THE SPEAR REPORT
45 Wintonbury Ave., 301, Bloomfield, CT 06002.
1 year, 50 issues, $297. www.spearreport.com.
Chesapeake Energy:
Steadily increasing production
Gregory Spear: "Chesapeake Energy (CHK) is the 6th largest independent producer of natural gas in the US. To put that in perspective, they produce about 1/3 the volume of Chevron (CVX) or Exxon (XOM). But when it comes to investing in natural gas, size does not matter. What matters is steadily increasing production and the rate of replenishment of reserves. You may not be aware that many of the largest gas producers in the US experienced year-over-year production declines in the first quarter. In fact, 11 of the top 20 gas producers had a summed 1st quarter net decline of over 2 billion cubic feet of natural gas, year-over-year. Chesapeake, on the other hand, led the pack with a 37% increase.
Of course, most independent producers like CHK hedge their production, which means they take positions in derivatives to lock in a minimum return and smooth out seasonal price fluctuations. The real question is how well do they do that. CHK's current hedge positions guarantee them $35 for oil and $6/mcf for gas through 2005. That's great market timing work. While that means they won't benefit much from a spike in gas prices, they won't suffer due to price volatility either. In fact, $6/mcf is windfall rate of return and CHK is 90% in gas - a virtual pure play. That's why, since its low around $5 in the summer of 2002, the chart of this company looks like a tech stock, and that's why it has not started to correct like the rest of the market.
The company is growing bit by bit, literally, as in drill bits! Chesapeake operates approximately 6000 producing wells, and drilled or participated in drilling about 1000 in 2003. Their operations and reserves are geographically concentrated in Oklahoma, western Arkansas, southwestern Kansas and the Texas Panhandle, which increases operating efficiency. The company has unusual expertise in finding gas at depths of more than 2.5 miles, with a 92% success rate at those levels, but they also make plenty of savvy strategic acquisitions. They spent about $1 billion on 7 acquisitions in the first quarter of 2004 that netted the company $866 million in proven reserves at an average cost of $1.49/mcf. Since 1998 they have acquired almost $4 billion in reserves at an average cost of roughly $1.40. That's why we say $6 gas is a windfall for CHK. For the three months ended 3/31/04, revenues rose 50% to $563 million and they brought $104 million to the bottom line, a gain of 54%.
Technically the chart looks somewhat overbought, but that is the state of affair throughout the industry. The stock gapped up recently and may pull back slightly from here. If you are looking for a surgical entry you can probably find it in the next few days. Otherwise, as we say, just average in, a little each week for a month or two, and you should get a good average price."
THE DINES LETTER
P.O. Box 22, Belvedere, CA 94920.
1 year, 17 issues, $195. Limited Time Special Trial Offer, 3 issues, $59.
Good time to start
accumulating precious metals
James Dines: "Septembers are favorable for gold shares as measured by DIGSA (the Dines Gold Stock Average). Since 1968 there have been 20 up (57%), 15 down (43%), and one neutral. Silver shares in DISSA (the Dines Silver Stock Average) have been neutral the last 23 years, with 12 up and 11 down. The fourth quarter is often a good time to start accumulating precious-metals shares in anticipation of the positive Seasonalities of the first quarter, when gold and silver shares usually rise, by Dinesism #9: the Dines Rule of Gold Seasonality (DIRGS)."
FINANCIAL INSIGHTS
P.O. Box 793-Z, Oakhurst, NJ 07755.
Monthly, 1 year, $225.
Gold and Silver Destined
For Substantially Higher Prices
Dr. Richard Appel: "Gold and Silver continue in their corrective phases. This has been frustrating for those who believe as I do that the precious metals Bull Market will take both the yellow and white metals to far higher levels. However, for those of us who have lived through numerous, similar difficult periods, we recognize that they go part and parcel with a gold Bull Market.
If I am correct, and gold and silver are destined for substantially higher prices, it will likely take three to five years at minimum before their Bull Market's completion. As I have often stated, periods such as now must be endured in order to position oneself to maximally benefit from the gold and silver Bull Markets. Those who attempt to trade in and out of these markets will ultimately be left in the wake when they enter one of their near vertical prices advances. There are too many whipsaws which lie ahead that will dash the hopes and dreams of gold traders!
