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0920 EST Monday March 06 2006

Good Morning: About seven months ago, just as the Gold market was beginning to move, we came up with some high side estimates for Gold that essentially translated to a possible high end range of $600 to $750 for this year and $750 ~ $950 in 2007, with a possible outside chance of $1,050 or higher and we went on to explain how these sharply higher Gold prices might impact the earnings of major Gold producers and especially how they would also impact junior mining companies with proven reserves and promising exploration potential.

We went on to suggest that even stocks like Newmont Mining and Goldcorp could even see their stock prices potentially gain as much as 400%, because a $1000 Gold price would not only dramatically impact the value of their net in-ground reserves, it would effectively triple or quadruple their earnings especially if their cost of production was low enough to justify that, which in the case of Goldcorp it apparently is.

Amazingly, we did not have to wait for $1,000 Gold for Goldcorp GG to do just that and deliver some truly stunning annual earnings and last evening the CEO and President of Goldcorp, Ian Telfer made a compelling case as to why he sees a $600 + Gold price this year and a price surging to $800 in 2007 citing dwindling supplies, increasing demand especially from China and India's huge new emerging middle class populations and lack of Central Bank selling as the major driving forces behind increasing Gold and Silver prices and also very much, the fact that Gold and Silver have not moved up in tandem with many other commodities, such as Oil 700%, Copper 400% along with other metals that have soared and the price of everyday goods and real estate, which over the past 25 years have in many cases soared 1000%.

The real mover behind the price of Gold is likely to the unknown factor or impact of a combination of this such expected huge new demand versus declining mining production for the first time in 25 years and lack of any new mines that can be brought on line over years to come.

As we have said before quoting among others: Dr Richard Appel's The Resource Sector's Transformation - That's exactly what it is. A new found respect and re-evaluation of stocks within the junior exploration sector have recently become influenced by a new mind-set. Earlier in their Bull Market these companies were affected by two primary factors. The first was the price of gold, which for a few years did not really excite the Gold sector like what has happened of late. The second major influence driving the junior shares has been the tangible spill-over of emotion and especially capital from the major gold stocks. As a group, the gold producers tended to move in lock-step fashion with gold, with the exploration companies carried by what is now seen as their very strong tailwinds. What Appel is really saying is that at this juncture, we are really only seeing familiar and general Gold oriented money being invested in the Precious Metals sector and just as we've been saying ourselves, with the probability of a $20 ~ $25 year bull market in Gold that in all likelihood lies ahead, that we are really just at the very beginning stages of enthusiasm for Gold and that in due time, especially if the above figures are reached within a year or two, then enthusiasm could be at fever pitch by then and much more widespread, but nowhere near the peak crescendo that could be years away.

Trade Well
From the Desk of Savant

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