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I spent two days in Peru with Bob Baxter, President of Norsemont. He is the first person in the industry that I have talked to who actually has thought out the primary issue of mining a major copper/moly porphyry today. It's not the size or even the grade that matters; it's how soon you can get into production. At today's prices, every inch of ground on earth is either a prospective mine or it's good for nothing but raising moose. I've seen a dozen or more major systems. There is lots of copper around in the ground and I know there is 150 years production of moly identified.
Prices are high today reflecting both the destruction of the dollar and enormous demand from India and China. But supply and demand are laws written in rock. Today's prices are sucking metal out of the ground but one day there will be too much supply. When that day comes, and you are in the midst of the ribbon-cutting at your opening day ceremony, it won't matter how much metal you have, by the time the ends of the ribbon flutter to the ground, you will be closing up shop.
Bob Baxter
and Norsemont get it. And Bob is cracking the whip to both increase
the quantity and quality of his resource, but also to fast track
that puppy to production. To the victor belong the spoils and
to the swift go the high prices. Norsemont has a great system
and the faster they get it into production, the more they stand
to make.
By and large Norsemont is in the driver's seat. Mitsui would love to have an off-take agreement but that isn't part of the deal and Norsemont can ship their cons to whomever they wish. That's a giant lever for Norsemont to either nudge Mitsui into buying them out or to accept a buy-out of their 30% interest. Likewise, Rio was smart enough to have a clawback but it's not valid unless Norsemont more than doubles the resource. But copper doubling in price has exactly the same effect as doubling either the resource or the grade. Who on earth would have projected $4 copper two years ago? Well, in a way Norsemont did and whether through skill or just blind luck, they are sitting on a multi-billion dollar lottery ticket.
But no one is perfect. At the beginning, after Norsemont did the deal with Rio, the company focused on getting the story out. They got listed in Frankfurt and made sure the Europeans knew their story. It paid off in a big way and the stock was trading 200% higher 16 months ago. But Norsemont got lazy and started taking their shareholders for granted and shareholders bit back with a 66% decline.
There is no real reason for the decline, the resource is substantial, metal prices are strong and management is being very aggressive about fast-tracking the project to production. But we have a situation unmatched at any period in history. Every hard commodity is in shortage and there are 3,000 juniors out there begging for attention from a small and growing smaller group of loyal metal bugs. Until and unless the industry starts communicating its message to the great unwashed, share prices will languish even as metal prices are banging against the roof.
Norsemont has seen the error of its ways and has become a sponsor. I like the aggressiveness of management and that's worth a lot. This is not the time to be sitting on the egg until it hatches. We own shares and I am biased. Do your own due diligence, you get to keep all the profit.
Norsemont Mining Inc
NOM-T $1.60 Canadian (May 24, 2007)
NOMFF-OTCBB
28.9 million shares
Norsemont website
Bob Moriarty
President: 321gold
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