₪ David Pescod's Late Edition September 19, 2006
GLAMIS GOLD (T-GLG) $42.16 -2.15
GREAT PANTHER (V-GPR) $ 1.79 -0.13
It seems like yesterday that commodity prices were soaring (ah, the good ole days) and that meant that oil companies and mining companies were suddenly surveying the world for opportunities. It led them to some pretty scary countries and investors/speculators have always had to be aware of that country risk as in the last 24 hours, we’ve been very much reminded of that.
First of all, Russia, which has never seemed like a safe place to us, has decided to change the rules on the massive $20 billion Sakhalin natural gas project. That involves two Japanese companies, Mitsui & Company and Diamond Gas-Mitsubishi Corporation, along with the project operator Shell. The bottom line seems to be that the Russian interests suddenly want in on the project now that much of it has been built and paid and naturally, they probably want to get in at the bottom. Scary!
Another place that I certainly would never want to visit would be Chad. According to some analysts that follow that country, it’s arguably one of the poorest countries in the world and the suggestion is that it’s also one of the most corrupt.
Chevron Corp. and Petronas have invested a big chunk of money there and you guessed it, now that the facilities are built and the cash flows are coming, Chad orders these two companies to leave the country. Once again, Chad was never on our list of safe places to speculate on.
For those who follow Don Coxe’s work, you might be a little bit nervous about something he is saying about a country that many people assume would be a safe place to be—Mexico.
He writes on a piece dated September 8th: “If Mexico is in fact a near zero political risk country, and that’s no longer clear. Lopez Obrador has said he is going to set up a parallel government when Felipe Calderon is inaugurated as incoming President. Already, you’ve got Oaxaca shut down entirely by a teachers’ strike, and the radicalism is spreading. The problem with this is that ordinarily you could say, “well, you send in the police and restore order”, but the Mexicans know that historically, just about the largest level of corruption that the consumer see upfront is from the police force. And, travelers in Mexico who have been involved in car accidents of any kind, can attest that the only way to get yourself out of situations like that is to pay off a policeman.”
“So, I draw this to your attention, the problems they have in Mexico: the society is not politically mature enough to be able to get a consensus on doing the kinds of things that are needed, even if Calderon is left in power.”
This is a little bit scary because many of the great little gold and silver stories, many of which have been beaten up in the last little while admittedly, are based out of Mexico. And just how worried should one be about that?
www.glamisgold.com
www.greatpanther.com
BRILLIANT MINING (V-BMC) $0.77 -0.02
GOLD-ORE RES. (V-GOZ) $0.59 -0.05
ESPERANZA SILVER (V-EPZ) $1.70 n/c
One of the serious mining folk out there that we choose to listen to from time to time is John Greig. Years ago, it was his Sutton Resources that was one of the success stories of the day and more recently, Canico, which was bought out by Companhia Vale do Rio Doce – much of the hard work was done by John’s former partner Mike Kenyon, but John was along there as well.
More recently, John was one of the founders and major players behind EuroZinc Mining (EZM).
We go to John for his take on this beaten up resource sector that one wonders if it has not gone beyond a correction. Or is this just a typical September, we wonder. John points to the oil and gas sector leading commodities down and he suggests it’s the shoulder season for demand for many energy products, but he does admit that the gas storage levels is creating a bit of a scare. He figures over time, this will take care of itself.
As far as metals, which is his business, he figures there are certain commodities that just remain in huge demand. While he notes growing inventories of copper, he suggests that zinc is simply going the other way as demand grows and inventory shrinks. Uranium looks like it just wants to go higher, he suggests, even from this lofty level of $52.00 and silver he figures, is in the $10.00 to $15.00 range for some time, which is a pretty healthy range to be in. Gold, he wouldn’t be surprised to see it correct to as low as $550, but there it should find some support and then go the right way from there. In time, he expects better markets.
As far as some of his favorite stories, we have featured John before with Western Keltic. Shortly after the interview and enjoying the good market at that time, Western Keltic much more than doubled, but lately has suffered like other resource companies. He suggests a pre-feasibility study for Western Keltic by year end will be very important to that company’s future.
As far as what his three favorite picks would be today, he suggests Brilliant Mining, which is a bit of a nickel producer as we speak which he thinks justifies or validates current prices, but they also have exploration both in Labrador and in Australia that have very promising targets.
In Australia, they are looking for small, but high grade nickel zones and with success, Greig believes Brilliant could be multiples of this level.
www.brilliantmining.com
One of his favorites from the past that has been hurt like all other juniors in this current market is Gold-Ore. He still hopes to see a two or three-bagger on this stock over the next year or so and suggests one of their problems (besides the bad market) is that drilling is going so very slowly. They already have a mill on their property he points out and the small bit of production they do have at this level, supports some of the ongoing exploration and development.
www.goldoreresources.com
Esperanza Silver is his third pick, looking for narrow veins of high grade silver. Drilling should start next month and he has big expectations for some drilling success, but his target on the stock is only $2.50, because Esperanza only owns a small percentage of the San Luis property.
www.esperanzasilver.com
If you would like to receive the Late Edition, just e-mail Debbie at
debbie_lewis@canaccord.com |
