So, let’s look at techniques you can utilize to speculate in the resource exploration sector to  make unfathomable profits.

The vast majority of exploration companies are hazardous to your financial health. The key is to select only the finest companies. And in this sector, that means starting with the most talented and experienced management that are working on highly promising projects.

Your company must also be able to weather most any storm that comes its way. If I’m certain that a resource stock has the required long-term staying power I will put it in the “buy and accumulate” category.  That means I take an initial position, and then happily purchase more shares on any subsequent price weakness that has nothing to do with the company’s overall fundamentals. This is how you make volatility your friend.

You see, resource companies frequently sell off en masse. Healthy babies are routinely thrown out with the bath water. Let’s look at a stock called Impact Silver (AMEX:IPT) that is in the portfolio of my Resource Windfall Speculator service:

In this portfolio, we select stocks that relate to specific commodities that are in long term bull markets. Silver certainly qualifies on that count and we hold six total silver stocks in the portfolio right now.

To tell you the truth, Impact did not appear overpriced at the $1.50 Canadian range in early 2008. However, the global financial crash altered that perception — even though silver performed just fine last year. In fact, silver was up in 2008 and has been up nearly every year this decade. Impact silver has a 52 week high of $0.88 Canadian and a 52 week low of $0.175. How’s that for volatility?

Impact Silver has remained a buy for all of this time, because the company’s fundamentals were just fine. Their silver production and successful exploration remained on track. While the price fluctuated enormously, the value remained intact.

Again, we identify long-term value and take advantage of short-term price weaknesses when it is illogical. Anyone who had the courage to buy Impact Silver near $0.175 Canadian is pretty happy right now with its $.77 share price. That’s a 340% gain. They’ll be even happier when the company far surpasses its previous highs.

Yes, those who bought IPT near $1.50 still have some catching up to do. But that’s okay. If you want to speculate, you must be able to absorb some losses without sacrificing excessive sleep.

Another stock I personally own, Salazar Resources, has a 52 week low of $.12 Canadian and is now trading near $.80. Stock appreciations over the last eight months of 100 – 200% gains are commonplace.

The primary point is that bottom feeders can make astounding profits. We’re staring at another extreme opportunity in the coming weeks for rescuing babies from bath water.

•    Resource stocks are typically weak in late summer because the most influential players are on vacation.
•    Gold and silver get official spankings via government management with predictable regularity.
•    Resource stocks tend to sell off with the overall stock market, which now looks exceedingly vulnerable.

I’m convinced that $1,200 gold and $20 plus silver will soon be the floors under these precious metals. There will be few screaming bargains when these factors are in place. In the mean time we are probably heading for another bout of overall sector weakness that has next to nothing to do with individual company fundamentals. A banquet for bottom feeders is always a special occasion and we will be loading up in my advisory.

Are you hungry?

Invest Resourcefully,

Rusty

Source: A Banquet for Bottom Feeders

For the tale of the tape, the TSX Exchange lost 0.95%, while the TSX Gold Index fell 6.80% and the TSX Venture Exchange, Canada’s largest junior exploration bourse, added 4.04% with the advancing issuers swamping the decliners by a 483 to 368 margin on volume of 161 million shares traded.

Goldcorp tabled third quarter earnings of $297 million or $0.42 per share thanks to a big foreign exchange gain and stronger gold prices. Taking out the $240 million foreign exchange gain, profit fell to $64.7 million or $0.09 a share, from $82.3 million, or $0.12 a share in the same period in 2007. Goldcorp ended the day down C$1.98 at C$22.54.

High River Gold Mines (HRG) moved a step closer to bankruptcy after announcing that delays in getting its Taparko-Bouroum mine into commercial production has put one of its subsidiaries in breach of its financial covenants. Financial problems also put plans to purchase remaining 50 per cent of Prognoz silver project in Russia off until at least the end of November. High River ended the day down C$0.03 at C$0.11.

It was a good day on no news for Midway Gold (MDW). The company is currently raising C$2.75 million priced at C$0.22 per unit, which holds one share and one C$0.28 warrant. Midway ended the day up C$0.17 at C$0.47.

Investors in the more speculative exploration stocks are breathing a sigh of relief because buyers appear to be back bottom feeding in the sector. We will see what Monday trading has in store.

Source: Resource Stock Roundup Monday, November 3, 2008

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.

