McEwen Capital launches junior gold index

It always bothered Rob McEwen that there was no benchmark to measure how his junior gold investments were doing. So in his usual fashion, the gold entrepreneur decided to do something about it.

Mr. McEwen and his team at McEwen Capital have launched a junior gold index, which investors can view on his Web site, www.mcewen capital.com. It is believed to be the first true proxy for how the junior gold sector is doing, and the former head of Goldcorp Inc. hopes to eventually do much more with it.

Initially, the McEwen team did not plan to take the index public - they considered it an internal tool to keep tabs on the sector. But during an investor presentation for Mr. McEwen's current company, US Gold Corp. (UXG/TSX), they showed people the index and found that they were getting many more questions about that than about US Gold. Eventually, they decided to make it available for everyone.

Ian Ball, a senior executive at US Gold and McEwen Capital, said in an interview that there are already two indexes for large-cap gold stocks (the HUI and the XAU), but there was clearly demand for something specific to the juniors that could be used to benchmark their performance against the seniors and against the gold price.

"The TSX Venture Exchange should create a subindex for the juniors. And they don't. We don't know why, but we decided to create our own and persuade them that there is an audience for this," he said.

Twenty-one companies were put into the index. They read like a who's who of Canada's junior mining sector: Osisko Mining Corp. (OSK/TSX), Rubicon Minerals Corp. (RMX/TSX), Detour Gold Corp. (DGC/TSX), Fronteer Development Group Inc. (FRG/TSX), and of course US Gold.

In selecting the cream of the crop, Mr. Ball said there was a realization that many junior golds with weak balance sheets are trapped in penny-stock territory and will not go up, no matter what the gold price does. "Most of the juniors are still dead," he said.

So for the index, the focus is on companies with good cash balances, trading liquidity, and an actual discovery of some note. For the most part, this small group has defied the rest of the junior sector and rallied strongly this year alongside the gold price.

"There's a brat pack of junior companies like ours that seem to be getting most of the attention. They've got strong management and strong cash positions," said David Adamson, Rubicon's chief executive.

The index has been publicly available for a couple of weeks, but McEwen Capital has much broader hopes for it. The plan is to build up a following, get listed on the Kitco bullion Web site alongside the HUI and the XAU, and possibly launch an exchange-traded fund that tracks it.

In the shorter term, the company hopes to make background data to the index available so that investors can build their own models, and offer more charting material.

"We just haven't spent the money to have the real-time charts created, because we have to buy the data from the exchanges and it does get a little expensive," Mr. Ball said. "But we're slowly getting there. This started for our own amusement, but we do think there is a need out there for it."

Peter Koven, Financial Post Published: Wednesday, June 17, 2009

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Suitcase With $134 Billion Puts Dollar on Edge: William Pesek

June 17 (Bloomberg) -- It’s a plot better suited for a John Le Carre novel.

Two Japanese men are detained in Italy after allegedly attempting to take $134 billion worth of U.S. bonds over the border into Switzerland. Details are maddeningly sketchy, so naturally the global rumor mill is kicking into high gear.

Are these would-be smugglers agents of Kim Jong Il stashing North Korea’s cash in a Swiss vault? Bagmen for Nigerian Internet scammers? Was the money meant for terrorists looking to buy nuclear warheads? Is Japan dumping its dollars secretly? Are the bonds real or counterfeit?

The implications of the securities being legitimate would be bigger than investors may realize. At a minimum, it would suggest that the U.S. risks losing control over its monetary supply on a massive scale.

The trillions of dollars of debt the U.S. will issue in the next couple of years needs buyers. Attracting them will require making sure that existing ones aren’t losing faith in the U.S.’s ability to control the dollar.

The dollar is, for better or worse, the core of our world economy and it’s best to keep it stable. News that’s more fitting for international spy novels than the financial pages won’t help that effort. It is incumbent upon the U.S. Treasury to get to the bottom of this tale and keep markets informed.

GDP Carriers
Think about it: These two guys were carrying the gross domestic product of New Zealand or enough for three Beijing Olympics. If economies were for sale, the men could buy Slovakia and Croatia and have plenty left over for Mongolia or Cambodia. Yes, they could have built vacation homes amidst Genghis Khan’s Gobi Desert or the famed Temples of Angkor. Bernard Madoff who?

These men carrying bonds concealed in the bottom of their luggage also would be the fourth-largest U.S. creditors. It makes you wonder if some of the time Treasury Secretary Timothy Geithner spends keeping the Chinese and Japanese invested in dollars should be devoted to well-financed men crossing the Italian-Swiss border.

This tale has gotten little attention in markets, perhaps because of the absurdity of our times. The last year has been a decidedly disorienting one for capitalists who once knew up from down, red from black and risk from reward. It almost fits with the surreal nature of today that a couple of travelers have more U.S. debt than Brazil in a suitcase and, well, that’s life.

Clancy Bestseller
You can almost picture Tom Clancy sitting in his study thinking: “Damn! Why didn’t I think of this yarn and novelize it years ago?” He could have sprinkled in a Chinese angle, a pinch of Russian intrigue, a dose of Pyongyang and a bit of Taiwan-Strait tension into the mix. Presto, a sure bestseller.

Daniel Craig may be thinking this is a great story on which to base the next James Bond flick. Perhaps Don Johnson could buy the rights to this tale. In 2002, the “Miami Vice” star was stopped by German customs officers as he was traveling in a car carrying credit notes and other securities worth as much as $8 billion. Now he could claim it was all, uh, research.

When I first heard of the $134 billion story, I was tempted to glance at my calendar to make sure it didn’t read April 1.

Let’s assume for a moment that these U.S. bonds are real. That would make a mockery of Japanese Finance Minister Kaoru Yosano’s “absolutely unshakable” confidence in the credibility of the U.S. dollar. Yosano would have some explaining to do about Japan’s $686 billion of U.S. debt if more of these suitcase capers come to light.

‘Kennedy Bonds’
Counterfeit $100 bills are one thing; two guys with undeclared bonds including 249 certificates worth $500 million and 10 “Kennedy bonds” of $1 billion each is quite another.

The bust could be a boon for Italy. If the securities are found to be genuine, the smugglers could be fined 40 percent of the total value for attempting to take them out of the country. Not a bad payday for a government grappling with a widening budget deficit and rebuilding the town of L’Aquila, which was destroyed by an earthquake in April.

It would be terrible news for the White House. Other than the U.S., China or Japan, no other nation could theoretically move those amounts. In the absence of clear explanations coming from the Treasury, conspiracy theories are filling the void.

On his blog, the Market Ticker, Karl Denninger wonders if the Treasury “has been surreptitiously issuing bonds to, say, Japan, as a means of financing deficits that someone didn’t want reported over the last, oh, say 10 or 20 years.” Adds Denninger: “Let’s hope we get those answers, and this isn’t one of those ‘funny things’ that just disappears into the night.”

This is still a story with far more questions than answers. It’s odd, though, that it’s not garnering more media attention. Interest is likely to grow. The last thing Geithner and Federal Reserve Chairman Ben Bernanke need right now is tens of billions more of U.S. bonds -- or even high-quality fake ones -- suddenly popping up around the globe.

(William Pesek is a Bloomberg News columnist. The opinions expressed are his own.)

To contact the writer of this column: William Pesek in Tokyo atwpesek@bloomberg.net

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