WORLD GOLD ANALYST
45 Victoria Rd., South Woodford, London E18 1LJ, U.K.
Monthly, 1 year, US$660. www.worldgoldanalyst.com.

Top Ten Producers in March 2006 Quarter

        Paul Burton: "After its acquisition of PlacerDome, Barrick Gold ousted Newmont as the largest gold producer for the March 2006 quarter, although the US company is marginally ahead on a rolling four quarters' basis.
        There were some significant production declines, with lower grades once again at Grasberg affecting Rio Tinto's and Freeport-McMoRan's reported production.
        One of the most profound trends in the gold mining industry is the cost inflationary pressure that producers find themselves under. For instance, Oxiana Gold's cost increased by 115% and Randgold's by 107%.
        Despite the pressure of rising fuel, power and labour costs, a number of companies achieved spectacular cash cost reductions year-on-year thanks to the high prices of their by-product minerals.
        Agnico-Eagle reported industry leading cash costs of negative US$241/oz and Meridian Gold negative US$64/oz.
        Freeport McMoRan was the top earner in the quarter with net income of US$1.34/share.
       Note: World Gold Analyst provided coverage on over 70 gold mining companies, we have selected the Highlights of the March 2006 Quarter for the top ten producers.

Top Ten Producers in March 2006 Quarter
Company	Production (koz)
1. Barrick Gold (3)	1,956
2. Newmont Mining (2)	1,403
3. AngloGold Ashanti (1)	1,340
4. Gold Fields (4)	1,023
5. Harmony (6)	561
6. Freeport-McMoRan (7)	462
7. Buenaventura (9)	436
8. Newcrest Mining (10)	368
9. Kinross Gold (-)	362
10. Goldcorp (-)	295
Figures in parenthesis represent positions in March 2005 quarter.

       Barrick Gold (TSX: ABX; NYSE: ABX, www.barrick.com): Q1 2006: Net income up 239% from Q1 2005 to US$224 million (US$0.29/share) as sales revenue rose 159% to US$1.25 million. Cashflow of US$378 million generated as Barrick benefited from higher gold production as a result of the Placer Dome acquisition (1.96 Moz v 1.14 Moz), higher gold prices (US$537/oz v US$428/oz) and newly acquired copper production.
        Q1 production gains of 469 koz from former Placer operations and production from new mines at Lagunas Norte (+211 koz) and Veladero (+74koz). Elsewhere, higher grade at the Goldstrike property (open pit and u/g reported together) added 102 koz. Cortez production fell from 132 koz to 52 koz as grades and ore processed fell as warned.
        2005 yr: Full year income rose 62%, to US$401 million, as production rose by 9% to 5.46 Moz, and the gold price was 12% higher. This performance despite cash costs increasing from US$214/oz to US$227/oz. Results benefited from a reduction in amortization costs and after the 2004 results suffered a US$139 writedown charge against Eskay Creek and Peruvian exploration properties.
        Geographic split of production of 5.5 Moz in 2005 was North America 2.86 Moz; South America 1.23 Moz; Australia/Africa 1.33 oz.
        Post Q1 end, shaft damage at South Deep (ABX 50% will impact production.

        Newmont Mining (NYSE: NEM, www.newmont.com): Q1 2006: revenues of US$1.1 billion were up 21% on Q1 2005, although down from Q4 2005, as the average gold price received jumped US$130/oz to US$555/oz. Equity gold sales were down 10% at 1.39 Moz. Cash cost rose 16% to US$275/oz. Net income rose by 148% to US$209 million (US$0.47/share).
        Nevada production fell 9% (493 koz) principally due to lower underground grades from Midas and Deep Post and unplanned mill downtime. Costs rose by 28% as a result of increased labour and consumable costs. The other major decline was in Australia because of lower grades at Kalgoorlie, Jundee and Martha (NZ) and lower output with the depletion of Groundrush.
        2005 year: Revenue was level at US$4.4 billion as equity sales fell to 6.5 Moz (from 7.0 Moz). Net income fell to US$322 million (down 27%) as Minahasa environmental charges and the Buyat Bay law suit gave rise to one-off costs of US$56 million. The company also took writedowns on assets and Nevada goodwill totaling US$69 million.
        The company also invested US$10 million in Queenstake, with which it also concluded an ore purchase agreement.
        The company declared a dividend of US$0.10/share.

        AngloGold Ashanti Ltd. (Johannesburg: ANG, www.AngloGoldAshanti.com): Q1 2006: A new loss of US$185 million (Q1 05, US$22 million profit) due to lower production (down 15%) and a non-hedge derivative charge of US$181 million. Adjusted headline earnings were US$86 million (up 41% from Q1 2005) as operating costs were reduced from Q1 last year.
        In South Africa, gold output fell 8% to 610 koz with lower grades at Great Noligwa, Kopanang, Tau Lekoa and Tau Tona. There were also big falls in production at Cripple Creek, Bibiani and, most markedly, at Geita where drought followed by heavy rains disrupted operations and output fell to 84 koz from 192 koz. Unit cash costs up 8% to US$/oz.
        2005: AngloGold plunged from a profit of US$108 million in 2004 to a loss of US$183 million, despite a 6% increase in production to 6.2 Moz and an 11% improvement in gold price received. Unit cash costs rose 6% to US$281/oz but total costs rose 20% to US$2.3 billion. A loss of US$36 million at ERGO, now closed, contributed.
        The company has flagged its high capital commitments at the moment which may impact on dividends.
2006 guidance: Q1- 1.4 Moz at cash cost of US$311/oz Year - 5.9-6.1 Moz at US$285-293/oz. 2007: production increase to 6.3-6.5 Moz.
        Anglo American reduced its holding in the company to 41.8% (from 52%).

        Gold Fields Ltd. (South Africa: GFI, www.goldfields.co.za): Attributable gold production decreased 2% with increases at international operations, notably Tarkwa, all but offsetting a 7% decrease in South African production.
        At Tarkwa, a 15% production increase was due to higher stacked and recovered ounces. Use of the first lift on the North heap leach pads allowed higher ore volumes to be placed and the CIL plant performed well with an improved blend of hard and soft rock at higher grades.
        St Ives had a good quarter with higher grades and mill throughput, despite unscheduled downtime; while Agnew and Damang continue to slightly improve their performance.
        A production fall of 18% at Kloof was the main issue in South Africa. A slow start after the Christmas break was exacerbated by a lack of stockpile material, labour disputes and unforeseen grade visibility.
        Driefontein production was marginally lower with lower underground production balanced by an increase in surface tonnage. Beatrix performance remained steady.
        During the quarter, GFI completed the purchases of Cerro Corona and Bolivar Gold. The Bolivar takeover will consolidate mining exploration claims around the Choco 10 mine, in Venezuela.

