Spot gold jumped just over 1% or $16 an ounce on Friday bringing its two-day gains to almost $50 an ounce.

Gold ended the week at $1,590.80, recovering from an intra-day low Wednesday of $1,528 as investors sold the precious metal to cover losses elsewhere.

That level briefly signaled a bear market with the precious metal 20% below the record of $1,913 hit on August 23 last year.

The sharp turnaround in sentiment in the bullion market has some asking whether the rally is a dead cat bounce or perhaps the best chance to buy before prices rocket.

Gold bulls say a new round of monetary easing in the US – a distinct possibility – and possible similar programs in the crisis-ridden Eurozone will restore the yellow metal's status as an inflation hedge and wealth preserver.

Flooding markets with cheap money would also hurt the dollar, further boosting the metal's price.

Read more about QE in the EU, Grexit and Operation Twist and the effect on the gold price here >>

Big bullion bounceback

A report released today by the US EPA does not paint a favourable picture of the proposed Pebble Mine in Alaska.

The report, titled "An Assessment of Potential Mining Impacts on Salmon Ecosystems on Bristol Bay, Alaska", says the Pebble Mine, a huge copper-gold deposit being shepherded through a 50-50 partnership between Anglo American and Northern Dynasty Minerals, would have significant impacts on fish populations and streams surrounding the mine site, located near Bristol Bay.

The study looked at the potential impacts of large-scale mining in the Bristol Bay and two other river watersheds, considering a potential open-pit mine producing 2-6.5 billion tonnes of ore and a 139-km transportation corridor:

Based on this mine scenario, we conclude that, at a minimum, mining at this scale would cause the loss of spawning and rearing habitat for multiple species of anadromous and resident fish. A mine footprint of this scale would likely result in the direct loss of 87.5 to 141.4 km of streams and 10.2 to 17.3 km2 of wetlands.

The report abstract notes that even if mining did not result in any accidents or failures, the mine "would result in significant impacts on fish populations in streams surrounding the mine site." Accidents or failures could include the release of contaminants or the catastrophic failure of a tailings dam.

The release of the report coincides with an announcement this week by Northern Dynasty stating that the Pebble Partnership is planning to spend $107 million to advance the mine in 2012, with the objective of achieving permitting by the end of this year.

The Pebble Mine is one of the largest undeveloped polymetallic mineral deposits left in the world.

According to a project website, the deposit hosts 55 billion pounds of copper, 76 million ounces of gold, 3.3 billion pounds of molybdenum, and quantities of silver, palladium and rhenium. Comparing the world's undeveloped gold deposits, Pebble ranks no. 1, dwarfing even Rio Tinto's Oyu Tolgoi project in Mongolia, which is ranked fourth at just over 40 million gold ounces.

So far the Pebble Partnership has invested about $500 million into the project, including about $150 million on studies.

The size of the proposed mine and its location near salmon-bearing streams has attracted considerable controversy and opposition from some quarters.

Last November, 81% of the Bristol Bay Native Corporation —  the largest private landholder in southwest Alaska — rejected the mine on the basis that it will "unavoidably put at risk the 'fisheries and our Native way of life."

A month earlier, voters in the Lake and Peninsula Borough narrowly supported (by 34 votes) a ballot measure put forward by anti-Pebble activists that would restrict future development that affects more than one square mile of land within the 31,000 square mile borough.

The ordinance, however, is being challenged in court by the State of Alaska which argues that it seeks to undermine state authority over large-scale resource development.

Pebble Mine would damage water, fish habitat: EPA

In an interview with Louis James, John Hathaway discusses the US's economic outlook and why he's delighted by the current bearish sentiment toward gold.

[To be a successful speculator, one must be willing to go against the mainstream investment trends, as John is. There's no better way to get a primer on contrarian investing than by sitting in on the recently concluded Casey Research Recovery Reality Check Summit – and you can do that by ordering the Summit Audio Collection today. Every presentation, every chart and graph, and every actionable investment tip can be yours, in either the instantly available MP3 files, or in CD format.]

Louis James: Ladies and gentleman, thanks for tuning in. We're at the Casey Research Recovery Reality Check Summit. We're talking with John Hathaway, one of the more successful fund investors – institutional investors – in our precious metals field near and dear to my heart. John, can you give us a quick version of what you talked about here, for those who didn't make it to the conference?

