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Etruscan Shareholders Vote In Favour Of Endeavour Offer

Etruscan Resources Inc. announced that Etruscan shareholders have voted today at a Special Meeting of Shareholders to approve the plan of arrangement whereby Endeavour Financial Corporation will acquire the remaining 45% of Etruscan common shares that it does not already own. Over 78% of Etruscan’s shareholders were represented in person or by proxy at the meeting which compares favourably with the 71% shareholder turnout for Etruscan’s annual general meeting held on May 19, 2010.

At today’s Special Meeting, over 98% of shareholders voted in favour of the Arrangement, including over 93% of votes cast by minority Etruscan shareholders (ie., excluding Endeavour and related parties).

Under the Arrangement, Etruscan shareholders will receive C$0.26 in cash plus 0.0932 of an Endeavour share for each Etruscan share. Completion of the Arrangement is subject to satisfaction of certain conditions including final approval of the Supreme Court of Nova Scotia. It is anticipated that the Arrangement will be concluded on or about September 10, 2010 at which time Etruscan shareholders will be sent information about how to exchange their Etruscan common shares for cash and Endeavour common shares. Etruscan shares will continue to trade on the Toronto Stock Exchange under the symbol “EET” until the end of the trading day before the effective date of the Arrangement.

First Majestic Silver: Record Earnings and Cash Flows. Purest Silver Producer With 93% of Revenue From Silver Production

The Company generated net income of $8.9 million in the second quarter of 2010, or earnings per common share (“EPS”) of $0.10. Total cash costs per ounce (including smelting, refining, metal deductions, transportation and other selling costs, and by-product credits, which is a non-GAAP measure) for the second quarter of 2010 was US$8.20 per ounce of silver

First Majestic Silver Corp. is pleased to announce the unaudited financial results for the Company’s second quarter ending June 30, 2010. The full version of the financial statements and the management discussion and analysis can be viewed on the Company’s web site at www.firstmajestic.com or on SEDAR at www.sedar.com.

Second Quarter 2010 Highlights ($CAD) Change from Q2-2009
Gross Revenue $31.8 million Up 102%
Net Revenue $29.0 million Up 122%
Mine Operating Earnings $13.1 million Up 679%
Net Income after taxes $8.9 million Up 757%
Earnings Per Share – basic $0.10 per share Up 900%
Cash Flow Per Share (non-GAAP measure) $0.14 per share Up 1300%
Silver Ounces Produced (excl eqoz Au & lead 1,538,798 oz Ag Up 86%
Silver Equivalent Production 1,656,165 eq. oz Up 73%
Silver Equivalent Ounces Sold 1,623,844 eq. oz Up 51%
Total Cash Costs per ounce US$ 8.20 Down 10%
Direct Cash Costs per ounce US$ 6.16 Down 2%
Average Revenue per ounce sold US$ 18.68 Up 48%


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John Embry Likes Orvana Minerals

In an interview with The Gold Report, John Embry of Sprott Asset Management, talks highly of Orvana Minerals (Orvana analysis by O B Research from June 16).

I like Orvana Minerals Corp., which is another small company with a tight market cap that is developing the El Valle gold-copper project, one of the old Rio Narcea properties in Spain. I think that one is just starting to catch on. They’re very competent underground miners. They proved that at the Don Mario mine in Bolivia. Their stock was always extraordinarily cheap because of its Bolivian base. It’s moved fairly significantly recently. I think it’s got a lot further to go, said John Embry.

Source: The Gold Report

The Best Gold Interview of 2010

By Jeff Clark, Senior Editor of Casey’s Gold & Resource Report

Much of what passes for “insider” information these days is often conspiracy-edged or largely conjecture. True inside information is actually hard to come by. So what follows is the refreshingly candid and uncut version of my talk with a first-hand participant in the murky and little-understood world of gold bullion, mints, and bullion dealers.

Customarily, when considering a company for a potential recommendation, I hold a series of discussions with management. It was during one of these vetting procedures that I spoke with Andy Schectman of Miles Franklin – and heard some disturbing reports about supply that every investor should know. Andy is a bullion seller, so you’re welcome to take his comments with a grain of salt. On the other hand, what he sees week after week and what he hears from his high-level industry contacts might just make you pull back on that salt shaker and re-inventory the number of ounces you own…

Jeff Clark: Andy, tell us about the kinds of contacts you have in the industry and where you get your information.
Andy: I’m associated with two of the six primary mint distributors in the United States. There are only six primary precious metal distributors here because the qualifications are very difficult to meet. Aside from having $100 million in annual sales, you have to extend a $50 million line of credit to the U.S. Mint, and very few companies can do that. So in working with these companies, I’m privy to information that many others aren’t.