        Harmony Gold Mining Co. (Johannesburg: HAR, www.harmony.co.za): Results were mainly negatively affected by lower operating profit associated with a 14% fall in gold production owing to the "typical" December break problems, coupled with a reduction in grades, and a negative A$148 million mark-to-market of the Australian hedge book.
        The fall in production led to a 19% increase in unit cash costs, with significant decreases in tonnages and grades reported at both the 'Quality' and 'Leveraged' operations.
        CONOPS implementation at Masimong was completed at the end of the quarter, which together with production initiatives established at Tshepong, is expected to impact favourably on the mines' future profitability.
        Although Cooke I shaft at Randfontein is entering the last phase of its economic lifespan, fast tracking of the 128 South project at Cooke 3 should offset tonnage shortfalls, beginning in May this year.
        Commissioning of the North shaft at Joel in March has created two more operating levels, allowing an expected improvement in tonnage to 50,000 t/m in the next six months.
       In Australia, the St George underground mine is now fully operational and partially offset the impact of a seismic event at the Mt Magnet mine, which lost 38 days of production.

        Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX, www.fcx.com): Copper and gold production and net earnings slumped dramatically in the quarter as mined grades were even lower than expected and milling operations were suspended for four days after a road blockage by protestors.
        PT-FI's quarterly gold production fell by two-thirds as milled head grade dropped 60% and metallurgical recovery factors dropped. Mine sequencing at Grasberg does lead to volatility in head grades, particularly on a quarterly basis, and grades are expected to rise later in the year but the poor performance may impact on 2006 annual production.
        With much lower copper and by-product gold production, unit net cash costs rose sharply, up 60c/lb, although this is in part due to the inclusion of all quarterly stripping costs under new accounting guidelines.
        Some 20% of mill throughput was sourced from the Deep Ore Zone (DOZ) underground mine, which increased production to 43,800 t/d ore.
        A mudslide caused three fatalities in March and damaged mine service buildings. Production was not affected but it has prompted a geotechnical review that may require changes to the mine plan.
        Smelter operations at Atlantic Copper continued to report increases in operating income as the impact of improved maintenance turnaround times and higher charges cut in.

        Buenaventura (Lima: BVN, www.buenaventura.com.pe): Net income in the March quarter was 89% higher than a year ago despite a negative mark-to-market variation of US$10.3 million.
        Operating income was 111% higher, due to 24% higher silver sales and higher prices for silver, zinc and lead.
        Total EBITDA was 62% higher, whilst the EBITDA from direct operations was 87% better.
        Gold production, including that from Yanacocha rose 3% and the realized sale price rose 22%.
        Sales of other metals were 3.3 Moz silver (+1%), 7,838 t lead (+15%) and 12,981 t zinc (+4%).
        Gold production at Yanacocha remained steady compared to Q1 2005. Budgeted production is 2.6 Moz for the full year 2006. (3.3 Moz in in 2005). Cash operating costs rose 12% because of a greater tonnage mined, more and higher prices for commodities and higher labour costs.
        Gold production at Orcopampa in the quarter was 8% higher, whilst cash operating costs increased 10%. This was caused by an increase in supplies and contractors' expenses due to the mining of a decline to deepen the mine.
        At Antapite production fell 5% due to a 6% decrease in ore grade.

        Newcrest Mining (Australia: NCM, www.newcrest.com.au): Attributable gold production fell 14% with reductions in gold production at all operations. Group copper production also fell, down 18% to 23,219t in the March quarter.
        Based on spot prices for copper and silver, quarterly cash costs actually improved despite this performance, due to higher by-product prices and favourable currency movements. The impact of much lower realized copper hedge prices is significant, however, as attributable cash costs at achieved prices were US$235/0z and total production costs US$328/oz.
        Telfer mine production was lower due to inclement weather and lower equipment availability, while ROM grades were lower than planned. The first contribution from underground operations was reported.
        Material movement and production at Cadia was lower, as planned maintenance of both face shovels and significant rainfall affected access to high grade areas of the pit. Mill throughput declined due to relining work and power outages. Cash costs improved with higher copper prices boosting by-product credits.
        Mining of the higher grade pit at Toguraci is nearing completion and quarterly production was lower due to inclement weather, a pit wall failure and geothermal groundwater problems.
        Lower grade stockpiles supplemented mill feed.

        Kinross Gold (TSX: K; NYSE: KGC, www.kinross.com): Kinross reported net earnings of US$8.9 million, compared to a loss in March quarter 2005. Earnings include an expense of US$9.4 million relating primarily to non-cash foreign currency translation losses on deferred tax liabilities.
        Gold equivalent oz produced and sold were consistent with budgeted amounts for the quarter but 11% lower than Q1 2005.
        Revenue in the first quarter was 10% higher, owing to higher gold prices although offset by less gold sold.
        At Paracatu production rose 6%, but unit costs rose 23% due a range of factors including energy, labour and exchange rates.
        At Round Mountain production fell 11% due to reduced loader availability, crusher downtime and weather related delays.
        Production at Fort Knox and La Coipa rose 8% and 14% respectively, whilst gold extracted at Crixas remained steady.
        At Porcupine JV gold production in the first quarterof 2006 was 43% lower than 2005. This was largely due to lower grades. Gold production was further impacted by an unplanned mill shutdown.
        Gold equivalent production at Musselwhite was 25% lower due to localized ground conditions that delayed access to higher-grade ore blocks. As a result, mill feed for the quarter was limited to lower-grade ore from underground and stockpiles.
        Residual production from stockpiles at Kubaka continues as the mine winds down.

        Goldcorp Inc. (TSX: G, www.goldcorp.com): In Q1 earnings tripled whilst gold production rose 7.5% compared to Q1 2005, as the Amapari mine contributed for the first time with 20 koz..
        Average total cash costs were minus US$88/oz for the March quarter as byproduct copper sales at Peak and Alumbrera and by-product silver sales for Luismin were credited to gold costs.
        Goldcorp's acquisition of some of Placer Dome's assets includes the operational mines Campbell (100%), Porcupine (51%), Musselwhite (68%) and La Coipa (50%). The remaining share of Porcupine, Musselwhite and La Coipa are owned by Kinross. It also owns a 40% share in the Pueblo Viejo gold development project.
        In April Goldcorp entered into an agreement with Atlas Cromwell Ltd. to sell certain of the previous Placer Dome Canadian exploration interests. On completion Goldcorp will own an 82% equity interest in Atlas (76% fully diluted).
        At year-end 2005 proven and probable reserves had trebled to 14.7 Moz. By adding the Placer Dome reserves, on a pro-forma basis, reserves are now more than 25 Moz.
On March 31, 2006 Goldcorp completed the acquisition of Virginia Gold Mines and its Eleonore gold project in Quebec.
        Editor's Note: Goldcorp is the world's lowest-cost and fastest growing multi-million ounce gold producer. In May 2006, Goldcorp became North America's third largest gold producer after acquiring certain Placer Dome assets from Barrick Gold.
        It is important to note that the above companies are the top ten producers in the March quarter.

