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If it's Ghana, it must be Monday

Bob Moriarty
Sep 3, 2010

It's been a busy year. Gold wants to rocket to the moon yet great juniors sit and stagnate waiting patiently for some investor to make an appointment to buy 100 shares. You can't sell any shares without an appointment made weeks in advance. Studying the movement of juniors makes watching a Bonsai tree grow look exciting.

For many years I have used a chart of the XAU over gold to make both buying and selling decisions. That chart broke down in 2008 and has never recovered. Today it's about as valuable as a predicting tool as tea leaves or chicken guts. With gold this very minute at $1246, some $20 under its all time high, gold shares are cheaper relative to gold than they were in the middle of 2001 when you couldn't give shares away.

Either I have gone insane or the world has. With real inflation measured by John Williams of Shadowstats.com at 4.2% for intermediate goods in July, who in their right mind would buy a 30 year US Government bond paying 3.5%. The bond market is on the verge of a major crash and when it does, the sound will be heard around the world.

On Sep 1st we linked to a great piece about how hyperinflation will happen by Gonzalo Lira, a writer who is new to us. I think he has it exactly right when he suggests that hyperinflation is not inflation on steroids as most people believe but it is a rush out of paper money into something real. [And he's a novelist and film director by trade, yikes. That is a 'double treat' breath of fresh air for 321gold readers.]

If you think about it, as long as two people agree something is money or can be used as money, it is money. That includes gold, silver, paper, plastic, big rocks with holes in them, salt, shells, beads, cattle and I suppose, good-looking women. But when one party no longer thinks of something as money, you can be standing tall, with a pocket filled with big rocks with holes in them [and a house full of luscious red-headed wenches] and be as poor as a church mouse.

We are very near there. We stand on the edge of World War III with Israel doing everything in their power into nudging the US into attacking yet another country that is no threat to anyone. The "Clean Break" from the peace process called for an unlimited series of wars of aggression on the part of Israel back in 1996 and they continue today. They will until someone whacks Israel up the side of the head. This behavior is that of insane people and in the end will result in the destruction of Israel.

So we have the US government doing everything in their power to create hyperinflation on the one hand and the government of Israel doing everything possible to pull the pin from a nuclear hand grenade. I have shivers running up and down my back. Something really bad is about to happen. I had the same feeling in the summer of 2001.

African Gold Group

Physical gold and silver, booze and bullets remain the only safe havens. For what you have to keep in paper, you should be in gold and silver production stories or pre-production stories. I have one, African Gold Group (AGG-V), that I first mentioned in May; I wrote about their primary Mali project Kobada. They have just released really excellent drill results that the market simply ignored. [Editor's note: To AGG: Oy, as this goes to press, that news release is still NOT on your website.]

South Africa used to be the elephant in the gold production room. For a lot of reasons gold production in the country has slipped and now China leads the world. But within Africa, South Africa still out produces #2 African producer, Ghana by 3-1. Tanzania is in third place. I wrote about my visit to Midlands in Ghana a couple of months ago. On the same trip I visited the properties of the African Gold Group.

AGG has just released the first drill results from their program in Mali that was underway when I visited in May. The results were outstanding; up to 44 meters of 2.11 g/t rock worth some $85 a tonne. The stock did nothing. Part of the reason was the market has never heard of AGG but to a far greater extent, gold shares are not getting fair value because it's a lot easier to buy a gold ETF. In general I am in favor of the ETFs but there is little doubt, they are poaching sales from some outstanding juniors.

Over the long term, I don't think that's an issue. Investors can buy gold in the ground far cheaper than they have ever been able to do in the past and one day soon ordinary investors are going to be standing under the shadow of a nuclear cloud and start thinking maybe investing in gold would make more sense than investing in paper.

AGG has completed 131 RC drill holes in Kobada in Mali with a total of 16, 464 meters of drilling. That is a major program but still leaves a healthy $2 million in the company kitty. There is a 43-101 resource of 740,000 ounces of gold. With a $35 million dollar market cap at present, that only values the gold in the ground at $50 an ounce. That's pretty cheap.

A major is involved and funding part of the exploration. I view Mali as a couple of million ounces of gold and an easy takeover target. Someone big is going to want to get their hands on that gold.

The 43-101 resource in Mali is going to tend to put a floor under the share price. But Ghana has as much or more potential in the 3 major gold projects there. I did visit them and in one project illegal artisan miners were removing at least 20 ounces a day, perhaps two or three times that much. The gold is there and it would be cheap to mine.

There is no current 43-101 resource for Ghana but there are minor historical resources and at some point AGG will need to make a major commitment to Ghana as they have in Mali. They announced plans for an airborne mag and radiometrics survey to be conducted on two of their projects in Ghana but have not announced status on the surveys as yet.

As I said in my first article about Ghana, I have never been to a country that had so many 5 million ounce deposits waiting to be discovered. AGG has world-class potential projects in two mining friendly countries with cheap labor rates. Technical support is excellent and management seems to have a good handle on finances. I liked the company enough to buy shares when I got back from Africa.

The company has started to advertise and that's a good thing for them so people will get to know the name. AGG is a very cheap option on gold. We are shareholders and we are biased. Please take some responsibility for your own actions.

African Gold Group
AGG-V $.51 (Sep 2, 2010)
75.2 million shares
African Gold Group website


Bob Moriarty
President: 321gold

321gold Ltd