(Kitco News) -Kirkland Lake Gold Inc. (TSX: KLG) and Newmarket Gold Inc. (TSX: NMI) announced Thursday that they have entered into an agreement to merge in an all-stock deal valued at C$1.01 billion.


Kirkland Lake Gold, NewMarket To Merge In C$1 Billion DealThe combined Kirkland Lake Gold company will have a market capitalization of approximately C$2.4 billion and produce over 500,000 ounces of gold annually. Officials say cash costs in 2016 will be less than US$650, with all-in sustaining costs below US$1,015.

Existing Kirkland Lake Gold and Newmarket shareholders will own approximately 57% and 43% of the combined company, respectively, on a fully diluted in-the-money basis, officials said. Kirkland Lake already completed one merger this year, adding St Andrew Goldfields in January.

The Thursday announcement said the combination of Kirkland’s Macassa complex in Canada and Newmarket’s Fosterville mine in Australia will form the backbone of a mid-tier gold producer. The combined company will operate seven mines and five mills in countries with low geopolitical risk, describing Canada and Australia as two of the top mining jurisdictions in the world.

Combined production in 2016 from Macassa, Fosterville and Kirkland’s Taylor mines alone will be over 330,000 ounces, with cash costs of under US$600/oz and AISC below US$800/oz, the companies said.

Under the transaction, existing shareholders of Newmarket will receive 0.475 of a post-consolidation share for every pre-consolidation share of Newmarket. The exchange ratio implies C$5.28 per Newmarket share based on the closing price of Kirkland Lake shares Wednesday. This represents a premium of 9.4% based on the closing share price of Newmarket Wednesday and a premium of 22.9% based on Newmarket’s 20-day volume weighted average price, the companies said.

“The potential that exists at Macassa as we continue to access higher-grade mineralization in the South Mine Complex at depth will be complemented by Fosterville, a high-grade operation with exceptional successful drilling results,” said Tony Makuch, president and chief executive officer of Kirkland Lake Gold. “We see several opportunities to grow this company within the expanded portfolio, where the combined teams will have the financial and technical capabilities to execute on our progressive growth strategy.”

The merger statement said a growth strategy will be supported by a balance sheet with a combined cash balance of over C$275 million and free-cash flow generation that amounted to C$92 million, on a combined basis, in the first half of 2016.

Douglas Forster, president and CEO of Newmarket, said the deal accomplishes Newmarket’s goal of becoming a low-cost producer with more than 500,000 ounces per year while providing shareholders with an immediate premium.

“The combination of our two flagship mines, Fosterville and Macassa, will be the cornerstone of an exciting new mid-tier gold producer with an attractive growth profile and operations in two of the best mining jurisdictions in the world,” he said.

For Kirkland Lake Gold, the transaction will require approval by two-thirds of the votes cast by its shareholders as well as approval of a simple majority of disinterested shareholders voting at a special meeting. The transaction will require the approval of a simple majority of the shareholders of Newmarket, as well as the approval of two-thirds of the votes cast by Newmarket shareholders for the name change and share consolidation.

Plans call for details to be mailed to shareholders in October, with both shareholder meetings and closing of the transaction expected in December.

The Kirkland Lake and Newmarket boards of directors both favor the merger, the companies said. They also said Luxor Capital Group, LP, which owns approximately 15.7 million shares of Newmarket as of Sept. 25, supports the transaction,

(Kitco News) – Safe-haven demand will continue to drive gold and silver prices higher next year and support the precious metals market in the next three years, according to one Canadian bank that is making across-the-board revisions to its precious metals forecast.

BMO Capital Markets thursday increased their gold and silver forcasts through to 2019In a report published Thursday, analysts at BMO Capital Markets, said that they see gold prices averaging $1,413 for 2017, up 5% from their previous forecast $1,350 an ounce.

