RE: RE: RE: any thoughts on this 5 min pt of viewHave read his stuff....used to be just a " big picture " trend guy based on demographics and spending patterns now he's " chartman " on everything? Has had some good calls and, yea...if the dollar bounces - oil and esp the PM should correct. Caveat to that is the FED should be raising rates BIG TIME - they aren't. A jump in rates, at least initially, would strengthen the $$ and you would suppose the knee jerk inverse trade would ensue.
Hey....a look back. Found this, always interesting to read. Morgan from 2006. Small blurb on Genco which i knew Morgan liked at one time. And GPR...noted as a buy - price $2.25 Cad - 2006, so took awhile...eh?
Morgan Report - JUNE 2006
Quote:“The hand that rules thepress, the radio, the screen and the farspread magazine, rules thecountry” Learned Hand memorial address for Justice Brandeis
This month’s quote is interesting, becausethe precious metals news is now starting to hit the mainstream press,and we watched a few analysts on some of the major business channelsspeak about gold and silver—some in fact were quite positive. Does thisportend the bull run will be over soon? We doubt it, but we still thinkwe are due for some further consolidation. Our work was picked up byBarrons, and we have been in contact with Dow Jones a few times in thepast month.
The silver ETF hasgathered nearly 70 million ounces of physical silver so far, accordingto the iShares Web site, and the Comex inventory has decreased byapproximately 12 million ounces of silver over the past few weeks. Weare watching closely and have our radar on full alert, but so far, themarket seems to be trading in a fairly orderly fashion. The swings upand down are big as we have warned for quite some time.
We want to review severalof the mining companies, both large and small, but before we talk miningshares, we wish to do a quick analysis of where the precious metalsmarkets are at present.
First, all readers knowthat the volatility has increased dramatically the past few months. Wewere cautious that a sharp pullback could take place, and silver didmove from around the $15 high to under $12. Gold also moved down sharplyafter making it to over $700.
The Commitment ofTraders (“COT”) report is at a level currently where the silverprice is usually near a bottom. With the huge amount of trading takingplace with the silver ETF, the COT report may not be as valuable to ouranalysis as it has been in the past.
We sent out an alert toour e-mail subscribers on the 19th of May and gave a buysignal, not knowing if this would be a short-term trading bounce or amore significant move to the upside. At this time, all indications arethat we had a tradeable bounce here and we sent out another alert on May31st stating to either sell this short term trade or sell atleast part of your “trading” position.
Several asked which stocksto use if you want to trade a portion of your portfolio. Simply look totrade the stocks in the Asset Allocation section. These are the easiestand most liquid to trade, due to institutional following and ability toenter and exit quickly. We do not advocate trading any of the juniors.
Our analysis at this pointis a bit cloudy, because the metals are reacting based on politicalpressures more than on currency movements. However, we are comfortablestating that even if we miss a move on the trading positions your coreholdings of 75% will keep the majority of your portfolio working foryou. Our best “guess” at this point is the metals will continue somewide swings up and down and only the most nimble of traders will be ableto take advantage of this voliality. During the next three months weexpect to see more consolidation in both the metals and the miningequities.
The pullback we expectwill be one that should last several months, be very volatile, and haveenough days where the metals move up to keep the majority of investorsinvolved. However, from our point of view, the overall market will grindlower, and we expect to see a good entry point near the end of August orin September.
Speaking of politics, a wave of socialism hasthreatened Bolivia, which has already nationalized its natural gasindustry. Evo Morales, the country’s new president, says he won’t paythree European firms after taking over their natural gas operations.
As stated in one of our Internet radiointerviews, we do think Apogee Minerals is the most connected,politically, of all the companies we follow that do business in Bolivia.The Bolivian government has assured Apogee and others that it wouldn’tdream of nationalizing their assets. It is a very difficult call here asto what an investor should do. At this point, first, we would not putany money into Bolivia unless your risk tolerance is very high. As faras Apogee is concerned, we would rate it a hold. This company has anexcellent silver project, and the key individuals in the Boliviangovernment know that the best way to bring money and jobs to the area isto let the mining community move forward on their respective projects,but we cannot be certain. For those that are very aggressive you couldpurchase here but please watch it closely.
All of this uncertainty is good news for thesilver price. If Bolivian silver production slumps, the global silversupply/demand gap is going to get worse.
