DOUG CASEY RECOMMENDS ARU !!!
BUY UNDER C$8.00—Aurelian’s big deposit is in Ecuador, where the government is considering a massive “windfall” tax. That’s bad. And that’s what has the stock on sale.
We didn’t sell our Ecuador plays in the International Speculator when the windfall tax news broke because we are skeptical the proposal will go through as is… and even if it does, Aurelian’s Fruta Del Norte monster deposit will still be highly profitable.
While a tax on “extraordinary profits” will cap the upside for Aurelian, it is far more preferable than an across-the-board higher tax rate being applied to all mines, regardless of profitability. That is the sort of tax – poison to marginal miners – now being proposed or implemented in the U.S., Bolivia and Argentina, to name a few. At least with the proposed tax in Ecuador, you have to have significant profits before the tax kicks in. And on that front, we have no doubt that Fruta Del Norte will be very, very profitable.
We say that because Fruta Del Norte has the best of both worlds: size and high grade, assuring that it will be a mine in the not-too-distant future. Unlike most prospective mines, which face a multitude of serious hurdles to production, Fruta Del Norte’s size and grade trumps all those hurdles, and so the only real questions still outstanding are related to who will build it and on what terms. In short, this project is so robust, it can handle a higher level of taxes and capital expenditures than almost any other new project now on the horizon. Fruta Del Norte is, so far, the discovery of this cycle and we’re convinced that ARU shares will go much higher before the project, or the whole company, is sold.
As to our hesitation about entering ARU to date, frankly, we were just plain wrong in our projection for what ARU would publish in their first resource calculation. The weakness we expected didn’t materialize because instead of coming out with an initial number significantly below the ten million ounces the market seemed to be expecting, the company surprised us and the market with even more gold: 13.7 Inferred million ounces at an average grade of 7.23 g/t gold, plus 22.4 million ounces of silver at 11.8 g/t silver. Instead of dropping to our target of C$4.00, the shares took off for C$10.25.
The windfall tax scare, combined with late 2007’s correction in the shares, knocked ARU back to C$6.59, just a couple weeks ago. Why bring it up now? Because the last few trading days showed that ARU’s share price will respond to movement in the gold price, even with the windfall tax question unanswered. If we wait until that question is settled in a reasonable (or at least workable) manner for miners, ARU will be trading well above today’s levels. So we’re looking for days when gold is down to start building a position in ARU.
Could you get hurt buying at current prices? Yes. No question. So many things could go wrong in Ecuador, there’s no point in listing them all. Even outright nationalization, while unlikely, is not completely out of the realm of possibility.
But even populist president Rafael Correa seems content with taking a bigger slice, not killing the project… a move that would also kill any further investment by Western mining companies in his country. And so we’re willing to place a bet that ARU will continue to make rapid progress with Fruta Del Norte, making investors at this level a lot of money in the process.
One reason for our optimism is that the size of the resource is continuing to expand – the latest results included 216.6 meters grading 12.85 g/t gold in infill drilling, and 13.5 meters of 16.86 g/t gold in a 100-meter step-out to the south of the current resource area. Upgrades from Inferred to Measured and Indicated ounces are on the way, and we expect the next resource calculation to increase the size of the deposit as well. This is a find for the record books.
If the Mania stage hits this year, before ARU is taken over, this is a story that can drive the company’s shares to the moon and beyond faster than any other.
We want some in our portfolio, and are going to start buying on the dips. The current price works for an initial stake in the ground, but we’ll be looking for more opportunities to get in for less than C$8.00, such as we saw just ten days ago. |
