Anytime you see the price of anything - gold, silver, the Nasdaq, sugar - go curvilinear, get ready to bail out. Nothing goes straight up. But they do often often come straight down. Gold and silver have just gone through a brutal shakeout. I don't doubt we have fewer gold and silver bugs today than we had two months ago. It's called a correction. It's perfectly natural in a bull market. (or a bear market for that matter).
One guy called it perfectly and he's a guy I disagree with on a regular basis. On April 20th, Peter Grandich wrote a piece which he titled, "Sorry, But It's Time For Another Caution Flag and First Red Flag." Go back and read the piece and then look at a chart of about anything. He called it perfectly. I tend to disagree with much of what he writes because he spends a lot of time talking about manipulation as if it's important. Manipulation is one of those things that even if it was true, it's meaningless. I mean, let's say every ten cent move in gold is the product of the Fed or Goldman Sachs or whoever the villain of the week is. Even if it's true, where do you ever get any kind of a buy or sell signal? All information which you can't invest on, is nothing more than noise.
I discount conspiracies and manipulation totally. They don't give any kind of signal at any time. If they are real, they are meaningless and if they aren't real, why bother worrying about them? If you want to make money in these markets, you must have valid and timely signals.
So if you really want to see if Peter Grandich knows what he is talking about when he's talking about timing the market, you need to be looking for a buy signal. I've given him his just due for the validity of his sell signal, what's he got to say about buying? On June 7th, he wrote a follow up piece. He called this one, "It's Time To Jump Back in Precious Metals and Mining Shares With Both Feet Again." I'll give him credit on both pieces, he didn't mince words. You know exactly what he was saying.
He happened to be perfectly right both times and in a month or so, I'm sure every guru out there will be saying they got it right but you not only have to time it correctly, which he did, you have to make it clear as hell and he did that as well.
Conspiracy bugs don't usually use the words bull market. Honest to God, I don't think I have ever heard The Usual Suspects ever call this a bull market. It's a bull market. And it acts like a bull market and if you want to believe in manipulation, feel free. But read guys like Peter Grandich, they offer a lot of sense at times and his calls this cycle were worth millions of dollars.
As you can probably guess from the title, I'm back in the bull camp. It was a brutal washout and if you held firm, your shares went down a lot. Don't worry, it's a bull market and that happens. I've said a couple of times before, you could pretty much sell at the Dec-Jan high and buy at the May-June low and double your money every year. Here's a signal I use a lot and it was accurate for the buying signal and not so good on the sell in January. Here's another article which makes a similar point.
I suspect there was a lot of foreign buying of both gold and silver and that tended to warp the cycle this year. We came very close to WW IV and while BoobusAmericanus wasn't aware, the rest of the world was. Israel came very close to goading the US into nuking Iran but Putin had a little mano-el-mano discussion with Baby Bush and Israel and made it clear that Russia wasn't going along with any more wars designed to give Israel safe borders.
The US is trapped in one expensive and bloody Tar Baby now and a nuclear war on Iran would be the tar babies of all tar babies. You have to wonder what kind of weird God Baby Bush and the Israel lobby believe in that they can advocate the cold blooded murder of millions of people. There will be peace in the Middle East when Israel wants peace and there will be war until that day. That doesn't mean the US doesn't have a right to a foreign policy of our own.
While it's true that John Bolton is still mumbling at the UN, the guy is like the Energizer Bunny. Shove a couple of D Cell batteries up his butt and he goes on and on forever. If the citizens of this country ever want to get their country back, they should start by dumping that idiot. He makes Bush sound intelligent.
There's a purpose to all this mumbling of my own, I really do have a purpose other than saying it's safe to invest in gold and silver and mining shares again. There will be a test of the lows and prices will bounce around for a couple of months before it's clear that the lows are behind us, but buying low and selling high makes a lot more sense than the alternative.
I did a radio interview the day gold was down $44 and silver down $1.20. I always learn a lot from interviews or when I speak and I have a question and answer period. I've listened to most of the speakers out there at one gold show or another and quite frankly, they are boring beyond belief. It's the same speech year after year. I hate that and I hate trying to force my opinion down people's throats. Frankly we are in uncharted waters and no one has all the answers. But I do enjoy the questions I get at shows because it tells me what the listeners are interested in.