Our Big-Picture Perspective:
Beginning last fall, gold and silver pricesmounted an explosive up move, which caught a number of technicalanalysts and many investors by surprise. The underlying stocksrepresenting our core holdings made strong gains as well, and now thatprices have been backing and filling across a wide range, along withdeep corrective activity within the major uptrend, we thought it was agood time to briefly revisit each of these companies.
Before doing so however, it is helpful tonote some of the important things an investor needs to consider beforehe or she takes a position in a particular company. Then, as long asnothing fundamental has changed, it may be appropriate to keep thatstock or even purchase more shares during periods of temporary weaknesssuch as we’ve seen lately.
First, management and geological expertiseare critical keys to a mining company’s longer-term success. Second isthe quality of a company’s business model, which is often a strongpredictor of how successful it will become. Third, it helps that theoperation either has an identifiable resource base or else a line onsome highly prospective properties.
If these considerations are present in agiven company, then further research may lead to taking a position. Italmost seems that money and “ounces in the ground” migrate toward thosefew people in the sector who have demonstrated what it takes to find anddevelop or joint venture a good property. When these factors all lineup, the odds really begin to swing in our favor!
We see part of our job at The MorganReport as providing relevant information and thoughtful analysis, sothat the individual investor can do further diligence on his or her own,arriving at decisions that will hopefully improve investment returns. Noone in this business, including us, has a lock on the truth, but we willcontinue to do our very best to help you move in the right direction. Aspart of this effort, in this month’s report we have provided a site linkto each of the companies we will be discussing. Then, if you choose,conduct further research on your own.
Mining is an inherently risky business, mademore so by unpredictable operating cost factors, production delays,legal considerations, and more recently, country risk. This last factorhas become pronounced lately, in regard to one of our long-term picks,Pan American Silver, and one we have never favored, Apex Silver.
The Morgan Report’sCore Silver Holdings:
Pan American(PAAS)https://www.panamericansilver.com/index.asp has top-flight leadershipand a variety of mining operations outside of Bolivia, but the uncertainpolitical climate there and in Peru may prove to be a drag on shareprices over the near to intermediate term, notwithstanding the verystrong profit picture PAAS has been mounting in recent quarters. Westill like Pan American and believe they will weather the storm. Recallhow Ross Beatty wrote off the entire cost of the Dukat Mine in Russiawhen things looked bleak there, and took the company on to much greaterthings. (Pan American eventually recouped most of their investment inthat project.)
The company has shown real flair in buildingboth its resource base and the bottom line. It now markets some of itssilver production to investors in the value-added form of what havebecome known as “Pan American Hammers”—5/10/100 ounce silver ingotsstamped on the sides with the company’s distinctive logo.
Apex Silver (SIL)https://www.apexsilver.com/home.html however is another matter, andinvestors may want to consider if they desire to continue holding acompany which, after sinking an enormous amount of borrowed funding intoconstructing its San Cristobal Mine—much of it contingent upon hedgedfuture production set up at considerably lower silver and zincprices—now has to deal with the questionable policies that Bolivia’sMorales seems intent upon carrying out. San Cristobal hosts what may beone of the world’s largest silver-zinc-lead deposits.
Apex has a certain amount of appeal to it,and perhaps things will blow over in Bolivia. This is a case whereinvestors really need to define their core considerations when decidingwhether to hold onto or fold a position. The future is unpredictable,but as investors we should look at the evidence, guess where it mightlead, and then make our own personal decisions. We never put a buy onthis company; our concerns were first it was primarily a zinc companybut “touted” as a silver company. Not bad, because zinc has been on firelately. Our other concern was hedging due to the amount of debtfinancing required.
Silver Wheaton (SLW)https://www.silverwheaton.com/has evolved into quite a storyduring its short life. Originally designed as a spin-off from Goldcorp,going by the interesting name of Chap Mercantile, it is essentially asilver royalty company that buys all of its silver under long-termcontract from several mining companies. Early investors who followedthis company in the news were able to buy it prior to a 5:1 reversesplit. It then migrated from the Pink Sheets to the AMEX and now tradeson the NYSE!
