Republic Gold (RAU.ASX) lost my confidence

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I dumped my Republic Gold stock last week. They were under-performing, which caused me to take a more detailed look at the stock. The problem was I observed some anomalies in their reporting. I contacted the company, and was not satisfied with the response. I might be an alarmist, but too many companies are mining the market, and I'm not going to tolerate it for a third time. Previous cases being GLN, MLX. Call me a purist, but I have long believed that CEOs should disclose all the facts, and not selectively use their discretion to achieve 'maximum effect'.

In this case SheldonDIDNTthink - at least not critically until some loss was taken. Sorry to all those concerned. For the next 5 years I see myself as very busy, so the market comes send place. Please only use this information as a guide along with other sources of information.

The issue I had with the company was their lack of disclosure, 'missing' bulk sample data. This to me is critical. It seems implausible to me that data can simply go missing. The old 'My Patagonian dog ate my results' just strikes me as dubious. i.e. Something some 5th grader would argue. Its easy for a company to convey that they bought the project at a low cost, but I simply think the data at depth is lacking, even if the surface trenching results look ok.

Republic Gold is dealing with nuggetty gold, and this is why this issue is so important. The stock has not attracted any interest with rising gold prices, so I feel safe letting this one go.

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Andrew Sheldon www.sheldonthinks.com

Good gold stocks at this week

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Based on the gold chart, it appears that in the next week we are going to see the start of a rally in gold stocks. For this reason its worth reviewing what is low. The ones that catch my attention are:
1. Integra Mining (IGR.ASX) - this company plans an expanded mine output, and poses some potential for future resource expansion
2. A1 Minerals (AAM.ASX) - the company has just had an issue which has pulled them back from 44c to 25c - their issue price.
3. Adamus Resources (ADU.ASX) - this company is also just bedding down a rights issue. You have the option of buying the share or tradable rights (ADUR) up until 10th April 2010 I believe.
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Andrew Sheldon www.sheldonthinks.com

Gippsland (GIP:ASX) eventually to develop tantalum project

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Sometimes there are companies who profit from human right violations. Sometimes there are companies who would be doing far better if only human rights were observed. Gippsland Ltd (GIP.ASX) is a case in point. The company controls one of the largest undeveloped tantalum resources in the world, and has faced a substantial hurdle to develop the project. The problem is that tantalum consumers have done little to trace the supply on their tantalum. The world price of tantalum is rising, up from $US38/lb to $45/lb. Sustainable demand however for the commodity will rest upon a concerted effort to end the purchases of illegally mined tantalite (Ta2O5) in the eastern Congo. The UN has its largest humanitarian force in the nation (numbering 17,000), and their are calls for greater efforts to be placed on the Eastern border with Uganda and Rwanda, where militia groups continue to mine illegally.
One wonders if the rise in prices is due to greater success by the UN in curbing illegal mining or strong demand for tantalum in Asia and elsewhere for use in cell phones, and a litany of portable devices which use this material. There is of course a scrap trade in tantalum because most people tend to recycle their phones, etc. This is of course commonplace. This is a useful commodity, and one can expect much higher prices if global demand continues to grow, and illegal mining is curtailed. It will happen eventually, and Gippsland Ltd is well-placed to benefit.
If my recollection is correct it has a 51% stake (certainly controlling interest) in the large open cut resource in Egypt, with the government holding the balance. The project will also product feldspar and tin by-products. The project, once in production, will be the largest tantalum mine in the world, with a long life.
In addition the company has a stake in some interesting gold-copper anomalies along strike from the Koka gold-base metals project in Eritrea, so that project interest also offers long term upside. This company has a lot of shares on issue, so a consolidation might place some pressure on the stock, though this will probably not happen until the company turns around (i.e. proceeds with construction go-ahead). The feasibility study is complete, the company really needs project finance in order to proceed. The World Bank was involved at one point, but opted out. Understandable perhaps, as the market reality might not change as long as rule of law is absent in the Congo. You might ask what the United Nations are united on when they cannot bring about peace for this backward state, where simply militia folk run around looting farmers, forcing child labour and raping village women. More surprising still. Why is it so hard for them to foil the supply lines for the tantalum. I'd have thought that at military school that lesson was covered in War Strategy 101. Oh that's right. I forgot the UN is about peace. And peace means conceding to groups of unsophisticated tribal 'guerrillas'.
Anyway, given that the UN listens to my words, I'm expecting a turnaround soon. From the perspective of investing in GIP, the positives are:
1. Prospect of a takeover
2. Prospect of buying out the Egyptian government - I should look for a precedent but I'm an armchair analyst with back problems :)
3. Prospect of drilling results from the Eritrea projects
4. Prospect of financing for the Egyptian tantalum project
5. Prospect of improved sentiment as tantalum prices rise. See chart below.
On the negative side, who knows how long the UN bureaucracy takes to deal with this issue. The global economy might slacken off a bit as a result of weaker economic activity (as Fed is no longer buying back debt securities). One would however expect them to print money, but that is not the same as jobs. Will people upgrade their phones? Hmm...I doubt it. The Eritrean projects are long term, GIP is rather cheap, so I think I would be inclined to trade the stock off its current lows.