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GROWTH STOCK OUTLOOK
P.O. Box 15381, Chevy Chase, MD 20825.
1 year, 24 issues, $235.

Newmont: Revenues flat, earnings
down in 2005, sees bright future for gold

       Charles Allmon: "As the world's second largest gold mining company, Newmont operates worldwide on five continents. Newmont Mining (NYSE NEM $50.52) is the only gold stock included in the S&P 500 index.
        When management reported to shareholders in February 2006, they had this to say: "Declining supply and robust demand are providing powerful support for gold prices. Throughout 2005, we saw jewelry demand increase over 4%, driven by strong demand in the Middle East, Turkey, China and India.
        "Even more impressive, inflows into the seven gold exchange traded funds have stimulated over 15 million ounces (over $8 billion) of demand since inception, reflecting the market's confidence in the sustainability of this gold bull market. On the supply side, a dearth of new discoveries in the last seven years, combined with an ever-lengthening permitting process and rising capital costs, has reduced mine output by 5% since 2001.
        "Another factor driving gold prices higher is gold's ongoing role in the world's financial systems. Gold is money, and it shines in uncertain political and economic times. The U.S. Current Account deficit has grown to an unsustainable level of over 6% of Gross Domestic Product, oil prices have skyrocketed, and the Middle East remains unstable. In 2005, the U.S. dollar was remarkably strong, yet gold had another solid year, rising 20% to close at $517 per ounce. When the growing financial imbalances of the U.S. are one day reconciled with the fact that no country can borrow its way to prosperity, we believe gold will shine brighter than ever.
        "The case for gold is easy and we believe the case for Newmont is just as strong. In 2005, Newmont benefited from a 9% increase in the average spot gold price, realizing over $440 per ounce for the year. Our stock gained 20% in 2005, significantly outpacing the S&P 500 and the Dow Jones Industrial Average.
        "For 2005, we again generated industry leading cash flow from continuing operations of $1.3 billion, despite lower earnings resulting primarily from ongoing industry-wide cost pressures and the impact of several non-cash charges. Income from continuing operations for 2005 was $374 million ($0.84 per share) compared with income from continuing operations of $453 million ($1.02) per share) in 2004. The 2005 equity gold sales were 6.5 million ounces compared with 7.0 million ounces in 2004. As we look to 2006 and beyond, we are excited about the opportunities our newest initiatives will provide for improving our cost structure and competitive profile in the industry. We remain confident in the exploration prospects contained within our 32-million-acre land position in many of the world's premier gold districts.
        "In 2006, we expect to increase our investment in exploration, spending approximately $158 million, with our team of geologists and geoscientists continuing to develop and employ state-of-the-art geophysics and geochemistry technology. In 2005, we replaced depletion and generated reserve growth for the fourth straight year.
        "Over the next four years we will be investing approximately $1.8 billion in capital development programs designed to offset the natural decline of several mature operations around the globe. In 2006, we will be adding production from the Leeville and Phoenix mines in Nevada, and from the Ahafo mine in Ghana. In 2008, we expect to begin production from the Akyem mine in Ghana and the Boddington mine in Australia. These capital-effective mines will have average project lives of over 16 years, and once completed, will add over 2.5 million equity ounces of annual production at average costs applicable to sales below the current industry average."
        "Energy prices accounted for over 18% of operating costs in 2005. While gold prices increased 20% in 2005, oil prices were up over 40%, placing increasing cost pressures on the gold mining industry. To help address these costs pressures, we have commenced construction of a 200-megawatt power plant in Nevada that is expected to significantly reduce our operating costs when completed in 2008.
        "During 2005, Newmont also increased its investment in the areas of sustainable development, environmental stewardship, employee health and safety, and social responsibility. Our commitment to leadership in these areas is fundamental to our long-term success and is already paying dividends. Our Ahafo project in Ghana was the first mining project to receive International Finance Corporation funding approval following the World Bank's Extractive Industries Review."
        "As we reflect on 2005 and look to the future, we see a gold price environment that offers tremendous opportunities for substantial returns on our investments. We remain steadfast in our no-gold-hedging philosophy; and we continue to maintain the industry's strongest balance sheet, with year-end 2005 cash and cash equivalents, marketable securities, and short-term investments of $1.9 billion. As we open 2006, our competitive advantages include an unrivaled land position approximately the size of England, a pipeline of long-lived assets slated for initial production over the next four years, superior trading liquidity, and industry-leading environmental and sustainable development programs."
        On 12-31-05 total assets were $13,992,000,000, current assets $3,036,000,000, current liabilities $1,350,000,000, cash and short term investments $1,899,000,000, long term debt $1,733,000,000 shares outstanding 447,766,000, shareholder equity $8,376,000,000 ($18.71 per share) return on shareholder equity 3.8% negative cash flow. [Company address: 1700 Lincoln St., Denver, CO 80203. (303) 863-7414.]"
        Allmon's Comments: "Management said some weeks ago that earnings in 2006 might be flat, or even down. Meanwhile, costs continue to rise. What is happening politically in South America may in time affect Newmont operations there as Marxist leaders attempt to hold companies for ransom. It could happen in almost any developing country.
        While the gold price rise to over $700 per ounce has been nothing short of breathtaking, I mentioned in March and April 2006 that investors should not be surprised to see gold fall back under $600. If that happens, I would double our Newmont position. As the world's problems unravel, not to mention world terrorism, a far higher gold price appears inevitable over the next 5-10 years. I stated before and do so again: Under certain conditions, we should not be surprised if the gold price again crosses the Dow, which might be 3,000.
        Meanwhile, Newmont revenues could about match 2005, perhaps up a tad. Earnings in the $1.25-$1.36 may be a reasonable expectation."

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

One more chapter in the
great bull market for gold

        Dr. Hans Black: "The downward trek for precious metals - and particularly gold - which began near the $730 level in mid-May, tuned quite violent by mid-June as the key metal touched $535 on an intra-day basis. This almost $200-an-ounce downturn can only be described as historic as it occurred within just one month. Judging by the reporters calling us for comments, it is likely just one important chapter in what will be known as the great bull market for gold this decade. While violent downswings are certainly troubling and very tricky to trade, we must admit that we were not surprised, and used the opportunity - particularly in early and mid-June - re-accumulate and, importantly, accumulate additional positions on price weakness. For now, we expect gold to meander in a relatively tight price range between $550 and $650 for a number of months before it breaks higher once again.
        We continue to emphasize the same quality gold companies as before. Producing companies such as Cambior, Eldorado, and high-quality exploration companies such as Southwest Resources and Gabriel Resources would be on the top of our list."

