never hear complaints by the big mining firms, no matter how difficult their businesses become. Some like Barrick are stacked with bankers on their executive boards. Their firms were created to suppress the gold price. Add Wall Street price clamps to the newer challenges of labor strikes on foreign lands, and foreign governments confiscating property, if not imposing higher royalties in bold attempts to rewrite existing contracts. The mining firms are the exemplary showcases of inelastic gold supply market, as higher price has resulted in lower mine output, a Jackass argument for several years.

◄$$$ THE MINING STOCKS ARE AN ADVENTURE IN AMATEUR HOUR. MANY SMALLER FIRMS ARE NOT EFFICIENTLY MANAGED, OFTEN SUBJECT TO SEVERE SLAMS FROM BASIC STOCK SHARE DILUTION, EVEN BY CANACCORD NAKED SHORTING WHEN PART OF FINANCE DEALS. A BIG GAPING HOLE IS MARKETING, A DROPPED BALL. THE MINING FIRMS IN GENERAL DO NOT EDUCATE THE POTENTIAL CUSTOMER BASE ON THE MOTIVES FOR BUYING GOLD IN GENERAL. THEY LEAVE THAT DUTY TO THE OFFICIAL MINTS WHO OPPOSE THE SYNDICATE BANKERS. MARKETING AND EDUCATION ARE SORELY MISSING TO PUBLICIZE THE FLAGRANT ONGOING CRIMINAL BEHAVIOR IN GOVERNMENT FINANCE MINISTRIES. THE PROTECTIVE HEDGE IS GOLD & SILVER INVESTMENT, WHICH THE PUBLIC MUST BE TAUGHT. $$$


The Jackass had an unfortunate awakening in 2007 and 2008. The victim of a few frauds in the Junior mining and energy sector, while the advocate for that sector. When a speaker at the Cambridge House conferences from 2005 thru 2008, many CEOs were met, but not as many as some might expect. My preference was to talk to the field engineers, the geology experts. My entire theme has been economics and currencies and bonds, not geology, so learning was a goal. Over time a strong impression overtook me, fortified by many sides, mostly negative. Their executive staffs seemed thin in makeup, and their flat organizations seemed to lack depth, but they boasted of low overhead. Their dependence on contractors seems too common, but that might be a benefit. Their vulnerability to the devious bankers seemed glaring, outmatched 1000:1 in budget and at disadvantage in the market (see naked shorting and hedge fund spread trades). 

The deep wounds by their all too common finance partner Canaccord on naked shorting seemed not too hidden. One firm in particular called me four months later, as the investor relations agent admitted to uncovering some Canaccord naked shorting exactly as described to him (he was on the lookout). My dumping of the stock bothered him, but my reason bothered him even more. Later was revealed how the Alpha Group systematically colluded with Canaccord to defraud their own clients from numerous finance deals. The big award winning firm Canaccord sold far more shares than awarded as part of the capital raising deals. The Canadian brokerage houses are smaller, but some are as vile as Wall Street firms.

The small mining firms engaged in practices that featured interminable finance deals, which seemed like paper inflation, a source of constant dilution. Their lockup periods seemed like time bombs on stock outlays. Their promise to investors seemed to bear a Godot flavor as in endless waiting for production to arrive, only for even greater capitalization pain from building the critical mills. Their overall impression seemed like amateurs being slaughtered. At times my perception of them at conferences was akin to a plalanx of kids with high priced lemonade stands, but often good chocolates and at times some significant props as female eye candy. Over the years, such detrimental impressions sunk in. For my personal turning point, it took a fraud by a small Alberta-based energy firm and a 75% stock loss to push me over the edge. Within a month, sold were 90% of my stocks in portfolio, never to look back again. No regrets. Right call. Mere paper during a global paper storm. And countless notes of gratitude from Hat Trick Letter subscribers in averting deep losses.