I believe that is only a matter of time before gold and silver again resume their upward paths. However, there is one caveat for which we should all be aware.
At some point the equities Bear Market will likely generate a sharp, sustained decline. If this is substantial gold may also suffer. In such an environment and if people need money, they may not be capable of easily selling their stockholdings. The more liquid large capitalization stocks will likely offer some market into which to sell. However, the majority of common stocks will likely go "no bid." If this occurs people will continue to require money to survive, and some will certainly sell gold.
The flip side is that gold may reluctantly once again regain its safe-haven status. During times of uncertainty and monetary and financial turmoil gold has forever been the savior of the common man. If the stock markets enter a serious fall gold may arise and take the lead as investors recognize that fact. For those who did not live through the severe stock market correction that began in January, 1973, and ended in October, 1974, you should know that the precious metals and their shares fared quite well. Common stocks, as measured by the Dow Industrials, fell from about 1050 to 577 during this time-frame, while the multitude of lesser quality companies gave up 75% or more of their earlier highs. Gold on the other hand moved from about $100 to touch $200 during the same period! It is impossible to predict how gold, silver and their shares will respond under similar circumstances, but if the future is a mirror of the past, they should do well.
Given the above, gold's recent fall below $400 gives me some concern. It appeared to be consolidating above that level, but was not able to sustain itself. It now appears that gold is poised to go lower, at least in the near term. The primary point to watch for gold is $372. This was the low of this downward correction. If it is violated $340 is the next area of major support. I question if $340 will be touched. However, in the event that this occurs, it will not indicate that gold's Bull Market is over. If you view a long-term gold chart you will see that it will require a break below $320 to bring the validity of gold's secular Bull Market into question."
CMI'S STOCK OPTION TRADER
PO Box 5379, Destin, FL 32540.
1 year, 26 issues, $595.
Gretchen Marszalk: "In spite of much anti-gold chatter by many talking heads, gold is still in a long term uptrend that started at the beginning of the last bear market, which appears to characterize a long term disinflationary economic trend and the rapid depreciation of the dollar. The long term minimum price objective of the inverted head & shoulders pattern for XAU still remains in the 120 area."
Roger Conrad's UTILITY FORECASTER
1750 Old Meadow Rd, Ste 301, McLean, VA 22102.
Monthly, 1 year, $129.
Duke Energy:
A long-term recovery bet
Roger Conrad: "By mid-2002, Duke Energy's (NYSE DUK $21.11) aggressive global investment strategy was badly off track. Management struggled with worsening margins at its natural gas power plants and energy trading, and a wave of regulatory and accounting investigations. By late 2003, speculation was rampant that the dividend would be axed up to 60 percent.
Enter new CEO Paul Anderson. With common stock as his only compensation, he's since moved aggressively to return the company to a sound footing.
Anderson's first move was to declare the dividend sacrosanct. Setting a goal of $4 billion in debt cuts for 2004, he dumped non-core Australian assets for $1.24 billion and troubled Southeast gas plants for $475 million, scaling back money-losing Duke Energy Trading and Marketing. The company also settled myriad lawsuits and investigations, dispatching the 2000-01 Western state power crisis disputes for $207.5 million.
A real earnings turnaround may be a year away. But both S&P and Moody's now rate Duke's credit outlook "stable." Core utility and pipelines are gaining ground and power markets are tightening for the 10 gigawatts of unregulated power plants outside the South. As a result, risks have diminished enough to return Duke to the Growth Portfolio Aggressive Portfolio as a long-term recovery bet up to 21. My two-year target is the low 30s, though I'm prepared for plenty of ups and downs along the way.
INVESTOR'S VALUE VIEW
2254 Winter Woods Blvd., Ste. 2006, Winter Park, FL 32792.
1 year, 24 issues, $95. www.valueview.net.
