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Buying Bucks for Cents

Bob Moriarty
Oct 3, 2008

With the world's banks potentially only days from a total freeze-up and an Argentina style collapse, it's a good time to think about safe havens. If you haven't bought a physical gold or silver insurance policy, you don't have much time left.

Physical gold and silver are your insurance policy but there is a real limit to how much you can own. That's true both from a security point of view and the difficulty of buying metal right now. If you are investing, you want to be in production or near production stories in good juniors with real assets in gold or silver or energy.

In 2001 many juniors were selling for less than the cash they had on hand. The same situation exists today and that should be no surprise since we are at an extreme of emotion. It appears that gold and the gold stocks bottomed out as forecast in September.

The ideal stock would be a stock that has unlimited upside potential and very limited downside. I know resource investors are burned out at the losses of the last six months but that's always true at bottoms. If you have any contacts at Canaccord, contact them and see if you can get your hands on a report called "Cash Rich, Cash Poor Small-Cap Mining." It was put out the 19th of September.

It reveals that Nautilus Minerals (NUS-V) has $295 million dollars in cash and a market cap of $217 million. At today's price of $1.46 you could buy the company, fire everyone and take home about $80 million in free money. The second company on the list, Orvana Minerals (ORV-V) is selling for $.59 a share and has about $.70 in cash a share. How much downside do you have from there?

Last fall I visited Durango Mexico to see a silver junior and wrote about them. The company, Golden Tag (GOG-V) had a tiny resource of 2.5 million ounces of silver. They announced a dramatic increase [pdf] in their share of the resources in January of this year to 21 million ounces silver equivalent as a result of last year's drill program.

Golden Tag owns half the San Diego property. Their partner is silver mid-tier ECU. GOG completed their earn in to San Diego in 2007 and they now split all expenses with ECU. GOG is the operator on the project.

It's a good story. Golden Tag did a JV with ECU on a highly prospective property right in the silver heart of Mexico. With a small expenditure of not much more than $2 million, they have generated a fair size 21 million ounce resource. They are now in a Phase 4 drill program of about 5,000 meters to test deeper formations.

It will be weeks before assay results begin to come out on the 1st hole that went down to 1000 meters. But they have located a new, unknown massive sulfide area of mineralization. Some of the intersections were in the 30-40 meter true width.

I expect the 5000-meter program to be more successful than last year. The resource could easily double and perhaps go higher. They did intersect a big vein system.

Even though I'm off the pure exploration plays right now, GOG is very appealing. First of all, resource stocks are all on the 2 for 1 counter. You will never again see really solid companies selling so cheaply. Second, while GOG is not going to go up 20-fold in a vacuum, they are a solid base hit, especially at the lowest price in two years. They manage to get more done with less expense than any of the small Mexican juniors I follow. I was and am quite impressed with the way they make the Eagle squeak.

Look for a new resource early in the New Year. You can buy silver, in the ground, through GOG, at a little over $.30 an ounce, now. It should be three times that and they will have a lot more silver with the new resource. At some point ECU will come in and snap them up at a nice premium.

Golden Tag is an advertiser and we are biased. We do not own any shares in the above-mentioned companies.

Golden Tag Resources
GOG-V $.22 (Oct 3, 2008)
GTAGF-PK 39.7 million shares
Golden Tag website

Bob Moriarty
President: 321gold

321gold Ltd