◄$$$ THE SOLUTION FOR MINING FIRMS IS TO ATTRACT TEN TIMES THE CUSTOMER BASE. THE CHALLENGE GOES FAR BEYOND MARKETING. THE MISSION WOULD BE TO INSTRUCT THE PUBLIC ON CORRUPTION IN THE GOLD MARKET, CORRUPTION IN THE USDOLLAR MARKET WITHIN THE FOREX, CORRUPTION IN THE USTREASURY BOND MARKET WITH DERIVATIVE SUPPORTS. THE PUBLIC DOES NOT UNDERSTAND GOLD, IS COMFORTABLE WITH FAKE PAPER MONEY, CANNOT COME TO GRIPS WITH THE CONCEPT OF WEALTH PROTECTION, AND CANNOT USUALLY QUOTE THE PRICE OF GOLD. THE PUBLIC DOES NOT KNOW THE PRIMARY CYLINDERS OF THE GOLD BULL MARKET, WHICH STAND AS DEBASED MONEY AND NEGATIVE REAL INTEREST RATES. $$$

Sadly, the US public does not understand either Gold or Money. The public is very concerned about savings and investment, but it is bored and ignorant or the concept of money, especially illegitimate money forms. The promotion of Gold goes contrary to the USGovt that supports the USDollar for national security. The USMilitary further supports the US financial structure through intimidation of nations attempting to diversify out of USTBond reserves. The United States provides the Persian Gulf protection roles. To be sure, covering these relevant areas in a mining firm Marketing program would be a tall order, but would also invite syndicate attack, including from the USGovt groups in partnership with the criminal syndicates. Before long, mining firm executives would be revealed as being child pornographers and terrorist money traffickers. Regardless, the mining firms do not have appropriate Marketing functions or staff. An Investor Relations group with pamphlets and budgets for conference booths is not a comprehensive or effective marketing function. Education of the public on the urgent financial requirement to hedge against lost life savings is the objective. Informing of risk for routine everyday participation in the fraudulent banking system that lacks a proper foundation is the objective. Most of the public does not know about the existence or risk from fractional banking practices. Observe the threat of tax and seizure to bank accounts from Cypress and Europe. It seems mining firms prefer to dazzle with snazzy photos of producing deposit projects in remote areas with challenges. They prefer to impress with mine core samples. They deal with sparkling coins. They do not educate on why putting a large slice of life savings in gold or silver bars is an urgent necessity during times of chronic unaddressed financial crisis.

The end user should not be the marketing agent by default. It is an abrogation of duty for the industry. The mining firms leave it to the USMint or Royal Canadian Mint to promote coins. The firms do not typically have a Marketing staff beyond the thin ranks of Investor Relations, which appear to feature fast rotating members in filled posts. The mining industry is not the only industry on the planet that requires no marketing. By example, General Motors needs marketing, even though dealers do it. Huggies needs marketing, even though supermarkets do it. The New York and Nasdaq stock markets need marketing, even though thousands of companies do it. Dell and Hewlett Packard need marketing, even though the retail chains do it. The function of Marketing would be to create DEMAND for their metal product and its assorted ancillary products like coins, as savings devices, as insurance, and more.

The other function of Marketing offices would be to reveal why the current Gold & Silver prices are not proper, since bound by corrupt markets and collusion with regulator bodies. The defense is constantly needed against the typical distracting false arguments about jewelry driving the Gold price. How lame and tiresome! The investment demand is foremost in any historical gold bull market, a point in need of promotion. The Marketing offices must promote the education of the public on basic economic matters, like a negative real interest rate is the most significant Gold bull market factor, which has not gone away. Therefore, the Gold Bull Market is still on in a powerful way. The mining firm Marketing leaders could be trotted out on the financial networks to counter the stupid bland propaganda. My recollection is lucid back in 2003, as the financial wonks and mindless talking heads actually stated that the Gold price was rising due to geopolitical stress over the Palestinian issue. How braindead indeed!

The Gold price should be triple its current level. It is languishing because the mining industry is populated by some of the stupidest people in all of commerce, but they make up for it with arrogance and glitzy glossies from free mailings and conference booths. The Marketing function must educate the public, since at least 90% of the masses could not quote the Gold price within a $100 error. A contact named Stewart did this precise exercise in the US in a recent year. Of the 1000 personal interviews, only 9 people were able to come within $50 of the current Gold price. That is under 1% of the sample. A special thanks to Stewart for his shared points on the mining industry shortcomings for marketing, valid all. The American people cannot even begin to understand the systemic, engrained, inestimable corruption that surrounds them in everything from money, to bonds to the military to the government overall. My conclusion lately has been that American people care about their savings, but not about money, and are therefore as confused as they are frightened by the ongoing endless crisis. They have no idea what a solution would look like, namely the Gold Standard.