 Half
Price Sale follow-up
Mike Hoy
May 7, 2004
The response
I have received to my article, "Half Price Sale" has been overwhelming. I have
been going non-stop, except to eat and sleep, and cannot keep
up. Therefore, I am going to write a summary of the three stocks,
to which I referred in my article "Half Price Sale."
Sorry I can't personalize this to each of your individual needs.
I do plan to get back to each of you, as time permits.
In every case, but one, the response from each of you was very
positive. The only response that could be viewed as negative
told me that I had a lot to learn. I'm sure he's right! Hopefully,
he can teach me the logic of selling, good quality gold, silver
and natural resource stocks, at what could be the lows, in a
bull market! Hopefully, I might teach him that the greatest profits
made in a bull market are achieved in the "up move during
each leg." Not by trying to trade the pullback in a correction!
In a bull market, corrections should be used for building positions.
The greatest risk in a bull market is getting caught on the sidelines
when the next leg up begins. Buying a stock is easy, in a bull
market they all go up. The true skills come in knowing when the
time has come to sell. In a bull market, particularly from these
levels, stocks always go higher than what people think in the
beginning. If I can sell within 15% of the ultimate highs I will
be a very happy man and handsomely rewarded. If you doubt this,
just go back and look at the long term charts of the tech stocks,
the Dow and bonds. If I would have told you in 1983 that the
Dow would go to 11700 you would have told me I was crazy! Where
we sit now, in the bull market for gold and silver, is in the
first leg.
Very few people have the skills to "market time" the
highs and lows of each move. If they do have the skills then
the need for them to have to sell newsletters and investment
advice would be non-existent. I know I don't have the skills,
and I keep proving it to myself over and over again. When will
I learn. True market timers, who make money, must be able to
separate their emotions from their investment decisions. This
is hard to do, if not impossible, in most cases.
From the many responses I have received this has been the number
one crime that we, yes I'm am guilty of it too, have all committed.
Emotions taking over logic and good sense.
How do we correct this? Knowledge and research are the answers.
Know why you are investing in a industry, like the metals and
other natural resources. Then learn all there is to know about
the companies that you follow. Go to their websites, read, learn
and absorb knowledge. Learn from people, whose writings make
sense and authors that have earned your respect. And then, this
is most important, "DON'T SECOND GUESS YOURSELF." If
the basic overriding reasons you made a committment to invest
in a certain industry have not changed and there have been no
material changes, within the companies themselves, Then don't
get excited about the price volatility within the market. If
you truly do understand what's going on, then you can have the
guts and conviction to build your position on weakness or ride
any storm out along the way! After all, when the storm passes
the sun comes out, doesn't it?
Patience and discipline do have a tendency to be rewarded!
I have to practice what I preach. I too, second guess myself.
The three stocks that I am going to talk about fall into this
catagory. The difference, I believe, is that, I do believe I
know what is going on. As a result, this brings everything back
into focus. Incidently, I do own all three of these stocks.
Admiral Bay
The first stock
is Admiral Bay - ADBRF in America and ADB in Canada. This
is a classic case of wondering "what is going on?"
Of all the responses, I have received, this one puzzles me the
most. Unless I missed it, no one who wrote to me about their
portfolios, owned any ADB. I can't figure it out. This company
is "rocking"! They are in the process of developing
their American oil and gas properties. From wells being hooked
up, cash flow is expected to to reach $10,000/day by the end
of June and $35,000/day by the end of the year. This is just
their first year! Where will they be at the end of 2005 and 2006?
With no new major oil and gas fields being discovered and the
writedowns going on at the major oil companies, what better industry
to be in. Even "Magoo" Greenspan has talked about the
need to develop our natural gas resources. I think, I have read,
all new power plants coming on line are natural gas. Seems to
me there is a future in natural gas. Where has ADB concentrated?
Coalbed methane natural gas! Their American operations are coming
on line Now!
Let's not forget the 250,000 acre coalbed methane project at
Moose River in Northern Ontario. This could be huge but, it's
down the road. Read about this on the company's website.
Let's not forget the high grade silver project in Mexico. Again,
this is down the road, but it looks very promising.
Drilling is ongoing at Moose River and in Mexico. Results will
be coming.
The point is, based on the cash flow from the U.S. operations,
now under way, this stock is cheap. Assuming the company can
meet its goal by year end, $35,000/day X 350 days = $12,250,000/yr.
cash flow. This would be the annualized cash flow, from the U.S.
operations. This is the goal management has set out for ADB.
Remember, this is just the first year in production and they
have just started hooking-up wells. Yeah, I think it's cheap.
I like to say "undiscovered" but I can't. All you readers
have seen the company's news releases and corporate website listed
on websites like "321gold." So why don't you own it?
NovaGold
Next is NovaGold
- NG. Here is a company with world class properties. The
management of this company has done a superb job of building
wealth for its shareholders. Drilling to date, has shown results
giving way to advancing work, on what could be at least two world
class mines. Most mining companies can only "dream"
of having a world class mine. NovaGold may not be far from proving
up enough resources to have at least two world class mines. With
no long term debt and $60,000,000 in the bank They have the resources
to prove up the resources. I don't know about you, but this does
excite me.
NovaGold's first mine will come into production in late 2005,
early 2006. It's going to produce 100,000 oz./yr. with a cash
cost of $200/oz. Let's see, 100,000 oz. at $175 [conservative]
margins=$17,500,000 profit. Not bad!
NovaGold's annual report is very well done. They do an excellent
job of laying out their plans for the future. I would much prefer
to own NG vs a major. Personally, I feel the majors will take
a shot at buying NG out. I hope I'm wrong. I don't know how I
would replace it in my portfolio. This is my core holding and
we own a lot of it.
To me, owning NG is like owning bullion. NG has found a lot of
gold, (they have only scratched the surface with the drilling
they have completed. This means more gold to be found). We know
there will be mines developed. This means the gold is still in
the ground. No storage costs, no high-grading, no declining reserves.
I figure, about the time we finally get our mines ready to produce,
gold prices will be substantially higher and world-wide reserves
will be less. This will add increased value to our reserves and
inevitably to the stock. Think of the earnings if gold happens
to be at $500-$600 oz.
Someday, someone else will figure this out. Remember, research
and knowledge. In the meantime I'll patiently wait and build
my position. [NovaGold's website]
Golden Phoenix
Lastly we have
Golden Phoenix - GPXM. This company has come into a positive
cash flow position. Ore from the Mineral Ridge Mine is being
processed. This cash flow will go a very long way to funding
their other projects. One of their operations is a molybdenum
project (I know I can't pronounce it either so we will call it
moly). According to a news release, on the company's
website dated 3-16-04, this
could be a very profitable project. When I start playing with
numbers I see earnings that could approach the value of the stock
at current prices. Who knows exactly what the future holds for
GPXM, as for me, I don't see any clouds on the horizon, just
hard work. I think the management of GPXM is up to challenge.
Anyway, I look at it, I truly see Golden Phoenix, as well as
Admiral Bay and NovaGold as a "Half Price Sale!"
These companies are doing well and patience will be rewarded.
May 7, 2004
Mike Hoy
Mhoy1954@aol.com
321gold Inc
Miami USA
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