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:

1. Sustained higher gold prices.

2. Improving financials and free cash flow of the major producers.

3. A discovery to heat the blood of the investing community.

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.

~~~~~~~~~~~~~Special~~~~~~~~~~~~~

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,
David Galland, Casey Research

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…

Source: Where There’s Gold

For the tale of the tape, the TSX Exchange fell 0.47%, while the TSX Gold Index dropped a modest 0.1% and the TSX Venture Exchange, Canada’s largest junior exploration bourse, added 0.97% with the advancing issuers beating out the decliners by a 528 to 469 margin on lower volume of nearly 194 million shares traded.

It was a good day for shareholders of Mano River Resources as the junior inked agreements with a leading Russian steel and natural resources company that include a $4 million equity placement and the sale of 61.5% of the Putu Range iron ore project in Liberia held under African Iron Ore Group, which is an 80% owned subsidiary of Mano. The price tag is $37.5 million. Satisfactory due diligence still needs to be completed but in the meantime, Mano added C$0.19 to close at C$0.36.

Investors are not enamored by proposed nuptials of Niblack Mining and Committee Bay Resources. The deal would see each Niblack share exchanged for one Committee Bay share. Of interest to cash-rich Committee Bay is Niblack’s wholly owned VMS project in southeast Alaska. Committee Bay ended the day down C$0.015 at C$0.265, while Niblack closed at C$0.27 for a C$0.03 loss.

It took a day for investors to digest but the latest drill results from the Represa zone of the Camino Rojo project in Mexico’s Zacatecas state helped shares of Canplats Resources. The owner of the highly touted find gained C$0.80 to close at C$4.75.

Metalex Ventures, WSR Gold and Arctic Star Diamond continued to trade heavily after the joint venture reported that massive sulphides have been encountered between 78.1 and 90.1 metres depth on their project in the James Bay Lowlands. Metalex ended the session down C$0.015 at C$0.35 on over 7.6 million shares traded, WSR dropped C$0.07 at C$0.63 on nearly 800,000 shares traded and Arctic Star lost C$0.02 to close at C$0.12 on over 2 million shares traded.

The volatility in the Canadian markets may be pointing to a short term top for the big producers, while the junior bourse is attracting more interest. We will see what Tuesday trading has in store.

Source:  Resource Stock Roundup Saturday, May 24, 2008

Older and smarter minds than mine, minds resting in the cranium of Explorers’ League members, for instance, have been convinced that a number of major discoveries would be announced.

But so far, other than a small handful that appear to hold the stuff, there has only been one legitimate elephant bagged; by the team of Aurelian (T.ARU). 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:

1. Sustained higher gold prices.
2. Improving financials and free cash flow of the major producers.
3. A discovery to heat the blood of the investing community.

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.

Evidence of that statement is provided by the gold share bull market of the mid-1990s, the most powerful to date, which occurred against a back drop of flat to falling gold prices. In case some of the big winners from that market have slipped from your memory, they include returns such as; Cartaway, up 26,040%; Pacific Amber, up 4,376%; Arequipa, up 5,692%, and so on and so forth.

So, What’s Going On?

According to MineWeb, Peter Munk, the somewhat unpopular chairman and acting CEO of Barrick Gold, the world’s largest gold producer, stated at the company’s recent AGM that there have been “virtually no new discoveries.”

While we might disagree around the edges of that statement, Chairman Munk is technically correct in that the level of discoveries being made is a small fraction of that needed to replace the depleting reserves of the gold producers.

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 to 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 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 5-million-ounce threshold they previously required to even consider taking an ore body into production.

A Risk and an Opportunity

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.

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, or will require going underground or building a mill to process sulfides. (Under 1 million ounces? Fuggedaboudit!)

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 2 million ounces, or the strong potential of same.

In other words, take the opportunity in these down markets to focus on getting positioned ahead of the majors… that’s where the big money will be made as things gather steam again going forward.

David Galland is managing director of Casey Research, publishers of the International Speculator, now in its 28th year. The current edition includes “Courting the Majors,” a feature on what attributes the major mining companies are looking for in a junior explorer. All new subscribers are invited to give the International Speculator a three-month trial with an unquestioning 100% money-back guarantee. Learn more and sign up now to receive the current edition.

By David Galland, Casey Research

Source: Gold, What Gold?

Why exactly has this happened? Especially when commodity prices are soaring pretty much across the board. Aren’t the explorers supposed to show leverage to the underlying resource prices to which they seek?

History demonstrates typical long term leverage with exploration stocks. If gold goes up 20% you can reasonably expect the gold shares to perform at a multiple of that figure. At the present times the “juniors” aren’t even keeping up with rising commodity prices.