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CRAWFORD PERSPECTIVES
6890 E. Sunrise Dr., #120-70. Tucson, AZ 85750.
Monthly, 1 year, $250.

Sky signs are shifting radically

        Arch Crawford: "Gold topped on May 12 at $739 just before the open in New York, and dropped very sharply into June 14. On the bounce from these lows, resistance was encountered at the 38.2% retracement. It broke through and is now approaching the 50% retracement at about $640. The more important 61.8% of the drop is around $660. We want to be short into the 31st of August, but the place to act is not yet clear on our drawing boards.
        Expect a choppy July with a sharp decline in August. Tentatively, short on any rally to $657-$663 and place STOP at $671.70 on the August contract (Q).
        Sky signs are shifting radically from a very inflationary environment (Jupiter square Neptune) to an extreme deflationary one (Saturn opposite Neptune)! For that reason, we have remained cautious on the Oil, metals & CRB for the first time in many months. Last month we said: "Gold may dip to 550-570 or even to 480-490 in late August, worst case."
        For Gold Bugs who fear missing a discontinuous emergency in the price Gold, you may want to keep an Open Buy Stop above the market on the trading floor at all times.
        In 2007, another series of Jupiter squares to Neptune may bring a massive Hyper-Inflation resulting from a concerted attack against the Dollar as the world's reserve currency. It could start this year near Labor Day in the US. We have mentioned last 3 months: "Do Not bet heavily under these circumstances, and keep closer Stops." Opportunities will likely develop this Fall for truly phenomenal gains being Short US securities and Long most commodity baskets.
        The Oil looks higher immediately and has near term targets in the $80-$82 area! It needs to break above the recent trading range to $76 before slipping below $68 (where it appears to be supported). The XOI oil stock average has already returned very near the highs at 1187.50, a positive sign."
        Editor's Note: Since 1977, Arch Crawford has been providing quintessential market timing by planetary cycles and technical analysis. Visit the web site at www.CrawfordPerspectives.com.

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THE ADEN FORECAST
P.O. Box 790260, St. Louis, MO 63179.
Monthly, 1 year, $195. www.adenforecast.com.

Geopolitical tensions pushing gold up

        Mary Anne and Pamela Aden: "Geopolitical tensions are pushing gold up... from the rush-hour train attacks in Mumbai, India to Iran's persistent plans to build nuclear programs, to North Korea's defiance, to Israel's attack on Southern Lebanon. Gold jumped up to close at a six week high today and a C rise is underway. Gold's C rise is strong above $625 basis August, but gold will remain very firm by staying above $605. A close above $675 means gold could shoot up to test its May high and possibly go higher, which would be in line with a normal C rise. But don't be surprised to see more volatility. Gold is a safe haven right now as it's rising while the dollar is stable. Keep an eye on the numbers. Silver and gold shares, while on the rise for four weeks now, they're lagging gold. Silver is firm above $10.70, but to follow gold's strength it must close and stay above $12.10, basis September. Likewise for gold and silver shares. They are poised to rise further and HUI is strong above 340, but it too must close above 351 in order to follow gold (VGZ is at a new high). Platinum is strong along with gold, closing at a five week high today. It's strong and solid above $1200.
       Copper is also strong at a six week high today. A renewed rise is underway, in spite of its overbought situation, by staying above $3.30. It would be super strong at a new high above $3.98. The resource shares are lagging copper but, like gold shares, they are on the rise. Keep your positions.
       Oil remains strong near the highs and it looks poised to rise further, above last week's record highs. Oil is very strong above $71.50 and a close above $75.20 means it could shoot up to the $80 as the next target. Our energy stocks are lagging the oil prices. The strongest are oil's ETF, USO, and COP, IYE, XLE, IXC and NFX. The coal related stocks are lagging the most. Keep your positions.
       The stock market is vulnerable and a decline since the May highs is underway. The Industrials are weak below 11190. A decline below 10950 means the Dow could test its June 13 low at 10750. It would be outright bearish below it. The Transportations have formed a double top while S&P is clearly weak below 1280. The world markets are similar. Continue to avoid them.
       The Utilities is the only one showing strength and it's likely leading the bond market. Bond prices have formed a double bottom and are poised to rise. This will be confirmed once the yields close and stay below 5.13% on the 30 year and 5.06% on the 10 year. The yields could fall to possibly as low as 4.70% on the 30 year, but even if it does that won't change the major trend which is up for yields and down for bonds. A stronger bond market at this time would go hand in hand with a slowing economy.
       The U.S. dollar index is stable to neutral. It reached a double bottom in May and June and as long as it stays above these lows near 84, it'll remain stable in spite of the trade deficit. It's still weak, however, unless it closes above 86.40. The Canadian dollar fell to an eleven week low as the Bank of Canada left interest rates unchanged. This overpowered the rise in gold but if gold keeps rising as we suspect, the Canadian dollar will benefit. For now it's weak unless it can close back above .8900. The major trend is clearly up. The other currencies are still in an intermediate rise above: 1.26 on the euro, .8050 on the Swiss franc and 1.8280 British pound. The yen is neutral as the BOJ decides its fate... will they raise their rates from zero? We'll soon find out. Meanwhile, the yen is stable above .8580. Keep your positions. The Australian and New Zealand dollars are looking better but it's premature to buy."

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THE MONEYCHANGER
P.O. Box 178, Westpoint, TN 38486.
Monthly, 1 year, $149, or $22 in US 90% silver coin, or other gold or silver equivalent.

Gold and Silver in bull markets

        Franklin Sanders: "Staring and staring at the gold chart, I begin to tremble. Have we missed the bottom? Earlier in the month it touched during the day off its 200 day moving average at $542.27. Since then it has rallied. Today it is hovering beneath its 17 day moving average. Crossing that would be the first sign higher prices are coming.
        But get a grip on yourself, Moneychanger. Although the MACD and RSI indicators point to a correction completed, there is a great likelihood we will yet see another plunge, touching back to that bottom to confirm it. If that happens, buy with both hands, all you can stand and more. In fact, buy anyway.
        Bear in mind that we are at the time when gold's seasonal lows occur, June - July. I know that summer and vacation season has your minds distracted, but you had better pay attention to the gold market and buy.
        What we'll likely see is gold moving sideways through July and August, perhaps with that one touchback. It will frustrate and demoralize, but just keep your eyes on the horizon. This fall gold will begin to rise again, and above $720 lies virtually no resistance. Therefore $1,000 will offer the first serious resistance. It's gilding the lily for me to observe that once gold crosses $1,000, everybody will be paying attention and its rise will begin to feed on itself.
        Highest I expect to see on any upward move is 600 - 610. A breakout above that would mean some serious rise is taking place. On the downside expect the $540 area to hold. What if it didn't? If its goes lower, mortgage your house and buy gold with the proceeds.
        You're in a bull market. Life doesn't present you with many opportunities like this one.

