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Back up the truck

Bob Moriarty
July 8, 2004

On May 10, two months ago, I wrote a piece called, "Buy." For those 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.

"Canarc 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 shares.

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

1. Sterling 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 goals.

2. Endeavour Gold Corp (EDR-V)
website
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

1. Desert 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 (SUR) website
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.

3. Dynasty 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.

4. Eagle 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 venture partners.

5. Midway (MDW) website
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 having

1. Cardero (CDU) website
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.

Cardero is a must-have stock in any protfolio.

2. Northern 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.

3. Northern 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.

4. Palladon (PLL) website under construction
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

1. Endeavour 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 $2.90? Look 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.

2. Atikwa (ATK) website
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.

3. True 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
Bob Moriarty
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Please don't email me, I am out of touch until Sat Jul 24th.

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