“We look past the upcoming Fed meeting in December – though it undoubtedly drives short-term volatility – and instead focus on monetary policy that is anything but “normal” for the next year or two at least,” the analysts said. “In our view, low rates are not generating the economic recovery they theoretically should. Certainly, one could argue that accommodative policy is preventing what otherwise would be a slide into recession, but if this is as good as it gets, then safe-haven demand for gold remains supported.”

At the same time the bank revised its outlook for 2018 and 2019, expecting prices to average around $1,350 an ounce and $1,250 an ounce, up 8% and 4% respectively from the previous forecast.

Although 2018 prices are lower compared to 2017, in a telephone interview with Kitco News, precious metals analyst Jessica Fung, said the forecast is to reflect that the “lower for longer interest rate” environment will provide a higher floor for the metals prices going forward.

“The gold rally is far from over and we expect it to continue through 2017 and 2018,” she said.

Along with its more bullish outlook for gold, the bank expects silver prices to average $23.63 an ounce in 2017, up 13% from the previous forecast of $20.88 an ounce. For 2018, the bank sees silver prices averaging 20.25 an ounce, up 7% from the previous estimate. The bank left its 2019 forecast unchanged at $19 an ounce.

The bank analysts also noted that lower interest rates are also driving investors, in a continued search for higher yields, to take more chances in what are becoming over-extended global equity markets. They said this is also positive for gold and silver as they expect to the precious metals will be used as a hedge as these markets unwind.

The Dow Jones Industrial Average cratered almost 200 points as concerns about the European banking sector weighed on investor sentiment and volatility accelerated in the healthcare sector. Shares of Deutsche Bank AG (USA) (NYSE: DB) hit an all-time low on Thursday as concerns about the company’s liquidity and a need for a bailout to pay its $14 billion settlement with the U.S. government. DB stock fell more than 6.7%.

We expect volatility to heat up this month. That’s why our list for the best stocks to buy in October 2016 emphasizes quality companies that can survive a volatile market. Before we get started on today’s news, check out the three best stocks to buy in October, right here.

Let’s look at the final numbers on Thursday for the Dow, S&P 500, and Nasdaq:

Dow Jones 18,143.38; -195.86; -1.07%

S&P 500 2,151. 2; -20.25; -0.93%

Nasdaq 5,269.15; -49.39; -0.93%

Here’s a look at today’s most important market events and stocks, plus a preview of Friday’s economic calendar.

What does it mean to “own” something? It’s a question you should be asking … especially if that something is gold.

The Oxford English Dictionary defines ownership as “the act, state, or right of possessing something.” That sounds about right. But what does it mean to “possess” something?

After all, you can own something that’s in someone else’s legal possession. For example, I own a house in Cape Town. My tenants have formal right of possession under a lease. I sleep at night because the sheriff of the Simon’s Town Magistrates’ Court will enforce my superior right of possession under South African law if needed — say, if they stop paying rent.

In other words, the “state or right of possessing something” that isn’t under your physical control depends on contracts and on law. That in turn depends on the ability and willingness of those who honor contracts — and enforce laws — to do so.

If you “own” precious metals under certain types of arrangements, you may be shocked to find that you’re in a legal limbo where ownership and possession are hazy at best.

It’s not a place you want to be.

Deutsche Bank Unter Alles

German mega bank Deutsche Bank is in serious trouble. The International Monetary Fund (IMF) has publicly called it one of the greatest threats to the global financial system. The Russian government (no doubt crying crocodile tears) is investigating its role in rampant money laundering. And the U.S. government has just announced a fine related to its behavior before the 2008 crisis that is more than the bank’s current market valuation.

Over the last few years, Deutsche Bank has been the principal banker and repository for a popular exchange-traded commodity fund (ETC) called Xetra-Gold. As you know, we here at the Sovereign Investor Daily don’t like metals ETFs and ETCs because you don’t really own any gold — just a claim on gold.

