The BarkerLetter

December 24, 2007

Greetings investors.

Don’t forget to keep an eye on the market over the next 10 days. There could be a spike and some selling opportunities.

Lately I’ve been writing about the adventures of a gold explorer in Ontario’s Geraldton Gold Camp, near the northern shore of Lake Superior, and not too far as the crow flies from the renowned Hemlo gold discovery of the early 1980s. It`s where Kodiak Gold (KXL.TSX-V) is exploring a network of high-grade, near-surface veins within the 300 square kilometer Hercules claim group.

A cheaper deal with some assets nearby is Sage Gold, trading on Canada’s TSX Venture exchange under the symbol SGX at under $0.50 Cdn per share.

The company plans to drill 22,000 metres of core next year on properties located in the Geraldton camp. Right now they’re testing the continuity of gold discovered on their Jacobus property, approximately 3 kilometers north of where Kodiak hit 3.6 meters of 10.46 opt gold on the Golden Mile vein.

Yep, you read that right - 10.46 ounces of gold per tonne!  A short intersection to be sure, but extremely rich.

Sage is also seeking nickel and copper there, and expects to receive assays from the latest round of drilling soon.

Meanwhile, the aerial magnetic surveys of the Jacobus property have indicated a hot zone on the SE corner, which is contiguous with the northern extension of a similar magnetic high on Kodiak’s Hercules property. That’s exciting! Sage interprets the geophysical ’signature’ there (described as `a north-west trending low`, which will no doubt be familiar to those who understand the science of aerial electro magnetic surveying!) to be similar to the Golden Mile quartz vein system.

They plan to trench that NW low, plus a known quartz vein, in 2008 in addition to conducting detailed ground geophysics and geological mapping. 

It`s shaping up to be an exciting year of discovery for both Kodiak and Sage.

December 21, 2007

Greetings investors!

Readers of this column know I’m half expecting a bullish rally over the holiday season, a kind of a sneak rally.

I’m disposed towards that outcome by slightly more than half now, after witnessing yesterday’s market close. I think the CDNX is ready for a new bullish move after gapping up from the opening and closing higher.

It needs confirmation though: If the CDNX gaps again at the opening this morning and holds there, I’ll consider going long my favourite stocks in the afternoon session.

December 19, 2007

Greetings investors.

Friends of this column know we’re following a prospective gold play within a few hundred kilometers of Canada’s famed +20 million ounce Hemlo gold complex in Ontario Province.

That’s the Golden Mile project, operated by Kodiak Exploration which trades as KXL on the TSX Venture exchange. The stock had a nice pop after a trading halt earlier this month, and a subsequent news release that announced the discovery of another vein system which had the effect of extending the strike length substantially.

To date, Kodiak has been selectively drilling targets pinpointed from their geophysical data. According to the company, the geophysics point to a potentially bigger system, or systems, that could encompass the entire 300 square kilometers of their Hercules portfolio: 

‘Geophysical data indicates that the Golden Mile, Yellow Brick Road and other significant vein systems at Hercules may be several times more extensive than the five plus kilometres of gold bearing veins that have been exposed on surface to date. The geologically accepted rule of thumb for Archean veins is that they typically have a vertical depth extent equal to 50% of their surface expression, underlining the potential of the entire Hercules project. Large gold bearing veins have been confirmed to occur frequently within the Elmhurst Lake intrusion. Early results indicate it contains multiple significant parallel and ladder structures outside the Golden Mile discovery area that remain to be tested.’

That is a very bold statement. But is it true? We’re getting closer to finding out. Kodiak has wrapped up the first 3,000 meters of that drill campaign. Most of the results are now in, and I doubt the as yet unreleased assays will tell the whole tale.  However, they could offer some more clues, and have a short-term effect on the stock price.

Kb

December 18, 2007

Greetings investors.

I’ve got a wait signal from my reading of the candlesticks on the Canadian Venture Exchange (CDNX) index chart for the TSX.  The index is heavily-weighted towards junior mineral exploration.

The chart signals themselves though suggest the index may be building some slight momentum. The MACD line is essentially flat along the zero line; however, there is still some accumulation going on.

Risk intolerant investors will want to stay in cash, while the gamblers among us will want to take a position now. For the rest, it’s a good idea to have your wallet at the ready for if and when that MACD line spikes up into a rally.

