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eDitOr’S NOte

Happy New Year

appy New Year to all of our readers. We here at American Hard Assets hope you and yours had a prosperous holiday season.

prESEntEd by: AHA Metals, LLC

In this second year of American Hard Assets magazine, we’ve seen our readership increase both in print and online, via our website www.ahametals. com. There you will find the great content you’ve come to expect from AHA along with interesting stuff from our partners, real-time updates, exchange rates, metal prices, and more.

mAnAGinG Editor: Brad Hastedt

To kick off 2014, we’re bringing you a Gold and Silver forecast along with predictions from industry experts. We know you have come to expect great content based from the American markets, but we’ve also included international market content as well and have beefed up our World News.

dirECtor of opErAtionS: Mike Boniol

EditoriAl Support: Kevin Thompson vp SAlES & mArkEtinG: Mike Obert SubSCriptionS: Leigh Chamberlain CirCulAtion mAnAGEr: Jennifer Cunningham GrAphiC dESiGn: Noel ‘Kip’ M. Macasero GEnErAl mAnAGEr: Josh Eells

CuStomEr SErviCE: Sandi Heuerman

fEAturE WritErS: Fred Reed, Nic Forrest, Ed Estlow, Mark O’Byrne, Michael Haynes, Gabriel Benson, Eavan Moore, Jonathan Kosares, Louis Golino, Scott Wayne ContributorS: Grierson, Greg Canavan, The Bullion Baron, Hector Cantu, Alistair Bailey, Mike Woodcock, Daryl Middleton,

Aside from the core metals markets, we’re continuing our commitment to the most interesting hard assets coverage you’ll find on the newsstand. Find out about what to expect from the art market in the New Year as well as the latest in numismatics. Cinematic investment is always a very interesting topic and we find out this issue about a new reality to investing in that genre.

Michael Moore, Christy Stewart, Jonathan Kosares, Tom Genot diSClAimEr: American Hard Assets is 100% American

owned. All contents of American Hard Assets (AHA) are for information purposes only. AHA does not guarantee the accuracy, completeness or timeliness of the contents. None of the information contained herein constitutes a solicitation, offer, opinion, or

So, we’re all set to put a bow on 2013 and to ring in the New Year with our best issue yet. As always, don’t hesitate to give us feedback on the magazine or online to help us get better. We want to bring you the content you need to see. Thanks so much for making our first year memorable and keep up with American Hard Assets for all your investment news in the future.

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H a r D a S S e t S u p D a t e S | World News

World News Updates

1,800 Rare U.S. Coins Valued at $23M (Source: Associated Press)

rare St. Louis coin collection that sold for more than $23 million at a two-day New York City auction can be traced to when the collection’s 102-year-old owner received an 1859 one-cent piece more than nine decades ago from his grandfather. Retired St. Louis lawyer Eric P. Newman only paid about $7,500 for the 1,800 piece collection of early American coins that sold for much more at the auction. Most of the coins had been off the market for 50 years. Auctioneer Jim Halperin said the items represent just one-third of Newman’s total collection. Another auction of foreign coins is planned for January and is expected to garner at least $10 million, Halperin said. Proceeds from both sales will go toward supporting the nonprofit Eric P. Newman Numismatic Education Society. The society operates the Newman Money Museum, which is part of the Kemper Art Museum at Washington University in St. Louis. Newman is a 1935 law graduate of the school. “His feeling was that it would be a win-win situation of having these wanted items back in the hands of collectors who appreciate them, not just sitting in bank vaults,” said Andy Newman, a trustee of his centenarian father’s charitable foundation.

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The auctioned items included a 1795 U.S. silver dollar in almost pristine condition that sold for $910,625 and another one from 1799 that sold for $822,500. A rare quarter-dollar from 1796, the first year the denomination was produced by the U.S. Mint, sold for $1,527,500 — compared to the $100 initially paid by Newman. Halperin, co-chairman of Dallas-based Heritage Auctions, called Newman one of the world’s most accomplished numismatists, or professional coin collectors. He’s written at least five well-received books and countless articles on the topic in a journey that began with a present from his grandfather when Newman was just seven. Much of his recently-sold collection was obtained in the 1930s from the estate of a colorful collector, Col. E.H.R. Green, whose wealthy mother, Hetty Green, was known as “The Witch of Wall Street.” “He helped invent it. He saw the future before anybody,” Halperin said of Newman’s early forays into collecting coins. “He really predicted what future tastes would be like.”

World News | H a r D a S S e t S u p D a t e S

World News Updates

Antwerp’s Secret Heart of the $50B Global Diamond Trade (Source: Telegraph)

