-- Posted Wednesday, 18 July 2007 | Digg This Article
July 17, 2007
Background
We are moving towards important leverage points in the financial markets and we are only half way through the summer.
Actually, I believe this is an important fulcrum from which investors can beneficially leverage their Junior Mining Positions. It is indeed a critical time. As I mentioned in my last article, I think we may have turned the corner on gold and the PM complex and some of the indices such as the HUI are indicating as much. Nevertheless, it is still a relatively slow start after anywhere from 8-13 months of agony depending upon how you calculate the retrenchment. However, there is time to purchase some very undervalued gold and silver shares in this ongoing gold bull market.
There are several points that concern me and I’d like to share them with you. Forgive me if I’m being redundant but sometimes redundancy can be a benefit.
1. The international global economy is on fire but I don’t see the US as a participant. The increase in the DOW is an almost de facto result of this international global expansion. I personally do not believe the CPI – PPI numbers coming out of Washington DC. Furthermore, the disconnect between Wall Street, the Federal Government, and Main Street becomes more exaggerated by the day. Local and state governments are not too far behind the curve as all entities appear to be starved for cash. This becomes a crushing burden on our diminishing middle class who are asked to shoulder a greater financial responsibility in the face of a more uneven playing field. It can make one downright cynical if one is not careful.
Please go to Jim Sinclair’s www.jsmineset.com and review Dan Norcini’s posting on Friday, July 13, 2007 titled The Disconnect between Wall Street and Main Street America. Dan is both an excellent mind and an excellent writer who understands the big picture. We all do ourselves a favor in keeping current with this site, its host, and Dan Norcini’s views. Of course, Jim is no slouch.
2. Few people, except a very few intelligent and forward looking analysts, mention the real problem facing the US and that is Debt. I am constantly amazed, for instance, that the omnipresent political Sunday talk shows (Meet the Press, Face the Nation, Fox News, and the ABC Program with George Stephonopolis as examples), never mention the real problems of the day in any detail. Homeowners by the millions are going under. Debt is a national cancer that is eating away at every level of our country. All the other issues I’ve mentioned in the past are still unresolved and it feels a bit like Washington DC plays the fiddle while the rest of the country burns. Is that too harsh? Your decision-your choice but we all need to choose carefully in the future.
I honestly believe that there are junior mining companies that might assist us in getting out of that debt. It’s a “twofer” because as you personally eliminate debt, you are supporting gold and silver while helping our country get stronger. You are helping your country by doing something that the politicians do not have the intestinal fortitude to do—switching from paper assets to hard assets. If we follow these paths in our own portfolios, we are benefiting regardless of the policies being followed by the larger financial entities.
China is making it easy to get gold into the hands of their citizens. China, for crying out loud! What do they know that we don’t!
Remember too, that although the Dow is moving ahead at a record breaking clip, it is not all encompassing. It may work for fund managers and retirement funds but I just don’t see the average American going out and purchasing 10,000 shares of a Dow Stock. We’re usually talking about 100 shares and we had better be nimble and quick in order to maintain those gains.
And of course, we must always be cognizant of the risk-reward issues. Most of these Junior mining companies are high-risk, high reward adventures that require patience. Nothing comes easy but choose the right company at the right time and the results can be impressive. If we go at it with the idea that we’re all going to be millionaires in a month, we’re going to be disappointed because this is a sector that always appears to be long on time and short on money—that is until the “mother lode” is located. There’s no fever like gold fever (sung to the tune of there’s no business like show business).
The politicians are held captive by the Federal Reserve and the multinational corporations. The country needs to send a message to the Fed that we understand they are neither Federal nor are they a Reserve. And remember that the Fed does not set interest rates; the bond market does. This is a very important point to remember.
3. There are no real differences between any of the political candidates or political parties as far as I can tell with the exception of Ron Paul (www.ronpaul2008.com). Even though Dr. Paul or Congressman Paul may have limited chances for success, I have to go with my conscience on this one. I said limited, not impossible. However, if enough of us believe that intelligence, morality, integrity, and getting the US back on an even keel, is important, miracles might happen. Ron Paul’s campaign is “the little train that could”. Please review this man and his credentials carefully. He has a powerful internet following and unlike the Heehaww candidate of several years back, this medical Doctor is a man who will not make that mistake and miscalculate the transcendental leap from the Electronic World to the Real World. Enough said for now.
