Analyst and Media Coverage

Allan Barry Report On Commodities & Resource Stocks 22nd Edition

Welcome to the 22^nd edition of our report and our first edition of 2009. This time of year is a time for reflection on the past year and outlook on the year ahead. So in this edition we will do our review of 2008 and our outlook for 2009. We also went through this exercise on our first online radio show of 2009 which you can find on our website. We can’t do anything about the past except learn from it, so we will spend a lot more time discussing our outlook for 2009. As challenging as 2008 was for investors in every industry, especially in the resource sector, we think 2009 is shaping up to be much more rewarding.

When considering 2008 from the perspective of an investor it will undoubtedly go down in history as one to remember. Most would prefer to forget the year entirely, but it will be talked about and studied for many years into the future. It had one of the most violent corrections in history; regardless of the size of your portfolio or what industry you invest in, the pain was widely distributed.

As you know, this report covers commodities and resource stocks and this investment category was one of the only places to find above average returns for several years. However, when the selling started on Wall Street it took everything down throughout the world markets. Right around the time that the selling pressure was the worst was when we started our online radio show. Talk about timing!

Our first radio show was on November 5, 2008 and in our early shows we talked about how the selling of stocks across the board had reached ridiculous extremes. It didn’t seem to matter what the fundamentals looked like; stocks were sold because they were stocks. We aren’t going to recap all the radio shows (you can find them on our website at www.allanbarryreports.com) but we would like to point out that when many commentators were discussing doom and gloom scenarios, we were a voice of reason.

Last year’s violent correction was caused by the bursting of the housing bubble and serious mismanagement of large financial institutions that drove the world into a global economic downturn. Whether one agrees or not with central bankers and politicians in the largest economies they have decided to try and spend their way out of this situation. It will be very important when economies turn the corner that they are just as quick to change direction and slow down their spending. Otherwise, the increased printing of money as well as growing deficits and debt will continue for a very long time.

U.S. President Obama has taken office at a very challenging period and it is our belief that he will do a very good job. His economic stimulus plans include spending money on the aging infrastructure, which, regardless of what has been happening economically, needs a lot of work. In addition to the network of roads and highways, the power grid needs work as well and his plans call for a lot of spending in these areas. This will create jobs.

Whenever we hear about these stimulus plans it strikes us as to how many commodities will be needed for these projects. Then we look at all the cutbacks in exploration, development and production of many commodities and it is clear the supply chain is weakening and is not well prepared to feed the demand. We are having somewhat of a replay of the period around 2001 when the commodity bull started moving and prices went aggressively higher.

In addition to America’s stimulus plans, other countries also have plans to spend a lot of money on similar programs. China is planning on spending a lot on infrastructure and this will help grow their domestic economy. These two countries are the largest consumers of commodities and the economic stimulus plans will add to their consumption.

With the combination of plans to spend on projects and the cutbacks in producing the required commodities, things are falling into place for commodity prices to go much higher. Later in the report in our commodities commentary section we are going to talk about long term supply and demand for commodities. It’s suffice to say that we think the balance of supply is going to be tipped toward higher prices and we are sort of in the period between the big stock market selloff that punished stocks in all sectors in late 2008 and the next bullish move for commodities and resource stocks.

Some of Our Treasure Hunters

A common theme we have been seeing for the last few months are cutbacks by explorers, developers and producers of commodities that will only serve to weaken the supply chain. As the supply chain gets weaker the demand from the economic stimulus plans will kick in and cause higher demand, overwhelming the supply chain and driving prices much higher.

One way for companies to stand out from the crowd is to keep working while many in the industry are cutting back. Many of the companies we follow from our past reports as well as the three new ones we are adding in this report have high quality projects and are staying busy. When the prices for commodities start getting stronger it could happen very quickly and when the starting gate opens those that are cutting back could be left in the starting gate by those that are currently working hard on their projects.

When considering adding a company to this report or talking about their news on our online radio show we are looking for those with high quality projects that are keeping busy while others are cutting back.

Later in the report we will present the roster of featured companies from past reports. The new companies added in this edition complement the overall group. If you would like to research the group from past reports we have a directory on our website. There is a list of all the companies from our past reports with links to their websites. Many of these companies have had very good news since we started our online radio show and we discussed their news on the radio show. On our blog we have notices of subjects talked about on the show and what companies were discussed to help you find the ones you would like to listen to.

We are big believers in investors doing their homework to research and understand the fundamentals of companies they are invested in or are considering. With our reports, website, directory, blog and radio show we feel we have an outstanding group of tools to help you research commodities and resource stocks.  

Some new additions:

Colossus Minerals Inc.

Colossus has a very interesting gold-platinum-palladium project in Brazil that has returned very promising grades and intersections in their drilling. Their Serra Pelada project had a lot of work in the past and has a lot of potential. We are not shareholders of the company.