Jeff: So, what have you been hearing from them about supply for physical gold and silver?
Andy: I think in order to properly characterize what’s happening in the industry, it’s important to start from a big-picture perspective, which is that by and large the masses in this country are not involved in precious metals. In my experience, the move we’ve seen in gold over the last decade has primarily been from international investment – sovereign wealth funds in the Orient, petrodollars in the Middle East, India buying from the IMF, Russia and Japan accumulating, etc.

Most U.S. investors have lived through nothing but prosperity and good times, where they perhaps didn’t think they needed to own gold – but I think the rest of the world isn’t as optimistic about the future. So when you talk about supply, it’s important to acknowledge that most people in this country don’t own any gold and silver. To me, that’s what should really alarm people. 

Jeff:  Tell us how you would characterize supply right now.
Andy: Fragile. Availability of product changes almost weekly.

But it’s worse than that. When the market plunged 1,000 points in one day last month, two German banks bought about 35,000 or 40,000 one-ounce coins and cleaned out the Royal Canadian Mint overnight. Think about that: two banks cleaned out one of the world’s preeminent mints in one day.

Then you have the Austrian Mint recently announcing they were running into supply issues. And the U.S. Mint has been the model of inefficiency for the last several years. They have been either reluctant or unable to meet demand when it comes to Gold Buffalos, Platinum Eagles, and fractional Gold Eagles. They issue dribs and drabs of them, but certainly not enough to meet demand. 

Jeff:  And they frequently run out.
Andy:  They frequently run out, they frequently have delivery delays, and it’s a situation where very quickly we could see major disruption in the supply chain.

Jeff: We saw supply constraint in 2008, where dealers were running out of product. Do you think we’re headed there again?
Andy: I do. In 2008, when gold dropped from $1,000 to $700 very quickly, all product worldwide disappeared. Within weeks the U.S. Mint was shut down. The Canadian, Austrian, and Australian Mints were all eight to 12 weeks back-ordered or shut down. The Australian Mint stopped taking any new orders in July or August for the rest of the year. The Rand Mint, for the first time ever, sold out of all its product. One wealthy Swiss businessman flew his own 747 there and cleaned them out. 

So product was impossible to get, but not just from the primary mints; even the refiners that made 100-ounce silver bars couldn’t get them. No one could get anything, and it was a very scary time if you owned a gold company. There were many days I sat at my desk wondering how I was going to get product tomorrow, and there were times we couldn’t take orders whatsoever. And that comes from a company that’s done over $100 million in sales, is a member of the certified exchange, and that has contacts that run very deep in the industry – and I couldn’t get anything.

A friend of mine who owns a very prominent gold and silver company in Colorado has a store front, and back then he told me, “I want to put a sign on my window that says, ‘All we do is buy, we don’t sell,’ because one person will come in there and clean me out and there’s nothing to be had.”

So what I think is ahead comes from that experience. If you factor in that very, very few people in this country have even held a gold coin – let alone own any gold, or understand the reasons to own it, or will even accept the arguments for owning it – I think the primary distinguishing characteristic of this market will be that people won’t be able to get product when they want it. The rising price in and of itself will not be the main hurdle. For the most part, people will overcome price, because they’ll want to own it. The real issue will be getting product in a timely fashion, and that will become difficult for the average American. 

Jeff: What about supply from those selling coins and bars who bought at lower levels? Doesn’t that increase the available supply?
Andy: This is what I believe is a distinguishing feature of this market: there is a total absence of a secondary market. There isn’t one. Period. In years past, we used to do a lot of business with people wanting to sell. Today, virtually no one is selling their coins back to us. In fact, for every 100 transactions we have, maybe one is a seller – the other 99 are buyers. Our largest supplier, who provides over 60% of all bullion to the U.S. market, told me earlier this month they have days without one single buy back. And this is from the largest supplier in the U.S.

Jeff: Why do you think no one’s selling?
Andy: People are afraid. They’re afraid of what’s happening geopolitically, economically, fiscally, and want to hold on to their gold. As they should, because this is exactly the kind of circumstance gold is for.

So I would argue that as gold and silver creep higher, there will be more and more buying and less and less selling. And less selling means less product for buyers.

When you look at the fact that there is no secondary market, and then you throw into the mix that the mints are already running into production problems, and then add the troubles in Europe, which could easily spread, I think it’s easy to see how demand could outstrip supply. I assure you, there’s an awful lot of gold acquisition going on in other countries – the Swiss and Germans, for example, see the handwriting on the wall. They were buying everything up when the European crisis broke. It was bedlam for awhile.

And if all of a sudden people here wake up and feel they really need to own gold but can’t get it, we’ll be right back where we were in 2008.

But to your point, yes, nobody is selling anything right now and almost anything you buy will be dated 2010. That’s because there are no backdatedcoins to be had virtually anywhere. Maybe 20 here or 50 there, but nothing on a meaningful basis.

