$Gold Weekly

Will there be a predicted gold price coda in the summer? Bearish opinion does not formally recognize negative deposit rates at the ECB, nor do near zero rates in the U.S. seem to register.

Gold derivatives markets have resulted in a volatility smile with a heavily skewed outcome, to the benefit of carriers of financial interest in the markets, the banks. The banks could be trying to tie one derivative after another, but there is probably much more financial interest in the spread trade between the spot price and long dated futures.

That volatility smile is now up, and the timing could not be better.

The weekly chart will probably see an important crossover of the 13-week EMA and the 34-week EMA.

http://scharts.co/1iHb6W2

Jan, 2009 - What I Figure

In January of 2009, the PEA was posted on SEDAR. If you look at it through the lens of subordinated production, where gold poured at the mill goes into escrow, and then 'produced' out of the account, the numbers finally make sense, and match the numbers doled out by the company to date.

You cannot report subordinated production numbers in an engineering report, however. Even with the weak anticipated grades, the company should still be profitable. But the company did not establish cash flow.

You might have gone to a shareholder meeting in the meanwhile, and been lied to. So what then, is the point of even bothering with IR?

Here's how to figure it out. This method might not be entirely correct or exact, but it is a very good assumption. The numbers will have varied greatly, so it's impossible to come up with the results with exactitude.

1. Take an empty sheet of 8.5X11 paper.

2. Write across the top: Escrow - Gold Notes - Waterton - Marketable Securities

3. Leave a space large enough to put a lot of small size yellow stickies.

4. Below this space, draw five columns, titled: fiscal 2010 - fiscal 2014

5. In the space below the title and above the five columns, stick four yellow stickies, each marked 25k., representing 25k oz.

6. Take two of those stickies outof the space above the columns, and place them in the fiscal 2010 column. You should have two stickies left over, not assigned to a column.

7. Put four more stickies in the space above the column, each marked 25k, representing 25k oz.

8. Take two more stickies out of the space above the columns, and place them in the fiscal 2011 column.

9. You should have four stickies in the space above the columns (held in escrow,) and four stickes in the first two columns, to pay costs. The stickies below are costs in terms of oz. produced out of escrow.

10. Now draw a 'W' above the fiscal 2012 column, representing the Waterton Bridge. You already have 100k. oz. in escrow prepared to back the Waterton Deal, and prepay the entire amount in a payment-in-kind swap. This deal will have closed in fiscal 2014, which ended in April.

11. Now place four more stickies in the empty apace above the columns, but this time, only take ONE sticky marked 25k oz., and place it in the 2012 column. You would do this for each subsequent fiscal year.

12. You should have a total of 325 oz. held in escrow, with all costs paid in terms of oz. produced out of escrow. Oz. produced out of escrow carry all of the writedown for prepaid, payment-in-kind type deals, including marketable securities, thus the quarterly losses on the balance sheet, and the increase of liabilities.

Thus you have the Waterton Deal fully backed and prepaid with 100koz., and you have the first tranche of Level 1 Marketable Securities backed with ~225koz.

This is a poison pill measure. Any prospective buyer of the company has to come up with either the money or the gold, should ownership in the company suddenly change. It is also a capital raise. The dilution of shares was only meant to distract and another form of poison pill. JV with Masuparia is also a poison pill measure.

-F6