Xetra-Gold, however, differentiates itself from other ETCs by stating in its investor contract that “every gram of gold purchased electronically is backed by the same amount of physical gold” stored in the Frankfurt vaults of Clearstream Banking AG, a wholly-owned subsidiary of Deutsche Börse AG, one of Deutsche Bank’s subsidiaries.

Xetra explicitly says that every time an investor buys shares, a corresponding amount of gold is purchased and put into the vault, so that “investors always have the possibility of demanding delivery of the securitized amount of gold per bearer note.” Because of this promise, Xetra is extremely popular. During the first seven months of this year, order book turnover on Xetra stood at approximately €1.5 billion. The assets managed by Xetra currently amount to €3.5 billion.

But recently, an Xetra investor encountered a big surprise. When he went to arrange for delivery of physical gold, a Deutsche Bank account executive informed him that physical delivery “is no longer offered for reasons of business policy.”


Dude, Where’s my Gold?

People piled into Xetra because it promised the small spreads and low fees of an ETC and the promise of quick physical delivery of gold on demand. Usually you get one or the other, but not both. It seemed too good to be true. It was.

As things stand, Xetra is a paper-only ETC. If you want to turn your shares into gold, you have to sell them to a willing buyer and use the proceeds to buy gold somewhere else. That’s not what Xetra promised at all.

What about those promises of full gold backing? Nobody is quite sure how Xetra and Deutsche Bank are justifying their failure to deliver gold, but the likely culprit is a clause in investor contracts that allows Xetra to modify its terms as the need arises. Many contracts include such boilerplate, and many people ignore it precisely because it is boilerplate.

The problem is that any contract that allows one party to alter the terms at will means that the other party has no real rights of ownership. In this case, Xetra investors don’t have gold in their possession, but neither do they have an enforceable right to convert their shares into the metal.

Possession Is 9/10 of the Law

The speculation about Xetra is predictable. Deutsche Bank has probably raided its gold holdings in its scramble to remain solvent. And there’s nothing any Xetra investor can do about it, since they never really owned any gold in the first place — just a piece of paper.

If you want the protection that ownership of real gold bullion provides, you need to own it yourself and store it in your own name. You may pay a bit more in spreads and fees, but if you’re owning gold as a hedge against financial calamity, that shouldn’t matter.

The upside of avoiding massive loss far outweighs the extra cost of being a real owner of gold … not of a worthless piece of paper.

As we kick off the final week of trading in September, today James Turk issued a warning to King World News for this week regarding the gold and silver bull markets.

James Turk: “September has so far been a good month for the precious metals, Eric. As of today’s close in New York, gold has risen 2.5% this month, while silver has jumped 4.7%…

So both metals are continuing the string of good months that we have seen so far this year, in which gold is up 26% and silver has risen an eye-watering 42%. It is amazing that gold and silver are getting so little attention with these fantastic year-to-date results, but that is typically the way new bull moves get started. The bull market train leaves the station with a lot of people waiting on the platform, hoping it returns for them to climb on board. But the odds of gold going back to $1,200 or silver to $18 get slimmer with each passing day.

CAUTION – Option Expiry Week
Nevertheless, we have to get ready for the next few days. We face another month-end option expiry, which starts tomorrow on the Comex and ends Thursday in the over-the-counter market. We know from experience that option expiry can be brutal. It looks like the slam down on Friday – particularly in silver – was contrived to set the stage for this week, namely, to keep precious metal prices under pressure so as many call options as possible expire out of the money.

So if this option expiry proves to be similar to just about every other option expiry we have seen for many years, we can forget about prices rising this week. Price manipulation at option expiry is just part of the picture of overall manipulation of the gold price. This manipulation has a couple of aims. First, it takes pressure off government central planners. When the electorate sees a rising gold price, people react. They intuitively know that a rising gold price is a red-flag signaling monetary problems, and policymakers don’t like to see their policies being discredited by market reactions.

