Back up the truck
July 8, 2004
On May 10,
two months ago, I wrote a piece called, "Buy."
readers confused by my message, basically I was trying to say
it was time to buy. The hardest thing for nervous investors to
understand is that you want to be buying when no one else wants
gold stocks. Unfortunately we remain a herd animal and people
still want to be part of the herd. If you keep doing that, you
will forever be selling at bottoms and buying right at the top.
The herd is always wrong. Do the opposite of the herd if you
want to make money on a consistent basis.
Let me give
you a perfect example of irrational behavior on the part of investors
pointed out to me by the peerless Steve Saville only today.
Resource (TSX: CCM) reported more good drill results from its
Benzdorp porphyry-style gold project, including 315m (beginning
at the surface) of 0.45g/t gold. Strangely enough, the results
were reported after the close of trading on Tuesday but not a
single Canarc share was traded on the TSX on Wednesday. This
shows that in the current market environment there is a general
lack of interest in the speculative mining stocks. However, when
the market in these small-caps is dead (as it is right now) it
often pays to do some nibbling."
I was as serious
as a heart attack when I sent out the "Buy" alert in
May and the timing has turned out well. But there is another
issue. The past two months have proved to be a good time to buy
stocks in a low risk environment. But now I suspect we are about
to come out of the summer doldrums and for certain you want to
be fully invested when the train leaves the station. I suspect
the increase in volatility suggests a move into what Richard
Russell calls Phase Two of the ongoing gold bull market when
the investment community begins to take an interest in the metals
I think it's
time to back up the truck and load up with quality gold and silver
shares. In real terms they are as cheap or cheaper than they
were three years ago at the bottom when the industry hovered
on the brink of extinction. Companies are far better financed
today and management isn't in a constant and wasteful battle
to keep the wolf from the door. Load up the truck while you can.
The following list is not designed to be inclusive or even to
be the very best stocks you can buy. There are hundreds and hundreds
of companies around. No one can possibly follow them all and
I don't even attempt to try. Myself, I am skeptical about companies
which started up last week but when the wind is strong enough,
even the turkeys will fly. These stocks listed below are companies
I know the best, naturally many of them are advertisers, but
this isn't even a full list of advertisers, these are companies
I would be happy to own. And in many cases I do.
Do not fall
into the trap of bidding up poorly-traded tiny juniors with no
liquidity. Don't chase stocks based on my recommendation or that
of anyone else. It's very common for stocks to rise just after
someone popular reommends them and just as common for them to
come back down shortly thereafter. I think these stocks are good
buys at today's prices, not two or three times today's prices.
Be patient and if you can't get into one, throw a dart. If I
am right about timing, it doesn't really matter which stocks
you are in. They all look good to me given our present political
and financial outlook.
I like cash
flow in metals stocks. The constant dilution of many stocks is
like a Chinese Water Torture. I've seen the market cap of some
stocks go up 10-fold while the price doesn't change. So as an
investor, you may be right on the overall value of a company
increasing but never get to share a penny of it.
Silver stocks I like
Mining (SRLM) website
Sterling is hard to beat in the $6 area. It got way overpriced
at $14 but they are near a fully-reporting status which will
help their liquidity. And by September they will be pouring silver
in Mexico. Their progress is 'slow but steady' towards their
2. Endeavour Gold Corp (EDR-V)
The name may be confusing but their message isn't. The stock
was this level in January when they announced a giant silver
deal in Mexico. Since then they have done a $9.6 million dollar
financing and are moving forward with the project. I talked with
Brad Cooke about the project yesterday. It is just as good or
better than it looked in January yet the market is ignoring the
fact they will be a producing silver mine in about six months.
It doesn't get any better than this, money in the bank, great
management and a project soon going into production.
Gold stocks I like
Sun Mining. (DSM) website
Take everything I said about Endeavour Gold and duplicate it.
I just came back from a trip to Jacobina in Brazil two months
ago, money in the bank, great management... production starting
in maybe 9 months... everything on track... It doesn't get any
better or cheaper than this. I really like these people and the
progress they have made in two years.
2. Sur American
The stock was about $.24 a year ago when I first started following
them. I did a piece on them in late December when they were $.56
and the stock vaulted to $1.97 before crashing (like many many
other stocks in the Dec-to-now timeframe) down to $.40. Yet they
have really advanced their projects and come up with remarkable
grades of new showings.
Gold (DYG) website
The stock is cheaper than it was before they announced a series
of deals in China. The market isn't giving them a cent of value
to an immense potential in China.
Plains (EPL) website
With a dozen or more projects in joint ventures, Eagle Plains
is one of those perfectly situated companies in a roaring gold
bull market. Great management, good projects and solid joint
Newmont just pulled out of a joint venture on their main property
in Nevada after spending $3.5 million. Now all the data and benefit
goes right to Midway who now owns 100% of the project. That's
a very good deal for Midway. I think Newmont uses a number of
4 million ounces and the fact there isn't 4 million ounces is
bad for Newmont and great for Midway. A 1 or 2 million ounce
property in a company with a $156 millon market cap isn't exactly
the end of the world. In the process of looking at a merger with
a private company with a giant sized land position. A merger
would be good for shareholders of both companies. Midway would
end up with 6 major projects and the private company would now
have access to capital.
6. New Guinea
Gold/Vangold (NGG and VAN) website / website
Joint venture partners in Feni. Giant potential, project is similar
to Lahir. Crap shoot with a 30 to 1 payoff. Those are good odds.
Vangold has 75% of this project, New Guinea Gold has 25% but
they jointly hold a raft of excellent potential properties in
PNG. Something will hit eventually. More drill results shortly.
Copper stocks worth
With a world class series of IOCG properties located in the Baja,
Cardero has hit a home run. But it's been said that you don't
know you have a mine until you have a law suite pending and that's
what is hanging up the price. Cardero did a deal with a company
three years ago in the Baja on some of the projects and because
of internal bickering amongs the shareholders of that company,
they are trying a bit of greenmail on Cardero. I doubt the suit
has any merit but in today's business climate, anyone can be
sued for any reason. Cardero still has world class project in
Peru and Argentina.
a must-have stock in any protfolio.
Dynasty (NDM) website
World class management and project in Pebble in Alaska. Stock
rocketed to $11.54 where it was overpriced but it's back to $5
and quite reasonable.
Orion (NNO) website
Part owner of a producing copper mine in Argentina. For all the
nonsense about how we are about to run out of silver bandied
about, they need to look at the supplies of copper and current
demand. We really are about to run out of copper. Price of the
stock is where it was 6 months ago. Insane. Buy when all of those
around you are insane.
It's just come up on the radar scope but here is a tiny market
cap, producing copper junior. I will be visiting their property
and doing a story in a few weeks.
Odd and sods
Mining Capital (EDV) website
Where else can you buy $4.50 worth of
the very best gold, copper and silver stocks on the block for
at this! They
are a venture capital company who take their payment in stock
and as a result, get first dibs on some of the best juniors around.
It's a zero brainer. If you like gold stocks, you have to like
Endeavour Mining Capital.
I first came across these guys when the stock was in the $.20
to $.24 range six months ago. They want to find a good property
they can take into production. They have rejected 15 properties,
and that's good. One day they won't reject a property and the
stock will triple overnight. Good management with lots of experience.
North Gems (TGX) website
Emerald mine in the Yukon. I'm out the door in 10 mins (Thu 8th)
on a visit with them and I will be writing them up in 2-3 weeks.
July 8, 2004
Please don't email me, I am out
until Sat Jul 24th.