Bull & Bear's Resource Stocks

        Jennifer Dowty: "Some market mavens dubbed 2005 the year of "black gold." In 2003, small caps outperformed; in 2004 mid-caps led the rally; then, in 2005, the large caps came into full bloom.
        In 2005, the S&P/TSX 60 Index increased 26.3 per cent, more than double the returns for the S&P/TSX Small Cap Index, which climbed 10.6 per cent. The major reason for the disparity in performance between these indexes? Energy.
        Energy was the sector leader, delivering a spectacular 63.4 per cent return. At year-end, this sector had a 26.9 per cent weighting in the large-cap index and only a 16.8 per cent weighting in the small-cap index. Having a material position in energy stocks was the key to strong investor gains in 2005.
        Looking forward to 2006, sector calls and weightings will once again be crucial. Energy will remain strong, but I believe the sector leader will shift from black gold to yellow gold.
        Other base metals, such as copper and zinc, will continue to trend upward. Commodities have, indeed, enjoyed a multi-year rally; however, it is my belief that we haven't even begun to see the peak.

        As emerging countries, such as China and India, continue to grow, demand will remain strong for commodities, and the uptrend for these stocks should remain intact. These non-renewable resources are in tremendous demand!
        This is not to say that the furious rally we have seen in the first weeks of the year will not be followed by a correction. A short correction, or a brief period of consolidation, should be expected and would, in fact, be healthy for the market, setting the stage for future positive momentum.
        However, after a short period of weakness, strong demand, tight supply, heightened merger and acquisition (M&A) activity and higher earnings revisions, due to strong commodity prices, should boost commodities even higher.
        M&A activity will grow with commodity prices hovering near record levels; companies are flush with cash and seeking growth.
        I believe the Canadian market will rally, the Canadian dollar will embark on US$0.90 and that we will see healthy returns from the S&P/TSX Composite Index again in 2006, led by metals.
        Bullish for the market are the soon-to-be completed Bank of Canada's tightening cycle inflationary pressures remaining benign and the Canadian labor market staying healthy.
        Stocks that I featured in previous issues, and which remain on my list of favourites for 2006, include ING Canada, Calfrac Well Services, Certicom, Crew Energy, Duvernay Oil, Yamana Gold, Virginia Gold Mines, Shore Gold, ATS Automation Tooling Systems, EuroZinc Mining, Google And Rider Resources.
        Discussed below are three stocks that appear attractive, ranked in order of my preference.
        My No. 1 pick, Alamos Gold Inc. (TSX AGI, $8.15, 416-368-9932, www.alamosgold.com), has increased by over 20 per cent year-to-date. However, despite the runup, I recommend buying this stock now and accumulating shares on any dips. Here are four reasons:
        First, this is a development-stage mining company with one of the largest undeveloped gold resources in Mexico. The company is nearing production and is in the final phase of mine development. Management expects to reach commercial production in first-quarter 2006.
        The company will report positive cash flows and earnings this year. This also makes Alamos an attractive takeover candidate.
        Second, production and reserve estimates continue to increase due to positive drilling results that indicate high-grade resources.
        Third, Alamos has no production hedges and is fully leveraged to the price of gold, which I believe is going to rise to US$600 an ounce.
        Strong physical demand for gold, a safe haven for investors in times of volatility, and a declining U.S. dollar all provide support for the commodity.
        Finally, in the past year, analyst coverage has doubled, as has the company's market capitalization, which is now just over $600 million.
        Centurion Energy International Inc. (TSX CUX, $12.55, 403-263-6002, www.centurionenergy.com) is an international oil and gas company with properties in Egypt, Tunisia and offshore West Africa. It exited 2005 with a production rate just under 40,000 BOE/d (barrels of oil equivalent per day).

        Centurion has consistently doubled its production over the past several years, and 2006 should be no different. The company will experience strong growth in cash flows and earnings, both of which should more than double in the upcoming year.
        Centurion has an active drilling program, and within the next few weeks drilling results should be announced which, if successful, would lead to higher reserves. Positive news could run the stock up to the $14 level.
        The president of the company has stated that a longer-term strategy and growth potential lies in liquid natural gas (LNG), which would enable the company to export gas worldwide.
        Westaim Corp. (TSX WED, $5.75, 403-237-7272, www.westaim.com) has a technology division, iFire Technology Corp., that is on the cusp of partnering in order reach commercialization.
        iFire has a pilot production facility that recently began producing high-definition, 34-inch flat-panel screen televisions. The company is compiling production data from the pilot plant and plans to solicit potential partners with this data.
        True, one can go into any electronics store and purchase a flat-screen television. But Westaim believes it has two competitive advantages over current flat-screen televisions being sold: superior picture quality and lower operational costs to produce each television.
        Lower manufacturing costs are the significant competitive advantage. As flat-screen televisions become more affordable, companies need to be able to lower costs in order to maintain profit margins.
        Westaim estimates that its cost structure is 30 to 50 per cent below LCD and plasma displays. The stock price should get a lift when a production partnership agreement is signed.

