The following is the text of an e-mail I sent today to Subscribers of StockResearchPortal.com. StockResearchPortal.com is a research website that provides coverage on the approximate 1,600 Mining and Oil & Gas stocks listed on the Toronto and Toronto Venture Stock Exchanges.

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I have frequently stated my belief that one risk element that must take center stage in any thoughtful investment research and analysis of a company are the politics, economics, and prospective economic well-being of the country(ies) in which that company principally operates. That is one important reason StockResearchPortal.com categorizes each mining and oil & gas company in its Company Universe by it business ‘type’ (e.g. explorer or producer) and the geography in which it principally operates. You can find these categorizations on the ‘Company Overview‘ page on each ‘Company Data Page‘ in our website, in the ‘Compare & Rank Companies‘ data component in our website, and in several other tables and data components in our website. You can also review the latest write-up on countries in which companies in our Company Universe principally operate by visiting ‘Economic Research‘ on our Main Nav, clicking on it, and then clicking on ‘Country Specific Economic and Political Commentary‘ found on top of the left Navigation Bar of the resultant webpage.

I recommend you read an article titled ‘One man’s defence of a national reputation‘ in its entirety by clicking here. The article discusses a Private Member’s bill currently before the Canadian Parliament that “aims to impose controls on powerful Canadian mining companies that operate overseas”. The Conservative Party, who currently operate under Canada’s Parliamentary System of Government as ‘minority government’ (the party with the largest number of Members of Parliament, but without a majority of those Members) are reported as having “vowed to kill the bill”, which apparently is going to be debated in a House of Commons Committee this week. The Bill is opposed by Canada’s Mining Industry which is reported in the article as:

· being comprised (in 2007) of 1,373 mining companies listed on the Toronto Stock Exchange (‘TSX’);

· having had (in 2007) 79 billion shares traded on the TSX collectively valued at Cdn$482 billion;

· representing 60% of all world mining companies;

· representing 43% of total world mining exploration; and,

· allegedly having violated human rights in 30 countries, in circumstances the companies say they have done nothing wrong and, where there are no Canadian laws that regulate mining companies abroad.

Canada’s International Trade Minister Stockwell Day is reported as saying there will be no legislative action because it would not work, the companies do not need it, and “one country doesn’t develop laws that apply in another country”.

The article also reports that while Canada’s Members of Parliament consider controls, foreign pension funds have signaled they won’t invest in Canadian mining companies unless they adopt firm corporate responsibility rules abroad.

My comments on all of this are:

· first, having spent my adult life as an objective expert witness in major corporate litigation matters I can tell you unequivocally that its is easy to allege wrong-doing, that there are two sides (or more) to every story, that in litigation plaintiffs (i.e. in this case the countries that are protesting) often act for opportunistic reasons that go beyond the claims they make, and allegations in lawsuits often ‘overreach’ and are ‘overstated’. Stated simply, while I recommend you click here and read the referenced article, I suggest you do not leap to the conclusion that Canadian mining companies who operate abroad are guilty of anything until a Court decides otherwise;

· second, that mining (or any other type of) companies operating abroad have documented ‘corporate responsibility rules’ makes good sense to me as part of a company’s overall Corporate Governance. While I don’t know how many companies operating in foreign jurisdictions have such ‘documented rules’, I expect many do – and that going forward any that don’t likely will create such documentation; and,

· three, I think the fact that the referenced Private Member’s Bill has been put forward should be seen by investors as nothing more but something that focuses them, not on the behavior of the Canadian mining companies in foreign jurisdictions, but on the question of how (if at all) the politics and economics of any particular jurisdiction influences the ‘risk profile’ of a company operating in that jurisdiction.

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The following is the text of an e-mail I sent today to Subscribers of StockResearchPortal.com. StockResearchPortal.com is a research website that provides coverage on the approximate 1,600 Mining and Oil & Gas stocks listed on the Toronto and Toronto Venture Stock Exchanges.

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In a previous e-mail I suggested the importance of the amount of net cash (cash + short-term investments – interest bearing debt) an exploration company has on hand in the context of its monthly total operating expenses and current year drilling program/business plan – and discussed what I see as the importance to you as an investor in such a company to continuously monitor its net cash balance and monthly ‘cash burn rate’ or ‘run rate’ (the company’s prospective monthly net cash outlay).

