Category Archives: Market News

Bullish on Northwest Biotherapeutics (NWBO)? You Should Be.

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Late last evening Northwest Biotherapeutics (NWBO) released news stating the company is expanding the number of clinical trial sites for their “ongoing 240-patient randomized, double blind, placebo controlled clinical trial of DCVax® immune therapy for Glioblastoma multiforme (GBM), the most lethal form of brain cancer“.

This puts NWBO’s brain cancer drug on the fast-track to significant interim data and, eventually, commercialization (upon FDA approval).

This latest announcement follows very significant news from one week ago, which has since spurred the price onwards and upwards, quite notably.

NWBO is now working with Fraunhofer, the largest applied research foundation in Europe, to administer trials in Europe, as well as provide DCVax-Brain for compassionate care uses. What this means is sales in Q2 and yet another source of capital to finance operations.

See our coverage on the significance of those earlier news, including the partnership and approval for compassionate care uses in Europe, here.

Fast-forward to today. NWBO is in late-stage trials for a potential breakthrough product that will treat brain cancer. Dcvax-Brain has two significant advantages over current treatments: effectiveness (think what someone would give to live another year) and limited side-effects (think what patients treated with chemotherapy go through).

NWBO has just signed an agreement to sell this treatment in Europe under compassionate care uses, meaning revenues will soon start flowing in (beginning in this very quarter).

Yet, NWBO still trades for under $60M. To give you a benchmark for the potential inherit in this firm, consider Biovex, a private biotechnology firm that was in late-stage clinical trials for head & neck cancer when Amgen (AMGN) bought them out for $1 Billion. That buyout happened just earlier this year. And Biovex’s clinical data closely resembled the results that NWBO has been reporting in trials.

What Can You Expect? 

More of the same. Superior data from trials and continued expansion of the clinical study of DCvax-Brain in patients with brain cancer. Look for sales to reflect compassionate care uses of DCvax in Europe, in the second quarter. And don’t be surprised to see NWBO continuing to edge higher, incrementally. 

NWBO has the markings of a $100M company just based on where they are today. That, in itself, could mean a handsome return-on-investment (ROI). At another time we’ll look at how Dendreon’s (DNDN) prostate cancer drug made them a $6 Billion company. Their humble beginning is oddly familiar to NWBO, perhaps the firm next in line to introduce a novel brain cancer drug into the market.

Once bullish, famed contrarian Jim Grant sees trouble in rising markets. His advice: Hold cash

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NEW YORK (AP) — Jim Grant quotes obscure dead economists at length. He pines for an earlier time of gas lights and top hats when the dollar was convertible to gold. He wears bowties.

Prolific author, gold bug, droll chronicler of Wall Street folly, Grant would be easy to dismiss as an entertaining but irrelevant throwback if he hadn’t been proven so right so often. Now, as small investors are putting more money into markets, the publisher of the biweekly Grant’s Interest Rate Observer is warning of new dangers. He says prices are too high for nearly every asset you can think of – stocks, junk bonds, Treasury bonds, British gilts, even Iowa corn fields.

With its wry observations about investor self-delusion, Grant’s newsletter ($910 for an annual subscription) has become a sort of bible among the bold and bearish alike. Though detractors say he’s far too negative, he’s been praised for some timely calls. In the 1980s, he warned of an overheated junk bond market before it collapsed. He foretold of the bursting of the tech bubble in the late 1990s, and revealed the false alchemy of Wall Street’s mortgage packaging business before housing crashed four years ago.

Occasionally, he’s gotten bullish at the right time, too. Amid the panicked selling of late 2008, Grant told readers to load up on investment grade bonds, junk bonds, even a few of those much-derided mortgage securities. Some picks have more than doubled since.

A graduate of Indiana University, Grant, 64, was a Navy gunner’s mate before starting his journalism career at the Baltimore Sun in 1972. He then joined the financial weekly Barron’s before starting Grant’s Interest Rate Observer in 1983. He’s also written seven books, mostly financial histories and profiles. His first book was on Bernard Baruch, the pre-WWI financier and advisor to presidents. His latest is a profile of Thomas Reed, an acerbic and witty Speaker of House over 100 years ago.

As stocks were falling last week, Grant visited The Associated Press in New York to talk about why it’s not just stock investors who should be worried. Below are excerpts, edited for clarity, from a wide-ranging conversation in which he lit into the Federal Reserve for our current troubles, warned of 10 percent inflation and waxed nostalgic for a time when Washington had the courage to let prices fall in crises rather than goose them up and prolong our agony.

Q: What’s your view of the stock market?

A: The Federal Reserve has unilaterally taken it upon itself to levitate asset prices. It is suppressing interest rates. When you’re not getting anything on your savings, you are inclined to go out and buy something, anything, to generate either income or the expectation of capital gains. So the things that we take as prices freely determined are in fact manipulated.

A few months ago, (Fed Chairman) Ben S. Bernanke, Ph.D., the former chairman of the Princeton economics department, stood before the cameras of CNBC and said that the Russell 2000 is making new highs. The Russell! He sounded like another stock jockey. He was taking credit for new highs in the small cap equities index. The Fed, as never before, or rarely before, is now the steward of this bull market. One wonders what it will do if stocks pull back significantly.

Q: Are stocks overvalued?

A: Some big multinationals left behind in the past ten years (like) Wal-Mart, Cisco Systems, Johnson & Johnson appear to be attractively priced. But generally speaking, things are rich.

Q: What would you have done in the financial crisis if you had been in Bernanke’s position?

A: Resign. I don’t know. I have great faith in the price mechanism, in the mechanics of markets. I think there should have been much less intervention and we should have let some chips fall, many chips fall.

Before the Great Depression, there was a great depression (lower case `g’) in 1920-21. Within 18 months, the GDP was down double digits and commodity prices collapsed. Harry Truman lost his haberdashery in Kansas City. It was very painful, but it ended. And the Fed, during that depression, actually raised its discount rate and the Treasury ran a surplus. The reason it ended was the so-called real balance effect – that is, prices came down and people with savings saw things that were cheap and they invested. That’s the fast and ugly approach.

The slow and ugly approach is to mitigate, temporize and forestall to give us time to work ourselves out of difficulties. That’s the current approach. I think it’s intended to be a more humane approach, but I wonder about its humanity. I mean these college kids get out of school and they’ve got nothing. It’s awful – 9 percent unemployment and going nowhere except sideways.

Q: But Bernanke has succeeded by some measures. Big companies are flush with cash, their profits are on track to hit a record this year and the riskiest among them are raising money at the lowest rates ever. Who could have imagined this during the depths of the financial crisis?

A: Let’s go back to the previous cycle of 2002-3. Cisco Systems was for 15 minutes the costliest company on the face of the earth, and digital technology was about to raise every human being out of poverty. OK, so that cycle ends – Bang! – with general disarray in the stock market. What do we do? Well, we press down interest rates and we give residential real estate a little helping hand. What’s not to like? Home ownership rates are rising. Stocks are up. Risky companies are issuing debt at levels never before imagined.

Who would have dreamt such an outcome was possible after the tech bust? And that ended noisily and here we are again and our monetary masters have devised new, even more audacious methods of stimulus. In three or four years we’ll look back and say, `Can you believe we fell for this again?’

Q: You’ve been warning about higher inflation for a while. How imminent is it?

A: I’ve been all wrong on this. I thought that this massive monetary stuff would generate the conventional kind of inflation that would be expressed in much higher CPI readings. Not so far. But all things are cyclical and the seemingly impossible is just around the corner. On September 30, 1981, the 30-year US Treasury bond traded at 14 7/8 percent and I remember some crank, some visionary, was talking about how interest rates were going to zero, you watch. Oh, yeah right. And so it came to pass.

It does seem improbable that the inflation rate would ever get beyond 3.5 percent, let alone knock on the door of 10 percent. But I’m here to tell you it’s going to 10 percent.

Q: Won’t policymakers come down hard if we get even 6 percent inflation and try to lower that?

A: Sometimes they can’t control things. We had 6 percent inflation before. Washington is full of well-intentioned people. Ben Bernanke keeps saying that what we really need is a little inflation. He says we’ll get 2 percent or a little bit more. You shouldn’t even think that, let alone say it out loud. That’s such bad luck to tempt fate by saying that you can calibrate things like that. You can’t do that.

Q: So with inflation ahead, are you buying gold at $1,480 an ounce?

A: I am not buying it now. I have bought it in the past. Gold is a very difficult investment because its value is indeterminate. It is the reciprocal of the world’s confidence in the likes of Ben Bernanke. I think the price will go higher.

Q: When did you first buy gold?

A: Well, my first misadventure with gold was standing in a queue in front of the Nicholas Deak currency and coin shop, which was on lower Broadway. And it might have been January of 1980 at the very peak but if not then, it was late 1979. I almost top ticked it. That was before I learned never to stand in line to buy an asset. You always want to go where nobody else is in line.

Q: Let’s talk about the dollar. Washington says it wants a strong dollar.

A: It’s disingenuous when (Treasury Secretary) Tim Geithner says he’s for a strong dollar. What he means to say is the economy stinks and we need even greater oomph from our exports and for that we would like a much lower dollar in a measured, managed kind of decline. That’s what he wants, and he wants it by November 2012.

Q: What’s wrong with a weak dollar? Caterpillar recently said it is nearly doubling its capital spending because the weak dollar allows it to sell more overseas. It plans to spend much of that on factories in the U.S., paying construction workers to build them and hiring people to work in them.

A: Well, that is the Caterpillar story. The whole manufacturing story in the U.S. is very sunny, and it’s in part due to the state of the dollar. But if (prosperity) were as easy as debasing one’s currency, think of all the countries that would be prosperous that are rather the opposite. Argentina would be booming. And Weimar Germany would not be a story of failure but of success.

