Australian resource stocks

The gold market has gone no where of late and the reason is that we don`t see any erosion of other asset classes just yet. There is a lingering fear of inflation, but you won`t see alot of money going into gold stocks whilst equity & property markets are running with the bulls. And I don`t mean the Spanish bulls of Pamplona, I mean the Filipino prostitutes of Pampanga. If I`ve got the name wrong its because I never stopped there.

But in anticipation I like the following entries into the gold market - all companies listed on the Australian Stock Exchange (ASX):

1. Gleneagle Gold (GLN): It owns a 2nd hand treatment plant which will be revalued when it proves up enough gold at its Western Australian site. Mind you they already have alot of gold delineated, much of which will enter resource status as the gold price rises. The problem is that gold prices in $A terms will be undermined by a strong $A since gold is sold in $US. For this reason - go DRA >>
2. Dragon Mining (DRA): Dragon has commissioned its first gold mine in Sweden, and is planning a 2nd. Since Sweden (or EU) is not historically a resource market, its currency will not rise with the gold price, so $A revenues not repatriated will stay high. These funds thus can be invested in further production capacity.
3. Gippsland Ltd (GIP): I am expecting the resources sector to collapse in the next 6-18mths as the US-chinese property markets burst. Say by jun-sept`06. The LME & COMEX traded commodities are the most vulnerable to speculation, but I expect tantalum demand (used in mobile phones & laptops, PDAs) to be sustained because of the lack of new supply. GIP is bringing on a large new project. The reason i like GIP is because the project is Ta, tin (few sources & new applications, replacing lead in ammunition), feldspar (used in tiles/paint). Its in Egypt, so might the risk discount disappear??? Hmm.
4. Matilda Minerals (MAL): This company has had some impressive exploration results on Melville Is, Northern Territory, Australia. Its moving towards mining its high-zircon concentrate, high grade ore with minimum 3year mine life. Given that mineral sands generally extend over vast areas of coastline and they have about 200km of coast under application, there appears good upside. The `sands` are shallow and high grade, minimising environmental impact. It remains to be seen whether there will be opposition from aborigines, even though the regional land council supports the project. The projected high returns and exploration upside make this an attractive buy, but watch those market signals. Its an industrial commodity, which will be sold down in any global meltdown.
5. A1 Minerals (AAM): These guys are getting attractive high grades from shallow drilling in WA. The prospect of treating the ore through a third party toll treating plant make this an attractive proposition, particularly given the tight share register.

- Andrew Sheldon www.sheldonthinks.com