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Sunday
Jul162006

Are G8 effective?

G8 demands a halt to hostilities in the Middle East, but is anyone listening?

As our illustrious leaders meet in St Petersburg, Russia, the hostilities continue unabated. The pleas and platitudes continue to flow but fall on deaf ears. George Bush blames Iran and Syria for sponsoring Hezbollah while European Leaders call on Israel for restraint. In the middle of all this Russia hope to be given membership of the World Trade Organisation but the United States still has not allowed them entry.

Is it me? Or are their priorities somewhat misguided? Would it not be better to concentrate on getting one thing right instead of this butter fly approach of flitting from subject to subject without solving any of them. The Middle East problem has existed for many years and despite the Camp David meetings, the road maps, the initiatives, we have absolutely nothing to show for it. Maybe it is time for a different approach, a non-political approach where a small team of ‘ordinary’ people from a selection of countries sit down with representatives of the aggrieved parties and sort it out. Could they possibly do any worse than the mess we have now?

To read a little more detail on this subject go to:

http://www.chron.com/disp/story.mpl/ap/world/4050185.html

16 July 2006.
Tuesday
Jul112006

Newmont Mining

Is Newmont an over weight elephant too heavy to fly? Rhonda Brammer of Barron’s thinks it is a great time to buy Newmont.

In an article on the front page of The Business, dated 9/10 July, entitled ‘Newmont Mining: the goose soon to lay the golden egg’ Rhonda Brammer puts the case for buying gold and also for buying Newmont. If you are contemplating buying Newmont then we suggest that you read her article. The article is very well researched and very well written. It contains facts and figures along with a couple of interesting graphs. There are quotes from the Chief Executive, Wayne Murdy, as well as the company chairman Pierre Lassonde. There are also quotes from BMO Nesbitt Burns, RBC Capital Markets and Citigroup who expect Newmont's shares to sell at $75. All good sound research so far. As we on this site expect gold to go along way we would automatically fall in line with the gold bull argument.


However, then we come to the comparable analysis, a comparison is made between the progress of Newmont and the S&P500. We struggle with this as a basis to recommend Newmont as the S&P500 covers a wide range industry sectors not related to gold.

Why is there not a comparison between Newmont and similar companies in the mining sector? If we compare Newmont with for example Kinross Gold, market Capitalisation of approximately $3.7 billion then a different picture begins to emerge. If we go a step further and compare Newmont with Bema Corporation, market capitalisation of $2.2 billon, then Newmont’s growth in percentage terms does not look too good at all.

We can see from the two graphs below that both these two mining companies have dramatically outperformed Newmont. There are other mining stocks that would also produce a similar result.

NEMvsKGC1

NEMvsBGO1


When one invests in this sector of the market it is usually in hope of higher than normal stock market returns. Newmont has been analysed to pieces and its value is well known. It is difficult for us to see where the growth for Newmont will come from and its past performance does not offer us any encouragement.

We can only conclude that we will not be buyers of this stock at the moment and cannot foresee a reason to change this stance in the near future.
Saturday
Jul082006

Gold set to rally in September?

Is gold set for yet another rally in September? Over the past few years gold has always had a spectacular end of year upward rally, always starting around September.

In September of 2003, gold prices went from around $350 to approximately $425. A $75 move, a 20% move. In 2004 gold prices moved from $400 to $450 at the end of September. A $50 move representing a 12.5% increase in gold prices. Last years action will be explained in detail further on in this article. The graph below shows the September rallies of recent years.

Gold September Rally Pattern

Investors getting into position, anticipating a September rally, may cause a small upturn in gold and gold stocks before we enter September. So buy your gold or gold mining stocks before we enter that period.

However, last year gold began its move upwards literally as soon as we entered September and it continued to rise throughout the month. By the end of September gold prices had climbed nearly $40, from about $435 to a high of over $470. A $40 dollar move in a month doesn’t seem that dramatic now, when we have seen gold prices move $10, $20, and $30 even $40 in one day!
However one must bear in mind the gold price of a year ago. Gold was about $450 and so a $40 move is close to a 10% move. A 10% move on today’s prices would be a rise of $64 in a month. $64 in one month is about $16 a week or just over $3 a day. After September we could see gold at over $700. ($640+10%=$704)

September only signifies the beginning. After the September rally there should be a consolidation for about a month. Then gold will probably rise about 20% from the end of November until the end of January. Providing that gold prices stay above $700, a 20% move would force gold to test its all time high of $850 by the end of January.

