a moly bull.

Fears make resources sparkle
Silver and gold seen as good buys after taking a beating in subprime aftermath
SHIRLEY WON
From Tuesday's Globe and Mail

December 4, 2007 at 7:00 AM EST

Hedge fund manager Otto Spork believes the pummelling taken by resource stocks because of fears that the U.S. subprime mortgage mess would slow down the North American economy has created buying opportunities.

"We are looking to buy on this weakness," the portfolio manager with Toronto's Sextant Capital Management Inc. said an interview.

"We feel that certainly the junior gold and other resource stocks are nowhere reflecting their true value."

Mr. Spork runs the $20-million resource-oriented Sextant Strategic Opportunities Hedge Fund LP that was 85 per cent in cash by June before markets headed south last summer. "We saw that the markets were very high, and felt there was a correction coming," he said.

Resource stocks, especially smaller company names, have been hit badly by the "negative sentiment" stemming from a belief the subprime mortgage woes would get worse, he said. "People were going to more liquid [names], taking a flight to safety."

Mr. Spork's buying spree in the past couple of months, however, has taken his fund down to 10 per cent in cash.

He is "very bullish" on the gold sector, saying he believes the price of the yellow metal is en route to $1,500 (U.S.) an ounce within the next two years. While gold has traded over $800 recently, it closed yesterday at $794.70.

But silver has "better upside potential" because much of its production has disappeared through industrial uses while gold still exists in jewellery or bank vaults, he added.

"We could easily see $35 or $40 per troy ounce for silver [over the next couple of years], and it's about $14 now."

Mr. Spork is also upbeat on molybdenum - a metal with industrial uses like strengthening steel and removing sulphur from crude oil.

Molybdenum prices sat at around $3 or $4 a pound for many years, but in recent years have ramped up to the $32-$33 level, he said. "We think there is going to be more upside, but ... there is a lot of profit to the mining companies at these prices so that's how you have to look at it."