Vancouver Bonanza!

Sometimes, you can feel the tides of history washing around you, and this week was precisely that kind of time for me.

Sunday, for example, I was personally pushed, pulled and almost stampeded in a gold rush.

No, I dont mean something like the Klondike Gold Rush of 1897. I mean a modern gold rush, going on at this very moment, right under the noses of Wall Street.

Thats what Ive just experienced at the 2006 Resource Investment Conference in Vancouver.

Man, you want to talk gold rush? Then this thing definitely qualifies. About 7,000 people attended, TWICE the number that attended last year.

To put that in perspective, four years ago, only about 400 people showed up for the same event. Thats a 1,650% increase!

Metals are hot. Hotter than hot!

The excitement could be felt in the palpable buzz emanating from the great auditorium and exhibition halls, where those same 7,000 swarmed over the booths of 350 companies.

And it wasnt just gold. Silver, uranium, copper and more all had their day in the sun.

Kilo-sized silver ingots were the favored paperweights. Core samples, rippling with the richest veins of gold and silver Ive ever seen, were displayed like hunting trophies.

But like most mining conventions, sometimes it also felt like a meeting of the Liars Club. Many of those companies will give you the impression theyre sitting on the next Homestake. By Neddy Jingo, all we need is a little more time (and your money), and our stock is going to the moon! they say.

One woman, eight months pregnant, manned a booth for a gold mine that she told me would be in production by the fourth quarter of 2007, trading for only $8 a share.

That piqued my interest. How much do you have in proven and probable reserves? I asked.

Oh, we dont have proven reserves, she said. Not yet.

I Did a Double-Take So Hard
My Incredulity Snorted Out
My Nose Like a Sneeze

Behind her, another woman, overhearing our conversation, rolled her eyes and moved on to the next booth.

I thought to myself: Well lets be kind to pregnant women. Lets remember that she works for gold miners, and gold miners are among the worlds biggest optimists.

Thats true they have to be. Thats why attending a mining conference like this could be dangerous for a non-skeptical person with more money than horse sense.

But if you can separate the wheat from the chaff, you can find good companies, too plenty of them. For example, I met a manager of one of the gold mines already in my Red-Hot Canadian Small-Cap portfolio.

Environmentally Friendly
Driller in Latin America

This guy didnt even have to say anything to the people swarming his booth. The chart of his companys stock behind him headed skyward like a 747 was a picture worth a thousand words.

And I finally got to meet face-to-face with the CEO of a drilling company thats also in the Red-Hot portfolio. My subscribers know who Im talking about his company specializes in small-footprint, environmentally friendly drilling in Latin America, and I interviewed him by phone for a previous issue.

You couldnt wipe the grin off this guys face with flaming wood!

Business is better than good. About 15 of his customers were there at the conference. Hed have more, but he has to keep turning em away!

He was sitting in his booth, chortling over his good fortune. Sales zoom! Profit margins zoom! Earnings zoom, zoom, zoom!

Oh yeah, we bought this stock at the right time. The question Im asking myself now is: Do we own enough? I mean, its still dirt-cheap! Under $1.50 a share. You know that wont last for long.

I also scouted out two more companies that could make nice additions to any portfolio …

A Small Gold Miner That Is Finding
Rich Hoards in the Brazilian Jungle

This one, also in Latin America, has a working gold mine that recently started production with a cash cost of under $300 an ounce.

It bought some of its assets for pennies on the dollar.

It is working hard to increase its reserves rapidly and is bringing new mines into production quickly.

It also has plenty of cash and little debt.

A Tiny Little Silver Miner
That Was Hammered Flat
When Times Were Tough

There are quite a few silver mines in that category, some worthy of your money, some not so worthy.

The key is that now the tables have turned.

This one happens to be close very close to bringing a mine online, a mine it owns lock, stock and ingot.

And what a mine!

Some of the test results from this are wildly rich, showing over 20 ounces of silver per tonne of rock. And theres plenty of other metal there, too gold, copper, lead, zinc.

The smart money is already pushing this stock higher. But it still trades under a buck a share, and it has a long way to go to get back to its old highs.

Black Gold

The Resource Investment Conference focuses on mining companies.

But theres another kind of gold black gold on peoples minds. In fact, one of the reasons gold is going higher is precisely because of the oil money thats switching from dollars to gold because of igniting tensions in the Middle East and Persian Gulf.

Here are just a few of the sparks we see right now …

Today, in Gaza and the West Bank, millions of Palestinians have just voted for Hamas, the terrorist group financed largely by Iran and responsible for most of the suicide bombings in the region. This opens a whole new chapter in the escalating conflict.

In Europe and elsewhere, Iran is yanking large sums of money out of major banks and shifting it to Asia, where it will not be subject to sanctions.

Oil analysts are trying to figure out whats up with Kuwaits oil reserves.

