The BarkerLetter

Greetings investors.

I’ve had a look at Ecuador’s new manifesto regarding ongoing stewardship of its mineral resources.

First, the back story: Virtually all of these ownership issues in Latin America are basically two-fold: One the one hand you have an existing community of artesanal miners who fear the insiders in the judiciary and government will sell the land out from under them to a handful of multinationals. They may look like simpletons out there with their donkeys and pick axes, but they’re really not. Some of them are very good miners as well. 

Second, many of these countries have had experiences with undercapitalized juniors who got ahold of mining projects back in the 90s when gold prices were low and subsequently went under, leaving the promises of schools, hospitals, and infrastructure unfulfilled.  I think after a decade of false starts they’re all a bit wary.

I don’t really believe the political rhetoric coming out of Quito over this proposed new mining code. I think it’s shrill and overdone.

However, this new president, Correa, is an agriculturalist — which doesn’t bode well for the likes of us. He’s also a crook. Last month the Colombians staged a daring commando raid on the FARC’s jungle camp in Ecuador and recovered a laptop that detailed cash payments made to Correa by the guerrillas. So that’s what we’re dealing with here.

Yes, it’s true that Aurelian will have some more hoops to go through, and the company’s net worth will diminish, and their mining costs will go up. That transborder region with Peru is spitting distance from the headwaters of the Amazon, where the Peruvians have just finished making an unusually large nature preserve. But it’s far from over.

What investors have to fear is world opinion rather than new mining codes. Chavez, Correa, and Morales (Boliva) have made so much political hay from their quasi nationalization programs that they’ve managed to frighten investors half out of their wits. It’s why the stock prices for companies like Crystallex (KRY.TSX), which sailed through the new mining and environmental regulations in Venezuela and is busily mining gold in Kilometer 88, is still trending down a year after it all happened.

Greetings investors.

Here’s our current fave, a real sleeper called Fortuna Silver Mines Inc. (FVI.TSXV), with silver/polymetal assets in Mexico and Peru.

Shares of FVI spiked 25% yesterday on news from its 76% owned San Jose silver-gold deposit in southwest Mexico. It released the best intercepts from drilling that ranged to 4.36 grams gold and 302  grams silver per tonne over 7.1 meters.

That’s the first of many such media releases to be expected in the coming weeks. The company drilled a total of 43 holes in the project’s Trinidad zone and 23 in the San Ignacio during 2007, and assays for all are in the pipeline now.

Fortuna plans to use the data to update its mineral inventory at San Jose by the end of the next quarter. That currently stands at an indicated resource of 17.7 million ounces silver equivalent, with another 49.1 million inferred ounces.

That’s not bad for a deal with $46 million in the bank and a market capitalization of $195 million. In fact it’s among the best silver deals I’ve seen.

They even have some ‘elephant country’ stories from Peru, where the company’s wholly-owned, silver-lead-zinc Caylloma Mine is situated, in Arequipa Province. How does 6,231 grams per tonne silver over 7.35 meters grab you? That intercept was made along the eastern extension of the Bateas Vein, located more or less in the center of the concession area.

Caylloma has proven reserves of 3.6 million ounces silver, and about another 13 million ounces in the inferred resource category. The mill there currently processes approximately 850 tonnes per day.

If you’re looking for a silver deal with home run potential, this is as good as it gets!

Kb
 

Greetings investors.

Shares of Ivanhoe Mines (TSX:IVN) are in the tank after the company reported steepening losses from last year. The stock is in a firm downtrend after reaching its high of $18 Cdn per share last July, and now trades under $12 Cdn per share.

The real problem for Ivanhoe stock appears to be the lack of a definitive agreement with the Mongolian government over its Oyu Tolgoi copper project, despite all the mightly efforts from last year to close a deal. The matter is reportedly pending amendments to the country’s mineral laws which are now before its parliament.

Oyu Tolgoi has a projected mine life of 40 years and peak annual production of 1.6 billion pounds of copper. Virtually all of that is destined for China.

Typically, projects of this scale require substantially more lobbying efforts to get into production, and Oyu Tolgoi is no exception. However, I believe it will be permitted eventually and Ivanhoe stock will return to its highs. I just hope it happens during the current peak in copper and gold pricing.

It’s worth noting that mineral giant Rio Tinto PLC, which has a 9.95 per cent stake in Ivanhoe, is in China at this moment promoting good will and the need for infrastructure projects. My bet is they’re pushing the Chinese to built the transportation nexus needed to bring mineral production from Oyu Tolgoi in the east to markets in the west. I wouldn’t be surprised to see Rio Tinto involved in some of those capital projects, as a joint venture partner.

