The Silver Bullet
Sunday, March 04, 2007

A few months ago we recommended moving some money into the Central Mineral Belt (CMB) players because we thought this emerging geologic area in Labrador was poised for further uranium deposit discoveries. It was hard for us to believe that Aurora had the only deposits on their land, and after seeing how they grew the deposits through drilling, knew that there was more out there. There was also another deposit further inland of the CMB, and this is the area we targeted for our picks. One of which was Silver Spruce Resources which had a very large land package in the area and their properties Joint-Ventured with Universal Uranium.

This past week we saw the stock jump over 128% in one day! This was the result of positive drill results found throughout many drill holes and over long intervals. If you read the press release, you will realize what a big event this is for all of the CMB players. This now indicates that we were correct in our assumption that uranium mineralization is actually scattered throughout the region and will allow for a mill to eventually be built. Aurora may now have the incentive to build a larger mill than needed to process their ore, which would make even marginal deposits developable as there would not be the large capital requirements needed to construct a necessary mill.

With this huge run-up in the share price of Silver Spruce their share structure shall change dramatically. Now all of their warrants and options will be in the money, so it is conceivable that their shares outstanding will catapult from ~22 million to ~41 million. This will most likely bog the share price down for a while, but it is also very conceivable that some newsletter writers shall come out and recommend this stock sometime in the future. So we shall keep our holdings in our portfolio at the time, perfectly understanding that the stock may be stuck in a perpetual trading range (or even that it declines) for a certain time frame, because we would rather hold onto anything uranium that cash out and miss out on something special (such as a recommendation from those far more influential than us).

Many (more like all) uranium portfolios are down considerably as the market has been hammered with the global sell-off of this past week. We do not view this as an exit point for our uranium assets, as “bull markets never end in a day.” Those are the words that echo in our head from our mentor, as our Canadian Index stood at an all-time high on one day and then got nailed the next. Maybe we go into a hibernation for a period of time, but the bull market is not over. This is a downturn that shakes out “the hot money” and allows the real players to double down and stabilize the market for another run. We are believe that this next run could occur very shortly as Cameco will be reporting news on Cigar Lake in the following weeks.

The most important thing to realize during a broad market downturn is that non-marginable securities fall the hardest, quickest. When uraniums do hit their bottom, it is our opinion that at that exact moment they will be oversold by about 10%. This is usually how sell-offs play out in hot markets, and it is due to those margin calls. Right now uraniums as a group are falling due to getting slammed last week, but what is more is that people were forced to cover their margin by selling them all the way to this point. Is it over, well we are closer than yesterday, and the day before that, but it will not all be over with until people have more money to speculate with once again. For those of us that have been keeping some gunpowder dry for a rainy day, we should take full advantage of this downturn right when things look as if they couldn't get any worse. As the weak hands have been forced out of the market, those of us with more muscle are adding to existing positions as well as taking up new ones at great discounts! It is one of the rules of markets, and what preserves bull markets over the long haul. So if you don't have any extra gunpowder stored up, get some...if you do, let us keep it high and dry for now but very ready to deploy it at any time.