Finding high quality platinum projects is not easy, especially if you’re looking in North or South America. The area where Serra Pelada is located was once the focus of a major mining rush in Brazil. Leading the charge were the local small scale miners, called Garimpeiros. These miners use very rudimentary mining methods – basically back breaking labour using their hands and very little equipment to dig up the precious metals. Often they mine out what is near surface and leave a lot behind. Their activities often show good places to look for mines. In fact, the largest mining company in Brazil did a lot of drilling in the area.

However, major mining companies can change direction quickly and move onto the next big mine because they have bigger projects elsewhere and they don’t always thoroughly assess an exploration project. These orphaned projects can be excellent places to explore for a new mine. Colossus got involved with this project a couple of years ago and since then has been getting very good results with their drilling.

In addition to promising drilling results they are finding metals that look to have higher prices in the future when looking at supply and demand. They have shown this is a high quality project and it looks like they will be very busy working on it this year. We look forward to future drilling to tell more of the story but we are pleased to add them to the group we follow at this time.

Colossus Minerals stock symbol is CSI and the shares trade on the Toronto Stock Exchange. Their website is www.colossusminerals.com. On their website you can find past news releases and additional information to do your own due diligence.

International Tower Hill Mines

International Tower Hill Mines is a company we have followed for the past couple of years. Recently we discussed them on our online radio show because of very good drilling results and an updated resource estimate from their Livengood gold project in Alaska . We are not shareholders of the company.

The Livengood project is in close proximity to Fairbanks, Alaska, which benefits economically from mining in the area. The key mine in the area is the Fort Knox mine and it employs many people from Fairbanks. It, however, is getting closer to the end of its mine life and before it gets too close it will be very important to the local economy for a new mine to provide jobs.

Past work at Livengood has resulted in them showing this is a multi-million ounce gold project. They are also finding some zones with high grades for a near surface open pit target. These new zones could play an important role in future feasibility work to assess the economics of bringing this project into production.

They recently announced an updated resource estimate that significantly increased the ounces of gold in the ground. One of their goals for 2009 is to increase that resource to around 10 million ounces of gold. With some of the recent drill holes encountering higher grades and the deposit open in all directions it looks like they have a very good chance of reaching their goal for 2009.

International Tower Hill’s stock symbol is ITH and the shares trade on the Toronto Stock Exchange and they also trade on the NYSE Alternext market with the symbol THM. Their website is www.ithmines.com. On their website you can find past news releases and additional information to do your own due diligence.

Minefinders Corporation Ltd.

Minefinders has a lot of promise and one of the reasons we follow them is they have recently started production of gold and silver at their Dolores Mine in Mexico. Secondly, they have the potential of growing to reach a segment of the mining sector that is currently underserved. We are not shareholders of the company.

Those that have read our past reports are aware we are always on the lookout for companies that have the potential to bring a project into production and then use that to help them grow much bigger. In the last few years there were many mergers and acquisitions that started with the largest mining companies taking over others of similar size. Then it moved down the food chain to middle sized mining companies and larger exploration companies. These actions sort of hollowed out the middle sized group of companies which have long held an important role in the mining sector. Some projects are not big enough to attract major mining companies and in the past it was the middle level companies who would take over those projects and develop them into mines. In fact, many of the current major mining companies grew into the companies they are today by using this acquisition model for growth.

Some major mining companies started as exploration companies that made discoveries they developed into mines and kept growing. This is the path that Minefinders has followed with their Dolores discovery that has now become a mine. Management spent many years and went through many ups and downs but they have seen it through and now they have a mine. Recently they announced news about their first quarter of production and also updated on progress toward it reaching full commercial production.

When the Dolores discovery was made, the prices of gold and silver were much lower than they are today. After many years concentrating on discovery through to production, they have now turned the switch on at this mine at a very good time. This success has them in a position to grow into a bigger company and be a potential acquirer and builder of future mines.

Minefinders stock symbol is MFL and the shares trade on the Toronto Stock Exchange and they also trade on the NYSE Alternext market with the symbol MFN. Their website is www.minefinders.com. On their website you can find past news releases and additional information to do your own due diligence.

Commodities Commentary

Whenever we look at the price of any commodity we want to get a high comfort level in the long term prospects for the price to rise. And we feel that the best way to get a reasonable idea of the future is to focus primarily on supply and demand. We look at supply and demand as sort of a balance and try to get an idea how that balance is tipped. If demand is stronger than supply then prices are primed to go higher.  

A lot can be learned about future supply by looking at the past. The last 25 years can give you a pretty good idea about the long term supply chain of many commodities. In much of the 1980’s and 1990’s there was a dramatic under investment in exploration, development and production of commodities. This long term period of under investment weakened the supply chain and will have an impact for many years, maybe even decades.

If the supply chain is weakened and a surge of demand comes along, the commodity producers are inadequately prepared to feed the demand. Around 2001 this situation played out and it was the start of a tremendous move in the price of many commodities.

