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David has a 3-part series titled “The Fuse is Lit” which can viewed on YouTube

Based on the May 17th, 2013 Premium Update. Visit our archives for more gold articles.

The latest World Gold Council Gold Demand Trends report shows that the gold market is driven by diverse global demand, and the appetite for owning gold jewelry, bars and coins continues to grow.

“The price drop in April, fuelled by non-physical moves in the market, proved to be the catalyst for a surge of buying that has left many retailers short of stock and refineries introducing waiting lists for deliveries,” said Marcus Grubb, Managing Director of Investment at the World Gold Council. “What these figures show is that even before the events of April, the fundamentals of the gold market remain robust with; growing demand in India and China, central banks consistently adding gold to their reserves and strong buying of investment products such as gold bars and coins.”

The report, for the period between January-March 2013, shows that total jewelry demand was up 12% year-on-year in Q1 2013, driven mainly by Asian markets. For example, jewelry demand in China was up 19% on the same period last year and stood at a record 185 tons. Demand in both India and the Middle East was up 15% respectively and in the US, demand showed a significant increase, 6%, for the first time since 2005.

Demand for gold in China and India was also fuelled by an increase in bar and coin sales – up 22% year-on-year in China and a whopping 52% in India. The US also saw a growing hunger for bars and coins– up 43% compared with the same quarter in 2012.

There’s significant investment demand for physical gold bullion at the current prices – what does it mean for the market? That it’s going higher in the long run and that the current move down is just a correction. It doesn’t imply, however, that the bottom is already in or that it will form without additional temporary downswing.

To gain some insight into short- and medium-term picture of the market, let’s take a look at the charts. In today’s essay we will discuss the implications of the current situation in the USD Index and the general stock market for, gold, silver and mining stocks, and we will also provide a follow-up to our recent essay on gold stocks and gold. We will start with the very-long-term USD Index chart (charts courtesy by http://stockcharts.com.)

In this chart, we see that more moves to the upside took place this week. As we stated in our essay of two weeks ago:

The index has actually confirmed a breakout above the very long-term resistance line. It has closed above it now for three consecutive months (yes, months). While a correction to the 80 level is still possible in the short term, an eventual move to the upside is now more likely than not.

This week’s price action was in tune with what we expected after the recent breakout and the situation remains bullish.

Let us move on to the general stock market.

The stock market (S&P Index in this case) continues to move higher this week as expected. The situation is overbought on a short-term basis, but we do not expect to see a move below 2007 high. If anything, we could see stocks move back to this level, which could further verify the breakout and allow them to gather strength in advance of the next rally. After all, the breakout above the 2007 high was confirmed.

To see how the situation in the USD and stocks may translate into the prices of gold and silver, we now turn to the intermarket correlations.

The Correlation Matrix is a tool which we have developed to analyze the impact of the currency markets and the general stock market upon the precious metals sector, (namely: gold correlations and silver correlations).

The short-term situation here is mixed and no real implications can be drawn at this time. The medium-term correlations are negative for the precious metals with both the USD Index and the general stock market. The precious metals are still pretty much anti-asset at this time. The medium-term odds, which favor a rally in the USD Index and the general stock market, have now painted a bearish picture for gold, silver and the precious metals mining stocks.

To finish off, let us have a look at the situation in gold stocks relative to the yellow metal itself.

On the above chart, the situation hasn’t changed much this week. Hence, comments made in last week’s essay remain up-to-date at this time and the bearish outlook continues to be supported by this chart:

The trading channel and the next horizontal support intersect at a point much lower than where this ratio is today. Of course, the existence of a target level by itself is no indication that it will be reached; the trend has to be in place as well. The point here is that the ratio has already broken below the previous late 2008 major low and is now a bit more than 5% beneath it. This is a major breakdown and it was confirmed. The implication is that the trend is still down.

With the trend being down and accelerating and the recent breakdown being confirmed, there is a good possibility that the miners will decline significantly once again. This makes the previously mentioned target level a very important one. At this time it seems likely that the ratio will move to its 2000 low – close to the 0.135 level.

If gold stocks decline relative to gold as they did late in 2000, and gold declines to $1,300 or slightly higher, the target level for the HUI Index would be slightly above the low of 2008 – around the 180 level.

Summing up, the long-term and medium-term outlook is bullish for the USD Index at this time. As for stocks, the situation remains bullish for the medium term, and although a short-term correction is likely not too far off, we don’t expect to see it immediately. Finally, gold stocks’ performance relative to gold continues to provide us with bearish indications. Overall, it seems that the final bottom in the precious metals market is not yet in.

To make sure that you are notified once the new features are implemented, and get immediate access to our free thoughts on the market, including information not available publicly, we urge you to sign up for our free gold investment newsletter. Sign up today and you’ll also get free, 7-day access to the Premium Sections on our website, including valuable tools and charts dedicated to serious Precious Metals Investors and Traders along with our 14 best gold investment practices. It’s free and you may unsubscribe at any time.