Jeff:  It sounds like regardless of what’s going on in America, global supply could be in jeopardy if this trend continues.
Andy: Absolutely, especially with the fact that there is no secondary market. Really, the people who enter the game late are going to be at the mercy of the mints. And if the mints run out of supply, or just stopped selling for whatever reason, it’s “game over” for those who want to accumulate. Right now there’s as good a supply as I’ve seen in a couple years, and that’s at a time when we’ve already witnessed the Royal Canadian Mint running out of gold for a week or so, the Austrian Mint also running out of product, and the U.S. Mint rationing Silver Eagles for a short time.

Jeff: And you’re calling this a good supply market?
Andy: Yes. It’s as good as we’ve seen in a couple years. 

Jeff: That’s scary.
Andy: I don’t think you’re exaggerating by saying that. And the message is, “Buy now while it’s still available.” I know it may sound like I’m trying to sensationalize it, but I’m really not. Based on what I know, it’s my opinion that if 5% of this country put 5% of their money into gold, there would be nothing left tomorrow morning. Supply is that small compared to the tremendous amount of money that’s out there.
Here’s another example. I had a meeting with a money management company here in Minneapolis that manages some of the oldest money in the entire country, literally billions of dollars. And when I spoke with them, I discovered the principals of the firm had never held a gold coin. They asked me questions that were as rudimentary as what I would get from a complete novice. By the end of the conversation, they said they would start with a $5 million order. I later learned this was a small order for just one of their clients. It was just dipping a toe in the water for these people.
Well, it won’t take too many of these kinds of people waking up to gold to drain the supply chain. Most of the wealth in this country is driven through money managers, and at some point these people will tell their managers, “I don’t care what the price or premium is, get me gold.” When they come knocking in large numbers like that, the supply chain will dry up overnight. I know this to be true. If we see an event that drives money managers to buy physical gold, the supply will be gone.

Jeff: Some of that money is already going into the ETFs.
Andy: Yes, but not when you consider the total capital that’s available. And keep in mind that the prospectus for GLD and SLV state that, more or less, you can’t take possession of the metal. So, do you “own” gold if you have shares in GLD or SLV, or any ETF, for that matter? If you can’t put the coin or bar in the palm of your hand, the answer is no.

Jeff: Are you seeing any difference between gold and silver? Is one more difficult to come by than the other?
Andy: We’ve seen a lot of demand for silver, probably more so than gold, and the U.S. Mint has already rationed Silver Eagles once this year. Junk silver bags are becoming much harder to get. And I think the higher gold goes, the faster silver will disappear. At some point the American public will realize they should have some gold and silver, and we could see a situation where the gold price could get out of reach for some investors. Those people will turn to silver and, as a result, it will probably be tougher to get than gold.

Jeff: If supply gets scarce, do you expect premiums to shoot up?
Andy: Absolutely. In 2008 the premiums were astronomical. Silver Eagles were $5.50 to $6 over spot. Gold Eagles were $100 to $150 over spot. The premiums went parabolic. That could easily happen again.

Jeff: And that was due to constrained supply.
Andy: Yes. When the price fell off the table, everything disappeared quickly. That’s counterintuitive, I know, because logic would dictate that as the price of something falls, demand is waning. But as the price fell, I think it became more attractive to large interests around the world, and everything got gobbled up fast.
Looking ahead, I can tell you that the only way you’ll see premiums stay where they are is if the mints are able to keep up with demand, and based on what I see I would argue there is no way they can. They can’t even keep up now. On top of that, as I stated, people aren’t going to sell their gold this time unless they absolutely have to, so there won’t be any supply coming from sales.

Jeff: So your message to someone who owns little or no physical metal now is what?
Andy: Acquire as many gold and silver ounces as you can. In the end it’s not about price paid, it’s about number of ounces. View the supply issue as critically as you would the price, because I believe that more than anything else, the lack of available supply will mark this industry.

Jeff: Excellent advice, Andy. Thanks for your input.

Orvana Reports Third Quarter Results

“Results for the third quarter and the nine months ended June 30, 2010, are in line with our expectations. The Company continues to transition as we work towards start-up of the El Valle-Boinas/Carles mine, the development of the UMZ at Don Mario and the completion of a preliminary economic assessment of Copperwood. Our senior management team remains focused on developing these current projects and seeking out new opportunities” said Roland Horst, Orvana’s Chief Executive Officer

Orvana has $26.9 million in cash and cash equivalents at quarter end. Subsequent to the end of the third quarter, Orvana signed a term sheet with Credit Suisse AG for a US$50 million five-year term corporate debt facility, expected to close in October 2010, subject to due diligence, final credit approval and documentation. After fully funding its capital requirements at EVBC and UMZ, Orvana expects to have accumulated substantial cash reserves from its residual cash and operating free cash flows to finance additional gold and/or copper property acquisitions, as well as the forecasted mine development at Copperwood. Orvana has no plans to issue equity at this time. Orvana will continue to seek gold and/or copper advanced stage properties in politically stable regions, utilizing its mining expertise to increase long-term value for shareholders.

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