In the past few weeks we have been speaking both with people who help raise capital for Canadian Mining Exploration companies and the executives of some of those companies.  Certainly for many of these companies raising cash through private placements has been easier after March (when the stock markets bottomed) than it was from mid-2008 to March – albeit most executives I have talked to express the view that those private placements often have been done at share prices discounted from ‘real value’.  Simply put:

·    at any point in time an inability to raise new capital may result in dire consequences (e.g. mothballing, sale at a ‘forced to sell’ and hence discounted share price, or in the extreme case ‘liquidation’) for a company and its shareholders even if the company has  promising exploration prospects; and,

·    where a company is able to raise incremental capital, the more expensive that capital is, as a rule the greater will be the dilution suffered by existing shareholders.

You may or may not believe that going forward the world stock markets (read in particular the U.S. stock markets) will deteriorate following their +/-50% index rise since March 9, 2009.  In either case, I suggest in this environment if you hold or are considering investments in junior mining exploration companies that you, in combination with your investment advisors, now look closely at the amount of:

·    net cash each such company currently has on hand;

·    debt each such company currently has on hand; and,

·    how the net cash balance of each such company relates to its prospective ‘cash burn rate’.

You can quickly determine the amount of net cash a company had at its last quarter end, and the amounts it has spent in each of its most recent 8 fiscal quarters, by reviewing its quarterly balance sheets and cash flow statements found under the ‘Latest 8 Quarter Data’ in the left Navigation on the Company’s Data Page on StockResearchPortal.com.  Using that data as a a basis for discussion, I suggest you then call the company’s President or Investor Relations Executive in an attempt to determine the Company’s current net cash position and prospective ‘cash burn rate’ over at least the next 12 months.

Where a company does not have net cash on hand to sustain at least 12 months of operations at its current and near-term planned monthly ‘cash burn rate’ I suggest you address with your investment advisors what that means to the company in the contexts of both:

·    the likelihood the company’s ability to raise cash in the current and prospective market; and,

·    what that likely means to the company’s risk/reward profile going forward.

In this regard, I suggest you carefully consider what happened to virtually all listed companies last fall and winter – the prices of their shares pretty much all dropped precipitously with the general drop in world stock markets, irrespective of the quality of their operations or opportunities.  If a significant drop occurs again in world stock markets, mining exploration and other companies that might be able to raise capital in the present market environment may once again find it extremely difficult if not impossible to do that.  I consider the current economic (and hence stock market) climate to one of significant uncertainty.  In my view strong cash positions are a very important ‘touch point’ when considering investing in exploration companies in any stock market environment, and become even more so in times of greater market volatility and uncertainty.

Ultimately, of course, the real question you and your investment advisors need to answer is whether that risk/reward relationship is right for you in each company you presently are invested in, and what course of action you now (and each day hereafter in both good and bad markets) should take with respect to your investment in each such company.

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The following is the text of an e-mail I sent today to Subscribers of StockResearchPortal.com. StockResearchPortal.com is a research website that provides coverage on the approximate 1,600 Mining and Oil & Gas stocks listed on the Toronto and Toronto Venture Stock Exchanges.

*          *          *          *          *

An article on Wednesday titled the ‘World ‘can no longer rely on dollar’‘ reported that the Managing Director of the International Monetary Fund (‘IMF’) delivered a speech in Beijing on Tuesday on the global economy and IMF reform, saying “The imperative of greater global currency stability meant the world could no longer rely, as it had done since the end of the gold standard, on a currency issued by a single country”. He further stated his view that a new global currency might evolve out of the IMF’s Special Drawing Right (‘SDR’) in-house unit of account. He also said China needs a stronger yuan as part of a package of policies to help rebalance its economy by promoting domestic demand, the sooner the better, but this will take time. He then expressed concern that political willingness to overhaul the international monetary system would falter if, in a year’s time, the visible signs of the economic crisis had faded.

The article reports that former IMF chief Michel Camdessus at the same conference said time was of the essence in reforming the global monetary system given: “This favourable window of opportunity is there. It will not stay open forever”. Camdessus also is reported as giving broad backing to a recent proposal by Chinese central bank governor Zhou Xiaochuan that an expanded SDR could eventually replace the dollar as the global reserve currency and to that end the SDR basket had to be modified to include the yuan and perhaps the Indian rupee and Brazilian real.