If the world were to lose confidence in (the dollar) we would suddenly be in a much less advantageous financial position. The U.S. is uniquely privileged in that we alone may pay our bills in the currency that only we may lawfully print. That’s our prerogative as the reserve-currency country. But it has seduced us into a state of complacency. We never actually pay the rate of interest that we might be expected to pay – the real rate of interest – on Treasury debts.

It’s great for now that we’re paying 2.5 percent or whatever on our public debt. But wouldn’t it be better if there were an accurate price signal that was telling us that we’re borrowing too much?

Q: If investors lose their faith in the dollar, what would replace it?

A: I think there will be a gold standard again in your lifetime, if not mine. It’s the only answer to the question, if not the dollar, then what?

Q: Where should people put their money now?

A: The trouble with the present is that nothing is actually cheap. My big thought is that our crises are becoming ever closer in time. The recovery time from the Great Depression was 25 years. The stock market peaked in 1929. It got back there in 1954. We had a peak in 2000, crash, levitation, then the biggest debt crisis in anybody’s memory. The cycles are becoming compressed. The temptation to become invested at peaks of these shorter cycles is ever greater.

Perhaps one way to proceed is to hold cash at the opportunity cost of not much in Treasury bills. You make nothing, but you want to have this money when things are absolutely, not just relatively, cheap. This time of full or overvaluation shall pass. On recent form, it’ll pass in a thunderclap and there will be a panic and it’ll seem as if the world’s ending. And that’s when somebody who is nimble can get fully invested in a comfortable way.

It won’t feel comfortable, it will feel awful, but I think that’s the way to do it. I mean everything (you could invest in) is either uninteresting or rich, it seems to me.

Q: What about Treasury bonds?

A: I think it’s useful to imagine how things might look ten years hence. What will one’s children, heirs or successors think about a purchase today of ten-year Treasurys at 3.25 percent? They’ll look back and say, `What were they thinking?’ The (federal deficit) was running at 10 percent of GDP, the Fed had pressed its interest rates to zero, it had tripled the size of its balance sheet, and they bought bonds? Treasurys are hugely uninteresting, as is similar government debt the world over.

Q: Any last thoughts?

A: Because the Fed has coaxed or cajoled people into stocks, including many financial non-professionals, I think it has moral ownership of the market in a way that no recent Fed has had. Either the stock market owns the Fed, or vice versa but they are too intertwined now. If stocks pull back by 20 percent, how can Bernanke just sit there and say, `I want a bear market?’ I think he has some moral responsibility for the finances of the non-professionals who bought.

Q: Does this mean the Fed might announce QE 3, a third round of quantitative easing to lower rates and raise stock prices?

A: Yeah, it means QE 3 through QE N.

Written by BERNARD CONDON

Today In Small Biotech

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There’s a lot going on in small cap biotech, even more so when you take into perspective the entire sector. What I’ve attempted to do is organize a brief overview of a few key biotechs making significant strides by way of price and volume. For the purposes of this report, the objective was to find companies with a capitalization under $500M, traded under $5/share, and seeing abnormal volume. The results of that screen were further narrowed down by looking at a key factor in low debt/equity. In fact, all of the companies listed (below) have hardly any debt to speak of and cash positions to justify variable levels of stability. The last criteria was for short interest to be at or below 5%. 
 
Thursday’s spotlight spent a considerable portion of time over at Rexahn Pharmaceuticals (RNN), whose shares closed at a new 7-month high on Monday. By the end of the session, investors valued the company 24% higher on the basis of last week’s $3.95 Million injection by Teva Pharmaceutical Industries (TEVA), who now owns 6.29% of the company, and the likelihood of something good coming out of ongoing Phase 2 clinical trials for three separate drugs.
 
ImmunoCellular Therapeutics (IMUC.OB) was also the beneficiary of a new 7-month high price after announcing their first patient had enrolled in Phase 2 clinical trials for ICT-107, a cancer vaccine targeting glioblastoma, late last week. They have a considerable portion of cash on hand relative to their burn rate and no debt. More information can be found in my earlier write-up on the company.
 
Repros Therapeutics (RPRX) was another recipient of abnormal share volume, which propelled its stock price higher on Monday. In January the company reported it had received Institutional Review Board (IRB) approval to commence the Phase IIb study of Androxal® in men with secondary hypogonadism. More importantly, their offering of common stock and warrants is expected to close “on or about February 8th, 2011″, and the $11 Million they will raise “is expected to provide Repros funding into mid-2012″.
 
Zalicus’ (ZLCS) oncology research collaboration agreement with Novartis was extended to May 2012 in early January. The only other noteworthy event that I could find regarding this company without getting specific was a bio conference they are presenting at. Zalicus followed suit gaining 6.25% on Monday; volume topped the 3-month average roughly 37%.
 
Unlike its biotechnology counterparts, Orexigen Therapeutics (OREX) is still trading well below 52-week highs, but quickly moving higher after being discounted 70% last week. Shares bottomed at $2.5 and have already pierced the $4 mark just four sessions later. The FDA turned back their application for a weight-loss drug that would have essentially ‘made’ the company. Instead, Orexigen has some work ahead of itself before it can resubmit an application to the Food & Drug Administration and potentially reap approval.
 
Neoprobe (NEOP) held its own revealing the long wait for listing on the AMEX is no longer a wait at all – shares will begin trading on the NYSE Amex “on or about February 10, 2011″. As volume traded was twice that of the 3-month average, shares enjoyed a modest 3.37% rise. The up-listing announcement, however, came out after hours and should give shares a boost this coming session.

Disclosure: I’ve been compensated for writing an independent opinion regarding ImmunoCellular Therapeutics.

11 Reasons Why Apple (NASDAQ: AAPL) Could Fall in 2011

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AAPL LogoAfter revolutionizing the technology of media and personal electronic devices for the 21st century, staging one of the greatest comebacks of any company in history, and dominating consumer and investor attention for the past five years, Apple (AAPL) may be setting up for a hard fall.

Down and almost out, Apple was nothing to be too excited about 10 years ago. Its Macintosh computers were the bulk of its product line, and PCs were in almost full control of the market. But with the invention of the iPod, which revolutionized the way we listen to and buy music, Apple began its road to recovery – which eventually led it not only to recovery, but to domination as well.
It’s hard to even imagine what things were like before the iPod. Walkmen, CD players and far-inferior MP3 players would be almost embarrassing nowadays in comparison to the iPod, which has become the icon for music devices in the past few years. And the addition of the iPhone to Apple’s product line was met with almost hysterical excitement, as lines outside of Apple stores became a common occurrence. Add to that a consistently-innovated computer and laptop line, thousands of “Apps” for the iPhone that allow people to do anything from looking up restaurants to turning on their cars, and the seemingly never-ending hype as to what Apple will do next, and it is obvious why Apple has been able to build such a powerhouse out of its brand.
But as is the case with every company, story, and fixation, the party eventually ends. Things can’t improve and improve and improve and improve forever. At some point, what was once popular becomes second-class; what was once innovative, becomes old-fashioned; what was once a well-kept secret becomes a monotonous, repetitive idea that offers no benefit.
What I’m saying is that at some point Apple will no longer sit as loftily as it now does. It could fail to innovate, fail to care for its customers, or simply fail to meet expectations. And when that happens, we can expect “Apple lovers” to snap out of their whole-hearted faithful love-affair, wreaking havoc on the stock price if not also sending the company into frenzy. There is no doubt that Apple is one of the greatest companies in the world, with some of the greatest consumer products and revolutionary technologies. But at what point does the fun end?
 
11 Reasons Why Apple Could Fall in 2011

1) Price Run-Up. Less than eight years ago, you could have bought Apple shares for $7. Today they’re sitting at an all-time high above $325 – more than a 4,600% gain!
Take a look at the following chart:

As you can see, there were plenty of opportunities to buy Apple if you missed the first moves: early 2006, early 2008, late 2008-early 2009, and basically at any point before today. The stock did not move straight up without pause; it offered investors numerous chances to jump in.

But after a 4,600% move, now sitting at all-time highs, and especially after such a steep rise since early 2009 – is there really that much room left to go? Aside from the fact that there are probably plenty of other investment opportunities that will outperform Apple, could such a meteoric rise in stock price continue for that much longer?
 
2) Market Cap. With a market cap of over $298 billion, Apple is now the second-largest company in the world. It recently became the world’s largest technology company, moving past Microsoft (MSFT), which was once in a similar position that Apple finds itself now. Besides for the fact that Apple is by no means the market-share leader in computers or phones, there is one much bigger point that just stands out in my mind. The market cap of Apple is equal to the market caps of IBM (IBM), Hewlett Packard (HPQ) and Dell (DELL) combined!
Moreover, it is hard to argue with the claim that it is much harder for a large company to grow as quickly as it did leading up to that point. In other words, as hard as it is to double a company’s market cap from $50 million to $100 million or from $10 billion to $20 billion, it is exponentially harder to take a huge company like Apple and grow its market cap from $300 billion to even $400 billion. Large corporations are sometimes like large, heavy objects much harder to move.

3) CEO Steve Jobs. Undoubtedly the most prominent figure in Apple, if not the entire technology space, Steve Jobs has been the mastermind and visionary behind much of the company’s success. Yet while Jobs should be granted the utmost credit for his achievements, two issues could still derail the company.
First, his health is of major concern to the future of Apple. In 2004, Jobs announced that he had been diagnosed with pancreatic cancer. His health has been repeatedly scrutinized over the past few years, with Bloomberg even mistakenly publishing a 2,500-word obituary of Jobs in 2008. In April 2009, Jobs underwent a liver transplant, further pointing to the heightened issue of his health.
What happens if Steve Jobs is no longer able to lead Apple? The man who has been behind Apple’s revival and surge to the top of the technology world is seen by many to be vital to Apple’s continued success. Yes, he has established a very strong foundation on which the company can continue to build. But the loss of his vision and continued leadership will hurt the company in the short-term if not put a major damper on its growth in the long-term. Even if strong leadership is available to replace him, you can surely bet that many stockholders would be selling their shares if anything were to happen to him.
The second issue, which has been the downfall of many powerful men and innovative companies, is Jobs’ arrogance. Jobs has downplayed Apple’s surpassing Microsoft in market cap, rejected Adobe’s (ADBE) Flash technology for use in his own company’s products, and bashed competitors like Research in Motion (RIMM) and Google (GOOG). His arrogance has obviously brought him the success he now enjoys, but some of the excessive and unnecessary arrogance he may be guilty of could prevent Apple from taking part in new ventures, new ideas and new partnerships, and could even make Apple a target. One of the most important rules of wisdom and success is being open to new opportunities and not thinking that nobody else can offer good ideas. We’ll see how this one plays out.

