Part of the reason for the rise is weakness in the dollar. People often say that oil is denominated in dollars. But maybe it is the other way around; dollars are denominated in oil. A dollar is worth how much oil it can buy. Part of oil’s rise is simply marking down the value of the dollar. Weak dollar means higher oil prices.

People will blame the higher oil price on speculators, but something interesting is happening in the markets for minor metals like molybdenum. Prices are rising, too. The silvery metal, used to strengthen steel, is now $15 a pound — nearly double the $8 and change it fetched in April. This is significant, because there is no futures exchange for moly. It trades on a physical spot market. Speculators play a very small role here. The buyers of the metal use the metal.

So there is a demand story shaping up here, too, mostly focusing on a fragile recovery of some sort and mostly centered on China and the emerging markets. The market is looking ahead.

For instance, over the weekend, South Korea reported numbers that show signs of a recovery in that country. Industrial output fell less than expected, and trade volume surged to $60 billion. That was its best showing since last October. Also, South Korean companies have been reporting better-than-expected results.

The biggest buyer of South Korean goods is China. Still, it’s a confusing time because of all the stimulus money that governments around the world have been spending. So it’s hard to say what’s real and what’s just an illusion created by a temporary spending binge.

Another piece of the puzzle from last week: Spot iron prices in China (meaning iron ore for immediate delivery) topped $100 per ton. That’s the highest level since October 2008. The other breakthrough in iron ore last week came when BHP Billiton (NYSE:BHP), the world’s largest miner, announced that a third of its customers were moving to prices linked to the spot market.

This is big news for the industry. The old way was to have annual contracts with a negotiated price. This was bad for iron ore companies because the contracted price lagged the increase in iron ore prices. And when iron ore prices fell, steelmakers just reneged on their contracts. As the iron companies found out, having contracts was a great way for iron ore producers to cap their upside and leave them with all the downside. Not so good.

The industry now looks like it is moving toward more spot pricing, which is a good thing for the producers. Iron ore prices have rallied too, along with crude oil and moly.

Every rally, like every bottle of beer, has a finite life span. There will be lots of bumps along the way, but the prices of many commodities — such as oil, iron ore and moly — will tack higher, in my view. Intelligent small-cap investors would be wise to pick up shares of their favorite companies in these sectors.

Sincerely,
Chris Mayer

Source: Oil and Molybdenum Are Poised for Future Gains

For the tale of the tape, the TSX Exchange added 4.82%, while the TSX Gold Index rallied 12.9% and the TSX Venture Exchange, Canada’s largest junior exploration bourse, lost 1.08% with the declining issuers outpacing the advancers by a 494 to 288 margin on volume of 152 million shares traded.

Shares of copper miner Anvil Mining got slammed after the company reported a third quarter loss of $17.3 million or $0.24 per share, compared with a profit of $39.1 million or $0.55 per share in the same period of 2007. Falling copper prices, political uncertainty and operational issues in the Democratic Republic of Congo all impacted the bottom line. The company also does not have enough funds to complete the development of the stage II solvent extraction-electrowinning plant at its Kinsevere project. Anvil ended the day down C$0.46 at C$0.62.

Sherwood Copper tagged 3.6% copper over 10.5 metres at its advanced Kutcho project in northwestern British Columbia. The miner closed out the session at C$1.49, for a C$0.01 gain.

Roxmark Mines cut 1.68% molybdenum over 0.7 metres at its vein No. 3 target on the Nortoba-Tyson property in Ontario. Roxmark ended the day up C$0.01 at C$0.06.

The intraday swings on the order of 10% make this a very nasty market to trade indeed. Longer term it looks like a firm bottom has yet to be established with the junior bourse hitting new intraday lows before recovering. We will see what Friday trading has in store.

Source: Resource Stock Roundup Friday, November 14, 2008

It was two years ago that I first met Dr Jeffrey Malaihollo, the geologist and Managing Director of Central China Goldfields. Then he described to me the five mining projects, all in China, upon which his company was working.

Last week, when I met him for the second time, the number had been reduced to two. Judging that two of the original five had been insufficiently promising to be worth the struggle with local Chinese bureaucracy, Malaihollo gave up on them. He has also withdrawn from a project at Snow Mountain, but this time was able to walk away with a £1m profit having sold out to its Chinese partner.

