The Rude Awakening
Scotland, Edinburgh
Friday, June 29, 2007 ------------------------- - Exploration's dark ages recedes - how to invest in
the new bull, - The Agora Financial Reserve - 6 More Days Only!
- Today's word of the day: Porphyry.
------------------------- Joel Bowman, from Edinburgh, Scotland… Yesterday we brought you a look at some of the obstacles geologists and exploration companies must overcome in order to locate and extract precious payday metals from the earth. [If you missed Part 1, you can find it here: What's in a Rock, Part I - By David Galland Today, David Galland of Casey Research takes a look at the kind of rewards diligent, well-managed companies can expect in the new bull market. Read on and enjoy… --- Agora Financial Reserve - 6 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 - 6 Days Left ---------------------------------------------- What's in a Rock, Part II
By David Galland
Between the years 1980 and 2000, gold - and pretty much all other commodities - suffered a grim bear market. Gold dropped from a high of $850 in January 1980 all the way down to $252 in July of 1999, after which it traded pretty much sideways until the current bull market started to emerge in early 2002. Not surprisingly, as this deep chill enveloped the gold market for nearly 20 years, the mining industry went into hibernation. At $850 per ounce, crawling over the figurative fields of glass shards to bring a gold mine into production was worth the risk and hassle. Decidedly not the case at $252 per ounce. So drill rigs were left to rust, universities stopped offering programs in economic geology, and former mining promoters reinvented themselves as dot-com impresarios. Importantly, and understandably, funding for the junior Canadian exploration companies that are now leading the charge into the remote corners of the world to search for new deposits was virtually non-existent. Throughout the 1990s, total worldwide gold exploration expenditures rarely topped $2 billion per year - a pittance compared to the sums devoted to exploring for other commodities. It doesn't take going through the whole Aristotelian logic thing to figure out that a drastic reduction in exploration spending, meaning fewer geologists out in the field looking for new deposits, will, in time, result in fewer and fewer new deposits being found. Exploration's recent dark age is over now, but it had a profound effect that hasn't yet played out. And it's an effect that provides compelling investment opportunities. Now here's where it gets interesting. There is a very long lag-time between exploration expenditures and new production coming on line. The lag is unsurprising if you recall my explanation of the laborious and slow-moving exploration cycle. The fact of the matter is that unless you have the luxury of exploring an area contiguous with an existing mine - low-hanging fruit for which the exploration/production cycle could be as quick as 2 to 4 years - the time required to move a good geological idea into production is typically 6 to 10 years. Recent production increases have come from the increased exploration back in the mid-1990s. Importantly, we haven't yet picked the fruit from the soaring exploration expenditures that kicked off in earnest only in 2003. Today, expenditures have reached historic levels. As in "never before" has so much money been spent poking at rocks. It is inevitable, therefore, that as sure as night follows day, so, too, will a series of major discoveries. And most of those discoveries will be made by micro-cap junior Canadian exploration companies - many of which still trade below $1.00 and boast market capitalizations under $50,000,000. By positioning yourself in the higher-quality and better-managed of these stocks today, you put yourself on the path of extreme profits. How extreme? When I tell you, you are going to like the path. I mentioned the mid-1990s' discovery market, a raging albeit short-lived bull market in Canadian exploration stocks that literally turned dimes into dollars and even tens of dollars. Importantly, these returns were made against a backdrop of generally flat to falling gold prices. The bull market was triggered by a series of mineral discoveries, including those made by Diamet (diamonds), Diamond Fields (nickel) and Arequipa (gold)… with the final "discovery" being that of Bre-X (fools gold), later unmasked as a really big fraud, which deflated investor enthusiasm and killed off the bull market in gold shares almost overnight. Even so, during this period, in which investor interest rose to the level of a minor mania, companies with little more than drill holes were selling for $20 a share. Which brings us to the present. Unlike the action in the mid-1990s, the next round of attention-grabbing discoveries will occur in the folds of a secular gold bull market, one that is soundly based on concerns over the impact of a faltering U.S. dollar on the global monetary system. Which is to say, it could have several years left to run (currency trends tend to last a decade or more, once in motion). When will the first of the inevitable big discoveries be made - the one that makes the market sit up and take notice? It literally could be any day now. In fact, in the pages of our International Speculator, we're already following several companies working deposits with the potential to be giants, including one that just hit into what looks to be a rare gold porphyry (most porphyries are copper dominant). If the next round of drilling confirms this, we could be looking at an elephant deposit of 20 million ounces - or more. The market cap of that company? Currently around $100 million. By the time this is over, it could be 10 times that amount. The gold market and, for leverage, the high-quality gold exploration shares, are just getting warmed up for the really big show just ahead. As my favorite partner and long-term friend Doug Casey is fond of saying, the trick to making the big money from investing is to be timid when everyone is bold… and bold when everyone is timid. With a new round of major discoveries just over the horizon, this is definitely the time to be bold. 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 with unbiased recommendations on investment with the potential to double or better within a 12-month horizon. If you're bold enough for a risk free trial subscription to their International Speculator service, follow this link: Doug Casey's International Speculator -------------------------------------- Rude Endnote: Any and all Rude comments can be flung in the direction of aussiejoel@the-rude-awakening.com Look out for your 5, arriving soon-ish. Cheers, Joel Bowman
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