4) Extreme Expectations. After shattering analyst estimates again and again, expectations for Apple are higher than ever. They just haven’t ceased to amaze almost everyone with their record numbers, continuous innovation, and growing grasp of market share. There simply is no company out there like Apple.
But after exceeding investors’ expectations time and time again, is Apple setting up for disappointment? With 47 out of 50 analysts covering Apple maintaining a “Buy” rating and the remaining 3 a “Hold” rating, it’s hard to say investors could be any more bullish than they already are. Almost no one dares to bet against or even speak poorly of Apple; analyst price projections are hovering in the $400+ dollar range; and with Apple touted as everyone’s favorite stock for years now, it could be that all the high growth, big expectations, and future opportunities are already priced in. What happens if Apple slips or even just fails to meet the sky-high expectations that have been set for it? It’s understandable that Apple will drop if it completely screws something up; but what if it just fails to exceed expectations? After exceeding expectations for years, investors’ won’t settle for just meeting expectations. If Apple can’t continue on its course for growth, and do so in tremendous fashion, it could begin to lose its luster. And if it loses its luster, you can bet that many of those invested in Apple will begin to pull their money out in search of better investment opportunities. Nobody remains a crowd favorite forever.

5) Anyone Left to Buy? After dominating the headlines, media coverage, and the minds of investors for years, is there anyone left who hasn’t bought Apple yet? Almost every fund and institution is invested in Apple; your grandmother is probably invested in Apple. If it’s no longer a well-kept secret, is it really a great investment anymore? And is there anyone left to swear to it? With all the opportunities to invest in it, I find it hard to believe that there are that many people left to buy it. Anyone who has wanted to already has. And though there may be some investors who may get into it again or even for the first time, there is a higher chance that those who own it will sell it at $325 – the new investors would, in effect, be buying from those who have owned it for a while. Smart money will be selling to last-to-get-in investors.

6) Declining Quality. Apple used to be known for its product quality and customer service, but lately it appears it has been cutting some corners. Understandably so, as Apple tries to grow rapidly and has to keep up with demand and strict time schedules, it sometimes comes across some issues, such as getting its products out on time. But at the same time, a company that grows so quickly sometimes can’t keep up with quality and customer service; it simply doesn’t have the time or resources.
And where did we see this happen? The iPhone was shipped out as soon as possible, and ended up having faulty antennas. To make matters worse, Apple refused to recall the phones and shipped out iPhone “bumpers” instead. Moreover, many iPhones are functioning poorly – just ask some of your friends who own one. iPods have been dying on people for years, for no apparent reason. I’ve even heard people complain about the laptops recently – something Apple has never had problems with. And now, the iPad has been made with a reflective surface, which makes it almost impossible to use in the sunlight – how can anyone take it to the beach or use it outdoors? The Kindle, on the other hand, is made with a non-reflective surface, and avoids these issues. Apple must address these issues and keep up with quality control, or it faces the threat of losing loyal customers.

7) Innovation? Apple is where it is today because it was able to introduce revolutionary products and continuously innovate them. But after a few generations of iPods, iPhones and laptops, innovation is somewhat lacking. It’s just not that easy to continuously improve on an already-successful product. Take the iPod, for example: it started off as a music-only, black-and-white display device. Then came color, video, internal speakers, touch-screen, Internet, and many other features. But what else is really left? Much of the good features have been introduced already. Many have therefore claimed that the iPods, iPhones and computers are now part of Apple’s core product line – meaning they will continue to grow, but fairly steadily.
The iPad is supposedly Apple’s new focus. I will admit that it’s an interesting and probably useful gadget. But is it really as innovative as investors believe it to be? To an extent, it’s really just a big iPhone or small laptop. And it also cannibalizes some of the iPhone, iPod and laptop sales. Since it offers very similar features to Apple’s other products, there is not much benefit in owning the iPad if one owns the iPhone, iPod and laptop. The iPad may just have been the result of Apple’s dire need to innovate, but innovation may have plateaued.

8 ) Competition. Apple has hogged the spotlight and much of the smartphone and tablet market. But as other companies see the benefits and opportunities in the space, they will begin to ramp up the competition. The Android and the Blackberry continue to be threats to Apple’s iPhone market share, with Android actually growing faster. The iPad’s relative success also has interested companies like Samsung (SSNLF.PK), HP and Research in Motion to introduce their own respective tablets. It’s only a matter of time before Apple loses its “first-to-enter” role and faces the reality of a market with increasing competition. Another sign of Apple’s struggles is its recent sale of iTunes gift cards for less than their face value. Best Buy (BBY) recently sold $50 iTunes gift cards for $40. A 25% sale seems pretty desperate; it tells me that even Apple doesn’t believe its prices are justified. Apple does have the ability to remain on top and offer the most appealing products, but it definitely won’t be easy as it has been until now. And that could easily send the stock price lower.

9) Hacking and Viruses. Unlike PCs, Apple computers have been known to be very resistant to viruses. While PCs have been plagued by hackers, viruses and other similar issues, the Apple system has been relatively safe. But as Apple computers continue to sell at an increasing rate, viruses and new problems are more likely. And if Macs begin to wear down at a quicker rate, they could lose some sales. My strategy has been to buy three PCs for the price of one Mac. Apple computers are just too expensive to justify, in my opinion; I’d rather buy three PCs over the course of a few years for the same price I’d be paying for one Apple laptop. That way, if I get a virus on one computer, I can just buy a new one without worrying about all the money I’ve spent. Unless Apple can continue to protect itself from viruses and maybe lower its prices a bit, it may face some fierce challenges.

10) Weight in S&P 500 and NASDAQ 100. As Apple shares continued to rise, they have carried the broader market and indices with them. Apple is second only to Exxon (XOM) in the S&P 500 in terms of weighting, and makes up over 20 percent of the NASDAQ 100 (QQQQ), equal to the weighting of Microsoft, Google, Oracle (ORCL), Cisco (CSCO), Intel (INTC), Amazon (AMZN), and Research in Motion combined.
That means that for every one percentage point that Apple gains or loses, its impact on the NASDAQ 100 equals much bigger moves in any other individual stocks or even an equal move in the 6 next-biggest companies. In other words, the market and the indices heavily depend on Apple to continue to carry them upward; if Apple begins to fall, it will drag the rest of the market along with it. And regardless of how the other companies are doing, if investors start seeing the market drop, they are prone to avoid the market. Also, Apple’s weighting in the index will be up for review if its weight reaches 24% of the index. If that does happen, Apple’s weighting will be reduced, which will in turn result in less broad-market ETF money being invested in Apple. Right now, money being invested in the NASDAQ 100 through the QQQQ is being allocated heavily to Apple; if Apple’s weighting is reduced from 20%+, however, less money will be allocated to it, which could result in a weakening stock price.
Apple’s heavy weighting in both the S&P 500 and NASDAQ 100 make it the benefactor of a large portion of ETF and broad-sector investments, as allocations are based on a stock’s respective weighting. But at the same time, Apple’s heavy weighting makes it susceptible to a big drop if investors pull out their index ETF or funds, or if Apple’s weighting is recalculated in the NASDAQ 100. The market’s tremendous dependency on Apple is something to take note of.

11) Poor Use of Cash. With over $25 billion in cash on its balance sheet, Apple is not efficiently putting its money to work. With these massive cash levels, Apple could have paid a dividend to shareholders, buy back stock, or even buy a few companies with promising technology or services. Instead, Apple is not rewarding its investors and isn’t improving through acquisitions. Its idle cash may be due to the uncertainty about the market or simply due to Steve Jobs’ arrogance in thinking the company doesn’t need to acquire any smaller companies. Either way, however, Apple isn’t making the best use of its resources.
Apple has been on top for years now. It is the favorite of many funds, individual investors and the media. It has revolutionized the technology and culture of music, mobile phones and computers. And it is expected to continue to shock the world with its capabilities. But expectations may simply be too high. After a 4,600% parabolic rise in stock price, the involvement of almost every investor, extreme expectations as to Apple’s future, a CEO with health issues and potentially-blinding arrogance, a tremendous market cap which could prevent it from growing as quickly as it has, increasing competition, slowing innovation, and declining quality and customer service, Apple’s euphoric peak may be rapidly approaching. With an almost euphoric position in the business and investment world, it may just take a small slip or a failure to exceed expectations to send Apple stock tumbling, triggering a snowball effect that sends institutions and investors running for the exits.
There has been no proof yet of Apple stock price slipping, but it has been stuck near the $320 range since October. Such a sideways move could be a sign of distribution at the top – as smart investors sell their shares to newcomers. Unless Apple can shoot out of this range, it may be setting up for some trouble. The best move for investors would be to wait and see which way it moves, and maybe even take some profits; with all the issues we’ve discussed, there may be too much risk out there.

