Bull & Bear's Resource Stocks

       James Turk: "I have been very critical of GLD, the new exchange-traded fund for gold. My point has been that it is not an alternative to owning physical metal. Rather, it is just another paper alternative promising to deliver gold.
       Consequently, I have been wondering how GLD would prepare its financial statements, given that the prospectus discloses that gold stored in its subcustodians and subsubcustodians (which could be all of GLD's gold) is not audited, or even inspected. Its recently filed 10-Q answers in question.
       The asset reported on GLD's balance sheet says: "investment in Gold". It does not say just: "Gold." By declaring GLD's asset to be an "investment", it is an easier hurdle to meet for auditing purposes.
       Investments in gold can be nearly anything gold related, and for example, include gold certificates and other promises to pay gold. All GLD has to do to satisfy the auditors therefore is to show them a bank statement of the Bank of England for example, or any other subcustodian (i.e., a piece of paper) that says gold is stored with them.
       If GLD declared its asset to be "Gold". They would have to substantiate to their auditors that the gold really exists, which GLD of course cannot do because of the inability to audit or even inspect gold stored in subcustodians and sub-subcustodians.
       Thus, this 10-Q just re-confirms what I and others have concluded all along - GLD is just another paper scheme. It should not be considered as an alternative to physical gold ownership because it is not. But we only need logic, and not the 10-Q, to tell us that.
Since launching in November 2004, GLD has gathered some $2 billion of assets. Its sponsors would have us believe that this $2 billion is newly created gold demand, but this proposition is self-evidently preposterous given that the gold price has fallen $30 since GLD was launched.
       How much of that $2 billion would have been used to purchase physical metal if GLD hadn't existed? How much higher would gold be today if GLD wasn't launched? So do not view GLD as an alternative to physical gold, because it's not."

       Gold & Silver remain in the midst of a major bull market, expected to continue into 2007-2008. Simultaneously, they are in the middle of what has been forecast to be a 6-12 month correction/consolidation - particularly in Silver - that could stretch into April 2005 before a new multi-year low takes hold.
       Gold rallied to new highs - violating part of this scenario but not altering the April 2005 cycle. However, Silver remains below its 850.0/SI high of April 2004 and could drop to 560.0/SI in the coming months. A weekly close below 662.0/SIH will confirm this.
       Platinum remains in a 4-5 month consolidation pattern until a daily close above 884.0 or below 812.0/ PLJ. A surge up to 954.0 is possible IF a daily close above 884.0/PLJ materializes. Otherwise, Platinum should also work lower into April 2005."

       Robert Briechle: "National Fuel Gas Co. (NFG): An integrated energy company with $3.7 billion in assets, NFG operates in three major business sectors: natural gas distribution, pipeline and storage, and exploration and production (E&P). The firm provides gas service to more than 732,000 customers in western New York and northwestern Pennsylvania, operates a 2,910-mile pipeline system extending from western Pennsylvania to the Canadian border, and owns underground gas-storage facilities. E&P operations take place in the Gulf of Mexico, California, Appalachia, and, more recently, the western provinces of Canada. Other activities include energy marketing, timber, and international energy projects. The Timber segment markets lumber from its New York and Pennsylvania land holdings.
       NFG's operations are capable of generating about $250 million worth of free cash flow through the end of the decade. Management is quick to dispose of nonperforming assets and to move to better opportunities. The balance sheet is in excellent shape, with debt lowered to 48% of total capital, and the firm is in its strongest financial shape in years. NFG just reported its second highest earnings year in its history ($164 million, or $1.98 per share), with earnings growth expected to continue for the next two years.
       Conservative investors can rely on the stable nature of the company's regulated Natural Gas Distribution and Pipeline and Storage operations, which represent more than 60% of earnings. Also germane is the company's 34-year record of increasing its dividend (just raised again by 3.7% to $1.12 per share from $1.08 in June 2004), a policy expected to continue, and an attractive yield. And management's recent actions to address underperforming assets, particularly its E&P company, are also a positive factor going forward.
       A share of NFG purchased at the 52-week high in 1994 would today earn a 6.2% yield. The company's diversified gas-distribution earnings, improving financial position, balanced earnings mix, good dividend record, and attractive yield make the shares suitable for conservative investors."
       Editor's Note: Mr. Briechle is Senior Vice President, AFA Financial, Inc., North Royalton, OH.