t is a business worth $50 billion a year in gems built on mankind’s desire, sometimes a dark passion, for rare stones of brilliance and beauty. As supply from the mines to market fails to match the world’s growing appetite, the market is booming, confidently expecting that next year the trade will become more valuable than ever before. In 1,500 diamond offices, eight thousand people, representing 160 nationalities, handle diamonds worth $139 million every day. Inside their safes are uncut, cut and polished gems worth hundreds of millions more. Indirectly away from the scene, 25,000 insurers, bankers, security guards and drivers take part in a business that is worth five per cent of Belgium’s exports. The hub of diamond prospectors, cutters and polishers can trace its origins back to the 16th century but took global pre-eminence in the 19th century when a combination of low wages and relaxed regulation pulled the trade to Antwerp from Amsterdam. Even when the guest of a well-known diamond trader, security when entering the Antwerpsche Diamantkring, at number 2 Hoveniersstraat, is tighter than at any global summit of world leaders. Visitors must hand over their passport and have the print of their right index finger scanned before receiving a swipe card. The details are then checked on criminal record databases. Terrorists too have struck at the diamond trade’s Jewish community. On October 20, 1981, a car bomb exploded near a synagogue in the Hoveniersstraat. Three people died and the street was devastated. As well as a security born from the threat from armed robbers or terrorists there is an all-permeating culture of secrecy as many traders seek to hide their glittering trade from another predator, Belgium’s tax man. Beyond the security barriers the Diamantkring is like any other office block, with its empty, slightly shabby strip-lighted corridors and nondescript company name plates on the doors. The rooms and desks are stark. Sitting around desk lamps equipped with a special “northern light”, Indians, Jews, Russians and others sit with their eyes glued to a jeweller’s “loop” scrutinizing, and usually rejecting, uncut and polished diamonds. The gems are wrapped in “parcels”, the uncut in folds of the kind of paper you usually see in a cheesemongers, the cut and polished diamonds carefully arranged in padded boxes to avoid scratching. Vashi Dominguez, a Spanish-Indian entrepreneur and founder

based in London, granted The Telegraph rare access to the beating heart of the diamond trade. He estimates that for every carat, a fifth of a gram, of rough stone scattered in front of the men grading them, up to 1,750 tons of earth has been mined to get at them. The owner of Vashi.com and Diamond Manufacturers Ltd, Mr Dominguez has built his business on his contacts in Antwerp and the cutters of stones in Mumbai and Surat in India. He explains the rigid concentration of those sorting rough diamonds, for valuation ahead of cutting and polishing, a task that only a skilled human perform. “Diamonds come in over 16,000 different categories and there is no technology where you can just analyse what the criteria are. Technology can tell you the size and the shape but not the color and clarity. That is not an exact science, it is more like an art that will always require human interaction,” he said. “All diamonds are different. Even with those 16,000 categories there are many others. If I’m buying a parcel of diamonds they are all different.” This is the exciting moment, he explains, when, tumbling from a folded piece of paper, an exceptional diamond can cross a trader’s desk. “I find this so exciting because all diamonds are different. They are like fingerprints. So every time you look at a diamond with a loop or a microscope you are looking at something unique. Every single day you see something different,” he said. “There are very few jobs or industries that inspire this passion. If you are not excited about this industry, what are you going to get excited about? The rough diamonds look a bit like broken glass but once they are polished you can see all the lustre, sparkle and brilliance, the life and color. For me, even after 15 years in the business it is sheer excitement.” “Retail demand is outstripping demand. This is a situation that all major producers forecast will continue,” he said. “Demand is getting stronger than ever, supply is shorter, known reserves are declining and with all these factors, prices are going to go up. There has never been a better time to invest.” Amid a financial crisis that wiped trillions off the value of assets and investments, diamonds promise astonishing returns. “When we look at one to five carat diamonds over the last five years they have produced an average compound return of 11.6 per cent. That is across all categories, the best are even higher,” he said.

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H a r D a S S e t S u p D a t e S | World News

World News Updates The key benefit of the stockpile’s end will be, in the words of Will Rhind, ETF Securities’ managing director, “full transparency in the palladium market for once.” While the stockpile is operated by Russia’s finance ministry, which according to RT, releases material only when the government needs to “soothe any outstanding budget deficits,” such releases have not been without side effects. If past years are any indication, data on the amount of palladium released this year from Russia’s stockpile should be made available in January — though even if the amount comes in at zero, it will be impossible to know whether the country still has more sitting in the wings. At this point, however, Norilsk Nickel believes that is no longer an issue. As Berlin said last week, “we don’t expect that the Russian government sales will have any influence on the market this year or in any following year.” The end is effectively here, he believes, no matter what the Russians say — or don’t say.

Is Russia (Finally) Running Out of Palladium? (Source: Resource Investing News)

ohnson Matthey and Norilsk Nickel all seem to be basing their conviction that the stockpile is finally nearing depletion on the fact that Russia has been releasing lower and lower amounts of palladium for the past few years.

Dubai’s $7 Billion Expo 2020 Could Become a Glittering White Whale (Source:Gizmodo)

For instance, at the beginning of the year, Bloomberg quoted Johnson Matthey as saying that 2012 stockpile sales came in at 250,000 ounces, down from 775,000 in 2011 — that’s a decline of 68 percent. The firm is certain that sales this year will follow a similar downward trend, sinking to around 95,000 troy ounces. “Russian state stockpiles have been dwindling and are now pretty much exhausted,” said Peter Duncan, Johnson Matthey’s general manager of market research. Similarly, Anton Berlin, Norilsk’s market strategist, said at a conference last week, “[i]n the last couple of years, the stream has become really thin. We view this as a very good indication that the stockpile is depleted,” as per International Business Times. Barclays, on the other hand, cites Swiss trade data as indicative that the stockpile is nearing depletion. Most palladium released from the stockpile is thought to move through Switzerland, Kitco News states, and Barclays said during the summer that in July, “Russian shipments into Switzerland were around 6,400 ounces … consistent with last year’s run rate.”

