The BarkerLetter

November 30, 2007

Greetings investors!

Shares in Kodiak Exporation are on a tear again today, rising better than 20% to almost $4 1/2 Cdn per share in afternoon trading.

Yesterday the stock was halted pending drilling news from the company’s wholly-owned Golden Mile project in Ontario’s Geraldton Gold Camp.

The news, when it came, reported gold intersections of ‘mineable widths’ from multiple new drill holes, expanding the mineralized zone to depth and along strike.

The Golden Mile vein system is now at a vertical depth of 130 meters, which is double the previously known depth extent, and remains open.  The intersections from recent drilling are small, under 5 meters in fact, but numerous, and in proximity to each other.

Kodiac is calling Golden Mile an ’extensive new gold discovery’, and I have no problem with that description.

Gosh, maybe it’s another Hemlo!

Wouldn’t that be nice?

Watch this space for more information on Kodiak and Golden Mile, as it becomes available. I’m going to follow this puppy closely!

Careful out there.

Kb

November 29. 2007

Greetings investors!

We’ve seen a nice run on Kodiak Exploration Limited (KXL.TSX Venture Board) since the middle of last month. The stock is up some 500%.

Kodiak has an interesting mix of base and precious metals properties in some of Canada’s richest mineral regions, and they’re all wholly-owned.

Their property of note lately is the Golden Mile prospect, on its Hercules property in Ontario’s Geraldton Gold Belt. Kodiak has reported extremely good grades from drilling there, including a 3.6 meter intercept grading 358.56 grams per tonne, or better than 10 ounces. Wow!

Of course all of those high grade intercepts are extremely short,  no more than 4 meters in fact. But more assays are pending.  The company has planned 60,000 metres of drilling to expand the known extent of the system and, at the same time, work towards building a resource in the zones of known high grade mineralization. 

The time to get into this play was last September, when the stock was at $0.50 Cdn - it’s over $3 per share now and traded as high at $5 per share in late October.

However, it may prove worthwhile taking a look at Sage Gold Inc, also trading on Canada’s junior venture exchange under the symbol SGX.TSX-V.  Sage’s stock price has followed Kodiak’s very closely over the past few months, and spiked $0.13 Cdn today (Thursday) to close at $0.57 per share on very heavy volume.

Sage raised $5 million Cdn earlier this month from a financing priced at $0.50.

There was no news release accompanying the big volume and subsequent spike in price today. However, the company is drilling its Jacobus property adjacent to Kodiak’s Golden Mile discovery, with assays expected in early December.

I’d be a seller in Sage is I held any; but I don’t.  So in that case I’m looking seriously at getting a position in the coming days, just in case there’s more to the pre-assay release hype than just  … well, hype.

Careful out there.

Kb

November 27, 2007

Greetings investors!

Uh uh …

First there was this proposed BHP Billiton/Rio Tinto Ltd. merger to create the world’s largest integrated mining company. Now the world’s second largest zinc producer is warning of lower earnings.

Am I the only one who thinks we’ve been too long at the trough?

Zinifex Ltd. of Australia has warned investors that rising costs, the strong Australian dollar and lower zinc prices could hold back earnings this year.  Net profit is still ontrack to exceed last year’s record result, but I think this is a harbinger of leaner times ahead.

I don’t like to be the skeleton at the feast, but higher costs and inflated currency values have created an artificially expensive operating climate for mineral explorers and producers.  A downtick or (heaven forbid) prolonged dip in metals prices could be disasterous.

Look, it’s the reverse scenario of a few years ago. After a prolonged bear market for copper, nickel, and precious metals (closer to a nuclear winter in fact), producers had wrenched down operatings costs so far that any upward moving in pricing sent profits and share valuations sky high.

In this reverse scenario, we’ll see it all go the other way.

Personally, I think BHP and Rio are both looking to their future survival, rather than a way to expand profits over the short term. They’re already planning into the next bear market. 

The only way to stay in business when aluminum and steel return to ’90s prices is to be the world’s largest volume producer with the thinnest margin.

But it’s always profitable to buy the right penny explorers, if you can get them cheap. Nobody ever went broke finding minerals, merely from producing metals at costs that were too high to sustain profitability in a dwindling commodities market.

Be real careful out there.