       David Morgan: "We expect a choppy market for gold and silver for the next three months at least. Silver is acting stronger than gold presently and may move to the $7.25 level only to be followed by disappointment, meaning another pullback. The best we can offer is to stay the course and buy only on weakness, selling into strength is possible but all markets are so indecisive right now it is best to keep accumulating.
       Moving into 2005 silver should hit the ten-dollar level at some point. Historically, the precious metals make strong moves up in the first quarter of 2005. We anticipate this may not be the case this year. It is possible to see gold and silver languish. Gold is more U.S. dollar dependent than silver and if the dollar index is able to mount a multi-month rally soon, gold may stabilize the recent gains and consolidate further. Silver being a smaller market and receiving non-stop demand from industry, should continue to out perform gold. Make no mistake the long term precious metals trend is significantly higher with possible peak in 2010.
       Because of the fundamental factors affecting the dollar and the macro economic picture on a worldwide basis, it becomes probable that we will see higher metals and mining share prices in 2005. We expect more participation to take place, meaning more buying pressure ass the mainstream investing public begins to understand the commodity boom ahead and the precarious position of the U.S. dollar. Most average investors are not very comfortable buying stocks, but less likely
       We would not be complete in our forecast without writing a bit about the other point of view. Andy Smith of Mitsui Global Precious Metals published "Precious Thoughts: 2005 Forecast." His view is that gold will be a poor performer in 2005 and sees $480 as a near term high point. This forecast points out that gold has not appreciated that much in any currency except the U.S. dollar, and Andy sees the dollar at a turning point and looks for dollar strength.
       Precious Thoughts is not bullish on any of the white metals. Platinum, Palladium, and Silver all look lower to Andy Smith. Their technical work suggests Platinum around $765, Palladium near $150, and silver is key to watch at $6.70, but predicts this level of support will fail and silver could slide to $5.32 to $5.50. In our worst case scenario we might see gold near the $410 level and silver all the way down to $6.20.
       Obviously, we do not agree that all is well with the U.S. dollar, but short term the dollar is due for a rally. To state gold has not done well in other currencies certainly is factual, but most ignore the most important point that the Yen for example is almost entirely tied to the U.S. dollar as are all world currencies, so it is a bit ludicrous to think that any currency can move against the dollar. We are not disputing the currency markets, we only wish to establish the given fact that all currencies are ultimately tied to the U.S. Remember that the deck chairs on the Titanic were all aboard ship, and even though the chairs could be rearranged the ship was going down and the chairs along with it.
       Again, to remain as consistent as possible we are still looking for gold to breakout in most if not all currencies and this will give us great confirmation that the next phase of the bull market in the precious metals has begun. Right now, we are still climbing the wall of worry that all bull markets must climb."

