November 24, 2010

Good Morning:

Ireland/The EuroZone, Junior Gold Drivers, Mining Takeovers

Ireland/The EuroZone

You likely have noticed the number of articles and comments being made in the past week with respect to Ireland and its ongoing financial woes. I strongly suggest you take the time to read an article this morning titled 'Merkel (German Chancellor Angela Merkel) Points to '' - reading time 8 minutes. The article discusses 'risks facing the euro' highlighted this week by Ms. Merkel, and Germany's 'clear support for the euro'. The article also highlights the financial circumstance of Spain, and includes a 'Sovereign Debt Contagion Model (table) that includes 15 Eurozone countries and the U.S. In my view all equity investors - resource or otherwise - ought to keep a watchful eye on the Irish story as it unfolds, with emphasis on how that story may affect the Eurozone generally, individual Euro countries specifically, and the equity and money markets.

You might also want to read two other articles this morning on the Irish situation titled ' target="_blank">Spain and Portugal under fire as bond spreads hit record' - reading time 1 minute.

Drivers To Review - Junior Gold Explorers

On Sunday I added a further answer to the Question 'What are the main drivers I should be looking to when researching a junior gold exploration company?' on StockResearchPortal's Investment Education Forum. If you are interested in 13 things I focus on, and my reasoning for focusing on each,

If you invest in mining equities I suggest you take the time to read ''. Published yesterday, reading time is 3 minutes. The article discusses last's week acquisition announcement by Caterpillar of Bucyrus, a mining equipment manufacturer. From my own consulting experience I agree with the author's comments on EBIT-DA (earnings before interest, taxes, depreciation and amortization) multiples. If Caterpillar paid 10.5 times estimated 2011 EBIT-DA for Bucyrus, as I assess things Caterpillar must be extremely bullish on Bucyrus' near term growth prospects - or it must expect to realize a tremendous amount of synergy (post closing cost savings) - or a combination of those two things.

I think importantly, the article makes an interesting observation, and one I have thought a lot about as I develop StockResearchPortal.com. As stated in the article "let's look at mining in general. The most important thing to appreciate is that mining is viciously cyclical" BUT (and this is the thing I have been thinking a lot about) "since this 'new' demand for industrial commodities (from the emerging markets) shows no signs of abating, the long-term outlook for the mining industry is more compelling than ever ... and probably less cyclical". Something to think hard about. As I have said in other e-mails, I expect a large amount of merger and acquisition activity in the coming years in most of the mining sectors.