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Populous

n 2020, Dubai will host roughly 70 million tourists to its first World Expo, housed inside a gigantic, brand new, solar-powered city. But exactly how smart of an investment is an Expo, these days? And can economically volatile Dubai handle the $7 billion cost? Dubai beat three other cities to clinch the bid—Ekaterinburg, Izmir, and São Paulo. The projections for how it could help bump up Dubai’s GDP are optimistic: it could add as many as 200,000 jobs, and boost the city’s GDP by one percent every year until 2020. But there are also plenty of troubling projections. Like so many other

World News | H a r D a S S e t S u p D a t e S

World News Updates cities that have eagerly hosted Expos,Olympics, and World Cups, the ROI is not always what it’s cracked up to be. The forthcoming site of the 2020 Expo will add another 1,000 acres of new buildings to the market—at a cost of between $7 and $9 billion over the next seven years. Keep in mind that roughly $42 billion of the city’s current debts will come due during the same period—shaky ground, indeed. So what are those billions going to? 45,000 new hotel rooms, for one thing, not to mention an extension of the city’s subway system (plus roads, tunnels, and other infrastructural investments). Then there are the 12.9 million square feet of exhibition space, designed by the Dubai office of American architecture firm HOK, which worked alongside a design team from Populous. Under these “souk-like” canopies, exhibitors from more than 150 countries will set up shop during the fair, inside what the architects describe as “innovation pods” and “best practice areas:”

Bitcoin: Super Currency or Super Fad?

(Source: USA Today)

here’s considerable debate about where bitcoin will find its niche in spite of its growing popularity. Those who flush valuable Bitcoins are creating new products designed to simplify the technology and spread Bitcoin mania into the modern American mall. One major unanswered question regards who will be building these massive structures—and how they’ll be treated. Dubai, like its neighbor Qatar, has a less than pristine record when it comes to the human rights abuses of migrant construction workers. Another super-expensive, super-fast tracked construction project is not likely to improve that reputation. And then, of course, what will happen to these massive spaces in 2021, when the tourists go home and the city is left with even more housing and commercial stock? According to HOK, the site will become a “Museum of the Future.”

While the number of Bitcoiners has grown, and some have become instant millionaires, the currency has yet to gain traction among American consumers and businesses. “If you want to make it popular, you have to make it easy, consumer friendly,” says Rob Banagale, who designed Gliph, a mobile phone application that allows people to send or receive Bitcoin via text message, bypassing the sometimes cumbersome transactions through Bitcoin exchanges. “Technology always starts off a little rough. We’re trying to sand off the edges.” Even as more people acquire the Bitcoins, one of the greatest challenges is finding a place to spend them. About $7 billion worth of Bitcoin is now in circulation.

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H a r D a S S e t S u p D a t e S | World News

World News Updates

Some initial Bitcoin users traded their dollars, euros and yen for Bitcoin to do business on black market Internet exchanges, such as Silk Road and Black Market Reloaded, where vendors who dealt in illegal drugs and services demanded Bitcoin. As the number of Bitcoin users has grown, so has the need for legitimate markets in which to spend them. Colleagues Michal Handerhan, a social media and website manager, and Tim Sidie, a computer programmer then working at NASA’s Goddard Space Center mused at lunch one day in March about where they could spend their Bitcoin. They created BitcoinShop.us, a website that lists goods for sale on Amazon, eBay and other retailers, available for purchase by Bitcoin. To work around Bitcoin’s volatility, they had to design a computer program that recalculates prices on the site every 15 minutes. They charge a 10% transaction fee. The site filled its first order in September and has logged more than 600 transactions worth $120,000 for goods in every category since then. Transactions are large and small. A nonprofit organization spent $16,000 on computers, tablets and office furniture. They have sold snow blowers, an industrial sewing machine, a 3-D printer, condoms, an acoustic guitar, pearl earrings and toys, including My Little Pony and Star Wars Lego. On Thursday, a customer bought pumpkin spice coffee with Bitcoin. Expansion plans include expanding shipping from the U.S. to Canada and Australia and carrying merchandise from Macy’s and QVC, Handerhan said. Sidie calls Bitcoin “a huge evolution” in the history of money that he expects to thrive. “The rate of people who accept Bitcoin as payment is skyrocketing,” Sidie said. Part of the effort to move Bitcoin into the marketplace also means persuading people the cyber currency is legitimate, safe and has a value. Dave Smith, 32, of Lansing, Mich., created GoGiveCoin.com to encourage Bitcoin users to recruit others into the fold. “I’m a free market guy. I never liked the idea of the Federal Reserve,” he said. “I was excited about the idea of Bitcoin.”

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The site, which launched in November, allows Bitcoin users to give Bitcoins as gifts, even to those who don’t have the electronic wallets and have never used Bitcoin before. He has had two sales so far: one to a relative and another to an audience member at a talk he gave. He said he’s not discouraged by the slow start. “It’s like being on the ground floor of the Internet 20 years ago,” Smith said. “Bitcoin is going to be transformative.”