       Gary Alexander: "Most commodities have made their turndown. Prior to last month, oil and gold were the sole big-name commodities rising strongly, but gold got a nosebleed at $450 and started down (We sold half our gold stock position at $450, but I still like holding gold bullion as a currency hedge.) Just as I said in last September's issue, when gold hit $450, almost every major publications started talking about gold, and how to get rich in gold. I said the opposite. This is the time to lighten up.
       Governments still control 32,000 tons of gold, about 12 years of new mine production. Every time we see $400 gold, governments sell into the rally. The U.S. alone still owns 8,135 metric tons (three year's global mine production), while Germany, France and Italy own nearly 9,000 tons. The International Monetary Fund and European Central Bank control 4,000 metric tons, and the Swiss own 1,443 tons.
       Turning to oil, most Americans look to the gas pump for their views on inflation, and prices are falling again. Based on the views of Daniel Yergin, author of the seminal book on oil markets, The Prize, I'll predict an average $38 a barrel oil this year. Yes, oil demand will rise, but supplies will rise faster, as $40 oil fuels new discoveries, in places once though too expensive to develop.
       Soon, we'll see oil coming from oil sand, from wells in deeper water, and we'll be using scanners from space to profile more geological anomalies that promise more oil deposits. Based on new supply potential, the International Energy Agency estimates there are over a trillion barrels of supply at today's prices, and 2.3 trillion barrels at slightly higher prices. If unconventional sources like tar sands and shale are included, we might be able to see four trillion barrels of potential new supply.
       The U.S. Energy Information Administration has projected a 2010 world oil price at $23.70 a barrel (in today's dollars). By 2015, they say, the price should be $25.43 a barrel. This is the first time they made a prediction that far in the future. But an article in the current Foreign Affairs warns that lower oil prices could cause a depression in the Middle East, resulting in political upheaval there. Maybe they have a point. That region is getting poorer, not richer, despite their vast oil deposits.
       A month ago, the popular media was shouting the opposite warnings. The Sunday supplement Parade asked the burning question, about gas lines: "Could It Happen Again?" The prestigious Scientific American proclaimed "The End of Cheap Oil." As usual, these "Limits to Growth" articles cried "Wolf" at their loudest pitch just as the problem retreated back into remission."

Dr. Hans Black: "Both the gold and silver markets are more or less following our script of the past several months, as they seem to be consistently correcting the excesses of last November/December. The price of gold bullion, which has touched $455 just two months ago, now stands at approximately $418 and shows every sign of needing a further decline under $400 in order to shake the many weak longs that remain in hedge funds involved in this market.
Investors are no doubt reeling from the speed and severity of the drop in gold stocks. For example, the most senior gold stock, Newmont, has plummeted over 20 percent in just a month-and-a-half during this recent gold setback. Other middle-cap companies have fared worse and many have declined between 30 and 40 percent from their peaks. However, we plan to use any further weakness to re-accumulate some of our favorite gold shares. Although it may be a drawn-out process, we expect that somewhere in the next three-to-six months a more solid bottom for gold in particular, and other precious metals in general, should form. For longer-term holds, we continue to like Newmont, Placer Dome, Eldorado, Cambior, Orvana and Southwestern Resources, but would only advocate additional buying once gold bullion dips below $400."

       Joseph McKittrick: "Throughout a large part of its history, the domestic steel industry has played an important role in the economic and technological success of the United States. In days past, there were tales of "Robber Baron" tycoons, such as Andrew Carnegie or J.P. Morgan. Fortunately for the American consumer, those days have past, but the legacy of these important companies still lives on.
       Nucor Corp's (NUE) origins date back many years to a company founded by Ransom E. Olds (the founder of Oldsmobile). Although originally started as a nuclear instrumentation and electronics company, a reorganization effort was launched in 1964 to revitalize the less than profitable company. A key decision was made to expand the company around its most profitable business, the manufacture of steel-joists. As business boomed, the company constructed its first steel mill in 1968. Since that time, the company formerly called Nuclear Corporation gained three more joist facilities, eight more steel mills, and a new name, "Nucor Corp."
       Nucor's success as a steel business has been significant. Today it is the largest steel producer in the United States and employs over 9,900. Manufacturing facilities are located in twelve states and produce products such as carbon and alloy steel, steel deck, plate, beams, cold finished steel, metal building systems, light gauge steel framing, and steel fasteners. NUE's business is broken into several smaller groups, known as Bar Mill Group, Sheet Mill Group, Nucor-Yamato Steel Company, Beam Mill, Plate Mill, Vulcraft Group, Cold Finish Group, Building Systems, Fastener Division, and Nucon Steel.
       The Bar Mill Group produces steel bars, and other products for recreation equipment, farm machinery, and automotive applications. NUE's sheet mill group fabricates flat-rolled steel for appliances as well as pipes and tubes for construction and other industries. Nucor-Yamato and the Beam Mill Group produce heavy structural steel products, including pilings and super-wide flange steel beams. Nucor's Plate Mill produces steel for makers of refinery tanks, rail cars, and ships/barges. Vulcraft continues NUE's steel joist business as well as producing joist girders and steel deck for buildings. The Cold Finish Group makes cold finished bars that are used to produce machined parts. NUE's fastener division, as one might guess, produces screws and bolts used in farm implements, construction, and military applications. Nucon produces light gauge steel used in residential and commercial construction framing.
       Interesting Qualities To Note: Major competitors include Bayou Steel, Birmingham Steel, and Bethlehem Steel. Nucor has increased its dividend every year since 1973. Nucor is a member of the S&P 500 index.
       Since we last featured Nucor in February 2003, the company has risen from a price of $20 TO $57 (accounting for a 2-for-1 split last October). Based on the current dividend the company is Overvalued, with a yield of only 1.0% and downside risk of 54%. A dividend increase appears likely in light of NUE's past record and its current payout ratio of only 7%. This will inevitably raise the company's upside and thus lower the downside. Earnings have undergone a steady recovery as the Bush administration briefly used tariffs to curb alleged foreign dumping of steel. The company does not appear within our regular pages as it was moved to the Faded Blues category. However, because of our extensive writings we felt a review would be very helpful to longer term subscribers. Our rating therefore reflects our belief that although a dividend increase is likely, shares have already undergone a drastic price increase and have exhausted the vast majority of remaining upside."

