Let’s start with a bit of history... This would not be the first mining success story in Ireland. Despite being dismissed back in 1856 by the director of the Geological Survey of Great Britain as a country ‘devoid of minerals of any worth’, Ireland has had a mining boom since the discovery of the Ballyvergin copper mine in the 1950s.
The further discoveries of the Tynagh and Silvermines zinc, lead and silver deposits in 1961 and 1962 spurred more excitement. And since then Ireland has been a significant producer of zinc and lead in particular. Mine production reached a high in 2003 when 419,000 tonnes of zinc were produced. This accounted for 41% of European production and nearly 5% of the world’s output.
So another major find in Ireland would not be a huge surprise…
Cheap stock with great potential
At only £2m, the valuation is low considering the deal Belmore struck with international mining group Lundin Mining Exploration early this year. After all, Lundin has agreed that it must spend £13m to acquire a 70% stake in the licenses that Belmore holds in Ireland’s County Clare. And they may be able to confirm the promise of a mining sample taken by Belmore early last year.
And don’t worry about “resource nationalisation”. I think we can rely upon the Irish government to treat investors fairly, a comment that does not always apply to less scrupulous regimes overseas.
As energy and metal prices climbed last year, a number of governments took steps to grab a bigger slice of the pie. Big international companies like BP and Exxon battled for control of their ventures in Russia and Venezuela. Weighed-up against this stark threat, a junior Irish miner actually looks like a good bet.
Exploration of a previous discovery could reap rewards
International mining companies have taken note of the potential in this region and both Tech Cominco and Xstrata are involved in zinc exploration in County Limerick. But it was BHP Billiton which owned the County Clare licenses before it elected to withdraw from the country in the 1990s. So it is now Belmore that has a license covering four hundred square kilometres in County Clare, as well as a further eighty square kilometres in Donegal.
It was in the former that Belmore made what could be a highly significant discovery just over a year ago. Its drill bit encountered a ten metre band of rock that consisted of 13.84% zinc, 5.52% lead and 62.84 grams per tonne of silver. This is a rich mixture and it attracted considerable attention in the mining industry. The share price of Belmore doubled to 6p, since when it has been moving sideways. But now the action could be about to start again.
In the last few weeks, Lundin has moved two drilling rigs onto the site. Now it has started a drilling programme to determine whether Belmore’s initial discovery was a just a fluke, or whether it is just the tip of a major underground resource. We will find out in the next few months.
Nothing in the mining industry is ever certain, and the road between an initial promising discovery and a working mine is full of twists and turns.
We share a sunny view of life with entrepreneurs amongst whom no group is more convinced of the glass being half full than the mining crowd. Add the bonny spirits of the Irish into the mix and you will, for sure, have a band for whom the end of the rainbow is never more than a few footsteps away.
I will be watching out for announcements from Belmore this summer. This is a share that could see some action.
Best wishes,
Tom Bulford
For The Right Side
P.S. There are 5 “suicidal” mistakes that most investors make. Avoiding these could make the difference between making a lot of money and losing a lot. If you’re interested, I can show you the mistakes to avoid – and I’ll even show you the companies to buy right now. Click here before you buy another share.
MARKET NOTES
Libor’s record lows are good news for banks… for now
BY THEO CASEY
The Libor (London Inter bank offered rate) is probably the best way of tracking the credit crunch. It’s the rate at which banks lend to each other, and a number to watch what with over $300 trillion worth of financial products dependent on it.
This figure indicates the confidence of the banks. At the height of the credit crunch last year, banks were lending to each other at an eye-watering 6% rate of interest. Today, as you’ll see from the chart below, the interest payable is only 1.35%.
Banking bonus – Three-month LIBOR rates fall to record low
Source: Bloomberg
It’s a great time to be a bank. However, we must remember that the falls have been solely the result of government intervention. Worldwide bailouts, rate cuts and quantitative easing are the catalyst of these record lows.
This is the real reason why so many banks revealed profitable first-quarter results in April. Some analysts saw the sector’s return to profit as a “green shoot”, and a reason to be optimistic for a speedy return to economic growth. We heartily disagree. The intervention is the equivalent, as splendidly put by The Absolute Returns Letter “of the US government reducing the cost of goods to zero for its embattled car manufacturers and then going on to buy – courtesy of the tax payer – a couple of million cars that nobody really needs.
“Even Detroit would make money given those conditions!”
This is no recovery. It’s the government spoon-feeding profits to banks and the banks having the wherewithal to keep their mouths open. It can’t last, and neither will these record Libor levels. Continue to play it safe and invest selectively because there is nothing sustainable about this “green shoots” we see before us.
The Daily Reckoning – Will it be Japan or Zimbabwe for us?
BY BILL BONNER
Boston, Massachusetts
Monday, 18 May 2009
Inflation or deflation
Tell me if you can
Will we become Zimbabwe
Or will we be Japan?
Merle Haggard
Ol’ Merle Haggard has the key question figured out. Which will it be? Zimbabwe or Japan? Will it be runaway inflation... or deflation that refuses to run anywhere?
Long suffering Daily Reckoning readers already have our answer. We gave it even before the bubble burst in ‘07/’08.
“Yes!” we said... it will be Zimbabwe AND Japan. But not in that order. Japan first. Then, after the feds have got the hang of Quantitative Easing, it’s Zimbabwe here we come!
But there’s gotta be a surprise, right? It can’t be that simple, can it?
Markets rarely make it easy for you. And for a very good reason. If it were easy to see what was coming, it would be easy to avoid trouble and take advantage of opportunities. You can see where that would lead.
Investors would race ahead and ruin the whole thing. If they saw the market going up, they’d buy stocks. This would cause prices to rise before they were supposed to. And if they were going to crash, investors would sell off their stocks... and drive prices so low, the market couldn’t crash – it would already be at bottom.
Do you see where we’re going with this? If investors – or anyone – could see what was coming, they’d short-circuit the process.
Read on...
To read the Daily Reckoning in full, click here.
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