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Strategies & Market Trends : Ride the Tiger with CD

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From: zoo york12/9/2006 1:08:50 PM
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Gold Canyon Resources (V.GCU) and Rare Earth Metals:

I think that REE are going to become the flavour of the month sooner or later in this sector. There is a regular rotation of the resources that are in favour in the overall bull market that has been in effect for several years, and during that time stocks leveraged to gold, silver, zinc, nickle, coal, natural gas, oil sands, and uranium (several times) have each had their day in the sun.

The fundamental picture for REE is becoming a compelling story, since most are produced in China, and they are critical for the production of many components in demand today. Right now there are few people who have even heard of REEs, and fewer still who can tell you what the hell gallium or scandium is, or what it is used for. That will change. It will start as a stealth bull, as people begin to appreciate what is going on, they research for stocks leveraged to REEs. Then the media and analysts will catch on to what is going on, and a boom will happen.

The time to profit from that behaviour is right now, while people are not paying attention. For example review that each of the sectors I pointed out above went through periods when the leveraged stocks were easy to accumulate cheaply. No one carred about coal, zinc, or silver in 2002 and you could have made 1000% gains by stepping up and buying then. And the uranium stocks were even more compelling values.

GCU's Cordero project has many great advantages. It is the biggest REE deposit in North America, and it exists in the mining friendly state of Nevada. It is near surface, with exceptional economic considerations for a open pit mine. It is located far from major population centers, and on the site of a former producing mine for mercury. It is also advanced, with a NI43-101 compliant report on the record, and it is growing, as further exploration activity is ongoing.

Add it all up, and I think buying the stock now at the current depressed market value is a no-brainer, with the caveat that investors will have to approach the play with patience, so no one can say for sure when the market will wake up and realize the value and get excited about he REE story in general. Thats the trade off for getting exceptional value, is that it takes time for the market to catch up. But I think it will.

GCU also has a compliant gold resource of a quarter million ounces at their high grade Red Lake area Springpole project. For a stock that once traded above $21 to be priced at 28 cents, when they have built in so much greater value now, is intriguing to say the least.

I am doing some research on metallurgy and putting together some estimates for the resource potential and some assumptions on the economics of the project. I will post this once I have the time to catch up. But I do think now is a good time to be accumulating GCU, and I have picked up 24,000 shares in my own PF.


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