       Canadian Oil Sands has plenty more upside as its huge potential emerges.
       Tobias Crabtree: "One of our energy holdings - Canadian Oil Sands Trust (COSWF) - has had a great run. The stock itself is up some 48 percent, and if you had reinvested dividends, returns rise to 54 percent. Many of our subscribers want to know more about it - what exactly it is, and whether at these levels we still like it.
       Canadian energy trusts are similar to U.S.-based master limited partnerships, such as Income Portfolio holding TEPPCO Partners (TPP) - that is, they pay a distribution that includes some return of capital along with a dividend.
       And yes, we still like Canadian Sands very much and think it has further to go. It's true that the strong demand for trusts - which offer attractive yields along with exposure to rising oil and natural gas prices - has raised valuation levels. But trusts that are positioned to expand their reserve base, setting the stage for a rise in future payouts, remain good buys. Canadian Oil Sands squarely fits the bill.
       The fifth-largest independent Canadian energy producer, Canadian Oil Sands offers the purest play on the Alberta oil sands, which are estimated to contain some 1.75 billion barrels of recoverable oil - second only to Saudi Arabia. While traditional crude production in Canada has been dropping, production from oil sands has been growing steadily, and by 2015, three out of every four barrels of oil produced in Canada may come from oil sands. (Further testament to the importance of oil sands: major oil companies ConocoPhillips (COP) and ExxonMobil (XOM) have signed on as partners with Canadian Oil Sands in its oil sands project.)
       Of course, there's no free lunch. Extracting the oil requires a large input of energy; as a result, the company's operating costs are high - averaging nearly $21 a barrel during the third quarter of 2004. But overriding the high costs is the enormous growth potential of the trust's reserve base. By mid-2006, when an $8 billion capital investment program is due to be completed, the trust should be able to ramp up production nearly 50 percent compared to the most recent quarter's average of 86,000 barrels a day. Such rapid growth combined with a slowdown in capital spending should lead to double-digit hikes in the quarterly distribution.
       We think the stock, despite its strong run, has plenty more upside as investors become more fully tuned into the tremendous potential growth in production. The trust's proven and probable reserves have an estimated life of nearly 60 years - vs., for example, 44 years for oil sands play Suncor Energy (SU). The company has a strong balance sheet, with net debt below 40 percent of book capitalization, and despite its major capital investment program it has maintained steady quarterly distributions of $.50 Canadian.
       A very slight negative is that additional shares could be created for Canadian residents once non-Canadian ownership - now estimated at 43 percent - exceeds 50 percent, slightly diluting shares for U.S. residents. Also, a 15 percent Canadian withholding tax is deducted when distributions are paid, and the nontaxable portion of the cash distribution is treated as a reduction of cost base, necessitating two additional forms at tax time for U.S. residents. The stock trades on the Toronto Stock Exchange in Canadian dollars, under the symbol COS.UN; U.S. investors can buy shares in U.S. dollars over the counter under the symbol COSWF. We advise buying Canadian Oil Sands for a target of 80 (in U.S. dollars)."

