Resource World Magazine

20 www.resourceworld.com F E B R U A R Y / M A R C H 2 0 1 4 O ne of the advantages of owning more than a few gray hairs is that experience has taught me that there may indeed be truth in the old saying from the biblical book of Ecclesiastes: "What has been will be again, what has been done will be done again; there is nothing new under the sun." That adage could easily be applied to the world of precious metals mining. Undoubtedly, the past 30 months have been a difficult time for both miners and investors as indicated by a simple review of gold and silver price movements. After peaking over US $1,900/oz in late summer 2011, gold plunged quickly by $400 before entering a trad - ing range lasting 18 months from around US $1,500 to $1,800/oz. A second sharp decline carried the price down to below US $1,200/oz by mid-summer 2013. Silver has also followed a similar timetable and the comparable prices are US $50/oz; $27.00 to $35.00; and then below $19.00. When other factors such as over-regulation leading to difficulties in obtaining permits as well as rising transportation and labour costs are added, it can be readily noted that this has not been a favourable time for our industry. In fact, words like gloom and depression have been used to describe the prevailing mood at recent industry gatherings. However, when the history of precious metals prices and mining activity over the past half-century is taken into account, that picture might allow for some comforting thoughts going forward, for the fact is that throughout metals investment history, there are numerous examples of extreme gloom being followed by boom – and vice versa. It seems to be a reality that human nature leads us to act during bear moves as if pessimism will never end, so prices fall to extreme low levels and, in an opposite manner, during bull markets prices are bid to excessively high levels. Precious metals investments over the past half-century provide us with several examples of this principle. For those who were active during the early 1970s, who can forget the veritable mania to acquire gold investments which took place dur - ing 1973-74? America, which had outlawed the holding of private gold in 1933, had just passed a new law reversing that earlier decision as of midnight December 31, 1974. It was believed that hordes would rush out and buy gold, thereby driving the price to new highs. Gold itself surged to US $200/oz by year-end 1974 and the level of speculation was so dynamic that huge numbers of traders crowded the floors of minor exchanges such as Spokane, Denver and Salt Lake City and it was not unheard of for small mining shares to show rapid gains in the hundreds and even thousands of percentages. Then a funny thing happened. There was no rush to buy gold on January 1, 1975 and the price of gold collapsed to just US $104/ oz by mid-1976. Shares plunged. Fortunes were lost. Several minor exchanges soon went out of business. Deep gloom prevailed. But then the worm turned. From 1977 through January 1980 the news background improved – at least for gold speculation. War between the (former) Soviet Union and the US appeared possible over Afghanistan; interest rates and inflation soared to truly uncomfort - able levels; American hostages in Iran sapped confidence and a feeling of malaise spread. Gold and silver soared to over US $800 and US $50/oz, respectively. Once again, a mania atmosphere prevailed in the world of mining investments. Quite suddenly, prices collapsed. Gold's quote was soon cut in half while silver fell by 90% to barely US $5.00/oz. Once again, fortunes were lost. For the next 20 years, varying measures of pessimism prevailed, interrupted by periodic rallies, but then the worm turned again, so to speak. Gold and silver began new bull markets near the beginning of this century and if the price movements were somewhat slower than in preceding eras, they were still significant with gold rising from about US $260/oz to over US $1,000/oz by early 2008 – but once again boom turned to gloom as gold's quote plunged to under US $700/oz. Junior shares fell dramatically as financing dried up during the Great Recession. Again, things dramatically changed direction as gold and silver soared from late 2008 through mid-2011 to reach the levels noted above – only to be followed by the comparative fiscal and psychologi - cal damage of the past 30 months. In some quarters the gloom and doom atmosphere has become so thick it is difficult at times to see any optimistic light at all, but if the above history has shown me anything, I believe another quote would serve us well, one attributed to wise old King Solomon..."This too shall pass." n S P E C U L A T I O N S L e o n a r d M e l m a n Golden Cycles "What has been will be again, what has been done will be done again; there is nothing new under the sun."

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