        Konrad Kuhn: "Northern Orion Resources Inc. (Amex NTO) is engaged in the development of precious and base metals worldwide and is one of the world's lowest-cost copper and gold producers, producing 50 million pounds of copper and 75,000 ounces of gold a year within a strong bullish commodity market. Based in Vancouver, Canada, and led by an experienced management team, NTO underwent a successful restructuring and development program over the past four years, growing from a market capitalization of $10 mil. To over $500 mil., generating $55 mil. In annual cash flow and currently holding over $130 mil. In cash. NTO's principal cash flow producing asset is the 12.5% interest in the high grade Bajo de Alumbrera mine in northwestern Argentina. The reserve estimate shows the mine has approx. 1.6 mil. Tones of copper and 6 mil ounces of gold in the ground. At current metal prices, Alumbrera can produce copper at less than zero cost per pound (net of gold credits) to bring NTO substantial annual cash flow for the next 8-10 years.
        Management aggressively intends to use part of Alumbrera's revenue to develop its wholly-owned Aqua Rica copper/gold/moly deposit located 20 miles upland from Alumbrera, with which it shares similar metallurgical and recovery processes. Aqua Rica contains an estimated 21.8 bil. Pounds of copper, 13.3 mil. Ounces of gold and 1.7 bil. Pounds of molybdenum, as well as silver. At current metal prices, the value of this deposit is approx. U.S. $90 bil. Dollars. It could produce about 150,000 tonne of copper, associated gold and moly annually for at least 30-yrs. Generating substantial cash flow for NTO while providing hundreds of good-paying jobs for surrounding communities.
        Revenues for FY'04 were $32.6 mil. While earning .01 per share. For the 1st 9 mos. of FY'05, revenues increased to $28.8 mil., while earnings per diluted share of .16 vs .14 for the same period in the prior year. It should be noted that the Q3'05 was a record quarter of profitability.
        The company has a strong balance sheet with cash, cash equivalents, and short-term investments of $140.8 mil. Of the 148,476,482 shares outstanding, approx. 60% are closely held. With its current cash position and anticipated significant future cash flows from Alumbrera, combined with the strength in the copper and gold markets, NTO is well positioned to bring Aqua Rica on line, increasing its profit growth substantially.
        Recommended under 2.65, the stock has been in a strong uptrend undergoing a major breakout for a 1st objective up into the 6-7 area. We would continue to purchase on all pullbacks under 3-1/2, especially since Aqua Rica's estimated rock value makes it one of the world's most valuable copper/gold/moly deposit per tonne of ore known today.
        The Aqua Rica's resource sits mostly on or near the surface and can be mined using very cost-effective, open pit methods. For the most part, mining companies aren't great investments, but NTO, with limited debt, is poised for an exciting period of growth and development, especially due to the growing global demand for metals it mines. Ultimate target low-teens."

        Charles Allmon: "I bought my first gold shares around 1955, American South African, then listed on the New York Stock Exchange. You played ASA like a yo-yo. When you thought the stock market was headed down, you bought ASA. You sold ASA when a new market uptrend appeared to be underway. Big money traded in and out of American South African. ASA probably moved as predictably as any stock on the Big Board, but that party ended in the early 1970s when President Nixon closed the gold window. For good reason: The U.S. dollar still was convertible into gold. For years, Charles de Gaulle, president of France, loaded up on U.S. treasury gold at $35 per ounce. Smart move indeed. De Gaulle hauled away tons of U.S. gold in exchange for U.S. paper dollars ... and gold soared while U.S. paper declined.
        All of my managed account clients held large positions in South African gold shares for several years in the late 70s. In January 1980, I spoke at a major gold conference in Palm Springs, California, just as gold hit its wild finale. At my round table discussions, I stated unequivocally that I intended to sell all gold shares the following week. Which I did, just as gold was cresting around $850 per ounce.
        Here we are in 2006 and our managed accounts hold both Newmont Mining (NEM) and Barrick Gold (ABX) (a GSO company) which recently acquired Placer Dome. Barrick Gold now is top dog in the gold mining industry, ahead of Newmont, which was the leader for years.
        The World Gold Council reports that global investment demand for gold rose by 56% during the third quarter of 2005. So what might drive gold demand in 2006 and later? Several factors. Raging debt and a spendthrift U.S. Congress may be a major contributor. With the U.S. trade deficit now pushing $800 billion, and heading pell-mell for $1 trillion ($1,000,000,000,000), can either inflation or deflation be far behind?
        For several years, central banks around the world sold gold in concert, agreeing to offer 500 tonnes annually, parceled out according to country reserves. That put a lid on gold for some years. Then came the perception of future inflation. Boom! Some central banks, which had been selling gold for years, expressed interest in increasing their gold reserves. At the end of 1999, world central banks' combined gold inventory accounted for about 15% of their total reserves. In late 2005, that figure stood at 9% gold in total monetary reserves.
        Even Russia's central bank recently indicated that 10% gold reserves would be "appropriate," double the 5% gold in current reserves. Central banks of Argentina and South Africa made similar noises. In Austria, the executive director of the central banks says that his bank" held more gold than U.S. denominated assets, even though the bank halved its gold reserves to about 300 tonnes in the past ten years," reports the Financial Times. The World Gold Council said that central banks hold 31,000 tonnes of gold, about ten years of annual demand.
        In 2005, gold jewelry demand alone will exceed the 500 tonnes of gold which central banks agreed to sell annually in their broad 1999 agreement. Unthinkable a decade ago, South Africa, once the world's major gold producer, sees their 2005 gold production at the lowest level in 80 years. With sharply declining gold grades, South Africa production could plummet to one-sixth of 2005 production in 25 years. Declining global gold supply weighs heavily in boosting the gold price.
        Crank in strong investment demand for gold in China, India, and the Middle East, plus the real fear of Islamic fanatics, and we may have the perfect financial storm. I reiterate my original gold forecast of some years ago (which was subsequently picked up by several others). Do not dismiss the possibility that the gold price may again cross the Dow. While gold appears to be in a new bull market, we should expect some heart-stopping declines along the way, say $90 - $160 per ounce, albeit demand continues to build. A major nuclear attack by terrorists on one or more U.S. cities sometime in the next seven years could put the Dow below 2,900, and gold above 2,900.
        After 14 centuries of off-and-on Islamic jihad, Islam again is on the march. The Muslim conquest of Europe moves inexorably to conclusion in the 21st century. As I have mentioned before, Islam expects to defeat the West through the wombs of its women. This alone could unhinge most financial systems, forcing gold even higher.
        The Sunday Times of London reported on December 11 that Israel had ordered preparation for an attack on Iran's nuclear facilities before the end of March 2006. Iran recently purchased the latest Russian ground-to-air missiles capable of bringing down jet fighters as well as missiles. They could be operational in a matter of weeks. Is this intelligence actionable for investors? Perhaps. An Israeli hit on Iran, whose president in December promised to "wipe Israel of the map," could send oil and gold soaring... and the whole world holds its breath.
        Meanwhile, the stock market and gold rarely ride the same roller coaster for long. Eventually permanent decline in oil availability will alter the financial equation as never before. But that's down the road."

