budfox on precious metals

  1. 2,839 Posts.
    FYI.....If interested
    Just lifted this from Gold Digest.
    Cheers all,

    Tony Locantro

    The Australian stock market on a broader basis has performed quite well, amongst a backdrop of travel warnings, the Qantas in-flight scare and an array of profit warnings that have seen some stocks decimated and overrun by the short-term traders chasing anything with a pulse. Major shocks include further selling pressure in AMP, disappointments in Aristocrat and the handing down of a nine-month periodic sentence to Rene Rivkin along with a $30,000 fine. For overseas readers Rene can be compared to either a Martha Stewart or AJ Cohen and for Australian investors he would rank up there with Warren Buffet in terms of his public profile.

    Housing Bubble and The Economist

    After spending some time away from the press the housing bubble has reared its ugly head yet again and the basis of the article in The Economist managed to finds its way into our Weekend Australian today. I covered the housing bubble here in previous articles and there is little need to harp on about it, however only today have I convinced my sister that she is unlikely to hold onto her paper profits from a timely entry into the London unit market. Just like SARS has seen its press coverage fall dramatically just because it is not covered in the press does not mean the problem does a "Copperfield". Those that witnessed the hysteria surrounding the AIDS epidemic could now almost be asking the question, "What ever happened to it?"

    It is a case of wages rising to meet housing prices or having housing prices collapse to enable ownership. With the world teetering on the brink of another nasty recession that could yet unfold into a depression to rival that of the 1930's I doubt whether a school teacher or police officer is going to see their pay double from around $50,000 to $100,000 so they can partake in the "Great Australian Dream".

    Many attempted to pick the top and were out on their timing and I was one of these however my argument is, "Try selling when the avalanche is underway". For those in the precious metals market many experienced further pain before a number of equities actually managed to turn positive.

    Australian Gold Sector

    The sector continues to punish those companies that fail to meet the giddy expectations placed on them. Only this week have we seen Gindalbie (GBG) fall away on production issues and a Rivkin sell recommendation along with Kingsgate (KCN) who up until recently had enjoyed an excellent flow of good news. The market was clearly unimpressed with KCN's rising production costs and it would appear that the first sign of bad news finally triggered investors to lock in some profits (or losses depending on their entry).

    As I have stated previously we are not yet in the wonderful market period where every gold stock will perform well. Even the most popular ASX gold company Croesus (CRS) has struggled in the low-mid fifties after threatening to break through $1.00 in January. Stock selection remains the key, although I have noticed an increase in buying in the more speculative issues in preparation for the next stage of the PM bull market.

    Silver…. another false start

    Silver has been frustrating to say the least, and again once a break of $5.00 looked likely we find it now struggling to hold $4.50. The two major Australian silver plays Macmin (MMN) and Malachite (MAR) continue to drift lower, although both are starting to again find support with major drilling programs underway and/or about to commence for both.

    With the silver price under-performing gold of late, silver investment could now well be skewed well towards being "contrarian" which is not such a bad thing in the current climate. The second and third tier silver plays are also struggling although their gold exposure is managing to at least maintain their current share prices. The silver story has not changed despite a lower deficit, and if anything the emerging new uses and increasing investment demand should flow well into some form of recovery down the track whether it is short-lived or not.

    Exploration…the new driver

    It has been pleasing to see excellent follow up drilling results from Alkane (ALK), and Ramelius Resources (RMS) announcing an immediate follow up to encouraging sniffs around Coolgardie. With the nickel price continuing to perform well there has also been renewed strength in the sector with MPI Mines (MPM), Independence Gold (IGO) and Western Areas (WSA) all partaking in further share price rallies.

    Programs I am currently following include,

    Malachite Resources (MAR) drilling for silver at Conrad. The company is aiming to complete an 8-10 hole program with the completed assays yet to be received.
    Austminex (ATX) is continuing drilling at Grosmont, Dreadnought and The Mount (Coolgardie Region). (Gold)
    Resource/reserve definition drilling by Macmin (MMN) at Mt Gunyon. (Silver)
    Central West Gold (CWG) and Mount Conqueror (MCO) following up interesting gold hits at Boorook.
    Ongoing evaluation and drilling at Empress (Coolgardie) by MPI Mines (MPM) and Herald Resources (HER). (Gold)
    Further drilling by Independence Gold (IGO) at the Victor Long nickel mine in Kambalda.
    Exploration and studies by Universal Resources (URL) and Bolnisi Gold (BSG) at the Roseby Copper-Gold project in QLD.


    Recent Strong Performers: Alkane, Emperor, Equigold, Gympie, MPI Mines, Newcrest, Sino Gold, Sons Of Gwalia.

    Share Price Weakness: Gindalbie, Kingsgate, Croesus, Durban.

    Steady As She Goes: Bolnisi, Dalrymple, GRD, Herald, Newmont, Oxiana (new entrant to list), Placer, Sipa, Triako, Troy.

    Selection For Next Outperformer: Herald Resources (HER)


    Whilst the AUD gold price has recently improved, the Australian gold sector remains weak with some prices below the May-June peak in 2002.
    The market has been unforgiving in terms of poor production performances and exploration results below expectation.
    Many of the mid-cap producers have accelerated drilling efforts as resources/reserves decline. A further bout of consolidation is likely as a number of emerging producers further advance their respective projects.
    Sentiment remains slightly bullish, although there is some consensus that gold stocks will not be chased until the $400 has been well and truly breached.
    Market volumes in the speculative sector have increased off an abnormally low base, however volumes are still well below 1998-1999.
    Even a base metals discovery could provide the catalyst for further activity in the gold and silver juniors regardless of the commodity price.
    The previous market darlings in the gold sector have struggled whilst a new group of companies are threatening to emerge as the new "stars".
    The current volatility in the gold and silver price is not being fully reflected in the prices of a number of ASX listed companies. Whilst the junior explorers are starting to crawl away from their rolling lows, interest is negligible on an historical basis. It should be emphasised that once "gold fever" strikes the majority will chase a number of stocks vigorously and gold enthusiasts will again slowly adjust to a higher price environment that will again bring along its own frustrations.
    2 June 2003

    Couple of bits wouldn't "copy & paste", the full article can be read by going to:

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