John Hathaway: Sure, yes. I think we're at the end of a correction that resulted from the peak last summer. It was overcooked, kind of hyperventilated hysteria over the debt-ceiling talks, the rating downgrade of the US sovereign debt, and I think basically the stocks and the metal had been working off that boiled down to what we now have is a simmer. I think we are at a position where there's not a lot of downside, and I would not be surprised by revisiting the previous highs of $1,900 and maybe even new highs over $2,000 this year.

What will do that is basically – so much of the narrative has been quantitative easing. When Bernanke announced on the 29th of February that they were done with quantitative easing (and if you believe that I've got a bridge to sell you, but for the time being let's assume that there won't be any), I was very impressed that gold did not go to a new low. It printed somewhere below $1,600 at the end of the year, made a couple-of-day swoon, but it didn't go to a new low. And then when the Fed minutes came out it also did not go to a new low, it kind of reiterated what Bernanke said. So the narrative may be changing. I'm not ruling out quantitative easing as a possibility, but there are things out there that gold might be looking at that the CNBC mentality hasn't figured out.

Remember that gold rose for many years before we even heard of quantitative easing; it was in a steady uptrend. So what could those things be? What would take gold – what would be the new headlines that might take gold to higher highs? To me, the biggest thing is that the Federal Reserve has purchased something like 61% of all new Treasury debt in the last year; and if they aren't going to continue that, then what's going to happen to rates?

Louis: Right.

John: The Chinese – who had been big supporters because they were rigging their currency – have not been generating foreign exchange to anything like the extent they were, so their participation rate in Treasury auctions has gone way down. If you look up the TIC numbers, foreign buying of Treasuries has dropped precipitously, so you have the two biggest pillars of support for keeping rates low in question here, and let's see what happens on June 30th. If you don't have a political buyer, either the Chinese and foreign buyers who are manipulating currency, and the Fed because they said they aren't going to do it, what are rates going to do?

If you are going to get a risk-free return inflation-adjusted today that's not politically motivated, it's got to be somewhere around 4-5% on the short end of the curve. Every hundred basis points adds a huge amount to the budget deficit, so to me we're in a real trap here, where it's going to be a game of chicken as to whether the Fed can really live up to what Bernanke said on the 29th.

Louis: Isn't that really the bottom line? They can't allow that interest rate to rise with the debt outstanding –

John: It seems very difficult. The recovery, the alleged recovery that we had, is very… I'll grant that things are better than they were a year ago or two years ago, but you'd have to call it feeble at best and maybe not sustainable. That's one thing that I think could affect the gold market.

The second thing, and I think it's very important too, is that inflation is rising. Even though the economy is soft, the number I look at – and I know we're going to have John Williams speak at lunch, and we know he has a very good take on it – is the MIT Inflation Index, because that's real-time pricing of billions of products. You can get to that website just by googling "MIT Inflation Project"; and that does not include services. Most of the services I take are inflating at more than 5%; they are closer to 10%. But goods that could be measured in real time are rising at 5%, so that's also going to be a factor. That means if rates stay where they are, the Feds are just going to be that much more behind the curve.

So those are two things; and the third thing is that there's $1.5 trillion of liquidity in the system that should the recovery – and I'm not a macro forecaster, but let's say the recovery does sustain itself – you've got $1.5 trillion of free reserves that could just turn into money supply. Then you really would have a potentially hyperinflationary scenario, and the Fed would be completely powerless to do anything about it. So I think that's bullish for gold – gold is not backward looking, it basically looks forward. I can go on and on. You've got the European unresolved sovereign debt crisis in Europe.

Louis: Let me jump in with a question about this, then. You've stood out really from the crowd in that most people agree on the general prognosis for gold. Most people are sort of near-term bearish, you know, the ones –

John: It makes me so happy.

Louis: [Laughs] But, you know, once a bear sentiment sets in, it seems to almost have its own momentum.

John: Yes.

Louis: You're the only who's saying "I think we're near the bottom." Most people are saying, "Sell in May and go away" –

John: Yes, I heard a couple of things from this session that just made me want to jump up and buy –

Louis: I understand the contrarian reason for that, but can you tell our audience a couple of reasons why you think we might be near the bottom or why you're ready to buy now and not waiting to see how this summer turns out?

