THE SUPER CYCLE IS HERE
EXTRACTS
by Larry S.
Levy
Editor, Arts 'n
Mines Newsletter
December 12, 2005
In these reports, you've long read how I've expected the markets were about to enter a significant period showing an historically important break out for raw materials - the dawn of a Super Cycle, if you will. Well, I think that period is well underway, and over these last many months the stocks of the major mining companies have been responding enthusiastically. That's to be expected, of course, but it happens in a delayed response to the upswing in metals prices. Investors seem to want sustaining evidence in multiple earnings reports before they start bidding up the prices of the producers.
As juniors, or exploration-phase companies have no earnings, they historically will not move up along with the seniors. That market, the one we follow in these reports, lags until a fever erupts. We are not there, yet. However, I do not think we are too far away as we watch the increasingly steep rise in raw materials prices. Once the market begins to feel as if the senior producers have been over bought, once the cocktail hour gossip shifts from real estate to raw materials stocks, watch out. That's when anything connected with junior mining issues will not only rocket higher to catch up to the seniors, but will dramatically escalate far beyond that.
The last time this happened was in 1979-80. Then, even the dogs among the exploration stocks moved up from a few hundred to several hundred percent - just because it was time in that cycle for that to happen. Those companies who were able to show exciting exploration results or advance ones already in their stable saw their stocks go up from a few thousand to several thousand percent, or more..
Was that a Super Cycle? No!
A Super Cycle is a once or twice per century event that carries raw materials prices ever higher for several years, or even decades. In other words, the Super Cycle I very strongly believe is beginning now, is highly likely to afford astute investors and speculators a once in a lifetime opportunity.
Do you find this hard to accept? Does it sound promotional? Read this http://www.miningweekly.co.za/min/news/today/?show=78441 and then look at the following examples.
In
the last week alone, GOLD was up 4.65 percent.
Since my last complete newsletter on June 1, GOLD is up 26.52%
to $525.50 as of Friday.
From this time 3 years ago, GOLD is up 61.64 percent.
In
the week ended last Friday, SILVER was up 5.15 percent.
From June 1, SILVER is up 21.54 percent to $8.97 as of the
end of last week.
Over the last 36 months, SILVER is up 93.95 percent.
In
the last week, COPPER was up 4.65 percent to $2.10 per pound.
Since June 1, COPPER is up 36.54 percent, and
over the last three years, COPPER is up a whopping 187.47
percent.
ZINC
in the last week was up 4.32 percent to $.8227 per pound.
Lowly ZINC is up 50.26 percent just since June of this year, and
ZINC is up an amazing 106.55 percent over three years.
And this bull market is only growing stronger.
GET ON THE RAW MATERIALS BAND WAGON OR BE LEFT BEHIND!
Now that I have your attention, let me scream something more at you, and perhaps for the last time at these prices. Cardero Resources (CDY - Amex, $4.23 / CDU.V - Canada, $4.90) is the best speculative mining opportunity in base and precious metals that I have ever seen in decades of watching this market sector. For an exploration phase company, it has more high potential, high profile targets than one can count on ones fingers and toes. AND the price is about to blow skyward, in my opinion, in a dramatic and lengthy rise that will take the market's breath away. For informational purposes, I last recommended the stock to you at $3.39 on November 22, so it's up 25 percent in less than 3 weeks and very significant news is still to be heard.
Here's a quick summary of the top three goings on, each of which could see news this coming week, if not before the end of the month.
1)
Cardero has just confirmed the existence of an iron
oxide-copper-gold (IOCG) belt/district in Baja, Mexico.
Assays will be released any day on the first of five targets.
IOCG mines are the largest on earth, and the first one here is
estimated by geophysics to hold a possible 3+ billion tons of
ore. That's just ONE of FIVE potentially massive targets.
Cardero holds 40 percent with Anglo Gold, and can increase it's
participation to 49 percent.
--> NEWS PENDING <--
2)
Cardero holds multiple IOCG claims in Peru, AND the
incomprehensibility massive Peru iron sands project, the
resources of which could dwarf the Baja, Mexico holdings. Work
is in progress on the iron sands that could advance the
importance of this project among the world's iron users like
nothing else they've ever beheld. This is now quietly getting
BIG attention, and by that I mean from major steel producers.