Silver Offering Once in a Lifetime Opportunity

        On 13 June silver kissed its 200 day moving average, and has moved up ever since. So far 1040¢ has blocked it, so if we saw a breakout above that then a sustained rally would follow. But I expect silver, like gold, to touchback toward its low, then trade sideways for a month or two.
        As with gold, the indicators have turned up and the ratio has touched the 200 day moving average. In addition, I noticed yesterday that the discount on the buy side of US 90% silver coin had dropped from minus 35 cents to minus 20 cents. Immediately the thought ran through my mind, "The last time I saw that price was at silver's last price low." Mmmmm.
        The most price-favourable form of physical silver now remains US 90% silver coin.
        Silver is offering you a once in a lifetime opportunity, the chance to buy at the bottom of a correction after a bull market is proven to be in place. It's like someone shouting, 'Hey! Free money! Back your truck up and I'll load you down!"

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THE DINES LETTER
P.O. Box 22, Belvedere, CA 94920.
1 year, 17 issues, $195. www.dinesletter.com.

Looking for Base Formation
In preparation of Autumn rally

        James Dines: "In our first Interim Warning Bulletin of 2006 we indicated that the golds and silvers were ready to rally, which turns out to have been a really lucky guess. But bull markets often move three steps up, and then one or two down. The very function of the downers is to keep the easily-bored investing public out until they can't stand it any longer and buy near a Top Formation. We have waited out a half-dozen of these Consolidations since the gold bull market began in 2001, and have observed that when weak-handed selling dries up, the next move should be to new highs to confirm that the Major bull market is still intact.
        We have been looking for a short-term decline in gold prices since its recent high, but our last Interim Warning Bulletin signaled that golds were finally down into Oversold territory and primed for Base Formation. The chart of Dines Gold-Stock Indicator Consensus (DIGSIC) has dropped into its "Buy Zone," and those who unluckily bought golds higher might want to consider averaging down during dips. That IWB also reflected our growing optimism toward the US dollar, and how precious metals should nonetheless uncharacteristically rise alongside the US dollar. Our IWB concluded that "the current decline seems to us to be approaching some kind of Bottom Formation" in the golds. Note that the mood of extreme optimism toward gold a couple of months ago has now been displaced by a fearful general consensus that gold has made a Top and will never go higher. But gold soared from $252.80 to $725.50 since Aug 1999, and is now down to $580, so what's the problem? Would a decline in a stock from 72 to 58 be less frightening? To the contrary, we are looking for Base Formation to begin soon in preparation for gold to enjoy an autumnal rally."

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THE YAMAMOTO FORECAST
P.O. Box 573, Kahului, HI 96733.
Monthly, 1 year, $350.

Higher gold prices later in year

        Irwin Yamamoto: "We anticipated a correction in the gold market. And we got a $100 price drop. In the immediate future, the bullion should feel more downward pressures in this rising interest-rate environment. Yet as the economy slows, the loss of value in the dollar means higher metal prices later in the year."

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EQUITY FUND OUTLOOK
P.O. Box 76, Boston, MA 02117.
Monthly, 1 year, $149.

Permanent Portfolio fund
provides a way to preserve capital

        Thurman Smith: "Preservation of buying power over all market conditions is the idea behind the 23.5-year-old Permanent Portfolio (PRPFX). It maintains a fixed allocation of 25% in gold and silver, 10% in Swiss franc assets, 15% in U.S. and foreign real estate and natural resource companies, 15% in aggressive domestic stocks, and 35% in U.S. government paper. Over its lifetime it has underperformed the market. But in the last seven years it provided an annualized total return of 10.8% against a 2.3% return for the market with very little risk. So this fund might be useful in a choppy market that makes little net gain over a sustained period. However, if gold is suffering the fund is likely to lag. In the recent correction Permanent Portfolio dropped 9.9%, while the market decline 8.9%. Over some future period of seven years with a more typical market return, it may not look so good. But for cautious investors who are willing to give up market returns in rising periods, Permanent Portfolio does look like a way to preserve capital in weak market. (800-531-5142/$1000/FSA/http://www.permanentportfoliofunds.com)."

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WATER INVESTMENT NEWSLETTER
230 Main St., Halstead, KS 67056.
Monthly, 1 year, $140.