This has boosted Central China’s bank balance to about £3.4m, useful ammunition for its two remaining projects. Defying the company’s name these are anything but in Central China.

One of them, Dong Mao Huo, is in Inner Mongolia in the far north of the country, while the Nimu project is in Tibet. The two projects are quite different. Dong Mao Huo is a small gold mine that could be quickly brought into production. Nimu, on the other hand, is at an earlier stage. But it could become a very large copper and molybdenum mine – and the one that could really see shareholders hit the jackpot.

The Dong Mao Huo gold mine has a history of sporadic production, with as recently as 2005 70,000 tonnes of ore being mined and sent to local refineries. Central China got involved in April 2006, when it entered into a joint venture with the Shandong Zhengyuan Geology & Resource Company.

Eighteen months later it had completed a thirty four hole exploratory drilling programme which suggested that there may be more gold than previously thought. Further drilling is now underway to define the extent of the resource and Central China intends to release an estimate of the total resource by the end of the third quarter of this year.

All being well it expects to be mining 7,000oz of gold per annum from an open pit mine starting early next year, in which it will have an 80% share, with the potential to extend the resource and ramp up production later on.

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According to broker HansonWesthouse the copper and associated molybdenum grades found so far are ‘about average for this type of system and in order to be economically attractive, a large tonnage deposit will be required. Nimu certainly has the size to fulfil this requirement… and now just needs an increase in grade.’

This month Central China is starting a new drilling programme that will throw further light on the potential at Gan gjiang, while further work will be undertaken on the other six licenses.

In twelve months time Central China could be producing gold at Dong Mao Huo and will have a much clearer idea of the quality of the Nimu project. Although it is early days, there is no doubt that Nimu could be a real company-maker.

At present Central China is valued at just £8m. But in a peer group comparison it lists fourteen other projects from around the world that have an average copper grade equivalent to that at Gangjiang. They have market values of anything from £1bn to about £15m depending upon their location, the size of the resource and their stage of development. This certainly tells us something about the potential for Central China Goldfields, although it does not necessarily indicate that the shares are undervalued at the moment.

Central China must first define its resource, and then it will have to cut deals with Chinese partners in order to bring in the necessary capital for mine development. A railway line that is being built in order to connect Tibet’s capital Lhasa to China’s heartland will pass within some thirty kilometres of Nimu, but still the region is remote.

Hanson Westhouse has declined to put a value on Central China at this stage, preferring to wait for the first resource estimate for the Gangjiang license expected towards the end of this year. A good result here could start to get the ball rolling for a share that has so far flattered to deceive. This is definitely one to watch.

Regards,

Tom Bulford
for The Penny Sleuth

Source: Finding Nimu

But how do you uncover and identify the very best small cap companies?

Well, the trick is to identify specific market niches that are in the very early stages of growth – and invest in the companies (if any) that are positioned to exponentially grow sales, revenues, and profits when these market sectors take flight.

In this spirit, here are three of the top market niches that I’ve recently identified – and the corresponding small cap stock charts that fit into each powerful category.

Market Niche: Bullish on Titanium

I find it amazing that we’re in the heart of a commodity boom – not one in a hundred commodity investors realizes that titanium (not steel) will soon be viewed as “The Metal of the 21st Century.” In fact, while steel stocks are blasting higher across the board, one small cap titanium stock (listed below) could be one of the best investing opportunity you see all year.

Here’s the situation…

Discovered in 1791 and named after Titans of Greek mythology, titanium is a light, strong, and corrosion-resistant metal with a grayish color. The two most useful properties of titanium are the fact that it’s resistant to corrosion and that it has the highest strength-to-weight ratio of any metal.

In its unalloyed condition, for example, titanium is as strong as steel but 45% lighter.

As you can imagine, this unique combination of strength, light weight, and corrosion resistance makes titanium useful in hundreds of applications. For example, it can be alloyed with iron, aluminum, vanadium, or molybdenum to produce alloys for jet engines, missiles, spacecrafts, petro-chemicals, or desalination plants.

If you’ve bought a new golf club in the last 12 months, odds are the overweight head on your driver is made of titanium.