The ongoing global credit crunch is a primary reason for this disparity. The appetite for speculation has waned. Global players have sold off winning positions in order to create liquidity. Some suggest that hedge funds may be shorting the explorers. Whatever the reasons are, the anomaly won’t persist indefinitely.

Either commodity prices must fall or junior miners must rise and close the gap. I don’t see commodity prices falling significantly from present levels. They stand as protection against currency debasement which happens to be a growth industry these days. The US dollar remains at the epicenter.

Opportunities abound. Let’s look at a simple example in a company called Amera Resources (AMS:Toronto).

This portrayal is for demonstration purposes only. I personally own this stock. It is not in the Resource Windfall Speculator portfolio and this is not a buy recommendation.

That’s an ugly chart. The stock is going down on exceedingly low volume (15,000 shares this day). Amera’s 52 week high is $.41. It’s near its 52 week low of $.11. Amera has 34.5 million shares outstanding. At $.14 Canadian, that gives them an overall market cap of a miniscule $4.83 million.

Surely something must be fundamentally flawed with this company. But that’s not the case. They have money, excellent management and exceedingly promising projects in mining friendly South American countries. I wrote a series some time back on “The Perfect Resource Exploration Stock”: The Perfect Resource Exploration Stock, The Perfect Resource Exploration Stock: Part II, The Perfect Resource Exploration Stock Part 3: Anatomy of a Ten-Bagger.Amera fits the majority of the qualifications for such a title.

Buying high quality speculative stocks with a market cap of $5-$10 million is pretty much a “no brainer” from the perspective of savvy resource investors. It’s called ultra cheap lottery tickets. Say they prove up an asset valued at $300 million, for example. That would be 60X the current market cap level.

There are zero assurances of such an event transpiring. That’s why it’s called speculation.

Lots of market participants would be much more comfortable buying stocks at annual highs instead of annual lows. Low prices freak them out and they end up capitulating. Capitulation is pretty much rampant these days. I believe that’s what shows clearly on the Amera chart.

When the last sellers give up their shares the market then becomes dominated by buyers. The bottom is in. The market then heads back towards the next extreme. The fear/greed cycle is inherent within all markets. All the more so in the junior explorers. Some companies are selling at prices close to their cash on hand value.

Summers are typically dreary times for the juniors as well. Buyers are more interested in their tans and exotic travel than following stocks. Will the sector go even lower during this vulnerable time? It’s entirely possible.

Still, the downside seems dwarfed by the upside potential. It’s likely to be an historic opportunity for accumulation. What’s your long term view on commodity prices?

Invest Resourcefully,

Rusty

P.S. To let me know what you thought of today’s article, send an e-mail to: feedback@investorsdailyedge.com.

Source: They’re Giving Away Resource Stocks

For the tale of the tape, the TSX Exchange tacked on 0.07%, while the TSX Gold Index was the lone loser by dropping 1.7% and the TSX Venture Exchange, Canada’s largest junior exploration bourse, added 0.46% with the declining issuers once again out battling the advancers this time by a 548 to 501 margin on good volume of 253 million shares traded.

First Quantum Minerals saw first quarter profits rise 54%, thanks to higher sales and higher copper prices. The miner earned $182 million or $2.68 a share in the first three months of the year compared to $78.3 million or $1.16 a share in the same period a year earlier. Copper production tallied 75,616 tonnes in the period, up from 46,403 tonnes and realized copper prices came in at $3.51 a pound, up from $2.59 a pound in the first quarter of 2007. Unlike the gold guys, cash costs per pound dropped from $1.06 to $0.99. But the results were not good enough as shares in First Quantum ended the day down C$4.35 at C$87 even.

Moving in the other financial direction was merchant bank Pinetree Capital. The investor of junior exploration stocks continues to bleed red with the first three months of 2008 resulting in a loss of $56.4 million, or C$0.50 per share from a gain of $47.2 million or C$0.55 per share in the same period of 2007. Pinetree ended the day down C$0.36 at C$2.93.

Shares of Antares Minerals got a boost following news that the near-surface leachable portion of the Haquira deposit would produce annual revenues of $220 million and an average annual after tax profit of $46 million. Using a base-case copper price of $2.00 per pound a 50,000 tonnes per day operation would yield an after-tax internal rate of return of 25.9%. The after-tax net present value tallies $224.4 million, using an 8% discount rate and the initial capital costs hit $301 million. Antares ended the day up C$0.55 at C$3.95.

Goldsource Mines Saskatchewan coal find is not dying out as witnessed by the trading action of North American Gem. The junior inked a deal to acquire more ground west of Hudson Bay, Saskatchewan and ended the day up C$0.055 at C$0.27.

For those of you with a forward looking bent, Golden Chalice Resources detected numerous large conductive bodies at a depth of 300 metres below the Discovery zone on its Langmuir nickel property in Ontario. Golden Chalice ended the day up C$0.14 at C$1.32.

Canada’s big board continues to trade at or near all time highs, while the junior bourse is once again starting to gain some traction. We will see what Thursday trading has in store.

Source: Resource Stock Roundup: Thursday, May 15th, 2008