When the big market correction happened in the second half of 2008 it drove the price of practically every asset class down in a dramatic fashion. Commodities were not spared and were punished as were resource stocks. With commodities getting aggressively oversold, it forced big cutbacks in exploration, development and production.

These recent actions or inactions to work on the supply chain (just when it was starting to improve after a couple decades of chronic under investment) is setting things up for a repeat of history. In order for the commodity bull to resume what we think is its long term bull-run, it will need a new surge in demand.

With all the economic turmoil in 2008 the central bankers and politicians in many of the biggest economies think they can spur economic growth by pumping lot of money into the system. Maybe they can but what we have been paying particular attention to are the plans on the projects they want to spend money on to try and drive economic growth up. When listening to these plans it seems that everything they plan on building will need a lot of commodities.

It looks like there is a realistic argument to be made that there is a demand surge coming for commodities and that is happening as the supply chain is weakening. This is just like the perfect storm that happened around 2001 when commodity prices took off. It looks like 2009 is shaping up to be the start of the next leg up in the long term commodity and resource stocks bull market.

Our Favourite Treasure Hunters

Below is the roster of the companies we have featured in past reports. These companies and the new additions we added in this edition have a common theme. They all have high quality projects that in our opinion to a large degree have valuations that are not accurately reflecting their realistic potential.

In the last few years, three of the companies we featured were taken over by larger companies and they are not included in the list below. These success stories include Wolfden Resources, Peru Copper Inc. and Gold Eagle Mines.

Before Wolfden was taken over, they spun out their gold projects and created Premier Gold Mines which is currently doing very well, so their success continues. Peru Copper was featured several times in our reports and is another company we were fortunate to follow early until they were taken over. Prior to Gold Eagle being taken over, they were the result of a merger between Exall Resources and their joint venture partner. We had started following the success of their discovery early when we featured Exall several times in the report and then with Gold Eagle Mines. Gold Eagle continued the success of the discovery by advancing it to the stage where Goldcorp Inc. took them over at a handsome premium.

In our view some of the companies currently featured in the report have the potential to follow the same paths as the above success stories.

Before closing this section we would like to add that another way we follow or sometimes discuss news from the group we feature in this report is on our online radio show. On the top right hand side of the main page of our website at www.allanbarryreports.com you will see the online radio icon. Click on that and our radio player will come up and all our past radio shows are archived on there. If you haven’t had a chance to listen to our radio shows, we encourage you to try it out.

Below the radio show icon is our Blog and by clicking on that you will see that we keep track of all the radio shows and print reports including which companies and topics were discussed. We have linked all the company names to their website so you can easily go research their fundamentals. We also have a directory on the main page of the website with all the companies that have been featured in our past print reports with names linked to their websites.

We have started all these new features because we are big believers in investors doing their homework to understand the fundamentals of the companies they are watching. It is always advisable that before making any investment decisions to do your own due diligence and consult with those whose opinions you rely on to make investment decisions. We cannot stress enough how important we feel it is for investors to do their homework before making any investment decisions. If these reports are helpful in identifying companies that merit readers doing their own further investigating, then we feel this report is a success.

Our roster of featured companies:

In Closing

We sincerely hope you like the changes to the report and the new additions to our website. If you have any comments on the changes, please feel free to give us a call or drop us a note; we highly value your feedback. As always, we would like to take this opportunity to thank you for taking the time to read the report. We hope this information proves to be informative and helpful.

We ask readers not to post this report on any website for at least three days after you receive it and if you do to kindly post the entire report without any editing. By posting the entire report it gives new readers a look at the complete report and they can find out how to subscribe for future reports. We invite readers to pass on our contact information to anybody they feel may be interested in receiving this report or future reports and we would be glad to add them to our email list for future publications. Our contact information can be found at www.allanbarryreports.com where you can also find our past reports and a way to subscribe at no charge for future reports.

Regards,

Allan Barry Laboucan,

Editor and Writer

Allan Barry Reports

Disclaimer: The information included in this Allan Barry Report on Commodities and Resource Stocks is for information purposes only. No statement or expression of opinion, or any other matters herein, directly or indirectly, is an offer, solicitation or recommendation to buy or sell any securities mentioned. The information contained in this report is drawn from sources believed to be reliable, but the accuracy and completeness of the information is not guaranteed, nor in providing it does the editor Allan Barry Laboucan or his companies, or affiliated companies, assume any liability. We do not receive or request compensation in any form in order to feature companies mentioned herein. The editor may have equity positions in companies referenced in this newsletter, or offers consulting services to these companies and will notify the reader of these positions or services provided to the company in the section of the report on each individual company. The editor, his personal company or affiliated companies, disclaims all responsibility and accepts no liability (including negligence) for the consequences for any person acting, or refraining from acting, on the information provided in this publication.