The Second (and last) Great Buying Opportunity for Mining Shares in 2008

Darrell Brookstein, Mining Insights 07/29/2008

The TSX Venture Exchange Index is at all-time lows (it’s only two to three years old) and this milestone is reaching its nadir at the typical seasonal lows for mining shares and gold in mid-July to end of August. The seasonal conforms to real-life factors, not some randomly occurring price cycle. The factors affecting gold price cycles include the Christmas jewelry-buying season, weddings season in India, dental and electronics industries’ purchasing, etc.

1990-1994 was a peculiarly difficult period for junior mining shares, but I haven’t seen a much worse a period than “now” since 1978 when I began to focus on these types of shares. The washout since the 2007 highs has been devastating, and while the first buying opportunity I identified in 2008 was good relative to the prior two years, with hindsight it’s clear we would have been a bit better off to wait. But by roughly averaging prices then with prices now, I am convinced we will be shown to have made extraordinary purchases, when others were/are throwing the babies out with the bathwater. My old partner, Rick Rule, used to say, “Feed the geese when they’re quacking” (meaning: sell stock to buyers when the buyers are clamoring to buy).

Well, they certainly are not quacking now. This is the opposite of a great selling opportunity, and, that is, by definition, a great time to buy.

NOW is the time to complete your investments for the rally in mining shares I see lasting for from 15 to 40 more months, and starting over the next six weeks.

We have seen nothing to dissuade us from our expectation of $1038 gold and $25.11 silver minimums, and, based on our proprietary, pattern-recognition trading methodology, we still expect those prices this calendar year or by end of first quarter 2009, the latest. We still believe $1300+ gold and $31+ silver are possible before this bull market ends. Attendant with that, the TSX Venture Exchange Index would go significantly above its all-time high.

Based on 30 years of professional involvement with precious metals mining shares, we believe the second great buying opportunity for 2008 is upon us and is likely to be the most important opportunity of both the last and future 12 months.

If you are technically sophisticated and want to wait for a bottom to be “in place” before making further acquisitions, you have our blessing (FYI – Our educated guess is that the actual bottom occurred on July 17 or will occur at a slightly lower level before August 10). However, for most of our readers, purchases should be made immediately and certainly before August 20.