The latest reports indicate they may be only half of what the Kuwait authorities have officially stated.

All this is turning up the heat on oil still further.

At the convention, I was lucky to run into the CEO of a junior energy company as he walked around the conference. We struck up a conversation that was so interesting I sat him down and interviewed him on the spot.

Turns out his company is sitting on probably 1.5 TRILLION cubic feet of natural gas. But this gas is hard to get to theyre drilling test wells right now, utilizing new technology, to see if they can make it work.

This is no sure thing. If it were, his stock would be trading at $10 right now. But this is exactly the kind of thing America needs because the natural gas is tucked away in a remote corner of North America, far, far away from the boiling witchs cauldron that the Middle East has become.

Sure, natural gas prices have pulled back this week, but thats due to unseasonably warm weather. If we get a cold spell, the snapback, could be hard enough to trigger whiplash.

It will take up to 18 months before this CEO is sure he has a winner on his hands. But this is not the kind of situation in which you can wait until AFTER the news. The stock has enormous potential long before that event, and the only way to play it is to take the chance.

Sorry to be so vague, but its one Im considering for the Red-Hot Canadian Small-Caps portfolio. Ill keep my eye on it and will be ready to move at a moments notice.

These are just three of the treasures I found in Vancouver. There are a lot more where those came from.

Will I be recommending these three companies? That depends on the selection process I still have to go through when I get home. Plus, the precise timing will depend on market action.

Indeed, heres where you have to ask yourself (as I did) …

Is the Gold Market
Overextended Right Now?

If all these people are suddenly showing up at a metals and mining conference, could that be a sign that the market has gone a bit too far, too fast?

Sure it could, and that worries me, too.

But then I remember the powerful forces that are driving this market.

We are sending the Middle East more of our money every day (for oil), and oil-rich sheiks, fearing unrest and an Iran that grows more militant every day, are pouring that money into gold.

China and India are doing the same.

And its not just gold. China is rebuilding its entire electrical grid, and racing to connect the 20% of the country that isnt on the grid at all.

Enough people in China move to cities every year to populate all of Florida. All that new building takes copper, aluminum, lead, and more.

India, meanwhile, is sick of being third-world or last in line, and its going to give China a run for its money in reshaping its infrastructure. Just back up the truck and load up the metals, why dont ya?

Some speakers at the convention also sounded a word of warning about the red-hot action in metals.

In this context, it might be wise to take a word of advice from Frank Holmes. Hes the largest shareholder and CEO of the mutual fund family, US Global Investors, with a success record that other fund managers can only envy.

Frank spoke at the convention and said that yes, gold could pull back here. Seasonally, its due for a correction, and there are other technical factors.

But then he listed one bullish force after another for gold and energy forces that are familiar to my readers, and ones I think could reshape the world.

Speaking of US Global, they have two great funds to play these trends:

US Global Investors Global Resources (PSPFX) rotates to the natural resource sector it thinks is hot. For example, in the most recent quarter, it was loaded up with energy, and that helped it achieve a nearly 50% return. It has a total expense ratio of 1.3% cheap is a no-load fund, and carries a four-star Morningstar rating.

The beauty of this fund is that it tends to go where the action is. Energy was hot last quarter, so it shifted more to energy.

If it thinks metals are hot, it could shift more to metals. This gives you flexibility and a great return.

US Global Investors World Precious Minerals (UNWPX) is strictly a precious metals fund. It did very well last year, returning over 30%. If you think gold is about to lift off the launch pad, this can be one of the vehicles you use. The stocks in its portfolio are highly leveraged to the price of gold. And it has a total expense ratio of 1.48% still good no load, and a three-star Morningstar rating.

Conclusion: The Rush Is Here, My Friends!
Both for the Yellow Metal and Black Gold!

You should either be early or be smart, and hopefully both. Those who sit on their hands until its too late will miss out.

There are enough new mines coming online that around 2009 or so, if trends remain the same and these mines pan out, we could see an end to golds bull market. But thats still 3 years away.

But right now, I believe the supply/demand gap is your window of opportunity.

Yesterday, some of the mining and energy stocks took a little breather. The oil service stocks came down a tad. So did our favorite gold stocks. When that happens, it’s good. It gives you a chance to buy without the frenzy.

Right now, you can ride this wave entirely on your own, with your own navigation tools. Or, if you wish, you can hop on board with me. Just be aware that my available slots are running out.

Yours for prudent profits,

Sean

About MONEY AND MARKETS

MONEY AND MARKETS (MAM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Larry Edelson, Tony Sagami and other contributors. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MAM. Nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MAM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical inasmuch as we do not track the actual prices investors pay or receive. Contributors include Marie Albin, John Burke, Beth Cain, Amber Dakar, Michael Larson, Monica Lewman-Garcia, Julie Trudeau and others.

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