gindalbie gold discovery, page-8

HBG

I will have a very fast go at this. Please note these are my views on resources stocks and others I am sure will have their own or even disagree with what I say.

Basically there a three main phases of capital growth for resource stocks:

1. Discovery
2. Feasibility
3. Production

Essentially if you dont know much about the industry I would recommend that you pick one of these phases to focus on. And start reading, reading, reading. Learn, learn and learn. The reality is that it takes a mining professional whom has a degree behind them probably 15 years to become a good resource analyst so how the are you going to do it with the occasional bit of reading.....? that is your challenge.....

The earlier you jump on in the project timeline the greater the risk you take. The highest risk is when you jump in BEFORE a discovery taking a punt that you will strike it lucky. The least risk is buying BHP or RIO.

The second decision is to determine what timeframe you want to be in the market. Are you a day trader? Are you a position trader holding for say 1 week to three months, or you an investor and will hold for say 6 months to two or three years?

The third decision is to decide what risk you are prepared to take. By saying that I am not referring to whether your money is play money or not, I am referring to what sort of probabilities you are prepared to put your money on.

To increase your probabilities of winning in the long term you must seek a long term repeatable pattern in the market. The reality is that one discovery stock will not make you wealthy, nor two. For most people making decent money out of the market will mean finding a niche that you can relaibly put your money into and you know the market will at high odds perform in a certain way.

People who are currently punting on TAS for example are not even at discovery hence the risk at is highest.
People buying TAS right now are doing something akin to going to the racetrack - the odds of a new discovery are always poor. Traders can say they researched it, etc, etc but that doesnt change the fact that a raw wildcat exploration project is a poor place to put your money.

Two areas for healthy capital gains that I have personally focussed on are:
1. Jumping onto new discoveries straight after the first announcement, and
2. Buying into a stock after they have finished their feasibility and have got or are close to getting bank finance.
3. Buying a producer with a production growth profile ie new projects coming on stream.

Currently I would put GBG, SBS in category 1 and I would put LAF, GGN, HIG in category 2. NCM would fit surprisingly into 3.

I have personally bought GBG recently on the basis that their new discovery sounds promising and I am banking on further strong followup results. I will hold from anywhere from one week to three months. If the next set of results are poor I will sell immediately.

I also hold LAF and will do so right through to first production.

This whole sector is capital intensive (they are always doing placements, etc) and full of insider trading. By no means is it a level playing field. I work in the industry and can tell you staright that mining companies
are also commonly guilty of taking a shining light to every exploration project they have. The reality is that they have no choice as they have to rely on placements and shareholder plans to survive. It is not that they tell fibs, you just dont get the whole picture .......

The ultimate issue is to learn what it takes for a resouce project to be highly profitable. What grade of ore is required? What strip ratio? Will the mining cost be high or low? Are there metallurgical risks? The list of risk factors in mining is endless.

Look for the companies with quality assets.

Another place to start is to look for broker research on projects and find out what the project NPV is and compare it to the market capitalisation of the company.

This could go on but I will finish it here.

Good luck.
acturtle