Thank you for reading. Have a great and profitable week!

Przemyslaw Radomski, CFA

Founder, Editor-in-chief

Gold Trading & Gold Investment Website – SunshineProfits.com

* * * * *

About Sunshine Profits

Sunshine Profits enables anyone to forecast market changes with a level of accuracy that was once only available to closed-door institutions. It provides free trial access to its best investment tools (including lists of best gold stocks and silver stocks), proprietary gold & silver indicators, buy & sell signals, weekly newsletter, and more. Seeing is believing.

Disclaimer

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Pension Funds “Selling Gold ETFs”, Dollar Weakness Seen Offering “Only Hope” Short Term

GOLD PRICES failed to hold a rally above $1380 per ounce in London on Friday morning, trading 5% down for the week as world stock markets held steady.

Both the Euro and British Pound also cut their mid-week rallies against the Dollar, holding gold prices at €1070 and £904 per ounce respectively.

New data overnight showed Japanese machine orders leaping 14% in March from February, while China’s leading economic index rose slightly for last month.

Eurozone construction output sank 8% in March from a year earlier.

“A spell of Dollar weakness looks like gold’s only salvation at the moment,” says one wholesale dealer in a note.

“So another disappointing data point could encourage more short-covering [when bearish traders close their position] ahead of the weekend.”

The US Dollar crept towards a 10-month high vs. a basket of major currencies this morning.

US consumer sentiment data were due for release Friday at 09.55 New York time.

“Bullion’s price break below the psychological $1400 an ounce level may introduce additional near-term pressure on gold,” says bullion market-maker HSBC’s James Steel.

“However, physical demand is likely to pick up further given the price drop, to help stem potential losses.”

Over in India – the world’s biggest gold buying nation on an annual basis – “There is no supply,” Reuters today quotes Prithviraj Kothari, head of Mumbai importers Riddhi Siddhi Bullions Ltd.

Thanks to this week’s sudden imposition of Indian gold import restrictions, supply is so tight some distributors are charging up to $20 an ounce above international benchmark London prices, Kothari says.

Hong Kong premiums have jumped this week to record highs of $5 per ounce, with the kilogram gold bars favored by China’s investment market now “hard to come by” according to one Singapore dealer.

Even so, “Many people are waiting on the sidelines,” reckons Singapore dealer Brian Lan at GoldSilver Central Pte, “as they are expecting another drop” in global gold prices.

Amongst Western money managers, “We’re seeing some of the pension funds selling via the

ETFs,” reckons analyst Daniel Smith at Standard Chartered bank, “which is a bit of a worrying sign.”

Exchange-traded trust funds backed by gold shed yet more metal on Thursday, with the two leading US funds – the GLD and IAU – dropping 7 tonnes between them to reach the lowest combined level since April 2010 at 1,233 tonnes.

Since Dec. 2012′s all-time peak, the GLD and IAU have lost 21.4% of their combined gold ETF holdings.

“The price of silver in 2013 will primarily be determined on the demand side,” says the latest Commodities Weekly from French investment bank and London bullion dealer Natixis, forecasting “relatively stable” supply with a slight dip in recycling.

On the industrial side it says, and “despite promising expectations from the rest of the world, we expect a slight drop in [photo voltaic] installations due to weak European [solar panel] demand” thanks both to low subsidies from government and the continued Eurozone crisis.

Silver ETF holdings have yet to follow gold trust funds sharply lower, Natixis notes – primarily because private investors own the former, as opposed to money managers in gold.

“[But] at some point these retail investors are likely to start selling.”

Total silver ETF. holdings of 19,400 tonnes currently equate to 60% of last year’s total market supply, the bank’s analysis adds, and “an outflow…could introduce substantial downside risks for silver prices.”

Adrian Ash

BullionVault

Gold price chart, no delay | Buy gold online

Adrian Ash is head of research at BullionVault, the secure, low-cost gold and silver market for private investors online, where you can buy gold and silver in Zurich, Switzerland for just 0.5% commission.

(c) BullionVault 2013

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Carl Brechtel, COO of Corvus, stated: “An adequate and economical power source is a key infrastructural component to this project which already has excellent access, favourable topography, a low strip ratio, good heap leach gold recovery, and a talented local work force.  These improvements to the power supply infrastructure represent a significant benefit to Corvus Gold in the development of the North Bullfrog mining project.”

Director Departure

The Company announces that Daniel Carriere will be leaving its Board of Directors effective today to focus his efforts on his primary business interests.  The Company would like to thank Mr. Carriere for his important contributions to Corvus Gold over the past two and a half years during its start-up phase and wishes him well with his current and future endeavours.   

About the North Bullfrog Project, Nevada

Corvus controls 100% of its North Bullfrog Project, which covers approximately 68 km² in southern Nevada just north of the historic Bullfrog gold mine formerly operated by Barrick Gold Corporation.  The property package is made up of a number of leased patented federal mining claims and 758 federal unpatented mining claims.  The project has excellent infrastructure, being adjacent to a major highway and power corridor.  The Company’s independent consultants completed a robust positive Preliminary Economic Assessment on the existing resource in December 2012.

