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Gold Stock Alert:

The beginning of the end?

Bob Moriarty
February 13, 2002

Nah. This is not the beginning of the end. It's not even the end of the beginning. It may be barely the beginning of the beginning. We are in a gold bull market. It will go higher, much higher than any of us can imagine. Every stock with gold in its title and the CEO not in handcuffs will go higher than you ever dreamed of.

On the other hand, there are going to be some days you wish you had never looked at the price of gold or your gold portfolio. Yesterday was such a day. It's all part of the wall of worry junior gold bull markets go through. The market had been going curvilinear since the first week of December and while gold bugs would prefer gold climb that way every day, markets don't move like that. Gold got a little carried away.

It's like a good news, bad news joke. The good news was that gold was rocketing to the moon and the bad news was that the gold shares weren't following in trail.

So we have another good news, bad news joke for you. The bad news is that gold is falling rapidly towards zero. The good news is that the shares aren't following. Don't worry about it. Steve Saville is right, don't focus on every dip and fall of your favorite stocks. You don't make money by sweating stock prices.

Meanwhile back at the ranch, there are some very attractive share prices. This doesn't mean they might not get more attractive but they are sure better than they were a week ago.

Our all time favorite silver stock (well, one of them), is Cardero. (trading as CDU-V on the TSE) They have way more silver than anyone can imagine. If you want a double play, pick up Ascot (Trading as AOT-V on the TSE) Ascot owns a bunch of Cardero shares, about five Ascot shares is equal to one Cardero share. Right now Ascot is selling for about a 35-40% discount to Cardero.

New and interesting. If you want an interesting low grade but enormous copper play, buy Northern Orion (trading as NNO-T) Famed financier Frank Giustra just put together a package for NNO allowing them to purchase the Agua Rica property from BHP. The property has 10 million ounces of gold and 18 billion, that's right 18 BILLION (as in Federal Reserve $ numbers) pounds of copper. Low grade but according to my friend Kevin Klomblies, copper is headed for $1.20 this year. The short story is that NNO is buying $50 million dollars worth of drilling and work for $3.6 million now and $9 million down the road.

Buying dollar bills for quarters is never a bad deal and Northern Orion offer both a gold and a copper play. Gold is a byproduct but there's a lot of both of them. We tried buying some shares at $.12 and couldn't get filled. While 90% of stocks were down for the day, NNO closed up 33%. It will go higher.

And speaking of Frank Giustra, Endeavour Mining Capital (trading as EDV-V) is still selling at about a 40% discount to NAV. We own some and I will buy this puppy all the way up. When it sells at a premium, then the word is out and everyone knows about it, sell. Endeavour Mining is the financial arm for Giustra. They get paid in shares and warrants. If you believe gold is going up, this is probably the only low cost way of getting warrants and cheap shares. It's a permanent option on gold.

And our favorite little gold company just became a big gold company. Placer Dome exercised their right to backin to Donlin Creek. So NovaGold (trading as NRI-T), which was a $2 million dollar company two years ago is now a $160 million dollar company that will own 30% of a major mine which will be producing about 1 million ounces of gold a year. I've been itching to tell the real story and the guys at NovaGold being engineers and control freaks, didn't want me to.

Strictly off the record, the real story is that they did it with five guys. Total. Five guys. Don't ever let anyone convince you junior exploration companies are all hype and no gold. While everyone else in the industry was whining about the low price of gold, they were drilling and telling their story to everyone who would listen. We listened and did our best to tell our readers. I'd guess 90% of the people who own the stock have always held it at a profit. Once the public actually realizes how big Donlin Creek is, they will be worth a lot more.

Five guys. Flipping incredible.

Speaking of flipping incredible, Lakota Resources (trading as YLA-V) hit yet another new high while the market tanked. With a prime piece of land right next to the old Sutton property in Tanzania, things are heating up. We suspect they will be announcing something soon, nobody wants to sell the stock. And that means something.

We have always loved Candente (trading as DNT-V) They have come out with some interesting news lately. GoldCorp is now a big owner of their shares as GoldCorp Chairman Rob McEwen spreads his wings in the industry. And they just came up with some interesting precursor results drilling in Newfoundland. Nothing spectacular but indicative of getting closer.

Speaking of getting closer, Gallery Resources (trading as GYR-V) has a drill rig in place as we speak and is drilling interesting targets in their Black Bart-Katie project in central Newfoundland. We like the management of GYR and think someone is going to strike oil sometime soon in Newfoundland. Or something better than oil. They have been waiting for winter to freeze the bogs so they can move their drill rig into position. Expect results in a month or so.

Bob Moriarty
February 13, 2003

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