The BarkerLetter

October 3, 2007

Greetings investors!

Last spring I wrote up Ivanhoe Mines Ltd. (IVN.TSX) when it traded between $11 and $12 per share.  The stock price got up to $18 or by midsummer and fell back to its current range of $13.

The stock climbed back after the August sell off and I think it will retest that $18 high in the medium term, with some fits and starts along the way.  In recommending Ivanhoe I was basically buying management. I believe CEO Robert Friedland has both the means and the drive to make the company one of the world’s largest mining companies. It may not happen overnight, but I’m confident it will happen.

One step towards that goal was his deal that roped British mining giant Rio Tinto into a long term joint venture on Ivanhoe’s Oyu Tolgoi copper-gold project in Mongolia. Rio Tinto coughed up the second tranche for that project this week, which totalled about $350 million Cdn.  It can now increase its ownership of Ivanhoe to 46.65% from a previous agreed 40% agreed previously (Rio Tinto is also shelling out $38.1 billion US to acquire Alcan Ltd of Montreal).

Rio Tinto paid US$303 million last year for an initial stake of 9.95%, with the balance to be paid upon the conclusion of a long-term investment agreement with the Mongolian government. The last I heard that agreement was still awaiting parliament approval.  However, Rio Tinto obviously felt confident enough to release the second tranche to Ivanhoe.

Oyu Tolgoi, otherwise known as Turquoise Hill, comprises 24,000 hectares on four mining licences in the South Gobi region of Mongolia. The key to that project’s success, apart from its substantial reserves of copper,  is the proximity to China which is now putting in the infrastructure to ship copper and other raw materials to its booming cities. It’s a very strategic project, designed to capitalize on China’s runaway growth both in the short and long term.

I’m more inclined to invest in Ivanhoe than Rio Tinto. Mr.Friedland is aggressive and ruthless and he hates big mining companies, although he wants very badly to run one. Turquoise Hill might very well be the project that gives his flagship company Ivanhoe that status.

 It already has a market cap of more than $4 billion Cdn. - which is almost the price paid by Inco in the ’90s for Friedland’s famed Voisey’s Bay nickel-copper-cobalt discovery.

Kb

October 2, 2007

Greetings investors!

Glencairn Gold Corporation (GGG.TSXC-V) is shifting its focus to the Libertad project in Nicaragua after writing down its troubled Bellavista gold mine in Costa Rica to the tune of US$50 million.

This is a buying opportunity, with the stock now under $0.20 per share. It’s also sparked some institutional interest as well: A recent financing at $0.15 per unit has increased from $22 million to $25 million Cdn. 

I’ve been reluctant to invest in Glencairn over the years because I’ve never had a lot of confidence in the Bellavista project. 

Nicaragua isn’t big on heap leach mining either, but Glencairn proposes to use conventional gold extraction methods at Libertad located outside the capital city of Managua.

The decision to convert from heap leaching at Libertad was made last winter after extensive metallurgical testing of the ore. Leaching operations were suspended last spring, although the mine continues to produce residual amounts of gold. In the second quarter of this year it sold 2,147 ounces at an average realized price of $673 per ounce, resulting in revenues of $1,446,000. The mine however had a loss from operations of $490,000.

I think this is all rather auspicious. I’d rather invest in a cheap stock with a developing project than an expensive one with a troubled mine (Glencairn traded as high $0.70 per share earlier this year).  Although a formerly producing mine, Libertad still has all the ear marks of an advanced exploration play.  Drillling at the Mojon East extension of Libertad has intersected high grade gold/silver (to 40 grams per tonne Au) and revealed two parallel mineralized zones 400 metres east of the current mining area.

Now priced at $0.17, Glencairn is looking very attractive. I’m looking forward to seeing future drilling results and the results of a feasibility study on Libertad.

There is still a little exposure though (isn’t there always?). Bellavista could very well be deemed an environmental liability in Costa Rica, which could incur substantial clean up costs for the company.

I have a feeling we haven’t seen the end of that story.

Be careful out there.

Kb

October 1, 2007

Greetings investors!

I’m getting keener on O&G juniors these days, since this oil rally seems to getting legs. Particularly attractive among those is Lexaria Corp. (OTC BB: LXRA), which is active now in Mississippi, Oklahoma, and Alberta, Canada.

The company’s main focus is Mississippi, where it has 30% to 50% gross interests in a handful of producing and exploration stage projects. The company is well financed going forward, having raised over a million dollars last summer.

LXRA’s area of mutual interest in southwestern Mississippi hosts approximately 100 drill targets over 7,500 miles where 2D and 3D seismic have been shot. The immediate focus area, Palmetto Point, is a 32,000 acre area within a much larger zone of over 200,000 acres. Both oil and gas bearing zones have been located from drilling over the past year.

The Palmetto project was the company’s first deal. It commenced a 10 well drilling program there for an initial 20% gross interest, but expanded that to 30% over 12 wells. They also have a 40% interest in 50-wells outside Palmetto, where seven have been drilled to date.

Lexaria’s production of natural gas increased during the year as these additional wells came on line and existing ones were optimized. Gross production ranged from 19,572 to 25,944 million cubic feet (mcf) in the spring quarter during Phase I and II stages.

On the oil side, production on its Isbill #2-36 well in Oklahoma has been stabilized at approximately 40-45 barrels oil per day and 10 mcf/d natural gas. Lexaria has a 7.5% interest in this well and remaining drilling prospects in this Owl Creek property.

I like this deal for the slow and steady manner in which it is increasing shareholder value. And there’s always the chance of hitting something big during the drilling to follow. The stock is thinly traded and closed recently at just under $1.50 Cdn per share.

KB