 

Article courtesy of Yoni Jacobs of Chart Prophet Capital

Wall Street Breakfast: Must-Know News

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  • Rio advances on Riversdale. Rio Tinto (RIO) moved forward with an A$3.9B ($3.9B) offer for Australian coking coal developer Riversdale Mining, after its earlier A$3.5B bid was rebuffed. Analysts said the move makes strategic sense for Rio, whose portfolio was underweight coking coal. The A$16/share offer was recommended by all of Riversdale’s board, except for the director appointed by major shareholder Tata Steel (TATLY.PK, but investors sent Riversdale shares up 1.6% in Aussie trading to A$16.57, suggesting they expect either a sweetened offer or a rival one. Premarket: RIO -1% (7:00 ET).
  • Rovi buys Sonic Solutions. Rovi Corp. (ROVI) will pay $720M in cash and stock to buy Sonic Solutions (SNIC), the owner of popular digital video player software DivX. The $14.17/share offer is a 26% premium to Sonic’s closing price yesterday. Rovi said the combined company will be better positioned to help movie studios sell content in the fast-growing digital entertainment market. The deal is expected to add $0.05-0.10 per share to Rovi’s adjusted earnings. Premarket: SNIC +24.7% to $13.97 (7:00 ET).
  • Advantest raises offer for Verigy. Advantest (ATE) has raised its takeover offer for Verigy (VRGY) by 23% to roughly $900M, equivalent to $15/share. Advantest had previously proposed to acquire Verigy for $12.15/share. Verigy’s board will consider the offer, but in the meantime its $600M merger deal with LTX-Credence (LTXC) remains in effect.
  • AIB poised for capital injection. Irish Finance Minister Brian Lenihan is expected to ask Ireland’s top court today for permission to inject €3.7B ($4.8B) of capital into troubled Allied Irish Bank (AIB). The move would leave the Irish government with more than a 90% stake in the lender, up from its current 19% stake. AIB is expected to acquiesce to the request, which would allow the injection to occur immediately, and the court’s involvement would allow the bank and the government to completely sidestep shareholders. Following the capital injection, the government may de-list AIB’s shares, despite earlier speculation that the stock would continue trading for at least the near future. Premarket: AIB -15.6% to $0.92 (7:00 ET).
  • Hilton settles Starwood suit. Hilton Worldwide reached an agreement to settle a corporate-espionage lawsuit filed last year by Starwood Hotels (HOT). Hilton officials had been accused of stealing confidential Starwood documents in order to build a modern boutique-style chain. As part of the settlement, Hilton agreed to never develop its Denizen lifestyle brand and can’t start developing a similar brand for two years. Hilton must also make an unspecified payment to Starwood, and must let a court-appointed monitor review its marketing material to ensure Hilton doesn’t benefit from material in the Starwood documents.
  • Barnes & Noble shareholder cuts stake. Money manager Aletheia Research and Management, the third largest shareholder of Barnes & Noble (BKS), has cut its stake in the struggling bookstore chain. According to regulatory filings, Aletheia now owns 7.67M Barnes & Noble shares, or a 12.7% stake, down from 14% last month and 15.1% earlier in the year.
  • Comcast-NBCU deal review extended to January. Comcast (CMCSA) confirmed yesterday that the regulatory review of its proposed NBC Universal (GE) deal will continue into January, stymying the company’s plans to close the controversial deal by the end of 2010. There had been ongoing rumors that regulatory approval would be delayed, but until yesterday both parties in the transaction had stood firm on their original timeline.
  • AstraZeneca, Abbott part ways on Certriad. AstraZeneca (AZN) ended its license agreement with Abbott Laboratories (ABT) to develop Certriad, a drug meant to treat mixed dyslipidemia. The mutual decision was prompted by an FDA decision in March 2010 which caused a regulatory delay in the drug’s commercialization, and the two firms jointly determined that their licensing agreement was “no longer commercially attractive.”
  • U.S. files WTO complaint against China. The Obama administration filed a complaint with the WTO over subsidies China provides its wind-energy manufacturers, acting on a petition brought by the United Steelworkers union. The U.S. claims that the Chinese government fund which awards grants to wind power manufacturers appears to require recipients to use Chinese-made parts, which violates WTO rules.

Earnings: Wednesday After Close

  • Bed Bath & Beyond (BBBY): Q3 EPS of $0.74 beats by $0.08. Revenue of $2.2B (+11.1%) vs. $2.1B. Shares +6.6% AH. Micron Technology (MU): FQ1 EPS of $0.15 misses by $0.13. Revenue of $2.3B (+32%) vs. $2.4B. Shares -3.6% AH. Today’s Markets
  • In Asia, Japan -0.2% to 10346. Hong Kong -0.6% to 22903. China -0.8% to 2855. India -0.2% to 19983.
  • In Europe, at midday, London +0.1%. Paris -0.4%. Frankfurt +0.1%.
  • Futures at 7:00: Dow flat. S&P -0.1%. Nasdaq -0.2%. Crude +0.1% to $90.61. Gold -0.3% to $1383.60.

Thursday’s Economic Calendar

8:30 Durable Goods
8:30 Personal Income and Outlays
8:30 Initial Jobless Claims
9:55 Reuters/UofM Consumer Sentiment
10:00 New Home Sales
10:30 EIA Natural Gas Inventory
10:30 ECRI Leading Index
4:30 PM Money Supply
4:30 PM Fed Balance Sheet

Written by Rachael Granby, SeekingAlpha
Original post

Ireland Races to Secure Weekend Aid Deal Amid Bank Concern

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Ireland is in the final stages of negotiating an international aid package to rescue its financial system before markets open on Monday after investors yesterday dumped the bonds of its largest banks.

Euro-area finance ministers may seal an agreement with Ireland tomorrow, with a teleconference slated to begin at 4 p.m. Brussels time, a European Union official said on condition of anonymity. The loans may cost as much as 6.7 percent, compared with a rate of 5.2 percent paid by Greece, state broadcaster RTE said, without citing anyone.

The need for a pact, which may be worth 85 billion euros ($112 billion), is intensifying as capital flows out of the nation’s banks. The Irish government two years ago assured senior bondholders they wouldn’t lose their money if banks failed. For negotiators, the risk is that breaking the pledge may spark concerns about the quality of other euro-region debt.

“One possible scenario is that the financial package for Ireland could include an element of restructuring affecting senior debt,” Fitch Ratings said in a statement yesterday. “Fitch has no visibility of this matter but notes that such a restructuring could have wider implications for the euro area.”

Allied Irish Banks Plc and Bank of Ireland Plc bonds fell yesterday on concern the government will abandon a pledge to protect senior bondholders and instead force them to share the bailout costs. EU and International Monetary Fund officials are taking legal advice on how senior bondholders can share the cost of the rescue without triggering lawsuits, the Irish Times said yesterday, without saying where it got the information.

Irish Crisis

Ireland’s crisis is now forcing Portuguese and Spanish politicians to quell speculation that they are next in line for rescue. The cost of insuring Portuguese, Irish and Spanish government debt against default yesterday rose to records based on closing prices, according to CMA.

“The sovereign debt crisis has gone from third to fifth gear in just a matter of days,” said Kathleen Brooks, research director at Gain Capital Group LLC in London. “Whereas the Greek crisis and the start of the Irish crisis were concerned with individual sovereigns and their problems, the current chapter of Europe’s sovereign woes has turned into a periphery- wide issue where no one is safe.”

Ireland may pay an average 6.7 percent for the loans, which would last nine years, RTE said. The cash will come from the European Commission, the IMF and the European Financial Stability Facility, which will charge different rates, RTE said. The IMF’s loans may be the cheapest at 4.5 percent, and the EFSF would be the most expensive, RTE said. The EFSF will provide the bulk of the overall bailout.

Hardball

Ireland’s debt agency has paid an average of 4.5 percent on funds raised over the past two years, RTE said.

“If that is true, it is too high,” Leo Varadkar, a spokesman for the opposition Fine Gael party, said on RTE. “The government in my view needs to play hardball.”

Allied Irish’s 750 million euros of 5.625 percent senior notes due 2014 plunged 2 cents on the euro to 75 cents, a 2.6 percent decline, according to composite prices on Bloomberg. Bank of Ireland’s 974 million euros of 4.625 percent senior unsecured notes maturing in 2013 fell 3 cents on the euro, or 3.4 percent, to 82 cents.

‘Similar Problems’

While deposit outflows have “stabilized” in recent weeks, Anglo Irish Bank Corp. Chairman Alan Dukes told Bloomberg Television two days ago that the nationalized lender lost about 12 billion euros of deposits this year and that “other banks are having similar problems.” Anglo Irish yesterday had its long-term counterparty credit rating cut to below investment grade by Standard & Poor’s, which cited concerns about sovereign support for the bank.

Deposits at Allied Irish and Bank of Ireland have fallen by a combined 22 billion euros since the end of June, according to estimates from Emer Lang, an analyst at Dublin-based securities firm Davy.

Governments elsewhere in Europe pushed back against investor bets they may next be in line for a bailout. The average yield investors demand to hold 10-year debt from Greece, Ireland, Portugal, Spain and Italy yesterday reached a euro-area record of 7.57 percent. By contrast, Germany pays 2.73 percent.

Portugal’s government denied a report in the Financial Times Deutschland that it’s being forced to seek aid. The country’s parliament yesterday approved the government’s 2011 budget proposals, which include the deepest spending cuts in more than three decades. The European Central Bank bought the country’s bonds yesterday, according to people familiar with the transactions.

‘Wrong’

European Commission President Jose Barroso said in Paris yesterday that “it’s completely wrong” to suggest the commission has lobbied Portugal. The German government “isn’t pressing anybody to seek funding,” Steffen Seibert, Chancellor Angela Merkel’s chief spokesman, told reporters in Berlin.

“There are those who think that the best way to preserve the stability of the euro is to push and force the countries that at this moment have been more under the floodlight to that aid,” Portuguese Finance Minister Fernando Teixeira dos Santos told Jornal de Noticias in an interview published yesterday. “But that is not the vision or the political option of the countries that are involved.”