Kb

November 22, 2007

Greetings investors!

Personally, I hate to see it when the world’s largest mining companies start making takeover bids for each other.

It’s not a bad thing necessarily, but it shows a ripening bull market, a peak if you will.

Last week I said I wasn’t keen on new or emerging base metals and precious metals producers, because of the economics of that stage in a company’s lifecycle. The biggest gains are made in the early stages of discovery, and during the latter stages of optimizing the company’s presumed operations. It’s when the company begins to get profitable, and enters a period of exponential growth.

In a similar vein, I’m not keen on the big producers such as BHP Billiton Ltd. or Rio Tinto plc, which have had several consecutive quarters of untrammelled growth. I think they’re fully valued.

BHP Billiton wants to acquire London-based Rio for $150 billion. Wow! The bid was nixed earlier this month, but I think the Australian mining giant will keep trying and eventually succeed. 

Apparently the takeover would achieve efficiencies by reducing overlapping investments in mines and other assets. It is also said to be a good thing for steel makers.

Not so, according to the steel industry federations in Japan and China, who fear the creation of a mega monopoly on iron ore that would be unfair to the producers. 

The two companies control 60 per cent of Japan’s raw materials imports, according to the federation.

Like, whatever. The point is this: Iron ore and steel making are good businesses right now, and going forward!  It’s why I’m in favour of iron ore start ups like Northland Resources (NAU.TSX-V) which has an impressive suite of projects in Scandinavia.

One of those is  the 100% owned Hannukainen iron-copper-gold project in Finland, where Northland plans to collect a bulk sample for the purpose of metallurgical testing. Metallurgy is one of the final stages of feasibility, and suggests the project is well advanced.

Check them out. The stock is just over $3 Cdn per share!

Kb

November 20, 2007

Greetings investors!

Last week I commented on how miners turned in lower quarterly earnings during the recent reporting season. That is particularly true of Canadian juniors, those with exposure to the Canadian dollar. 

I believe this trend will continue through the current quarter, which has seen unprecedented gains in the loonie’s value relative to the US dollar.

However, the experts say the temporary squeeze is unlikely to put off investors, who have continued to pump money into Canadian miners in the hope of cashing in on the next big discovery or acquisition.

I beg to differ ….

A number of base metal companies have reported lower earnings because of the high loonie.  That rapid rise has made doing business more expensive for many Canadian miners, especially those who record revenues in U.S. dollars but pay expenses in Canadian currency.

One example is FNX Mining (FNX.TSX), one of my favorite Canadian nickel miners. It posted lower 3rd Qtr. earnings despite record production. Its net income fell almost by half to to $12.5 million Cdn, even though revenue was higher.

On top of the higher loonie, labour and materials costs have risen across the board for miners, making it even harder to break even.

It’s why I’m not buying emerging or existing metals producers. I prefer grass roots plays trading for pennies. There’s a bigger upside there.

Careful out there.

November 16, 2007

Greetings investors!

I’ve been watching Colombia for some time now.

The country is incredibly rich in gold.

Every country makes that claim of course, especially in South America.  But it happens to be true here.

Moreover the political situation has stabilized, though not enough to inspire US President George Bush to include Bogota on his recent S. American itinerary. But Canadian Prime Minister Stephen Harper visited earlier this year, and praised its potential for rapid economic growth.

I spent a few weeks chatting up some gold miners in and around Medellin, in the gold-rich provinica of Antiochia last summer. My opinion is that all the gold fields there are known and owned by a handful of wealthy locals, who plan to use private companies to exploit them.

Once I figured this out I devoted considerable time to chatting up a secretary who works for one. My plan was to convince her employer to vend a few hundred hectares of mineral leases into a Canadian public entity, for the purpose of raising a bit of money for exploration and development. But it was no dice. ‘We’re already financed … privately,’ was the flat reply.

The provincia of Antiochia has very good host geology for gold, and the local government is very keen on promoting itself to North Americans. They’ll happily sell you claims and mineral leases. I don’t think there will be any gold on them, or at least not very much.  But they’ll take your money. 

To that end the government of Antiochia has submitted a proposal to the Toronto Stock Exchange which suggests the creation of a board of Colombian ‘mini’ companies ready for financing.