http://www.google.com/finance?chdnp=0&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chdet=1268974800000&chddm=77615&chls=IntervalBasedLine&q=ASX:GIP&ntsp=0
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Andrew Sheldon www.sheldonthinks.com

Pike River Coal (PRC) - listed ASX & NZE

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There are not many metallurgical coal producers in the world. More importantly there is not a great amount of coking or metallurgical coal. There is still less hard coking coal, as is produced from the West Coast of NZ, the Bowen Basin of Qld, and the Illawarra fields of NSW. Western Canada and the USA has some, but it suffers from a long rail freight. The implication is that Chinese and Indian steel mills will be struggling to get the stuff. It will be harder than ever to finance new mines in the current market, so this company strikes me as attractive, even if the NZD is relatively high to the USD, its still a significant discount. The Pike River mine is located on the West Coast of NZ, so it suffers from the inconvenience of panamax (70,000dwt) shiploading. This is not idea for shipments to Asia. They will therefore pay a penalty, but this will be offset by the lower NZD (compared to AUD) and premium character of the coal in terms of ash....if memory serves me correct. I used to study this stuff years ago. Better still the stock which suffered some set backs is falling back to its lows after a capital raising. This stock is listed in Australia and NZ. In NZ, the support is 73c. The company's major shareholder is NZ Oil & Gas, which has supported the issue.

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Andrew Sheldon www.sheldonthinks.com

Westgold Resources (WGR:ASX) - watch!

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Gold prices are set to reach new highs in coming weeks. In the spirit of a gold rush, I have found another nice gold explorer. I'm a little late to the party on this one, but its a developing story, so its one to watch. Westgold Resources has identified a gold province adjoining the Tennant Creek gold fields of the Northern Territory. The NT has not produced much gold, though interestingly the Tennant Creek field generated 5Moz at an average gold grade of 17g/t, compared to more typical grades of 2-4g/t. More interesting still is the fact that Westgold has successfully reinterpreted this geological terrain and found gold in an adjoining area, with seemingly the same geological characteristics. The Rover 1 discovery was the first of many targets to be assessed. See the attached gold grades.

It is early days so one does not want to get too excited since there is a lot of money to be spent before anything is mined, but this is a promising discovery. You can read the presentation yourself, so you can see the potential, though it does not offer a great upside. I am not inclined to invest at this point because the stock has a premium attached to its exploration upside. It is capitalised at $110mil, but it does have $22mil in cash. Its justified but without having resources yet to back up that valuation, one is inclined to look elsewhere. But you have to love the geology. There is another good streaming presentation on their website.
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Andrew Sheldon www.sheldonthinks.com

Mining Fundamentals eBook - 2nd edition

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Anyone interested in how we identify the best mining stocks in the world? Interested in how we find the best mining stocks during the current gold boom? Our Mining Fundamentals eBook is intended to provide you with the tools.

I have recently expanded our 1st edition (150 page) Mining Fundamentals eBook to offer even more value to investors. This $US19.95 1st edition report is still available, though you might prefer the 187-page 2nd edition which offers greater value following feedback from readers. If you buy the first edition, you can still upgrade to the 187-page (Professional Analyst's) 2nd edition by paying the difference. i.e. If you have already purchased the 1st edition, simply purchase the 1st edition again and we will forward the 2nd edition to you.
The 1st edition is still offered to investors as a teaser. It is timeless content. The difference is simply an expanded and revised package of content thanks to the feedback from readers.
I would like to thank those readers and others for their support in 2009!
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Andrew Sheldon www.sheldonthinks.com

Money for the funny

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Watch ZEITGEIST The Movie in Educational | View More Free Videos Online at Veoh.com

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Andrew Sheldon www.sheldonthinks.com

MIL Resources (MGK.ASX) - break out due?