So when I was giving the interview the other day, the interviewer asked me for the safest possible investment. With many stocks down 40-50% (including some of mine) and more, he wanted to know what was safe to invest in. The answer may surprise you a little because it's not something I write about a lot but that doesn't mean I don't think about it.
We began an energy site 18 months ago at the request of some of our energy advertisers: it's called 321energy. (What a shock!) If you haven't been there, you owe it to yourself to visit now and again. I was reluctant to invest the money into starting the site because I didn't believe there was enough timely information on energy and I also believed it would be difficult to build the readers. I mean, there is a gold community of dedicated gold investors, (and all too many gold nuts who think it's something to worship) but there is no community of energy investors.
For every article which gets posted, we probably read five other articles. I don't want to post every single piece written about gold and silver, (or energy) I just want to post enough to help educate investors. When we began the energy site, I found myself reading 10 times more about energy than I had ever before. I have a little advantage over the average person, I read about 1500 words a minute. It drives Barbara crazy, she can't accept that you can both read that fast and absorb the material as well but you can. And I became a believer in Peak Oil. I also became a believer in nuclear power.
Peak Oil is not only real, it's here. We will realize in a year or two that we have actually passed the peak of oil production. Like it or not, the increased demand for energy from China and India is going to create a hell of a problem. And like our foreign policy (What foreign policy?) we have no energy policy. That's already dragged us into a war we can neither win, nor afford. I can't blame Baby Bush for the destruction of the dollar and our economy, the gutless Democrats are just as responsible.
We have an energy problem now. Not tomorrow, not someday, NOW. And maybe one guy in 10,000 gets it. I don't doubt I can find 1,000 more people in Miami who can discuss basketball more intelligently than they can explain our energy policy. It's what happens at the end of Empire and we are there. Boy are we there.
Uranium and nuclear power offer one of the only alternatives which is actually viable. The Tar Sands consume more energy than is being produced. I'll bet you didn't realize that. And alcohol from corn consumes more energy than it produces. We can afford those solutions now, we have both energy and money to burn. But one day soon we will be forced to actually look at the economics of energy production.
I can assure you Global Warming is real. I've been to Alaska and Northern Canada and it's warmer, much warmer. I've been to Greenland and north of the Arctic Circle in Finland. The days are warmer and the permafrost is melting and there are giant implications as a result. I can't say Global Warming is 100% caused by man. I don't believe it and the facts don't support it. Man makes a contribution but the sun and natural cycles of the earth have far more effect. But for certain, we can't afford to be pumping more and more CO2 into the atmosphere.
Nuclear power is a viable solution, perhaps one of the only supply solutions. Obviously reducing demand is just as necessary and that's going to happen as well. The war's over the next 20 years will be about energy and food, which is nothing more than a derivative of energy.
You want a safe investment, buy uranium. Or buy shares in a uranium company. But pick the right uranium company.
Five years ago, uranium prices were about $8 a pound, down from $110 (in constant dollars) in 1978. You couldn't give away a uranium project. Today, like most hard commodities, uranium has rocketed to $45. Now you can't stop for a traffic light in Vancouver without being offered shares in one of the 150 new uranium companies out there. But there are uranium companies and there are uranium companies.
You want to be investing in the real companies and many of the 150 companies will never mine a pound of U3O8 or develop a resource. I just returned from a few days in Argentina visiting one of my favorite resource companies.
Wealth Minerals was formed to take advantage of the rise in uranium prices with the goal of being the best nuclear resource company in Argentina. To cover all their bases they added a gold project in Central BC.
Argentina is one of those interesting countries where you have to wonder what they would be like if only they had better government in the past. (The US comes to mind as well) In 1914, Argentina had the 4th largest economy in the world and the per capita GNP was on par with England. Today the natural resource rich country has slipped to #30 behind Portugal but ahead of Slovenia.
Argentina was and is a leader in the use of nuclear power with the first of two operating plants coming on line in 1974 and a third plant was being constructed but was halted in 1994 with the plant 81% complete due to a lack of funds. And while Argentina has enormous potential for uranium production, currently they are not mining at all.
The country's Atomic Energy Commission (CNEA) began in 1950 and was responsible for exploration and development of uranium resources within the country but the last uranium mine was closed in 1997 for economic reasons.
Wealth has committed to an aggressive program of exploration and development with the goal of becoming the premier uranium company in Argentina. Wealth controls about 120,000 hectares of land in Salta province and has begun surface mapping. I didn't visit those properties so I can't really comment other than to point out some grab samples have returned valued of up to 3.34% uranium.