Gold 2005 rally

So now that we have established where gold prices are going, the next point is how to take advantage of them. Of course the most obvious option is to buy gold bullion. By purchasing bullion or a gold ETF you will track gold price exactly as you shall do as well as the gold price. This is the safest way to trade gold. However to maximise the benefit and increase you leverage on the gold price, you would be better off buying gold mining stocks in the HUI.

The HUI tends to outperform gold as is shown in the chart below.

HUI Sept Rall Chart

I think that buying gold mining stocks is the best option. You may want to buy a mix of stocks and physical gold for added security though. Try to buy mid sized gold producing companies, as large companies like Barrick and Newmont are usually slow to follow gold. Bema Gold, Agnico-Eagle and Kinross are good stocks to be buying as well as others. Other gold stocks are mentioned in our gold mining category.

If anyone has any other suggestions of gold stocks, or comments on this article, please leave them below.
Thursday
Jul062006

Hecla Mining Company

HeclaLogo

This company is a miner of both gold and silver and I guess it is thought of by the investing community as more of a silver producer. However, having produced 140 000 plus ounces of gold in 2005 we think it qualifies for a spot in our portfolio.

Hecla Mining is a low cost primary silver producer in North America, producing 6 million ounces of silver at an average total cash cost of $2.96 per ounce in 2005. Hecla also produced gold at an average total cash cost of $337 per ounce. So from this we can glean that as a company they are solvent and are generating good cash flow. This is very important as it provides a solid financial basis on which exploration activity can be founded. And it is the possibility of a new major strike that is attractive to us as investors. This precious metals mining company has exploration properties and operating mines in superb mining areas worldwide. Hecla’s excellent exploration prospects, management ability, minimal debt and good cash position make this an excellent precious metals prospect as an investment. In putting our money on the table we are mind full of an exit strategy in all cases. With this particular mining stock we are thinking long term and intend to buy and hold. We may have to eat our words though if it rockets and presents us with an opportunity to take some profits off the table. We will inform if that opportunity appears to be developing and also if and when we sell.
From a geopolitical standpoint Hecla is active in the United States, Mexico, Venezuela and Alaska. We are quit comfortable being in these areas although mining gold at the La Camorra Unit in Venezuela will need to be watched. The La Camorra Unit in Venezuela produced just over 100,000 ounces of gold in 2005.

Hecla’s common stock has been traded on the New York Stock Exchange for approximately 40 years under the symbol “HL.” This company increased their gold production by 51% in the first quarter of 2006 and recorded earnings in excess of $38 million.

From the chart we can see the stock has recovered from the market sell off and is sitting just on its 200 day moving average. To us this is a good place to shop in the life cycle of a stock.

At the time of writing this mining stock has a Market Capitalisation of $628 and a P/E ratio of 35 and closed at $5.27. It may indeed move down from here and provide you with a better buying opportunity later in the summer. However, we think that the downside for this gold and silver mining stock is limited compared to the upside potential, which we believe to be explosive in the very near future along with the rise in gold prices.

05 July 2006.

HeclaChart
Tuesday
Jul042006

Taseko Mines Limited

Taseko Mines Limited



This is a diversion from the norm for us as this company generates its cash from Copper and Molybdenum mining. However there is a gold kicker to it, which adds some extra spice. Taseko Mines Limited is traded on the TSX as TKO and on the AMEX as TGB.

Taseko is part of the Hunter Dickinson group who has an enviable track record. The function of Hunter Dickinson is to provide a complete service that encompasses geology, finance, investment and guidance on government and regulatory affairs. We will probably cover Hunter Dickinson more fully in a future article.