I think a dip below zero will be bearish, in which case I’d wait till it dives deeper into oversold territory before buying. See the annotated 90 day chart below.

Kb

December 14, 2007

Greetings investrs!

Lately I’ve been writing about a developing gold play in Ontario’s Geraldton Gold Camp, not far from the multi million ounce Hemlo discovery of 26 years ago.

I’m particularly interested in a company with workings there called Kodiak Exploration, which trades on the TSX Venture exchange under the symbol KXL. It has a discovery area called Golden Mile, located within a larger claim group called Hercules. That in turn is within a few hundred kilometers of the +22 million ounce Hemlo gold deposit:  fairly close on the map, but not ‘close’ geologically speaking. To be close in that context means to be on trend with the deposit or its host geology or system, which Golden Mile is not.

Still, results from drilling in the area of strike has been significant enough to hold my interest. 

Before I get into that I want to look at the big picture….

What Kodiak potentially has there is a handful of near-surface, parallel vein systems located within the so-called Elmhurst Lake intrusion. I’m told the Archean systems there are known for their continuity at depth, and it is extremely rare to see so many of these gold bearing ones at or near surface. 

Moreover, the discovery of the Golden Gate vein in a distal portion of the intrusion demonstrates (in the words of management) the strong potential of the entire area.

I like a few things here: First, the fact that the near surface Archean veins don’t make sense. Neither did Hemlo. In fact, the majors walked away from joint-venturing it because the geology of the discovery didn’t square with widely accepted exploration theory about gold deposits. Really big discoveries never make sense at the start.  The first group of drill holes at Hemlo came up dry.

And what about these ‘deep’ Archean vein systems? If they’re typically deep, does that mean there is potentially much more mineralization below the drilling depth, and what the geologists have exposed so far is the tip of the iceberg? Well, wouldn’t that be nice?

Second, I like management’s bullish statement about the strong potential of  ‘the entire area’. I’m not sure what area they’re referring to, whether it’s the entire Hercules claim group or Golden Mile, but I think it can be interpreted to mean ‘multiple deposits’. That’s exciting indeed!

I’ve already stated the results of Kodiak’s recent drilling there. Some assays are still pending as well.  The point is they’ve found economic grades at shallow depth within a structure that remains open, and measures a total strike length of more than 4 kilometres. That’s impressive!

So far the gold intercepts from drilling appear very short but the game is far from over; the company plans to drill a total of 60,000 meters 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.  In other words, there will be some step-out and in-fill drilling along the way to try and fast-track the project towards a resource calculation. That’s bullish!

The most recent quartz vein discovery there is interesting all on its own. The 11 metre wide quartz vein coincides with one of several structures that have been indicated from the geophysical data. We’re told it contains abundant sulfides and is open in all directions. According to Kodiak, the area of strong gold potential now has geometry in excess of 30 square kilometres.

(Cont.)

December 13, 2007

Greetings investors!

We can expect to see some seasonal selling of our favourite mining stocks going into the Christmas holiday season.  Investors typically need to divert a little investment capital into buying presents and winter vacations this time of year, so they`ll be taking some of that off the table in the days to come.

The question in my mind is whether Christmas week will be a good time to average down. Stock prices often plunge in late December , and as quickly snap back up. But not always.  In fact I`ve seen some real smokin` hot market rallies occur over the last few days of the year.

In either case, it`s a real good idea to watch for dips and rallies just before and after Christmas Day. There could be an opportunity to make some quick capital gains.

Meanwhile, I`m watching Canada`s bellwether (for metals) Toronto Stock Exchange (TSX) index for clues, and especially the composite index for the venture board, where many of my junior miners are located. After last August`s sell off I rather hoped to see the CDNX test its high for the year, and though it made some impressive gains through October we didn`t hit record territory for the year. The index is treading water at present, having given back more than half of those gains in the past five weeks.

However, my favourite indicator - the MACD - remains mildly bullish so I`d say we`re in for a rally of sorts early in the New Year. The juniors are still under accumulation as well.

The one ominous thing is the relative quiet from the majors. Last year at this time practically all of the world`s biggest gold mining companies were publicly predicting a banner year for gold in 2007, which has certainly been the case. But I haven`t heard a peep so far about 2008.

We`ll find out soon enough though.

Careful out there.

