The BarkerLetter

October 23. 2007

Greetings investors!

Here’s another story I’ve been following forever: The Kumptor Mine in Kyrgyzstan.

Canadian uranium producer and former gold miner Cameco Corp. (CCO.TSX) got involved in that deal in the 1990s through an extremely shady arrangement with an ‘intermediary’, an entrepreneur who was discredited by the Kyrgyzstan government immediately after getting a commission.

Since then, the Kumptor Mine (proven and probable reserves of 4.7 million ounces) project has been kicked around like a football, as various parliaments and prime ministers tried to reach some kind of consensus on how the country’s mineral assets would be managed.

I’m not sure why Cameco is still involved in Kumptor, since it stated more than 10 years ago that it wanted out of the gold business. It is involved nevertheless by way of a 53% interest in Centerra Gold (CG.TSX), which has a binding agreement with the Kyrgystani government to operate the mine.

It’s been reported that the agreement reduces Cameco’s stake in Centerra to 41 per cent, and raises the government’s holding to 29 per cent. Public shareholders would own the remaining 30 per cent. The accord has also promised a “simplified, stable and predictable tax regime.”

All of this makes me extremely nervous. However, I am attracted to Centerra as a potential crisis play (i.e. cheap shares). The stock has been extremely volatile in recent months, dipping from over $15 Cdn per share last winter to almost $2 in August. It hit a post August high of $12 earlier this month.

In other words, the stock price has swung from a more than 600% loss - and back again - over the course of less than six months. Wow! Fortunes have been made and lost and made again on this one, and recently too.

I’m watching the stock very closely. Vancouver brokerage Canaccord recently reduced its buy of CG to a hold in anticipation of the fall out from the parliamentary elections in the former Soviet satellite state. The political climate there is quite unstable.

I’m hoping the good news/bad news oscillator swings back to the downside in the coming weeks, at least long enough to force Centerra’s stock price down to under $5 Cdn per share. I’d like to buy it for that on the next dip.

But hey … be careful with this one folks!

Kb