SAN FRANCISCO – I saw several of the baseball San Francisco Giants were crying on the field when they won the World Series in Texas.
California governor candidate Jerry Brown, opposing eBay’s Meg Whitman, evoked baseball imagery in one of his final rally appearances. A ticker tape parade is planned downtown for Wednesday. And so on.
It is wonderful how an entire region, in this case Northern California, gets world serious glow from a winning sports team.
OK, so it’s not soccer or rugby or ice stick. Still, I intend to cry when gold goes above $2,000 an ounce. The Giants (the team was in New York way back then) had not won one of these World Series contests for 56 years. For gold, adjusted for inflation, they say it’s been almost 30 years since the metal was above that 2k level.
There will be no ticker tape parade when gold surpasses $2,000. That is because when gold gets there, the world will have experienced one or more of the following: horrendous price inflation or currency turbulence; Asia-West trade wars; commodity shortages; energy challenges; fiscal bust-ups. You get the freeze frame.
The payoff for investors in commodities – let’s stick to gold – will be the solace of owning a hard ball that commands purchasing power against all currencies.
For miners, the steady price of gold above $1,300 already has paid dividends this year. The big miners such as Newmont Mining (NYSE: NEM, Stock Forum), Ashanti (NYSE: AU, Stock Forum) and Barrick (NYSE: ABX, Stock Forum) have enjoyed hundreds of millions of dollars of glow & flow into their corporate treasuries.
As for levered gambits, naturally, the spotlight is on the so-called junior prospectors, or the mid-tier producers. The best of them trade in Canada and in Australia as equities. Finding the ones that have yet to “pop” higher on the equities scale gets investors into the World Series.
A couple of ideas just across our Ticker Trax desk:
Eurasian Minerals (TSX: V.EMX, Stock Forum) has what appears to be a global footprint. In that respect, it’s world serious.
Eurasian is operating now in Australia, Haiti, Sweden and Turkey. To be sure, the shares have doubled in a year to an almost $100 million market capitalization. I think Eurasian is also operating in the Kyrgyz Republic.
Most folks know Eurasian because of its ties to Haiti. I tend to believe that humanitarian attention to that small island nation, albeit for tragic reasons, ultimately will benefit the miners on site there. That includes Newmont Mining and several much smaller companies.
Newmont, Eurasian and heavyweights Bill Clinton, financier Frank Giustra and Mexico’s Carlos Slim have raised tens of millions of dollars to assist Haiti’s post-earthquake efforts. My sense is that when miners, millionaires and former government leaders get involved in stumping for a nation, they often learn much about its potential. In this case, it’s the minerals.
In addition, asset managers these days are seeking companies that are poised to become producers in a world of $1,000-plus gold. (Hey, silver, moly, platinum, copper and nickel, even geothermal these accelerated commodity days, ain’t bad, either, at least in my book.) Running a small gold and/or poly-metallic prospector with offices in four or five parts of the world is either insane or brilliant. I happen to know CEO David Cole and I am pretty sure he is not certifiable. (Smile.) Eurasian’s Scott Close just sent me a photo of some Eurasian gold nuggets from an Australia project. The photo is here.
Inter-Citic Minerals (TSX: T.ICI, Stock Forum): This is the China prospector and mine developer that we used to track in Ticker Trax. We no longer do but subscribers made money after purchasing ICI at something like 80 cents Canadian. Analyst Catherine Gignac of NCP Northland Capital Partners just noted that Inter-Citic appears poised for a “large resource increase at its Dachang Gold Project in way-eastern China.
I think big Jim Moore’s company is doing a 25,000-meter exploration program there. He’s a former college football player. So big Jim knows how to win.
Analysts these days generally use a $1,000 average gold price (and a 10 percent discount rate) to calculate a project’s net present value. For Inter-Citic’s Danchang, based on a preliminary economic appraisal, Ms. Gignac arrives at a $287 million value. That’s $2.35 a share for the $1.75 stock. Most folks respect her views.
I own neither of these companies. I’d like to say they can win their own World Series. Or at least become world serious.
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THOM CALANDRA of Ticker Trax helps his audience find value in a quagmire of investment choices. Thom was founding editor of MarketWatch, CBS MarketWatch and FT MarketWatch. He was the voice of Thom Calandra's StockWatch and The Calandra Report. Thom has been covering life-sciences and natural resources since 1988.
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