John: Sure. Well, first of all, I'm not a trader. I mean, I'm long, and last summer I thought, "Gee, this is really a little spooky, we're not at a sustainable level," but there wasn't a whole lot I could do about it. And here we are and we have some cash, we have some inflows, so we are able to put money to work. And what is it that makes me think we're there? Sentiment numbers are extremely negative, historically, when they've gotten to these levels. By the way, I put out a quarterly newsletter now that has a lot of this data, which can be found on our website.

Louis: Go ahead and give us the website.

John: It's the Tocqueville Asset Management website, and it should be fairly easy to find. So sentiment is at levels that have been associated with big rallies. Traders' commitments, net longs, net spec longs are way, way down there. I look at that a lot just as a way to see where the market is positioned. The guys who can create some volatility are not there, and so if gold starts moving, they won't want to miss it, and so they'll come in. And then, we've looked at some technical stuff. I'm not a technician but most of what I see from a technical perspective is extremely constructive. So I put those things together.

Sentiment is rock bottom. COMEX traders' commitments are very, very constructive, and technical things that we look at are very constructive. So I would say all of those things, plus hearing these guys say that they are not going to step in – that's more anecdotal, but that to me is just very, very positive. So I – frankly I don't stake my reputation the way that Dennis Gartman does on making trading calls, but just as an experienced observer of this market for some number of years now, I think we're ready to make a move higher.

Louis: Okay, well, thank you very much. Word to the wise.

John: Thank you.

‘This is the bottom for gold’ – John Hathaway

Michael Pascoe, writing for the Sydney Morning Herald, hits on a little-reported theme gleaned from remarks by BHP Billiton chairman Jac Nasser this week in Sydney:

Amidst the petty local political noise, the really big message in the speeches by BHP's chairman and CEO this week was entirely missed: implicit in the iron ore demand projections is that India isn't going to do a China, that India won't spectacularly industrialise in the East Asian manner.

Pascoe recalls the widely-held theory that India's industrialization, powered by a rapidly expanding population, will eventually catch up with China's, fuelling at least another decade-long commodities boom, which is of critical importance to Australia with its rich deposits of metallurgical coal and iron ore used for steelmaking.

Nasser blew a hole in that theory, reports Pascoe:

The message from BHP this week is that demand for iron ore flattens out as China's growth trajectory moves into the greater consumption phase from a concentration on construction and infrastructure. Ipso facto, India doesn't take off.

Continue reading Pascoe's column here

Alarmingly, BHP's Nasser all but declared the good times over, referring to the supercycle commodities boom driven principally by iron ore, the Australian megaminer's most profitable business by far. FT.com (sub required) reported:

“The tailwind of high commodity prices has contributed to record growth in the sector. Now we have a period where those tailwinds are moderating and we expect further easing over time,” said Mr Nasser.

“Where the industry previously lacked investment opportunities and choice, it now has more projects than cash flows. All of us in the industry are having to make choices.”

By "making choices," Nasser confirmed earlier comments from BHP's top execs about scaling back its most ambitious programs saying it will not spend the $80 billion previously set aside for expansion by 2015.

While most analysts expect BHP will continue to pour money into iron ore in Australia, the company's other megaprojects – Olympic Dam, expansion of its US shale gas operations and Jansen potash project in Canada – may be put on the back burner.

Read more about BHP's capital expenditure plans here >> and here >>

India the next China? Don’t bet on it, says BHP

McEwen Mining (TSX and NYSE:MUX) President and CEO Rob McEwen on Thursday cautioned shareholders that recent energy-industry expropriation and Argentina government policy decrees augured negatively for its San José silver/gold mine and other development projects.

According to one of our MINING.com correspondents who attended the general meeting yesterday, McEwen plans to divest or joint-venture its Los Azules Argentinean copper asset once ownership of the disputed project is resolved next year.

The Toronto-based company is currently involved in litigation with TNR Gold (CVE:TNR), a Vancouver-based junior miner that is challenging title to the northern half of Los Azules. TNR is seeking, among other things, recognition of a right to a 25% interest in the property.

On top of all this, a study published this month by the non-profit organization Center for Human Rights and Environment (CEDHA) of Cordoba, Argentina, claims Los Azules will affect nearly 200 glaciers. If true, McEwen will face serious legal troubles, as Argentina has a law that prohibits mining activities in glacier areas, protecting them as water reservoirs for human consumption and agriculture, as well as maintaining biodiversity and serving as tourist attractions.

In a press release, the Canadian miner said the company’s goal is to qualify for inclusion in the S&P 500 by 2015 by creating a high growth, low-cost, mid-tier silver and gold producer focused in the Americas.

