The Ormetal Report

April 18, 1997

Gold Stocks, revisited! -

It has been a dismal year for gold and gold stocks. With gold locked in a downtrend since February 1996, we didn't really need more negative stories to affect this market. But, then came the Bre-X saga and its evident effect on some of my favorite gold stocks mentioned in Gold Stocks for 1997 and Beyond. Not only these, but also the entire mining sector took it on the chin. We are just starting to find a bottom and although everything looks oversold, there are no garantees that we have seen the end of this correction. But all will agree that a rally would make sense here. Look at what happens in the past 3 months:

Company

Jan 1st

High

Now

Variation 
since Jan 1st

Crystallex International
International Precious Metals ($US)
Manhattan Minerals
Pan American Silver
Richmont Mines

2.50
4.37
10.75
8.25
5.75

5.87
14.25
12.25
12.50
7.00

4.05
10.16
8.75
8.80
5.60

+62%
+133%
-18.6%
+6.7%
-2.6%

Gold (London P.M. Fix)
Toronto Silver & Gold Index
Vancouver Resource Index

369.55
11302
2381

369.55
11575
2551

342.10
9143
1936

-7.2%
-19.0%
-18.7%

 


 

 

Crystallex, a legal
battle more than
anything else

 

Since I introduced Crystallex International Corporation earlier this year, not too much has happened on its main properties. However, this company has introduced a new variable that has attracted a new breed of investors: The ones who believe that acquiring valuable properties using legal tricks is as good as discovering them through hard exploration work. Crystallex is now claiming that the millions ounces of gold discovered by Placer Dome Mines at Las Cristinas, Venezuela, belongs to them. Apparently, the titles to the Las Cristinas property are really owned by one of Crystallex's subsidiaries. Crystallex is seeking an agreement with Placer Dome. But the latter is saying that KRY's claims are unfounded. It really looks like a long legal battle will be the only way to solved this deadlock. The focus is now on this new situation. And as an investor in KRY, I don't like it. Simply said, this new dimension implies that any news on KRY's other properties will not be noticed by the market. And if eventually Placer Dome wins, you can bet on KRY's stock falling like a rock. On the other hand, if KRY wins this battle, bet on much higher prices.

The jury is still 
out on International 
Precious Metals

There are not too many analysts or newsletter editors who follow International Precious Metals. For now IPM remains a wildcard that has not been discovered or that is simply ignored by the North American precious metals establishment. Despite this, International Precious Metals is among the best performers of the last quarter. Just try to find a precious metals junior that is up 400% since summer 1996 and more than 100% since the beginning of the year, you will see that it isn't easy. I won't steal the show and pretend that I am one of the biggest fans of IPM. In fact, I am certainly the most skeptical of the few newsletter editors who recommended this one to their subscribers. Still, I am not blind -and I recognize that the management of IPM is taking all the necessary steps to prove that they really have a monstrous deposit containing several millions ounces of gold and other precious stuff. The potential is truly immense and the whole thing is credible. Still, I am not yet convinced that all is in the bag for IPM. I want to see more numbers and more engineering work that confirm that the high recoveries the company announced earlier this year will remain in a production environment. That is why I recommended that my subscribers take some profit a few weeks ago. The next month should see major announcements by the company that should either convince the skeptics or distress the fanatics.

Manhattan Minerals
increases its share
in Tambo Grande

Manhattan Minerals continues to grow in the quarter and announced several good news items. The most important one was certainly the acquisition of a further 25% interest in the Tambo Grande copper-zinc-silver property in Peru. MAN should be drilling in Peru sometime this summer and should start to generate a lot of excitement from this great project. Manhattan also announced some very encouraging results from the Candamena property, a Mexican play that could turn out to be a 2-3 million ounce deposit. Operations at their Morris mine are continuously producing gold as well as the necessary cash flow to pay for their exploration efforts. Stay tuned for more news during the remainder of the year.

Pan American Silver gets
into a major Russian
silver play

Pan American Silver remains one of my favorite selection to participate in the silver market. You can bet that this company still believes that the silver market will become explosive in the next few years, and it is getting ready for this event. In the last quarter, Pan American Silver signed a letter of intent that could be its greatest acquisition ever in the silver market. PanAM won a bid to acquire the Dukat Silver Mine, 400km north of Magadan City, Russia. This property is Russia's largest silver producer and contains an inventory of more than 400 million ounces of silver. PanAM Silver will complete due diligence and could add as much as 66% of this proven silver resource to its inventory. We should know by year end if the deal is made.

Richmont Mines
brings Nugget Pond
to commercial production

Richmont Mines is my most conservative gold stock, and for good reasons. It is undervalued based on its strong cash flow and earnings. It announced last week that its new Nugget Pond mine in Newfoundland, Canada is now in commercial production and confirmed earnings estimate of about $0.50 per share and a cash flow of more than $1.00 for 1997. With new acquisitions expected in 1997, Richmont should continue to see its growth accelerate. In my opinion, RIC is a core holding for all precious metals portfolios.

The stocks above are only a few among the many I
follow and own. The time is coming when a real
bull market in precious metals will take these
stocks and others much higher in price.

A gold nugget can be worth three to four times the value of the gold it contains because they are so rare.

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