Ohio Precious Metals added to the LBMA’s Good Delivery Gold List (Source: Stewart Murray, Chief Executive

he gold refinery of Ohio Precious Metals, LLC (OPM Metals) of the United States of America has been added to the LBMA’s Good Delivery List for gold with effect from 19th December, 2013. OPM Metals has satisfied the LBMA as to its ownership, history, production capability and financial standing. It has also passed the LBMA’s exhaustive testing procedures, under which its gold bars were examined and assayed by independent referees, and its own assaying capabilities were tested. OPM Metals is located in Jackson, Ohio. Its primary sources of feedstock include dore, scrap from the jewellery sector and dishoarded bars. OPM Metals’ refined gold output is in the form of investment bars, grain, coins and medallions.

Background The London Good Delivery List of Acceptable Refiners of gold and silver is maintained by the LBMA, by whom it is copyrighted. It lists those refineries whose gold and silver bars have been found, when originally tested, to meet the required standard for acceptability in the London bullion market. The List now includes 67 gold and 77 silver refiners.

About the London Bullion Market Association The LBMA is the international trade association that represents the wholesale over-the-counter market for gold and silver bullion. The LBMA undertakes many activities on behalf of its members, including the setting of good delivery and refining standards, the organisation of conferences and other events, and serving as a point of contact for the regulatory authorities.

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S p e c i a l F e a t u r e | Alaskan Gold

Going for Gold in

Alaska By Eavan Moore

ighting reckless battles against ice, excavators, and their own crew members, the gold miners on Alaska-focused reality television shows paint a dramatic picture of life in the resource business. Recent high gold prices drew dreamers to Alaska, and shows like Gold Rush Alaska and Bering Sea Gold have helped fuel a surge of interest among would-be placer miners. But industry veterans say the shows fail to capture the truth of placer mining. Success, to them, means earning enough to live off during the winter season – and the chief threat to their existence isn’t snow or equipment catastrophes, but paperwork. The real gold fortunes come from major metal deposits owned by explorers patient enough to spend years on workable mine plans and secure investors as committed to the region as they are.

Placer Miners “It seems like everybody wants some Alaska-based TV show or something or other right now,” remarks Steve Herschbach, a prospector and writer whose previous business, Alaska Mining and Diving Supply, saw an uptick in mining equipment sales after the shows started airing several years ago. “But also, of course, mining has certainly been undergoing quite the boom due to the gold prices for the last few years….What really drives the sales is more the price of gold than anything, and the TV shows are just capitalizing on that.” What they also have to capitalize on is one of the few remaining placer mining industries in the world. Placer miners are different from prospectors, explorers or industrial miners; they obtain free gold in creek bottoms without trying to trace it back to a largescale deposit. Their methods are simple: strip the upper layer

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of earth to get to the bedrock, collect gravel, wash it, and settle out the heavier gold particles, all without resorting to the more intensive crushing and leaching used by big operations. Placer miners don’t earn much in a year; most live off the proceeds of a short season that begins when the ice thaws in April or May and ends by October when waterways freeze again.

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It’s a tough life, but satisfying for people like Sheldon Maier, a placer miner in the Fortymile district, and the 450 other permitted miners scattered throughout Alaska. Unfortunately, Maier says, the industry is threatened by regulatory requirements too onerous for these small-scale miners – and the TV shows aren’t helping.

“My dad watches the show,” says Maier. “He says it’s entertaining, but they dramatize everything a bunch. It has brought the regulatory branches down on us harder because what they’re showing is that these guys aren’t always operating safely, and they don’t always care so much about the environment. They’re just trying to extract as much gold as they can.”

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S E C T I O N N A M E | Story Name

Tom Irwin, current vice-president of International Tower Hill Mines (ITH), spent six years as a commissioner at Alaska’s Department of Natural Resources. He watched one episode of Gold Rush Alaska. “Their kind of gold mining isn’t what people do up here,” he says, explaining that miners go in with formal, permitted plans. “It’s not helter-skelter, it’s not at risk of losing a pump or a hoe in the water, or catastrophic failure. They care about personal safety and environmental safety and wouldn’t make a very good TV show.”

particular MSHA, have got so many rules that are designed for huge mines, great big multibillion-dollar mining operations.” Herschbach thinks the time will come when there are no small miners and prospectors. “It’s all going to be just big operations,” he says. “The ability for the individual to get out there and do it is dwindling fast because of the permitting.”

That said, not all the requirements for regulatory compliance are realistic for small-timers. To maintain their Mine Safety and Health Administration (MSHA) certification, miners regularly go through training classes. Funding cuts for education have made it more difficult for miners to afford compliance, says Maier. “They cut the funding for the classes and redirected it to enforcement,” he says. “So they’re hiring more enforcement people to enforce the regulations rather than help us to comply with them.” Maier says a number of people have quit rather than fill out the required paperwork.

In practice, many Alaskan miners continue to operate while out of compliance – with the blessing of regulatory agencies that recognize many changes have happened in short order, says Leslie Tose, project manager at the U.S. Army Corps of Engineers. For example, rule changes in 2006 and 2008 added new requirements for streams and wetlands preservation that miners are still struggling to fulfill. Her office has been holding off on making certain demands while working on a simplified permit application for the small-scale miner that will cut down on stacks of paperwork. “It’ll be like a cellphone,” she says. “He can stick it in his pocket.”

