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Sunday
Jul302006

Portfolio Update 30 July 2006

We have now recommended eight stocks since June, so we are slowly building our position in the precious metals market. All of our analysis, ideas, predictions, thoughts, worries and actions are published on this site for all to see.

There are some commentators who are of the opinion that free information is worthless. This opinion assumes that cost equals value. It does not. It never has and never will. We as investors are constantly looking for under valued investments where the cost is less than the value we hope to obtain.

1. Agnico Eagle (AEM) we paid $30.88 and it now stands at $35.69, a rise of 15.58%, which represents terrific progress. It was interesting to observe how this stock was traded as it announced record quarterly earnings. Agnico rose, as the news release time got closer and then dropped about $1.50 when the news hit the wires. The old adage of ‘buy the rumour and sell the news’ was clearly demonstrated. However, come the next morning it looks like those same investors caught the jitters and bought back into Agnico as the stock price moved north once again. There is the opportunity to trade this gold mining stock on a short-term basis and we may suggest such strategies later on. But for now our strategy is to get into position before the next rally. Some eminent analysts are advising that we should wait until closer to the end of August for better gold prices and they may be correct. We however believe that we should be in this market now as the next move may catch us on the wrong side of the line.

Anyway what’s wrong with a 15% increase since the end of June?

2. Bema Corp (BGO) paid $4.56 and it now stands at $5.64, a rise of 23.68%, another terrific advance. Our investment is looking good with this mining stock and set to go further as gold prices improve.

3. Cambior (CBJ) we paid $2.61 and this stock closed at $3.02, a rise of 15.71%, this investment could turn out to be the pick of the bunch. It looked a little slow to start, but on Friday it gained 11.03% in a single day. This demonstrates to us the thinness of the gold mining sector. As savvy investors seek to protect their wealth by moving small percentages of their funds into gold stocks their demand forces up prices dramatically. If you are not into drama then don’t follow us.

4. Kinross (KGC) we acquired at $10.08 and this stock now stands at $11.54, a rise of 14.48%, was our leader, but now it has been overtaken, not to worry still a handsome gain.

5. Silverado (SLGLF) we bought at $0.08 and it now stands at $0.064 a fall of 20.0%. Back to planet earth with a bump. Silverado could languish here for a short time. However with a small amount of good news coming from the Nolan Heights project it could move up again very quickly. The green fuel side of the business could also do with a boost in terms of news, say about possible government grants, etc. We will have to sit on our hands for the moment.


6. US Gold Corp (USGL) we bought at $8.40 and it now stock stands at $8.00 a fall 4.76%, having experienced considerable volatility. We are still happy to hold and have every confidence in Rob McEwen, the company Chairman.

7. Hecla Mining (HL) we paid $5.27 on 05 July 2006 and it now stands at $5.35 an increase of 1.52%. Nothing else to say.

8. Taseko Mines Limited (TGB) we paid $2.78 for this mining company and it closed at $2.68, a fall of 3.6%. We will stick with this one as with all of the above.

If we placed an equal amount of money into each of these mining stocks then the overall gain is 5.31%.

Generally, we are really pleased with the current performance of our selection of eight mining stocks. Our philosophy is to be bold and buy and hold. If we have done our homework correctly and the fundamentals have not changed then there is no reason to run for the door.

We are confident that our approach will pay dividends and even if you do not buy any of the above make sure that you have some gold mining shares in your portfolio and enjoy the ride.

We welcome you to observe our portfolios performance and please do make comparisons between us and your current hero’s stock picks. Our knowledge is shared with you for free please enjoy it in a relaxed and calm manner.

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

30 July 2006
Friday
Jul282006

What if Gold’s current trend continues over the next 5 years?

Interesting. The graph below shows possible gold prices over the next five years, if the trend of the last twelve months continues.

goldtnext5yearsfollow12monthtrend


Taking the percentage that the gold price moved each month last year, and applying it to today’s gold price calculates a possible graph for next year. If one presumes that gold prices stay around $640, gold’s 50-day moving average, then this chart would be the outcome.

The graph shows that gold prices could be over $2000 at the end of 2011. This is equivalent to gold’s all time high in 1980, as adjusting $850 for today’s inflation gives around $2200. But adjusting $850 for inflation in 5 years time may prove to give a much greater figure.