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Over the last week MIL Resources has made its way up from 3.6c to 4.3c on small volumes. One might ask whether this stock is about to break out. Looking at the chart, the stock has been in a consolidation channel. The question is - Is this ascending wedge going to hold up as a trend line? I suspect it will break out in coming weeks)based on news either about a JV over its Amazon Bay iron ore project in PNG, or activity with respect to its gold project in PNG.
There are so many iron ore projects. The question I ask is? How many of them are so close to prospective DRI plants in Asia, how many lie on the coast? How many of them involve extraction of unconsolidated beach sands with dredges? This is a project which lends itself to incremental scaling up. It is the type of project well suited to a minor, but a major would help. You don't need a major terminal. I would suggest offshore self-loading 8,000dwt barges would be adequate, loading into 20,000dwt vessels destined for Singapore, the Philippines or Malaysia. I would be surprised if the total capital cost is more than $20-30million. Of course you can start big and bring in a major partner. In this type of market a Chinese partner might be nice.

I think this stock is way under-valued so I expect as much.
Need a stock update - see the updated chart at Google Finance!
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Andrew Sheldon www.sheldonthinks.com

A few more emerging gold producers

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A number of small emerging gold producers that I have identified and bought this week are:
1. Republic Gold (RAU): This company has a number of interesting deposits - a large iron ore resource in Bolivia, which adjoins a Jindal Group project (Indian steel company). It also has a gold resource in Bolivia which will achieve feasibility study stage next year. In Queensland it has a small resource suited to heap leaching. It has not really responded to the gold price increase, and it has $5mil in cash.
2. Adamus Resources: This company has gold interests in Africa. They are an emerging producer, they have a solid resource base, which is likely to expand.
3. NorthWest Resources (NWR): High gold prices favour those with the most advantageous position. At current share price NWR are capitalised at just $7.2mil, yet they have 370,000 oz of gold, a small treatment plant, $5.7mil in cash, and resource upside. I must confess to finding such small vein deposits messy, but the they are just too cheap.

There is a few strategically placed medium-sized emerging gold producers in Africa which are going to be taken over by larger companies, or similar sized companies seeking to increase their PER profile in international markets. I would not be surprised to see Ampello Mining (AMX.ASX), Perseus Mining (PRU.ASX) or Adamus Resources (ADU.ASX) taken over in the next 6 months. Perhaps just as likely is a three-way merger between these companies. Of course no CEO likes to lose their job, so it would depend on other opportunities they have. You didn't really expect them to act in shareholder's interests did you? :) Well least not primarily.
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Andrew Sheldon www.sheldonthinks.com

A1 Minerals set to perform

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A1 Minerals yesterday released a glowing outlook for their mining project. The company is due to commence mining this month (Dec'09). News could not be better as gold breaches the $1200/oz mark. In its latest drilling it encountered 6m of 69g/t. This looks more impressive than it is given the the bulk of the high grade occurred over 2m, meaning that its less likely to be continuous. This is near-surface enrichment of gold. The promising aspect about such gold discoveries is that they promise the mining company a 'bonanza' in terms of upfront cash flows. This is the type of situation in which miners can have exceptional years. Importantly the A1 ground has yielded some very high grades over the years, so we might expect some higher output than is indicated by grade control. There is even talk about expanding output to 100,000 oz per annum. I suggest the likelihood of this is likely to come from toll treatment of their ore. Remember - when you have the highest grade in the district - everyone wants to process your ore. You price the competitors out of the market. See the presentation at the A1 Minerals website.
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Andrew Sheldon www.sheldonthinks.com

MIL Resources (MGK.ASX)

