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     Ja Nein
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      schrieb am 05.09.02 17:37:32
      Beitrag Nr. 1 ()
      http://www.financialsense.com/editorials/sinclair/082102.htm

      GUEST EDITORIAL

      James E. Sinclair
      Chairman & CEO of Tan Range Exploration Corp

      HOW TO IDENTIFY A GOOD BUY
      Top 10 Criteria on Selecting Juniors
      by James Sinclair
      August 21, 2002



      Wednesday, August 21 "SELECTING INDIVIDUAL GOLD & SILVER STOCKS"
      Q: You speak about a gold share portfolio that is 2/3 non-hedged gold producers and 1/3 gold exploration and development companies. How does one identify who these companies are? Also what about silver mining companies?

      A: The criteria of selection for the non-hedger producers is the easiest of your questions. You need, of course, a source of information, but the less biased the better. A brokerage company on an entity of their interest usually does write-ups of companies as a selling tool. Recommendations made by friends are well meaning, but usually are their selected personal positions. Unsolicited promotional material must be considered suspect. I suggest you subscribe to "World Gold," which is a Mining Journal Publication (marketing@mining-journal.com) which presents itself as global, authoritative and independent. I believe it is as close to that description as you can come in the analytical community. It covers all producers of 100,000 ounces per year and up. You will get information on their operations, costs and hedge positions, as well as all other pertinent information. Criteria to selection, IMO, can be what you feel is exceedingly good in the following categories among all those reviewed:

      1. Political stability of places of operation.
      2. Total cost per ounce of production, not simply cash cost of production.
      3. Total un-hedged proven and probable reserves position.
      4. Cash position.
      5. Hedging and gold sales activities.
      6. Share information, such as cap value, shares issued, and average daily volume of shares traded.
      7. Comments on major projects.
      8. Comments on operating results.
      9. Technical analysis of the stock price comparing the very long monthly chart, the medium term weekly chart and the short-term daily chart. Purchases can only be made when at least the weekly and daily charts are in agreement as to the positive direction of the share. Price objective should be considered by the means of historical point and figure charts (which do not calculate time) utilizing what is called vertical and horizontal counts.

      Nothing is gained without effort. Just as in trading, for investment you MUST study technical analysis in order to be at cause and not the effect of market. So you to have to study the fundamentals of gold companies. If you accept the advice of others without doing your homework, then you are to blame if your situations are inferior. Once you have made a quality judgment concerning an investment, you must make the timing decision of when to invest. That is called Technical Market Analysis.

      Criteria for judgment concerning gold Exploration and Development companies are somewhat more complex. There are at last count 1800 competing companies in different states of repair and disrepair. This is the arena, which if successful, will return the greatest percentage appreciation with the attendant greatest risk.

      The source of information on this category is the same as the non-hedger producers above; "World Gold" published by the Mining Journal (marketing@mining-journal.com), their section "Junior Company Roundup" plus one more source "The Canadian Mining Handbook" for the current year published by Southam Publications Company (hgibson@corporate.southam.ca).

      The criteria for selection in the junior exploration and development company fields are, in my opinion:

      1. Reputation of management, which you can determine by:
      (a.) Is the CEO singularly dedicated to the company or is this company only one horse in a large stable of companies? You can obtain this information from the records of the administrative law body governing the exchange on which the share trades or from that exchange itself. Some individuals are officers and/or directors of up to 30 companies. The problem with this is simple. If a property is decided upon, which company in the stable gets the property? What is the basis of his decision? This also explains why some of these individuals draw very low salaries, something about which they like to call attention. However, if you add up the 30 or more small salaries from the different companies in their stable, the total comes to a very large sum. If you discover that your company is run by this type of individual, with interest in many different issues, run (don`t simply walk) away.

      b. What properties have the management been involved in -- in their career as a manager of junior companies -- that have actually come into production? The fact that a person may have once worked for a major gold producer and claims a major`s property as a result of his efforts is thin ice. In a major, no one person is responsible for any one property. Again run, don`t walk away.

      2. What is the present policy of the company as far as granting options to insiders? Beware of `paper-hangers` in the disguise of real people. The finest property can be diluted to irrelevancy to the shareholders` interest per share. If the company is liberal with granting of options to insiders, again run, do not simply walk away. If the company has a policy that allows for re-pricing of insider options to lower levels for insiders when the share declines, run away even faster.