       James Rapholz: "I bet that less than 2% of you folks out there would ever dream of getting yourself involved with a great big pile of filthy, dirty, old, black coal. But, I'll also bet you the price of a good steak dinner, that after you read the following - your avarice just might change your thoughts on coal...
       This one goes by the handle of Fording Canadian Coal Trust (NYSE FDG $77.57). Last year's earnings per share = $1.56, annual dividend $4.29 "5.5%," (pays quarterly), and is 47.9% held by institutions.
       This company is an export-coal producer, with the capacity to supply more than 20 million tons of metallurgical and thermal coal products. Its U.S. and Mexican subsidiaries produce the industrial minerals wollastonite and tripoli.
       The Fording Coal Trust is the purest play on the international supply/demand imbalance for metallurgical ("met") coal. This market is driven by the high demand from steel companies for this type of coal because of the record global demand for steel that is primarily derived from it.
       A real good example of the supply crunch for steel came from the auto builder "Nissan" last December, when they announced they would be forced to shut down operation at 3 of their plants. Nissan said that high demand for its product coupled with a shortage of steel left them without enough steel to meet their demand.
       Nissan buys the majority of its steel from the South Korean firm Posco. They recently asked Posco to increase shipments and Posco has just announced that they had signed a new $120 per ton "met" coal supply deal with a major Australian supplier.
Japan's Nippon Steel Corporation and Korea's Posco have just entered into a strategic deal with Fording to purchase a (2.5% stake each) in FDG's Elk Valley Coal Partnership as part of a plan to increase Elk Valley's metallurgical coal production from 5.6 million tons per year to 7.0 tons per year.
       Fording did own 62% of Elk Valley but, after all the deal is completed, they will own just under 60% with Teck Cominco Limited of Canada owning the remainder.
       This is where the money is going to fly into Fording: Nippon steel recently said they have entered into a 10-year supply contract with Elk Valley and Fording's Mine to supply it with 29 million tons of coal beginning this year. It is a 6 million ton increase over the amount that Nippon purchased from the two mines over the past ten years. The price per ton for the 2005 coal will not be disclosed until April.
       Industry sources put the price of the 2005 coal at $120 per ton, which is more than double what Nippon paid in 2004. So, Fording gets a 25% increase in Elk Valley's coal production for 5% equity share and they get a 10 year contract to buy all the coal they are capable of producing.
       A very small percentage of all the coal in the world is pure enough to produce stainless steel. And because of long lead times to find new supply (4 to 5 years) - Fording has a secular supply demand imbalance that is going to bring them a mountain of money!
All of this information suggests that 2005 contract prices for metallurgical coal will be double what is sold for in 2004. Coal mining is a fixed-cost business so one might conclude that Fording will be paying a dividend of $15 to $18 per share or 19 to 23%...
       Fording's "Coal-Year" starts on April 1 each year, meaning that 2005's distributions will not increase until the new contract prices go into effect as of that date. This wave of money should last for at least 6 to 8 quarters. Buy Fording up to $84 and expect to sell it for $120 by the end of 2006. Now - coal really doesn't taste all that bad - does it?"
       For more information on the Fording Canadian Coal Trust, contact J. G. Gardiner, President/CEO, 205 9th Avenue SE, Calgary, Alberta, Canada T2G 0R4, (403) 260-9878.