Spanish Prime Minister Jose Luis Zapatero told Catalan radio RAC1 that investors who are “short” on Spain “are going to be wrong and will go against their own interests.” Finance Minister Elena Salgado said that Spain will issue less debt at the remaining auctions of 2010 because the nation’s financing needs for this year are already covered.

Irish Woes

Ireland’s woes are having domestic political repercussions. Prime Minister Brian Cowen’s party lost a special election for a vacant parliamentary seat to a Sinn Fein candidate who said he wanted to “burn” holders of bank debt. The premier probably will still be able to pass the 2011 budget even though the loss reduces his parliamentary majority to two.

While opposition political parties back the aim of reducing the budget deficit to the EU’s 3 percent limit by 2014, labor unions are planning a “mass mobilization” in protest at the planned cuts, with a march in Dublin today.

 

Written by Dara Doyle and Simon Kennedy

Casinos struggle back from recession

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Amid a new reality — casinos are not recession-proof — gambling in Louisiana and Mississippi is staging a slow comeback from the economic meltdown of 2008, aggravated for a time by the Gulf of Mexico oil spill that chased away some tourists.

But at least for the rest of 2010 and into 2011, industry analysts expect many players to keep a tight grip on their wallets amid uncertain economic times — and those who watch casinos are largely unwilling to predict when full recovery might come.

“Gamblers, like other people, have to feel comfortable about their financial situation,” said Joseph Weinert, senior vice president of Linwood, N.J.-based Spectrum Gaming Group. “There had been the perception that the industry was largely recession-proof, but we saw what happened a couple of years ago. When the economy got tanked, the industry got whacked.”

For the first three quarters of 2010, revenue at Mississippi’s state-licensed casinos totaled $1.83 billion, down 12.9 percent from the first nine months of 2008 — the period leading into the U.S. economic freefall. Still, the decline has slowed. According to the Mississippi Department of Revenue, casino takes dropped only 3.3 percent from the first three quarters of 2009.

In the latest count, the 11 casinos across the Mississippi Gulf Coast were down 12.7 percent from the first nine months of 2008, but recorded only a 1.3 percent drop from 2009, indicating that the oil spill had only a small effect on gambling. The 19 casinos on the Mississippi River, including Tunica in the Arkansas-Tennessee corner, were down 12.8 percent from 2008 and 5 percent from last year.

In Louisiana, the 13 riverboat casinos, Harrah’s downtown New Orleans casino and the four race track casinos, for the first three quarters of 2010, recorded a 7.7 percent drop in gambling revenue from the first nine months of 2008. The 2010 tally was down 5.3 percent from 2009.

“I’m reserved, but optimistically reserved. The numbers appear to be stabilizing,” said Dane Morgan, chairman of the Louisiana Gaming Control Board.

But sustained growth is a question mark, regionally and nationally.

Recently, at the Global Gaming Expo in Las Vegas, American Gaming Association head Frank Fahrenkopf said gambling revenue in state-licensed casinos rose 1.3 percent — or to just over $8 billion — from the second quarter to the third quarter of 2010. But that’s still about $100 million less than casinos took in during the same period last year. Fahrenkopf blamed that on reduced discretionary spending by consumers.

Earlier this month, Jefferies & Co. analyst David Katz said he expected Louisiana and Mississippi casinos owned by Penn National Gaming Inc., Pinnacle Entertainment Inc., Boyd Gaming Corp. and MGM Resorts International to report mixed results during fourth-quarter revenue reports, saying the region’s recovery still lags behind other markets.

“Right now, the gaming industry is largely a function of the regional and national economies,” Weinert said. “It depends upon whether you see those economies flatten out or start showing some life. The casinos will follow that.”

A large chunk of Louisiana’s casino business is pointed at Texans. Shreveport-Bossier City gambling revenue, for the first three quarters of 2010, fell 10.5 percent from the first nine months of 2008. The recent tally is down 4.4 percent from 2009. The five riverboats and the track casino in that market have been facing increased competition from Indian nation casinos in Oklahoma.

In Lake Charles, where direct competition is more isolated for three riverboats and a track casino, the tally is just about the same in comparing 2008 and 2010, although down 5.8 percent from 2009. The 2008 figures were skewed by September when two major hurricanes chopped at as much as $20 million from the historic monthly count.

In the New Orleans area, which has two riverboats and a track casino along with the land casino, gambling revenue is down 9.4 percent in the three-quarter comparison of 2008 to 2010 and down 2.9 percent from 2009. The boats and the track casino generally appeal to a local market, while Harrah’s — more aimed toward tourists and the convention business — typically posts big months during such events as Mardi Gras, the New Orleans Jazz & Heritage Festival, the Essence Festival and big-ticket sporting events.

But more outlets want to get into the competitive fray, despite the slower times. Pinnacle hopes to open its $357 million riverboat casino-hotel project in Baton Rouge in December 2011. That market, which currently has two gambling boats, has seen a 13.3 percent drop in revenue from the first three quarters of 2008 to the first three of 2010.

“I think a new casino will grow that market, but it will be at the expense of the other operators,” said industry analyst Cory Morowitz of Galloway, N.J.-based Morowitz Gaming Advisors. “There’s not enough room otherwise.”

Three groups have filed for the 15th and final riverboat license allowed by Louisiana law. Two want another Lake Charles casino, while the other wants another suburban New Orleans boat.

Louisiana regulator Morgan said he hopes a decision on the winner will be made by March.

In Mississippi, Gaming Commission executive director Larry Gregory said no new projects are near fruition, but investors continue to express interest in the state, especially along the coast.

“We have had a lot of interest over the past year. People coming down here and looking and wanting to move forward with something. But in today’s economy, it’s difficult to fund these projects,” Gregory said. “The coast is prime for development. But it’s not just us. You look at mature jurisdictions all over, not new ones, there are just not many projects.”

Written by Alan Sayre

What recession? Shoppers eat up Black Friday deals

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For one day at least, you could almost imagine the recession never happened. Millions of the nation’s shoppers braved rain and cold to crowd stores while others grabbed online bargains on what could be the busiest Black Friday ever.

Early signs pointed to bigger crowds at many stores including Best Buy, Sears, Macy’s and Toys R Us, some of which had earlier openings than past years or even round-the-clock hours. Minnesota’s Mall of America and mall operators Taubman Centers Inc. and Macerich Co. also reported more customers than last year.

But the most encouraging sign for retailing and for the economy was what Americans were throwing in their carts. Shoppers still clutched lists and the buying frenzy was focused on the deals on TVs and toys, but many were treating themselves while they bought gifts for others, adding items like boots, sumptuous sweaters, jewelry and even dresses for special occasions.

Elayne Breton and her daughter Michelle got to Maryland’s Mall in Columbia around 7 a.m. A few hours later, Michelle had picked out several presents for herself, including a pair of UGG boots, perfume and an iPod Touch. At Nordstrom, she scored a long-sleeved purple shirt that her mother let her wear out of the store.

“Last year we were careful,” said Elayne, whose husband’s beer distribution business has started to pick up again. “This year we’ll do more.”

The strong Black Friday builds on retailers’ momentum after a solid start to November. Shoppers who can afford it are buying more nonessentials, like jewelry and luxury goods.

“Last year, consumers were extremely into the basics, the socks, the pillows,” said Keith Jelinek, director of the global retail practice at consulting firm AlixPartners. “This year, they’re hungry to dress up their wardrobes, their homes. Shoppers were buying items with a little more pizazz, trendier sweaters, sheets in higher thread counts.”

He cautioned that they’re not looking to replace everything — just looking for a few special items. “They’re still very value-conscious,” he added.

Macy’s CEO Terry Lundgren said there were 7,000 people outside its Manhattan flagship store for its 4 a.m. opening, up from 5,000 people a year ago.

“The difference between this year and last year was that last year, people had a budget and a list. They’re doing the same thing this year but they’re also buying for themselves,” he said. Among some of the hot sellers were a luggage set for $49.99 and $39.99 cashmere sweaters.

He noted that two groups that helped fuel customer traffic were young shoppers, ages 15 to 25, and men, both of whom were buying for themselves.

Sharply reduced prices on flat-screen TVs helped fuel many stores’ sales, according to Marshal Cohen, market research analyst at NPD Group Inc. Stores were grappling with a glut of TVs heading into the season because they had overestimated consumer demand.

Research firm ShopperTrak is expected to release Black Friday data on Saturday, but a full picture of how retailers fared for the overall weekend won’t be known until Thursday when major retailers report their monthly sales results.

For the economy, the question remains: Will shoppers keep it up?

Nearly 15 million people remain unemployed, and concerns about job security cloud consumer confidence. Spending is picking up but has not returned to pre-recession levels. And shoppers haven’t let go of many cautious habits learned from the Great Recession.

Many purchased with cash, and layaway remained popular as shoppers try to budget. Sears reported that consumers were setting aside items like Nordic treadmills that were on sale for $399, a savings of $400, to be delivered after the holidays.

Credit cards were staying inside many wallets.

“Now that I’m debt-free, I want to keep it that way,” said Desiree Banks, who was at Best Buy in Macedonia, Ohio, with a stack of DVDS for $3.99 each.

Shoppers did their homework, researching deals on websites. Stores made planning easier by touting their bargains last week.

“Every year, we get more refined,” said Deb Brown, 42, who was at the Bellevue Square Mall in Bellevue, Wash. She came from White Rock, British Columbia.

Many teens bucked the bargain-hunting trend, shopping full force — and paying full price — at high-end stores like Hollister and American Eagle Outfitters, according to mall officials. That suggests that parents, feeling more financially secure, are giving their children extra spending money, said Jharonne Martis, director of consumer research at Thomson Research.

A big worry is that some of the solid buying earlier in November could steal thunder from the rest of the season and leave a deeper lull between Thanksgiving weekend and the few days before Christmas.

