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Gold Notes

Richard Russell
Dow Theory Letters
March 31, 2004

Gold Notes -- Newmont recently raised a billion dollars. The thought is that NEM is readying to buy another gold mine. If they are going to buy another mine, which might it be? If I had to guess I'd guess American Barrick or Placer Dome, but that's just a dumb Russell guess.

I do believe that we're at the beginning of a broad move towards consolidation in the gold industry. The leaders want to increase their reserves, and the easiest way to do that is to buy other mines

And speaking of consolidation, yesterday it was announced that the Russians are in the act. Norilsk Nickel announced that it had acquired 20 percent Gold Fields (GFI), the giant South African gold mining company. The $1.16 billion deal is the largest foreign investment made by a Russian company up to now. Norilsk is the world's largest producer of nickel and palladium and a leading producer of platinum, copper and cobalt.

Now why would Norilsk want to buy a big piece of a major South African gold producer for over a billion dollars? Russell guess -- because Norilsk thinks that the price of gold is going to move higher. Could that be it? Answer -- Yeah it could.

I've mentioned this outfit before but CEF (Central Fund of Canada) is a company that holds almost all its assets in gold and silver, the actual metals. The stock sells for just over six dollars, which represent about a 15% premium over net assets. But if you buy America Eagles you'll probably pay a premium of near 15% over the spot price of gold, so looking at it that way, the premium over net assets isn't that prohibitive, not if gold really takes off one of these days. My old friend, Ian McAvity is a director of CEF, which I like (Ian's a "gold-man" from way back). And yes, I do own some CEF.

And if you need to buy coins, call my good friend, the one and only Leon, at 858 459 2228. Leon will ship anywhere in the states. I make nothing on anything Leon sells -- Zip. Nada. Nothing. One more thing -- Leon is totally honest.

Richard Russell
Dow Theory Letters

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