The Rude Awakening
Scotland, Edinburgh
Thursday, June 28, 2007 ------------------------- - The big money is still on the table for mining,
- Thwarting obstacles and keeping your eye on the goal,
- From proud-as-punch to the bowl of punch and plenty more…
------------------------- Joel Bowman, reporting a stones throw from Edinburgh University… Yesterday your proud-as-punch editor sat next to the proud-as-punch father of his girlfriend to watch her accept her Masters Degree of Sociology from the University of Edinburgh. This morning his mitigated cerebral capacity reminds him of the bowl of punch consumed in the post ceremony celebrations. In between acceptance speeches, choir recitals, lengthy organ interludes and the slow-moving procession of graduates, we chatted about the long, hard road to victory and the importance of keeping one's eye on the goal. As any parent, partner or participant will testify, sticking to the books for four years is no easy task. There are hurdles and setbacks aplenty, which each individual must overcome in their own way. It is difficult to imagine a worthy achievement without having overcome worthy obstacles along the way. Indeed, it is often the conquering of these obstacles that make the achievement so sweet. As a student, graduation is only the first of many paydays. The big money, quite literally, is still on the table and it is what one does with their education in the future that will further enhance the achievement. The same can be said for almost anything worth achieving in life including, but not limited to, matters of the heart, the wallet…even geological exploration. While the myriad hurdles along the way provide temporary setbacks, it is the big payday that motivates companies and individuals to keep their eye on the goal. "You'd be correct in suspecting that the easy money in gold shares has already been made. It has." States Doug Casey of Casey Research. "But it would be financial folly of the highest order to assume that it's too late to make the big money. The big money is still on the table. "The reason has to do with something that's simple to understand but that not one investor in a thousand has heard about: the exploration cycle." Read on below for the full article… --- The Agora Financial Reserve - Only 7 Days Left --- Here's Why You'll Get Our Newest $995 Investment Research Service Completely Free… It took us nearly two years of careful preparation. But we're putting the final touches on what should turn out to be one of our best performing stock research services over the next few years. It's called the Energy & Scarcity Investor and it'll cost at least $995 per year when we launch it in the next couple of months. But since you're a valued Agora Financial member, you can receive it 100% FREE. Details Here: Agora Financial reserve - 7 Days Left! ------------------------------------------------------ What's in a Rock
By David Galland In a manufacturing business, an entrepreneur buys raw materials from suppliers and then assembles the materials into cars, shoes, candlesticks or some other final product. But in the extractive industries, such as oil or gold, the first step isn't to buy raw materials but to find them. And it's not easy, because nature has hidden them under the earth's crust, perhaps in a remote or even dangerous corner of the world. Understanding the timing of the exploration process is critical to understanding why the big gold profits are still ahead, and why it is so important to get positioned in the quality companies today, while there is still time to do so. The process, greatly abbreviated here, begins when a team of geologists come up with a geological concept. ("Geological concept," if you're not familiar with the term, is geology talk for "educated guess.") Sometimes these guessing geologists work for a big mining company, but more often than not, they toil for a fleet-footed junior Canadian exploration company. Gathering up picks and shovels, the team spends days, weeks or even months poking through the brush looking for rocks that would suggest their idea has some merit. If they find anything promising, they'll collect samples and send them to an assay lab for a mineral analysis. If the assay lab had nothing else to work on, our geologists might get a report back in days. But in fact, assay labs aren't nearly as numerous as, say, donut shops. And due to the surge in exploration in recent years (a topic I'll return to momentarily), there is a large and growing backlog at the world's few assay labs. So explorers must wait 2 to 4 months or even longer to learn whether their rocks carry traces of a valuable deposit or are just…rocks. Assuming the assay results are encouraging, the explorers move on to the next phase, trying to verify that an ore deposit is waiting beneath the surface. Of course, they can't see under the dirt and rock, so they do the next best thing, which is to drill deep holes and dig out samples. Before you can drill, however, you must get a permit to disturb the ground, a process that, depending on where your property is located, can take two months to a year - or in some ecologically sensitive areas, forever. Because our hypothetical exploration team is on the ball, we'll assume they get the permit. Which takes them to the next hurdle: while the shortage of assay labs is acute, the shortage of drills and experienced crews to run them is far, far worse. How much worse? If you want to drill a project in 2007 and don't already have a drill lined up, the odds of