        David Morgan: "The stock of Minco Silver got a big boost after John Embry of Sprott Asset Management named the company among his top three picks on January 10, 2005. That's some endorsement! Of course, we would have liked to bring you this information sooner, as we have been tracking Minco Silver since 2004, when it was a non-trading subsidiary of Minco Mining (TSX: MMM, Amex, MMK) But, what's done is done. We can't control John Embry's speaking schedule, but we'll keep trying to highlight the better opportunities in the silver sector as early as possible.
        Another reason that played into this is that we're planning a field tour of Minco Silver's properties in March of this year. After the company has received such publicity, we decided to provide you with this brief introduction to the company and moved the trip to China up, so look for an in-depth coverage of Minco Silver sooner rather than later. We know of no other analyst or newsletter covering this company yet, so the story is barely starting to get attention.
        Minco Silver has a lot going for it. In addition to offering leverage to silver, which we expect to be among the best performing asset classes in this resource bull market, the company is also a play on China. President of Minco Silver, Ken Cai, and two other key members of the management are Chinese, which undoubtedly gives it additional advantages over most other western resource companies operating in China. It has a very respectable Board of Directors and a strategic partnership with Silver Standard for silver exploration in China. Both Silver Standard and Minco Mining are large stakeholders in Minco Silver.
        "That's nice," you say, "But do they have the goods?" The answer is YES. It's hard to tell a story without getting into too much detail. The company completed a NI 43-101 compliant report in November of 2005, showing 130 million ounces of inferred silver resources at its Fuwan Property. A 10,000-meter drill program is underway and should be finished by the end of Q1, 2006. Minco Silver is acquiring an additional 30% in the Fuwan Project, which gives this Vancouver company full control. With this deal, Minco Silver will have four exploration permits covering nearly 206 square kilometers. It will be responsible for all the exploration and development spending on the Fuwan Project, while Guangdong Geological will keep a 10 percent net profit interest. There is much more to the story, but for the moment we'd like to explore another interesting way to buy into the company.
        Minco Mining owns 14 million shares, or 56 percent of Minco Silver. The market cap for MMM as of January 31, 2006, is C$75.3 MM, while same for MSV is C$99.5 MM. That values the rest of Minco Mining, the parent company, at about C$20 MM. A brief visit to Minco Mining Web site reveals that it has a 43-101 compliant gold resource of 3.8 million ounces from two properties, Changkeng and Anba. Add to that another 16 properties in its portfolio and we arrive at a conclusion that Minco Mining should be worth a lot more. Therefore, it seems to us that a smart play right now may be to look at the parent company, Minco Mining. This is a back-of-the-envelope calculation. Do your own due diligence, that's the way we see it.
        We don't want to take away from Minco Silver and, after the field trip, will explore why it may deserve a place in your portfolio based on its own merits. Yet, at this very moment, the market is giving you the opportunity to get into Minco Mining at a discount, compared to its peers in the gold sector. This is a unique situation brought about by the recent spin-off of Minco Silver, and we expect the market to correct it in the not so distant future."

        Vita Nelson: "Gold is glittering brighter now than it has for the past 25 years. Silver prices, too, are up sharply. The question for investors is whether this trend is likely to continue. And, if you believe that it will, what should you do about it?
        There's no one dependable reason for the recent run-up in precious metals, and therefore, no good way to know whether the current upward trend will continue. So placing a large bet on silver or gold may not be wise, particularly in the wake of recent price increases. However, we've always suggested wide diversification among asset classes - including precious metals. If you don't already own them, you may want to move a small percentage of your assets into commodities, including precious metals, if only to ensure that you won't be entirely left behind.
        How should you hold your silver or gold? I've mentioned gold exchange-traded funds (ETF) such as streetTRACKS Gold Shares (GLD) and iShares COMEX Gold Trust (IAU). They make more sense than holding gold coins or bars because you don't have the storage and transaction headaches. The big negative is the tax aspect: the IRS treats these ETFS the same as physical gold and taxes any long-term gains at 28%, not the 15% that you'd owe on stocks.
        Other than taxes, though, investing in these ETFs is a simple, efficient way to get a direct play on the price of gold. When silver ETFs become available, which may happen this year, you'll have a similarly practical way to invest in silver.
        Besides ETFs, another viable way to invest in gold or silver is through the stocks of mining companies. These stocks can be volatile. However, if the price of gold or silver goes up, the profits of these companies likely will go up even faster, sending up the prices of their shares.
        Moreover, mining companies can pay dividends, and many have done so, in years of profitability. You won't earn dividends from bars or coins.
        Precious metals funds were up 30% last year, bringing the five-year average return to the 30% level, tops among all fund categories. In both 2002 and 2003, annual returns were around 60%.
        If you sell the stocks of mining companies (or funds holding such companies) at a gain, after holding period of more than a year, you'll get the same 15% tax rate as you would on any long-term capital gain in the stock market now.
        Among managers of precious metals funds, the top holdings are Newmont Mining, Placer Dome, Goldcorp, Barrick Gold, and Meridian Gold, so those are the companies where you might start your research, if you're interested in individual stocks.
        If you'd prefer to buy a fund, Morningstar's "analyst picks" are American Century Global Gold, for pure gold exposure, and Vanguard Precious metals and Mining, for more diversified holdings.
        As with most types of investments, it's best not to commit all your funds at one time. Instead, a prudent approach would be to invest regularly, over an extended time period, to protect against buying at what may prove to be a peak."

       Thomas Henning: "The Bond Market has topped out and has been consolidating a downleg from 118 to 110. A close below 110 would confirm the next leg down to about par. When this occurs, cranking up interest rates, look for the implosion to start, lead by the housing and auto industries. . .for starters.
        The Gold Complex has kicked off and confirmed a cyclic bull market. The action is shaping up like an upside panic.
        Near term, an overdue correction is evolving. Let it. My favored wave tea leaf count very tentatively suggests that the 1st wave of the juicy #3 primary has been completed, the present correction being the #2. If this count turns out to be right, as the old jazz classic goes, "The best is yet to come, babe."
        At any rate, don't get cute and overtrade this move. Stay with the main upcycle.
        The Stock Market has been waving out a terminal count that has been detailed in my next article in Bull and Bear Financial Report. In short, the internals are putrid and failing, thus not confirming the February strength, which must be respected simply because it's there.
        However, until the Dow closes below 10,660, confirmed by the Transports below 4050, the bulls will be in charge of an internally weak market."