      3. Does the company have deals with major producers? Since you cannot evaluate the property without a degree in Geophysics and Geology, the best you can do is to determine if those who are so capable have seen fit to make deals with the junior. If they have not, then be quite skeptical. If they have, how many deals have been made? Be careful of the one-property company. If it fails, there is no bottom in the stock regardless of how good the gold environment is.

      4. Is the company you have selected on a path towards percentage Joint Venture "JV" deals or on the royalty path? For those that automatically believe percentage JVs are better than royalty agreement, look at Royal Gold and its accomplishments. A mix between both is, in my opinion, a wise decision. Royalty is the direction I have chosen to go. There is nothing to preclude a junior royalty company from advancing a property to a level whereby a spectacularly good deal can be made. A Net Smelter Royalty (NSR) deal means that your company does not put one cent into the deal after the royalty option is elected by the major. It, unlike the percentage deal, means that you do not deal with the major for your reward. On a Net Smelter Royalty (NSR) deal, your percentage of gold production comes directly from the smelter. An income royalty deal puts the royalty junior into the hands of the major in regard to the level of ethics of the major. So far I have never seen a gold mine run in a taxed area make a dime in that area. It is usually expensed to death by the major from a tax-free location. Beware of Income Royalty deals as they suffer from the same problem as a percentage "JV" deal. That is they are at the accounting mercy of the merciless majors. A merciful major gold producer is unfortunately an oxymoron of world status. For the 1/3 of your portfolio, consider owning at least one junior Net Smelter Royalty (NSR) company and one junior percentage company that both meet the criteria of integrity.

      5. The cap value of the company should not exceed a modest multiple of the already capitalized exploration costs. This will change at various stages of the general market environment. However if all other criteria is equal, you should buy the share at a cost that is not extremely above what the company has already put into retained properties.

      6. The more senior the place of listing, generally the better the application of rules and regulations are.

      7. The company should have enough funds in place in the treasury to be able to finance their operation for at least two years from the time of your purchase. They should also have some means of income that is in place other than simply draining the treasury by which they can meet ongoing corporate expenses.

      8. The company should have in its additional land package on not yet dealt properties what is called Blue Sky or potential upside based not on hope, but on scientific disciplines such as geophysics and geology. It cannot be unexplored land but must have through the efforts of the junior considerable scientific information for mineral targeting and conclusions showing significant potential acceptable to the industry standards.

      10. Just as in the selection of your non-hedger producer, the company stock price must be bullish on the monthly, weekly and daily charts. The weekly and daily must agree that a purchase is warranted. A price objective should be readable from the discipline of vertical and horizontal counts on point and figure charting. In the case of the junior, attention to the technical is even more critical than the share of the non-hedged producer.

      After this work is completed, the discipline of selling one third of the total portfolio into market rises in the general price of gold and appreciation of the gold shares MUST BE adhered to. The decision of when to make these sales will come out of your present study of technical analysis even if all you learn is what is a trendline, support and resistance. Harry Schultz (www.hsletter.com) and Marty Pring (www.pring.com) both publish excellent technical services on gold shares as well as other items. Both of these services are a must for the serious investor regardless of the size of the investment. A serious investor makes a small fortune into a big one. The person unwilling to work hard makes a big fortune into a small fortune.

      In answer to your question on silver companies:

      It has long been my personal feeling that silver is so affordable as compared to gold, why not simply own the silver? You can add whatever leverage or no leverage at all, by disciplining your dealings in silver futures so that you approach silver futures as an equivalent for cash silver or up to 50% margin if you care, just like a listed security. This way you avoid the risk of what has long been a way to describe an executive of a silver mining (or gold for that matter) company. That is "a Liar standing on top of a hole in the ground." I used to speculate that the only thing wrong with that statement was how do you know there is a hole in the ground?

      Futures, however, should not be approached at all if you have not studied technical analysis. Again you must study the long-term monthly chart, the medium-term weekly, and shorter daily chart. You must not be long silver unless the weekly and daily technicals are in agreement that such a position is warranted. No praying to the god of greed for relief from a bad position in silver futures can be tolerated. It is a ticket on the express train to living in a cardboard box on the corner of Houston and Bleeker. Another suggestion is that offerings to the god of greed are required for success. That is getting out early and let someone else find the top. If you drop 10% of your trading stake, leave immediately and consider it tithing to the god of greed.

      Best Regards,
      Jim
      Avatar
      schrieb am 27.09.02 14:43:02
      Beitrag Nr. 2 ()
      Hat immer noch seine Gültigkeit!!!!!


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