The project currently includes numerous prospective gold targets with four (Mayflower, Sierra Blanca, Jolly Jane and Connection) containing an estimated Indicated Resource of 15 Mt at an average grade of 0.37 g/t gold for 182,577 ounces of gold and an Inferred Resource of 156 Mt at 0.28 g/t gold for 1,410,096 ounces of gold (both at a 0.2 g/t cutoff), with appreciable silver credits.  Mineralization occurs in two primary forms: (1) broad stratabound bulk-tonnage gold zones such as the Sierra Blanca and Jolly Jane systems; and (2) moderately thick zones of high-grade gold and silver mineralization hosted in structural feeder zones with breccias and quartz-sulphide vein stockworks such as the Mayflower and Yellowjacket targets.  The Company is actively pursuing both types of mineralization.

A video of the North Bullfrog project showing location, infrastructure access and 2010 winter drilling is available on the Company’s website at http://www.corvusgold.com/investors/video/.  For details with respect to the assumptions underlying the current resource estimate and preliminary economic analysis, see the technical report entitled “Technical Report and Preliminary Economic Assessment for the Mayflower and North Mine Areas at the North Bullfrog Project, Bullfrog Mining District, Nye County, Nevada” dated December 6, 2012 and available under the Company’s profile at www.sedar.com.

Qualified Person and Quality Control/Quality Assurance

Jeffrey A. Pontius (CPG 11044), a qualified person as defined by National Instrument 43-101, has supervised the preparation of the scientific and technical information (other than the resource estimate) that form the basis for this news release and has approved the disclosure herein.  Mr. Pontius is not independent of Corvus, as he is the CEO and holds common shares and incentive stock options.

Mr. Gary Giroux, M.Sc., P. Eng (B.C.), a consulting geological engineer employed by Giroux Consultants Ltd., has acted as the Qualified Person, as defined in NI 43-101, for the Giroux Consultants Ltd. mineral resource estimate.  He has over 30 years of experience in all stages of mineral exploration, development and production.  Mr. Giroux specializes in computer applications in ore reserve estimation, and has consulted both nationally and internationally in this field.  He has authored many papers on geostatistics and ore reserve estimation and has practiced as a Geological Engineer since 1970 and provided geostatistical services to the industry since 1976.  Both Mr. Giroux and Giroux Consultants Ltd. are independent of the Company under NI 43-101.

The work program at North Bullfrog was designed and supervised by Russell Myers (CPG 11433), President of Corvus, and Mark Reischman, Corvus Nevada Exploration Manager, who are responsible for all aspects of the work, including the quality control/quality assurance program.  On-site personnel at the project log and track all samples prior to sealing and shipping. Quality control is monitored by the insertion of blind certified standard reference materials and blanks into each sample shipment. All resource sample shipments are sealed and shipped to ALS Chemex in Reno, Nevada, for preparation and then on to ALS Chemex in Reno, Nevada, or Vancouver, B.C., for assaying.  ALS Chemex’s quality system complies with the requirements for the International Standards ISO 9001:2000 and ISO 17025:1999.  Analytical accuracy and precision are monitored by the analysis of reagent blanks, reference material and replicate samples. Finally, representative blind duplicate samples are forwarded to ALS Chemex and an ISO compliant third party laboratory for additional quality control. McClelland Laboratories Inc. prepared composites from duplicated RC sample splits collected during drilling. Bulk samples were sealed on site and delivered to McClelland Laboratories Inc. by ALS Chemex or Corvus personnel. All metallurgical testing reported here was conducted or managed by McClelland Laboratories Inc.

About Corvus Gold Inc.

Corvus Gold Inc. is a resource exploration company, focused in Nevada, Alaska and Quebec, which controls a number of exploration projects representing a spectrum of early-stage to advanced gold projects.  Corvus is focused on advancing its 100% owned Nevada, North Bullfrog project towards a potential development decision and continuing to explore for new major gold discoveries. Corvus is committed to building shareholder value through new discoveries and leveraging noncore assets via partner funded exploration work into carried and or royalty interests that provide shareholders with exposure to gold production.

On behalf of
Corvus Gold Inc.

(signed) Jeffrey A. Pontius
Jeffrey A. Pontius,
Chief Executive Officer

Contact Information:   Ryan Ko
Investor Relations
Email: info@corvusgold.com
Phone: 1-888-770-7488 (toll free) or (604) 638-3246 / Fax: (604) 408-7499

A breakdown of the 13-F data indicates that during the first quarter, the Soros Fund:

1. Maintained a $32mm stake in individual miners.

2. Added a staggering1.1 million shares of GDX to its holdings, at a reported price of $37.84 per share. Total Soros Fund GDX holdings now stand at 2.666 million shares, at a reported value of over $100,000,000.

