Platinum has been dragged down by gold this year, but the fundamentals of the market are bullish.

While holdings of gold in exchange-traded funds have plummeted this year, contributing to the yellow metal’s 17 percent price decline, we’ve seen the opposite when it comes to platinum. Holdings of platinum in various ETFs have surged 523,000 ounces, or 36 percent, since the start of the year.

Platinum ETF Holdings

Our Magnificent Seven of Grains are perhaps not as exciting as those in the Seven Samurai or the cinematic classic The Magnificent Seven (Yul Brynner, 1960), but they are also essential to the survival of the world “village.” Without the Magnificent Seven of Grains hunger would be far more widespread in the wold. These seven nations provide 78% of the global course grain and wheat exports. They provide 13% of total world consumption of these grains.

Essentially, course grains and wheat are total grains minus corn and rice.

In the world of investing, there’s a lot to be said for buying undervalued assets.

Occasionally the market provides some incredible opportunities to pick up high quality assets so cheap that, to paraphrase acclaimed investor Jim Rogers, all you have to do is walk over and pick up the money lying in the corner.

One of the benefits of traveling the world so extensively is that I’m constantly exposed to these sorts of opportunities. And occasionally surprised when I’m not.

When visiting Bangladesh a few weeks ago, for example, I was surprised that asset prices were so expensive. The Dhaka stock market index was trading at nearly 20x earnings… hardly a bargain.

This only further solidified my view that Quantitative Easing in the West (specifically in the United States) has really taken a toll around the world in creating spectacular asset bubbles. But that’s a different story.

Here in Chile, there’s a number of asset classes that are undervalued. I’ve been very vocal over the last year or two that farmland prices in Chile are some of the most attractive in the world.

For example, farmland with ultra-high quality soil can be had for $4,000 to 6,000 per acre or less. In the US and Europe, it can be 2-3 times that cost.

Not to mention, the taxes, labor costs, regulatory costs, and overall operating costs are much lower here.

Now, there are places in the world where farmland is cheaper. Africa. Argentina. Bolivia. But you’re taking a lot more political risk. And in most of those cases, you’re not going to find the same rich, volcanic soil and temperate Mediterranean weather.

As I’m heavily involved in agriculture operations here, I’ve made the apples-to-apples comparison (and blueberries-to-blueberries comparison as well). And I’ve found that the profit per acre here is multiples higher than in the US or Western Europe.

It’s possible, for example, to generate 40% to 50% unleveraged returns from high value perennials… and 15% to 20% on seasonal crops like corn.

Given that farmland yields in much of the developed world are more like 2% to 4% (or less), it’s obvious that farmland in Chile is deeply undervalued… and that farmland in the developed world is likewise overvalued.

Now, I really don’t recommend that people try to rush down here and buy farmland. In fact, I strongly recommend against it. Most people are going to be taken to the cleaners.

The hard truth is that it’s -very- difficult to buy property here… and the due diligence requirements can be exhaustive. I spent 9-months conducting due diligence before I closed on my first property in Chile. And there are few credible experts here whose opinions can be trusted.

The market here is very insular. It’s not like being in North America or Europe where you can ask Google to serve up the answers on a neatly organized web page. It takes a LOT of boots on the ground effort.

Not to mention, there are numerous pitfalls for an absentee foreign owner of agriculture property in a country where s/he doesn’t speak the language. And if it goes south, it can be a multi-million dollar mistake.

So as grand as the opportunity in Chilean farmland may be, the challenges are very real.

But there’s something else down here that I think is an even bigger opportunity. It’s easy to purchase, easy to own, and there’s very little maintenance involved. And it’s, by far, one of the most deeply undervalued assets I’ve ever seen.

I’ll tell you all about it tomorrow–

 
Simon Black 
Senior Editor, SovereignMan.com

Is China the long silver ranger?

Could China be the big silver long? Who else has deep enough pockets to endure the recent price weakness and the increased margin requirements that typically follow?

Nevertheless, the Chinese willingness to accept fungible dollars instead of precious metal seems to be waning. They are quietly accumulating metals.

Perhaps this explains why the silver open interest has remained stubbornly high throughout the most egregious washouts the silver market has seen in years.

Normally this has the effect of clearing out weak longs, often setting the scene for a price turnaround based on the COT structure.

This could be just a subset of a peaceful currency maneuvering plan.

China is Now a Net Importer of Silver

China used to export silver, but it has recently turned into a net importer. It would therefore make sense for the Chinese to seek delivery, especially given the difficulty of obtaining a reliable stock of silver these days.

Outside of the big ETF (SLV) and COMEX, no significant (government) stockpiles of silver currently exist. Furthermore, scrap flow is typically reduced in a soft market, since people are less willing to part with their recyclable silver metal.

Miner acquisition is also relatively difficult, and its feasibility can often be affected by politics and the lack of opportunity.

The silver miners — including the few primary silver producers — have long suffered from suppressed market pricing. Furthermore, what capital and financing they receive usually comes from the same bullion banks who keep the price of silver artificially low.