--> NEWS PENDING <--
3)
Cardero holds many precious metals prospects in Argentina, one
of which is a strategically located copper-gold porphyry. A
porphyry is another massive type of mineral occurrence, making
for huge mining ventures. They may hold several hundred million
tons of ore, up to billions of tons. In this case, the target
lies between two other such more advanced ventures, and this one
will likely take the interest of one, or both of the these other
major mining companies, suggesting a possible early corporate
transaction in the making here.
--> NEWS PENDING <---
While it is extremely dangerous to play with numbers at this stage, I will do so below for the sake of you readers who may appreciate a graphic example of why I'm so excited about this company, and why I want you to buy some shares as soon as you can. [Be cautious and don't bet more than you can afford to lose, though.]
Cardero geotechs tell us that the Baja, Mexico IOCG project looks very similar to the Candelaria IOCG district in Chile. There, the properties run .75 to 1.5 percent copper, and gold from .2 to .6 grams per tonne. If we use numbers in between, we get an economic profile in-situ looking something like this...
3
billion tons grading 1 percent copper = 30 million tons and at
$4,200 per ton = about
$126,000,000,000
3 billion tons grading .4 grams ton gold = 38.7 million ounces
and at $525 ounce =
20,300,000,000
3 billion tons grading 50% iron = 1.5 billion tons at $48 ton
(lower Brazilian grades) =
72,000,000,000
Total in-situ value under these suppositions = $218.3 billion dollars.
So, what is it really worth right now, like in proceeds from a sale? It's worth what someone is willing to pay for it, assuming the deal is attractive to current shareholders.
How do we get to a quicky, ballpark number for talking purposes? Well, one rule of thumb is to apply a "typical" discount to the estimated in-situ value. We can observe from the market that very attractive deposits are often taken out at prices falling within 5 to 15 percent of in-situ value. The San Fernando target in Baja, Mexico is, however, unusually large - it's atypical of the market. But, the principle of diminishing returns tells us that even 5 percent may be too generous an expectation, so let's play with 2.5% for the sake of this exercise.
So, 2.5 percent of US218.3 billion dollars is $5,475,500,000, of which Cardero controls 40 percent (at this point). 40 percent is worth $2,183,000,000. That over roughly 50 million Cardero shares gives us an estimated present value of around $44.00 per share FOR ONE OF FIVE TARGETS in Baja.
Think that's high? O.k., cut it in half for about $22 per share FOR ONE OF FIVE TARGETS and then look at the current share price of US$4.23 before the assays are released.
Now go back and read the last press release too see that further drilling is on order for San Fernando, AND now also for the second of FIVE TARGETS, the one known as Amargosa.
Finally, consider that the Peruvian iron sands project could well yield many multiples of the value to be realized in Baja, Mexico. This, while the Argentina project could infuse Cardero with a very nice chunk of working capitol TO HELP KEEP THE COMPANY DEBT FREE, as it advances these much larger projects, and others.
And if these three ventures are not enough to make your head spin, they represent just a fraction of Cardero's many solid prospects. In fact, Cardero has so many options, it may soon split into multiple companies to better manage these projects and secure better returns for shareholders. That's more speculation than anything at this point, but it makes sense given the numbers of projects, the variety, and the vast geographic distances.
You may buy this stock now, ahead of the pending news, or wait for reduced risk following news and pay higher prices for the privilege. Either way, this may well be the most exciting ride you ever take with a mining stock, or any other investment for that matter. ...all in my considered opinion, of course. Do you own due diligence.
Cardero Resource company Web site: http://www.cardero.com/s/Home.asp
Merry Christmas and Happy Holidays,
"The
study of money, above all other fields in economics, is one in which
complexity is used to disguise the truth or to evade truth, not to
reveal it."
John Kenneth Galbraith
© 2005 Larry S. Levy
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Larry S. Levy
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Larry S. Levy is editor of Arts 'n Mines, a private email newsletter for special friends, guests and selected industry insiders. It is not available to the public. EXTRACTS is compiled from portions of the newsletter most often not dealing with specific mining issues. Mr. Levy also contributes economic and historical commentary on these subjects to international publications. He is retired from his former practice as a property valuations expert, during which time he held leadership roles in the premiere trade associations, lectured, and published articles on valuation topics.