3. Reduced it’s long position in the GDXJ Junior Miners Index fund, from1.998 million shares to 1.2 million shares—only to turn around, and purchase 1.510 million call options on the same index, at a reported value of $25,200,000. 

4. Lastly, the fund reduced its stake in the GLD gold fund from 600k shares to 530k shares, for a total reported value of $82,000,000.

In summary, as of May 15th, 2013, Soros Fund Management LLC reported owning over $239.2 million in gold related positioning, with over $25 million dedicated to call options on junior mining stocks.

 

Source: Bull Market Thinking

2013 FIRST QUARTER HIGHLIGHTS

• Silver ounces produced increased by 33% to 2,437,664 ounces compared to 1,826,803 ounces in Q1 2012
• Silver equivalent ounces produced increased by 36% to 2,731,792 ounces compared to 2,007,219 ounces in Q1 2012
• Net Earnings after Taxes amounted to $26.5 million, a 1% increase from Q1 2012
• Earnings per Share (basic) amounted to $0.23, representing a 9% decrease from Q1 2012
• Cash Flow per share (non-GAAP) of $0.38, representing a 9% increase from Q1 2012
• Adjusted Earnings per Share (non-GAAP) amounted to $0.21 after excluding non-cash and non-recurring items
• Revenues increased 16% to $67.1 million, compared to Q1 2012
• Mine Operating Earnings amounted to $34.6 million, a decrease of 3% from Q1 2012
• Total Production Cost per Tonne was $31.79, an increase of 9% from Q1 2012
• Total Cash Cost, net of by-product credits, was $9.49 per ounce, up 6% compared to Q1 2012
• Average revenue per ounce was $29.63 a decrease of 10% from $32.79 compared to Q1 of 2012
• Substantial budget cuts have been made for 2013 including a 49% reduction in exploration to $12.5 million and a 21% reduction in mine development to $68.2 million equaling a total reduction to capital expenditures of 16% to $162.3 million
• At the end of the quarter, Cash and Cash Equivalents stood at $110.1 million and Working Capital of $108.3 million

2013 FIRST QUARTER HIGHLIGHTS TABLE

(1) Payable Silver Ounces Produced is equivalent to Silver Ounces Produced less metal deductions from smelters and refineries.
(2) The Company reports non-GAAP measures which include Total Cash Costs per Ounce, Total Production Cost per Tonne, Average Realized Silver Price per Ounce and Cash Flow Per Share. These measures are widely used in the mining industry as a benchmark for performance, but do not have a standardized meaning and may differ from methods used by other companies with similar descriptions.

Keith Neumeyer, President and CEO of First Majestic states, “Despite the recent fall in silver prices we remain committed to aggressively growing our business while at the same time monitoring our investments and our production costs. This year marks a pivotal year for First Majestic with four major expansion projects underway simultaneously. These expansions remain on track and will set the stage for major growth in the coming years. However, we need to be sensitive to the current market conditions and be smart about our use of capital. We are committed as usual to focus on cost reductions and capital optimization without affecting our aggressive growth plans.”

FINANCIAL HIGHLIGHTS

• Generated revenues of $67.1 million for the first quarter of 2013, a decrease of 6% compared to the fourth quarter of 2012, primarily due to 9% decrease in average realized silver price per ounce. Revenues increased 16% compared to the first quarter of 2012, primarily due to 36% increase in production, partially offset by 10% decrease in average realized silver price per ounce.
• Generated net earnings of $26.5 million for the first quarter of 2013 (EPS of $0.23), an increase of 19% compared to $22.4 million (EPS of $0.19) in the fourth quarter of 2012, and an increase of 1% compared to $26.4 million (EPS of $0.25) in the first quarter of 2012.
• Adjusted EPS (a non-GAAP measure) for the first quarter of 2013 was $0.21, after excluding non-cash and non-recurring items which include the realized one-time net gain of $9.1 million as a result of the termination fee from the Orko Silver Corp. arrangement agreement.
• Cash costs increased 2% from $9.26 in the prior quarter to $9.49 in the first quarter of 2013, primarily due to a 2% increase in the Mexican peso relative to the US dollar on average quarter over quarter. Compared to the first quarter of 2012, cash cost per ounce was 6% higher primarily due to the addition of the La Guitarra mine, and a 3% appreciation of the Mexican peso against the US dollar.
• Recognized mine operating earnings of $34.6 million compared to $39.5 million in the fourth quarter of 2012, a decrease of 12% due to lower gross margin resulting from a 9% decrease in silver prices, a 2% increase in cash costs, and higher depreciation, depletion and amortization expense related to the increased size of plant, equipment and mineral properties. Mine operating earnings for the quarter decreased 3% compared to the first quarter of 2012, as the 36% increase in production was offset by a 10% decrease in silver prices, 3% appreciation of the Mexican peso, and higher depreciation, depletion and amortization expense.
• Cash flows from operations before movements in working capital and income taxes in the first quarter of 2013 increased by 4% to $44.9 million ($0.38 per share) compared to $43.2 million ($0.37 per share) in the fourth quarter of 2012, and increased by 21% compared to $37.1 million ($0.35 per share) in the first quarter of 2012.
• In March 2013, the Company received approval from the Toronto Stock Exchange to repurchase up to 5,848,847 common shares of the Company over the next 12 months through normal course issuer bid in the open market. Since April 1, 2013, the Company has repurchased 115,000 shares for a total consideration of CAD$1.4 million, of which 75,000 shares have been cancelled.
• In December 2012, First Majestic entered into an arrangement agreement with Orko Silver Corp. (“Orko”) to acquire all of the issued and outstanding shares of Orko. In February 2013, Orko declared that another company made a superior offer and First Majestic elected not to match the superior offer. Upon termination of the arrangement agreement, the Company received an $11.4 million termination fee from Orko in February 2013. Net of professional fees, legal and investment banking costs, the Company recognized a gain of $9.1 million in other income.

