CERVANTES CORPORATION LIMITED

delay in drilling due to weather and rig issues. Should be finished soon, expect results next month.

Central banks around the world always play this game, they let inflation creep up until it gets out of control & then they panic and jack up interest rates frantically in a belated attempt to stem the tide - I well remember the early 90"s recession we had to have with 18% interest rates.

Interest rates won't get as high as the early 90's but even if they go back to a reasonable rate of mortgages costing 5 - 6% instead of 2 - 3% at the moment the additional $15k pa cost to your average $500k mortgage holder will cause real pain especially when they have to first pay their tax so we can repay all the stimulus spending debt.

Inflation has been with us for quite a while now, it has just been manifested in asset prices in particular equities & property, now it is flowing through to the CPI figures which are already severely massaged to fit the central bank/government "everything is groovy" message. Sometime soon (I think within the next year) the doo-doo is going to make contact with the fan and a lot of bubbles will pop!

Gold will do well if the above happens & I am quite comfortable holding my albeit relatively small position in a gold spec like CVS while at the same time I am liquidating all my other equity holdings other than gold & other precious metal holdings.

Of course the above is just my opinion & many would say I am a pessimistic doomsayer - only time will tell who is correct.