finding one this late in the game are somewhere between slim and none. Okay, but our team is lucky - or well connected - and so is able to lock up a drill. Now begins the long and expensive process of punching enough holes in the ground to find out what's really there and to map out the boundaries and orientation of the deposit. The drilling may proceed just a few holes at a time, so that what's learned from each hole can be used to point where the next ones should be drilled. Of course, at each step, the sample the drill pulls out of the ground must be sent to an assay lab to wait its turn for analysis… and the clock ticks on. In time, the geologists are able to assemble the assay data into a reliable geological model. Around this time, the focus shifts to verifying that the minerals they've found are present in sufficient quantities to warrant the expense of clawing them out of the ground, that expense being influenced by a multitude of factors, not the least of which is how far below surface the deposit resides and in what kinds of rock. But let's say it appears to be an economically large deposit - say, one million or more ounces of gold. Now the exploration company has to confirm the metallurgy, a branch of science of great complexity. On ascertaining that you will be able to economically (there's that word again) separate the shiny yellow stuff from the dirt and rock, you move onto the next square. Oh, No… NGOs! Throughout this process, the smarter explorers invest considerable time and energy in softening up the local population and politicians. Get it right, and you might only have to wait a year or two for the environmental and construction permits needed to build your mine. Get it wrong, and you could be looking at delays of a decade or more. Throughout modern times, getting the locals to accept a mine has been a stiff challenge, whether dealing with citizens who hate the idea of a mine in their backyard or politicians who see the project as an opportunity for nationalistic grandstanding or outright extortion. Today, however, there's a new army of nay-sayers: dozens of well-funded Non-Governmental Organizations (NGOs), whose officers earn the entirety of their paychecks by trying to stop all mining in all countries. Make no mistake, these NGOs, some of which are playpens for committed Luddites, are well financed, well organized and increasingly well acquainted with the many ways a proposed mine can be tied up legally or by stirring up the local or national population. If by this time a mining entrepreneur hasn't decided to change careers and go into something less challenging, such as trying to build pipelines in Iraq, and he's able to battle through the NGOs, he still needs to build the mine - which means securing a lot of power and water. And because mine output is not light and easy to ship, all manner of additional infrastructure is needed. One intrepid would-be Yukon miner we're acquainted with will first have to spend $2 billion to build, among other things, a road and power line more than 60 miles long. The work, scheduled to begin soon, is expected to take until 2012 to complete. This sort of build-out is difficult enough in a friendly environment, but most of the world's remaining large mineral deposits are located in places like the Congo, the high Andes or, literally, Outer Mongolia. Of course, all of this is incredibly time consuming, and none of it is cheap. While you may think I'm overtelling the story, I'm actually short-handing the description of the process. The reality is much, much more challenging. It is no wonder, therefore, that only about 1 in 3,000 geological targets ultimately make it into production. And even for the rare success, years pass between the original geological guess and the first mine shipment. This high-stakes game of exploring for gold is risky even in the best of times. But in the worst of times, gold exploration is just plain crazy. Between, 1980 and 2000, the gold mining industry endured a brutal period, during which the gold price plunged from a high of $850 an ounce to a low of about $260 an ounce. Not surprisingly, the incentive to explore for gold all but vanished during this two-decade span. Without new exploration, gold mining production declines…which sets that stage for a new bull market in gold, and a new boom in gold exploration. This new boom is just beginning. Check in tomorrow for additional details…and a few names to watch. Joel's Note: David Galland is the managing editor of Doug Casey's International Speculator, now in its 27th year of helping independent-minded investors keep their eye on the goal. There have been plenty of paydays along the way, of course, including a junior gold exploration company highlighted in the most recent edition of the International Speculator that shot from its recommended entry price of $2.74 to $3.78…a 38% gain in just 7 days. This one, Dave assures his readers, is only just gathering momentum. To find out how you can give the International Speculator a try, risk-free, click here: Doug Casey's International Speculator Risk Free Trial --------------------------------- Joel's Note: As always, please address all thoughtfully penned emails to aussiejoel@the-rude-awakening.com . A selection of these emails is published in the Monday Mailbag each, er, Monday. Your 5-Minute Forecast is en route from the desks of Addison and Ian over at H.Q. in Baltimore but, for now, that's all from team Rude. Cheers, Joel Bowman
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