       Vivian Lewis: "Trans Siberian Gold plc (TSG.L) announced that, subject to financing arrangements, it will develop the Asacha gold mine in Kamchatka, Russian Far East. Following the appointment of Jonathan Best as CEO last November, TSG has undertaken an in-depth financial and technical review of both the Asacha and Veduga projects.
       The directors have agreed to move ahead as quickly as practicable with development at Asacha and, subject to completion of project financing, expect to start underground development in August, with plant construction starting in Sept. It is expected that plant commissioning will commence in December 2007 with first gold production in early 2008.
       Total capital and pre-production costs of the Asacha project are estimated at US$90 mn (including recoverable VAT of US$11 mn), of which $22 mn has already been spent, leaving US$68 mn to be funded through project finance and equity or an equity-linked instrument. Talks with Standard Bank Plc and the European Bank for Reconstruction and Development on project financing are going on and Anglogold Ashanti Ltd., a 29.8% shareholder in TSG, has agreed to participate in this funding to maintain its shareholding. It is anticipated that project finance can be arranged by May and development of the Asacha mine can then begin in earnest.
       The project finance is subject to fulfilment of certain technical conditions and to receipts of certain regulatory approvals, permits, and an extension to the production condition in the Asacha license. Every effort will be made to complete all outstanding items to meet the May target.
       Work at Asacha has continued on engineering studies, site preparation, and completing construction of the access road, while discussions with banks and lending agencies on project finance have been held. The current mineral resource contains 534,493 oz of gold equivalent (in gold and silver credits) in the measured and indicated categories (~ 80%) and 131,653 oz in the inferred category (~20%) for a total of 666,146 oz (20.7 metric tonne) contained gold equivalent. There is potential to increase this resource as more work is done."
        Editor's Note: Minute Woman provides exclusive monthly tips and analysis on selected international investments. Email alerts keep you informed of newest briefs.

        J. Taylor's new additions to his Energy Portfolio include CanWest Petroleum and Marathon Oil Corporation.
        1. CanWest Petroleum Corp. (OTC BB: CWPC $4.73) is an exciting oil sands play with a 70% interest in oil sands Quest, a private company that controls 846,000 acres of land in the Athabasca region just across the provincial border from the Athabasca oil sands of Alberta. Early drill results indicate with a relatively high probability that this project may have a very large oil sands deposit on its hands. In addition to this property, CWPC also holds a number of other properties such as its oil shale project known as the Pasquia Hills property in Alberta. This property holds a drill-indicated estimate of 3.4 billion barrels resource. We will say more now about this company, but it is one of the most exciting oil sands story we have seen and in the midst of growing international tensions, and some very active exploration work underway, I felt the need to let you know about this story sooner rather than later. More will be written in our March issue, which is due on March 1, 2006. Based on the work of our technical analyst, Roger Wiegand, we are looking for a price target on this stock in the $5.13 to $6.70 range by August 2006.
       2. Marathon Oil Corporation (NYSE: MRO $71.24). This is a true blue chip oil company that is engaged in the worldwide exploration and production of crude oil and natural gas, as well as the domestic refining, marketing and transportation of petroleum products. This is truly a vertically integrated company. It does operate on four continents and includes operations in northern Africa and the Middle East as well as places like Singapore and Malaysia. We don't want to underestimate the fact that this company could face some political problems in the future. But it also has solid operations in safer parts of the world including Alaska. It has oil and gas production and pipelines and major refining capabilities. Refining margins are very strong now and this company also is selling at a very low price to earnings multiple compared to its peers. We will have much more to say about this company too in our March 2006 monthly letter. But again, because we believe oil prices could be on the verge of a breakout in light of growing world political instability, we wanted to go on record recommending this stock now. Our technical analyst, Roger Wiegand is looking for a price target of $83.64 later this year."

        Louis Paquette: "We're seeing definite signs that a seasonal top is in place and the correction is getting underway. An intermediate correction isn't confirmed as we go to print as no intermediate trend lines have been broken yet and 50-dma's are holding. So far. But I'd be surprised if it isn't the case. Enclosed are some of our reasons why along with some seasonal low targets for gold and the HUI.
        The clearest sign that the sector needs a rest period is the parabolic shape of the weekly and monthly charts for gold and the HUI index in the past months. These patterns are unsustainable and often precede sharp corrections and periods of consolidation.
        Another reason, I suspect that the people who have been driving the gold market recently are a different breed than earlier investors. They are not true believers in the gold bull market but momentum players. They're only on board while it's moving in their direction. Once it isn't, these momentum players will jump off as quickly as they jumped on.
        Other recent participants may believe in the gold story, but they jumped head long into the game at a most inopportune time - after a terrific runup and right as a seasonal top should be forming. Oblivious of the weakness lying just ahead, many will need to be shaken out before the market can become sufficiently over-sold to stage the next rally. If the recent patterns hold, we can begin looking for this as early as May of as late as August.

        Roger Conrad: "Texas is often cited as a poster child for successful power industry deregulation. Some 27 percent of residential and 34 percent of commercial customers have switched from incumbent utilities to the competition, yet the old utes are still healthy. In addition, inefficient plants are being shut down and wind is now the cheapest and fastest-growing power source in the state.
        Unfortunately, there's also a dark side: soaring utility bills. In 2002, the baseline price to beat (PTB) charged by TXU Gas was 8.66 cents per kilowatt-hour (kwh).Today, it's 15 cents/kwh, a gain of more than 73 percent. In contrast, Texas companies exempted from deregulation have increased rates 21.7 percent, to an average 9.27 cents/kwh.
        The reason lies in the nature of the PTB. Initially set at a 6 percent discount to pre-deregulation rates, the PTB was designed to follow the cost of generating power from natural gas, the source of 51 percent of Texas' electricity and then far cheaper. As gas costs have risen, so have power prices.
        The result has been a windfall for products, particularly the owners of the state's nuclear (9 percent) and coal (37 percent) fleet. For example TXU, owner of the giant Comanche Peak nuclear complex, earned an estimated $1 billion last year, profit margin of 14.5 percent. That was despite losing 12.3 percent of its customer base to rivals since 2002.
        In 2007, the PTB will end and prices could go even higher. For one thing, many non-utility marketers have been forced out of business by financial pressures. In addition, producers have shuttered high-cost capacity and plant ownership has become increasingly concentrated, most recently with the purchase of Texas Genco by NRG.
        Soaring power rates are already triggering second thoughts in several states following the Texas model, including Illinois, Maryland and Ohio. Texas' state government is one of the most pro-business in the country and is unlikely to change course immediately. Sooner or later, however, either falling gas prices will bring down power prices or big customer unrest will force a rollback. Either way, that means lower earnings for TXU.
        Better Lone Star State players are NRG (buy up to 50) or Centerpoint (13). Sell high priced TXU while it's still Wall Street's favorite utility."