Noranda has booming profits
R Scott Pearson: "Noranda (NRD), a leading Canadian miner and refiner of copper, zinc, nickel, silver, and gold, has booming profits. The company also owns nearly 60% of Falconbridge, the leading nickel producer. Demand for industrial metals is through the roof, as China and other newly industrialized nations have increased demand to meet the needs of their own flourishing economies. Metal prices have risen, both as a result of this new demand and as a response to growing inflation. Nickel and copper are showing the best results at present, but if inflation continues, we can imagine the gold and silver assets to show more strength. The recent acquisition of a 50% stake in Kaiser Aluminum's bauxite mining assets and alumina refining facilities will only help build diversity of production.
Rumors of buyout bids from a variety of international firms, including a Brazilian entity and a Chinese mining company, have boosted the stock a bit, but higher earnings and forecasts have had more impact on the share price. If a buyout offer materializes, Noranda investors can expect at least a modest premium, but whether such a deal emerges or not, we believe these shares will prove to be a great long-term holding. If inflation continues to trouble the economy, the benefits of the holding such a miner will come sooner. With such an opportunity, there is little reason not to buy Noranda, at least at prices below 20."
SILVER-INVESTOR.COM
21307 Buckeye Lake Ln., Colbert, WA 99005.
Monthly, 1 year, $149.
Montanore Silver-Copper Project:
The $2.9 Billion Silver Jackpot
David Morgan: "Following our March analysis of and on the back of a surging silver price, the shares of Mines Management, Inc. (AMEX MGN) rocketed to an all time high of US$9.70 before settling back to earth in the following weeks along with the metal.
Currently trading at about US$4.50 per share, the market has probably given investors their final opportunity to board before the ship leaves the dock. As the company prepares to formally initiate the re-permitting of its world class Montanore Silver-Copper Project, the 260 million ounce silver resource will move one step closer to production.
They recently completed a revised mine plan that detailed a production rate of 8 million ounces of silver and 50 million pounds of copper per year at a cash cost of under US$2.90 per silver equivalent ounce. If in production today, it would rank in the top ten of the largest silver mines in the world.
The re-permitting issue remains the project's single biggest hurdle, but the company recently was assured in their most recent meeting by the Montana permitting agencies who encouraged them to proceed. It is no wonder, since the project has already undergone a decade of environmental assessment, and received a fully approved environmental impact statement that led to successful permitting under the previous operator. Further, all environmentalist opposition was put to bed in federal court, leaving very little for them to shoot at this go around.
And for those who remain doubtful, it appears that the political winds in Montana are beginning to blow the right direction since a recent initiative (I-147) campaign to overturn spurious anti-mining laws has received overwhelming support by all countries in the state.
To put in context the superior value in Mines Management's shares, acquisition of the Montanore Project ranks the company in the top tier of silver companies in the world alongside Apex Silver, Silver Standard, and Western Silver, but priced at about 1/5th the average value. As the company moves the project forward, you will see this gap close, and if you are a believer in silver, you would be hard pressed to find a stock with more leverage to the price of silver anywhere in the market."
Editor's Note: For more information on Mines Management Inc. contact Douglas Dobbs at (509) 838-6050 or visit the web site at www.minesmanagement.com.
INVESTOR'S DIGEST of Canada
133 Richmond St., W., Toronto, ON M5H 3M8.
1 year, 24 issues, $137.
Best Buy Methanex
is rolling in cash
Michael Popovich: "Analysts follow as many as 20 stocks, most of which are rated "buys." Of those buys, at any one time an analyst has one or two favorites seen as most suitable for new buying. Investor's Digest of Canada devotes a column to those one or two "best buys."
Methanol stocks are down. But methanol prices are up 23.7 per cent to US$272 a tone over the previous quarter, notes Toronto analyst David Baskin. Not surprisingly, he has a hankering for Methanex Corp. (TSX MX, $16.36, 800-661-8851, www.methanex.com), the world's biggest producer of methanol.
"The company is just rolling in cash," says Mr. Baskin, adding that Methanex is using its windfall to pay down debt - and boost its dividends.
In fact, the company, which recently upped its payout 33 per cent to US$0.08 a quarter, is reportedly committed to returning cash to stockholders either in share buybacks or higher dividends.
And although Methanex's cash flow obviously makes it an income investment, its low valuation - eight times earnings - also makes it a value play, Mr. Baskin adds. In fact, he believes that investors should buy now to take advantage of an inevitable rise in shares.