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When looking for gold stocks I am always trying to anticipate what will be the next big story. One of my strategies is to systematically read through reports for all of the listed stocks on the ASX. This is how I started doing it when I was 14yo. Over 25 years later, I don't have to go to the stock exchange anymore. All the information is online.
When I last did my periodically research a month ago, a stock that I stumbled across was MIL Resources. I remember this stock from about 8 years ago when it had magnesium projects. Today its focus is iron ore and gold in PNG. There are several aspects I like about this company:
1. The small market capitalisation of just $10mil - this gives me a lot of upside or bang for my buck if they have somerthing
2. They have $3.7mil in cash according to the latest quarterly - so they have some spending to do before the next capital raising, so I don't need to worry for a while.
3. They are currently preparing a gold project in PNG for drilling. I am expecting some high grade drilling results which could well capture the interest of the market
4. They have the Amazon Bay iron ore project. There are numerous deposits like this around the world. One of the other such deposits is controlled by Rio Tinto off the Taranaki coast of NZ. Unfortunately for Rio, the Maori Party is not so keen on seabed mining. I don't expect this will be a problem in PNG. In fact, there are other benefits. This iron ore could be barged a relatively short distance to Singapore or Malaysia as feed for a Direct Reduction Iron (DRI) plant. In fact the resource at Amazon Bay is so large that the project could justify its own on-site DRI plant. These are small-scale modular plants. All the better that PNG has onshore gas which would provide a local energy feedstock. But it gets better. This iron ore resource lies both onshore and offshore. It is unconsolidated so its easy to dredge.
5. There is another company based in Indonesia - I forget but I think its Indo Mines - which is ccapitalised at $17mil, and it has no gold exposure. I'd have thought this company justifies a $20-30mil market capitalisation prior to drilling the gold project, just to be on par with that company. Frankly, why would a Chinese steel maker want to buy into a WA based project when they would have to pay a steep rail and port charge. WA does have the offsetting benefit of deepwater port, however this project should be able to more than match those WA projects on costs. Why so cheap? Its a strategic asset close to Asia.
6. Pat Elliot is a well-known WA mining industry executive, so the company has some legs. He is accustomed to large projects. He's prepared a few feasibility studies :) I think we can expect a new investor for this iron ore project in coming months. The Chinese government I think was put off by the likes of Rio Tinto & BHP merging recently. Expect China to spend on a multitude of resource projects, just as Japan did from the 1960s. What else can China do with all those surpluses. It makes more sense for it to buy into resource projects than hoard commodities.

I bought some MGK.ASX over the last few weeks for 3.7-4.1c. I will retain them on the expectation of a JV partner for the Amazon Bay iron ore project, plus the prospect of some positive drilling results from their nearby gold prospect. I am expecting the bullish gold market to help lift this stock significantly. The iron ore project is longer term, however the short term decisions will be important in underwriting both projects, and the gold target is attractive.
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Andrew Sheldon www.sheldonthinks.com

Red 5 gets final approval for Philippines gold project

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We have followed Red 5 Ltd for about 10 years now. The attraction of this company was for a long time the geology. The company has some very prospective geological terrain in the Philippines. The drilling has demonstrated some exceptionally wide zones of gold mineralisation with good grades, not to mention deeper ore zones with zinc and silver from memory.
My initial interest was also sparked by the possibility of a large porphyry copper/gold mine, i.e. a repetition to the nearby AngloGold project. Instead they came up with wide intersections of sub-economic gold grades. It highlighted the plausibility, but not the likelihood of a large tonnage mine which would instigate the involvement of global majors. So the focus shifted back to the Siana pit, and our interest became long term.
The problem in the Philippines is the slow pace at which their government approves projects. They move at a very slow pace. This is in response to a number of mine spills by foreign companies. Having secured final approval, its worth looking at the economic merits of the company.
According to Google Finance, the company is capitalised at $122 million, yet based on my basic calculations, I get a value of their gold mining pre-tax cashflows of $560mil. This values the company 3-5 times high. Basically its trading at a PER of 1x. This of course ignores:
1. Project financing costs - low because they have already raised $35 mil in equity
2. Higher gold price - I have ratios suggesting gold is going to $2400/oz, so giving the company a valuation of closer to $750 million. Essentially the escalation in gold prices is going to offset the discounting of those future earnings, so it becomes basically $75mil x 10 years
3. Increase in reserves - There is the prospect of mine life increasing by 30-50% I'd say, as they shift to UG mining.
4. Increased production - An increase in reserves will allow for an increase in mine life, or more likely an expanded production, as the company moves to take advantage of higher gold prices.