And here’s the thing. When you consider the cost benefits of titanium on lifetime basis, the market is quickly discovering that no other metal is as reliable or as economical as titanium.

It’s categorized into the “Nonferrous Metals” group, which is defined as a metal (other than iron) such as copper, lead, zinc, nickel, and aluminum – and this is one of the specific sector niches that I’m bullish on right now.

The top small cap company that’ll capitalize off this titanium bullishness is Titanium Metals (TIE – NYSE). And in fact, TIE just might be the most undervalued stock on the S&P 500.

After all, if you run a screen of stocks on the S&P 500 that are down over 30% in the past three months and that also carry double digit earnings growth forecasts for the next fiscal year, the one company with the most attractive readings is TIE!

Their 3-month percent change is -42.5%, yet their Earnings Per Share growth rate currently stands at 35.3%. No other stock, which has fallen over 31%, has earnings per share growth this high. Not even Google (GOOG – Nasdaq)!

Therefore, you can realistically argue that TIE is the most under-valued stock on the S&P 500 right now. No other company with an EPS growth rate of 35% has fallen so far, and the best part is, most investors don’t realize this fact.

I’m currently recommending shares of TIE in my Bottarelli Research Small Cap letter, and I advise you to pick up some shares as well.

Sincerely,
Bryan Bottarelli
Editor, Bottarelli Research Small Cap

P.S. If you’d like more information on Bottarelli Research Small Cap, we invite you to review the letter below:

For the tale of the tape, the TSX Exchange tacked on 0.41%, while the TSX Gold Index added a modest 0.1% and the TSX Venture Exchange, Canada’s largest junior exploration bourse, ended the session 0.38% lower with declining issues swamping the advancers by a 548 to 432 margin on good volume of a tad more than 194 million shares traded.

Teck Cominco went out shopping and elected to buy Global Copper. The price tag is C$425 million in cash and stock. Of interest to the major is Global’s Relincho copper-molybdenum deposit in northern Chile. Global shareholders will receive C$3 in cash and 0.2 of a Teck Class B share for each Global share, plus the holders will get one share of a new company called Lumina Copper. If the market price of Teck Class B shares is less than C$45 per share, Teck will pay additional consideration, in cash or Teck Class B shares, such that the consideration payable for each Global share has a value of C$12.

If at closing the market price of Teck Class B shares exceeds $55.00, the number of Teck Class B shares to be issued will be reduced so that the value of the consideration per Global share does not exceed C$14. The new Lumina will hold all assets of Global other than the Relincho project, including Global’s interest in the Taca Taca and San Jorge properties in Argentina, some C$10 million in cash and a 1.5-per-cent net smelter return royalty in respect of the Relincho project, payable commencing in the fifth year after the start of commercial production. Global ended the day up C$2.78 at C$13.91, while Teck dropped C$0.91 at C$45.70.

Asia Thai Mining Co. has offered to by all the shares of Pan African Mining at C$4 each. On completion, the company aims to transfer C$2.5 million in cash and all of the non-Madagascar assets to a new company. Pan African ended the day up C$1.02 at C$3.79.

Skeena Resources tagged some nice holes on its advanced Malpica copper-gold project in Mexico’s Sinaloa state. Highlights included 112 metres running 0.949% copper and 0.427 gram gold per tonne. The project hosts a historic resource of 29 million tonnes grading 0.64% copper. Skeena ended the day up C$0.055 at C$0.30.

Gold Eagle Mines got a boost after reporting a 4.2 metre intercept averaging 29.85 grams gold per tonne at its flagship Gold Eagle property in Red Lake, Ontario. Gold Eagle ended the session up C$0.32 at C$9.13.

A stock to watch is Spur Ventures. Shares in the Chinese phosphate producer were halted pending news at C$0.68. Spur announced a deal with a private Chinese company to complete a C$11.34 million equity private placement and to pursue strategic investments in China and elsewhere in Spur’s fertilizer business. The Chinese entity will acquire 18 million units of Spur at C$0.63 per unit, which will make it Spur’s largest investor.

The more speculative junior issues continue to struggle as investors elect to take money off the table on almost any uptick. We will see what Tuesday trading has in store.