"At some point, people will recognize that Methanex deserves a higher multiple," he says.
Mr. Baskin admits Methanex's single-commodity status makes it vulnerable to any tumble in the price of methanol. But the same single-commodity vulnerability, he counters, could be leveled at any oil play or mining outfit.
In the meantime, he thinks Methanex management has done a great job, having continually boosted the company's output to capitalize on both scarcity and high prices.
He also says that because the company has locked in a long-term supply of natural gas - the prime ingredient in methanol manufacture - at a favorable price, it has a leg up on competitors who lack such protection.
For Mr. Baskin, president of Baskin Financial Services, Methanex is a best buy. His 12-month target price is $20 a share.
Company's operations span the globe
From its Vancouver base, Methanex presides over a global manufacturing and distribution network with factories in Canada, Trinidad, Chile and New Zealand, as well as sales offices in China, Korea, Japan and the U.S., among other locales.
For the three months ended June 30, Methanex's net income rose to US$52.4 million, or $0.42 a share, from $48.4 million, or $0.37 a share, for the similar period in 2003.
Revenue jumped to $412.3 million from $377.6 million, while cash flow from operations zoomed 18.7 per cent to $103.5 million.
For the six months ended June 30, net income fell to $99.2 million, or $0.80 a share, from $122.4 million, or $0.94 a share, for the similar period in 2003.
Revenue, however, was higher, rising to $805.2 million from $720.9 million, while cash flow from operation fell to $157.9 million from $192 million.
As a play on high menthanol prices, Mr. Baskin like Methanex. For a play on high metals prices, he likes Inmet Mining Corp. (TSX IMN, $19.05, 416-361-6400, www.inmetmining.com), a junior base metals outfit.
For one thing, he says, world demand for copper is now high - and likely to remain so, given China's frenzied rate of home construction and demand for copper piping and tubing. And Inmet, Mr. Baskin notes, is primarily a copper producer.
The company, besides being cheap, is both well-managed and geographically diversified. For Mr. Baskin, Inmet is also a best buy. His 12-month target price is $25 a share.
Besides copper, Inmet mines gold and zinc. Formed in 1987, it can lay claim to having a significant production base, instead of a pure exploration focus. Based in Toronto, Inmet boasts mining operations in Turkey, Finland, Papua New Guinea and Canada.
For the three months ended June 30, Inmet's net income rose to $16.8 million, or $0.39 a share, from $5 million, or $0.10 a share, for the similar period in 2003.
Revenue zoomed to $102.5 million from $57.1 million, while cash from operations more than doubled to $38.9 million from $15.8 million.
For the six months ended June 30, net income more than tripled to $39.7 million, or $0.94 a share, from $11.4 million, or $0.24 a share, for the similar period in 2002. Revenue, meanwhile, zoomed to $227.9 million from $101.9 million.
Editor's Note: Investor's Digest of Canada was recently voted the World's Best Investment Advisory by the Washington-based Newsletter and Electronic Publishers Foundation for the fourth time.
Stock Trader's ALMANAC INVESTOR
184 Central Ave., P.O. Box 2069, Old Tappan, NJ 07675.
Monthly, 1 year, $295.
Major potential in junior metals
Robert Cardwell: "We believe you'll do well using the current sell off in mining stocks to accumulate. Limit orders (below the market) reduce risk and may well pay off handsomely.
Pacific Northwest Capital (PFN.T), our cheap platinum-palladium play, has gotten still cheaper. It's selling at about a third of last year's high despite considerable progress since then. (You'll almost always do best if you consider all junior exploration companies trading vehicles, not investments). Anglo American continues to pay for drilling the Ontario project, where the companies have already delineated over one million ounces with many zones yet to be explored. PFN has other projects that are also being explored with the help of major partners, plus some prospects that it still owns 100%. The stock is a rare bargain considering the extent and quality of its projects.
Northern Orion (NTO), our other recent metals suggestion, has also corrected after an initial gain. Copper prices have slipped, but not nearly as much as the stocks of producers. Note that NTO, despite its junior status, is a substantial producer through its stake in the Alumbrera mine. Longer term, it will produce the Agua Rice property, with proven and probable reserves of 18 billion pounds of copper and 10 million ounces of gold. Even assuming a moderate economic slowdown in the U.S. and China, the supply-demand picture for copper remains quite favorable and likely will be so for some years to come. Northern Orion is, on an asset basis, one of the cheapest stocks on the board.
