VanEck Vectors Global Alternative Energy ETF Depressed About Gold Shares

Re: Chairman's Corner - Saturday, April 26, 2008
Title: Depressed About Gold Shares - Especially Juniors?

Dear CIGAs,

Nothing happens by chance! Please consider the following excerpt from the Reuters article below:

"Small and medium-sized miners and juniors who are still in the exploration stage, are the easiest targets for bigger companies, but the acquisitions wave won't likely stop there."

Why is it that amongst companies active in the minerals sector, it is primarily and almost only precious metals shares that are under severe selling pressure?

Why is it that companies active in other mined products or co-products as below have their shares in major demand?

Did gold not rise from $248 to a recent high of $1033 even while the hammer was being applied to gold shares - especially those that hold the potential and promise of new production in a period of declining gold output?

Is there not a glaring example of a mined product in the form of potash this week? Did not an IPO in a potash mining company (Intrepid Potash), which is used as a fertilizer, open up above its issue price by 58%?

Chemically, potash consists of potassium carbonate but it also might contain potassium oxide or potassium chloride depending on the feed source. Usually, potash takes the form of powdery salts. Modern methods of extraction generally rely upon deposits mined from ores, like sylvanite. Nowadays our potash comes from mining and goes toward inorganic fertilizer rich in potassium.

Why are other mining entities acting so well, especially those with the following significant products?:

Antimony Beryllium Cadmium Chromium Cobalt Manganese PGMs Rhodium Tungsten Vanadium

How about simple iron ore and all those involved in all the criteria of exploration and development of crude oil? That is also an extractive industry like precious metals mining.

Your answer may be that gold is different but it is not. You might say others think that gold has topped but has it?

The stimulants economically are the same for potash, iron ore and the other items listed above as it is for gold. It is the growth in Asia, the consequences of the effort to maintain the social order as the financial order implodes, and the condition of the US dollar.

Nothing happens by chance but for argument's sake let's call it an opportunity to be seized. Many junior gold companies are so depressed that they are worth more dead than alive. Gold and other metals shares are depressed so that they are selling well below their asset value

Asset Value is something that 3.7 generations have not taken into consideration where price is concerned. You may recall that I suggested to you that one major company would consolidate the industry. Keep that concept in mind. Major gold producers are in need of new production. This is FACT.

South African companies are in need of major projects OUTSIDE of the RSA. For the RSA gold producer there is no expansion of reserves in RSA because even if they have the reserves they cannot raise production levels as the energy situation is already stressed beyond demand. This is a long-term problem unfortunately.

The major consolidator of the gold mining industry may have gotten too greedy in waiting for future reserve properties to become ever cheaper for acquisition or joint venture.

The game being played by design or serendipity is to depress the juniors or to take advantage of the decline in the juniors as a result of the poor share price action by starving the junior or explorer of financing.

Depressing the price of the shares of most junior situations results in starving precious metal juniors of financing and their shareholders would be ripe for a bid for the company at a price much lower then their highs when gold was at $600. It may also make the smaller company eager to make deals at less than advantageous conditions for their investors.

The key here is that the gold producing industry is in need of new resources as present resources are depleting. That is fact.

It is much cheaper to pick up a property or entire company in a financially stressed condition because it cannot publicly finance for continued operation.

Let's call the situation the taking advantage of a serendipitous development. To others it looks like the consolidators are holding a smoking gun. The weakness in this strategy is the advent of new competition for minerals internationally - primarily from Asia and the Middle East.

The Saudis and the Chinese are actively looking for mineral prospects that are prospective for precious metals, strategic metals, industrial minerals including rare earths and beach sands to name a few. They have said so publicly at top executive levels.

The major industry consolidators now have competition from companies with more liquidity and NO need for debt to take any property to production.

The advent of this new competition may well trump the Western companies some feel are holding the smoking guns.

This competition from Asia and the Middle East may accelerate the consolidator - whose timing is a greed-driven desire to get properties so cheap they might be considered free - to move sooner than later.

To call attention to the factual nature of this analysis please read the following article regarding the stated interest of a major Chinese company given publicly at a recent professional mining conference.

Again, please note the all-important statement given by a top executive of the Chinese company:

"Small and medium-sized miners and juniors who are still in the exploration stage, are the easiest targets for bigger companies, but the acquisitions wave won't likely stop there."

Mega mergers ahead for mining industry
Fri Apr 11, 2008 6:13pm BST
By Ignacio Badal ? Analysis

SANTIAGO (Reuters) - With metal prices holding in what many call a super cycle, the global trend toward mergers and acquisitions will continue among miners, according to analysts and executives who attended the CRU/Cesco copper week in Santiago this week.

Small and medium-sized miners, and juniors who are still in the exploration stage, are the easiest targets for bigger companies, but the acquisition wave won't likely stop there, they said.

Mining analysts agree the market will soon see more huge takeover bids announced, like the failed attempt by Brazilian mining giant Vale (VALE5.SA) (RIO.N) to buy Xstrata (XTA.L) for more than $90 billion.

Executives say acquisitions will continue because global copper demand is growing and supplies are tight, so new supply has to be brought on line. The easiest way to do that is to buy existing producers.

Companies will be on the lookout for producing assets and smaller players won't have the same access to financing to bring new output on line.

"(Mining) costs have skyrocketed in recent years, with the subprime crisis and the disappearance of securitized debt markets ... it is increasingly difficult to finance, meaning only the best capitalized players can afford to invest," said Bart Melek, a Toronto-based analyst with BMO Capital Markets.

"We may well be entering an era of super-consolidation. We'll see what pans out during the course of the next two years," Charlie Sartain, the chief executive of Xstrata Copper, told the CRU conference on Thursday.

Words like mergers, acquisitions and takeovers were among the most heard at the CRU and Cesco copper week, where potential buyers and sellers huddled in hallways and hotel lobbies.

more...

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Message sent on Sat Apr 26, 2008 at 4:46:17 PM Pacific Time

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