There has been talk that Silver Wheaton’sprice could be affected by the debut of Barclay’s new silver ETF, butwith a business model second to none, we are still very positive towardthis company. They’ve got a well-heeled parent Goldcorp (one of our topgold holdings; see below), 100% of their revenue is derived from silver,and there’s money in the bank for future acquisitions. Plus their NYSElisting assures high investor visibility and increased institutionalinterest going forward. This stock can tend to get a bit ahead of itselfat times and it is best purchased on weakness.
Silver Standard (SSRI)https://www.silverstandard.com/s/Home.asp.A few years ago,Bob Quartermain had a vision about growing his operation into a companywith at least one billion ounces of silver in the ground, andthen in a few short years proceeded to do just that. Silver Standard ismoving toward becoming a producer, but currently is essentially arepository for “ounces in the ground”—mostly obtained at very goodprices during the quiet times early in this decade. Theiroutside-the-box thinking caused them to buy two million ounces of silveron the open market a few years ago, at prices that now look quiteattractive. Warren Buffet may have lost his physical silver, but BobQuartermain still has his!
Silver Standard’s deep roots go back to 1947,but this is in every sense a forward-looking company. It shares acertain complementary vision with Pan American Silver, with some of itsmanagement actually having served in both camps. We believe that thecompany will continue its strong growth trajectory over the intermediateto long term, and are quite comfortable keeping it as a core position inour Model Portfolio. We strongly recommend you consider doing the same.
Newmont(NEM)https://www.newmont.com/. With operations on five continents, Newmontbills itself as the world’s largest gold producer. The company trades onmost of the world’s major exchanges and has deep institutional andindividual investor participation. It also has Pierre Lassonde, one ofthe most astute CEOs around. Lassonde identified the current gold bullwhen it was just a newborn calf, and he continues to command attentionfrom the markets when he speaks. Usually, we would be somewhat leery ofpurchasing such a large mining company, given that this can be adetriment (in that it may be hard to turn such an aircraft carrier),indeed, Newmont faces the same problem that other majors do in itscompelling need to replace the ounces they mine. But with Lassonde,arguably one of the sector’s keenest businessmen, we’ll happily go alongwith the host of other investors who feel they MUST own this company.
Don’t expect a 10-bagger from Newmont, butyou are also unlikely to wake up one morning and find your shares havedropped 50%, as might be the case with a junior or an explorer. If weare right about this bull market being a long and strong one, thenNewmont is likely to keep piling on the earnings, and share price willreflect this positively for some time to come.
Goldcorp.(GG)https://www.goldcorp.com/. This company’s flagship operations arefound in Canada’s Red Lake District, offering it some of the mostcost-effective gold mining anywhere. Ian Telfer, and before him, RobMcEwen, have grown this once-small company to a $12 billion powerhouse.It is on the radar screen of big investors and institutionals alike. Notto mention country risk that isn’t even on the scale. And although youcan expect the volatility that’s inherent in the metals sector ingeneral to affect Goldcorp as well, we like this company as much at $30as we did at $10.
A few weeks ago, Goldcorp released its mostrecent quarterly earnings report, which among other things showed,“. . . cash costs of minus $88 per ounce (net of by-productcopper and silver credits), compared with $94 per ounce in 2005.”With stats like this, you gotta lovethese guys. And we do. We believe Goldcorp is a premier holding in thethinking man’s precious metals’ portfolio. It is large enough to competewith the majors, small enough to be nimble on its feet regardingacquisitions, and forward thinking enough to stay on top of the preciousmetals wave for a long time to come, in our opinion.
Glamis(GLG)https://www.glamis.com/. Glamis, a successful gold company in its ownright, made headlines not long ago when it purchased Western Silver,acquiring the massive Peñasquito Silver Project in Mexico. When the dealclosed last month, WTZ shareholders got .688 shares of Glamis plus ashare of the old/new Western Copper, Western Silver’s original namesake.The new Western Copperhttps://westerncoppercorp.com/ has been spun off as a separatecompany and is looking to develop its core copper site, the CarmacksProject located in Canada’s Yukon Territory.
Glamis has properties in Nevada, Mexico, andCentral America. It is a well-run, unhedged mining company. It now hasnot just gold, but silver and zinc too! We still very much like Glamisand intend to keep it as a core holding.