Clearly, stores worked hard to draw shoppers in for Black Friday and earlier, with more deals and expanded hours that allowed people to get shopping soon after their Thanksgiving dinner.

A number of stores including Old Navy, Toys R Us and Sears opened on Thanksgiving Day. Toys R Us was counting on getting an extra boost by opening 24 hours straight, starting at 10 p.m. on Thanksgiving. Many stores had trotted out the “Black Friday” label on sales as far back as October.

Best Buy Co. started its holiday TV ads 11 days earlier this year than last year. CEO Brian Dunn said customer counts were showing high-single-digit percentage increases Friday morning compared to last year. He said shoppers were throwing in items like Blu-ray players to go with early morning bargains that started at 5 a.m.

“Traffic was fast and furious. … We started earlier and we have more TV (commercials). I think both of these things helped,” Dunn said in an interview with The Associated Press.

Wal-Mart, which had most stores open around the clock, reported the top five selling electronic items included an Emerson 32-inch LCD HDTV for $198. Hot toys included $10 Barbies and $4 Zhu Zhu pets, which were last year’s hot hit.

Thanksgiving weekend is huge for retailers. In recent years, Black Friday — called that because the surge of shoppers could take retailers into profitability, or “the black,” for the year — has been the busiest shopping day of the year, according to data from ShopperTrak.

Black Friday is generally not as big for online retailers as Monday after Thanksgiving — known as Cyber Monday — but many were already off to a good start. By mid-afternoon Friday, eBags sales soared 69.5 percent compared with a year ago.

The retail blitz doesn’t make or break the holiday season. In fact, shoppers seem to be procrastinating more every year, giving retailers some nail-biting moments waiting for sales the last few days before Christmas.

Last year, the Thanksgiving shopping weekend accounted for 12.3 percent of overall holiday revenue, according to ShopperTrak. Black Friday made up about half of that.

AP Business Writers Mae Anderson in New York; Emily Fredrix in Cleveland; Ashley Heher in Chicago; Sarah Skidmore in Portland, Ore.; Jessica Mintz in Bellevue, Wash., and Ellen Gibson in Columbia, Md.; contributed to this report.

The Nuggets in Great Basin Gold – GBG – Interview with CEO Dippenaar

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The Nuggets in Great Basin Gold – GBG – Interview with CEO Dippenaar

October 19, 2010

By:  Marco G.

http://goombarhsedge.blogspot.com/

Great Basin Gold’s (GBG, TSX:GBG, JSE:GBG) stock has just broken out to the high side and they have doubled their market capitalization in the short time space of two months.  See the calculations in the table following:  (click to enlarge).

Table 1:  Great Basin Gold – Market Capitalization.  At October 19th, 2010 all the warrants are in the money and debentures may be converted to shares.

What do you suppose the market is saying here?  Well, ladies and gentlemen, this is a prime example of a mining company sitting in the sweet spot of the value curve when bringing their new mine into production.  For a fuller explanation of the sweet spot for a mining Junior click here. 

Great Basin does not just have one mine coming into production but two.  Their large prime mine in the Witwatersrand Basin of South Africa, Burnstone has started milling ore, this fall.  Their smaller sister Nevada mine, Hollister has been test mining for over one year and has just recently this summer stabilized their milling operations.  The market is finally acknowledging this mining production progress and is beginning to recognize the value of Great Basin and has responded by assigning a higher share price.  This is not a trivial matter, in the creation of a $600 million valuation increase, by bringing these mining projects into production.  This is the culmination of a long time struggle with mine building and financial markets resulting in rapid revaluation of Great Basin Gold’s share price.

Interview with Mr. Ferdi Dippenaar, CEO of Great Basin Gold

The author has followed Great Basin closely, and further background may be obtained from these articles here on Seeking Alpha.  It was with surprise and pleasure, when Mr. Michael Curlook, Manager of IR & Corporate Development  called and said that Mr. Ferdi Dippenaar, President & CEO of Great Basin Gold was willing to talk to me about Great Basin’s future prospects.  The interview following is verbatim from notes and was conducted by telephone with Mr. Dippenaar in South Africa on October 19th, 2010. 

The author asked Mr. Dippenaar to brief us on Great Basin’s outlook going forward as to exploration priorities among their existing mine sites of Hollister, and Burnstone and also their green field explorations in Tanzania and Mozambique.  Note:  further information about the Tanzanian and Mozambique properties are in the March 31, 2010 Annual Information Form here.

Ferdi Dippenaar:  If we have a look at the Mozambique property.  It is in the Tsetsera  area, it is a green belt.  It is an area that has seen some mining.  What we have is… we actually have a property, which we’ve done some dirt sampling, grab sampling, we’ve looked at some trenches, and tried to get…this is even …if I qualify, this is even before we put out a drilling program. 

Marco G.:  Right.

Ferdi Dippenaar:  The whole idea was to do a lot of surface work, and the mapping.  I forgot to say we’ve done the actual mapping, which we’ve spend quite a bit of time on.  So we have the…we could have let go of the property, we’ve decided against that, because just based upon the initial results, even if it’s only from the initial surface exploration, was such that we felt that it’s definitely worth follow-up.  The follow-up would be ….probably more trenching and then first pass drilling.

Marco G.:  First pass drilling?

Ferdi Dippenaar:  First pass drilling, yes.

Marco G.:  That will be exciting for investors.

Ferdi Dippenaar:  Yeah, I think it definitely will, we are looking forward to it.  We actually think it could be extremely exciting. 

Marco G.:  Yes, you say the property is 17 square kilometers, and from the information on your site, it has been worked historically by artisanal miners and that there is exposure on the surface.

Ferdi Dippenaar:  There is definitely exposure on the surface, but it is also trying to…there is not a huge amount of ground cover.  But it is also to bring it a bit further ….to understand the extent of the mineralization. 

Marco G.:  Okay, that’s Mozambique, how about the other area, Rusaf… GBG Rusaf.

Ferdi Dippenaar:  Yes GBG Rusaf , yeah that is quite interesting.  I think if you access the actual reports, technical reports, that were placed on the web site…  did you get them.

Marco G.:  Yes, we have gone through them.

Ferdi Dippenaar:  In our minds, it is basically the two areas, and that would be the Lupa area, which we own a significant land package, which ……..definitely after the first pass drilling.  That’s basically, what we did two years ago.  It is having to firm up.  Now it is the second pass drilling because we’ve identified some target areas.

Marco G.:  Okay,

Ferdi Dippenaar:  I don’t want to repeat everything that are in the actual reports as well.

Marco G.:  I understand… I guess what we are kind of looking for, and maybe GBG plans aren’t yet there.  October 15th has just barely gone past last Friday.  What with the warrants, now there is a fresh infusion of funds into the company.

Ferdi Dippenaar:  Exactly, you are quite right.  The whole intention is…so let’s just go through the various areas in Tanzania.  We’ve discussed the…we call it the N’kuluwisi gold property in southern Tanzania.  That’s bordered the Lupa area.  I think that you’ll see the measured and indicated and inferred resource, it probably around …well let’s just take the grade of 1.5 g /ton that’s currently 67,000 ounces.  That’s with the first pass drilling, that took place.  If one has a look at the northern section, which you’ve got the Lubando area.  I don’t know if you saw that technical report? 

Marco G.:  I may have, but it is not at my fingertips presently.

Ferdi Dippenaar:  I just trying to deal with the size and the actual resource.  So, that’s nearly 200,000 ounces but the one that probably excites us more is the Imweru report, where we have the resource of 629,000 ounces.  Yeah, that’s fairly large.  And bear in mind that is just first pass drilling.  So that’s was our prioritization of target areas, it would probably be in Imweru and then the southern portion which is the Lupa target area.  And that’s in N’kuluwisi, that technical report.

Marco G.:  All right.

Ferdi Dippenaar:  So, here we are talking exploration, and the prioritization thereof.  I would put the Hollister property right on top.

Marco G.:  Wow, Okay,

Ferdi Dippenaar:  So the Hollister property is the most important, bear in mind that we’ve made three discoveries, the Hatter Graben, the Gloria veins system and the extended Gwenivere veins system… all really prospective. 

Marco G.:  Right.

Ferdi Dippenaar:  We actually believe, that even from underground, we could achieve… we’ve focused and targeted another area.  Which is probably…it is the subject of exploration, that still has to take place later this year.

Marco G.:  Okay, as soon as that.

Ferdi Dippenaar:  Yeah, as soon as that.  Each year we do a lot of infill drilling at the Hollister property.  But we do believe that …our thinking is that if we drill a fairly long hole out to the Velvet area from underground.  We actually think that we could be passing through a number of structures that could be hosting mineralization.

Marco G.:  Yes, I see that in your reports, where you hit one area and then you hit a new vein system with one drill hole.  I guess that is the advantage of going underground and drilling underground,

Ferdi Dippenaar:  Yeah, again drilling underground is of course a lot easier.  It’s the ability to drill, to put out a long hole.  It just makes a lot more sense and lot more cost effective.

Marco G.:  Right, not only are you…  sometimes you can even do the infilling and you may hit things that you were not expecting, which is great…blue sky.

Ferdi Dippenaar:  Exactly, I believe there is a significant amount of blue sky at the property.  Hollister is just so extremely prospective!  It is slightly more expensive to drill in North America, than what it would be in South Africa or Africa, but just due to the prospective nature of the property, I believe there is good pay back there.

Marco G.:  Right, to add to the existing mine life and increasing resources.  I recall reading somewhere, that you say you are looking for 3 million ounces, so that is adding 2 million before putting in your own mill. 

Ferdi Dippenaar:  Yeah, that would be the idea.  That would definitely be…expand the current operation and also the life of mine.  I think that it is a bit of both.

Marco G.:  One of the best articles that I have read about your mine was the Northern Miner article, from February  of this year.  I think it was a lady that wrote it, a Gwen Preston from a site visit to your Hollister mine.