RECENT DEVELOPMENTS

As reported in February 2013, the Company planned to invest a total of $192.3 million in capital growth projects in 2013, of which $86.2 million was earmarked for mine development and $24.5 million towards exploration. Following the recent decline in silver prices, the Company has re-evaluated its company-wide discretionary capital investments for the first half of 2013 and has made several cuts. If silver prices do not improve prior to the third quarter, further cuts in capital commitments will be made. These current cuts do not affect production guidance for 2013.

The Company has earmarked the following capital expenditure reductions for the first half of 2013:

• Global exploration reduced by $12.0 million to $12.5 million, representing a 49% reduction
• Global mine development reduced by $18.0 million to $68.2 million, representing a 21% reduction
• Total budgeted capital growth requirements including priority construction and expansionary activities at various mines are now $162.3 million, representing a 16% reduction

The revised $162.3 million budget consists of $81.6 million for plant expansions for Del Toro, San Martin, La Guitarra and the underground rail system of La Parrilla and $80.7 million of discretionary exploration and development for all of the Company’s properties. Of the $81.6 million budget for plant expansions, $19.6 million has already been expended and, for the $80.7 million exploration and development budget, $23.7 million has also already been expended as at March 31, 2013. Therefore, remaining planned expenditures is $119.0 million, which includes $62.0 million for committed plant expansion and $57.0 million for discretionary exploration and development for the remainder of the 2013 budget year.

Furthermore, each of the Company’s on-going expansion projects at the Del Toro, La Parrilla, San Martin and La Guitarra Silver mines remain unaffected as a result of these reductions with the La Guitarra mine already ramped up to 500 tpd in the second quarter and the Del Toro and San Martin mines scheduled to ramp up in the third quarter. Therefore, global silver production guidance remains on track to achieve 11.1 to 11.7 million silver ounces or 12.3 to 13.0 million ounces of silver equivalent in 2013. The Company remains well financed with $110.1 million in cash and cash equivalents on hand at the end of the first quarter, allowing all priority construction and expansionary activities to continue on schedule towards achieving the Company’s estimated 2013 annual production growth rate of 40%.

During the first quarter, the Company completed a full implementation of SAP ERP financial and operational reporting software throughout and integrating all 24 of the Company’s head office and various subsidiaries. This investment is expected to provide enhanced and in-depth real-time analytical tools for operational performance and efficient analyses, monitoring of its operations’ cost accounting and various key performance indicators on a company by company basis and on a consolidated basis.

IN SUMMARY

First Majestic experienced another solid quarter of earnings and cash flow due in part to record production of 2,731,792 silver equivalent ounces, an increase of 36% compared to 2,007,219 silver equivalent ounces produced in the first quarter of 2012. Silver production hit record levels during the first quarter with 2,437,664 ounces of silver being produced, representing an increase of 33% compared to 1,826,803 ounces of silver produced in the first quarter of 2012. Cash cost per ounce in the first quarter increased $0.23 or 2% from $9.26 in the fourth quarter of 2012, primarily due to the 2% appreciation of the Mexican peso against the US dollar.

Total ore processed in the quarter reached 730,357 tonnes, an increase of 31% compared to the first quarter of 2012. The increase in milled ore is a direct result of the successful plant expansion at La Parrilla and the additional ore processed at the recently acquired La Guitarra Silver Mine.

The overall average head grade for the first quarter of 2013 was 181 grams per tonne (“g/t”), a 2% increase compared to 177 g/t in the first quarter of 2012 and 3% increase compared to 176 g/t in the fourth quarter of 2012. The increase from the previous quarter was primarily attributed to 15% higher head grades from La Encantada, due to increase in head grades from fresh ore, offset by 11% lower head grades from La Parrilla due to an increase in oxides production from the lower grade open pit. Combined recoveries for all mines in the first quarter were 57% and consistent compared to 57% in the first quarter of 2012 and 58% in the fourth quarter of 2012.

