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Gold/Mining/Energy : Gold and Silver Mining Stocks -- Ignore unavailable to you. Want to Upgrade?

To: Claude Cormier who wrote (917)	5/3/2001 7:17:00 AM
From: russwinter	Read Replies (1) \| Respond to of 4051

Here's a great commentary on juniors. Other than the subdued view on POG, this could easily have have been written by Claude Cormier or Russ Winter. I totally agree with his view on seniors. They should be underweighted now and funds shifted to juniors. CSFB Issues Precious Metals Report by Carolyn Pritchard May 2, 2001 Credit Suisse First Boston issued its quarterly assessment of the North American precious metals sector today, revising its recommendation to `under weight’ from `over weight.' But as the report’s author, senior mining analyst Robert Doyle, told smallcapcenter.com, what appears at first glance to be a negative outlook is in fact quite positive for the most junior of the small-cap exploration gold plays. CSFB’s changed its gold price assumption significantly. The spot price being used was changed from $275/oz. to $265/oz., and the contango (the difference between the current and future prices, or the effective gold interest rate) was changed from 5% to 2.5%. The report notes that since November of 2000, although bullion has changed little, gold equities have appreciated by approximately 30% leaving many companies overvalued relative to gold. Taking such revised price assumptions into account, the overvaluation and the seasonal nature of bullion (it normally fares worse from May through the end of August), CSFB recommends an `under weight’ position in the sector. But the news is not all bad. Supply and demand issues, the report notes, appear to be shifting from either negative to neutral or even neutral to positive, which could result in higher prices later on in the year. “My longer-term outlook isn’t as gloomy as my short-term outlook, so I’m not predicting the end of the industry,” Robert Doyle told smallcapcenter.com. In fact, said Doyle, there’s an exceptionally positive situation unfolding for the very small-cap end of the industry. “With a more difficult economic environment for senior producers, exploration budgets continue to be reduced, especially with respect to early-stage, or grassroots exploration – which is the bread and butter of junior exploration companies,” he explained. “At the same time, this reduced or diminished outlook for the sector results in reduced enthusiasm on the part of investors, which, again, can’t be good for anybody.” But as time moves on, Doyle said that situation could work to the juniors’ advantage. “The longer the senior producers run with reduced exploration budgets and continue to produce gold at record levels the greater the need they will have down the road for replacement deposits or discoveries to fill in for the ore bodies they’re currently mining out. So that - all other things being equal - production will eventually decline, and it will probably decline fairly dramatically because people today aren’t discovering new ore bodies to replace those that will be mined out. Doyle said that there is a genuine scarcity of quality projects out there right now of potential new mines, particularly those that are capable of being brought into production in the current environment. “The typical length of time between a discovery hole and first production is about seven years, so that in theory we’re seeing this tremendously slow turnaround.” Doyle said the four most exciting new deposits coming into production in the current 12-month period are Agnico-Eagle Mines Ltd.’s (NYSE: AEM) (TSE: T.AGE) (OTC BB: AEGGF) LaRonde, Goldcorp Inc.’s (NYSE: GG) (TSE: T.G) and Red Lake, Meridian Gold Inc.’s (NYSE: MDG) (TSE: T.MNG) El Penon – all small-caps, but nowhere near junior exploration status - and giant Barrick Gold Corp.’s (NYSE: ABX) (TSE: T.ABX) Bulyanhulu. But as he notes, all of these deposits were discovered in the early '90s and are just seeing the light of day. “I guess what I’m suggesting is that there haven’t been a lot of deposits like that discovered since that point in time, so we know that more of the same are not on their way.” But those juniors making discoveries will be well-positioned down the road. “In theory, the juniors will have another day in the sun when seniors are desperate for anything that looks remotely attractive.”