Orezone Resources (OZN) remains the same old story - drill hole after hole with promising grades of gold. The firm has three advanced projects in West Africa and pretty clearly will either become a major miner or be bought out. The stock is up a bit in the last month but would be higher given better market conditions. Buy any weakness.
European Minerals (EPMu.T) has slipped again - all the way back to the level where we first recommended the stock about a year ago. We better than doubled our money that time and expect to do the same again. This is another stock that's very cheap on assets. It worries some people that the assets (most of them) are in Kazakhstan, but that's why EPM is an opportunity. We think the company will be able to turn its property there into a mine. In any case, there should be some good upside when sentiment toward the mining sector shifts.
ValGold Resources (VAL.V) has been carried as a Hold while we waited, among other things, for results from exploring the Tower Mountain discovery in Ontario. Recent drilling results were enough to keep the project alive, but were not exciting - and VAL has continued to drift. The company is trying to do a private financing, which may keep pressure on the stock for a while. Val has a new chairman and we sense a new seriousness of purpose; it remains worth holding as a speculative trading situation."
WATER INVESTMENT NEWSLETTER
230 Main St., Halstead, KS 67056.
Monthly, 1 year, $149.
Jubak's Journal selects four picks
for drenching your portfolio in profits
Jim Jubak: "So how do you pick the right water stocks? Unfortunately, the water stocks that are the sector's equivalent of the oil industry's BP (BP), Exxon Mobil (XOM) and Apache (APA) aren't particularly good investments. Most water "producers," the companies that pump and then sell drinking and industrial water, are regulated utilities with rates of profit that are capped by state regulators who are reluctant to raise the rates paid by consumers. A utility such as American States Water (AWR), for example, shows average annual earnings growth of just 3.2% over the last five years, largely because the company has had to deal with the very tough rate environment in California. So instead of looking at the stocks of water "producers," investors should look at water companies that are the equivalent of the oil sector's drilling equipment and production services. These are the companies that sell the gear and services that filter water, turn seawater into drinking water, purify water for high technology industries or for the healthcare sector. I've found four water "equipment" stocks that I think fit the bill, and I'll be adding one to the Jubak's Picks portfolio with this column.
Watts Water Technologies (WTS) makes the equipment that water utilities use to deliver water to their customers: water pressure regulators, temperature and pressure valves, pumping systems, water filters and purification systems, and backflow valves that prevent contamination of drinking water. Legislation introduced in the U.S. Congress last year identified a need for $4 billion to $7 billion a year in low-cost loans so cities could upgrade their water and sewer systems.
In a December 2003 survey by Water World Magazine of 200 water and wastewater systems operators, 30% said they planned to upgrade the filtration systems on their drinking water systems, 45% planned to upgrade their storage systems, 45% their pump systems and 53% their pipe systems. And guess what they'll buy to upgrade those systems? The pressure regulators, valves and filter systems that Watts Water Technologies makes. The Wall Street consensus projects revenue will climb by 11% in 2004 and 9% in 2005. But the most interesting kicker for Watts may be its still-evolving business in China. The company recently gained total operating and financial control over its Tianjin China manufacturing joint venture. That should give the company the ability to realize the lower costs that it moved some of its manufacturing to China to achieve and gradually create a base for growth in the internal Chinese water infrastructure market. According to the Chinese Ministry of Water Resources, 90% of China's water supplies are severely polluted. In addition, the demand for water is growing as the country develops: Chinese per capita water use is only about 20% of that in the United States. Water shortages, especially in the fast-growing coastal cities, are already common.
