Gold Stock Bull

I remember Linux Gold for the spectacular run it had at the end of 2005. After bouncing around in the teens for over a year, the stock suddenly tripled, skyrocketed to over $0.50 in under two months. Linux quickly retreated to $0.35 before making one more stride all the way to $0.54. It has since been in a relatively steady 18-month downtrend that brought the stock price all the way down to $0.14, which has acted as solid support. But in the last two weeks Linux got its legs back and ran from $0.16 to $0.27, where it sits today. That is a 69% two-week gain that is reminiscent of the start of the last explosion that took Linux over $0.50. However, it is worth noting that while recent volume has been above average, it hasn’t spiked nearly as high as it did during the last run.

Just under half of the recent gains came in the few days leading up to their announcement of having acquired an option to purchase a 100% interest in 26 mining claims close to the historic Ester Dome mining camp near Fairbanks, Alaska. The other half of the gains came in the week following the announcement. The owner of the 26 claims says the land was and is the primary source for the majority of Placer Gold that has been mined from Ester Creek and its drainage over many years. Expectations are high for this property, as it is in the middle of the Fairbanks Gold District, one of the more prolific gold areas in North America. Over 10 million ounces of gold have been recovered from placer mining alone.

It was announced on September 9, 2007, a major gold/silver discovery was located on the claims, with a potential strike length of 6,500′, width of 100′ and minimum depth of 100′ of high grade gold and silver values based on the sampling and trenching program completed this year. The area has been re-sampled and results are pending. Drilling is planned on the mineralized zone this year, to confirm gold and silver values on the property.

Linux has other properties in the Granite Mountain region of Alaska, where Teck Cominco, NovaGold and Northern Dynasty have all developed significant gold, copper and zinc projects. NovaGold has identified about 25 million ounces of gold on properties to both sides of Granite Mountain. The world class Pebble (Northern Dynasty) gold-copper-molybdenum porphyry deposit to the south has a 28 million ounce gold and 16.4 billion pound copper inferred mineral resource.

Kinross Gold’s Fort Knox mill, which produces some 400,000 ounces of gold annually, is located within six miles of another one of Linux’s properties - Fish Creek Prospect. Kinross recently shared results of a geophysical survey that identified six gold targets on Linux’s Fish Creek Prospect.

Linux also owns claims in the Bralorne/Lillooet mining division in British Columbia and another 161 square kilometer property in China.

But for all of the excitement over the potential of Linux’s properties, it is thus far just that - potential. Expectations are high, but solid drill results are lacking. And being in close proximity to successful properties does not mean that Linux will necessarily strike gold with their properties. Nor does it prove that the $10.3 million they recently paid for the option to mine near Ester Dome was a good investment. However, expectation alone may drive their stock back towards $0.50 in the coming weeks and if they come out with any significant news or discoveries, we would not be surprised to see the stock hit the $1.00 mark. Investing in Linux is not for the faint of heart, but could provide some incredible returns if the lofty expectations come to fruition. And as gold passes $800, we expect quality junior mining companies to come to life and outperform as they usually do.

Linux is a high risk/high reward speculative play and you should perform you own due diligence before making any investment decisions. The author does not currently own any Linux stock.

With the gold price breaking records and the dollar sinking into the abyss, the major gold miners are planning for the future and shoring up their resources through acquisitions. The latest of which is Newmont’s announcement that it would acquire 100% of Miramar in a $1.5 billion all-cash transaction. Miramar’s shareholders were promptly rewarded with a 23% single-day gain. Some analysts are anticipating rival bids, which could push up the value of Miramar to levels even higher than their $6.31 close on October 10th. If you have followed Miramar over the years, you are well aware of Hope Bay, which is considered one of the largest undeveloped gold projects in North America.
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We were a bit early to say that the Gold Selloff Would Not Last. After pausing at 340, the HUI continued all the way down to support at 300. But 300 proved to be very solid support and the Gold Bugs Index bounced off this mark and charged all the way to a new record at 387. That is a gain of nearly 30% in just a month! More importantly, the HUI has broken through resistance at 370, which has turned back the HUI on five separate attempts over what has been a lackluster year of consolidation in the gold market.

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