China and other sovereigns would naturally seek to reduce the level of their forex reserves denominated in U.S. dollars, especially considering the Fed seems locked into its role as lender of last resort to the world — and especially to the Eurozone.

A case in point is that $600 billion of QE2-generated electronic cash actually went to foreign banks as a way of building capital reserves in lieu of ECB balance sheet expansion.

The Irony of it All

The silver market has often noted a phenomenon of overnight dumping that is typically seen at the Asian open, but it is timed to occur before most Asians are actually awake.

It is now thought to be U.S. operators initiating the selloffs at Asian openings. Could this be yet another front in the trade/currency war?

New buyers for silver currently seem to be waiting in the wings to accumulate silver on the dips. Of course, the silver market has been a “buy the dip” market since the 1980s, which is the classic investment strategy employed in a long term bull market. 

Short-Term vs. Long-Term Perception

The Chinese tend to take a long-term view and are notorious for being far sighted in their investment habits.

Not only is it necessary to go back decades to understand and gain perspective on the silver market’s currently situation, but it is also interesting to project forward several decades. 

The key to doing this is using the measuring stick (the U.S. dollar) as the proxy. Furthermore, observing the persistent rise in unfunded liabilities should help any potential silver investor maintain a bullish long-term view on silver.

However, for those hoping for a silver rally in a shorter time frame, it might be helpful to be reminded of the (high open interest with a reduced, though still concentrated short) structural set up in the silver futures market that allows price suppression to exist.

by Jeffrey Lewis

As a general rule, the most successful man in life is the man who has the best information

Most of the world’s cobalt is mined in Africa and the majority of Africa’s cobalt comes from the Democratic Republic of Congo. The DRC represented about 55 percent of global mine supply in 2012 and the country contains almost 50 percent of known worldwide cobalt reserves.

The DRC wants miners to process all their mined ore in the country to encourage more value-added production. On April 5th 2013, the government gave companies 90 days to clear stocks and halt exports of unrefined copper and cobalt – export streams are to be switched from ores and concentrates to refined products.

“It (the export ban – editor) will be fully enforced by July or August in order to allow mining operators to re-adjust themselves. The government is fully aware that mining operators have electricity problems.”  DRC Mines Minister Martin Kabwelulu speaking to Reuters

The DRC has tried to impose such an export ban twice (in 2007 and again in 2010), imposition failed on both counts because of a lack of power in the country – the DRC suffers from acute electricity shortages despite a vast network of rivers.

Existing hydro plants, Inga I and Inga II, only produce about a quarter of their joint capacity of 1,700 MW because of low Congo River water levels and poor maintenance. Inga 3 wasn’t built because of concerns over the business climate in Congo. If the first phase, called Inga 3 Low Head does get built, South Africa will receive just over 50 percent of planned power output. The government actually expects power shortages to worsen in the coming years and that by 2020/21 there will be a power shortage of some 5,000 MW.

The country’s frequent brownouts and blackouts, and an expected increase in electricity shortages, do not bode well for an increase in refining capacity. Already less than 10 per cent of the DRC’s 70 million people have access to power, and mining companies are scaling back production and expansion plans because of power shortages.

The news of the DRC’s impending export ban comes as the country is reviewing its mining code – the government is going to overhaul mining laws with an eye to boosting state revenues by increasing tax rates and raising the government’s minimum automatic stake in mining projects, proposals include:

• Enlarge governments stake from five percent to 35 percent in projects, the 35 percent would be “free and non dilutable”
• Increase royalties to gain greater state revenues from the sector
• Introduce a 50 percent levy, a windfall-profit tax, on miners’ “super profits” – when a commodity’s price rises over 25 percent compared with its level at the time of the project’s feasibility study
• Scale back the length of exploration permits to three years, from the four and five year permits available under the current code
• Exploitation phase of mining licenses to be reduced to 25 years from 30 years
• Companies be required to sign written commitments to protect the environment and help local communities
• Pay a capital-gains tax in the event of a takeover
• Projects, after production start, may no longer benefit from preferential customs rates on imports destined for use in mining 

According to an Internal Displacement Monitoring Centre (IDMC) report from May 2013. “There were more highly violent conflicts in Africa in 2012 than at any time since 1945.”

The Democratic Republic of the Congo (DRC) – previously known as Zaire – is no exception to the violence flaring in many parts of Africa.

According to IDMC’s report, armed conflict in the eastern part of the Congo intensified “dramatically” during 2012. The increase in fighting drove up the number of displaced people to record levels – there are more than 2.6 million internally displaced people (IDPs) in the country.

Traditionally the DRC’s North and South Kivu regions have been the main areas of extreme turbulence over the past decades. The mineral resources contained in these provinces have provided a steady source of wealth/funding for the various factions claiming its mines.