An announcement of that nature couldn’t help but assist Ivanhoe’s efforts to get the green light in Mongolia.

So watch for that!

Kb

March 27, 2008

Greetings investors!

The U.S. government revealed its gross domestic product figures for the 4th Qtr today … growth was pegged at 0.06 %.

That follows previous rates of 4.9% and 3.8% for the third and second quarters of this year, respectively.  

Plus, we’ve been told that the economic growth going forward will be an identical 0.06% for the next three quarters.

So — where’s this much feared recession? The customary pair of negative growth quarters? Where’s the beef?

Do you suppose all the dire predictions were just a clever ruse by Bear Stearns to get some cheap money, help it close a few difficult positions, handle some excess redemptions? If so, then it worked like a charm! With the Fed’s discount window open to broker dealers, we may see the entire stock market become monetized.  Say, that’s not a bad idea, and I’m sure it would even work for awhile.

Or maybe it’s a cyber recession. I think in America it’s possible to have such a thing, plus the subsequent ‘recovery’ of course, without actually having to endure it in real time. Perhaps we’ll just pole vault directly to the next period of untrammeled growth.

Actually I’m beginning to sense a political motive. I think the Republicans would rather have a recession now, when they can do something about it, than several months down the road when they’re out hustling votes. It’s why they’ve been pushing the economy onto the agenda in recent months.

I suppose it’s possible that the subject of the economy — and the prospect of a recession actually peaking during the upcoming presidential campaign – just hasn’t come up during the conversation in their little smoke-filled backroom. But I kind of doubt it. I think it’s more likely that the subject has come up repeatedly and there has been concensus in favour of conducting a preemptive strike.

Hey, if we don’t have a recession at all then so much the better — they’ll say quick action by the Fed prevented it.

I think there must be some softer, gentler people in the U.S. government these days. After all, they’ve manufactured a way to save the country without creating massive, collateral damage, like the last time.

Careful out there!

Kb

Greetings investors!

I love the financial news networks!

They spent all last week predicting a recession in the U.S., and now they’re predicting its end. In fact some are saying we’ve turned the corner, even though we haven’t even seen any data to suggest a recession has occured in the first place.

Oh, and would somebody please explain this Bear Stearns bailout to me, because I just don’t get it at all!

**

People want to know where metals prices are headed. I don’t know.

Lately we’ve been channelling Britney Spears for investment advice, since she seems to know about as much as anybody else these days. Here’s what she said about minerals: ”….oh … well, like, see, a long, long time ago … like way back when you were probly … oh I don’t know… about 40? Yeah, like waaaaaaaaaaaaaaay back before they even made iPods? In those days copper and zinc and nickel prices went down …ummmmm….at the start of a recession as order books emptied and inventories built up. Then when like that whole recession … thing …. just kinda  reached the max well then prices would rebound as demand picked up…‘

Interesting. So according to Britney the supply and demand cycle for minerals runs well ahead of the economic numbers.

So if we’re in a recession, shouldn’t commodities pricing be heading into the tank? Or rather, shouldn’t they already have done so? Well sure but here’s the thing — there are so many speculators in the works that pricing may no long reflect the relative position of the business cycle.

I think we could conceivably have a ‘manufactured’ recession, predicated solely on the unwinding of a prominent hedge fund or two. That sort of event is like the wheel coming off the cart. It’s impossible to predict which way the cart is going to careen or swerve. Actually at that point, the game plan is just staying out of its way.

But let’s talk about something more jolly –  like where and when the next major gold discovery is going to occur. More about that in subsequent editions.

Careful out there.

Kb

March 17, 2008

Greetings investors.

Call me an old fuddy duddy, but I was taught to wait for two consecutive quarters of negative growth before raising the recession flag, We haven’t even had one.

Nor have unemployment levels come close to the peak reached during the last recession in 2001.

And hey, what’s with the bookies over in Chicago betting the farm on a 1-point interest rate reduction by the Fed?  If money gets too cheap in the U.S. they’ll just end up creating a carry trade like they had over in Japan last year, and I don’t think anybody wants that.

And I don’t get how the Bear Stearns bailout relates to interest rate policy. The bailout was a move by Bear’s cronies on the Board of Governors of the Fed, not the Federal Open Market Committee which determines rates.

Oh, and are the financial markets really collapsing like the media tells us?

I haven’t lost my shirt yet, have you?

While we were all wringing our hands over the terrible misfortunes of Bear Stearns and Lehman Brothers, both companies reported earnings this morning that were above projections.  Lehman reportedly has $34 billion in liquid assets.