Inflation & Shrinkflation
Usually these signals mean rising inflation, and we are seeing a lot of that this year. Commodity prices are rising pretty much across the board, and that is resulting in higher prices at the grocery store. There are also disguised price rises with shrinkflation – keeping the price unchanged for a smaller, poorer quality or otherwise inferior product.

The second aim of price manipulation is that it gives those bullion banks that act as an agent for the government to front-run trades and use other means to bolster their trading profits, like pressuring the gold price during option expiry to earn the premium on the calls they write. So the gold price manipulation is also a subtle way in which the government is bailing out banks. Instead of taking the money from taxpayers in a visible bail-out, which is politically difficult – particularly in an election year – the banks get bailed out by picking-the-pocket of market participants.

And we all know the banks need bailing out, particularly here in Europe. The share price of some of Europe’s big banks today hit record lows. In other words, their stocks are trading below where they were in the depths of the 2008 crisis. Imagine what it going to happen to bank shares prices when the next banking crisis gets underway, which may be soon. And that brings me back to gold and silver.

Buy The Gift Of The Gold & Silver Price Dips
Central planners can huff and puff, and they can fight the market through their ongoing interventions. But they cannot change the reality of insolvent banks and rising commodity prices. Nor can they stop gold, which explains why gold is on a deliberate and resolute one-way road of rising prices since its $20.67 per ounce price when the Federal Reserve was created in 1913.

To wrap up, Eric, gold and silver prices may remain weak during option expiry this week. The precious metals may even take it on the chin. But let’s look beyond this week. There is every reason in the world to keep accumulating physical gold and physical silver. What’s more, the downside pressure we normally see during option expiry is a good time to buy. As the old saying goes, in a bull market, always buy the dips. And gold and silver are in bull markets.”

The general assessment of at least the markets is that Hillary Clinton “won” last night’s debate. That sent the U.S. dollar higher and gold prices lower. It also helped equities rise, although there the story is more nuanced.

This is not to say that Mrs. Clinton said better or smarter things than Mr. Trump, but rather that the markets abhor uncertainty and with Mrs. Clinton they know that, more or less, current policies will continue. The boat will not be rocked. Mr. Trump, whether you agree with his ideas or not, represents an unknown quantity.

With that said, the VIX volatility index fell about 9.5% today.

The drop of about $11.00 per ounce in gold can be attributed to a sense that safe haven plays are not crucial at the moment. The benchmark U.S. 10-year bond yield fell to around 1.55%, the lowest in the last thirty days.

Gold Futures Price

The greenback was up strongly against the euro, (adding to gold’s woes), on further uncertainty concerning the state of Deutsche Bank’s soundness and the consequences it faces for breaking U.S. banking rules. The German government said yesterday that it would not assist the huge bank in its battle with the U.S. Department of Justice.

On the continuing effect of that news, Deutsche Bank hit fresh record lows. That in turn dragged down the German DAX, French CAC and London FTSE stock indexes, although the heavy bleeding seems to have been stanched for the moment.

Asian stocks took the news of the American presidential debates in very good cheer, moving up especially solidly in Tokyo and Hong Kong. Shanghai lagged on t growth issues.

In New York, stocks were up despite a very raggedy day for oil. The Dow Jones Industrial Average rose almost 0.70% while the S&P 500 was up about 0.55%. The tech-heavy NASDAQ was up 0.80% on the sunny prospects of what are called the FANGs – Facebook, Amazon, Netflix and Google (Alphabet).

There was also good buzz sentiment on Twitter, which is having its tires kicked by a number of high-flying players like Disney and Microsoft. Twitter needs to be acquired in order to change, grow and reach its full potential.

West Texas intermediate slipped back well below the $45 per barrel mark, off 3.10% on the day. The word is that nothing much will be coming out of this week’s Algiers meeting of OPEC and its oil-producing cohorts.

The famous film and radio director, Orson Welles said of elections: “Popularity should be no scale for the election of politicians. If it would depend on popularity, Donald Duck and The Muppets would take seats in senate.”

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Wishing you as always, good trading,