Ferdi Dippenaar:  Oh yes, that’s right. 

Marco G.:  They went over quite a bit of exploration.  I recall that the Hatter Graben, from one of your conference calls , that one of the analysts was very interested in that.  They were asking you, I think it was earlier this year.

Ferdi Dippenaar:  You are quite right.  She did that visit.  Yes, anybody that tend to visit the site gets the …I sense….they see and they enjoy the what they see.

Marco G.:  Like from her article, it says here that GBG’s plan was to head towards that area with an underground decline .

Ferdi Dippenaar:  Yeah, that is still the plan.  The whole idea is to rather do a bit more exploration because exploration is obviously a lot cheaper than doing the development.

Marco G.:  Right, and that would serve a double purpose.  The decline would help in exploration and later it would be part of the infrastructure. 

Ferdi Dippenaar:  Exactly, that is still the thinking. 

Marco G.:  As part of this article, may I ask you are looking for the mine, a second raise it says.  Is that still happening presently?

Ferdi Dippenaar:  The second raise… oh yes, the Alimak raise, that is currently being developed as we speak.

Marco G.:  This is a vertical raise to help with ventilation and maybe other usages as well.

Ferdi Dippenaar:  Absolutely.

Marco G.:  I haven’t seen anywhere else, but this article touches upon the prospectively of the Esmeralda property that you folks were very fortunate to latch onto.

Ferdi Dippenaar:  Yeah, the Esmeralda property, we believe in terms of priority, it would be Hollister and then Esmeralda.  The principal or the main focus after we acquired Esmeralda was to get the mill up and running.  Of course after we get the mill up and running, we can then start focusing on actually …after the mill, is to try and see how… that is to look at more of Esmeralda but underground .  Bear in mind that we have a number of declines on the site, and the declines …especially the Prospectus decline …it was flooded by ordinary ground water.  It is something that could be easily be de-watered.  And they did just stop the mine, stopped mining so there is some mineable material and stopes available for mining which can contribute to production, while we are busy with more exploration.  There is production upside at Esmeralda and exploration upside

Marco G.:  Wow, okay.  I suppose I am a little bit too early.  As I’ve said your plans aren’t yet in place yet.

Ferdi Dippenaar:  Yes, it will be basically determined by the availability of funding.  So, if there is funding available, we will then go out and do the exploration at Esmeralda.  But only after we’ve allocated funding to do the exploration at Hollister.

Lastly, there is Burnstone.  At Burnstone, we have a significant ore body.  It is already in excess of 13 million ounces.  We can drill more holes and we continue to drill more holes and find more but ultimately at the end of the day you can only mine so much in the short term.  I just believe that one could do better by spending a bit more money on the …you know you get more return for your exploration dollar if it was spent at Hollister and Esmeralda in the short term. 

Marco G.:  Okay, short term it is Hollister and Esmeralda.  But what is the potential though, at Burnstone?  It’s the reef area and you are fortunate that in the Burnstone mine that it is the up lifted portion of the reef.  But there must be a deeper portion on the other side of the faults.

Ferdi Dippenaar:  No, it actually becomes shallower again.  The deepest portion of that basin is probably about 1200 to 1300 meters below surface.  That is the deepest portion; bear in mind that after 19 years of mining we only get down to 750 meters below surface.  So this is in 25 years maybe we get down to 1200 meters below surface.  There is a lot of mining to do.  A lot of shallow areas still that can be explored.   You know, we have ….remember that this ore body is extremely shallow.  We are mining on the shallowest part. 

Marco G.:  It is quite uncharacteristic of the deep South African mines.

Ferdi Dippenaar:  Very, very different.  Bear in mind … the very different basin; we own the largest land holdings in this South Rand basin.  The reef starts at 216 meters below surface. 

Marco G.:  That’s very shallow.  Mr. Dippenaar, may I enquire a little bit?  Your company is just bringing two mines on, into production and you have these mine building teams in place.  What might be the outlook going forward.  You are doing the exploration for further reserves and resources at both mines, in Hollister and Burnstone.   And Hollister is probably higher priority and more bang for the buck as you say.  Are there any thoughts as to how to further leverage these mine building capabilities of your teams.

Ferdi Dippenaar:  Yeah, I definitely think so.  If you have a look at the fact that the teams are there.  They have the necessary experience and then to  go out to expand the current operations or then build new mines.  We do have the capacity and management and the experience to actually to do that.

Marco G.:  The only thing holding you back is getting the production complete and the markets to re-rate Great Basin Gold as a Mid-Tier producer.

Ferdi Dippenaar:  Yeah, I tend to agree with that.  I just think we need to settle down both Hollister and then Burnstone.  And as soon as we settle them down, I think we are ready to go.  So, to me it’s just taking a bit of a breather.

Marco G.:  Sure.

Ferdi Dippenaar:  In terms of getting a bit of consistency at the operations. 

Marco G.:  May I ask, that Hollister, again, I read somewhere, that the main holdback for expansion isn’t mining, its actually milling capability.  For expansion of the milling circuit, you would be able to increase production.

Ferdi Dippenaar:  Exactly, that’s exactly why acquiring or ending up with a mill significantly larger than what we have would be the ideal situation.

Marco G.:  Would it be possible to continue like what you’ve done in the past, the contract milling.  Like say either at Midas or the Yukon Nevada operation, in parallel with your Esmeralda or is it just the costs don’t warrant it?  The costs and complexity.

Ferdi Dippenaar:  I wouldn’t like to send any more ore to the Midas mill, the costs of milling it there are just too expensive.  You just pay too much or lose too much by doing it.  My focus would rather be to find either a milling capacity…  If we do find milling capacity, we would be able to grow either operations, Hollister or Esmeralda.  That is the target.

Marco G.:  The target is to find milling capacity.  In previous years, I understand other companies were looking at and examining Hollister in terms of resources and in terms of …before the mine was actually where it is now.  It was three, four years ago where that they had an interest, maybe now it might the other way around.  You are working now and you have an interest in…  You have expertise in this narrow vein mining and there are probably other mines in there that could use that.

Ferdi Dippenaar:  That is true.  But as I said, let’s first get the current operation up and running and then we’ll be able to get a better idea of where it is we go in the future. 

Marco G.:  All right,  well, I want to thank you again, Mr. Dippenaar.  You are taking time, and it is the end of a very busy day for you, in the middle of your busy schedule.  This is really an exciting time for you I’ m sure, that these things are coming to fruition.  Burnstone pouring Gold and Hollister being  stabilized as an actual operation. 

Ferdi Dippenaar:  Yeah…….It is definitely an exciting time to be around.  Yeah…..it is a great time to be around.

Marco G.:  And also, certainly helps that there seem to be an increased emphasis on the Gold and precious metals.  Here you have two mines coming into full production right in the midst of that big trend.

Ferdi Dippenaar:  Yeah…it is a nice change.  We’ve been working on this extremely hard.   And it just seems like it is coming together pretty nicely. 

Marco G.:  Well, my hat’s off to you and your folks.  You folks have really brought it in.  This is probably just the beginning for Great Basin.

Ferdi Dippenaar:  I believe that.  I think we are at a very, very interesting time in the Company’s development.

Marco G.:  I kind of hear what you are saying about Burnstone, you have already 12-13 million ounces of Gold there.  The money has more bang for the buck, say elsewhere as at Hollister where it may be possible to expand production with the grades and the expertise that you have at being able to mine the narrow widths.

Ferdi Dippenaar:  Absolutely.

Marco G.:  Well, that is just great.   I hope that this interests our readers and maybe new investors.

Ferdi Dippenaar:  Thank you, I appreciate it.

Well, dear readers, there you have it, the CEO of Great Basin, that is in the process of ramping up two high quality production Gold mines. 

Outlook for Great Basin Gold in Production

The author borrows information from Great Basin’s presentation at the recent September 20th, 2010, Denver Gold Show to display the company outlook forthcoming.  The production forecast is in the chart following:  (click to enlarge).

 

Figure 1:  GBG Production Estimate.  Note the increase this year from Burnstone coming online and Hollister being stabilized.

Great Basin’s Hollister mine is now in full production with their Esmeralda mill tuned up for full recoveries.  Added to Hollister’s production is the start of milling at the Witwatersrand Burnstone mine this month.  Great Basin is estimating production of about 150,000 ounces of Gold for fiscal 2010.  That means sometime in the 4th quarter of 2010, Great Basin Gold will turn the corner into profitability. 

Then the outlook for 2011, in production is about 270,000 ounces of Gold.

Outlook for Great Basin Gold in Cash Flow

The chart following displays the estimated cash flow for the next few years:  (click to enlarge).

 

Figure 2:  GBG Cash Flow Forecast.  Note the rapid jump to almost $200 Million in 2011.

It is estimated that Great Basin after turning profitable towards the end of 2010, will now turn cash flow positive in 2011 with almost $200 million for the year.  This is due to the quick  ramp up in production of the Hollister and Burnstone mines.  This is a time of rapid change for the good in the financial affairs of the company.  As Mr. Dippenaar commented in the interview above:

                “Yeah…….It is definitely an exciting time to be around.  Yeah…..it is a great time to be around.”

Great Basin Gold is now in High Growth Stage of Cycle

Great Basin is in an opportune spot, as displayed in the classic model of a mining company along the route of mine development in the chart below:  (click to enlarge).

 

Figure 3:  Classic Mining Company Ramp Up.  Note the potential for a company that sits in the sweet spot of between point 6 and 7.  The high growth stage of GBG may be just starting.

That opportune sweet spot is just when the mining company turns the corner into profitability and is now poised for high growth.  Great Basin has just completed the mine construction and is now at the production start-up point.  As the theoretical model shows, there now appears to be great upside, as the company enters the high growth stage of its life.

Marco G.’s Opinion

The author looks to satisfy two prime criteria for investing in a mining company.  The first criteria is the quality, competence and perseverance of management.  Mining is difficult, and the results will boil down to how the management will create value for the investor.