Second quarter results for Taseko showed that they had generated an operating profit in the order of $7.4 million, mainly from their Gibraltar facility in British Columbia. The company intends to spend $62 million on an expansion programme at this mine in order to increase production from 70 million to 100 million pounds of copper per year. This tells us two things; firstly that they are solvent and have good cash flow and secondly that they have the funds to expand. The best mining story in the world cannot be a success without the funding to exploit the situation.

Taseko also owns a 100% interest in the Prosperity mine, which is also located in British Columbia, Canada. A lot of work has already been carried out in terms of exploration, planning, engineering, etc., with the indications that this is a large Copper and Gold deposit. By early 2007 an Environmental Impact Study, which is well on the way, will be more or less complete setting the stage for production.

Looking longer term they also have the Harmony project which is located on Graham Island, British Columbia, Canada. This has a large gold deposit with further investigation needed to establish the full extent of the total resources.

Geopolitically we consider Canada to be one of the safest places to conduct mining exploration.

Taseko has a market capitalisation of $288 million and a P/E ratio of 8.18. Its stock price has recently dropped in line with the market sell-off from approximately $3.90 to $2.10 per share and closed yesterday at $2.78. We are buyers at this price and expect this recovery to continue and to beat its previous highs in the next twelve months or so.

04 July 2006

Taseko Chart

Monday
Jul032006

Progress as of 04 July 2006

As it is Independence Day and everyone is on holiday we thought it would be appropriate to take a quick look at the progress of our selections. These six stocks were recommended in June, which is not too long ago.

1. Agnico Eagle (AEM) we recommended buying at sub-thirty dollars however we had to pay $30.88 on the day that we posted on this site. One can’t always hit it smack on but we thought a little over the odds were worthwhile. Anyway at the closing bell on Monday 03 July 2006 this stock stood at $34.07, a rise of 10.33% a superb gain since we bought it.


2. Bema Corp (BGO) we recommended buying at $4.56 and bought at this price. At the close this stock stands at $5.18, a rise of 13.6%, a healthy recovery indeed.


3. Cambior (CBJ) we recommended buying at $2.61 and bought at this price. At the close this stock stands at $2.77, a rise of 6.13%, a nice start



4. Kinross (KGC) we recommended buying at $10.08 and bought at this price. At the close this stock stands at $11.50, a rise of 14.09%, our current leader, which is better than we imagined at this stage.



5. Silverado (SLGLF) we recommended buying at $0.08 and bought at this price. At the close this stock stands at $0.085 a rise of 6.25%, another good move upwards.



6. US Gold Corp (USGL) we recommended buying at $8.40 and bought at this price. At the close this stock stands at $8.93, a rise of 6.31%, again not a bad start. It should be noted however that between our recommendation and tonight’s close this stock dropped and could have been bought considerably cheaper than we what we paid for it. Still, that’s life, it’s almost impossible to hit the exact bottom for any stock especially something as volatile as a mining company.


Overall we are really pleased with our first selection of six gold mining stocks. They are all in positive territory in a very short time. We will continue our research and post our findings with some guidance on how to proceed. Should a stock run too far ahead we might consider selling in the hope that we can re-enter the market at lower gold prices. Either way we will keep you informed.

Always discuss your investments with your regulated financial advisor before putting your hard earned money on the table.

Happy holiday.
Friday
Jun302006

GOLDgate

As a long time follower of Gold I have always been puzzled as to why gold prices have lingered around at very low levels over the last twenty years. Until recently I could only speculate that just maybe it wasn’t in someone’s best interest. But who’s?

A gentleman by the name of Bill Murphy would appear to be making great head way in this area. Mr Murphy is the Chairman of the Gold Anti-Trust Action Committee, often referred to as GATA. He is also Le Patron of a website called the LeMetropoleCafe, which is well worth a visit.

On Wednesday 28 June 2006 he appeared on ROBtv at 11.40 in a short piece entitled: Gold Cartel tampering with Bullion. In summary Bill Murphy more or less stated that the United States Government, and banks like Goldman Sachs and JPMorgan Chase were involved in manipulation along with the BIS, IMF, the Bank of England, The Treasury and the Fed. Strangely though, the IMF has produced a paper, just recently, in which they say the central banks have double-counted their reserves. In a way this supports Bill’s claim that they only have half of the reserves that we think they have. Odder still is that they have not carried out an independent audit since 1955, so really who knows the current state of these gold reserves?