At the Del Toro Silver Mine, the Phase one construction for the 1,000 tpd flotation plant was completed and inaugurated in a special ceremony on January 23, 2013. Phase two construction, which will include the addition of a 1,000 tpd cyanidation circuit, is now in progress. Phase two start-up is expected by July 1, 2013, at which time, the mill is expected to start ramping up to a combined throughput rate of 2,000 tpd (1,000 tpd flotation and 1,000 tpd cyanidation). The cyanidation circuit construction is progressing well with tanks, foundations for SAG mills and platforms for the Merrill-Crowe having been completed, and tailings filter #1 was fully installed and operational. As of March 31, 2013, 30 shipments totalling 933 dry tonnes of concentrates had been shipped. During the quarter, silver-lead concentrates have contained an average of 34% of lead, 4,875 g/t of silver and 1.3 g/t of gold. Further ongoing daily improvements are underway with a focus on daily tonnage, recoveries, quality of concentrate production and other plant optimizations. During the month of April, 12 additional shipments had been shipped containing 371 dry tonnes of concentrates. Production of Zinc concentrates began in May and eight shipments have been delivered containing 225 dry tonnes of concentrates. The Company remains on schedule for the third and final phase of production (2,000 tpd flotation and 2,000 tpd cyanidation) by the third quarter of 2014, at which time Del Toro is expected to become the Company’s largest producing operation, producing approximately six million ounces of silver per year, with significant amounts of lead and zinc.

At the La Guitarra Silver Mine, the expansion of the processing plant from 350 tpd to 500 tpd was completed in April 2013. This new circuit consisted of the installation of a new ball mill, new flotation cells and related infrastructure. The expansion is expected to increase La Guitarra’s output to approximately 1.2 million ounces of silver equivalent annually, representing over one million ounces of pure silver plus a modest amount of gold. Permitting for a 1,000 tpd cyanidation processing facility is expected to be completed in the next few months with an anticipated commencement of construction in the second half of 2013. At 1,000 tpd throughput from cyanidation, production is anticipated to reach over two million ounces of silver doré production per year when completed.

The Company’s third expansion project at the San Martin Silver Mine is progressing according to plan. The current 950 tpd mill and processing plant consists of crushing, grinding and conventional cyanidation by agitation in tanks and Merrill-Crowe doré production system. The plant operates between 850 to 900 tpd, and a plant expansion is currently underway that will see the production rate increase to a planned throughput of 1,300 tpd. The expansion project is expected to be completed on time and on budget in the third quarter of 2013. The Company is planning to release a new NI 43-101 Technical Report very shortly which will include updated Reserves and Resources from the Rosarios/Huichola areas as well as an economic assessment on the current expansion.

First Majestic is a producing silver company focused on silver production in México and is aggressively pursuing its business plan of becoming a senior silver producer through the development of its existing mineral property assets and the pursuit through acquisition of additional mineral assets which contribute to the Company achieving its aggressive corporate growth objectives.

FOR FURTHER INFORMATION contact info@firstmajestic.com, visit our website at www.firstmajestic.com or call our toll free number 1.866.529.2807.

FIRST MAJESTIC SILVER CORP.
“signed”
Keith Neumeyer, President & CEO

SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION

The last long-term bull market in gold-mining stocks, which ran from the early-1960s through to 1980, occurred in parallel with a major upward trend in interest rates, a steady undercurrent of “inflation” fear, and the occasional dramatic “inflation” scare. However, the current — we think it’s still current, although this won’t be proven until the gold-stock indices exceed their 2011 peaks — long-term bull market in gold-mining stocks has unfolded in parallel with a major downward trend in interest rates, a steady undercurrent of “deflation” fear, and the occasional dramatic “deflation” scare. These differences could have — and preferably would have — resulted in gold-mining stocks performing differently relative to gold and the broad stock market during the current bull market than they did during the last bull market, but that wasn’t to be. Gold-mining stocks are putting in a similar showing this time around.

The following weekly chart of the BGMI/gold ratio (the Barrons Gold Mining Index relative to the bullion price) reveals that the gold mining sector did very well relative to gold during 1964-1968 and then embarked on a substantial long-term decline. The major bottom for the BGMI/gold ratio actually coincided with the major peak in the gold price in January of 1980, at which point the gold-mining stocks commenced a 2-year rally relative to gold. Something similar has transpired during the current bull market, in that strength in the gold-mining sector during the first few years of the bull market was followed by a substantial long-term decline.

Notice that BGMI/gold’s long-term decline of 1968-1980 was interrupted by two meaningful (1-2 year) counter-trend rallies, one during 1970-1971 and the other during 1973-1974. To date, the long-term decline in BGMI/gold that began in 2006 has only been interrupted by one meaningful counter-trend rally (the sharp 12-month rally that began in October of 2008). It’s a good bet that a second counter-trend rally will begin this year — from either an April-May low or an October-November low.

The next chart reveals that while the BGMI/SPX ratio (the gold-mining sector relative to the broad US stock market) trended higher during the 1960s and 1970s, there were two substantial counter-trend moves. The current long-term upward trend in the BGMI/SPX ratio is immersed in its first substantial counter-trend move.