“Oh my gosh, the paperwork is just getting ridiculous,” agrees Herschbach. “I toyed around with the idea of being more serious, but it’s amazing when you start looking at what happens these days if you start trying to get into running just a little bit of equipment. The various governmental agencies that are starting to get involved, in

Maier nonetheless feels that enforcement has been more vigorous since the TV shows’ advent and since President Barack Obama took office in 2009. “Right now, we’re dealing with the Interior Department, the Corps of Engineers, and the Environmental Protection Agency,” he says. “They’re telling us

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Alaskan Gold | S p e c i a l f e a t u r e

that these regulations have already been there but now they just have a directive from the White House to enforce them. [MSHA is also] cracking down harder and coming down on us small miners here because they see these things going on the TV and they think that all of us are being really unsafe and they’re trying to protect us.” Disregard for the environment is not an accusation Maier would accept. “Those of us that have been doing this for a long time, we care deeply for the land,” he says. “Myself, I’m 30 miles off the highway. I live in the mountains for months at a time. And we do that because we love to and we choose that. We subsist off the land; we hunt, we fish. We drink the water.” The fact that miners work directly in streams means that numerous laws bear down on them: questions of water withdrawal, water quality, fish habitat, and so on are managed by different people and offices with different requirements. Tose says she’s excited about an initiative to allow small miners to do their own wetlands mitigation rather than paying into a mitigation bank as more well-heeled companies do.

But Tose, who has been working in Alaska since 1995, has another comment. “What I think is that small miners really like to complain a lot,” she says.

High Cost of Doing Business Even in Alaska, placer miners represent a small fraction of gold production, contributing only 85,000 ounces in 2012. The rest originates from a few major mines: Fort Knox, Kensington, Pogo, and Greens Creek. The state’s suspected mineral resources could support more mines, but getting new projects to production is a tough proposition in Alaska. For one, the days of surface prospecting are probably gone: the world is running out of shallow deposits, and Alaska is no exception. Herschbach sees his own prospecting work as a fun sideline. “In the mining industry we use geophysical surveys geared towards looking for metallic minerals,” explains Steve Todoruk, investment executive at Sprott Global Resource Investments. “Those are expensive surveys. A prospector doesn’t have that kind of money.”

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S p e c i a l F e a t u r e | Alaskan Gold

He finds Fort Knox a useful example in discussing ITH’s Livengood project, 45 air miles away. A July 2013 feasibility study put Livengood’s proven and probable reserves at 9 million ounces averaging .69 grams per ton. Irwin says that using the mine plan in the current study, the company would need gold to sit at $1700 an ounce, a far cry from 2013’s lows under $1300. But ITH has been discussing – with entities under confidentiality agreements – ways to optimize the mine plan and bring up the grade while conserving cash, which Irwin expects to last into the third quarter of 2015. Like most hopeful miners, ITH will need a larger company to partner with, and that can take time. Garfield MacVeigh, president and CEO of Constantine Resources, says finding the right partner was critical to his Palmer copper-zinc project. Dowa Metals and Mining Co. of Japan plans to spend $22 million over four years in return for a 49 percent interest in the project and guaranteed concentrates for its Japanese smelters. “We spent probably $10 million of our own money to make the initial discovery and advance the project, which allowed us to finally make a very attractive deal with a partner,” he says. “For us to try and raise the money that we would have needed to move the project ahead 100% -- I mean, maybe we could have found the money to do it, or maybe the company would have been diluted too much to make any sense to our shareholders.”

The Pebble Effect That leaves discovery to the companies that are able to raise funds in what is currently a very difficult financing climate. Todoruk suggests that explorers fortunate enough to raise money are more likely to look in less expensive jurisdictions: fuel and supplies add up to a 30-40% tax just for the privilege of operating in the remote north. But Alaska’s mineral potential, stable permitting environment, and supportive state government do have their attractions, and several companies continue to do advanced exploration work. From them, investors like Sprott are asking for very strong deposits. “If it’s open-pit, I’d say in Alaska you want it five million ounces over two grams per ton gold at least,” he says. “If it’s going to be an underground mine, ideally you want five million ounces at better than ten grams per ton.” It’s not impossible to get a lower-grade project built, but someone might have to pay a price for it. Todoruk says that Kinross’s lowgrade Fort Knox property near Fairbanks was acquired for pennies on the dollar from a company in financial difficulties. “That’s the only reason it worked,” he says. “If Kinross went out and found that deposit today, they couldn’t justify building it.” Irwin has a different viewpoint on grade, having worked on the Fort Knox project during his earlier career at Kinross. “When we came to do Fort Knox, there were a lot of questions - can you do a low-grade mine in Alaska? Can you get the supplies in? Can you operate in these cold temperatures? Do you have a quality workforce? Yes, you can. …Fifteen years later it’s still doing exceptionally well, and they’ve made it better.”