Royal Gold(RGLD)https://www.royalgold.com/profile.asp. Royal Gold is a gold royaltycompany, meaning that, rather than digging up the gold itself, it buysunder contract from other mining concerns. These agreements have avariety of clauses with such things as built-in inflation/priceescalators, specified delivery quotas, and monetary penalties for breachof contract. However, the key to understanding about a royalty companyis that if its business model is properly structured, a major portion ofthe risk of doing business will have been transferred from itself to theminer(s) that supply it. Thus, escalating fuel costs, a mining tunnelcollapse, or a host of other potential problems common to those doingbusiness in the always-unpredictable mining sector have been effectivelyremoved from the royalty company’s shoulders.
Royal Gold has agreements with mining concerns in Nevada, Montana,Argentina, Mexico, and West Africa. It also has an exploration andearnings contract with an operation in Finland. Royal has been thevictim of more than one vicious attack in the press, with its sharessuffering (temporarily) accordingly. But it always seems to bounce back,giving proof of its ability to remain a player in this long-term bullmarket.
The Morgan Report’sSpeculations for 2006
GoldenGoliath has been busy drilling andhas 17 holes that have been drilled but not assayed at this time. Someof the earlier drills have been very good and the stock respondedfavorably. The latest set of drills was fair and the stock has sold offhere. Knowing the area, the fact that Marc Legault was added tothe board recently, and his credentials with Agnico-Eagle prove to usthat he takes this company seriously and so should we. We are lookingfor good to very good assay results on the next set of drill results. Westill think this company may prove to be an excellent speculation. BUY.
Minco Mininghas been disappointing and triggered our automatic 15% stop loss sellsignal. The company has a strong relationship with Silver Standard, oneof our favorites and good management, but the volume and investorinterest in this company is poor. SELL.
Pitchstone is our speculation and only pick so far inthe uranium sector. The management is top notch and the company tradesrather well. At this time, only the very savviest of investors are awareof this company. We still like the long-term prospects and consider thisto still be a BUY.
Great Pantherwas recommended on an alert and is one silver company that in our viewis still undervalued here. The company has met their designated timelines, and, with our feedback from the mine tour, the mining people onthe project are top notch. We have little doubt that this company willdeliver as advertised and consider it to be a BUY. Internet readersplease see complete report in the subscriber’s section.
OurAlert stated the following: “We still have the belief that the preciousmetals markets are due for some consolidation but are cautious with thatstatement. The market has humbled us many times before. If we arecorrect, you might ask why not wait to purchase this company? This is ofcourse the challenge. The company is undervalued in our opinion and weare willing to take the risk here even though it may fall back. We willplace this company in the featured company section at today’s close of$2.25 Canadian. As a reminder we will follow the rule of using a 15%trailing stop on all of our speculative stocks.”
Wehate to have to sell this company at this time because we really havenot given it a chance. We also do not like bending the rules but aregoing to make an exception on Great Panther for the following reasons.First, we did give an honorable mention to this company when it was atforty-five cents, so some subscribers may have purchased well below the“Alert” price. Secondly, we did state using a limit order was best andeven we thought that the timing might not be the best due to anotherrecommendation coming out at the same time.
Ultimately, the decision is yours and if you purchased right at $2.25and followed with a fifteen percent stop loss you would be out of thiscompany right now. However for those that are holding or not yetpurchased, or even sold and wish to repurchase we want you to read thefull report and make your decision. We think this is one of the fewvalue situations in the silver mining area at present and therefore willrate this company a BUY!
Past Speculations Reviewed
MacMillan Goldcame to Spokane recently and gave this writer an update on this company.Certainly long-term readers know our thoughts on the people—that theyare among the best. The company has a whole portfolio of excellentprospects and a good amount of cash to work with. Sprott has invested abit into the company and having the near proximity to Western Silvergave us high expectations. The principals told us they have a veryfocused drill plan in place and will be executing the plan from thispoint forward. The drawbacks are that no one but readers here seems toeven know of this company, and the liquidity is very poor at times,meaning the share volume can be very low, even in a market that isgathering so much momentum.
Aurelian Resources,one of the companies that we do not follow closely although it is headedby one of our favorite geologists, Dr. Keith Barron, had some good newsrecently. We mention this company, because, like MacMillan, the companyhad a stock price that did nothing for a very long time, and then withone very impressive drill result, the stock price went to the moon.