Ionics (ION) is in the business of creating new supplies of usable water from water that is too salty, too contaminated or too full of industrial waste. The company is a global leader in desalinization, the process of turning sea water into fresh water, but the company is by no means a one-trick pony. Ionic's stable of filtration technologies runs from osmosis to ultra filtration to ion exchange, so the company can tackle just about any problem from supplying ultra-pure water to a high-technology factory to removing giardia from city drinking water. But what is unique about Ionics is the company's participation in joint ventures with local utilities to build and then operate water plants. That means Ionics risks more capital than it would if it merely supplied equipment or built the plant for a client, but the completed plant and joint venture in exchange supply Ionics with a steady stream of revenue. To date, Ionics owns joint ventures to build and operate water plants in Trinidad, Kuwait, Israel and Algeria. The company clearly plans to expand this model, and the world's thirst for more water gives Ionics the opportunity to do just that. Spain, for example, has just announced a $4.6 billion plan to build 15 to 20 desalinization plants along its southeastern coast to supply the growing tourism industry along that stretch of the Mediterranean. As the operator of a desalinization plant in the Canary Islands, Ionics has a track record that should enable it to nail down a piece of this new construction. Investment research from Needham puts the short-term internal rate of return from a project such as this at about 10% and notes that in the long term, the return rises to about 30%.
Cuno Inc. (CUNO) operates at the other end of the size scale in the water-purification market. If Ionics builds big, Cuno goes small, supplying water filters for refrigerators and similar appliances. That's not Cuno's only business, but it is the company's fastest-growing segment and one that will represent an even larger part of the company's revenues after the recent acquisition of WTC Industries (WTCO), a supplier of water filters to the appliance divisions of General Electric (GE) and Maytag (MYG). After the deal, the potable-water segment of Cuno's business will account for about 55% of the company's sales, up from 46% before the acquisition. Revenues from that business grew by 14.5% in the most recent quarter, and about 45% of those revenues were from the appliance segment. Besides supplying filters to appliance makers, Cuno has recently moved into selling filters under the Whirlpool (WHR) brand directly to consumers at do-it-yourself centers such as Lowe's (LOW). Cuno also is selling filters directly to consumers in Asia through a joint venture with NuSkin, a multi-level marketer. (Cuno was one of blue chips that you've never heard of in my recent column, "5 stealth blue-chip stocks.")
Pentair (PNR) is turning itself into something like a water pure play. The company sold its tools business to Black & Decker (BDK) for $775 million and will close its acquisition of Wicor Industries, the pump, pool, spa and water treatment equipment subsidiary of Wisconsin Energy (WEC) this summer. The result will be a company with a fast-growing enclosures business where sales of high-security enclosures for sensitive controls grew by 23% in the most recent quarter, and an even faster-growing water business where sales are projected to grow by almost 25% in 2005. That restructuring is likely to increase the company's earnings growth and the multiple that investors are willing to pay for shares. The tools business, which was 40% of sales, produced just 30% of operating income, while the water business produced 52% of operating income on just 39% of sales. I'm adding Pentair to Jubak's Picks with a May 2005 target price of $39 a share. These aren't the only stocks that have exposure to the supply/demand trend in water. Millipore (MIL) goes head to head with Cuno in the health-care segment. Pall (PLL) is a major player in filters for life sciences and industrial uses. ITT Industries (ITT) and Esco Technologies (ESE) both have water business. But the four I've highlighted in this column have the advantage of more pure exposure to the water business and the possibility of dominating one segment of that business. And that makes these water stocks float my boat."
FREEMARKET GOLD & MONEY REPORT
P.O. Box 5002, North Conway, NH 03860.
1 year, 20 issues, $260.
Yamana Gold
reporting good earnings
James Turk recently added Yamana Gold (Amex AUY; TSX YRI) to his recommended list. "Yamana is a gold producer with one operating mine in Brazil, with another mine under construction. It just reported good earnings due to improved cost controls and a weak Brazilian currency.
More information is available at www.yamana.com, and as always with my stock picks, I recommend that you investigate this company before you decide to invest.
There may be some more 'backing & filling' in the $390's. But regardless, the odds have finally moved in favor of gold. The big rally that I am projecting for gold in the autumn is becoming increasingly likely. Prepare for it."
INTERINVEST REVIEW & OUTLOOK
PO Box 51462, Boston, MA 02205.
Monthly, 1 year, $125.
