my trading service, The Money-Flow Matrix Trader. Gold’s move toward the historical resistance
point at US$400 an ounce could be attributed sim-
ply to the reflation of the US and global economy.
But the strong move above US$400 has to raise an
eyebrow or two. In my opinion, this move clearly
shows that inflation fears are on the rise. And they
will only get worse. The fear factor It may be helpful to think of gold not as an asset with inherent value, but as an inflation fear gauge.
Think of gold as an option (or even better as a
futures contract) with the fear of inflation as its
underlying asset. From that perspective, it’s easy to see that the
price of gold has room to run. Because inflation is
still very much a back-burner issue. We haven’t
even started to see headlines or roundtable discus-
sions about it. When we do, gold has the potential
to rise another 15% to 25%— a substantial move that
could be very profitable. Mining for profits It’s probably a good idea to own some physical gold, or at least a long-dated futures contract. But
the simplest way to get some gold in your portfolio
is by buying a junior mining company stock. And I’ve got one that looks pretty good. It’s a
Canadian gold producer with operations in Nevada.
I’m going to give you a brief rundown on the com-
pany, but I want you to remember that the primary
thesis for investment in a gold mining stock is the
price of gold. The company is Apollo Gold (AGT:AMEX). Apollo
operates pit-mining operations in Nevada. Total
proven and probable reserves are 940,800 ounces of
gold. Current production runs between 110,000 and
130,000 ounces a year. A new operation due to
come on line in the near future could add 70,000
ounces of gold annually. For the trailing nine months, Apollo made
CDN$65 million in revenues (around US$48 million
at current exchange rates), primarily from the sale
of 107,000 ounces of gold. The average price per
ounce was approximately US$375. Clearly, if the company can boost its production
to 180,000 ounces a year and fetch something north
of US$400 an ounce, revenues are going to rise sub-
stantially. Apollo Gold currently trades at around US$2 a
share, roughly twice annual sales. 180,000 ounces
of gold times US$400 an ounce works out to US$72
million in annual revenues. And that, in turn,
implies a forward valuation of just 1.2 times sales.
Assuming Apollo can maintain a valuation of 2x
annual sales, this company could easily add US$1
or 50% to its stock price. And, of course, positive news for the company or
a sharp rise in the price of gold, which I think is
imminent, could send the stock price even higher. So I’m rating Apollo Gold (AGT:AMEX) a strong
buy at or below US$2 a share, with a 6-month price
target of US$3. You can contact the company at:
Apollo Gold Corp., 204 Black Street, Suite 300,
Whitehorse, YT Y1A 2, tel. 720-886-9656, website
www.apollogold.com. n 6 Hotline: 410 528 8228 TAIPAN by Adam Lass, Bryan Bottarelli
and Ann Sosnowski I read the news today. Oh boy.
Sometimes, when I get up in
the morning, I’m not quite sure
what day of the week it is. Then
there are the days when I’m con-
fused as to which century my
morning paper is from. This morning’s headlines didn’t help much: They
are all about the president’s declaration that those
godless commies in the East shall not beat us to the
moon. Further reading reveals that the President’s advi-
sors are telling him that with any luck, a “space
race” would distract the populace at large from our
failure to win the hearts and minds of the citizens of
several small, eastern countries torn apart by insur-
gent guerilla movements. 2004: The year of Spiders and Diamonds Maintain your SPY and DIA basket…
but with a cautious trailing stop Adam Lass
