Greg's Note: Gold prices are up, so that means that gold exploration and mining should be up too, right? Well, mining is up, but no significant discoveries have been made. Something doesn't add up. David Galland from Casey Research believes this may be the beginning of "Peak Gold." We've got peak everything else, gold seems like a natural. Is the world running out of its mineable gold? Let us know what you think by writing into greg@whiskeyandgunpowder.com. Whiskey & Gunpowder
Gold may be even more precious than we think. During the last several years, mining companies around the globe have discovered almost no new large-scale gold deposits. So if the world's major gold companies can't find any new gold deposits in the ground, they'll have to find them in the stock market…by buying companies that already possess proven reserves. Therefore, forward-looking investors might want to take advantage of the current weakness in the gold share market to invest in some of the small mining companies that would be attractive takeover targets. One of the most intriguing aspects of the current market is the dearth of major discoveries so far in this cycle. This despite record amounts of money spent on exploration since this bull market began in 2001. ~~~~~~~~~~~~~Special~~~~~~~~~~~~~ Dividend Stocks for Big Income! Social security payments are a pittance...company pension plans are disappearing...and prices for food, energy, and healthcare are soaring! What investments can help you build your wealth and secure a steady future income stream? Dividend-paying stocks! Some of the most conservative companies out there are paying out more than CDs, money markets or Treasury bonds, and other stocks are yielding 8%, 10, even 20% RIGHT NOW! Plus, there's also the potential for big capital gains. Income investment expert Nilus Mattive has put together a whole list of recommendations. Click here to read more… ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Older and smarter minds than mine had predicted that the soaring price of gold would produce a new wave of exploration that would, eventually, produce a new wave of major discoveries. But so far, as Barrick Gold's CEO, Peter Munk, recently observed, "There have been virtually no new discoveries." Only Aurelian (ARU: TSX) has landed a legitimate "elephant" deposit bagged. Unfortunately, the carcass of that particular elephant rests entirely within the sketchy outlines of the nation of Ecuador where the locals are currently circling like a pack of hungry hyenas. It has been our contention that what was needed to light the fuse on the junior exploration stocks would be, in no specific order:
So far, we have had (1) and we are beginning to see (2), but (3) has proved remarkably elusive. Now, don't misunderstand. You can have a whopper of a bull market in these stocks without the discovery — that was the case in the 1970s bull market. But a discovery that fires the imagination can jump-start things in a big way, no question about it. Too bad nobody has found one recently. In short, we appear to have reached the era of Peak Gold. Whereas a major discovery used to be 10 million ounces or more, the threshold for attention-getting discoveries these days has fallen to more along the lines of 1-3 million ounces…and even those are hardly falling off the trees. Viewed from the perspective of an investor in the junior resource sector, this lack of discoveries means the fuse is lit — starting with straight-up supply and demand fundamentals — for a rocket shot tomorrow. Adding boosters to the rocket, we have a commodities bull market that shows no sign of ending anytime soon and, while the U.S. dollar will periodically rebound, it is not going to somehow reinvent itself as sound money in our lifetime. Importantly, as you can clearly read between the lines in Chairman Munk's words, once the majors get cashed up and get serious about replacing their reserves, they are going to have to look downstream to the juniors with discoveries…even if those discoveries are below the five-million-ounce threshold they previously required to even consider taking an ore body into production. Of course, lowering the threshold on deposit size will require trade-offs. For example, in order to be considered for an acquisition, a smaller deposit will almost certainly have to be near surface and open-pittable. It will also have to be near good infrastructure, and located in a jurisdiction with good laws and reasonable taxation. There is, in this situation, an opportunity and a risk. The Next Bear Stearns The horrible financial practices that have already taken down some top investment banks were not as rare as we may have hoped. In fact, shoddy bookkeeping and risky business maneuvers were being used in several financial institutions. Now the next victim is about to be claimed. Which financial giant is going down next? Click here to find out… ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Starting with the latter, if your portfolio now includes companies going after deposits in the one- to five-million-ounce range, you need to make sure they are not in a remote location that would require a massive infrastructure investment. As for the opportunity, while the odds and the amount of exploration spending still favor that we'll see the discovery of at least one and maybe two monster deposits in this cycle (there are a couple of companies advancing projects with that potential), and early shareholders will make fortunes as a result, there has rarely been a better time to invest in junior exploration companies with modestly sized projects in good locations. That said, you should still be focusing only on projects with at least two million ounces, or the strong potential of same. In other words, take the opportunity in these down markets to invest in the kinds of junior mining companies that major mining company might want to acquire… That's where the big money will be made as the gold market gathers steam again. Regards, Greg's Endnote: If the falling dollar wasn't enough to send the price of gold ever-higher, the idea of its relative scarcity certainly will. And what happens when the idea of peak gold hits the mainstream? Can $2,000 gold be that far behind? I don't think so. Click here to see just why gold could soon be doubling in price… |
Whiskey & Gunpowder Special Reports $1,000 Gold and Rising... 5 Entirely New Ways To Play the Gold Trend The 10 Shocking Reasons for China's Pollution Problem Geothermal Energy: Investment in the Future Here's One Coal Stock That's Set to Skyrocket Investing in Exchange Traded Funds The Real Story Behind the True Gold Bull Market If someone forwarded you this copy, please look here to start your own subscription. Wanna let us know what you thought of today's issue? Now you can... click on this link. Whiskey & Gunpowder is a free e-mail service brought to you by a team of rebellious brigands. If you have not already done so, please click here to confirm your subscription. This will help us ensure you get every Whiskey & Gunpowder without interruption. Are you having trouble receiving your Whiskey & Gunpowder? You can ensure its arrival in your mailbox here. Please note: we sent this e-mail to lemmetry@gmail.com because you subscribed to this service. To end your Whiskey & Gunpowder e-mail subscription, click here. Nothing in this e-mail should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice.We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of a printed-only publication prior to following an initial recommendation. Any investments recommended in this letter should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company. © 2008 Agora Financial, LLC. All Rights Reserved. Protected by copyright laws of the United States and international treaties. This newsletter may only be used pursuant to the subscription agreement and any reproduction, copying, or redistribution (electronic or otherwise, including on the World Wide Web), in whole or in part, is strictly prohibited without the express written permission of Agora Financial, LLC. 808 Saint Paul Street, Baltimore MD 21202. |