Remains positive towards gold
Dr. Hans Black: "We remain positive toward precious metals in general, and toward gold in particular, as we believe the current base-building period could dip back into the $350-$370 zone before heading much higher next year and into 2006. As we wrote last month, - and so many other commentators have mentioned it recently - the world has become a giant casino run by thousands of hedge funds supported by central banks that are likely afraid of doing anything too drastic that might sink the boat.
We recommend the accumulation of our favorite gold companies on any price weakness. Such companies as Placer Dome, Newmont, Eldorado, Cambior and Orvana deserve attention."
The Peter Dag PORTFOLIO STRATEGY & MANAGEMENT,
65 Lakefront Dr., Akron, OH 44319.
1 year, 24 issues, $389.
George Dagnino: "As the economy slows down in the next months, commodities will decline. Crude oil will also decline sharply and we will look back at 2004 as the year of the bubble in this commodity."
Ian McAvity's DELIBERATIONS on World Markets
P.O. Box 40097, Tucson, AZ 85717.
1 year, 18 issues, $225. Introductory Trial: $49 for 4 issues.
Ian McAvity: "The junior gold have been really whacked with many down more than 60% to 80% from their prior highs. If you play that sector, watch for the ones holding above prior lows on the down days. Many are showing signs of basing activity. That's not to say their lows are in, but that they are stemming declines prepatory to turning around. It's early in my view, but for those with little or no exposure, a down market can provide good opportunities for shopping.
I'm getting more interested in Silver again, in part because it was smashed so hard & rebounded impressively. The Silver/Gold ratio continues to look better. The implication would be a continuation of the recent behavior that when they go up, silver is likely to show greater volatility than gold in both directions.
The Copper price recovery impresses me, having retraced more than 50% of its sharp drop; but like the Nickel price, I'm nervous about possible double tops or lower peaks given the downturns in the Food and NFA commodity sectors.
Platinum has rebounded smartly, and appears to have preserved its long running uptrend channel. When asked about Palladium these days, my standard response is that my Russian isn't good enough to understand it anymore... it's not a market for amateur traders."
GROWTH STOCK OUTLOOK
P.O. Box 15381., Chevy Chase, MD 20825.
1 year, 24 issues, $235.
Barrick and Newmont
Two Solid Portfolio Holdings
Charles Allmon has no plans to boost his invested position in his portfolio at this time. As he mentioned prior to 2000, the stock market was headed for a big smash, or would move sideways for 10-15 years. It smashed, receovered a tad, and is now moving sideways for what may be a long time. We had best get used to the fact that investing in this decade is no place for amateurs.
Allmon reviews two of his holdings Barrick Gold and Newmont Mining, which of course, is tied to the gold price, which will probably soar higher than anyone dreamed possible.
"Barrick Gold (NYSE ABX $19.25) presented a detailed update of its four new mines under construction, including production and total cash cost estimates for the first three years, and it also announced that it would be proceeding with the development of the company's Pascua-Lama project. Barrick will be seeking permits and finalizing fiscal and taxation matters over the next 18 months and then begin the three-year construction schedule.
"Along with the four new mines already in construction, Pascua-Lama is expected to be a significant contributor to our low-cost production profile for many years to come," said Greg Wilkins, president and CEO. "The building of four new mines and the positive decision to proceed with Pascua-Lama represent a whole new chapter in the evolution of Barrick. Our overall portfolio of quality properties reflects balanced geo-political risk and long-term exploration potential. We expect that these five new mines will enable us to maintain our ranking as the lowest total cash cost major gold producer."
Barrick said that the four mines currently under construction are expected to be completed on time and within budget. These projects are driving a company target of 6.8 - 7.0 million ounces of gold production in 2007 at estimated total cash costs under $200 per ounce - a 40% production increase from the expected 2004 level of 4.9 - 5.0 million ounces.
Newmont Mining (NYSE NEM $42.27) as you know operates on five continents as the world's largest gold mining company. Their Peru operations are going great guns.
Peru's Minera Aruntani, one of Newmont's most promising new mines, aims to begin operating a new deposit this month and initially hopes to process up to 15,000 tonnes of ore a day, the mine's head of explorations said. Before Aruntani was discovered, many miners thought gold was confined to northern Peru. Peru is home to Latin America's biggest gold mine, Yanacocha, which is majority owned by Denver-based Newmont."
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