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INTERINVEST REVIEW & OUTLOOK
P.O. Box 51462, Boston, MA 02205.
Monthly, 1 year, $125.

        Richard Moroney: "Excluding a lawsuit-related gain of $390 million, Exxon Mobil (NYSE XOM $62) reported December-quarter earnings of $1.65 per share, up 27% from a year earlier. Including the gain, per-share earnings jumped 32% to $1.71. Consensus estimates had projected profits of $1.44 per share. Revenue climbed 20% to $99.7 billion. Income from exploration and production increased 44%, while refining and marketing profit grew 2%. Production fell 1% but would have risen 2% excluding hurricane effects, divestments, and accounting changes. The news of Exxon's strong results renewed calls for higher taxes on oil companies earning large profits while consumers pay high prices for gasoline. Exxon is a Long-Term Buy.
       Excluding a $55 million pretax gain from the sale of a stake in a gas-processing joint venture, Valero Energy (NYSE VLO $50) earned $2.00 per share in the December quarter, compared to $0.94 per share in the year-earlier period and $0.06 higher than the consensus estimate. Including the gain, the company earned $2.06 per share. Revenue increased 68% to $25.89 billion. Refining operating income jumped to $2.1 billion, up from $884 million, helped by $485 million from acquired Premcor refineries.
       Shares of Valero have fallen on concerns regarding refining margins. Average U.S. refining margins could come under pressure in the near term because of high import levels of refined product and seasonally lower demand. However, demand for refined products continues to grow, and supply may soon become tighter. Scheduled maintenance downtime at large refiners will reduce refining capacity, and stricter environmental regulations should curtail imports in coming months. Also, the price difference between heavy crude oil and light crude is widening. Refiners like Valero, with the ability to process the lower-cost heavy crude, should be able to maintain above-average margins. Predicting refining profits is difficult, but the 2006 consensus earnings estimate of $7.76 per share seems reasonable. At six times that estimate, Buy-rated Valero looks very cheap.
       Chevron (NYSE CVX $59) reported December-quarter per-share earnings of $1.86, up from $1.57 a year ago but missing consensus estimates of $1.89. Profits were hurt by hurricane damage, which reduced production and increased costs. Revenue increased 26% to $53.79 billion. Worldwide production increased 11%, boosted by the August acquisition of Unocal. Chevron is a Buy and a Long-Term Buy."

        Patrick Heller: "In the past two months there have been new revelations about central banks complying with International Monetary Fund (IMF) requirements by reporting gold as being in their vaults even if it is out on lease. After the Russian central bank announced plans to double its gold reserves, it revealed that only 123 of 500 tons of gold that they had reported as being in their vaults was actually there. The remaining 377 tons were out on lease.
        Just how much of the 900+ million ounces of official gold holdings (central banks, the IMF, the Bank for International Settlements, and the like) is really in the vaults? No one actually knows.
        "Mainstream" gold analyst Jessica Cross prepared a report for the World Gold Council where she calculated that at least 15% of official reserves were out on lease and perhaps as much as 25% was out on loan.
        Savvy analysts who don't toe the "official" line, like Frank Veneroso, think that at least 50% and perhaps as much as 75% of all official gold holdings have been leased and now exist in the form of jewelry.
        These outside analysts contend that as much as 45-50 million ounces of gold each year have been surreptitiously leaked into the gold marked by central banks trying to hold down the price of gold, or conversely, to prop up the value of their currencies.
        With disclosures like that made by the Russian Central bank, it is looking like extremists just might be a lot closer to the truth than the mainstream analysts. To the extent that any more of this analysis is confirmed by other central bank disclosures, that will simply magnify the gold shortages, propelling gold prices higher still.
        Recently, London-based HSBC analyst Alan Williamson dropped a bombshell. He is a "mainstream" gold analyst who now doesn't think that the central banks will sell as much gold as permitted under the current Central Bank Gold Agreement. Under this agreement, central banks were to sell 80.4 million ounces of gold over five years to help hold down gold prices.
        Williamson calculated that only 46.3 million ounces of gold will be sold by the central banks under this agreement and that, in the most extreme circumstances, a maximum of 74 million ounces of gold would be forthcoming.
        When even mainstream analysts like Wiliamson acknowledge such shortage of gold supplies, the day is getting closer for the real boom in gold prices.
        By the way, Williamson is one of the analysts whose precious metals forecasts are reported by the London Bullion Market Association each year. His 2005 predictions for gold, silver, platinum, and palladium were way too low.
        For 2006, his predictions are: Gold: Range $460-590, average $520, Silver: $7.00-10.00, average $8.50, Platinum: $875-1,050, average $945, Palladium: $175-300, average $225.
        As you can see, platinum has already exceeded his top price and the other three metals are all close to beating his top projection."