I did visit Wealth's properties in the San Jorge Basin located in the provinces of Chubut and Santa Cruz. The basin itself measures 400 km north-south and about 270 km east-west. And it seemed that in our three days visit, we covered every square inch of the basin by truck. We actually saw about 2 hours of rocks and it took 24 hours of driving in three days to see those rocks. I can verify there is a lot of ground in Argentina.
Within Argentina, uranium tends be be found in stratabound, sandstone-hosted rock similar to that of the Colorado basin in the western United States. In the Salta projects, there are between three and five mineralized horizons. It's up to Wealth to find a deposit which is both rich in grade and near enough to the surface to find and develop. In the San Jorge Basin, there are multiple horizons known to host uranium mineralization. We saw a lot of uranium in a lot of horizons and Wealth will learn a lot from the airborne survey.
One of the nice things about uranium is that it announces its presence to a device known as a scintillometer. The scintillometer measures gamma radiation given off by the uranium minerals and emits a loud high pitched squeal when around high grade ore. Wealth is conducting an airborne geophysical survey to measure ground radiation levels in the Southern Argentina properties and those results should be out shortly.
In addition, Wealth has just announced the purchase of a 100% interest in four uranium properties in Peru. Unusual about the deal is the fact that Wealth is actually purchasing the properties for stock and cash. Normally, companies want to stick to putting the money into the ground via work commitments. In this case, Wealth is putting up a total of 600,000 shares (worth about $1.2 million) and $167,000 in cash. The price indicates the high value Wealth is putting on the various properties. It's winter in South America now and the conditions are too cold to be working so Wealth intends to begin surface work in the 3rd quarter of 2006.
And Wealth has purchased a 30,000 square km property to the SW of Salta with a number of high grade surface showings with 10% of the grab samples showing values of 1% (20 pounds/ton) up to 3.34%. This deal was also done for shares indicating Wealth has a high degree of confidence in the value of the property.
While I was in Argentina I talked to some high level government officials about uranium and nuclear power and their intentions for the direction of nuclear power and mining within Argentina. And I can say the officials I talked to, get it. Currently Argentina produces almost 10% of their electricity via nuclear power. The government clearly wants to increase that percentage.
At present they are importing natural gas from Bolivia and Evo Morales has made it clear that the price is going up and the supply is not secure. Likewise, currently Argentina imports about 200 metric tons of yellowcake with a value of about $90 million US per year from France. There's always a possibility that in the future, for a lot of reasons, France could cut off the supply and that's not a condition any country wants to live with. Especially given the fact that there is a lot of uranium in Argentina now.
The government agency, CNEA, lacks both the financial resources and the people to go develop mines themselves. At one time they had the capability but they don't now. It makes all the sense in the world for the government to work closely with joint venture partners to develop the resources we know are there. For the government, they get to save the foreign exchange resources they are now spending on imported U3O8 and they can control their own energy future. And certainly the prospect of exporting yellowcake is attractive for both the government and any joint venture partners.
Wealth is at a very early stage of exploration for uranium in Argentina and it seems to me the market is not giving them much of a value for their properties. I really like their gold project in Central BC and either the market is giving them fair value for the gold and nothing for the uranium or it is giving them fair value for the uranium and nothing for the gold. In any case, it probably would make sense for Wealth to spin off the gold project at some point so full valuation can be obtained for each project.
At this point, Wealth needs a uranium resource to make it into the big leagues. I believe they will do it and Jim Dawson has an aggressive campaign planned once the weather warms up down south with the intention of having drills turning in six months or so. I do know the government supports their activity and remains firmly committed to the future of uranium mining and nuclear power in Argentina.
I'd like to see more of a sense of focus from Wealth. I'm not interested in seeing a five year exploration program which generates results only a geologist can understand. I thought I understood what they were doing in Argentina but that was before they added on the additional properties. I'm sure they are valuable, I just don't know how valuable. I want to see a resource now and I want to see a plan for development and mining. This is a race where 1st place is worth 1000 times more than 5th place and 150 people are in the running. I see Wealth as an easy $10 stock but it's a race.
There are no
mining experts in uranium, most of them have retired or died.
The industry is going to have to retrain and gear up for a new
generation of mining. Those juniors who make the correct decisions
now are going to reap handsome rewards. If ever there was a slam
dunk investment, it would be uranium.