Our good fortune in the mining sector continues. Last week saw the acquisition of Canplats by Goldcorp, and this week two of the nine exploration companies in the EI portfolio battled it out for "drill hole of the week" honors. That's nine exploration companies in the portfolio: not 43, not 101, but nine! San Gold announced 1,787 grams per tonne gold over 2.1 meters in a new vein discovery at Rice Lake, and Mirasol Resources drilled 1,164 grams per tonne silver over 25.4 meters in Southern Argentina. It doesn't get much better than that; maybe it's time to reflect on how much better the economic situation feels this US Thanksgiving holiday versus the last.
It's also probably worth reflecting on two truisms my ex-boss Rick Rule often repeats when he is feeling particularly smart: 1) don't confuse brains with a bull market, and 2) you never go broke taking a profit.
This year has been good to most participants in equities, metals, gold, and, depending on where you are, real estate. The outright fear we witnessed early in the year has turned to rampant speculation. We have discussed this in past issues (most recently November 1 and October 18) and presented the possibility that the massive global liquidity injections and a one-way US dollar carry trade are largely responsible for the apparent economic improvements. Our apprehension has been that if/when fear re-exerts itself we will all go down together, as speculative money rushes back to the perceived safety of the US dollar. The following Reuters headline brings this possibility home.
"Gold prices tumbled nearly 5 percent to a one-week low below $1,140 an ounce on Friday as investors fearing debt default in Dubai sought safety in dollars and cash."
This week we are officially taking money off the table by selling a portion of one of our portfolio positions that is up 120%. This is not an outright sell; it's still a good company that I expect to perform well in a rising metals market. It's my portfolio management style to cull some profits with the idea of reinvesting those funds into companies offering more leverage to a discovery: higher risk and lower market cap.
Stock Talk
Mirasol Resources (MRZ-TSX-V) pulled one of the best silver drill holes we have
seen for quite some time: 25.4 meters grading 1,164 grams per tonne silver, and 0.21 grams per tonne gold. The interval included 3 meters grading 7,753 grams per
tonne silver, and 1.17 grams per tonne gold. The market reacted quickly (and
irrationally) nearly doubling the stock price, and adding about C$19 million to MRZ's
market capitalization before settling out at C$1.26 per share. Although this
represented a clear "trading" opportunity, it is impractical for me to suggest trades
around such rapid fluctuations in this letter.