        Richard Band: "Retirees often don't care to wait several years for capital gains to add up. Such folks want to "see the money" now. If you're in that group, consider the high-yielding Canadian royalty trusts.
        Unlike their U.S. cousins, which gradually deplete a more or less fixed body of hydrocarbons, the Canadian trusts are constantly acquiring new properties. Thus, our northern neighbors are doing their best to replenish their assets - sometimes at bargain prices (for example, when a major oil or natural gas producer decides to get rid of a field that may be too small for the giant to bother with).
        Dozens of energy trusts trade on the Toronto Stock Exchange, with a handful dual-listed on the NYSE. However, trusts differ widely in quality. As a rule of thumb, you should avoid those with the highest yields (over 12%, say, at current prices).
        Typically, the highest yielders are sitting on short-lived assets. Only gamblers (or the ignorant) prefer wells that will soon run dry. Many of the trusts with eye-popping yields are also carrying more debt than I feel comfortable with. I'm not expecting a sharp drop in energy prices, but if the unexpected should happen, I want my trusts to weather the storm.
        You can accumulate ARC Energy Trust (OTC AETUF), Enerplus Resources (NYSE ERF), and Vermilion Energy Trust (OTC VETMF) on a pullback. All feature long reserve lives, moderate payout ratios (plenty of cash being plowed back into the business for growth) and low debt.
        My "best to buy below" price implies a yield of 10% for ARC Energy and 9% for Enerplus Resources. I've set a target yield of only 8% for Vermilion Energy, a new selection, because Vermilion is retaining a larger percentage of its cash flow in an effort to grow the trust's reserve base more rapidly.
        What to do now: ERF is the only one of the trio with a Big Board listing. If you purchase either AETUF or VETMF, you'll have to buy the stock in the OTC Pink Sheets. For Pink Sheets issues, always use a limit order, buying or selling. A limit order specifies the price you're willing to accept. To broaden your menu of energy trusts beyond those I've mentioned here, you might speak with a broker knowledgeable in this specialized sector, such as Charles Cox of UBS in Boston (800/225-2385, ext 8307).
        We're tracking the Canadian energy trusts as Niche Investments outside the model portfolio."

        James Rapholz: "I think I've discovered my next Glamis Gold. I recommended Glamis about three years ago when it was an unknown at two dollars a share. Glamis is now trading for about $30. And as a matter of fact - this one may just turn out to be an even bigger winner than Glamis because it not only produces gold but it also produces black gold (oil & gas)! It is a small unknown company but - it is in production and will soon be making a lot of money for it shareholders.
        Claude Resources, Inc. (AMEX CGR) Contact Information: Neil McMillan, CEO/President, 200 - 224 4th Ave. S, Saskatoon, SK S7K 5M5, Phone (306) 668-7505.
        I own 15,000 shares of Claude. It is trading for about 98 cents a share today (1-12-06). I strongly advise you to look this one over real good before making a decision on how to invest your money in gold stocks. I expect this issue to be trading for over $2 within seven months and make a tremendous price gain over the life of this bull market in gold.
        Claude Resources, Inc. is a gold mining production company and an oil and gas producer based in Saskatchewan, Canada. The company has 61.7 million shares outstanding (66.8 million - fully diluted) and is listed on both the Toronto and American Stock Exchanges.
        The company has a strong balance sheet, experienced management team and a very attractive mix of long-term revenue generating assets. These critical strengths provide as solid base for future corporate expansion.
        Claude's principal asset is the Seabee gold mine which is located 125 kilometers northeast of LaRonge, Saskatchewan. This 100% owned and operated mine went into production in 1991 and has produced in excess of 650,000 ounces of gold. The mine is a high grade, narrow vein underground operation with approximately 733,000 tones of reserves and an additional 1.4 million tones of resources with significant upside potential. Mining operations are performed by Claude's mining division, Centaur Mining Contractors. The Seabee mine operates with a cash operating cost of about $US 250 per ounce and total production costs of $US 325 per ounce.
        Claude controls a large land package surrounding the Seabee mine. Two recent discoveries, the Porky Lake zone and Santoy property have both been advanced to the bulk sample stage and are expected to be test-mined in 2005. Throughput at the nearby Seabee mill will be doubled to 1,100 tones per day for a modest capital cost to accommodate potential ore from Seabee and, if bulk samples prove successful, from these new discoveries.
        In 1998, Claude acquired Madsen Gold Corp., located in the prolific Red Lake gold camp in northwestern Ontario. This 10,000 acre (4,000 hectare) property produced 2.6 million ounces of gold before being closed in 1976.
        Highlights: Average five year cash costs of approximately US $250 per ounce, average five year total production costs US $325 per ounce, the Madsen Red Lake property is under option to Placer Dome, the company has oil & gas diversification and it has four advanced stage properties.
        In December of 2000, Claude entered into an option agreement with Placer Dome; whereby Placer can earn 55% interest in the Madsen project by spending CDN $8.2 million and delivering a positive feasibility study by the end of 2006. Placer Dome believes that the target model at the Madsen project is identical in nature to the multi-ounce per ton structures at the nearby Campbell mine (Placer Dome) and Red Lake mine (Goldcorp).
        The company owns 100% of the fully permitted 7,000 acre (3,000 hectare) Tartan Lake mine property located in Manitoba, Canada. The mine workings are currently being dewatered to facilitate a 4,500 meter underground drill program.
        Claude's Jojay property in Saskatchewan, Canada, also has an identical resource on it that is within trucking distance of an existing mill and will be the subject of additional exploration this year.
        In addition to the company's mining and milling properties, Claude owns considerable interests in several large oil and gas properties, most of which are located in the province of Alberta. These properties typically generate $9 million in gross revenues annually.
        This is a very good little gold mining and oil & gas producing company with an exceptionally bright future. Please believe me when I state that deals like this one don't come your way - very often! But - on the other hand - I don't want anyone to jump into it on just my recommendation. I want you to contact the company - ask for an information package and read it from cover to cover - an awful lot of good things have taken place at Claude since I wrote it up in May of 05. Next I'd like to have you go to their web site, www.clauderesources.com and pick up all the information it has to offer. Then if you have any questions or if there is anything that you don't understand - call the investor information office at (306) 668-7505 to make certain that all of your questions have been answered to your fullest satisfaction - before committing your hard earned money to an investment in this company."