Water treatment, metal recovery
hold bright future for BioteQ

        Roy Urrico: "It is not quite turning water into gold. However for Vancouver, B.C., - based BioteQ Environmental Technologies Inc. (TSX.V: BQE), its water treatment and metal recovery process is certainly bringing attention and contracts to the Canadian firm. BioteQ's patented Biosulphide(r) Process allows the treatment of acid contaminated water with the simultaneous recovery of saleable metals and reduction of total dissolved solids.
        The Biosulphide(r) Process is especially important in mining operations. "Mining companies are looking for alternatives," explains Brad Marchant, president & CEO at BioteQ, which reports $2.75 million in revenues and total assets of CDN$11.5 million. "Very often we can turn a cost center into a profit center by recovering some of those metals." Just as important, the process produces water from these treatment plants that meet mandatory discharge water quality guidelines.
        "I really like the BioteQ technology... it is a real gem in the water treatment industry," says Sara Elford, CFA, an analyst with Canaccord Adams. She adds, "Anytime you can treat water to selectively recover metals to offset the costs you have a great value proposition."
        The company began as a laboratory research project in 1988. In 1997, BioteQ took its first step in a new direction when it acquired, though its wholly-owned subsidiary Biomet Mining Corp., patent for a process to treat metal-laden, suplhate-rich wastewater streams for acid neutralization and metal recovery.
        BioteQ further developed the process to be the key technology in commercial-size treatment plants. In 2001, the company then known as Biomet went public, according to Marchant "to raise money to build it first commercial scale plant" and changed its name to BioteQ.
        During 2001, BioteQ signed its first commercial contract, with Toronto's Breakwater Resources Ltd., to build a small plant at the Caribou mine in New Brunswick. That plant, which went into operation in 2002, is not a big moneymaker claims the CEO, but it provided the needed confirmation of BioteQ's technology and demonstrated its potential environmental and economic benefits. "It has been a great test site for us,' explains Marchant. By late 2004, BioteQ began operating all mine dewatering, water collection and treatment at two Brunswick locations - the Caribou and Restigouche sites - owned by CanZinco Ltd, a subsidiary of Breakwater Resources.
        BioteQ gradually improved the two sites, which include two lime plants during 2005 through a number of process changes. A new high density sludge circuit was built in the second quarter at Caribou resulting in a significant increase in water treatment capacity, while producing less sludge from acid mine water that contains more than double the metal content originally anticipated. The Restigouche site has continued to be difficult to manage due to a 65 percent increase in annual rainfall and the age of the lime plant, which produces excessive sludge. In the fourth quarter, BioteQ installed a new lamella clarifier, which will produce higher density sludge for more economic handling, as well as improve water quality.
        According to BioteQ, results to-date have been excellent, with consistently much better water quality than regulatory limits require. The changes made during 2005 should result in overall profitability from the Caribou operations in 2006. Total revenues expected during 2006 from the contract with CanZinco are CDN$1.3 million.
        BioteQ's own biological plant, designed and built in 2001, is currently not operating, pending expansion, now in progress, for possible treatment of old tailings (the waste left during the mining process) annually with elevated metal content or zinc recovery from the mine drainage. The Caribou site has been a goldmine in other respects. It allowed BioteQ to display its technology, which resulted in commercial contract with Falconbridge in 2003 to build and operate a plant at their Raglan mine site in northern Quebec.
        The Raglan plant recovers nickel from mine wastewater on a fees basis. During 2005, BioteQ increased the treatment capacity by 50 percent while maintaining a perfect record in treated water quality and exceptional nickel recovery. BioteQ also removed over 10,000 kilograms of nickel from the wastewater, and treated and released water directly into the environment - without any sludge created.
        Because of Falconbridge's satisfaction with the plant's performance in 2005, they are not planning to operate their conventional lime treatment plant in 2006. Instead, BioteQ will provide the capability to treat a larger quantity of water, up to 700,000 cubic meters. BioteQ plans to meet the additional capacity through modifications to the water feed system made in late 2005, installation of backup generators and other plant changes made prior to 2006.
        BioteQ expects the plant to be able to treat approximately 30 percent more water this year compared with 2005. Raglan revenues of $800,000 were budgeted for 2005 and were actually $833,000. BioteQ expects this year's revenues to top that, somewhere in the range of CDN$1.1 million.
        In 2003, BioteQ signed a joint venture agreement with Phelps Dodge to build and operate a plant in Bisbee, AZ. The following year BioteQ completed a copper recovery plant, designed to recover copper selectively from circulating water from existing low-grade stockpiles. The design capacity of the plant is approximately 2.7 million pounds per year of copper recovered. Copper production at the site during 2005 was well below expectations due mainly to two factors: the lining in the contactor tank showed signs of premature failure and the tank was replaced in January 2006; and failure of an agitator shaft, which caused an extended shutdown of close to three months.
        By year-end, the plant produced 171,000 pounds of copper in concentrate. BioteQ expect copper production to return to bioreactor design capacity in the second quarter of 2006. By March 6, 2006, the plant had produced 189,000 pounds of copper from 54 operating days. Copper levels in the plant feed have remained steady and recoveries continued to be high. Ferric iron in the water has been higher than plant design and consumes the biogenic sulphide produced, which increases production costs.
        Installation of a ferric removal stage, considered for later in 2006, could maximize the copper recovery capacity of the plant. The expected revenue of approximately CDN$1 million for 2005 came up short and was actually CDN$614,000. However, the expected plant production for 2006 is 2,000,000 pounds copper, producing revenue for BioteQ's share of approximately CDN$2 million.
        The success of the Ragland and Bisbee plant not only completed the evolution of BioteQ from a research-and-development to an operating company but also showed positive cash flow from operations for the first time. It also validated BioteQ's business model that wastewater treatment could be both profitable and supply the proprietor with a superior environmental result. "We are offering a better environmental solution," explains Marchant.
        BioteQ operates on three commercial bases:
        • Design, build, own and operate
        • Design, build and transfer with a service contract
        • As a third party license
        There are now other projects underway for development in 2006 and beyond including:
        • A fifth BioteQ plant, its second plant with Phelps Dodge, is scheduled for commissioning in Oklahoma this year.
        • A consortium with EPCOR and Stantec won a bid to construct and operate a water treatment facility at the Britannia mine site, between Vancouver and Whistler, BC.
        • Selection by the U.S. EPA for a Super Fund site at Wellington Oro to treat contaminated ground water near Breckenridge, CO.
        • An agreement to develop a nickel recovery plant at Inco's north mine site in Sudbury, Ontario
        • A joint-venture with Jiangxi Copper in China to recover copper at the Dexing mine site
        • Development work on a prospective plant with PlacerDome, located in the Dominican Republic
        • An agreement for preliminary engineering at a site in Mexico
        The 2005 results represent the first full year of operations. In 2005, revenues were lower and operating costs and losses were considerably higher than expected, due largely to mechanical issues at the Bisbee site and extraordinarily high costs at Caribou due to record precipitation and infrastructure improvements. A unit issue of 6,388,888 shares with one-half warrant at CDN$0.90 resulted in new funds amounting to CDN$5,207,614 (net). Total liabilities increased in 2005 due mainly to the company taking down a loan facility of CDN$600,000. Shareholder equity changes in 2005 were the result of the financing, warrant and option exercises of CDN$442,950, stock based compensation charges of CDN$77,658 and the next loss for the year.
        Operations in the first quarter of 2006 include the Bisbee and Caribou plants and some revenues related to projects involving engineering fees. The Raglan plant does not operate in the winter months and water treatment commences in May. Revenues increased in the first quarter compared to 2005 due to additional fees for operating the Caribou facility, which were almost 50 percent higher than during 2005, but were not sufficient to show an operating profit.
        Momentum is on BioteQ's side. Currently, new projects are underway which should start contributing to revenues in 2007. With its current operating projects, the company is forecasting a small net profit for 2006. "In the last couple of years they have demonstrated the viability of the technology," says Elford. "There will be two drivers [for the BioteQ process]: one environmental, one economic."
        Editor's Note: Roy Urrico is a contributor to Water Investment Newsletter, a newsletter specializing on water stocks and investments.

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Russ Kaplan's HEARTLAND ADVISER
5002 Dodge St., Ste 302, Omaha, NE 68132.
Monthly, 1 year, $150.

Posco: Long-term gain potential

        Russ Kaplan: "A new old recommendation is Posco, formerly called Pohang Iron & Steel, which we initially recommended in 1998.
        Even though Posco is on the other side of the world (South Korea) it fits our definition of value perfectly and we think it has the potential for much long term gain. It is a major world steel producer and exports its products all over the world including the booming market of China.
        Its debt level is virtually nil which gives it the capacity to survive any kind of economy. In addition the stock pays a decent dividend.
        It may not be glamorous, but neither was U.S. Steel when we recommended when it was out of favor and before it made its very long upward gain."

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DOW THEORY FORECASTS
7412 Calumet Ave., Hammond, IN 46324.
1 year, 52 issues, $279.

