A Melman Minute By: Leonard Melman   NOTE: In order to complete Mr. Melman's forthcoming book on the essential fundamentals of the developing international financial crisis and its relationship to gold and silver, new "Melman Minutes" will be posted only three times per week, each Monday, Wednesday and Friday. The working title of the book will be 'Just a Melman Minute!"   November 25, 2009   Two seemingly relentless trends continued unabated in early trading this morning. First, gold continues to pass through milestone after milestone, crossing above the $1,180 mark in early trading and advancing further as the session progresses.  It would appear that any selling waves continue to be quickly overcome in short order.  Next, we find a similar but opposite trend in the U.S. Dollar Index which just broke to a new yearly low this morning.  Just as gold has rapidly exceeded any resistance on its upward move, the U.S. Dollar Index (DXY) continues to break below chart support levels. Given that both of these trends are ongoing and have developed unusual power, it would seem likely that the mining share indexes would be soaring to record highs, but that has not been the case.  There has indeed been some improvement, but it is hardly comparable to what might have been expected in light of the powerful advance of gold, silver, PGMs and the base metals.  In fact, with gold nearing $1,200 per ounce, the XAU remains below its level of summer 2008 when gold was almost $200 per ounce lower. We would also point out; in addition, the XAU Index is barely half the story, since it reflects mostly major, producing mines which benefit directly from the higher metals prices.  Although there have been exceptions within the junior mining realm where eye-popping gains have indeed been recorded, many of the early exploration and pre-development juniors have lagged badly. It is our belief that there are two reasons for this market hesitancy.  One consideration is that the marketplace has come to realize only a small proportion of development properties ever become actual, profitably productive mining properties.  Another relates to the complexities and limitations on raising capital in light of the onerous regulatory, social, environmental and legal difficulties which are continually thrown into the path of new projects. The first proposition is a simple truth.  Of the thousands of projects on which development work is initiated - and monies expended - very few wind up as producing properties.  Many change hands, willingly or unwillingly, and many are simply abandoned as the junior miner simply runs out of money and eventually folds.  This type of event occurs with particular frequency during stagnant periods such as the 1980s and 1990s. But it is the second problem, the one relating to overwhelming regulatory complications, that is our main concern.  What follows is a simple listing of the various categories of regulations within Canada and the United States.  It is almost overwhelming. Within Canada, there are entire bodies of regulations which affect the mining industry in terms of: Mining Safety Laws Department of Fisheries & Oceans National and Provincial Parklands Securities regulatory body requirements Securities Exchanges listing and maintenance requirements Environmental and ecosystem regulations Health regulations International regulations such as the UN Draft Declaration             On the Rights of Indigenous Peoples Plans for disposition of operational wastes Aboriginal Rights regulations, and An entire body of laws on the requirements for obtaining             permits for each phase of mine development. Inside the USA, the laws are equally numerous and have a tendency to contain mind-boggling complexity.  One look at the "Mining Health & Safety" laws illustrates the point for within its general provisions are specific requirement areas involving: Testing, evaluation and approval of mining products Requirements for the Approval of Flame-resistant belts Electric cap lamps Portable methane detectors Telephone and Signaling devices Diesel engine certification Dust collectors Fire-resistant Hydraulic Fluids Hazard Communications Training and retraining of miners Occupational Noise Exposure, etc, and so forth. It is not our purpose to question whether any or all of these regulations are necessary.  Frankly, it is our personal opinion that lawmakers and regulators have proceeded far beyond the normal limitations of reasonableness.  It is, however, our purpose to illustrate a vital point. Whereas in past mining eras, virtually all capital raised by junior mining companies could be immediately invested "in the ground" to prove up reserves and resources, and do it with speed and efficiency, huge portions of capital are now expended in the meeting of onerous regulatory requirements.  While these regulatory developments have been immensely beneficial to lawyers, accountants and other scientific professionals, it is our belief that they have had the effect of diminishing the likelihood of development properties ever reaching profitable production. It must also be realized that should a junior successfully comply with all regulations, they still may have to face the possibility of legal obstructions or delays file by Aboriginal, environmental or government bodies. It has truly become a "mine"field (pun fully intended) out there - and it is our opinion that the only effective means of resolving at least a portion of the problem can be accomplished only by arousing public opinion regarding the dangers which will result from a crippling of the mining industry. .......................... As of 9:30 AM PST, gold has soared to yet another all-time high, breaking above the $1,185 level with silver and platinum also showing good strength, ahead by 24 cents and $23 respectively.  Base metals are also advancing with lead and zinc showing the best percentage gains.  Crude oil sold off early, but has since rallied and is now up by almost one dollar on the day and financial markets are likewise improving with the Dow Industrials ahead by about 25 points while Canada's TSX Index is showing a sharper gain of about 100 points thanks to the metals and crude oil. Of particular note is the fact that the DX Index for the US Dollar has now broken below 74.50, the lowest level in well over a year and only three points above the historic bottom set near 71.20 during mid-2008. For our American readers, please accept our best wishes for a happy and meaningful Thanksgiving Holiday. (All quotes US$ unless otherwise noted.) Next "Melman Minute" scheduled for Friday, November 27, 2009. ◄  Previous Minute                                                                                                        Next Minute  ►
		DISCLAIMER The information presented above is based on data which we believe to be from reliable sources, but the accuracy of which cannot be guaranteed.  Any opinions or predictions contained herein are those of the editor and are likewise offered also for information purposes only. Any investment decisions should be made only following consultation with registered investment professionals.