Of course this is just an example of the power of 'positive thinking'. Well I call it Romantic Realism - applied to the mining industry. Anyway, this is what recreates mining millionaires when there is no prospect in the current market of being a real estate millionaire. If you look at the proportion of millionaires in Australia, most do it from real estate and mining. That is why there are more millionaires in Perth per unit population compared to any other place in the world. Basically its the centre of excellence in mining and they are now exploiting wealth around the world. I think you should learn how 'money makes money', or how to make money from mining. You should also read up about a nickel stock called Poseidon to understand the impact of speculation. Se our Mining Fundamentals book.
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Andrew Sheldon www.sheldonthinks.com

Sovereign risk in miners abroad

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There is a propensity to fear investment in foreign countries, at least there once was. Britons of course have been accustomed to investing in foreign countries for centuries, given that they funded the development of Africa, Australia, NZ and an array of other colonies. Of course for most of those times they also controlled the governments. In modern times, all investors are coming to grips with the benefits of foreign investment. With respect to mining stocks the benefits are:
1. A new global order which has resulted in a decline in governments resorting to expedient, populist, fascist policies like nationalisation of mines. The consequence of this has been a diminished risk of foreign stakes in mines being nationalised. The only case I can recall in modern times is the nationalisation of oil assets in Venezuela by a populist President Chirez. Union Res had dispersions caste upon its equity in a Iranian base metals mine, and a few projects are facing insurmountable delays getting title in some of these Central Asian states. The bigger the project, the greater its strategic importance, and the greater risk of nationalisation. That said large companies have more power to bear upon these rouge governments.
2. More prospective exploration areas in foreign, third world countries because the land is basically only had slight work undertaken, so any resources are likely to be near-surface, and potentially larger, otherwise they would have been more evident.
3. The development of a mine can be faster or slower. It depends on how supportive the local govt is for the project.
4. The costs of doing exploration are usually lower because of the low cost of labour. Capital items are usually more expensive because of lack of infrastructure. But some areas already have well-developed mining scenes, with plentiful skilled labour and power nearby. It depends.

Sovereign risk thus is less likely to involve nationalisation of assets. In the case of Democratic Republic of Congo, there are guerrillas occupying the border who can exhort money for guns. In PNG, there is the prospect of local tribal landowners attacking mine camps and destroying property. In these infrequent cases, a worker might be killed by gun or spear, but they tend not to disrupt operations too much. The governments are often quick to offer security. The Bougainville mine seizure in the 1980s was a different case because it was associated with a political coup. The massive mine closed permanently.
The latest example of sovereign risk is perhaps no worse than we might expect from Western governments. The government of Ghana has opportunistically decided to raise the royalty it imposes on gold mines from 3% to 6%, at a time when gold prices are on the rise. In defense of Ghana, its revenues might have been impacted by the recession, and third world countries have a lot of difficulty collecting taxes on citizens, so they levy import duties and resource royalties. The ugly side is that investors want to retain the upside of an investment, and they don’t want to share with governments on the basis of unexpected tax imposts. It is not a serious increase, but then its a bad precedent.
Such issues are considered in our Mining Fundamentals report.
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Andrew Sheldon www.sheldonthinks.com

How to pick flying stocks

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For those interested in how to assess gold stocks in this bull market I recommend a report I wrote last year called Mining Fundamentals. It incorporates a lot of the knowledge I have accumulated over the last 25 years of researching mining stocks. I have been doing this a long time. I bought my first stock when I was 11yo (through parents), by age 15yo I was going to the Dept of Minerals and Australian Stock Exchange (when it was in Bond St) to research stocks. Imagine a young mind soaking up all that info. I was researching during 1986 when I should have been studying for my exams. Anyway, the report will be updated next year. I will increase the price of it from $20 to $295 to reflect its value since only aspiring analysts seem to be buying it.
Beats me....I think its a useful tool. You can easily find free tips, but do you know the difference between one going up 300% and 3000%. Anyway, the book can be found here.
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Andrew Sheldon www.sheldonthinks.com