Uh, ok …

Frankly, I think gold is just too high profile in South America. There are too many grifters, all of them with projects and properties and the next big thing. I think the only real chance a retail investor has to making a buck in Colombia is with coal, which they also have a lot of. Gold is too high profile. There are just too many grifters involved in it.

A Canadian company active there is Coalcorp Mining Inc., trading under the symbol CCJ on Canada’s Toronto Stock Exchange (TSX). They were one of the first coal miners into Colombia, and as a consequence of that managed to snap up a handful of leases including the La Francia and Caypa mines located in a prodigious coal-bearing region near the Caribbean. CCJ has raised the money to put in a highway and other  infrastructure designed to link the fields with the port city of Cartegena. All in all, it’s a very ambitious project.

 The company has a huge market cap, and traded at $0.70 Cdn or under for the longest time.  A consolidation last year took the stock price to $3 1/2, and it went shortly after to better than $5 Cdn per share. It’s since pulled back to under $3 after that expensive port infrastructure plan hit a snag. Apparently the local government doesn’t want it, citing a negative impact on tourism in the area.

That’s not making investors happy, because Coalcorp raised a lot of money last year for that very purpose. The company’s financials are also turning people off - in it reported a first quarter loss of $7.8 million Cdn, or 9 cents per share a share, on reduced coal output (though revenues were over $100 million Cdn!)

Meanwhile, the Colombian government is analyzing alternatives to find a “quick solution” to the company’s plans to build the export port. They’re looking at Barranquilla (Latin pop diva Shakira’s hometown), around the mouth of the Magdalena River.

This story has a long way to go but I think we’ll see a happy ending eventually.  Meanwhile, the stock is cheap at just $2.20 Cdn per share, well below its book value of $2.78. Fundamentally CCJ is a screaming buy but the risk premium is definitely there. 

Careful out there.

Kb

November 14, 2007

Greetings investors!

Gold investors got some nasty surprises last month as the ranks of newly-minted producers released their balance sheets.  Start-ups are expensive, alright!

Some mining suppliers did well though. Cabo Drilling (CBE.TSX Venture Exchange) which I’ve  followed since last winter recorded its best ever quarter by turning in a profit of $11.68 million Cdn. That’s 11.3% better than the previous high from the 1st quarter of this year, and 54% higher than the same period from a year ago.

Cabo travelled to its 52-week high of +$0.75 Cdn per share on the news last week, and pulled back recently to the $0.55 range.

I rate it a strong buy not just for that and its ongoing business drilling for mining companies, but for the prospect of signing a really big company-making deal down in Panama where it has a subsidiary.

Panama has voted to spend $5 billion over the next several years widening its famous Panama Canal.  Wouldn’t it be nice for its shareholders if Cabo got the exclusive contract to provide all drilling services in association with that?

It’s hardly likely, considering the company has only one drill in Central America and it’s booked through the foreseeable on behalf of a handful of juniors with precious and base metals projects. But it’s possible, and I’m an optimist.

Buy.

Careful out there!

Kb

November 13. 2007

Greetings investors!

I think it’s time to buy West Timmins Mining (WTM.TSX).

I got involved in this gold explorer when it opened a year ago on Canada’s Toronto Stock Exchange at $0.30 Cdn per share. The stock got to $1.30 last July before pulling back during the sell-off in August. It trades at just under a buck Canadian now.

The company has been active in northern Mexico where it has very roughly outlined the perimeters of a 3 kilometer wide gold, copper, zinc discovery called La Dura, within a larger mineral district known as Montana de Oro. 

It’s early days on that one yet but they’ve pulled some very impressive grade to date and recently inked some jv’s to net a controlling interest in the neighbouring properties.

I think the simple word ‘mining’ in WTM’s corporate name more or less sums up their raison d’etre. The company wants to be a mining company, not a find ‘em, drill ‘em, sell ‘em off junior that fades back into the woodwork when the bull market ends.

To that end, I’ve seen them aggressively acquiring advanced exploration stage gold properties throughout Mexico over the past six months. Yes, there’s some dilution as a result of that but that’s not unreasonable given the company’s long-term goals. It currently has a market capitalization of some $100 million Cdn.

For that reason and others I think West Timmins is a solid buy currently at under a dollar, no matter what your investing objectives are.

Kb