My new Web Site http://www.seacoast-consulting.com/ will be addressing some of these issues and will welcome your input. It is under construction but we hope to have it up and running in a few weeks. It is not going to be at all like Goldseek. I have neither the time nor the expertise to mimic my host. On the contrary, we will be trying to carve our own niche by recommending a few companies that might do well as we move forward in this gold bull market. I shall also be recommending certain newsletters, writers, and websites, ala our Gifts to the Gold Community. It does indeed take a village for us to become informed.
I will have more to say about the macro economic-financial climate which is giving us the current surge in gold and the precious metals. However, don’t be fooled into believing that the base metals are being omitted from the party because Mr. Copper is above $3.50 US much to the surprise of many. I also have to reiterate that I don’t believe for a second that investors have awoken to the fact that gold, silver, molybdenum, and the “stuff factors” are on the move again. The “stuff factor” is nothing more than hard assets and I believe that soon it will be widely recognized that paper assets are giving way to the hard assets. When this really gets going, watch out (!) because you will see some amazing performances.
We might have an excellent run here over the next few months and even the next several years, but never forget that certain factions are not thrilled about a new rally in gold and “stuff”. Remember also, that stuff is difficult to store and goes against the grain of most of the financial community. We shall leave it there for the moment but just don’t forget that what goes up quickly can also come down quickly. This would really be more of a concern to futures and options traders.
It is my firm belief that this junior mining market is going to be like the old 2000 dot com market; only this time it will be on steroids. Investors are infinitely more sophisticated and they have an enormous amount of data with which to calculate their investment decisions and no lack of analysts who comment upon that data.
On to Madison Minerals
In my last article, I mentioned that there are some companies bordering on the insanely inexpensive. I think that Madison Minerals (MMRSF-OTC and MMR-CA) is one of them (www.madisonminerals.com).
I work for the company, I have options, I have a boatload of shares, and I’ve been buying more at these levels in the open market. That’s how much I believe that sooner or later, this story is going to bear fruit.
Actually is has already born fruit, it is simply that many investors don’t know the story.
General Introduction
Madison Minerals is a company I’ve been following closely for five years. I’ve written about MMRSF-OTC and MMR-CA) many times and those articles can be found in my archives on GoldSeek. These articles will also be listed on http://www.seacoast-consulting.com/. I want you to recall that there are two projects in Madison: The Mt. Kare project in Papua New Guinea and the Lewis Project in Nevada. Both have demonstrated excellent drill results over the years.
I recall that none other than my friend, the legendary Howard Ruff introduced me to this company many years ago. Back then he wasn’t a friend but he was one of the top junior mining commentators of the day.
After I met and had lunch with he and Kay did I consider him to be a friend. Still smart as a whip after all he has been through! Don’t ignore his book either, Ruff’s Little Book of Big Fortunes in Gold and Silver. It is well laid out and can be read in a leisurely afternoon. If you’re new to this sector, this book will help you tremendously.
I know many of the people at Madison fairly well and I know they put out very solid efforts on the behalf of their shareholders. This is a company that has been building a foundation for a very long time. It’s a foundation based in trust, projects, exploration, evaluation, joint ventures, deals, and results. There is no doubt that patience has been required. There is also no doubt that Madison has a very large base of loyal shareholders who know what is going to occur should one of these future drill programs return results such as were found in hole MAD 81 on the Lewis Project in Nevada several years ago. The discovery hole was somewhere in the vicinity of ½ ounce of gold over 100 feet. Incidentally, this one particular hole was both a blessing and a curse. It was a blessing because it demonstrated that an incredible resource was there to be discovered, and a curse because everyone was then expecting all subsequent holes to demonstrate similar results.
Whereas ongoing results were much above average, they did not compare to that spectacular hole. But then that is how these discoveries go. Fabulous results and then mediocre ones and then good ones followed by more fabulous ones and then not so great and then average, and then another super result, and well, you get the picture.
Trust between management and shareholders is a component in the operation of junior mining companies that has always been important and it is even more so today. There have been times when I’ve been misled; perhaps obfuscation would be a better word to use, by other junior companies. But I don’t feel I’ve been misled by this group. I will say again however, that patience has been a prerequisite to owning this company. But that same patience is a prerequisite for owning just about any quality junior with excellent properties.