The market has not given this MacMillan anyvalue for all of the hard work and very impressive exploration projectsin the portfolio. Unfortunately, in this business some companies ofmerit can be overlooked, and some with very little to offer but heavilypromoted can do quite well. Right now with the mining sector being so“hot,” many more junior companies are coming onstream almost weekly.With so many to choose from, it is difficult for investors to decidewhere to place their speculative money. –HOLD/BUY only if you are verypatient.
Callinan Mining,a base metals exploration company in Canada with an impressive trackrecord, was one company we took an interest in a long time ago and westill have readers that wanted an update. Callinan got our attentionagain when a grab sample from their Coles Creek Property returned 1,181g/t (35.94 oz/t) of silver. The same surface mineralization containscopper values up to .305% and molybdenum values as high as .4% alongwith lead, zinc, and gold.
Callinan will begin a drill program on Coles Creek this month. If theycan get these kinds of grades in a drill hole, there should be asignificant reflection in the market. Callinan owns the property 100%,and are well financed to compete the work.
Thecompany is also exploring for nickel in the Fox River Basin of Manitoba.The price of nickel has gone from $7.50 to over $10 since mid April,because of a growing demand for the industrial metal and a marked supplyshortage.
Sulphide nickel deposits are the easiest to mine and have the highestrecovery rate. Callinan has just located a geophysical conductor in FoxRiver, Manitoba, that bears a striking similarity to the Voisey’s BayNickel Deposit in Labrador.
Fox River is only300 km from Inco’s smelter in Thompson, making it an ideal place for anickel sulphide find. The company has staked 167,000 Ha. of land in FoxRiver and has cut grids over a dozen or so anomalies. Finally, it mustbe mentioned that Mike Muzylowski is one of the best in the business andthose familiar with Tan Range (Jim Sinclair’s company) might like toknow that Mr. Muzylowski was once the CEO of that company. We wouldstill rate this company a BUY if you understand that base metalprojects normally do not receive the rich valuations that the preciousmetals companies usually receive.
Kimber Resourceshas moved to an Amex listing, as many of our “speculations” have done inthe past. This is an indication that this and some of our other choiceshave been serious companies. At this point we think most of the rewardis built into the stock price and further appreciation although likelywill not that significant.We basically see that the company has become what we always believed itwould be, therefore we are looking elsewhere at this time. We did findone of Jim Puplava’s “Next Kimbers,” so please read every word of thisreport! We suggest selling and moving into another speculativeopportunity. If you wish to hold you could be looking for furtherappreciation, but we think most of the value has been built into thestock price at this time.
Mines Management has been one thatwe had a strong and favorable opinion on early and have watched developa strong following and move to an Amex listing. This is one of the mostleveraged companies to the price of silver and is still undervaluedrelative to its peers; however, we think the market discounts thisbecause it is an “all or nothing” prospect. The amount of copper andsilver in this project is very substantial and the company would be oneof the top five producers at the company stated production rate. Becausethere is a possibility that the process of bringing this project throughto production might fail, we have to give mixed signals on this companyat this time.
Thecompany recently announced it acquired two U.S. corporations fromNoranda, Noranda Minerals and Normin Resources. This is significant newsbecause with these acquisitions the company receives the Hard RockOperating Permit and the water discharge permit for their project.Further this will enable Mines Management to reopen the Libby adit andto conduct underground activities necessary for further exploration andevaluation of the deposit.
Forthose subscribers who have purchased this company very early and havesubstantial gains, we suggest you sell enough to regain your originaloutlay and hold the rest. This will lower your risk to a very tolerablelevel. For those who have purchased near our buy limit, we suggest youhold but continue to monitor the company progress carefully; anynegative news from this point forward could damage the stock price. Westill know and like the management a great deal and do think that thisproject will be completed, but it will be quite some time from now. HOLD/BUY.
Scorpio Mining.This company has definitely come through with the amount of oreoriginally forecast to us so long ago. The grade is not what wasoriginally anticipated but is economic. Those that have stuck with thiscompany now must realize that the shares outstanding are over 80,000 andover 100,000 on a fully diluted basis. When we first chose to speculatewith this company, the outstanding shares were just over 30,000. Thecompany should be profitable but for some reason has never gathered anytype of retail support.