Good gold stocks in Australia

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There are a number of gold stocks which I have followed for some time which have been doing rather well of late. These stocks are emerging gold producers. They include:
1. Red 5 Ltd: This stock has moved from 3c to 14c. By no means is this stock over-valued, though I would caution people about the 'Philippines risk' even if that risk is less apparent in the NE region of Mindanao. This is a historic mining area, and the company claims to have good relations with the community. Nevertheless there are risks in this country. Misinformation seems to rule.
2. A1 Minerals: This company will produce 30,000 oz per annum from Xmas 2009, with plans to use the proceeds to fund expansion to 50,000 oz per annum. They have a 1.7mil oz deposit. The plant is funded and under development. The company is capitalised at just $37mil, so still good buying even though it has moved up from a low of 7c to 33c today.
3. Integra Mining (IGR.ASX) is another emerging gold producer starting production next year. It plans to expand output to 100,000 oz per annum.
4. Navigator Resources (NAV.ASX) has lower grade material, but it is developing two projects, having acquired Bronzewinger for $34 million. It has just 4 years life remaining unless they can find more ore.
5. Marengo Mining (MGO.ASX): Marengo is a long term stock pick which has a large scale copper-gold deposit in PNG. The CEO Les Emery is a straight shooter. This size project will likely attract Chinese investment or Xstrata investor. This is definitely a good buy. The 15c mark is support, so hopefully we will find that price on a weak day.

These are the best play at the moment.
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Andrew Sheldon www.sheldonthinks.com

New blog for mining & energy news

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I have created a new blog for mining and energy stock news - http://sheldonmining.blogspot.com. This is blog is nothing more than a news feed for the stocks I like. I will be adding to it slowly over time. I will over the next few months be reviewing all of the ASX mining stocks which I am out of touch with. During these periodic reviews its common for me to find a few exceptional stocks.
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Andrew Sheldon www.sheldonthinks.com

Lynas Corporation (LYC.ASX) an interesting story

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I have been interested in Lynas for a long time now. I first discovered the company 10 years ago when it was producing gold from the Purarooda(?) gold mine in WA. Of course it was nice that they were producing gold, but the greater interest was in their rare earths project at Mt Weld. There are several compelling features to rare earths and this deposit in particular:

1. Very high grade: From memory the average grade is between 9-14%, whilst the competition is around 3-5%.
2. Supply: The supply of rare earths is dominated by China, such that they produce 80% of the global supply, as well as processing the stuff.
3. Increasing applications: Rare earths, a groups of some 30 metals - the light series and heavy series, and I am going from memory, are increasing used in some pretty high value applications.
4. Quantities required: The small quantities of the metal required in any application mean that the price of these metals could soar very high if the Chinese have the power to manipulate supply. i.e. The price of elasticity is very low. I might draw a parallel with platinum, because very little platinum is used in car catalyst converters, so prices can go very high because the car industry substitutes platinum for palladium.
5. Substitution: I am less aware of the availability of substitutes for rare earths, since there are so many of them, however I would expect substitution to be a less compelling motivation.
6. Lack of resources: You might find this difficult to imagine, but rare earths are actually quite rare. Well, more accurately, its rare to find them in commercial quantities. This is where Mt Weld is special because millions of years of insitu weathering in WA have concentrated the rare earths from this volcanic plug, making it quite the oddity.

Now there is an even more important factor than the Chinese power over the market. Its the angst of China over iron ore, that Australia and other countries seem to be 'conspiring' against the Chinese to keep iron ore prices. Of course these iron ore magnates are inclined to take over each other to control market pricing. This annoys the Chinese of course who are forced to pay high prices. This has forced the Chinese to develop their conceptual thinking skills. They have appreciated that just as Australia, Brazil, South Africa, Gabon, etc dominate iron ore, they dominate a few metals as well, particularly rare earths.

The interesting issue is whether the Australian Labor government will approve the move by the Chinese to control the company with 51%, even if Nick Curtis, the CEO has the controlling equity in the company. Nick will support the investment because he's an 'independent' director with a lot of stock in the company.

The implication is that an investment in Lynas is risky in the sense that the Australian government could reject the takeover. I would suggest however that acceptance is more likely for several reasons:
1. Australia has a great deal of control over the iron ore market
2. Australia will not want to annoy China, because there is probably a gas contract at stake
3. Australia has no control over the processing of rare earths anyway because the metal will go to China
4. The US has a strategic supply in the USA, so it will not care either
5. These metals are rare until the next discovery is made. Rare metals have no uses. When prices skyrocket, it will take them 10 years, but then they will suddenly find millions of tonnes of the stuff in outback Russia...my guess the Ural Mountains.