I think this is interesting stuff, that it certainly must be disconcerting for the current U.S. Administration, and that it ought to be taken as a clear signal to Americans that the world is perceiving America quite differently from an economic perspective than it did as late as only one year ago. Prior to the September, 2008 economic meltdown there had been talk by Iran and others about replacing the U.S.$ as the World’s Reserve Currency. This is now becoming an increasingly discussed topic – none of which in my view can be good for prospective world confidence in the U.S.$.

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The following is the text of an e-mail I sent today to Subscribers of StockResearchPortal.com. StockResearchPortal.com is a research website that provides coverage on the approximate 1,600 Mining and Oil & Gas stocks listed on the Toronto and Toronto Venture Stock Exchanges.

* * * * *

I came across an article this morning titled ‘Panic in Gold Market? Looming Shortage and Massive Short Squeeze?’ when selecting articles for StockResearchPortal’s ‘Today’s Filtered News’ feature. The article says:

· We are hearing of more and more cases of gold investors wanting to take physical delivery or have allocated gold;

· A couple of months ago Greenlight Capital, the large hedge fund, switched $500 million of investment in GLD to physical gold bullion;

· Apparently Germany has requested that its sovereign gold held by the NY Federal Reserve Bank be returned to Germany”, and “Hong Kong has requested the same of the Bank of England that stores its sovereign gold;

· Robert Fisk, a respected journalist for the UK’s Independent newspaper, reported this week that the Arab oil producing states, Japan, Russia and China have been holding secret talks to replace the dollar as the international reserve currency and as an accounting unit for trade – and that the basket of currencies they propose instead of the dollar would include gold!

· Rob Kirby’s (of KirbyAnalytics and GATA consultant) sources have told him that there was panic in the London gold market around September 30th, 2009 as participants in the market wanted to take delivery of their purchased gold and refused generous cash settlements that were offered instead – and that Central Banks had to come to the rescue to provide the gold via leasing;

· The gold market is in a precarious position. Just like in the days of the gold standard it only required one customer not having his deposit returned to bring down the bank because a domino effect is initiated that results in all depositors asking for their deposits to be returned. If my estimates are correct that somewhere between 64,000 and 150,000 tonnes of gold have been sold against a reserve of only 15,000t; and,

· If you “think” you own gold you should take a few more steps to make sure that you do actually own gold. If you have unallocated gold in some sort of pool account that does not have a satisfactory audit or you own shares in an ETF that does not have a reliable audit then take action. Take delivery of gold or move your investment to reliable and audited allocated storage.

I don’t know whether the statements made by the author of this article, or his assertions, are factually correct. I can tell you that about 2 weeks ago I spoke directly with representatives of the GLD ETF who directed me to an audit report prepared by Inspectorate International Limited, a UK based commodity inspection and testing firm. I revisited the GLD website this morning. By clicking here you can read a copy of Inspectorate’s latest report (dated October 21, 2009 – lower left side of the webpage) on the physical gold held on behalf of GLD on July 10, 2009 at the vaults of HSBC Bank USA National Association in London, England. This morning GLD reports holding 1,113 tonnes (35.8 million ounces) of physical gold valued at U.S.$40.6 billion.

I have thought hard about whether there is incremental risk attached to indirectly holding physical gold through an ETF (GLD is the largest Gold ETF, having accumulated the gold it holds from a standing start in late 2004) as contrasted to holding physical gold directly. While I don’t know how to quantify any such incremental risk, I have concluded there has to be some. My only real conclusion in this regard is: ‘How stupid would you feel if you were unable to realize on an indirect investment in physical gold when you could have held it directly‘. Anecdotally, a person I believe to be of modest means yesterday told me she owns physical gold, and has it buried in an undisclosed place – saving it for ‘a rainy day’. There are many reasons why I think ‘burying physical gold in an undisclosed place’ is not a great idea – but in the end it may beat holding physical gold indirectly.

I recommend that any reader who owns, or who is contemplating owning, physical gold either directly or indirectly click here and read the referenced article in it entirety and in context.

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