McEwen Mining's principal assets consist of the San José mine in Santa Cruz, Argentina (49% interest); the El Gallo Complex in Sinaloa, Mexico; the Gold Bar Project in Nevada, US; the Los Azules Project in San Juan, Argentina and a large portfolio of exploration properties in Argentina, Nevada and Mexico. In 2012, McEwen.

McEwen will invest about $40 million on exploration this year.

(image: Glacier in Argentina, Wikipedia)

McEwen considers selling the Los Azules Project in Argentina

Less than a month after officially launching its asteroid-mining plans, Google’s billionaire co-founders and filmmaker James Cameron’s owned company Planetary Resources, has already decided not to accept any more job applications.

In the careers section of its website, the company – founded about three years ago, but operating behind the scenes until last month- says it has received more than 2,000 applications since the launch on April 24 and that are not currently accepting applications for full-time employees, summer internships or student co-ops.

Overseen by former NASA Mars mission manager Chris Lewicki, and with only 20 employees at the moment, the Bellevue, Washington-based company has emphasized it is looking to hire qualified people to build spaceships and explore asteroids. In return, they offer applicants a life-changing experience:

• We are finding a new way to explore space beyond Earth orbit.
• We are a growing business with incredible people who are dedicated to Planetary Resources’ long-term objectives.
• Like all small businesses, we are a family. We love our team and what we do.
• You will get your hands dirty. If you prefer your hands clean, go somewhere else.
• We have a grill. We are not afraid to use it.
• Seattle, Washington. Ok, so it rains. It’s gorgeous, and anyone who says otherwise is from California.

Like any mining junior, the first step for Planetary Resources is resource evaluation. That is why the company is focusing on hiring professionals who can help launching low-Earth orbiting satellites to scan for likely targets.

Planetary Resources plans to build redundancy into its missions by sending multiple spacecraft on the same mission so if one breaks, the mission can continue. The satellites will also be cheaper.

Asteroids are rich in valuable minerals. An M-type asteroid, the third most common type, just one km diameter could contain more than two billion tons of iron ore and nickel. And, notes the company, they are not very far away.

"Actually, some near-Earth objects are the most accessible destinations in the Solar System. These are energetically closer to us then even the surface of the Moon and that’s because they have Earth-like orbits and they also have small gravity fields. So, we can reach them with very little propulsion," writes the company.

Getting the ore from asteroid to the earth's surface is still a ways off, and the company is leveraging unnamed future technologies.

"The microgravity environment presents unique challenges for materials acquisition and processing that require a different way of thinking about the problem. Problems associated material transport and handling must be solved with a new set of tools."

What's out there to mine?

In February this year, the heads of the world's five largest space agencies gathered in Canada to discuss interplanetary mining, particularly the viability of mining the Moon.

Several countries, including China, have already expressed an interest in mining the moon's resources and a number of prototype machines already exist.

Google co-founders have been known to take on big, outside-of-the-norm projects. The company is testing driverless cars. Google’s founders have also invested in space tourism projects and the company has been sponsoring a Moon-related prize, the Lunar X-prize. This $30 million competition aims to find privately funded teams to launch and operate a rover on the moon.

The National Aeronautics and Space Administration Agency (NASA), has been encouraging research to determine the mineral value of near-earth asteroids, particularly the moon. In 2009, as Mining.com reported, NASA inaugurated the first lunar mining competition in the hope that a future robotic mining operation on the moon could yield the energy needed to power earth’s major cities and give the space agency a boost in the quest for major human exploration of planetary space.

If you would like to be notified of opportunities at Planetary Resources when they become available, sign up on their mailing list here.

Planetary Resources doesn’t want more people onboard of its asteroids-mining ship

Peru’s illegal mining exports reached $1.8 billion in 2011, exceeding even drug trafficking profits, which accounted for $1.2 billion, said local consultancy firm Macroconsult.

The figures refer specifically to gold illegal exports and do not include the Madre de Dios region, where all yellow metal output is thought to be illegal.

Interviewed by local financial newspaper Gestión, Macroconsult associate director Elmer Cuba said Madre de Dios gold production accounted for 14% of Peru's output in 2011 or 728,000oz, which is a 35% jump compared to 2008.

Profits reached at least US$1.00bn, according to the firm, which would mean Peru is losing around $300 million a year in tax income.