The bottom line is that rather than being evidence that the gold sector’s long-term bull market has come to an end, the recent extreme weakness in gold mining stocks relative to gold bullion and the broad stock market is consistent with what happened during the middle stages of the last bull market.

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Days after Germany’s DAX index set a new record high, European stock markets extended yesterday’s losses this morning.

“Due to US Dollar strength and record levels in European shares, gold has been losing its ‘safe haven’ appeal in recent days,” says a note from German-based refinery group Heraeus.

Gold in Euros meantime dipped briefly below €1100 an ounce, while gold in Sterling fell below £935 an ounce.

Silver meantime fell to the lower end of its range for the past three weeks, dropping below $23.50 an ounce, as other commodities also dipped lower.

US Treasuries gained while German Bund prices fell.

The Eurogroup of single currency finance ministers were expected to discuss the creation of a banking union – which would include deposit guarantees and supranational supervision of financial institutions – as part of their meeting today in Brussels.

“We want a single European resolution regime,” European Central Bank executive board member Joerg Asmussen said, “together with a single resolution agency and a single resolution fund that is financed by a levy from the banking industry. This should come into place in parallel with the single supervisory mechanism hopefully by the summer of next year.”

Shortly after Asmussen’s comments were reported the Euro gave up today’s gains against the Dollar, dropping back below $1.30.

In contrast with Asmussen’s comments, German finance minister Wolfgang Schaeuble told reporters a day earlier that existing European treaties “don’t give enough foundation for a European [banking] restructuring authority”.

“You can do the same thing very well with a network of national authorities,” Schaeuble added.

“We should go as far as possible within the current treaties,” countered French finance minister Pierre Moscovici, “and then think about what could require a change in treaty. Our belief is that we can go very far.”

“The Germans are putting forward understandable questions which will have to be dealt with,” added Eurogroup president and Dutch finance minister Jeroen Dijsselbloem.

“But I don’t see why that would stop us making progress on the banking union.”

Ireland meantime may seek to use the ECB’s Outright Monetary Transactions program – whereby the ECB pledges to buy government bonds on the secondary market to prevent a sharp rise in borrowing costs – as it exits its bailout, the country’s finance minister said Monday.

“We haven’t decided in government yet whether we will apply or not,” said Michael Noonan, “but it is something that seems to be a mechanism that is working very well.”

The supply of scrap gold sent to refineries is expected to drop 4% this year compared to 2012, according TD Securities. The Toronto-based brokerage says around 1550 tonnes of scrap gold will be recycled during 2013, the lowest total since 2008, Bloomberg reports.

Last month saw gold’s biggest two-day drop in three decades.

“A lot of people were shocked,” says Arthur Abramov, owner of cash-for-gold business Manhattan Buyers Inc., which saw its monthly volume of gold recycled fall by 40% to 300 ounces.

Over in India, yesterday’s Akshaya Tritiya festival, viewed as an auspicious day to buy gold, saw an increase in gold jewelry sales compared to last year, according to local press reports.

“Sentiment of gold buying has turned positive,” says Haresh Soni, chairman of the All India Gems & Jewellery Trade Federation, adding that he expects gold sales for yesterday to show a 20-25% increase on last year’s festival.

Ben Traynor

BullionVault

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Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics. Ben can be found on Google+

(c) BullionVault 2013

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

 
FIRST QUARTER 2013 & RECENT HIGHLIGHTS

• Capital expenditures of $18.8 million on mineral properties, plant and equipment
• El Castillo operations:

• • Pad 8 construction well under way with stacking of ore and leaching
  • Argonaut is now operating all mining internally, having assumed prior contractor mining activities in March 2013
  • Over 360,000 gold ounces were added to the in-pit resources relating to sulphide mineralization

• La Colorada operations:
• Pad construction initiated in 2012 continues to progress well and we have now begun loading and leaching

• • Crushing circuit expansion continues and is scheduled to be completed and operational in the third quarter of 2013
  • Updated resource for the Veta Madre deposit added 110,000 inferred gold ounces, with potential for further expansion

• San Antonio and Magino permitting process underway

CEO Commentary
Pete Dougherty, President and CEO of Argonaut Gold stated “2013 will see a substantial investment in both the El Castillo and La Colorada operations as we bring forward our capital expansion programs. At El Castillo, the addition of the new heap leach pads and west side crusher/overland conveyor is aimed at reducing operating costs and providing production growth; both should be fully functional in the third quarter of this year. At La Colorada, the Company continues to open the ore body and construct the new crusher; both are anticipated to provide improved production in the second half of the year. Overall operations are showing steady improvement toward our 2013 goals and objectives and we are poised to make our guidance provided earlier.”

Financial Results – First Quarter 2013
During the first quarter of 2013, revenue was $43.1 million from gold sales of 25,441 ounces, compared to $24.4 million from gold sales of 14,498 ounces in the first quarter of 2012. Cash cost per gold ounce sold in the quarter was $594, compared to $639 in the same period of the prior year (cash cost per gold ounce sold is a non-IFRS measure, see note below).