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“The most significant new discovery in Alaska in recent history is the Pebble copper-gold deposit,” says Todoruk. Vociferously opposed by those who rely on nearby salmon fisheries, the Pebble project has polarized Alaskans, made global headlines,

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and worried miners who see it as a bad press or bad precedent for their jurisdiction. After spending six years and $541 million on the project, joint venture partner Anglo American walked away in September, leaving junior explorer Northern Dynasty to find a new partner or buyer. Todoruk suggests a junior who is fortunate enough to raise money in a difficult market will be warned off by the Pebble saga. “The message is if we find something, there’s going to be huge opposition to it. Why do we want to go there?” But what Pebble’s reception – and its still-to-be-released EPA report – means for other companies is still unclear. Environmental groups hailed Anglo American’s departure with cautious optimism, while the industry watched with discomfort. “EPA has been conducting an assessment of the area over the past few years and has said that they will use this assessment to decide if they’re going to veto their permits,” says Deantha Crockett, Executive Director of the Alaska Miners Association. Knowing that an already permitted project can be vetoed, she says, is “a gigantic red flag for people that are considering investing in Alaska. It’s a very scary thing for me as an Alaskan.”

Although the economic and environmental impact of Pebble is worlds away from placer mining, even Maier fears the outcome. “I would say I’m not personally a supporter of multinational corporations,” he says. “And let’s face it, a lot of these large mining outfits have had a bad history in the past of leaving environmental catastrophes behind. But if these environmental groups are able to shut it down without seeing a permit and having it processed, our industry will just be a bug on the wall, because it’ll be easier for them to shut us down.” “A lot of the time, our industry gets lumped in with those large mines,” Maier adds. “We’re just small business owners trying to carve out a living and live off the land and be good stewards and take care of it.” Irwin believes that it’s possible to mine responsibly on a large scale. And he, too, emphasizes the quality of life that draws him to work up north despite the challenges. “Alaska’s a great place for raising a family,” he says. “In this kind of [winter] weather, if you’re out on the highway and have a car problem – I say this as a compliment – sometimes the biggest problem you have is the number of cars stopping to see if they can help you. The outdoor activities allow family to appreciate and enjoy what God has created. We love this place.”

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S E C T I O N N A M E | Story Name

INVESTING IN FILM Adjusting New Reality

once asked an investor I knew, who in my mind had invested in plenty of things that I thought were borderline crazy, if he wanted to invest in an independent film that I was looking to finance. The investor did everything but laugh in my face. Was this investor right that investing in film is the same as just throwing your money away? A quick search online of investor websites seems to share this opinion.

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By Gabe Benson

“As the economy struggled, it became difficult to get investors to put their hard-earned capital into a project that lacked a clear path to success,” says Steve Hummell, Managing Partner Of Capital First Investment Group. “But as the economy has improved and discretionary cash is loosed up from stock profits, it is possible to think about investing in film again. But I would need to show my clients a solid game plan.”

Investing in Film | S p e c i a l F e a t u r e

On top of the advent of new distribution outlets needing to fill slots for hungry viewers, the question remains why aren’t more people investing in film.

THE TEMPTATION Just a few short years ago, a director name Oren Pei directed a found footage horror film for around $15,000. The film got into a few festivals, got great word-of-mouth reviews and was eventually purchased by a major studio for $350,000. The studio put some work into the picture, and eventually the movie was released and went on to gross over $200 million. The film was called Paranormal Activity and the fourth film in the franchise will be released in early 2014. To date the Paranormal franchise has grossed over a $500 million world wide. I would imagine if you had put up that initial $15,000, you would feel pretty good about your ability to pick a winner. And there are plenty of other success stories. According to Box Office Mojo, some other independent success stories are My Big Fat Greek Wedding (over $368 million), Saw (7 films and over $415 million), and The Blair Witch Project ($248 million). Each of these pictures struck a nerve in the public consciousness and raked in some serious cash. So with the potential for gigantic returns, on top of the advent of new distribution outlets needing to fill slots for hungry viewers, the question remains why aren’t more people investing in film.

As the world of independent film financing has changed so dramatically over the past several years with newer distribution outlets such as Netlfix, Hulu and ITunes all hungry for material, why hasn’t investing in film become a bull market for investing? The answer is, as always, in the business plan.

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S p e c i a l F e a t u r e | Investing in Film

If you can’t get your film in front of the right amount of eyeballs, your movie won’t make any money.

THE RISK The problem is the business plan. Too many times, the film’s producers either don’t have a business plan or are not realistic about their chances of success. “For both the investor and the group looking for financing, it is important to treat your film as a business. Too many groups approach me looking for financing for an entertainment project without having solid fundamentals,” says Steve Hummell, Managing Partner of Capital First Investment Group. “Who are the principles involved? What is their experience? What is the marketing plan? How are they bringing the film to the market? Put your film plan together just like you would if you are trying to start any business, because that is exactly what you are trying to do. You aren’t making a movie, you are starting a business.” And after you do that, you have to look at your business plan objectively. And from a producer’s point of view-you have to take the creative side of it out of the equation.

You can’t just assume that because you think it is the greatest story ever, it will be found and loved by millions. If your budget is too small, are you doing a disservice to the picture? Are you cutting so many corners that the film just doesn’t work? Is your budget too high for the type of picture you are making? Historical models show what types of movies gross what in certain environments. You certainly don’t want to tell a small personal story on a blockbuster budget. Sometimes the numbers just don’t make sense.

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Investing in Film | S p e c i a l F e a t u r e

Sometimes movies, like products, just don’t make sense financially. The world’s greatest lightbulb won’t sell for $1,000 a piece, and sometimes movies just can’t find the right budget.