And in today’s environment of “endemic burnout” by professionals and investors alike, even more credit should be extended to this group because all companies have to do more work with less resources. They’ve done exactly that although I’m not certain that everyone is thrilled with the idea. Nevertheless, it is the same with all businesses across North America. Labor costs can be quite expensive, especially in an environment where cash flow is virtually non-existent. Junior mining companies need to be evaluated by an entirely unique set of parameters.
The Mine-tech group, of which Madison is but a one third component, has been talented enough to lock down some very amazing projects not the least of which has been Oromin Explorations which was won in an open tender bidding process. They are certainly making the most of that opportunity in Senegal, Africa and I’ll discuss Oromin in the near future. To understand the progress with Madison, you need to understand the success with Oromin in Senegal, Africa.
I believe that because so many of their human resources have been preoccupied with Oromin, Madison has not always been front and center. That may be about to change. Mine-Tech is a relatively small company with a finite amount of human resources. Everyone from the CEO across the board is working to maximize the opportunities in today’s bull market. I don’t believe they’ve received full credit for the excellent work that has been completed. In the case of Madison, that may well change with the next drill program about to commence within a week or two or three. They are simply waiting for a few drills to become available.
I honestly believe that the Mine-tech group, Madison Minerals (MMRSF-OTC and MMR-V), Oromin Explorations (OLEPF.OTC and OLE.V), along with Lund Gold (LGD.V) will participate in this explosive up-leg that is coming in the precious metals market.
Remember that all junior mining companies operate within a relative world and are affected by time, market sentiment, the price of gold and silver, and how the US dollar is performing along with its counterparts. Remember also, that this last seven months has been brutal on at least 75% of these juniors. I believe that is about to change; in fact I see strong evidence that it is changing.
We are still only half way through the second phase of this three or perhaps even four stage gold bull market. This is the longest leg and is usually the stage of the bull market when the bids simply dry up. The infamous summer doldrums don’t help. The “buy in May and go away” axiom might just be ready to fall apart, and we might well see some rewarding gains between now and the Fall. The dollar is now down at around 80.50 on the USDX and a break below 80 just might set off some fireworks in the gold community. The quality Juniors will participate and Madison Minerals is a quality Junior. By Jove, I do believe that is a hypothetical syllogism!
Madison is still very much in the game and with their stellar credentials; they have an opportunity to do very well with their Lewis project.
I have been buying Madison at these depressed levels because I believe that with the new focus on Lewis in Nevada, things will change for the better. I will continue to purchase MMR up to a dollar US believing that when the public finally wakes up to this gold bull market, they are going to recognize the history, the projects, and the management of this company as a positive. It is my firm opinion that this is a share price that could double within a month, given optimal market conditions, and go from this $.40 level to the $.80 level and still be undervalued. This is another company that is simply flying under the radar because management chooses to put their money into the ground and keep promotion to a minimum. I figure I’m not going to change them after all these years so I might as well join them.
Why is Madison still so valuable?
I think that after all is said and done the one thing that makes Madison extraordinarily valuable is their proximity to Newmont’s Phoenix-Fortitude Complex mining operations combined with the fact that Madison has encountered some very attractive drill results on their own property right across the “fence line."”. Newmont’s operating Phoenix mine has produced some 8 million ounces of gold so one can easily see the possibilities and the potential.
I’ve been fond of saying that if you don’t watch your step you might fall into Newmont’s pit! Madison has drilled out portions of their Lewis property that are close to Newmont’s operating gold mine. They are about to explore both the Buena Vista Trend and the Virgin Trend.
From the Press Release dated June 28, 2007: “The 2007, 25,000 foot reverse circulation and 10,000 foot core drilling programs will begin as soon as drills and crews become available. This program will be a continuation of the combined infill and step out drilling programs which have successfully tested the Virgin Structural Zone along a 1,600 foot strike extent and to 600 foot down dip. Additional drilling will also be directed at the Buena Vista Structural Zone, a sub-parallel target located 1,500 feet west of the Virgin Structural Zone”
“Madison’s initial drilling at Buena Vista was conducted during the 2006 exploration campaign and comprised 7 widely spaced RC holes along 1,700 foot strike extent which included previously released results of 5.44 g/t gold over 7.6 meters (about 45 feet) in hole MAD-64 and 2.82 g/t gold over 10.7 (about 32 feet) meters in hole MAD -70.”