Different approaches for utilities

        Richard Moroney: "The last few months have been difficult for investors in traditional utilities. The utility indexes composed of S&P 1500 stocks rose more than 21% from the end of 2003 to highs in October 2005. But over the last year, indexes for electric, natural-gas, and diversified utilities lagged the S&P 1500 - and most utilities delivered negative returns.
        Despite the recent declines, the average stock in our Utility Update trades at a slight premium to its five-year average valuation. The sector as a whole earns mediocre Quadrix(r) scores, though many utility/energy hybrids and independent power generators score well.
        Deregulation has changed the investment landscape, sparking utilities to branch out into businesses ranging from power generation to natural-gas exploration to construction and even banking. These changes have made things more complicated for investors, who can no longer simply choose utility stocks based on yield and count on steady cash flows and low share price volatility.
        But the changes have also opened up new opportunities for investors. Utilities aren't just for income investors anymore. In the following paragraphs, we consider different reasons and strategies for investing in utilities.

Growth

        The term "growth utility" sounds like an oxymoron, and most utilities do indeed generate little growth - consensus estimates project average per-share-profit growth of 7% in the current fiscal year, well below that expected from most market sectors. But a few utilities, such as the ones discussed below have managed double-digit sales and profit growth over the last year and seem poised to continue that growth.
        TXU's (NYSE TXU $57) subsidiaries include TXU Energy, a nonregulated power generator, and TXU Delivery, a regulated energy distributor. Both operate in Texas. The nonregulated business generates about 80% of operating income. Texas electricity rates depend on natural-gas prices, as nearly three-quarters of the state's generation capacity draws on natural gas for fuel. But TXU Energy fuels its power plants with coal and uranium. Costs have remained flat, while rising natural-gas prices have boosted electricity rates.
        In April, TXU announced plans to spend $10 billion on 11 new coal-burning power generators, which should begin operating in 2010 if approved by regulators. The plan will increase TXU's generation capacity in Texas by 10%. TXU has an intriguing growth story and a 95 Quadrix Overall score, and the stock earns a B rating in our Utility Update. But the stock is somewhat risky and is not being added to the Monitored List.

Value

        Utility values are harder to find today. Utilities in the S&P 1500 Index average a P/E ratio 20% below that of the average for all stocks in the index. That discount has averaged 19% over the last two years. During the previous eight years, the sector averaged a 31% discount.
        At 14 times trailing earnings of $3.27 per share New Jersey Resources (NYSE NJR $46) trades 10% below its five-year average trailing P/E ratio. The company also trades at a discount to its five-year average price/book and price/sales ratios. Through its New Jersey Natural Gas subsidiary, the firm provides regulated natural-gas service to residential and commercial customers in New Jersey. The regulated business generates about 70% of profits; the rest comes from unregulated energy services and marketing, home repair, and real-estate development.
        The utility expects customer growth of 2.3% in fiscal 2006 ending September. Customer growth has averaged about 3% a year over the last decade, twice the industry average. Partly as a result, the company has been able to increase earnings for 14 consecutive years, despite going 11 years without a rate hike. During that 14-year period, per-share earnings rose at an impressive annualized rate of 12%. New Jersey Resources is a Long-Term Buy.
        The Forecasts has a Buy or Long-Term Buy rating on only three utilities. Two of them are utility/energy hybrids, a group that has delivered superior returns in recent years because of surging energy prices.
        Energen (NYSE EGN $37) balances the growth of its exploration and production business (47% of 2005 income) with the steady performance of its regulated natural-gas utility, Alagasco (53%). Both natural-gas and oil production have risen in recent years, helped by a series of acquisitions - most recently the $168 million purchase of oil properties in Texas in December.
        Alagasco serves residential, commercial, and industrial customers in Alabama. Regulations allow rates to account for temperature changes and the cost of natural gas. In June, the company increased its stock-buyback program by 9 million shares, bringing the total available for repurchase to 15% of shares outstanding. Energen is a Long-Term Buy.

High Yield

While utilities aren't just for income investors anymore, plenty still pay impressive dividends. On average, the utilities in our Utility Update yield 3.7%.
        Vectren (NYSE VV $27), yielding 4.6%, distributes natural gas in Indiana and Ohio and electricity in Indiana. It also operates such nonregulated businesses as energy marketing, mining, and services.
        Vectren has asked state regulators in Indiana and Ohio to decouple rates charged to customers from the volume of gas they use. The change would protect company earnings against lower usage brought on by high gas prices while encouraging conservation among customers. Under the proposal, the company would still be able to earn the current rate of return allowed by regulators. Vectren, rated Neutral, offers a solid choice for income. But we prefer New Jersey Resources among gas distributors.

Dividend Growth

        Yield is nice, but dividend growth also has benefits. Companies that consistently increase their dividends, like the one discussed below, demonstrate a commitment on the part of management to share their growth with stockholders.
        National Fuel Gas (NYSE NFG $35) has increase its annual dividend for 36 consecutive years - most recently raising the quarterly dividend by 3% to $0.30 per share in June. The company has generally paid out 55% or more of earnings, and the indicated dividend represents 59% of trailing earnings.
        The company's diversified businesses range from exploration and production to pipelines and storage to regulated distribution. National Fuel Gas counts on its unregulated businesses to boost profit growth. Consensus estimates project per-share-profit growth of 20% in fiscal 2006 ending September and 16% in fiscal 2007. National Fuel Gas earns an A rating in our Utility Update but is not on the Monitored List."

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THE COMPLETE INVESTOR
P.O. Box 248, Williamsport, PA 17703.
Monthly, 1 year, $72.