Kb

December 12, 2007

Greetings investors

A reader wants to know what I think of North American Paladium, trading under the symbol PAL on the AMEX, and also as PDL on the Toronto Stock Exchange (TSX).

I always approach these deals from three angles: Chart technicals, company fundamentals, and the underlying strength or weakness of the commodity in question.

I take a top down appraoch, so let’s look at palladium first. A quick glance at the chart shows a steep price rise last spring until the sell off in August. Since then prices have made slow, incremental progress upwards and I expect this to continue for the foreseeable future, based on the highs and lows over the past  90 days.

The technicals for PAL itself show the stock to be under distribution, which has taken the price from $12 or so down to its current $4  per share range. Based on the longer range chart indicators I expect the stock to move back up to $4.80 /$5.50 but I think it will go lower before that happens. In any case I haven’t seen any signs of a reversal to the current downtrend.

I’m not rushing out to buy PAL at the present time. Basically, I’m waiting for the momentum indicator to reverse before I do. If you’re a longer-term, risk-tolerant investor you may want to take a position now and accumulate on any subsequent dips.

Let’s go back to the larger issue of PGMs (platinum group metals) for a moment. I don’t know about you but shiny objects fascinate me, and I’m always looking for the chance to learn more about them.  The Spanish conquistadors considered platinum a by-product or ‘impurity’ of silver, and tossed it out during the refining process. 

Here’s what else I’ve gleaned from Infomine’s palladium portal:

The catalytic properties of the six platinum group metals (PGM)- iridium, osmium, palladium, platinum, rhodium, and ruthenium - are outstanding.  Platinum’s wear and tarnish resistance characteristics are well suited for making fine jewelry.   Other distinctive properties include resistance to chemical attack, excellent high-temperature characteristics, and stable electrical properties.   All these properties have been exploited for industrial applications.   Platinum, platinum alloys, and iridium are used as crucible materials for the growth of single crystals, especially oxides.  The chemical industry uses a significant amount of either platinum or a platinum-rhodium alloy catalyst in the form of gauze to catalyze the partial oxidation of ammonia to yield nitric oxide, which is the raw material for fertilizers, explosives, and nitric acid.   In recent years, a number of PGM have become important as catalysts in synthetic organic chemistry.  Ruthenium dioxide is used as coatings on dimensionally stable titanium anodes used in the production of chlorine and caustic.   Platinum supported catalysts are used in the refining of crude oil, reforming, and other processes used in the production of high-octane gasoline and aromatic compounds for the petrochemical industry.  Since 1979, the automotive industry has emerged as the principal consumer of PGM.  Palladium, platinum, and rhodium have been used as oxidation catalyst in catalytic converters to treat automobile exhaust emissions.  A wide range of PGM alloy compositions is used in low-voltage and low-energy contacts, thick- and thin-film circuits, thermocouples and furnace components, and electrodes.

The market got excited about PGMs last year when their use in catalytic converters in the manufacture of car engines increased, which fueled a rise in price.  Personally, I think the use for these fine metals will grow as the world becomes increasingly electronic and fuel efficient.

Fundamentally, I like PAL. The company just closed a whopping $75 million Cdn financing at $4 per share, which is substantially higher then the anticipated $56 million Cdn. Someone at least thinks the stock is drastically oversold at the present time, and is prepared to put money on it.

Bullish!

Careful out there.

Kb

December 11, 2007

Greetings investors.

Friends of this column know I’m bullish on Canadian gold, and optimistic that a major gold discovery will be made in the coming months. I have five reasons for this belief:

•  We are now in the 3rd year of a bull market for precious metals. Every junior exploration firm in the world is cashed up and drilling. Do the math.
• Gold prices.  Now at multi year highs, the price of bullion is fueling an unprecedented gold rush. Not only miners but just plain folks are turning over rocks in the unlikeliest places.
• Canada has a solid mining code and is pro mining. If someone makes a big discovery, the government might just let you hang onto it. Yes, there is a some exposure from various stakeholders in the regions of the country where gold tends to be found, the First Nations and the environmental lobby.
• Gold tends to be found in large quantities in Canada. Why not go where the gold is?
• As the bull market matures, the drive to make discoveries within a short time frame increases. In other words, everyone hurries up.

 I also believe that such a discovery will be made in Canada’s Ontario province. I’ll explain why in later editions of The Daily BarkerLetter.

Be careful out there.

Kb