Anyway, my point is that when this agreement is finally reached, the price of Lynas Corp stock will have a very sure path to heaven. It might take some time, but I'd expect some movement on the expectation of some market manipulation by the Chinese. The Chinese have never been so market-savvy, though after the Rio price fiasco, its fair to say they know what they are doing now. We are currently in recession, but that company is going to soar one day. Unless...I'm wrong and the Australian government rules against it. Well that is of course are even rarer story!
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Andrew Sheldon www.sheldonthinks.com

Google trends outlook for gold

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One way of determining the attraction of an investment is by looking at an indicator you might not have considered. I note that there is a considerable increase in traffic to this website this week. This prompts the question in my mind - what is motivating the increase in interest in my site. I'm not posting so regularly lately. I suspect there has been some newspaper articles on the global appeal of gold. I did however use the Google Trends analytics tool to determine if there had been a recent increase in Google searches for 'gold stocks' and 'buying gold', and I see no significant increase. Without looking at the technical (chart) patterns, I am inclined to think the reason is a favourable article.
We must remember however that buying stocks is not a popularity contest, and the 'smart money' is invested before the herd. The question then remains - when is the right time to buy. I will reserve that opinion for another day when I am working from my other computer. If you go to this website you can actually download the underlying data as a CSV (excel) file and overlay the gold price data over it. It might be more interesting to correlate changes in these numbers vs changes in gold prices (%change).
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Andrew Sheldon www.sheldonthinks.com

Bendigo Goldfields up for sale

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Bendigo Goldfields (BDG) is in trouble after Lihir Goldfield's decided to place the mine up for sale. There are several problems for Lihir I would suggest:
1. Low grades
2. Low predictability of gold grades
3. The lack of scalability of the mine
4. Low gold prices

The first two factors are unlikely to change, however there is the prospect of higher gold prices resulting in an increase in production in future. The problem is that there is some prospect of weaker gold prices in the medium term as we witness a recovery in the USD. For this reason, this is not the time to buy this stock. For Lihir, it seems a little too late to sell. Anyway, these developments are not surprising given our view on this stock dating back to October 2008. There is of course always the prospect of trading this stock when gold prices recover. In the interim, I would stay away from most gold stocks since the USD is stronger for now.

It seems probable that no party is likely to be interested in buying Lihir's BDG stake. I can't imagine a buyer. Perhaps the stock will be offered to an institution to place over time in exchange for a high commission. Otherwise maybe they will dump the stock on the market using some slight of hand. Well of course not...that's illegal....if they know about it. Usually institutions perform this type of dirty work...for a commission. It is the role of institutions to perform such work. They charge a large commission for such practices. The last one I remember was the Qld Metals Corp fiasco, where the major investment banks were peddling this company's stock issue in exchange for a 7% commission. The higher the commission the more dodgy the issue. Mostly issues involve a 3-5% commission, so 7% must be a dog, and you wouldn't do it in a bad market. So I guess an investment broker would be looking at a large share of the stock or 10% straight commission to unload this stock. Well its not without some value given the outlook for gold, and that treatment plant will be worth something. Maybe they can use the kilometres of underground development for carbon sequestration. Just kidding. It might have a useful life yet.
PS: Qld Metals Corp went broke. No thanks to my negative report on the issue. That did not stop my employer from recommending the issue...sorry not recommending...just not disclosing my report or findings. Its hard to knock back a 7% commission.
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Andrew Sheldon www.sheldonthinks.com

Kentor Gold (KGL.ASX)

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A reader asked me my view of this stock. I must say I saw nothing but risks attached to this stock for several reasons:

1. The narrow mineralisation
2. The nuggetty gold effect is likely to disappoint

3. The reliance on Russian drilling - which has historically shown itself to be unreliable. I see that they have done 400m of drilling, but that is not going to say much until they get a bulk sample back, and even then, the mineralisation is just 0.8m in thinkness in places, which means they will have to cut back the walls for mine entries. Nope, I'm not interested in this stock. They can talk up the prospect of a pre-feasibility as mine executives are prone to do...I've sailed on that ship a few times. But I can't see this project flying unless more info proves otherwise. They also have geothermal interests in Central Asia. Hmmm....Is there any demand there?

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Andrew Sheldon www.sheldonthinks.com