Sometimes movies, like products, just don’t make sense financially. The world’s greatest lightbulb won’t sell for $1,000 a piece, and sometimes movies just can’t find the right budget. And then you have to look at what to do with your movie once it is completed. Do you have the money to get it seen? “Sometimes the problem is the marketing dollars aren’t allocated in the initial budget. And I’m talking about more than money to advertise to the public, I’m talking about the money needed to market your finished film to distributors,” film and television producer Shaun McLaughlin says. “It takes money to set up screenings, submit and show at festivals, even to send out DVDs of your film. I’ve worked on too many projects where at the end of the day the film just languishes because all the focus went on getting the film made and not enough on getting it seen.” And if you can’t get your film in front of the right amount of eyeballs, your movie won’t make any money.

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S p e c i a l F e a t u r e | Investing in Film

On a small production budget you still end up on the plus side, but if your movie only grosses a smaller portion of that, the numbers can get pretty tight. And this is where your business plan needs to be scrutinized and every cost must be attributed in your analysis. Remember the $248 million that The Blair Witch Project made at the box office? Well, first you have to subtract 50% for the cut for the theater owners. So, then from your $124 million you have to subtract fees for your distribution company, sales agent, back end talent deals and marketing costs. Then with whatever is left over, you have to reimburse your investors and share

THE REWARD? But it would seem that with the new onslaught of new distribution sources-both digital and traditional-that your movie would have a better chance of being seen. “With the new distribution outlets available, there seems to be more ways to see a return on your investment assuming the production costs can be kept relative to the return that these new distribution sources can bring,” says Hummell. “The good news is that there is less of a chance for the investment to sit on the shelf for years without distribution, but the returns are also potentially lower as these new media sources (Netflix, iTunes, and VOD) don’t bring in as high a purchase price.”

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Investing in Film | S p e c i a l F e a t u r e

There are individuals who have mastered the market and found the sweet spot in their budget that allows for them to make the movie necessary to reach profitability. But it is difficult. profits. On a small production budget you still end up on the plus side, but if your movie only grosses a smaller portion of that, the numbers can get pretty tight. If your picture can’t secure a feature release slot, there is still life for your investors in VOD or Netflix, but the guarantees are lower and it will take your film that much longer to reach profitability if it ever does.

The bottom line is that making money in independent film financing isn’t impossible. There are individuals who have mastered the market and found the sweet spot in their budget that allows for them to make the movie necessary to reach profitability. But it is difficult. You know what else The Blair Witch Project, My Big Fat Greek Wedding have in common? They all prove that there isn’t a winning formula. Each of the creator’s next projects cost more and grossed significantly less.

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S e c t i O N N a M e | Story Name

American Coin Designs

Classic and Modern Have Their Place By louis Golino

ccording to a report published on October 28 in Coin World that was based on an October 18 meeting held by the Citizens Coinage Advisory Commission, the CCAC has rejected a proposal by the U.S. Mint to reissue various classic U.S. coins in platinum. The CCAC advises the Secretary of the Treasury on the designs and themes of U.S. coins and medals. The Mintâ&#x20AC;&#x2122;s proposed addressing lagging sales of precious metal numismatic coins in recent years by issuing a new multi-year platinum American eagle series that would reuse classic coin designs like the Morgan dollar, Draped Bust dollar, and Standing Liberty quarter. The Mint also proposed issuing a platinum proof coin in 2017 for the 20th anniversary of the platinum eagle program that reissues the design of the Augustus St. Gaudens $20 gold coin, whose obverse design currently graces gold eagles. It would be the only coin in the platinum program not to use the modernized Lady Liberty obverse. The CCAC countered that such a series would be a move in the wrong direction, moving away from its preference for the issuance of more contemporary coin designs. The CCACâ&#x20AC;&#x2122;s members believe on

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the whole that the reissuance of classic coin designs has been overdone, but most coin collectors disagree and are eager to see more classic designs. The issue will be revisited in future meetings of the CCAC, but the tension between the preference of collectors for more classic coins and that of the CCAC for more modern ones is likely to continue, and it could pose ongoing challenges for the process of coin issuance going forward. Classic coin designs are extremely popular with collectors of modern U.S. coins (and modern world coins too, as seen in the numerous classic world coins reissued in the last couple years). There are several reasons for this such as the fact that the old designs are in so many cases very powerful artistically and are inspiring representations of perennial American themes, especially the allegorical Lady Liberty. There is also the fact that many people cannot afford to collect many of the original classics such as Gobrecht collars, which is another design the Mint proposed reissuing in platinum, or would enjoy seeing such designs in a larger format and made to modern quality standards.

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N u M i S M a t i c S | American Coin Design

. . . commemorative U.S. coins have for the past couple decades not been terribly impressive, and in some cases are not very good at all, in the view of a wide number of collectors.