Speaking at the 10th International Gold Symposium, held in Lima from May 14-16, Cuba said the key to resolving the problem of illegal mining is comparing gold production with data from the Ministry of Energy and Mines (Ministerio de Energía y Minas - MEM), as well as the exports registered with tax agency Sunat.

An estimated of 1.14Moz gold was not registered with MEM last year, which accounts for 22% of total exports.

"The formalization will start by hitting their pockets and not with violence because we know who is exporting and therefore they can be found," Cuba said at the Gold Symposium.

Point of no return

Illegal gold production has increased fivefold in the last six years and is estimated to provide 100,000 direct jobs in the country.

According to Peru’s Ministry of Environment, the activity has destroyed 18,000 hectares of Amazon so far.

In a press release, Minister of Energy and Mines Jorge Merino, said Peru has reached a point of "no return" in the fight against illegal mining and that the government is working hard to end this practice that “harms people’s health, the environment and the economy.”

"Informal mining is a problem that has social connotations. There are about 100,000 informal miners in Peru and another 400,000 compatriots who depend on this activity. We must first understand the problem [and then find a] solution, which it is not easy,” he said the statement.

Merino added Peru is one of the first countries in Latin America to address the problem of illegal mining directly, through a gradual process that aims to incorporate informal miners into the system. “Illegal is not the same that informal,” he said, adding that the latter are supported by the Government and continue working for up to two years until their formal incorporation has been completed.

Peru’s illegal mining exports problem worse than drug trafficking: report

Yesterday, the House Committee on Natural Resources passed H.R. 4402, the National Strategic and Critical Minerals Production Act of 2012. The bill, offered by Rep. Amodei (R-Nev.), received strong support in the committee and now heads to the full House for consideration. Three amendments that could have adversely affected the mining sector, including adding a new 12.5 percent tax on mining, were defeated during the hearing as well.

Due to an inefficient permitting process, it can take up to 10 years to secure the necessary government approvals to mine in the U.S.—stifling job creation, halting economic growth and putting our national security at risk.  Rep. Amodei’s legislation aims to streamline the duplicative and unnecessary bureaucratic obstacles to mineral production.

H.R. 4402 will help revitalize the nation’s critical minerals supply chain and drive investment in a critical American industry. Help support this legislation ask your Member of Congress to co-sponsor H.R. 4402 to allow us to use our own American natural resources.

One step closer to a better US permitting process

The Globe & Mail on Thursday wrote in depth about the recruitment crisis in the Canadian mining sector.

According to the Mining Industry Human Resources Council, a body set up to help mineworkers transition out of the resource industry during the sector's slump in the Nineties may need to hire 112,000 new employees by 2021.

That's a 50% increase from current employment levels and the massive number of new workers is needed because the mining industry has a $140 billion pipeline of new projects across the country.

Despite paying the highest wages – average $40.42/hour vs a $25/hour across sectors – the mining industry faces an uphill struggle filling all the positions:

Hindering recruitment are some ongoing misconceptions and outdated perceptions about mining, Mr. Montpellier said. The image of mining as a dangerous, high-risk industry with men doing back-breaking labour deep underground and exploiting the resources of poor, underdeveloped countries is one that the industry must address.

Mining has become one of the safest industries, he said. It is a technology-intense field in which computer-controlled equipment often does most of the hardest work, while knowledgeable, highly trained technologists operate computers and other sophisticated equipment.

Continue reading at The Globe & Mail

Mining said to need ‘image makeover’ to attract workers. Paying average $40 an hour not enough

Mongolia is capping foreign investment in certain industries, including mining, in an attempt to keep profits inside the mineral-rich nation's borders.

Wall Street Journal (sub required) reports that Mongolia's parliament has approved a new law that caps future foreign participation in some sectors:

When it goes into effect, the law will require foreign investors to obtain government review and parliamentary approval for investments at 49% and above into industries such as resources, finance, telecommunications and media, according to analysts in Ulan Bator. The cap is specific to deals valued above about $75 million.

The legislation comes ahead of elections set for June.

Reuters reported earlier this month that the provisions were watered down, fearing a backlash by foreign investors in the mining sector – the foundation of the country's economy.

Last year gross domestic product  in the nation  of fewer than 3 million people  expanded by 17.3% and this year it should easily top 20% thanks to billions of dollars of foreign investment in the country's coal, copper and gold mining industry.

Mongolia legislates caps on foreign investment