write up in australian, page-2

A few resource companies mentioned, HAW towards the bottom of the article.

http://www.theaustralian.news.com.au/business/story/0,,24898849-18261,00.html

Good news as intuition makes its welcome return
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PURE SPECULATION: Robin Bromby | January 12, 2009

Article from: The Australian
SOMETHING is stirring -- it could be the speculators. Just a few months ago, should you have announced some good acquisition or an encouraging drilling results, chances are that your share price would have taken a hit.

Investors didn't want to know. They just wanted to get out with the least possible lost.

Yet, as the week ended, two juniors saw their share prices leap on news.

On Friday, shares in Spitfire Resources (SPI) were up 46.7 per cent after an announcement about near-surface manganese being drilled. The volume was small with about $41,000 worth of trades going through, so the rise had a tentative quality.

But the really good news is that intuition is back. You know that boom-time phenomenon: in the days leading up to a positive announcement, the particular stock starts to get a move on for no apparent reason and then it turns out that all that intuition and random guesswork just happens to be on the money.

Such was the case with BC Iron (BCI). The thought waves started emanating on Monday with the stock up 5.2 per cent; they got stronger on Tuesday with a 25 per cent jump but that intuition was really on a roll by Wednesday with a 38 per cent leap in BCI's price.

Thursday was almost an anticlimax. The company released the news of a 64 per cent increase in direct shipping ore at its Nullagine project in the Pilbara. There was only a 10 per cent spike that day.

Now some more conservative readers might feel that these unexplained movements do the market no credit in terms of transparency. But at Pure Speculation, we take the more relaxed view that, not only does such a phenomenon give hope that once again there is life in the market, but it sustains that air of raffishness that makes the mining and energy sector such a stimulating market to watch.

Brokers say 'buy'

ANOTHER promising sign: the brokers are putting out "buy" recommendations. Someone at DJ Carmichael moved fast to get out a note on BCI the same day as the announcement putting "speculative buy" on the stock, valuing it at $1.17 a share, which is a good way above the 38c at which the stock ended on Friday. Carmichael saw this as an encouraging step towards planned production next year. Hartleys initiated coverage on Western Areas (WSA) by putting a "buy" sticker on the stock, saying WSA was a premium-quality sulphide nickel producer due to its high nickel grades and exceptional exploration upside.

The same firm was similarly enthusiastic about Cooper Energy (COE), noting the company has a cash equivalent backing of $85 million and a share of low cost oil production.

All these comments are valid and reasonable except -- and this is a big "except" -- for the facts of the real world. First, the macro situation. New York economics professor Nouriel Roubini has made a name for himself for withstanding the ridicule when two years ago he predicted the financial catastrophe that has come to pass. He said on Tuesday that the biggest risk now is to believe that we are at the bottom.

The bubbles have only begun to burst, he says now. He sees the credit crunch getting much worse, with further cascading falls in asset prices and deleveraging and more financial institutions going bust. Worse, he sees more weakening in commodities markets.

But perhaps the trillions of dollars/pounds/euros that will collectively be pumped into the system by Messrs Obama, Brown, Rudd and Trichet will turn it around. Maybe. Here's what Henry Morgenthau, Roosevelt's treasury secretary, had to say in 1939 after five years of the New Deal: "We are spending more money than we have ever spent before, and it does not work ... We have just as much unemployment as when we started and an enormous debt, to boot."

Want to get specific? BNP Paribas looked at premia, the charge consumers have to pay on top of the London Metal Exchange quoted prices for transport and other costs. Premia are a reflection of the fundamental strength of regional markets; they can rise substantially in times of oversupply but not when markets are weak.

The study showed that premia are well down and BNP concluded: "Weak fundamentals suggest no immediate substantial upside for metals".

Frontier's difficulties

THINGS are still generally very tight out there. Frontier Resources (FNT) is trying hard to get more of its shareholders to pony up for an entitlements issue that closes next Monday. The new shares are priced at 3.5c against Friday's close of 1.8c, so you can see why only 180 of the 3300 shareholders have so far been game enough to send in a cheque. But MD Peter McNeil is just as concerned about the free attaching options. You need to get 50 holders of the minimum marketable parcel -- in this case, 11,112 shares -- for those options to be listed. The problem is that many of the people on Frontier's register who have accepted have subscribed for fewer than the number of shares that would get the options total over the line.

The drying up of finance is a real problem for the future of exploration and mine development in Australia. Frontier wants the money to do more work on its Tasmanian projects, which are looking promising. Assays late last year at Narrawa returned grades up to 12 grams/tonne gold, 12.5 per cent zinc, 11.1 per cent lead and 187g/t silver.

The costs of getting into production are, however, not too much of an uphill climb for Kentor Gold (KGL). Finding a local, underemployed mining contractor in the wilds of Kyrgyzstan is not something you do every day, but such do exist thanks to equipment left behind from the Soviet era.

The Soviets also built the underground access at the Savoyardy project, so Kentor can get straight at the gold-bearing ore.

This contractor has all the gear, so Kentor is looking at starting a small mining operation by the end of the year using hand-held mining equipment and possible hand-sorting of the ore. This means it can take a shortcut avoiding all the expensive stages to bankable feasibility study in order to raise capital for a full scale mine development. Last week Kentor reported an inferred resource of 35,500 ounces.

Crossed lines

LAST week readers might have got the impression that we were suggesting Uramet Minerals (URM) was running short of the readies and would need the $750,000 it was getting by handing over valuable phosphate ground to Joseph Gutnick. This resulted from crossed lines, so to speak, when we spoke to the company. Uramet had $3 million at the end of the September quarter, and still has a large chunk of that. You may call this a correction; we prefer the term "amplification".

Speaking of Gutnick, we were surprised to learn that there are not universal feelings of goodwill towards him out in the west, so much so that it has apparently taken many months for the people at Hawthorn Resources (HAW) to get the message through over there that Diamond Joe is no longer associated with the company.

The new management at what used to be Gutnick's Great Gold Mines are also, fortunately, in the position of having enough in the bank to pursue the Bevan iron ore project and with partners such as Newmont Mining (NEM), ABM Resources (ABU) and Thundelarra Exploration (THX) financing joint ventures over the company's extensive land position.

Hawthorn has a huge number of shares on issue, but shareholders ringing the Hawthorn office wanting to know why the stock is sitting at just 0.9c may have a point.

Fast track for mining

ALL the true believers in the Darwin railway and its promise to make economic many of the mineral projects along its route would have been cheered by the announcement from Minemakers (MAK). The company has decided to look at building a 250km railway line from the Darwin corridor at Tennant Creek to its Wonarah project towards the Queensland border. This would enable it to mine more than the 3million tonnes of phosphate a year that would be the upper limit using trucks.

The Australian implies no investment recommendations.

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