It is important to note that all of these coins are very popular precisely because they reissue the old designs. One wonders, for example, if the silver and gold eagle bullion and numismatic programs would have been so successful if they did not depict popular designs from the past, particularly the two used on these coins that are so widely acknowledged as excellent. And I hear on a regular basis comments from collectors that they would like to see more classics reissued, so there is clearly demand for such coins beyond the coins that have already been issued. It is therefore easy to understand why the Mint would want to satisfy collectors’ demand for classic coin designs by making more of them, especially since turning a profit is a major part of the Mint’s mandate, and the Mint strives to address the interests of collectors. But in the view of Scott Barman, who writes the Coin Collector’s Blog, and who ran for ANA governor earlier this year: “This sounds like a case of the marketing trying to dictate the artistic integrity of the U.S. Mint. The CCAC is right to tell them to come up with something better. I think if the marketing folks let the artists be creative they will come up with something far more interesting.” Mr. Barman also said: “While a lot of people love the classic designs, myself included, there comes a time to move forward and come up with something different and fresh. Although I have not agreed with some of the CCAC’s decisions, I agree that CCAC Chairman Gary Marks is right when he said, “Let’s

But the appeal of the classics also has a lot to do with the fact that modern designs on circulating, numismatic, and commemorative U.S. coins have for the past couple decades not been terribly impressive, and in some cases are not very good at all, in the view of a wide number of collectors. A good example of such mediocre art work is the 2012 Infantry Soldier silver dollar. If recent modern designs were on the whole of higher artistic quality, were not so one dimensional like many of the state quarters, and were produced with higher standards of engraving and with finer detail like many modern world coins are, people might feel differently. We can do better, and if we are going to issue lots of collector coins with modern designs, they had better be good ones, or they will continue to sell poorly like many recent commemorative issues. And it is also true that a number of classic coin designs have already been reissued to great success in recent years. The most significant cases are of course the obverses of the American silver and gold eagles and the Buffalo gold coins issued since 2006, as well as the 2009 Ultra High Relief Double Eagle gold coin and the four Liberty-themed First Spouse gold coins. There are a couple others like the San Francisco Mint silver dollar commemorative that reuses the Morgan dollar reverse.

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If recent modern designs were on the whole of higher artistic quality. . . were produced with higher standards of engraving and with finer detail like many modern world coins are, people might feel differently.

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N u M i S M a t i c S | American Coin Design

“While a lot of people love the classic designs there comes a time to move forward and come up with something different and fresh.” do something modern, something new. The problem with the U.S. Mint chasing classic designs is that it is already being done on the First Spouse gold coins when the corresponding president was single or widowed while in the White House, with the exception of Alice Paul whose effigy opposite of Chester A. Arthur was mandated by law.” But so far the number of classic designs used on U.S. coins remains relatively small. For example only four of the First Spouse coins out of more than 50 designs that will be issued in the series use classic obverse designs. In addition, silver and gold eagles exist in many versions and have been minted for almost three decades, but that is only two classic designs that appear on one side (the obverse) of both coins. So since just about everyone agrees the classics are great at least in moderation, a few questions present themselves: How much is too much? Is the Mint already making sufficient use of the classic designs, or should it do more in this regard? In my view the answer is to do both: issue some more coins with classic designs, and I think the upcoming hundredth anniversaries of the release of the Standing

Liberty quarter in 2017, and of the Peace Dollar in 2021 could be honored by issuing coins that use those beloved designs. Collectors are the end user, so to speak, so why not issue what the majority of collectors want? And at the same time, also issue coins with solid modern designs that make better use of the talented artists and sculptors at the Mint and in the Mint’s Artistic Infusion program. Few people would disagree that our modern coin designs have tended to lag behind what most of the rest of the world is doing, but I know we have both the artistic talent and the technology to do better. Just compare our recent modern design coins with the designs that appear on modern world coins, which regularly receive the lion’s share of awards for best designs. Finally, there is another aspect to this issue, which is the idea of modern depictions of Liberty and related Americana themes, and that is precisely what the CCAC suggested with its proposal for a series of circulating Liberty-themed coins that is now a bill pending in Congress. Ed Reiter, editor of Coinage magazine, wrote an editorial in his magazine’s October issue that criticizes the proposal and argues it is unlikely to generate the kind of revenue the commission and

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Lunar Story Horse Name Coins | S | e Nc ut Mi iO SN Ma Ntai M cS e

â&#x20AC;&#x153;. . . there is scope for all kinds of designs, provided they are compelling in the view of most collectors. There should not and cannot be a choice between either classic or modern. â&#x20AC;&#x153; its congressional supporters believe it is. He is also concerned that it would result in too many coins being issued, and in the creation of yet another product (the Liberty half dollars for collectors) that separates a collector from the money in his or her wallet.

appear on our coinage, which spans circulating, bullion, numismatic, and commemorative coins, would be folly. Both kinds of designs should be used as well as designs that straddle the two, such as the 2012 Star-Spangled Banner silver dollar, a collector favorite because it evokes the classic coins of the past yet does so in a modern way.

He may turn out to be right about the revenue issue, if the bill becomes law, although I believe the program would be more popular than he does. And the legislation calling for this program specifies only one new circulating coin a year, a dime or a quarter in alternating years, not both as Mr. Reiter wrote, and with a rebounding economy there is greater need for more circulating coinage. In addition, no one would force anyone to buy collectible half dollars they do not want, and I am sure many people would enjoy collecting Liberty half dollars. The key point for this discussion is that there is scope for all kinds of designs, provided they are compelling in the view of most collectors. There should not and cannot be a choice between either classic or modern. To argue only one kind of design should

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S E C T I O N N A M E | Story Name