However simply using the data from last year will not give a completely accurate predication. As with any bull market, this upward trend does not continue at a steady rate. The rate at which gold prices increase will itself increase as the bull market progresses. Therefore this graph is extremely conservative and gold is likely to move twice as fast as last year. This means that $1000 per ounce could be reached in 2007 and $2000 by 2009. In fact, gold could hit $5000/ounce in 2011. We will cover these predictions and the reasoning behind them in a future article.
Thursday
Jul272006

The Eagle Soars

Yesterday Agnico-Eagle Mines Limited reported record second quarter earnings of $37.1 million, or $0.32 per share. For the same period in 2005 it was $0.15 per share.
Earnings for the first six months of 2006 equates to $0.67 per share, three times more than the $0.27 per share, recorded in the first six months of 2005.

AgnicoLogo2

These are excellent results make no mistake about it. As we write the stock is trading at $35.64, up from $30.88 our purchase price when we bought about a month ago, as mentioned in the article entitled: Agnico Eagle Mines Limited.

This is a 15% plus rise in a very short time span.

We could be tempted to take a dollar or two off the table as it represents a nice months work. However, we bought it to get into position before the fall rally commences so we are sticking to our strategy and sitting on our stock. I doubt whether we will sell any of this stock before it has doubled, which we believe it will and in a very short time frame.

Something to ponder: A record low cash cost at LaRonde of minus $975 per ounce of gold. The costs being offset by the mining of other minerals.
Sunday
Jul232006

Gold: Update 23 July 2006

Where do we go from here? A myriad of predictions swamp the media. Hourly broadcast news bulletins are analysed in fine detail, but has anything really changed?

If you are a Day Trader, then I suppose monitoring by the second is to be expected. However, this should not be necessary for most investors. Investment, with an element of risk is what we try to do on this website.

In our opening article; Reasons to invest in Gold we laid out the fundamentals reasons for our future investment decisions. When we read through them again we find that not much has really changed other than some of them have had more airtime than others. The weight attributed to these reasons may cause day-to-day fluctuations but the effect on gold prices is negible and short lived.

When we examine the chart below we can see that gold is still on an upward trend and comfortably above its 200 day moving average. The other indictors, which are the Relative Strength index, the Ultimate Oscillator and the Stochastic, are all in the middle of their ranges. What does that tell us? Well, in the short term the direction is pretty much neutral. The indicators are pointing down so we could say that’s a slightly negative signal.

GoldUpdate23Jul06


Our plan is not to invest for tomorrow or next week, but at least for a year or so. Should there be a rapid upward movement we may take some profits off the table but we will certainly tell you when the time gets closer.
Friday
Jul212006

Gold: to fall with base metals?

If there is a sell off in base metals will gold get dragged down with it?

In a recent article entitled ‘Trouble Brewing’ by Paul van Eeden on the Kitco website, Paul warned of the dangers that could lie ahead for gold should the base metals suffer a fall. Also in an interview on ROBtv the same scenario was outlined. As an aside I do enjoy Paul’s commentary and he is a very well respected commentator in the investment world.

In these commentaries Paul tabled the idea that
the end of the real estate boom coupled with a generally slower economic growth rate will cause demand for base metals to drop. I would have agreed with this hypothesis a few years ago when the United States was the worlds economic power house and the largest consumer of just about everything. However, I don’t believe that is the case today. When we look outside of the North American market what do we see? We see China and India deeply immersed in an expansion programme the size of which the world has never seen before.

If we look at the pie chart below we can see the populations of China and India dwarf the population of America.

PoppieChart1

China recently published its GDP as being in the order of 11.3%, its fastest pace in a decade according to The Daily Telegraph, which is massive growth and they have 1.3 billion people. This figure has been taken at face value but there are those who would argue that China has been known to be economical with the truth when reporting such matters.

The Chinese and Indian people, like any other modernising nations can see and now want all the goodies and they are striving desperately hard to obtain them.

One of my colleagues has just returned from a tour of China and he just could not believe the pace of development that is happening and does not look like slowing down in the near future. China has 15000 road projects on the go, followed by houses and cars, you name it, they want it!

On this website we are primarily gold bugs, however, we can not see a fall off in demand for base metals for some time yet. Sure, it will be volatile for both base and precious metals but the world is hungry for both and they will be consumed in great volumes.

