Base metals supercycle remains intact

(http://ft.com/markets/)

The recent strength of base metal prices has confounded the sceptics. Lead, zinc and nickel have all hit all record levels while tin has surged to its highest level since 1989. Such gains have defied the forecasts of many investors who believed that the peak in the cycle for metal prices had passed.

US oil prices have declined by a quarter since early August but base metals have largely resisted crude’s gravitational influence, displaying unexpected price resilience in the face of a US economic slowdown and concerns about its impact on global demand growth.

NovaGold says no to Barrick

(www.mineweb.com)

Barrick Gold raised its all-cash bid for Vancouver junior NovaGold by 10.3% to $16 per share Tuesday. The offer values NovaGold at $1.7 billion on a fully diluted basis.

NovaGold has three major assets, including the Donlin Creek project in Alaska in which Barrick is the joint venture partner, with gold resources estimated at 14.8 million ounces, and 100% interest in the Galore Creek project in British Columbia, estimated to have measured and indicated resources of 6 million ounces of gold, 75 million ounces of silver, and 6.8 billion pounds of copper.

However, NovaGold urged its shareholders to take no action at this time. In a news release issued Tuesday, the company said it has achieved “a series of major development milestones on its projects".

Our stocks

Dear Gold Portfolio

As I couldn´t get these stocks last week at the opening, I am trying again and now on AMEX.

Buy 500 Northern Dynasty Minerals (NAK) at 6.75

I intend to post a summary of this company soon.

Gold

Click chart to enlarge
Chart courtesy of http://stockcharts.com

The most important thing about Gold and its very long term bull run is sustainability. That is exactly what we are founding here with the detail of being EMA50 that is giving a perfect support. Don´t get it wrong, this is a weekly chart and prices are consolidating to go higher.

Natural Gas

Click chart to enlarge
Chart courtesy of http://stockcharts.com

It´s the usual time to climb. Probably we´ll find a top until the year´s end.

Silver

Click chart to enlarge
Chart courtesy of http://stockcharts.com

That´s a solid a picture that make us believe we may start a rally anytime soon.

Copper

Click chart to enlarge
Chart courtesy of http://stockcharts.com

A fine (and symmetrical) consolidation. If it follows 2004/05 we have to wait sometime for a new rally…

Yields

Click chart to enlarge
Chart courtesy of http://stockcharts.com

Time for consolidation. Bond investors believed that a significant slowdown was on the cards but now they are not so sure.

S&P 500

Click chart to enlarge
Chart courtesy of http://stockcharts.com

Are we heading to a top? Not yet…

Crude Oil

Click chart to enlarge and change colour

Since August, Crude Oil has been falling sharply. It seems we have to wait a little more to see a bottom.

Dow/Gold

Click chart to enlarge

Chart courtesy of http://www.chartoftheday.com/

Yesterday, the Dow edged above the 12,000 milestone for the first time. Considering the magnitude of the past bear market, it is a great achievement indeed. For some further perspective into the current rally, today's chart presents the Dow divided by the price of one ounce of gold. This results in what is referred to as the Dow / Gold ratio or the cost of the Dow in ounces of gold. For example, it currently takes 20.1 ounces of gold to “buy the Dow”. This is considerably less that the 44.8 ounces back in the year 1999. When priced in gold, the current stock market rally hasn't amounted to much. In fact, the longer-term trend is actually down!

"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value." - Alan Greenspan

AURELIAN RESOURCES

Click chart to enlarge
Chart courtesy of http://stockcharts.com

Aurelian Resources (ARU.V) is called a junior miner because it is only on an early developing stage of its gold project and not yet near production.

But ARU has a super first class mining property registering reserves of 8 million ounces of gold with 80% of targets yet to be explored!

It is surely a highly profitable investment even at these levels. I will write a more detailed post about this company in the near future.

IVANHOE MINES

Click chart to enlarge

Extraordinary junior miner companies never disappoint. IVANHOE got a partnership deal with Rio Tinto and is up more than 30%.

Early on this blog I have expressed my opinion that the price of this stock could rally, with the possibility of going even higher than today´s level.

Nevertheless, I advise you to be cautious and trade a portion at your will, having a stop and following the action.

Gold and Oil again

Gold is loosing the battle with its EMA 50, which should be expected to happen this month and is looking the horizon from below. There is in place an unpleasant succession of lower highs and lower lows. A descending trend line, for now far enough from 540.

Is it possible that Gold will be trading downwards or sideways till the end of the year? Not likely.

On the other hand, with a few exceptions, every year over the last 15, Crude Oil has found its second half bottom in November or December. There is surely something here to think about.

Is it possible that Oil has already reached a bottom last week? I don´t think so.

After United States elections, we must assess these issues once more.

Our stocks

Dear Gold Portfolio

The trend is your friend...

