Categories: Precious Metals
Topics: General Precious Metals

Investors Missing the Boat on Gold and Silver Explorers

Gold's apparently effortless breach of the $1,500 mark, accompanied by its
staunch ally silver towards $50 an ounce, marks new territory for the Age of
Monetary Metals, which we have now entered. The twin frauds, the
artificially high valuation of the U.S. dollar and the equally nefarious
intervention by the Chinese to keep the Yuan down, are driving the world's
savers increasingly towards the only transparent (well, except for the
increasingly flaccid derivatives market price manipulation) and trustworthy
monetary unit. At this point, I'm embarrassed to be a human being.

What will posterity say about this era in history, where a small cadre of
over-educated men and women perpetrate simultaneous scams against the rest
of us to support an undeserved sense of entitlement expressed in grossly
excessive lifestyles?

Where are the protests in the United States? What happened to the American
spirit, that historically rose up against oppression and enslavement? In
China, the fear is palpable. They're even barring access to churches, which,
unfortunately for the present regime, is the great error repeated throughout
history. Steal their money, deny them a decent standard of living, sure, but
deny them access to their God? A fatal error, my Chinese friends.

In America, it would appear that the obsession with microscopic partisan
philosophy differences and dogma undermines any possibility of a united
electorate behind issues of grave and imminent import. It's a distraction of
the highest caliber, and a perfect example of how the current model of human
beings can easily occupy itself with senseless superficiality while the
stage upon which they debate is incrementally consumed by termites.
Completely transfixed by spectator sports, utterly mindless video games,
vapid entertainers, and formulaic and insipid movies, and a hundred thousand
talking heads all delivering variations on the Great Lie of the once great
United States, America is doomed. 300 million puffed up roosters strutting
around indignantly in what was once a resource rich land of promise but is
soon to be nothing more than an abattoir from sea to shining sea. What a
surprise it will be when the fences erected to keep the outsiders out turn
out to be fortified by the outsiders to keep the insiders in.


And still, the financial services industry, now a juggernaut smashing the
financial infrastructure of the world to smithereens under its own colossal
inertia, defecates a steady stream of worthless and impoverishing investment
products on the oh-so-thoroughly anesthetized and distracted American
investing public. The collateralized debt obligations and securitized junk
loans have been refined and retuned and now re-appear as triple A trash
among the cleverly adorned offerings of Morgan Stanley, Goldman Sachs and
J.P. Morgan.

Poor, poor, mainstream investors.

How horrible it must be to be an investor and not know anything about
investing in the Toronto Venture Exchange (TSX Venture) and Toronto Stock
Exchange's (TSX) vast selection of gold, silver and oil explorers and
producers. How impoverished must be the millions of global investors making
due with single digit gains, if any, and more commonly, losses at the hands
of major investment banks who load their portfolios with garbage.

It still ranks as a well kept secret, the phenomenal gains being realized by
astute investors on these Canadian exchanges, where nearly 80% of the
world's natural resource investment capital is raised and directed into
projects from Tasmania to Alaska.

A case in point: Newstrike Capital (TSX.V:NES, OTCBB: NWSKF.PK), a Midas
Letter pick from our January 2011 edition that our subscribers picked up for
$1.20 a share, announced on April 20th that one of their drills had
intercepted over 230 metres (755 feet) of mineralized core on the company's
Ana Paula project in Guerrero, Mexico that graded an average of 7.5 grams
per tonne of gold. The stock promptly doubled, providing those who bought at
$1.20 with an immediate 100% gain, in a mere three months. That's 400%
performance annualized.

Now granted, Newstrike is the exception rather than the rule. TSX and TSX
Venture stocks with major discovery potential tend to appreciate more
slowly, and the intercepts encountered by their drilling programs are rarely
so dramatic.

And quite frequently, the progress of share price appreciation is inhibited
by the unfortunate realities associated with financing exploration activity.
By the time a company who is exploring for gold and silver starts hitting
the large high grade intercepts that translate into demand for the company's
shares, that company has likely issued a large number of shares to raise the
money to get to that point. A good example of this is Seafield Resources
Ltd. (TSX.V:SFF), whose announcement on December 2nd, 2010 of a drill
intercept grading 1.29 grams per tonne over 449 metres. The stock shot up to
a high of $0.77, but the company announced a financing of 30 million shares
at $0.50, which effectively killed the rally. At the same time, millions
upon millions of shares from previous financings flooded the market, and the
stock to this day labours in the $0.30 range, despite further outstanding
drill and trench results.

Fortunately, while lousy financing structures taint the share price, beneath
the ground the deposit remains intact.

That being said, there is clearly some substantial mineralization present on
the property, and once the insiders and early investors who are in a big
hurry to dump their cheap shares have done so, it is likely the company will
proceed to develop the group of deposits on their Quinchia project in
Colombia. It is worthy of note that the 30 million share private placement
was subscribed for by the same parties who were substantial early
shareholders of Ventana Gold. (TSX:VEN), a company that delivered over 1000%
performance in the space of less than one year.

There are a multitude of examples, however, of companies whose incremental
share price increase in a one year time horizon demonstrate the conviction,
by investors, that there is a valuable mineral deposit underlying the demand
for shares.

On the TSX Venture exchange alone, more than 400  out of 1600 companies in
the resource sector have doubled in value in one year or less. Imagine 25%
of your investments doubling in one year! And in Canadian dollars to boot!

While the rest of the markets quiver on the brink of collapse, and investors
wait with baited breath for the next financial crisis to arrive (really its
still the same crisis that started in 2008 - just delayed thanks to the U.S.
government counterfeiting program), wise investors are building positions in
junior gold exploration companies with good exploration results, because
these will be the biggest beneficiaries of investor interest when the
mainstream finally realizes that the TSX and TSX Venture exchanges are the
absolutely best speculative games in town.

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