During the first quarter of 2013, gross profit was $21.0 million, compared to $12.3 million in the first quarter of 2012. During the quarter, profit from operations was $17.2 million, compared to $9.7 million in the same period of the prior year. Net income for the period was $11.6 million, or $0.08 per basic share, versus $7.3 million, or $0.08 per basic share, in the first quarter of 2012.

Cash and cash equivalents was $168.5 million at March 31, 2013. Capital expenditures in the first quarter were $18.8 million primarily as a result of infrastructure improvements at the El Castillo and La Colorada mines.

This press release should be read in conjunction with the Company’s unaudited interim condensed consolidated financial statements for the quarter ended March 31, 2013 and associated management’s discussion and analysis (“MD&A”) which are available from the Company’s website,www.argonautgold.com, in the “Investors” section under “Financial Filings”, and under the Company’s profile on SEDAR at www.sedar.com.

Summary of Production Results at El Castillo
As of mid-March, we assumed the day to day mining operations at El Castillo from the former mining contractor. We hope to bring further efficiencies to the mining process through this investment. Total tonnes mined in the first quarter 2013 were up 4 percent, compared to the first quarter of 2012. Of note, the 1.4 million tonnes crushed in the first quarter was a new record for El Castillo and represented a 71 percent increase in crushed tonnes, over the first quarter of 2012. The total ounces loaded to the leach pad were 36,023 in the first quarter of 2013, a 2 percent increase over the first quarter of 2012. The stripping ratio of waste to ore remained relatively consistent between periods.

The 2013 production guidance at El Castillo is expected to be between 90,000-100,000 ounces with a cash cost between $700 and $725 per gold ounce sold.

Summary of Production Results at La Colorada
Overburden removal began in the fourth quarter of 2012; we have now increased the daily mining rate to roughly 50,000 tonnes per day. During removal of the overburden we have encountered some marginally mineralized material at 0.27 g/t for the first quarter. We are on schedule to have the pit opened to ore in the third quarter. As a result, we anticipate mineralization to increase during the second half of the year.

The 2013 production guidance at La Colorada is between 30,000-40,000 ounces, back loaded to the second half of the year, with a cash cost between $450 and $475 per gold ounce sold.

Expansion Projects for 2013 
The Company plans on investing a total of between $64 million to $74 million on capital expenditures and exploration initiatives in 2013. Major capital expenditures in 2013 are expected to include approximately $25 million at El Castillo, $19 million at La Colorada, $6 million at Magino, between $5 million and $11 million at San Antonio and between $2 million and $3 million for other capital expenditures. Exploration expenditures in 2013 are expected to amount to between $7 million and $10 million.

Non-IFRS Measures
The Company included the non-IFRS measure “Cash cost per gold ounce sold” in this press release to supplement its financial statements which are presented in accordance with International Financial Reporting Standards (“IFRS”). Cash cost per gold ounce sold is equal to production costs less silver sales divided by gold ounces sold. The Company believes that this measure provides investors with an improved ability to evaluate the performance of the Company. Non-IFRS measures do not have any standardized meaning prescribed under IFRS. Therefore they may not be comparable to similar measures employed by other companies. The data is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Please see the MD&A for full disclosure on non-IFRS measures.

Qualified Person, Technical Information and Mineral Properties Reports
The technical information contained in this document has been prepared under supervision of, and reviewed and approved by Mr. Thomas H. Burkhart, Argonaut’s Vice President of Exploration, a qualified person as defined by National Instrument 43-101. Mr. Alberto Orozco, Argonaut’s Mexico Exploration Manager also supervised the drill programs and on-site sample preparation procedures at La Colorada. Bret Swanson of SRK of Denver, CO, who is an “Independent Qualified Person” as defined by NI 43-101 and the lead person responsible for completing the updated Veta Madre resource has reviewed this press release as it relates to Veta Madre.

For further information on the Company’s properties please see the reports as listed below on the Company’s website or on www.sedar.com:

About Argonaut Gold
Argonaut Gold is a Canadian gold company engaged in exploration, mine development and production activities. Its primary assets are the production stage El Castillo Mine in Durango, Mexico and the La Colorada Mine in Sonora, Mexico, the advanced exploration stage San Antonio project in Baja California Sur, Mexico, the recently acquired advanced exploration stage Magino project in Ontario, Canada and several exploration stage projects, all of which are located in North America.

Creating Value Beyond Gold

Cautionary Note Regarding Forward-looking Statements
This news release contains forward-looking statements that involve risks and uncertainties that could cause results to differ materially from management’s current expectations. Actual results may differ materially due to a number of factors. Except as required by law, Argonaut Gold Inc. assumes no obligation to update the forward-looking information contained in this news release.

For more information, contact:
Argonaut Gold Inc.
Nichole Cowles
Investor Relations Manager
Tel: (775) 284-4422 x 101
Email: nichole.cowles@argonautgold.com 
www.argonautgold.com