A guest post from Turd Ferguson's site.

I am just posting a few snippets.

Deals with Barrick's PASCUA LAMA mine.


Guest Post: "The Situation Is Even More Dire Than I Imagined"



Monday, June 11, 2012 at 5:00 pm

Our pal, SRSrocco, has penned another fantastic essay and he offered it as a guest post here at TFMR. I gladly obliged to print it because it's very well done and it is imperative that you read it. Thanks to SRSrocco and Harvey Organ for providing this information.

MY CONVERSATION WITH HARVEY ORGAN:

The Situation Is Even More Dire Than I Imagined


This past Friday night I had the most interesting conversation with Harvey Organ. The inspiration to contact Harvey came from a correspondence I had with Doc at Silver Doctors. Doc was getting ready to release his interview with Harvey when he relayed this rumor of big problems at Barrick’s Pascua Lama Project… another interesting development from Harvey.

Before I get into the meat of this article, let me state a few things. I have been reading a great deal about gold and silver since the early 2000’s. I started reading Ted Butler and then it expanded to other precious metal analysts and websites. One of the authors in which I gained a great deal of insight on monetary history was from Antal Fekete. He is an extremely smart mathematician that has written a great deal about the gold standard, the Real Bills Doctrine, free market interest rates, correct hedging and on a mining company called Barrick Gold.
Fekete wrote several negative articles about Barrick and how its lousy hedging strategy was destroying shareholder value. During my conversation with Harvey, I found out that Fekete actually learned about gold mining and Barrick from none other than Harvey himself. As the conversation went on, I began to realize that Harvey knew most of the people in the industry and was one of the individuals who understood the manipulation of the gold and silver markets earlier than most.

My initial intent to contact Harvey was on the issue of Barrick’s glacier problems at its Pascua Lama Mine on the border of Argentina and Chile – a mine located at an extreme altitude of 13,000-15,000 feet. However, I began to understand that some of my assumptions of the precious metals markets where quite naïve.

It is difficult to remember every detail from our conversation, but I will try to give you an idea of just how dire the situation has become in the paper gold and silver markets.

Harvey told me that he started seeing the manipulation in the gold and silver markets back in 1988. He also told me that Barrick Gold took the heap leach method of processing gold and used it as a method to drive out the competition. Prior to Barrick coming on the scene, a large percentage of the world’s gold mines were underground mines. Barrick used the economies of scale from the technique of the open-pit mining as well as the process of heal leaching to leverage their way to the top of pack.

To be able to accomplish this feat, Barrick had to hedge a great deal of its future gold production to finance acquisitions and development of these huge open-pit mines. This is where things got very interesting.

Harvey was a Barrick stock holder in the late 1990’s and early 2000’s. He began to realize something was wrong with the company. Harvey met with Jamie Sokalsky (just recently replaced Aaron Regent as CEO of Barrick) and other top officials from Barrick back in May of 2000 to let them know that their leasing of gold was going to get them in serious trouble.

Harvey told me that when he went to Barrick’s office back in 2000 for this meeting, he mistakenly got off the wrong floor – one floor below Barricks. When he got out of the elevator he realized he was at the wrong floor because he was standing at the offices of JP Morgan. Harvey thought this was interesting to see that Barrick’s office was located right above JP Morgan.

Harvey became disenfranchised with Barrick and sold all his stock back in 2004. This is where we enter into the world of the Pascua Lama Project.

BIG TROUBLE AT PASCUA LAMA??

Pascua Lama is one of Barrick’s largest gold and silver mines that is slated to be in commercial production by mid 2013. Harvey believes Pascua Lama should have been in commercial production several years ago, but the problems associated with Glaciers have kept them from doing so.
There has been on ongoing debate about the Glacier and water issues in both Chile and Argentina as it pertains to Barrick’s mining operation of Pascua Lama.
As the last article states, Aaron Regent may have been made the fall guy for Barricks big mistakes. Here we can see that the big acquisition of Equinox Minerals may turn out to be much worse than expected. I also believe there is bad news coming out of Pascua Lama. Again, this represents 25% of Barrick’s gold reserves and if Pascua Lama is not allowed to go commercial, it would be disastrous for Barrick’s stock price, balance sheet and contractual obligation to supply Silver Wheaton 170-200 million ounces of silver.

If Pascua Lama is unable to mine gold and silver without threatening the glaciers in both Argentina and Chile, Barrick will have to go into the futures markets and purchase silver to deliver to Silver Wheaton at its contractual price of $3.90 an ounce. This would be another nail in the coffin for the paper silver manipulated market.

Ironically, both Turd Ferguson and I had an EPIPHANY on the precious metals about the same time last week. Turd mentioned in one of his posts that he was no longer going to produce charts every day in his blog entries due to the fact that the markets are so manipulated that it really doesn’t call for it much anymore. I also reached the same conclusion but in a different way when it came to INVESTMENT DEMAND in the price discovery mechanism.