NOTE:  Mr. Melman will be active at the Cambridge House "Vancouver Resource Investment Conference" this coming January 22 and 23 (Sunday and Monday) at the Vancouver Convention Center.  He will be participating in a panel discussion Monday morning, presenting a workshop entitled "An Economic Perfect Storm - updated January 2012" 3:30 to 4:00 PM Monday afternoon and moderating corporate presentations immediately following his workshop.

This conference has grown into one of the world's most important and best attended mining symposiums and given the quality and variety of the speakers and a huge number of corporate exhibitors, this is one conference mining investors and enthusiasts should place high on their list.

Conference Website

Momentum is a strange thing.  Many of us who follow our favourite football, hockey or basketball teams can cite many examples where a period of lacklustre performance is followed by gathering strength until the entire tenor of the game changes.  The same consideration can also be true of financial and commodity markets.

Please note the chart of the Dow Jones Industrial Average of late.  After many months of 'waffling', the Dow has suddenly become one-directional, and that is to the upside, rising over the past few weeks from around 11,300 to near 12,700 with the last thousand points or so being almost vertical, without  meaningful interruption.

Frankly, there are two concepts relating to this move that we find disturbing.  First, a rally of this magnitude would seemingly reflect a strong belief in economic improvements, but the issue of coming prosperity, rising corporate earnings and steadily improving international financial conditions has hardly been resolved in a manner which this rally might be suggesting.  There are still many examples of weak economic data, the rate of corporate earnings growth is actually expected to fall and the major concern of our times, the European economic calamity, appears to be as far from resolution as ever .

The other concept is the appearance of the most recent time frame on the chart, paying particular attention to the incredibly small variations in ranges between daily highs and lows.  The first five months of this six-month chart conform much more to what might be considered regular market action than the last month, where everything has been confined to an incredibly narrow range of variation.  When I look at such a constricted range, two words come to mind; "artificial" and "manipulation."

In other words, I believe there is something very suspicious about the last month's financial market trading but trust the situation will clarify itself in coming weeks and months.

However, there is one point that must be stressed and that is any responsible commentator should never overlook market action, particularly when this particular market action could be easily placed within an important historic context.  That context states that as a general historic rule, long-term bull markets in general securities have been an ominous indicator for the precious metals and no period illustrates this better than 1994-2000 when the Dow Industrials put on a powerhouse move, surging from under 4,000 to almost 12,000 while at the same time, gold was falling in price from near $400 per ounce to $255 - the lowest price recorded during the past three decades.

In a contra-historic manner, gold has actually rallied strongly during the latest Dow move.  While the Dow was surging by about 1,000 points, the price of gold has moved up from near $1,530 to a present quote at $1,665 - a gain of $135. 

Despite this anomaly, we believe one should not discard the lessons of history and this strong rally by the financial markets should be part of our investment considerations going forward.

Please note our oft-repeated caution that no investments should be made

without prior consultation with a registered investment professional.

The financial and political news media has expended much time and effort of late describing the power of the environmental and aboriginal movements in regard to the two petroleum pipelines under discussion; the Keystone XL pipeline from Canada through the central US states to supply refineries in Oklahoma, Arkansas and Texas - and the Northern Gateway pipeline through Alberta and Canada to a designated port at Kitimat on the Pacific Coast, presumably for trans-shipment to Asian and other Far East markets. 

In the American example, the power of the environmental movement has come to the fore and they have succeeded in blocking further development of Keystone XL, at least for many months to come.  In Canada, debate surrounding the Northern Gateway has once again illustrated the effective power of the aboriginal community to use both the legal courts and the court of public opinion to block progress on that pipeline as well.

We have now received fresh proof that all of those considerations affect our world of base and precious mining as well - which is hardly news to those of us involved in mineral resource developments.

The issue at hand is the proposed copper mine near the city of Florence, Arizona.  Actually, I am very familiar with Florence as well as two other mining communities in south-central Arizona, Miami and Superior.  The entire region, which is presently facing difficult economic times, has a long history of mining with copper being the predominant metal.

According to an article in the Globe & Mail "Report on Business" section, Canadian junior mining company, Curis Resources Ltd, has recently proposed a new copper mine to be constructed within the boundaries of the city of Florence and that announcement has brought out heavy hitters both pro and con.  Arizona's Governor, Jan Brewer, who is strongly in favour of the project, is quoted as stating, "...it will spark badly needed economic development in the area.  Local business-lady Lisa Austin, currently running for the position of Mayor of Florence, also came out strongly for the project.

However, the environmental community is up in arms and defiantly opposes the mine.  Phoenix Suns owner Robert Sarver is backing a movement to stop the mine, stating it would ruin the water supply and the local City Council was sufficiently influenced by Sarver and residents of outlying communities to have voted to reject the mine by a 7-1 vote in December.

Feelings are running so high that supporter Austin commented to Globe and Mail reporter Paul Waldie, "...I've never seen anything like it.  I almost thought they were going to string me up like a lynch mob one day.  It was really amazing."

The power of the environmental community simply must not be under-estimated.  They are well financed, there is abundant communication between various special-interest groups and, it must be noted, they presently have a strong supporter sitting in the Oval Office of the White House in America who also exerts strong influence in other nations as well.

As of 9:45 AM PST, financial markets in Canada and America have moved to the plus side with the Dow Industrials ahead by more than 60 points while Canada's TSX Index is up by about 10.  Precious metals have turned higher as well with gold now trading at $1,665, a gain of about $10 today while silver is showing even better relative strength, up by more than $1.00 per ounce to a new six-week high above $31.50.  Base metals have reversed earlier rallies and are now slightly weaker on balance while mining share indexes are close to unchanged for the session.

In other markets, the US Dollar is little changed, crude oil is off by $1.50 to near $99.00 per barrel, and long term interest rates, as measured by the TYX Index, are continuing a recent rally which has seen 30-year bond rates rise from 2.88% to 3.10% during the past week.

All quotes US$ unless otherwise indicated.

Next "Melman Minute" schedule for Monday, January 23 when we will be reporting from the Cambridge House Vancouver Resource Investment Conference.