Buffett's big new stake in natural gas

        Genia Turanova: "In our FundFinds column, we typically nose out the hidden gems in mutual funds run by the smartest managers with proven records of success. In this article, instead of looking to a mutual fund, we've turned to a single company that, with its huge investment portfolio, is in some ways comparable to a fund. The company, as you may have guessed, is Berkshire Hathaway, and in scanning its holdings we're tapping the outsized brains of perhaps the smartest investor of all time, Warren Buffett. Buffett famously doesn't discuss his company's investments. But when the mandatory disclosure time rolls around, you get to see what the oracle of Omaha has been buying or selling.
        This past spring we were struck by the disclosure that Berkshire had invested more than $1.1 billion in shares of ConocoPhillips (COP), the third-largest integrated energy company in the U.S. and the country's biggest refiner. Worldwide, ConocoPhillips is the eight-largest energy company based on proved reserves and the sixth-largest refiner. Berkshire now owns more than 1 percent of Conoco and is its 15th-largest shareholder - nothing tentative about that as an initial position.
        The purchase is also interesting since until then Berkshire's only energy position was PetroChina, which could be viewed more as a currency or China play than as a pure energy holding. Buffett's new stake in ConocoPhillips may indicate a change in his perception of the dynamics of energy markets. Or he may simply have seen the company as a rare bargain. Regardless, we like his choice and see it as a great and timely energy play.
        ConocoPhillips stock has been underperforming, apparently reflecting investor disapproval of its $35 billion purchase of Burlington Resources, announced in December and recently completed. We think the acquisition, which represents a large bet on natural gas, will prove a plus. It adds significantly to Conoco's asset base, and Burlington's large natural gas deposits in Canada may be a godsend when it comes to developing Conoco's oil reserves (it takes energy to make energy, and it may take a lot of natural gas to produce more oil). The Burlington acquisition also should result in significant synergies and cost savings.
        Conoco's assets span the globe, and it has been aggressive in moving into foreign countries. These international operations will be the key to keeping growth humming in the future. Reportedly Conoco plans to raise its stake in Russian oil giant Lukoil to about 20 percent.
        While Conoco's debt, at 30 percent of capital, is certainly high, we're encouraged by the company's recently announced goal of reducing it to the 15-20 percent level. The dividend, after a recent raise, now approaches 2.3 percent, and Conoco intends to continue to use cash from operations to buy back additional shares and raise the dividend further.
        Throw in that the P/E of 6 discounts oil at around $40 a barrel, and the investment case becomes even clearer. Buffett is known for his eye for good value, and taking our cure from his investment book, we're adding ConocoPhillips to FundFinds for a 12-18 month target of 85."

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THE SPEAR REPORT
45 Wintonbury Ave., Ste. 301, Bloomfield, CT 06002.
Monthly, 1 year, $297.

Long term commodity bull

        Gregory Spear: "In our view, commodities and energy are still attractive investment candidates, as bull markets in hard assets tend to last for a decade or longer. We see an inverse relationship between tech and commodities, with tech being used as a source of capital. Commodity and energy stocks are still outperforming all other sectors on this bounce. One reason is that crude oil set a new all-time closing record recently, trading above $75 per barrel. The previous record was set on April 21. Gold and silver have been bouncing from very oversold conditions and the recent spate of geopolitical concerns is exacerbating the flight to hard currency."

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Roger Conrad's UTILITY FORECASTER
1750 Old Meadow Rd., Ste 301., McLean, VA 22102.
Monthly, 1 year, $129.

Chevron trading at bear market valuations

        Roger Conrad: "Liquefied natural gas (LNG), biofuels and India: That trio will keep Chevron's (NYSE CVX $58.71) earnings pumping ahead for years to come, even if oil and gas prices stagnate.
        Australia's $10.4 billion Gorgon project is the cornerstone of the super oil's LNG strategy, along with ventures in Angola, Nigeria and Venezuela. Gorgon has been stalled by permit delays, and projects in the other three countries have substantial political risk. But the company seems well on track to its goal of doubling LNG output by 2010, which it can sell to the highest bidder anywhere in the world.
        With ethanol use in the US mandated for pollution control reasons, Chevron should realize an immediate windfall from ramping up its current 300 million gallons-per-year output. Long term, however, its budding partnership with India's Reliance Petroleum - of which it can acquire up to 29 percent ownership - holds the greater promise for heavy oil refining potential, production/marketing of LNG in Asia and the fact that Chevron is ahead of all rivals in arguably the world's highest potential emerging economy.
        Since buying Unocal last year, Chevron's shares have been dogged by skeptics convinced it paid too much. That consensus view persists, despite the company's 40.6 percent boost in first quarter earnings on a 10 percent increase in production, supplemented by strong gains in refining, marketing and chemicals. The stock trades at just nine times the most pessimistic, energy-hating Wall Street estimate. Buy Chevron up to 65."

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BI RESEARCH
P.O. Box 133, Redding, CT 06875.
1 year, every 6 weeks, $125.

Major Drilling stepping up
capital spending on new rigs

        Thomas Bishop: "I continue to advise being 75% invested, 25% money market. Currently most attractive for purchase are ICT Group, Major Drilling, Taseko, Centene, PacificNet, Continental, inVentiv and more speculative-Paincare. Laserscope has been closed out.
       Major Drilling (MJDLF.PK $19.08) is one of the leading drilling companies for metals and minerals (vs. oil and gas). Major released earnings for FY 4/06 of C$1.23 that were C$.03 over my own forecast and up 76% vs. C$.07 last year and the Company said the good times should continue, including further margin improvement. Management does not give EPS guidance, but the consensus for 2006 appears to be around $1.70-$1.75. The Company also announced that it was selling off its drilling rig manufacturing company, UDR, netting C$30 million for it after tax. But they also sold off its $6 million of FY 4/06 operating income, which equates to 13% of Major's total operating income. They were facing some big investments there to automate and upgrade and decided it would be better to focus those dollars on higher margined drilling. I think this has to mean a short-term dip in profits in the near-term vs. what they would have been until the Company redeploys the proceeds. That does not mean that there will be an interruption of year-over-year excellent comparisons, but it might be more noticeable for a quarter or two sequentially.
        Combined with softening (but still excellent) metal prices I think this is why investors may not have given it much credit for beating estimates by a few pennies. While this (the loss of UDR's profits) was a concern of mine in the short-term, interestingly enough this was not a discussion point in the surprisingly long and well attended conference call. The Company will use some of the proceeds to step up its capital spending on new rigs to C$40 million this year. The shares have moved in sympathy with the mining sector, which overreacts to every movement in metal prices, but I think the economics for drilling will remain in place even at considerably lower metal prices. It takes 6-8 years to find a new deposit and bring it into production. With oil you hit oil, test it and hook up a pipe to it. You don't have to drill 100-200 more holes to define the deposit over the next couple of years and spend 2-3 years designing and building a mill, not to mention the permitting years. With 48% of drilling tied to gold $583 currently but still $690 for 6/09 delivery!), that's one metal price that really wags the dog- Buy."

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The Peter Dag PORTFOLIO STRATEGY & MANAGEMENT
65 Lakefront Dr., Akron, OH 44319.
1 year, 24 issues, $389.

A play on stronger commodities:
North European Oil Royalty Trust

        George Dagnino: "The strongest sectors have been energy, materials, and gas. Real estate, utilities, and healthcare have also rebounded in an attractive way.
        As a play on stronger commodities we are recommending North European Oil Royalty Trust (NYSE NRT $37.45).
        NRT, a trust, holds overriding royalty rights covering gas and oil production in certain concessions or leases in the Federal Republic of Germany.
        These rights are held under contracts with local German exploration and development subsidiaries of ExxonMobil Corp. and the Royal Dutch/Shell Group of Companies.
        Royalties are received for sale of gas well gas, oil well gas, crude oil, distillate, and sulfur. The company was founded in 1975 and is based in Red Bank, New Jersey."

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