Madison latest Press Release
Madison’s latest PR, dated June 28, 2007, and found at http://madisonminerals.com/archives/Madison_June_28_2007.pdf was about defining the drill program to be implemented on Lewis as soon as the drills became available. The 2007 drill program calls for an expenditure of 2.5 million US and the drilling of 10,000 feet of core and 25,000 feet of reverse circulation (RC).
Why does one stick with a company through all the meandering, the successes, the miscalculations, the bear markets and the bull markets? I’ve done it because I always believed in the story. Then I started working with the management and a few of their top geologists. It gave me added incentive to stick with the project. Quality projects usually take a great deal of money and a great deal of time. Madison has expended both on their projects and that gives them excellent value at this stage of the game.
The Original Story was about Mt Kare
The original story was all about Mt. Kare in Papua New Guinea. The company spent close to 34 million Canadian on this project over a period of about eight years and finally felt they needed some fresh energy expended on the project. What people don’t realize is that those eight years were smack dab at the end of a vicious bear market in gold and the precious metals that lasted a total of 24 years—give or take.
Eventually they entered into a joint venture with Buffalo Gold on the Mt. Kare project but my sensing of it was that the arrangement was not well understood by investors.
Then not too long ago, that joint venture was revised, and it was more palatable to both companies. Was it better understood by investors? I don’t believe so because if it were, the prices of both companies would be substantially higher. Please see the joint Madison-Buffalo PR dated May 18, 2007. It is self explanatory and will give you accurate insights into how that joint venture was retooled.
Conclusion
Madison is moving ahead on several fronts but all interested eyes are currently focused on the Lewis Property in Nevada. It sits right next to Newmont’s operating Phoenix mine which currently has produced in excess of 8 million ounces.
I believe that Madison is going to be similar to the overnight success of an actor or a singer. They will be successful in the eyes of the public but it will have taken them ten years to get to that point in their careers; hence the overnight success.
Madison has been consistently moving their projects forward and that holds true for the Lewis concession. I believe we’ll see this company in the $1.00 US range when gold finally punches through the $700 level. When gold reaches the old highs or gets past the $750 level, many of these quality juniors like Madison might double from there. We have to understand that this Lewis project is the real deal with better odds than most of going into production. This project is slow and steady as she goes and while there may not be enormous glamour to the project, there is certainly the working class work ethic that ultimately spells success.
Please visit their website and if you have the opportunity, review my past articles on the company. They can be found on www.goldseek.com in my archives.
In the interim, if you’d like to be on our mailing lists, please send your name, address, and email address to consulting@seacoastpub.com.
Until the next time,
D. Stewart Armstrong
consulting@seacoastpub.com
http://www.seacoast-consulting.com/ is under construction. Do stay tuned!
Disclosure and Disclaimer by the Author: In the spirit of full disclosure, although D. Stewart Armstrong, Seacoast Consulting, and or Seacoast Publishing, are independent entities, they may be employed by this particular company, may own shares in this company, and this company may be an advertiser on GoldSeeek.com which is an internet site in which the author is consistently involved. Although the author is an independent analyst, he is also a paid consultant by the Junior Mining and Exploration Sector. The author is a private investor in the precious metals markets. He is not a board qualified or licensed investment advisor. All material is deemed to be accurate and to have been gleaned from reliable sources in a timely fashion; but said material cannot be construed as being totally complete or absolute. Any foreword looking statements must be considered as such and taken into account. Consequently, the aforementioned parties can take no responsibility for any investment decisions you make or the results thereof. The author does not accept responsibility for any possible errors in calculations disseminated by any company he represents or in which he is involved, nor does he guarantee or insinuate any type of investment results. Consider any and all recommendations as personal opinions on the part of the author. It is highly recommended, and even insisted by the author, that investors, individuals, and all interested parties, conduct their own due diligence before becoming involved in any investment or with the interests of any company mentioned. That process would include direct contact with the company to confirm any facts, opinions, or ideas represented by these companies in general or on any Company CD’s distributed and referred to in these articles. The author would suggest the possibility of hiring professional advice from a certified investment advisor before making any investment transactions. Again, please consider these articles as opinions and please understand that investing in Junior Mining Companies is a high-risk, high reward proposition and you must take full responsibility for your own actions because there is always the possibility of losing all or a portion of your investment capital. This disclaimer applies to this article, Email correspondences, and all communications with both public and private entities. This disclaimer is applicable to all articles and communications published previously and to ones to be published in the future.
-- Posted Wednesday, 18 July 2007 | Digg This Article