       Roger Conrad: "Fund investors interested in a low-risk play on rising natural gas use should check out FBR American Gas Index Fund (GASFX, 15.49, no load, 2.6 percent yield). Launched in the early 1990s to hold the members of the American Gas Association, FBR rode Dynegy, Enron and Williams Companies to a compound gain of 149 percent from 1995 to 2000, crashed during the early 2000s bear market and has since followed the sector recovery to post solid gains. Today it's considerably more conservative, weighted toward regulated giants like Duke Energy, Dominion Resources, KeySpan and NiSource.
       Over the long haul, FBR will continue to reflect these companies' growing strength. Though I prefer constructing a portfolio of individual stocks, the FBR American Gas Index Fund is a buy up to 16. Note, however, the fund has had two up years and would surely pull back on a jump in interest rates.
       Those interested in building their own fund should check out my favorite direct purchase plans: Aqua America (800-205-8314, $500 initial minimum investment), Atmos Energy (800-543-3038, $1,250), ChevronTexaco (800-842-7629, $250) CLP Holdings (800-749-1687, $250), Consolidated Water (877-390-3093, $250), Dominion Resources (800-552-4034), $350), Duke Energy (800-488-3853, $250), Energen (800-946-4316), $250), Entergy (800-225-1721, $1,000), KeySpan Energy (800-948-1691, $250), MDU Resources (800-813-3324, $250), ONEOK (800-653-8083, $250), Piedmont Natural Gas (800-937-5449, $250), SBC Communications (800-351-7221, $500), Southern Company (800-554-7626, $250) and Verizon Communications (800-631-2355, $1,000)."

       George Dagnino: "Because of the strength in the energy sector, and in those stocks providing a high yield, we are recommending Enerplus Resources Fund (NYSE: ERF $39.14).
       ERF is an energy investment trust that holds royalties for EnerMark Inc., Enerplus Resources Corporation and Enerplus Oil & Gas Ltd. All of Enerplus' oil and natural gas property interests are located in western Canada in the provinces of Alberta, British Columbia, Saskatchewan and Manitoba.
       Production volumes for the year ended December 31, 2003 from Enerplus' properties consisted of approximately 42% crude oil and natural gas liquids (NGLs) and 58% natural gas on a barrel of equivalent oil (BOE) basis. During 2003, Enerplus, participated in the drilling of 543 gross wells (294 wells).
       In January 2004, the Fund acquired Ice Energy Limited, which operates a core shallow gas area in western Saskatchewan, as well as a commercial coal bed methane development project in central Alberta."

       Dan Sullivan: "Burlington Resources (BR) The oil and gas producer earned $400 million, or $1.02 per share, including a previously announced charge of $90 million, or 15 cents per share. In the year-ago period, the company posted earnings of $387 million, or 98 cents per share. Had the company not had the charge, it would have earned $1.17 per share in the fourth quarter.
       The company's revenues rose 46% to $1.6 billion from $1 billion in the year-ago period. Production rose 5% to 2.85 billion cubic feet of natural gas equivalent per day. Natural gas sales averaged $5.97 per thousand cubic feet up from $4.40 per thousand cubic feet in the year-ago period. Natural gas liquids prices averaged $29.04 a barrel as compared with $20.54 per barrel in the fourth quarter of 2003.
       For the full year, Burlington Resources earned $1.53 billion, or $3.86 per share, on revenue of $5.62 billion.
       Halliburton (HAL) posted fourth quarter 2004 income from continuing operations of $183 million, or 41 cents per diluted share. This included a loss from discontinued operations of $384 million, or 86 cents per diluted share. This loss is primarily the result of a revaluation charge that arose from the increase in the value of the 59.5 million shares of Halliburton common stock that have been contributed to the trust for the benefit of asbestos claimants.
       The company's consolidated revenue was $5.2 billion for the fourth quarter, down 5% from the year-ago period. This decrease can be directly attributed to a reduction in activity on government services projects in the Middle East.
       Nucor (NUE) enjoyed sharply higher fourth quarter earnings thanks to higher than average selling prices and increased margins. Prices increased on average by 66% per ton, while volume shipped grew by 9%. Additionally, the company profited from the successful integration of its coil plate mill in Tuscaloosa, Alabama and the cold rolling mill in Decatur, Alabama.
       Net earnings rose to $341.4 million, or $2.12 per share, from $20.6 million, or 13 cents per share a year ago. Sales grew by 86% to $3.09 billion from $1.66 billion. For the full year, net earnings rose to $1.12 billion, $7.02 per share, up from $62.8 million, or 40 cents per share, in 2003. Sales were up to 82% to $11.38 billion from $62.7 billion.
       Nucor forecasts 2005 earnings between $1.70 to $1.90 per share in the first quarter. The first quarter is typically the company's weakest of the year due to seasonal softness of the construction market due to weather. Nucor expects its second and third quarters to be stronger than the first."