The hugely mineral rich copper belt region of the DRC, the Congo’s Katanga Province, has also been producing industrial metals such as copper and cobalt for decades, historically the region has been very quiet and not been caught up in the vicious conflicts in Congo’s North and South Kivu.

Unfortunately conditions have deteriorated sharply in the eastern provinces, including Katanga. Very recently, hundreds of insurgents belonging to the Mai Mai Kata Katanga (“cut out Katanga” in Swahili) militia – one of several local militias operating in the province – clashed with security forces in the streets of Katanga’s capital city Lubumbashi. According to the United Nations at least 35 people were killed. The attack was the largest in the province of Katanga in more than a decade. The transport of minerals was interrupted and authorities imposed a nighttime curfew in Lubumbashi.

The DRC holds two major distinctions:

1. It is the richest country in the world in terms of mineral wealth, at an estimated $24 trillion.
2. It is the country in which the highest number of people – estimates go as high as ten million – have died due to war since World War II.

Cobalt is a strategic and critical metal used in many diverse industrial and military applications.

The growing political risk and socio-economic dissension within the DRC are creating mounting concern for the security of cobalt’s global supply chain.

“The Democratic Republic of Congo faces what is probably the most daunting infrastructure challenge on the African continent”. World Bank report on DRC Infrastructure

Jim Rogers is well known as ‘The Commodities King’, he co-founded the legendary Quantum Fund with George Soros and authored two highly respected investing books – Investment Biker& Adventure Capitalist. Mr. Rogers is very bullish on investing in Russia having been quoted in numerous publications as saying Russia’s leader, president Vladimir Putin, wants to shake his thug KGB image and Russia stacks up as a good contrarian play.

Well I’m not in the habit of investing on anybody’s say so. I do my own due diligence, make my own decisions and take full responsibility for being right AND wrong.

BUT

I have to agree with Mr. Rogers in that I believe Russia has at least one good investment, one for strategic and critical metals (including cobalt) hungry resource junior investors.

The company’s name is Global Cobalt Corp. TSX.V: GCO and it has recently started trading after a considerable halt, amazing project acquisitions, and a name change from Puget Ventures.

Global Cobalt is going to fast-track development of its world-class Karakul Cobalt Project in the Altai Republic of Russia’s southern Siberia. Having historic Soviet  C1+C2 resources estimated at 14.98 million tonnes of 0.28% cobalt equivalent Co eq. (0.21% cobalt Co; 0.09% bismuth Bi, 0.44% copper Cu and 0.11% tungsten WO2) with additional P1 resources of 46 million tonnes  containing 82,800 tonnes of cobalt – all non NI 43-101 compliant – the Karakul Project has the potential of being the largest known primary cobalt asset outside of Africa.

Global Cobalt also plans to bring on stream a solid pipeline of other strategic and critical metal projects creating a mining district with enormous potential.

Four additional assets, collectively known as the Altai Sister Properties (cobalt-tungsten), have been optioned for acquisition by Global Cobalt. The proximity of the Sister properties to the Karakul Cobalt Deposit adds the possibility of an extension to the main ore bodies providing significant upside to the creation of a new mining jurisdiction in Altai.

Global Cobalt Corp., with its highly qualified management team has the exploration, development and production expertise to enable timely, skilled development of their impressive asset portfolio.

Global Cobalt is the first mover into a new mining region, the mineral rich, pro-mining Altai Republic of Russia’s southern Siberia. GCO is the pioneer, the first foreign, investable, publicly traded mining company to advance the mineral resources in the entire region.

And that’s the investment opportunity, investors get to position themselves at the forefront of a move into an immense, resource rich untapped region, much like what happened with early movers into Mongolia and Kazakhstan.

Global Cobalt Corp. TSX.V: GCO should be on all our radar screens. It’s definitely on mine, is it on yours?

If not, it should be.

Richard (Rick) Mills

rick@aheadoftheherd.com

www.aheadoftheherd.com

Richard is the owner of Aheadoftheherd.com and invests in the junior resource/bio-tech sectors. His articles have been published on over 400 websites, including:

WallStreetJournal, USAToday, NationalPost, Lewrockwell, MontrealGazette, VancouverSun, CBSnews, HuffingtonPost, Londonthenews, Wealthwire, CalgaryHerald, Forbes, Dallasnews, SGTreport, Vantagewire, Indiatimes, ninemsn, ibtimes, businessweek.com and the Association of Mining Analysts.

If you’re interested in learning more about the junior resource and bio-med sectors, and quality individual company’s within these sectors, please come and visit us atwww.aheadoftheherd.com

***

Legal Notice / Disclaimer

This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment.

Richard Mills has based this document on information obtained from sources he believes to be reliable but which has not been independently verified.

Richard Mills makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Richard Mills only and are subject to change without notice. Richard Mills assumes no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission.

Furthermore, I, Richard Mills, assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information provided within this Report.

Richard does not own shares of Global Cobalt Corp. TSX.V: GCO

Global Cobalt is a paid advertiser on Richard’s site, aheadoftheherd.com