I think the FOMC is going to leave a few bullets in the gun. Anyway they already took action over the weekend, which I interpreted as a deliberate move to separate monetary policy from the alleged ‘tumoil’ over in the capital markets.

The smart money is on a 50 basis point cut … if that!

Ya know I think Federal Reserve Chairman Ben Bernanke is  a real nice guy – a bit aggressive, but nice.  Of course a bit of zeal is to be expected. It’s his first year in the job after all.

Anyway, to answer the most pressing question about the stock market I went to my friend Britney. You know, Britney Spears?

She said,”…well, like, I’m not really sure? But I s’pose the stock market kinda goes up and down ya know? Like a yo yo. And, well jeeze, if it goes up it goes down too.  I know ’cause I took an economics class in high school, riiiight? And like … well, ok .. it’s like this. The stock market goes up, right? It goes way, way up. And then people start to get panicky and take profits and it goes waaaaaaaaaaay down. So like if the index goes down by like 10%? That’s called like ….um, wait, I know this …ummm a correction.”

Well whaddya know. Britney, you’re right. The Dow Jones Industrial average is down just over 10% since last year. Then what happens?

“Well then it goes back up — silly!”

Oh. Really? Wow, this new knowledge astounds me. Thanks Britney.

Be careful out there.

Kb

March 4, 2008

Greetings investors.

We got news yesterday from a popular BarkerLetter pick, TiRex Resources Ltd. (TXX.TSX-V), which has an active precious and base metals project in southeastern Europe (Albania to be precise).

I’ve said it before, and I’ll say it again - ‘ … ay caramba!’

The results of the first round of drilling at the Mirdita project are among the best set of polymetallic assays I have ever seen. They intersected one, almost continuous 65 metre (213 ft) mineralized section including:

0.9% Copper,

11.6% Zinc,

1.0% Lead,

141.6 grams per tonne silver

5.5 grams per tonne gold ………………………over 14.1 meters.

and …….

2.3% Copper,

34.8% Zinc,

2.4% Lead,

376.1 grams per tonne Silver,

14.6 grams per tonne Gold ………………………over 3.1 meters.

and ……….

0.8% Copper,

12.5% Zinc,

13.0 g/t Silver

2.2 g/t Gold ………………………………………….over 27.5 meters.

That’s not bad for just one hole!

Of special note is the very high grade mineralization (53.8% Zinc was encountered in one intercept of 0.8m) and significant gold values (such as the 14.6g/t Gold over 3.1 meters). Tirex hasn’t made a determination of true width but quotes an estimation from historic drill data of about 30 meters.

Tirex owns an entire district of projects there, comprising 17 known but only partially drilled deposits on the property. The company believes it has great potential for a zinc-rich deposit which was not mined because of a lack of facilities.

TiRex says the first hole at Koshaj was drilled vertically and was designed to verify the drill data from the 1970’s. Two additional vertical holes are being drilled nearby to verify the previous drill hole locations and the deposit, and report the results to NI43-101 standards.

The company is angle drilling the Mirdita District (the previous holes were vertical) to develop an updated interpretation of the geometry, orientation and potential size of known deposits and exploration targets, including Koshaj.

Tirex is a company purpose-built to explore and develop the large 344 square kilometer Mirdita Property in Albania. The property is readily accessible by paved and gravel roads and is located 70 km north of the capital city of Tirana.

The stock has zoomed from under $2 to pushing $4 per share in the past 30 days. I started following the company back in October at $1 per share. Now I’m developing a missionary type zeal for this project over there on the border with Greece and Turkey. TiRex is one of my prime candidates for a $20 stock, medium term.

Careful out there!

Kb

March 3

Greetings investors!

Last spring we wrote up Aussie zinc producer Zinifex Ltd. , based on the long term pricing fundamentals and the company’s immediate prospects for enhancing its reserves.

We’re advising investors to sell on the heels of a successful takeover offer by rival base metals producer Oxiana Ltd. The company is buying Zinifex at a 14% premium (all stock) to last Friday’s closing price. That’s a better than 30% gain over the past 9 months. 

Buying Zinifex will more than double Oxiana’s sales and give the copper and gold mining company zinc, lead and silver projects in Australia and Canada.

Zinifex has A$2.2 billion of cash to fund new projects and acquisitions.

Oxiana is trading at 19 times estimated earnings, or A$3.93 per share on the Australian Stock Exchange today. Zinifex, which trades at 11 times earnings, rose A$1.15, or 10 percent, to A$12.28 - but still below the A$12.68 Oxiana offer price.

The combined company has A$2.8 billion in revenue and posted net profits of A$918 million in 2007.

Be careful out there.

Kb