The stock is still undervalued here and thecompany was able to raise a significant amount of money to further movetoward production. On the second main financing the company told us thatwas all the money they would ever need—that the cash flow from the minewould take care of any further expansion plans. This is not to beratethe company, only to point out that we think the stock is worth between$2.00 to $3.00, but in our view the risk-to-reward ratio is poor. Atsome point, this company may become a darling to investors. We are stillon good terms with the management but plan to sell our remaining sharesany time this company gets toward the US$2.00 level. There simply aretoo many other opportunities with better risk-to-reward profiles in ourview.
Finally, RBC put out a bank analysts report on Scorpio and gave a targetprice of $2.50. We know this analyst and find him to be one of the best.Although this company has the goods, the management still has not hireda mining engineer or finished the mill. We are putting a SELL onthis company and hopefully you can sell into strength. We will not becovering this company any further.
Silvercorp Metals reported the completion of an update of themineral resources at the Ying Mine. The National Instrument 43-101Technical Update Report dated May 26, 2006, almost doubles the Measured+ Indicated mineral resources and more than doubles the Inferred mineralresources previously reported. This company is one of the best andrichest mines we know of currently, and if investing in China does notbother you then we still rate this company a BUY.
Genco announced results forfinancial year ended December 31, 2005. Genco had another verysuccessful year reporting a profit from its expanding silver miningoperations of $2,582,409 and net income of $719,078. The company remainsone of the few junior silver producers that deliver positive net incomefor their shareholders. Of all the junior producers in Mexico, we thinkthis is still one of the best and not given full value for themanagement and dedication to shareholders. There were some accountingproblems that were corrected, and we expect to see many more “accountingcorrections” for other mining companies. We addressed this in a previousreport, that the SEC is looking closely at how mining companies expensetheir exploration activities. It has nothing to do with factual errors,only accounting methods. We consider this company to still be a BUY.
Coeur and Hecla are both consideredto be top companies because of the fact they both trade on the NYSE. Weconsider both of these companies to have below average growth potentialand each has a set of “problems” due to projects in areas of LatinAmerica, as discussed earlier in this month’s report. However, both ofthese stocks are very liquid, trading millions of shares each day, andare considered to be great trading stocks by the institutions. We do notconsider these to be buy and hold types of companies at this time, butsure like using them, as the institutions do, as trading stocks.
AssetAllocation
Top Tier:This section is for serious money where an investor can place up to 10percent of their Metal Mining money in each company. Please spread outin this sector; more portfolios should now favor gold over silver; westill expect the gold/silver ratio to drop back to 64 to 1 or so.
Top FiveGold Companies: Goldcorp (GG), Glamis Gold (GLG), Agnico Eagle (AEM);Royal Gold (RGLD), and Newmont (NEM). You could be cautious buyers here.However, currently in may be best to build cash and be patient.
Top ThreeSilver Companies: Silver Wheaton (SLW), Pan American Silver (PAAS),and Silver Standard (SSRI). These have pulled back into a safe buyingrange but are afraid they may drift lower by the end of the summer.
Speculations: In this section, only place money you can afford tolose. We will use a trailing stop of 15% from the time we featurea speculation in The Morgan Report. If a featured company fallsto a level of 15 below the date the company was featured, we will issuea sell.
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Company
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Symbol CAD (US)
|
Initial Date
|
Initial Price
|
Profit (loss)
|
Comments
|
|
Golden Goliath
|
GNG (GGTHF)
|
12/30/05
|
.20 CAD
|
+100%
|
|
|
Minco Mining
|
MMM
|
2/3/06
|
$2.23 CAD
|
-15%
|
Sell
|
|
Pitchstone
|
PXP (PEXPF)
|
3/2/06
|
$1.28 CAD
|
+34%
|
|
|
Great Panther
|
GPR (GRRLF)
|
5/4/06
|
$2.25
|
TBD
|
|
Speculation Alternative: EndeavourMining Capital, Telephone: 604-685-4554.
Toronto: EDV; OTCBBB: EDVMF; Web:www.endeavourminingcapital.com.
Thiscompany provides finance to mining companies to fund their projectdevelopment, strategic initiatives, and growth. Endeavour offersinvestors a way to have a basket of juniors with professionalmanagement. The fund sells for less than the Net Asset Value currently.