This article is an attempt to add a different view to the current debate on the state of the market. So we will conclude by sticking our necks on the line. Gold prices will be north of $1000 by January 2007. Please feel free to add your constructive thoughts and comments, as they are most welcome.

21 July 2006
Thursday
Jul202006

Golden Star Mining

GSSlogo1

Golden Star is a medium sized gold mining company with major properties in Ghana, West Africa. Its gold production is un-hedged and therefore appeals to us, as the stock price should move in line with gold prices. Last year Golden Star showed their worth by producing 200,968 ounces of gold at an average cash operating cost of $365 per ounce, creating a new record for the company.

Production this year should hit 300,000 ounces followed by 500,000 ounces next year, at a reduced average cash cost of $335/oz when the Bogoso-Prestea expansion project is completed.
Later on this year the Bogoso-Prestea expansion should be completed which incorporates a sulphide/bio-oxidation circuit. This investment is costing about $125 million, however production will increase to around 370,000 ounces per year.

A commitment by Golden Star to spend approximately $16.5 million on exploration clearly demonstrates their aggressive attitude to locating new sources for future mining projects.
The Company has proved that it is well funded, which is part of our investment criteria, without funding then there just isn’t an opportunity to expand. Their management team has West African experience and is familiar with local customs and practises.






The Market Capitalisation is $618 million and the share price $2.98 having had a recent high of $3.80 and reserves stand 4.05 million ounces. Trading volume has been low recently which may be a negative and delay progress slightly. However, after the recent market sell off a number of other gold mining stocks are displaying the same characteristics, so we view this as only a minor hindrance.

The chart shows this gold mining stock is recovering and may go through some consolidation before moving higher. But as gold continues its resurgence then so will Golden Star.

GSSchart1

The stock is traded on the Toronto Stock exchange under the symbol GSC and on the Amex under the symbol of GSS.
Tuesday
Jul182006

Silverado’s Green Fuel

SilveradoGreen1

With the problems in the Middle East helping to push the price of oil to new heights is it time to take green fuels more seriously?

Silverado is also working on the development of a coal-based alternative fuel. The fuel would substitute for oil in the generation of electricity and industrial heat.

The US has enough coal to supply its energy requirements for at least the next hundred years, but coal is dirty I hear you all scream! But what if it wasn’t dirty? What if it could be changed to provide a clean fuel, and vastly cheaper than the price of oil? The economic benefits make it worth investigating and there is also the added benefit of ‘energy independence’, which has got to be a major plus.

This brings us on to President Bush's Energy Policy Plan, the National Energy Technology Centre Vision 21 Program, and the United States DOE Clean Coal Power Initiative. Coal therefore could be the answer providing that it can be made available in a liquid form.

Silverado Green Fuel Inc., based in Fairbanks, Alaska is developing an environmentally friendly oil substitute produced from Low Rank Coal. A pilot plant has already underway and will be used to produce this Green Fuel from ultra-low sulphur Alaska sub bituminous coal following hydrothermal treatment. This fuel performed extremely well in combustion tests giving nearly complete carbon burnout, and minimal fouling. It is a stable fuel that can either be burnt or gassified as required. It is environmentally friendly and far less hazardous than coal itself. For the more scientific amongst us please visit Silverado’s website to gain a greater appreciation of the process. Silverado’s videos are also very informative.

How much cheaper is it? Current estimates put it at $15 per barrel. At this sort of price level it deserves more of attention. Silverado is working closely with State and Federal Legislators to develop funding through the government and also through private finance.

During my discussions with Silverado they very kindly sent me a book entitled Artic Village by Robert Marshall, which describes life in the 1930s in Wiseman, Alaska. (Printed in the United States by Thompson-Shore, Inc) Its well worth a read if you can get your hands on a copy.

A news flash on Silverado’s gold production:

The sluice plant is now operating for 24 hours per day and is running very efficiently. The quality of the gold recovered is of jewellery quality and commands a 67% premium over and above the gold price. Silverado have reported that they expect to sell the larger nuggets for around $2000.0 per once. The total gold recoveries and related financial numbers will be released throughout the year – watch this space for further developments.