        Tobin Smith: "Another potential target of opportunity is within the energy technology sub sector. In this space, we are looking closely at two companies, both of which make neutral gas and oil compressors. How's that for a specialization?
        In January, natural gas prices dropped to about $9 per million BTUs, the first time they've been that low since late July. And you probably wouldn't think that natural gas stocks would continue to trade at 52-week highs - but you'd be wrong.
        The market is realizing that the new trading range for natural gas is going to be more like $9 to $12 per million BTUs. Yet, most people still have natural gas stock valuation models built on $6 natural gas. What we are seeing is that smart investors in energy are recalibrating their valuation models to reflect the $9 to $12 natural gas range with $15 spikes during bad weather.
        All of this means that demand for natural gas equipment is going to continue to be robust, and that's where both Dresser-Rand Group (DRC) and Natural Gas Services (NGS) enter the picture. Both of these companies are leading the pack in the gas compression technology space, and if capacity constraints continue to become commonplace in the industry, energy plays such as DRC and NGS will continue to be in high demand.
        Continuing in the energy technology arena, albeit a different sub sector, we have two potential candidates for our Legacy Buy list. They are SulphCo (SUF) and Rentech (RTK).
       Both of these companies are part of the "Clean Tech" wave, as both are developing products designed to be environmentally friendly - and, of course, to increase profits in their respective industries.
        SulphCo develops technology for removing sulfur from crude oil and petroleum products, essentially converting sour crude into the easier-to-refine (and cleaner) sweet crude. They accomplish this through a process that uses ultrasonic sound waves. Most impressive are the many contracts they've entered into recently, as well as their longtime partnership with ChevronTexaco.
        Rentech develops and licenses technology that transforms underutilized hydrocarbon resources into alternative fuels and clean chemicals. Their coal-to-liquid process now has them poised to become potentially huge, as the Clean Tech trend continues to take shape in the form of tax credits and governmental mandates for this type of technology.
        Riding the RFID wave, we may revisit a position in Intermec (IN), formerly known as Unova. Last year we recommended the stock at about $16 and sold it at about $24 because we thought that the RFID rollout was just coming too slow.
        Our thesis was that Unova would spin off Intermec into a separate company. What they did, however, was sell off other assets in the company and change the name back to Intermec, essentially accomplishing what our thesis had predicted last year.
        This company is the biggest intellectual property holder in the RFID space, and we think the stock is worth around $50 (it currently trades at just under $38). That sure seems to me like a good prospect for our Ballast Growth Buy List.
        Finally, we really like conditions in the Internet advertising sector. Up until a few months ago, most advertising on the Internet was done by Internet companies. But now the big brand boys are starting to make their presence known in the online world. More importantly, the online world is starting to see a sizable chunk of the estimated $250 billion spent on all advertising each year.
        Perfectly positioned to take advantage of this development are two Internet advertising stalwarts: ValueClick (VCLK) and Digitas (DTAS).
        Both of these companies stand to be big beneficiaries of the Internet advertising boom - Web advertising grew 34% in the September quarter year-over-year. Some long-term spending estimates are as high as $22 billion-plus by 2009, and you can bet we'll be looking to take advantage of this oncoming wave."

THE PERSONAL CAPITALIST
6911 S 66th E Ave., Ste. 301, Tulsa, OK 74133.
1 year, 24 issues, $195.

Enjoying profits in Oil/Energy Shares

Sean Christian: "We believe that the 10,000 to 11,000 level has finally been broken and hope to see this confirmed with a move to 12,000 this year. Our forecast remains in place.
We have almost 8% of our portfolio in oil and gas stocks (XTO, CRT and WMB). Oil prices are going to always be volatile. The fact is, the world has been finding less oil than it's been using for twenty years. Demand has been soaring, but the oil that is being found is coming from places that are tough to reach. We find exploration and production companies focusing more and more on natural gas as finding new fields becomes more and more difficult. Therefore, the huge emphasis being placed on alternative fuels makes a great deal of sense. Technological improvements are needed so that wind, solar and hydrogen can be more viable parts of the energy equation. We are betting that hydrogen is one of the best ways to solve this. British Petroleum recently announced plans to develop the largest hydrogen-fueled power plant in the world in Southern California showing that the beginnings of the hydrogen economy are starting to take place. Our two hydrogen stocks, PLUG and HYGS, are making great progress in developing commercial products. In the meantime, we are enjoying tremendous profits from our three energy stocks. We will continue to hold them.

        Gregory Spear: "Petroleo Brasileiro (PBR P/E 10, Market Cap $91 billion) is Brazil's national oil company, which means it is an integrated oil and gas operation with exploration, production, refining, transportation and marketing divisions. Currently the company shows about 13 billion barrels in proven reserves, which is little more than half the size of the US reserves. While reserves are growing and exploration in Brazil is still in its infancy, much of its proven assets lie in very deep water offshore, which makes for slow and expensive development. Even so, PBR's domestic oil output surged to an average of 1.684 million barrels a day last year, up 13% from 2004.
        PBR has oil and gas operations in Angola, Argentina, Bolivia, Colombia, Nigeria, Trinidad & Tobago, Venezuela and even a toehold in the US, but it has a complete monopoly in Brazil and Brazil is big. It is the fifth largest country in the world by geographic area (about 10% smaller than the U.S. when one includes Alaska) and fifth largest population (186 million), spanning four time zones and sporting the world's eight largest economy. The only South American countries with which Brazil does not share borders are Chile and Ecuador.
        Urbanization has been rapid in Brazil, with 81% of the total population now living in and around cities. Petroleo Brasileiro owns and operates over 7000 service stations and 11 refineries in Brazil, with a total processing capacity of 2 million barrels per day. A few weeks ago, however, Petrobras spent $370 million to buy a 50% stake in the 100,000 bpd Pasadena Refinery System, as it expects oil from its new 180,000 barrels per day Albacora Leste field to make Brazil a net exporter. Petrobras is also looking at refinery expansion plans in Bolivia.
        The country consumes about 2 million barrels of oil a day, which is but one tenth of what the U.S. consumes but the country is growing at a steady pace. The Brazilian economy grew 4.9% in 2004 and the ranks of the middle class are swelling. In 2005, GDP growth was slightly above 2%, but Brazil's trades surplus in 2005 set a new record. With inflation still high (10%) but moderating a bit, Brazil accumulated enough in foreign reserves to clear its $15 billion IMG debt two years ahead of schedule. Interest rates in Brazil are about 17%, however, which is why the GDP is struggling but also why stocks of Brazilian banks have done so well.
        Brazil happens to be the world's largest producer of biofuels, particularly ethanol from sugar cane. Most of Brazil's ethanol production is for domestic consumption, as gasoline in Brazil contains 25% ethanol and 70% of all new cars sold in Brazil have engines that can run on either fuel or a mixture of the two. Petrobras has ambitious plans to ramp up ethanol exports to Venezuela, Nigeria, China, South Korea, India and the United States because Brazilian ethanol is less expensive than ethanol produced in the U.S. from corn. Petrobras is proposing a pipeline capable of transporting 1 billion gallons of ethanol annually.
        Petrobras' cash flow from operations was $8.8 billion in the most recent year, with year-over-year EPS growth at an impressive 44% in the most recent quarter and a 32% return on equity. When we profiled PBR in March of 2005, as a play on the emerging market theme, shares were trading around $45 and rose to about $95 before starting the current correction. All emerging market bourses are experiencing some profit-taking at this time and Brazil is no exception. That said, PBR is looking very strong right here and you can't argue with a monopoly."