Buy 300 Minefinders Corp (MFN) at 9.35
Buy 500 Northern Dynasty Minerals (NDM.V) at 7.50
Buy 1.000 Western Goldfields (WGDF) at 1.70
Buy 1.000 Stratagold Corp (SGV.TO) at 1.22

Minefinders Corp

Click chart to enlarge

Chart courtesy of http://stockcharts.com

Minefinders Inc (AMEX: MFN) has precious metal properties in Mexico and the United States, having valuable and expanding resources at its main project, Dolores, at the Sate of Chihuahua, Mexico.

An independent feasibility study made a positive recommendation of its Dolores property, which is in a developing stage as an open pit. Global capital expenditure is estimated to be approximately USD 132 million. Total cash cost of gold and gold-equivalent silver are estimated to average $238 through the 15.5 year mine life.

The study estimates total production of 1.45 million ounces of gold and 53.2 million ounces of silver (or a total of 2.3 million ozs of gold-equivalent). The project economics indicate a pay back of capital in 3.3 years, a net present value of $277 million and an internal rate of return of 24.3% using $475 and $7.50 as the price per ounce of gold and silver.

It has to be noted that new drilling results (not included in the feasibility study) have increased total project reserves to 2.45 million ozs of gold and 128 million ozs of silver (total of 4.48 million ozs gold-equivalent) and subsequent resource expansion drilling program is underway below the proposed pit.

Infrastructure development at the project has been underway since Q3 2005, construction has already started and production is expected to begin in 2007.

In addition to the resources already drilled, Minefinders Corp controls a strong portfolio of properties in Nevada, Arizona, and Mexico which have the potential to host new multi-million ounce discoveries over the next few years.

With 51.4 million shares fully diluted, Minefinders Corp has a potential stock price well above current prices on a medium/long term basis.

ECU Silver Mining

Click chart to enlarge
Chart courtesy of http://stockcharts.com

ECU Silver's operations are located on the Velardeña mining property in the state of Durango, Mexico. As a sort of financial back up and having also a role as a developing pilot plant, the company bought a milling facility in 2005 that is currently operating at 320tpd for normal production on a sector of Santa Juana mine.

Despite major discoveries that ECU has been made so far the geological conditions imply the possibility of bigger ones to appear!

Yet in an early stage, drilling program in Santa Juana and San Mateo mines has showed great discoveries with large extensions of average grade of silver above 150 g/t and of gold above 4g/t.

On a very conservative approach, resources were reported (for 2005) at 17.4 million ounces of silver equivalent and inferred resources were 81 million ounces of silver equivalent. In reality and including the discoveries that already took place in 2006, total resources so far should be estimated around 250 million ounces of silver equivalent. And we must remember that ECU has only completed less than 30% of its exploration program.

Without any doubt we have here a top junior mine company which is most probably going to deliver huge returns on the long term.

Our stocks

Dear Gold Portfolio

Buy 1.000 ECU Silver Mining (ECU.V) at 3.15
Buy 1.000 Mundoro Mining (MUN.TO) at 2.00
Buy 200 Aurelian Resources (ARU.V) at 25.5

Mundoro Mining

Click chart to enlarge
Chart courtesy of http://stockcharts.com

Mundoro Mining Inc. is a Canadian company listed on the TSX (ticker symbol MUN.TO). It is the largest gold project in China to be explored by a Sino-Canadian joint venture and is believed to be one of the largest undeveloped gold deposits in China.

The company has a 79% interest in the Maoling gold deposit, which is located in the Liaoning Province in north-east China, in the old area of Manchuria, not far from Beijing.

As Maoling has measured and indicated resources of 161 million tonnes grading 0.92 grams gold per tonne, it contains 4.8 million gold ounces. Even with such a low grade we arrive at an extraordinary amount of payable gold.

The development team is experienced in working in China and a bankable feasibility study is due in mid-2007 with production projected in the first half of 2009.

The capital cost is estimated at US$235 million and cash costs of US$167/ounce. The company has forecast that at $400-gold, the internal rate of return would be 18% with net present value of 134 million.

With a market capitalisation of approximately US$74 million, Mundoro Mining is probably a very interesting long term investment.

Our stocks

Dear Gold Portfolio

Time to buy junior miners...

Buy 500 Cumberland Resources (CLG) at 4.85
Buy 3.000 Tara Gold (TRGD) at 0.55
Buy 2.000 Bullion River Gold (BLRV) at 0.90

Wait just a bit more!

Click chart to enlarge
Chart courtesy of http://stockcharts.com

I have been away working hard. While stocks are up but bonds are also up (and yields down) signaling a slowdown in US, commodities are struggling for now.

Gold and Silver are fighting and I think they are doing very well. Strong, very strong hands, couldn´t manage to dump them and they remain above last major bottoms.

November will be a good time to see precious metals rally. We only have to wait for the elections.

Junior gold and silver companies are waiting to be bought. Tomorrow I may resume trading.

In my opinion this chart is bullish (see MACD´s histogram).