Monthly Archives: March 2013

Natural Gas Breaks $4 Barrier, Comeback For Coal Miners?

Natural Gas Breaks $4 Barrier, Comeback For Coal Miners?
In theater a farce is a comedy that uses disguises, costumes and ruses to make believe unlikely scenarios. Over the past couple of years, we may have witnessed this bizarre script play out in the energy sector. For awhile, one common belief among investors has been that fracking is the panacea that would solve the world's energy problems. Many investors ignored the coal and nuclear sector as a viable alternative. However, for many months I warned my readers to be careful of what you read. Natural gas is historically volatile and that coal and nuclear is crucial for modern industrial nations to utilize in their energy mix. Natural gas is now breaking the $4 barrier and appears to be headed higher as supplies are tight due to increased demand and limited production. There is also increasing public opposition to fracking from the public, especially with regards to groundwater contamination. Natural Gas has doubled since the peak of the fracking bubble. For over two years the coal and nuclear stocks have been ignored by this fracking farce that natural gas would be the sole source of our energy future. Now coal and nuclear may once again be seen as a competitive alternative.
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Ignore Declining Prices and Stay Focussed On Improving Fundamentals

Ignore Declining Prices and Stay Focussed On Improving Fundamentals
For Jeb Handwerger of Gold Stock Trades, it's not a matter of if the uranium, potash and coal sector will rebound, but when. He's already pounced on the three-year low that hit the spot price in 2011, but as Handwerger tells The Energy Report, investors can still benefit from an equity uptick in the uranium, potash and coal sectors. You have to buy when there's blood in the streets and real value. That's when you have to step in and pick up the bargains. One should fight the crowd when you see value and learn to wait. To paraphrase Jesse Livermore, money is not made in the buying or selling, but in the waiting.
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The Next Price Spike Could Be In Food

The Next Price Spike Could Be In Food
Population growth combined with potential inflationary effects could lead to increased demand for food. Increasing populations with declining arable land per capita will force farmers to boost yield using the key ingredient potash. Potash or potassium salts are amazing fertilizers. They make the plant stronger and improves output. Potash helps the physical condition of the crop boosting vitality. It helps a plant's immunity to withstand drought, infection and parasites. Do not forget that potash is also used in drilling, building materials, paper, pharmaceuticals and other products.
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Negative Sentiment and Capitulation At PDAC Could Mark Bottom In Junior Mining Sector

Negative Sentiment and Capitulation At PDAC Could Mark Bottom In Junior Mining Sector
We should start seeing an acceleration in merger and acquisition activity as companies seek alternative ways to cut costs and survive. This process is quite healthy and plants the seeds for the junior market recovery. Cash strapped companies should merge with competitors who have more capital. Companies with cash are watching their treasuries very closely as even positive technical and geological developments have been ignored by this market. This negative sentiment usually predicts a major bottom similar to the post Bre-X era and the 2008 crisis. At the moment, the public markets are not supporting the juniors and soon private equity and cash rich miners may pick up fire-sale assets. Conditions are ripe for a major industry consolidation or privatization.
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New Uptrend In The Uranium Miners?

New Uptrend In The Uranium Miners?
Jeb Handwerger said a look at the technical chart for the price of uranium is already “showing that the two-year downtrend is breaking to the upside after bouncing off of three-year lows. “Uranium is one of the few commodities still heavily discounted compared to other commodities. The mispricing of the sector can largely be attributed to a lack of understanding — on the part of many investors — of the overall global fundamentals that are involved in the uranium sector,” said Handwerger. He believes governments, utilities and big-money investors are beginning to come around to the reality that nuclear power will be a part of the modern, global, industry-based economy, especially in Asia.
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Increase In Resource Nationalism Boosts Demand For Additional Platinum Supply

Increase In Resource Nationalism Boosts Demand For Additional Platinum Supply
Right now, platinum may be undervalued to gold as it is 30 times more scarce and has averaged historically to be at least double the price of gold. Likewise, many of the platinum junior equities are deeply undervalued even compared to the bargain basement junior gold miners. This undervaluation may be due to the fact that currently the PGM market is much smaller than gold and lacks major institutional coverage. This may change as major investors and large platinum miners look to diversify into more stable areas such as the U.S. and Canada. Over the long term these development stage companies could be rerated as more funds enter the arena and as the public becomes more aware of the potential supply shortfall. Since high quality platinum projects are rare, once institutional and retail money comes into this sector it could cause a valuation jump in these assets.
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Uranium Miners: The Brightest Spot Right Now In The Resource Sector

Uranium Miners: The Brightest Spot Right Now In The Resource Sector
For many months, I highlighted the CB&I deal with the Shaw Group, the Chinese-Cameco connection, The Russians and Uranium One and the coming acquisition of junior explorers in the Athabasca Basin. Witness the acquisition of Fission Energy, which borders the famous Hathor Deposit which was taken over by Rio Tinto in 2011. Finally, after two years the sentiment has changed and is turning positive. This sector is extremely active with investment interest and confirms my belief that the death of nuclear that was called by so many analysts over the past two years was premature. Large companies such as Cameco, BHP and Rio Tinto are delaying large capital expansions and may be looking for undervalued juniors in mining friendly jurisdictions with easier capital requirements. The uranium sector was extremely active at PDAC as investors expect more deals at these bargain valuations. Already the two year downtrend in the uranium prices is being broken to the upside after bouncing off three year lows.
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Gold Explorers In Right Location Will Survive

Gold Explorers In Right Location Will Survive
In ancient Greece, farmers would plant crops based on prophecies from an oracle. Today investors look to spreadsheets and minute by minute charts to try to predict the future. Trying to be a prophet is an unprofitable occupation. The secret to wealth is buying wholesale, waiting and hopefully selling it retail. We all love sales and discounts when prices drop for fast food, clothing or cars. However, when it comes to mining stocks investors look for momentum and major price rises continuing to bid up the price to overbought levels. Instead, they should look for quality assets on sale in mining friendly jurisdictions.
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