Where are the top-flight investigative journalists these days? I’m old enough to remember Watergate and the incredible work carried out by Bob Woodward and Carl Bernstein of the Washington Post, which led to the downfall of President Nixon. Why is there not a huge demand from the media to insist that the government settle this matter once and for all by allowing an independent audit involving respected companies and a number of sceptics just for good measure?

Then and only then will this matter go away
30 June 2006
Wednesday
Jun282006

The excitement is under whelming


There are 20 trading days in a month and here we all are sitting on our hands waiting for the FOMC and their helicopter pilot to deliberate over the base rate. How did we get in to such a silly situation? Anyone who has ever spent more than 1 hour in a meeting knows full well that the attention span starts to wane after about 40 minutes. Why can’t these guys think about it before they get there, debate for an hour and fix the rate for at least 3 months if not 6 months. If they can only see 4 weeks ahead then surely we have employed the wrong the people.

The market stagnates for 2 days while these guys deliberate, not to mention the time wasted trying to second guess the result and the post mortem afterwards. Its at least 10% of the available trading wasted every month. I would be disappointed if my kids dithered as much as this.

Is it a Boy? Is it a Girl? No, no, no, it’s a great big quarter pointer. Wow, now was that worth waiting for?

Thank Goodness for the World Cup
28 June 2006
Wednesday
Jun282006

Cambior Inc

This company is the one of the largest gold miners in Canada, operating 6 mines in North and South America.

In 2005, they managed to produce 638,400 ounces of gold, and their target for this year is 529,000 ounces, which is mostly exposed to the price of gold. This year they intend to spend approximately $29 million in the exploration and development.

One of their new projects is the Camp Caiman development, which is located about 45 kilometres southeast of Cayenne, the capital city of French Guiana; a South American republic of France located on the northeastern coast between Suriname and the Brazilian border. Cambior were granted a concession by the French Government for an area of some 30 km² valid for a period of 25 years. This advanced project contains 1.2 million ounces of gold contained and is presently awaiting the issuance of permits for anticipated production in late 2007.

This project will play a major part in their efforts to hit a target of 800,000 ounces per year and a reserve base of 8 million ounces.
Having recorded record profits of $20.2 million in 2005 at an average cost of $284, this year the cost of production is estimated to be in the order of $294 per ounce.
To invest in Cambior is to invest in their management team and their ability to explore and mine. Although Cambior used to pay a dividend this will not be possible in the near term due to restrictions placed on the company by its lenders. You are not investing in Cambior for income but for growth.

The company is currently trading at $2.61 and has a Market Capitalisation of $716 million and a P/E ratio of 29. We think it is a good buy at this level and we intend to accumulate more over the summer. By September these prices could be history.

Cambior's shares trade on the Toronto (TSX) and American (AMEX) stock exchanges under the symbol "CBJ". Cambior's warrants, (CBJ.WT.C) and (CBJ.WT.D) trade on the TSX.

28 June 2006

Cambiorchart1

Monday
Jun262006

Kinross Gold Corp

Kinross Gold Corp is now the seventh largest primary gold producer in the world with approximately 1.6 million ounces of yearly gold production. Kinross has a no-gold hedging policy, which means you as an investor have the benefit of being exposed to gold price. The volatility of the gold price will directly affect the price of this stock so you must be prepared to ride out the pullbacks and enjoy the advances. This company is actively looking to expand through exploration and acquisition.

Kinross has a Market Capitalisation of $3.48 billion and recently traded at a high of $13.0 before the correction in gold prices, which pulled the stock back to the $9.0 level. This stock has stabilised and is currently priced at $10.08. Kinross is traded on the TSE as K and on the NYSE as KGC.

Looking at the chart, Kinross has bounced from its 200 day moving average, which in our opinion shows the strength of the stock. It may become cheaper over the summer however we are happy to accumulate at these levels.

Kinross Gold Corp