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Northwest Commentary
 Panel of Experts All Agree on Strong Future for
Precious Metals
Alexander B.
Korelin
January 31, 2004
Listeners to
The Korelin Business Report have heard me singing the
praises of gold investments for a long time. I started this tune
when gold was trading in the very low $250 range, taking the
advice of gold stockbroker Walt Raby, and I haven't stopped.
The conversations
I had with colleagues this past weekend at Joe Martin's "Gold
Show" in Vancouver, British Columbia strengthened my resolve
and today I would challenge anyone who felt that the current
strong markets associated with gold and silver were going anywhere
but up.
Let me recount
some of these conversations for you and see if you don't agree.
My co-host
on the Korelin Business Report, Paul Warren and I had
dinner with Jay Taylor Saturday evening just prior to the Gold
Show. As regular listeners to our program are aware, Jay is one
of the most respected individuals in our industry and thousands
of people seek his advice weekly by subscribing to his newsletter;
Jay Taylor's Gold and Technology Stocks.
We discussed
the fundamentals behind why the precious metals should continue
to rise in price. As Jay has brought up numerous times in the
past both in his newsletter and on our program, one of the strongest
of these fundamentals is the fact that the level of debt in the
United States on the part of consumers, business and our government
is frighteningly high. I agree with Jay when he says that when
consumers are unable to borrow additional money, the economy
will suffer tremendously. Historically, in a bad economy, gold
and silver do very well and investors who heed Jay's advice in
a time like this could do very well.
We conducted
four panel discussions at the Gold Show in Vancouver for our
listeners and the opinions given during these discussions were
well thought-out and valuable.
Our first panel,
on Sunday morning, included Doug Casey, Laurence Raulston and
Brent Cook. These are three very knowledgeable and successful
individuals whose past writing has proven to be accurate.
Raulston's
advice to listeners was the same as he tells his subscribers,
"Look for exploration stage gold companies with significant
assets because the larger companies need these assets and are
willing to pay dearly for them." When this happens valuations
of these exploration companies usually appreciates resulting
in a lot of happy investors. (A good example is Northern Dynasty,
which Laurence covered in Resource Opportunities some
time ago when the stock was trading well under the $1 level.
Today, after the news pertaining to the size of its Alaskan asset
was released, the stock began trading in the $8 range).
Doug Casey
said that, "gold isn't just going to go through the roof
... it's going to the moon." Doug is a guy who has made
a lot of money in the market over the past thirty years and I
take what he says seriously. He feels that a great way to take
advantage of, what he predicts is becoming a "significant
bull market in gold", is to invest in gold mining stocks.
In a recent article that Doug wrote he said, "The public
will be chasing these things the way they ran after Internet
stocks."
For the wary,
Doug said, "How do I know? Because I've been in this market
for 30 years, and I've seen it happen five times in the past."
He points to
the peak years of 1973, 1980, 1983, 1987 and 1996. "This
one will be the biggest of them all, because not only will gold
be running, but the public - trained by the 1983 - 2000 bull
market - all have brokerage accounts, and will be looking for
the next hot sector." (The three and a half thousand or
so attendees at the Gold Show all agree with Doug that the next
"hot sector" could very well be precious metals).
The other member
of this panel, Brent Cook, stressed that investors must carefully
examine each company before they invest. He suggested that they
read reports by a qualified geologist to insure that the company
has a viable asset. (Considering Brent's education and background
in the industry, I personally take his advice seriously).
Sunday evening,
I attended a hockey game with a group of people from Diamond
Fields International (TSX symbol, "DFI"); Frontier
Pacific Mining (TSX symbol, "FRP"); Candente Resource
Corp. (TSX symbol, "DNT"); and, Cangold Ventures (TSX
symbol, "CLD") These are companies whose executives
are some of the most experienced people in the industry. In the
conversations that I had with each of them, they all agreed that
we were living in one of the most advantageous periods of the
last twenty years for the mining industry. They all felt that
success would continue to come to both the companies and the
investors who bought stock in them.
About midway
through the hockey game I sat down next to David Morgan (Silver-Investor.com)
and we discussed the importance of silver in this market.
David said,
"The amount of silver available from the dealer classification
is around 50 million ounces at this time. The shortfall for 2003
will be reported in a couple of months and most likely will be
in the range of 65 million ounces. Thus, you can plainly see
that the physical market is getting tighter and tighter. Obviously,
what remains on the Comex in the Registered category is less
than one years supply. The current open interest in the March
delivery contract is very large and some interesting rumors have
been flying around. These rumors center around someone wanting
to take a large physical position in silver by the end of March
2004. If this rumor turns out to be accurate then expect the
silver price to move much higher very quickly. However, if the
potential holders of silver (longs) decide to settle for cash
before the end of March look for a spike and then a pull back."
David believes
that, "Long term the gamesmanship on the Comex will not
matter because soon the market will recognize the silver story
is real and market forces will respond to this reality. Meaning,
silver will become priced much higher.
On Monday,
I was involved in a panel with four of Vancouver's best mining
analysts: Dorothy Atkinson, Graeme Currie, Don Poirier and Jim
Mustard. These are folks who stake their personal reputations
on the advice they and their employers give to their clients.
In addition to giving specific investment recommendations, which
is beyond the scope of this article, they answered questions
pertaining to basic industry fundamentals. All agreed that, for
the time being, precious metals investment represented a great
opportunity for financial gains. They cited falling currency
values, questionable economic conditions throughout the world
and political instability as being the rationale for the strengthening
of precious metal prices.
I have been
very bullish on precious metals since we started emphasizing
this investment arena about two years ago on The Korelin Business
Report.
I believe that
many mining companies will do well in the months ahead providing
that gold and silver trade at levels that allow profitability
for each one. Most of the companies, which I follow, would be
profitable all the way down to a $350/ounce gold price. Below
$350 the universe grows smaller but it does not disappear.
Remember that
most of us invest in gold and silver because we believe that
these "hard money" investments give us insurance against
difficult economic times. The price of the metals is certainly
an important criterion in our investment decisions, but it is
not the only one. Regardless of the price of gold or silver,
corporate profitability is always the most important consideration
when a person is deciding if they should buy stock in a public
mining company.
Why would you
invest in a mining company that is not profitable at $600/ounce
gold or $7/ounce silver? Conversely, why would you not invest
in a mining company that is profitable at $250/ounce gold or
$4/ounce silver?
The recent
guests on The Korelin Business Report have convinced me
that under the current conditions my investing emphasis should
be weighted toward hard asset type savings.
Al Korelin
http://www.kuik.com/KH/KH.html
Alexander B. Korelin has been writing
his Northwest Commentary for the past twenty years. Mr. Korelin
is the founder and president of A.B. Korelin and Associates,
Inc., a business-consulting firm that works with the management
of public companies. Mr. Korelin is also the co-host of "The
Korelin/Hartfield Report" a one hour business radio program
which has been on the air in Portland, Oregon for the past ten
years and which airs on Saturdays at 11:00 a.m. on radio station
KUIK a.m. 1360. The program is also available for listeners on
the radio station's website which is www.kuik.com.
___________
321gold Inc
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