18 July 2006
Tuesday
Jul182006

Is Gold affected by the Base Rate?

Goldcoin1

There are a number of writers who seem to think that the base rate controls gold prices, absolute rubbish!

Beware these people as they are either; only 12 years old, really thick or had a memory transplant.

A short story by way of anecdotal evidence now follows:

Back in 1980 when I first traded gold I was working for an American company based in The Haag, Netherlands, Europe. I was about to relocate to Edmonton, Alberta, Canada, in January 1981, which I did. Having sold my London apartment I had a reasonable amount of cash in the bank. This presented me with a problem. A nice one, but nevertheless I had to make an investment decision. Doing nothing is still a decision by the way. Do I invest in the gold mania or stay in cash.

Gold was close to $800.0 at the time and guess what? The base rate was 19%. It was neck and neck between the bank and my employer as to who was paying me the most. My wages were the same as the interest I was getting from the bank.

So, if a base rate of 19% could not hold gold back why does anyone think that a base rate of 5% is going to anything to stop gold prices rising? There are a few technical analysts out there who address this issue with considerable expertise; it is worth taking the time to read them thoroughly.

Back to the decision: In 1980 I used graph paper and a pencil to calculate rough moving averages, etc. I concluded that the gold market was too hot and waited patiently for a sell off which came when gold dropped to $500.0. Hoping for a bounce of about one third of the price drop, which was $300.0 I needed a re-tracement of about $100.0. I went to the bank and bought on margin of 2:1. I put £12,500.0 in and the bank matched it. Gold bounced back to $600.0 and I made a tidy profit.

For all the Ice Hockey fans out there it is hard not mention a kid I saw score a 3 times in 17 seconds playing for the Edmonton Oilers. He turned out to be Wayne Gretsky and 3 fabulous years followed before I left Edmonton.

In my humble opinion Gold is on the move and the biggest mistake that we can make is not to be in this market. Whether you purchase the same gold mining stocks that we do or not, is not the issue. We believe that we are still at the starting post for gold and that it has a very long way to go.

18 July 2006
Monday
Jul172006

Klondike Star Mineral Corp

KlondikeLogo1

The best place to build a gold mine is next to another gold mine and Klondike Star is slap bang in the middle of the worlds greatest ever gold rush. This is the stuff that dreams are made of, the search for the mother lode. If you don’t have dreams they can’t come true. This area of the Yukon has produced placer or surface gold for over a century. However a mystery remains unsolved, where is the mother lode that gave birth to all this placer gold?

Someone who thinks he knows is the well known and respected Canadian mine finder Richard Hughes who has been able to evaluate the property and has determined that the source of the placer gold is in the 3 shear zones that intersect Lone Star mountain.

The 3 shear zones contain fine gold locked in pyrites. The formation also contains lode gold, or nugget gold found in the drain offs coming from the mountain. If Richard Hughes has diagnosed the situation correctly then the shear zones could be the source of nugget gold. If so, then this exploration could lead to a considerable discovery.

Investing hard earned cash on one mans predictive analysis is a gamble, but he is no ordinary man as his experience shows he has made significant discoveries in the past.

We also take some comfort from the fact that the Lone Star claims comprise nearly 1,200 mineral, or underground claims, so we are in the right place. And what of the company? Well, Klondike Star Mineral Corporation is a well-established exploration and development company actively engaged on eight major properties in the Yukon Territory, Canada. Their property consists of 390 square kilometres of land underlying the site of the Klondike Gold Rush. There is also some 93 square kilometres of land in other parts of the Yukon, which has been specially identified for exploration.

The trading volume has been on the increase lately, which is another good indictor. It doesn’t mean that the stock price will go up automatically but if the volume were falling then the stock price would possibly head south.

We are buying with the intention of holding for a year or so. This gold mining company is capitalised at about $95 million. We are happy to accumulate at the current price of around $3.80. This stock trades under the symbol of KDSM on OTCBB; the usual brokers such as Etrade should be able to execute your instructions.

Please visit their website and take the time to watch their videos and see if you get a feeling of competent professionals going about their business. The photographs of the northern lights are spectacular.

NorthernLights1

We can see from the graph below that recent increase in trading volume and the steady climb from $3.50 to $3.80. As always some retracement is possible.

KlondikeChart1

17 July 2006
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.