The second criteria consists of the prospects of mining in terms of production, reserves & resources and exploration upside.  Obviously, Great Basin is increasing production with the commissioning of the Burnstone mine.  The Burnstone mine is a shallow, low cost and long life golden nugget for Great Basin Gold.

 For reserves and resources, recently in September 2010, Great Basin has released  new NI 43-101 technical  reports for both their Burnstone and Hollister mines.

As for exploration, now that the mine building emphasis may be shifted, funding for  exploration should resume.  This was what the interview with Mr. Dippenaar was about; where are the exploration opportunities for Great Basin?  There are many drilling prospects as disclosed in the interview, but the highest priority will be the underground drilling from Hollister due to be reported upon this year.  Why is Hollister the highest priority, you may ask?  The Gold mining grades at Hollister are among the highest grades in the world for a production gold mine and may be considered “bonanza” grades, as reported in the September 2010 NI 43-101 report:

At a cut-off grade of 0.25 oz/ton (8.57 g/t Au), the combined measured and indicated mineral resources contain 1.64 million gold equivalent ounces grading 1.305 oz/ton (44.73 g/t Au) for gold and 10.3 oz/ton (355 g/t) for silver

The high grade is not just a lucky hit but the calculated average over the whole resource definition.  Hollister is the second bright nugget for Great Basin Gold.

Disclosure: The author is long Great Basin Gold -GBG.

Important Disclaimer

The information and opinions contained within this document reflect the personal views of the author and should be viewed as food for thought and amusement only. The author may from time to time have a position in any of the securities mentioned. There are no guarantees of the accuracy, reliability or completeness of the information contained herein. Independent due diligence and discussions with one’s own investment and business advisor is strongly recommended. These writings are not to be construed as an offer or solicitation with respect to the purchase or sale of any security or as an endorsement of any product or service. We do not request or receive compensation in any form in order to feature companies in this publication. It is prohibited to copy or redistribute this document to any type of third party without the express permission of the author. This document may be quoted, in context, provided proper credit is given.

Great Basin Gold’s (GBG) 2600 oz/ton Gold Bonanza Grades – A Closer Look

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Great Basin Gold’s (GBG) Bonanza Grades – A Closer Look
November 9th, 2010
By: Marco G.

http://goombarhsedge.blogspot.com/

Great Basin announced the highest “Bonanza Grades” of Gold found, 2560 ounces per ton, that the author has ever encountered this morning:
Great Basin Encounters Bonanza Grades in Blanket Style Mineralization at Hollister
VANCOUVER, Nov. 9 /CNW/ – Great Basin Gold Ltd. (“Great Basin” or the “Company”), (TSX: GBG; NYSE Amex: GBG; JSE: GBG) announces that trial mining in the Blanket Zone above the Main Clementine vein (number sign)18 at its Hollister project in Nevada has encountered bonanza grades of gold and silver. The Company cautions investors and readers that we are making this announcement out of an abundance of concern over interpretation of this information and, as the information may be known locally in the region of the mine site, the Company felt obligated to make it public.
Channel sampling carried out in conjunction with trial mining in the Blanket Zone has encountered the bonanza grades over a strike distance of 170 feet (57 meters).Channel samples taken every 10 feet (3 meters) gave values ranging from a low of 1.5 oz/ton(52.0g/t) Au and 3.2 oz/ton(111.9 g/t) Ag to a high of 2,560.4 oz/ton (88,845.9 g/t) Au and 1,829.8 oz/ton (63,494.1 g/t) Ag over channel widths from 0.3 to 2 feet wide. The current stope is continuously mineralized along its 180-foot (60-meter) length. Diluted over 3.5 feet (the width of the stope development), the average sample values were 66.4 oz/ton (2,404 g/t) Au and 78.5oz/ton (2,723.9 g/t) Ag. Muck piles have also been sampled; grabs are taken over the pile to collect as representative a sample as possible (between 10-15 lb. are collected every 10 feet). The fully diluted value of the muck samples taken from the stope to date averages 22.3 oz/t (773.8 g/t) Au and 23.4 oz/ton (811.9 g/t) Ag.
The Blanket style mineralization at Hollister is typified by very fine grained disseminated gold hosted by tuffaceous horizons in the Tertiary (10-15 million years old) volcanics that lie unconformably on the basement Ordovician (~430 million year old) metasediments. These zones of mineralization are thought to be “mineralization plumes” directly related to the activity of fluid which has focused in structures that control the underlying epithermal quartz – adularia veins, and propagated into the Tertiary volcanic pile.

Blanket mineralization was previously exploited by opencast methods during 1990-1992 by the Touchstone – Galactic Joint Venture. According to historic records, 115,000 ounces of gold were produced by a heap leach operation that treated low grade ore (~0.003 oz/ton or 1 g/t Au). Great Basin modeled all 46 drill intersections above the Tertiary unconformity, and +1 g/t grade shells generally locate above known mineralized quartz – adularia veins. In general, this style has been located in the first ~30 feet (10 meters) above the unconformity, and may have dimensions in excess of 150 feet (50 meters) long and 60 feet (20 meters) wide. Grades from these 46 drill intersections average 0.45 oz/ton Au (15.4 g/t) and 1.7 oz/ton Ag (59 g/t).

Extrapolation of stope 3000N 1E to surface (approximately 200 feet or 67 meters vertically above), places this zone 300 feet (100 meters) west of the historical Clementine mercury mine. It supports the near surface working metal zonation and gold deposition model for the Hollister mine, and indicates additional exploration potential.
Ferdi Dippenaar, President and CEO, commented: “In the past, we have identified the Blanket Zone as a target area worth exploring, and trial mining at the top of vein (number sign)18 has turned out to be a great way to test the prospective nature of this style of mineralization. Although we have encountered a limited amount of this high grade material through trial stoping, drilling is underway to determine the full extent of mineralization. More information will be made available as and when it becomes available. Based on our experience in the Main Clementine vein (number sign)18, we are evaluating the possibility of returning to previously stoped out areas above the Gwenivere high grade veins.”
Great Basin Gold’s Hollister Mine in Nevada is already one of the highest grade Gold producing mines in the world, with 1.64 million ounces of Gold estimated at an average grade of measured and indicated resources at 1.3 ounces of Gold per ton. This morning’s news of such bonanza grades certainly bears some examination.
From previous background knowledge and from researching the terms within the news release, the author pieces together what this may mean. For help in understanding the basic geology, the author had his assistant “My Right Hand With Mouse” put together a rough diagram displayed following:

Figure 1: Model of Great Basin Gold’s bonanza gold grades found above their Clementine Vein.
With reference to the above diagram, Great Basin’s Hollister mine is constructed to mine the underground Gold veins. These veins are in the basement sedimentary rocks, which refers to the lower layer of rock geology, the “Ordovician” which are 439 million years old. This basement is covered with a more recent geological layer of volcanic rocks named the “Tertiary”, which are only 10 – 15 million years old. The meeting point of these two rock layers is termed the “Unconformity”, or joining between the two rock types.
The Gold veins that Great Basin are mining are formed from magmatic fluids that originated deep in the Earth’s crust and flowed through faults and fissures in the basement rocks coming up to the surface. There are two main types of deposits formed from these magma fluids, high sulphidation and low sulphidation deposits.
Great Basin’s geologists believe that Hollister is an example of low sulphidation deposits. As the fluids left the Unconformity and entered the Tertiary volcanics, the fluids encountered groundwater. The magma fluids then interacted with the ground water causing violent boiling and depositing of the metals and minerals. The act of depositing minerals seals off the fault and so the magma fluids seek another way to surface. Again, more groundwater is encountered and more furious boiling occurs. The boiling drops the minerals and seals the fissure again. These cycles of furious action results in more and more of the minerals being deposited in the fissures within this area of volcanics above the Unconformity.
Eventually the magmatic fluids reach near surface and dissipates and mixes thoroughly with the surface rocks. This results in a broad disseminated layer of mineral deposits that is termed the “Blanket Zone” at Great Basin’s Hollister mine.
In this style of low sulphidation depositing at Hollister, the minerals deposited by the repeated action of the magma encountering ground water has resulted in very high Bonanza grades of Gold and Silver that Great Basin has just announced. These high grades appear to be concentrated above the existing Hollister Gold veins, between the existing mine tunnels and the surface Blanket Zone. These high grades positioned where they are gives Great Basin a large amount of bonanza mineralization in a location where it will be easy to mine.
Another way of looking at this is the average grade of their “muck”. Muck is the broken rock ore, that will be refined in the mill circuit. Their average muck grade is spectacular at:
The fully diluted value of the muck samples taken from the stope to date averages 22.3 oz/t (773.8 g/t) Au and 23.4 oz/ton (811.9 g/t) Ag.
Compare this grade of 22 ounces of Gold per ton with anything else, you read about gold miners anywhere. Compare this with the grade at their Burnstone mine in South Africa, which has an average grade of 5 grams (.15 oz) Gold per ton, which is considered high grade. This grade is at least two orders of magnitude or 100 times higher.
Great Basin are understating in saying, that this model, ” indicates additional exploration potential”.
Disclosure: The author holds shares of Great Basin Gold (GBG).

Important Disclaimer

The information and opinions contained within this document reflect the personal views of the author and should be viewed as food for thought and amusement only. The author may from time to time have a position in any of the securities mentioned. There are no guarantees of the accuracy, reliability or completeness of the information contained herein. Independent due diligence and discussions with one’s own investment and business advisor is strongly recommended. These writings are not to be construed as an offer or solicitation with respect to the purchase or sale of any security or as an endorsement of any product or service. We do not request or receive compensation in any form in order to feature companies in this publication. It is prohibited to copy or redistribute this document to any type of third party without the express permission of the author. This document may be quoted, in context, provided proper credit is given.