nice chart eh

The attached chart CLICK HERE resembles one of the BIG US Banks that is in BIG trouble.

It isn't a dodgy bank though. It is a Junior explorer that also looks as though it is in BIG trouble. It is in fact IGR.

Usually, one would expect a multitude of problems with a company that has fallen from grace so precipitously.

The share price has been in free fall since April this year losing around 85% of its value which was sitting at 66 cents back at its peak. It is now languishing around 10 cents although it perked up today which is a good sign following the rates cuts on Wall Street overnight.

Traditionally, such a fall from grace, could be attributed to one of the following usual suspects.

Dodgy Management

Poor Assets

Poor Cash Reserves

A Poor Business Model

Placed in the Wrong Sector

Sovereign Risk

Over Capitalised

Oceans of Shares on Offer

The reality is that NONE of the above explain the share price fall.

In fact, what is quite extraordinary is that the Aussie gold price is considerably higher now - (ie low $900's then verses low $1100's now ) - than when the share price was sitting at 66 cents back in April.

ie The share price is down from 66 cents to around 10 cents, and YET the fundamentals behind the company have actually strengthened. How remarkable is that? What's going on?

Well what has been going on is threefold.

1. Powerful interests have taken gold stocks down right around the world in an attempt to tarnish gold and to put lipstick on the paper currency pig. The so called US strong Dollar policy is nothing more than a guise to bash gold at every opportunity, and by default, to strengthen the US dollar. (Gold of course being the arch rival to printing presses) The strategy has worked well in the past but the ruse is now well and truly up. The Emperor (the US) has no clothes, but is strolling around as if no-one has noticed. And the Emperor is about to be charged with obscene behaviour.

2. Forced selling following the sub prime debacle, by Hedge Funds, Banks, Institutions and anyone forced into margin calls, has caused a deleveraging across all financial assets in a dash for cash.

3. Allowing Lehman's to fail, precipitated a daisy chain of derivative failures that instantly exposed an enormous number of Institutions around the globe to massive losses. Previously, allowing the likes of Bears Stern and Merril Lynch, to be swallowed up via takeovers, prevented the need for the forensic detailing of putrid loan books. Takeovers enabled bad assets to be moved off balance sheets to be reckoned with another day. The Lehman's bankruptcy however intantly triggered losses with counterparties and exacerbated the selling that was already taking place as per 2 above.

The company has been caught up in a torrent of irrational selling that has spread right around the globe in a one in a hundred year climactic meltdown.

IGR isn't alone - every stock on the ASX has been effected - but that isn't much consolation to long suffering shareholders. No doubt a couple of Institutional IGR shareholders have been under pressure as well, and have had to relinquish their holdings, contributing to the downward spiral.

Reflecting on the demise of IGR, what makes the situation somewhat perplexing is that not only do we have a higher gold price, but costs in the industry have plummeted across the board. In fact, the timing to be assembling a robust gold mine couldn't be better, with costs such as fuel, mining equipment, contractor rates for exploration and eventually mining, as well as general labour costs are now more competitive due to the world slow down. Robust projects coming on stream should be able to achieve a competitive advantage in the industry.

IMHO, when calm eventually is restored to markets, IGR will easily vault to its previous high of 66 cents, and when the gold price suppression ends, as end it must, even 66 cents will look cheap.

The Comex gold price is set by paper contracts and as a result the BIG boys can push the price around to wherever they choose. However, anecdotally there are reports around the globe that real physical gold is now not changing hands at Comex prices.

Prices are attracting healthy premiums and are closer to $US900 - $US950 than the current Comex fix of $US760. Also, supplies of physical gold (coins, & bullion bars) are reported to be scarce. Certainly gold production is falling around the world and if central Banks cease their surreptitious dumping to manage the price, real demand (both jewellery and investment) could force prices markedly higher.

I strongly believe that a little bit of gold fever will radically transform the entire gold share sector, and that it will definitely happen. And certainly Sinclair reckons it will as well (www.jsmineset.com) Sinclair has been one of the few who have called the current mess 100% correctly.

Anyway, Go the IGR's They have got to be cheap!

We have to climb back up that slope on the graph and we may have even started today!

Anyway, I bought a few more!

Cheers
Nev

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Moved from the "Europe" forum. Original message number: 78