       Michael Popovich: "You might think Canada's Baffin Island will never amount to anything more than several hundred thousand square kilometers of snow and ice. If you share those feelings, you should talk to Tom Meyer, a mining analyst with First Associates Investments in Toronto.
       There's a good chance the Artic isle could be home to a world-class iron mine by 2010, given what he says is a robust demand for iron ore, as well as a steel industry that increasingly wants quality inputs.
       That's why he's put a "speculative buy" rating on Baffinland Iron Mines Corp. (TSX BIM $1.55, 416-364-8820, www.baffinland.com), a Toronto-based company interested in developing a promising site.
       In fact, the site in question, near Mary River, could produce 10 million tones of iron ore annually for 25 years or more, says Mr. Meyer, who discounts the notion that mining in the Far North is necessarily fraught with problems.
       "Given improvements in engineering in the high Artic, both for mining and shipping, the impediments for this project have largely been removed," he says.
       Moreover, the window for ice-free shipping from Baffin Island is fairly long, being at least 10 to 12 weeks at Milne Inlet and 16 to 18 weeks at Steensby Inlet. In addition, steel-reinforced freighters have made high-Arctic shipping less dangerous.
       Mr. Meyer admits that two base metals mines - Polaris and Nanisivik - in Canada's Far North have now shut down. But these two were in successful operation for some time.
Now, because he believes Baffinland's current price fails to reflect its true value, he considers the stock to be a bargain. His 12-month target price is $2.40 a share.
       Mr. Meyer also has a soft spot for a junior miner like Canico Resource Corp. (TSX CNI $15.95, 604-669-9446, www.canico.com), a Vancouver-based company that's developing a nickel play in the steamy south.

       For one thing, he says, the site - the Onca-Puma in the Brazilian state of Para - has the potential to become a world-class nickel resource.
       And although world nickel supply remains constrained, demand continues to be strong, with insufficient nickel to meet forecast demand, Mr. Meyer says.
       Moreover, Onca-Puma is next to several mining sites owned by Companhia Vale do Rio Doce, a Rio de Janeiro-based mining giant and the world's largest producer of iron ore.
       So Canico's project is well positioned to take advantage of the infrastructure - roads, railways, and electrical power - that has grown up around CVRD's sites, the analyst adds.
       Mr. Meyer also likes the fact that Canico boasts a management team that proved itself by working on a Tanzanian gold site - Bulyanhulu - that was bought by Barrick Gold in 1999.
       Not only does he consider Canico's top execs to be "exceptionally strong," given Canico's size, but he considers them well-suited to develop a project of the scale of Onca-Puma.
       Meanwhile, he believes the company is attractively valued, trading at a discount to its peers as calculated on the basis of price divided by net asset value.
       For Mr. Meyer sees Canico is also a best buy, albeit a speculative one. His 12-month target price is $22 a share.
       Mr. Meyer sees Canico developing Onca-Puma in two stages, with the first, set for completion by the third quarter 0f 2007, costing US$750 million and the second, set for completion in late 2012, costing $320 million.
       Over the 45-year plus life of the project, nickel output is expected to average 38,000 tonnes a year, Mr. Meyer says.
       For the three months ended Oct. 31, 2004, Canico's net loss narrowed to $10.6 million, or $0.26 a share, from $12 million, or $0.41 a share, for the similar period in 2003.
       But expenditures on Onca-Puma fell to $9 million from $11.3 million, while corporate, general and administrative costs clipped 13.3 per cent to $731,000.
       As of Oct. 31, Canico had a working capital of $119.2 million $123.1 million, with cash and cash equivalents."