        Steven Lord and Stephen Leeb: "Energy stocks have done extremely well for the past 18 months, As base prices have gone through the roof. The stocks of most large-cap names in production, exploration and even transmission rose significantly as a result, although the increase in earnings power brought on by higher realized prices means that they still trade for extremely attractive price-earnings ratios. We've got solid exposure to the energy sector, mostly via services firms (as opposed to the direct exploration & production) in our Emerging Leaders portfolio already, and their performance numbers prove the old saying that rising tides lift all boats. As such, there is little need to increase our weightings in the sector. However, that doesn't mean we've stopped finding solid small-cap companies leveraged to $70/barrel oil.
        Unit Corporation (UNT) is a diversified energy firm focused primarily in the mid-continent region of the United States. With over 100 drilling rigs, the company explores for and produces oil and natural gas, as well as provides contract drilling services to other producers. It is the fourth-largest deep onshore drilling firm in the U.S. and is primarily focused on natural gas, boasting 347 billion cubic feet of reserves and growing its combined oil & gas reserves by 12% annually since 1994. Amazingly, 2004 was the 21st consecutive year that Unit replaced over 150% of its annual production.
        Like most energy-related firms these days, Unit's sales and earnings are at record levels. Higher drilling rates, higher natural gas & oil prices, and higher utilization are driving the company's growth as well as boosting margins. Wall Street now expects 2005 EPS to have more than doubled, to $4.40 per share, when they are released on February 8th. For 2006, per-share profit estimates vary widely, from $5.76 to as high as $7.34, for an average of $5.84. The company boasts low long-term debt (only 14% of capitalization) and generates $240 million in operating cash flow per year. The company's forward P/E of only 10 and the rock-bottom PEG ratio of 0.3 indicate Unit is attractively valued as well, while return on equity (21%) and return on assets (14%) are extremely strong. Obviously, such results have garnered some attention, and Unit's stock price has risen from the $20s in 2003 to nearly $60 now. Nonetheless, it still appears reasonably valued given the growth in EPS, and we think it can still be bought.
        Ditto for Dawson Geophysical (DWSN), which specializes in land-based seismic surveying in the U.S. Featured in Barron's back in August, the company soared over 70% in 2005, although it corrected sharply during the summer and is only now returning to its prior heights over $30. As a dominant player in the acquisition and analysis of complex geophysical and seismic data, the company's skills are in high demand from companies looking for natural gas deposits in the U.S. (Unit, for instance, is a customer).
        Dominant in its niche, Dawson is also extremely well financed. Cash on hand totaled $23 million last quarter, or $3 per share, there is zero debt, and $12 million in cash flow from operations. Hurt by the fall hurricanes last year, DWSN posted $1.47 per share in profits, only roughly even with 2004's $1.53 and attributable almost entirely to the fourth quarter. For this year, DWSN is expected to earn as much as $2.00 per share, equating to a forward P/E of 16.
        Dawson boasts rock-solid finances, dominance in a high-demand niche, and an attractive valuation. Note, though, that with 7.9 million shares outstanding the stock is thin. Buy."

        Jim Turk: "It appears the correction in gold and silver has ended and it looks like gold's bull market is back on track.
        I still expect gold to hit my target of $850 when we see the massive short covering rally I still expect.
       I had thought that my expected short covering rally would occur sooner rather than later, but it will in any case take place some time this year. It could still happen in the next few weeks, but the shorts (i.e., the gold cartel) have managed to 'circle the wagons' to regain some control. It is their eventual loss of control that will result in the short covering rally I am expecting.
       So continue to focus on $850 as my upside target for this year. This target provides a guideline for gold's upside potential in the near-term.
       Silver remains very bullish, and I continue to expect silver to lead the way (i.e., to outperform gold as both metals continue their multi-year advance). For this reason, it is important that we continue to follow the signals given by the gold/silver ratio."

        Ned Schmidt: "At this time we have a quandary. Two views can be taken of the Gold market. The end point will be the same whichever view is assumed. The difference is how one feels about purchases make in the mean time.
        The first view is that a correction of some duration and depth is beginning. Gold's price rise has been in significant part fueled by the leverage buying of funds. If those funds turn from the market, it could consolidate for many months. Price could move erratically lower, with significant bounces occurring. The buy signal would just be the first of many. Concern with this view is the duration and depth of the consolidation. Depth is not the most serious one, as any decline will be recovered. Duration is somewhat more bothersome. Length of the consolidation period could be well into late summer, early fall.
        Second view is that this is simply a minor correction in the greater bull market. One should make purchases on all buy signals. With this approach one puts some money to work on all buy signals as the bull market will carry to a profit. The risk is that the consolidation does develop as in the first scenario, and you are kicking yourself all summer.
        Each investor must decide which of the above scenarios to assume is the proper one. Gold is the investment answer and will be materially higher in price a year from now. The question is whether to buy on this signal or wait till later. For those investors that are prepared to "kick themselves" this summer but be happy in the fall, exercise your judgment and buy."

Ian McAvity: "The divergence between the two primary resource based currencies over the last year is increasingly remarkable, but on a bigger picture basis I continue to look at the longer term chart, and ponder the resistance around 90 cents for C$. A$ hit similar resistance at 80 cents in the past few years, and it was brick wall.
In Switzerland, an oil skeptic asked me what other redeeming features would I suggest to defend investing in Canada. I surprised him by suggesting a credible central banker, a new, paralyzed, untested minority government that's unlikely to be able to be too radical in any direction, and the four political parties recently emptied their treasuries so another election is a long way off. Political paralysis is a bullish to me. He also shared my hope that US voters might create some of it in the looming Nov mid-term election, but feared new problems in Iran may have been precipitated by then. I'd prefer dips back to 85 cents for any new C$ buying, but keep in mind it's a low volatility currency anyway."