Pescod says...

EXTORRE GOLD MINES
CROWN POINT VENT.
(T-XG)
(V-CWV)


It’s hard to believe that Argentina at the beginning of the
20th Century was considered potentially the best economy
of the Americas. So much for management of those rich
natural resources though as between dictators and what-
ever, those resources have been terribly mismanaged.

People had hopes with the election of Cristina Fernandez
de Kirchner, things might be altered positively, but today we
learn the country is lurching from bad to worse. In her first
move since winning re-election Bloomberg writes they have
changed a 2002 decree and is now requiring oil and mining
companies to keep at least 30% of their export revenue in
the country and that applies to all future sales.

Meanwhile, the average Argentinean doesn’t trust his
own government, a government that suggests inflation is
9.9%, but private economists say it’s closer to 24% and be-
cause of that and other factors, Argentineans pulled $10
billion out of their own country in the first six months of this
year and sent it elsewhere. Sad to see such a resource-rich
country so terribly managed, one wonders what next and
how the companies will cope with it.

We caught up with Canaccord oil and gas analyst Fred
Kozak who just a while a go wrote an 83-page report enti-
tled, “Investors Crying for Argentina...But will it be the ad-
ventures of Old or New Cristina?”...referring of course to the
new President and needless to say, Fred is a fan of the re-
sources and potential resources of Argentina, but so many
others wonder about governments there.

As we catch up him today, he suggests that this sell off
in the oil sector in Argentina might well be an opportunity as
he points to the important tidbit and that is...30% of their
export revenues must stay in the country. He reminds us
that the oil and gas companies that are based in Argentina
do not export their oil and gas and of course their revenue
does stay in the country anyway! The mining companies, he
reminds us, that’s a different case as they export most of
their ore or commodities and that might not be a buying op-
portunity, he infers.

Meanwhile there is a long list of companies with assets in
Argentina from Pan American Silver to Yamana Gold to
Goldcorp and even Barrick Gold. Extorre Gold Mines though,
is probably the most exposed.



One of the biggest of the movers on the markets yes-
terday (ironically gold was up 50-some dollars and yet
many gold stocks barely budged) was Orezone Gold, up
almost 20% on the day.

We tracked down President, Ron Little and he sug-
gested that there’s nothing imminent that he knows of
other than a recent marketing trip he did to funds and
brokers in Montreal and Toronto. Must have been some-
thing he was saying…

He reminds us though that while the old Orezone
company he and his current team led was sold, they are
going to make sure the current Orezone is in a different
state of affairs, if and when they ever get to the point of
becoming a potential take-over candidate. None of that
being in debt and at the mercy of other players.

In the meantime, the company sits at about a three
and a half million ounce resource with two million of
those ounces inferred, and their target is that by April
when new resource numbers come out, they hope to be
up to as much as five million ounces with three of that
measured and indicated.

They are still working on a massive drilling program
on their Bombore project in Furkina Faso for 170,000
meters of drilling, averaging about 10,000 meters a
month. The drilling program should be completed by
Christmas and then the bookkeeping starts...calculating
just how big a resource they really do have.

Their project is turning out to be quite a big one with
Bombore being about 11 miles long and anywhere be-
tween a couple of hundred meters and a kilometer wide
and so far much of the drilling has come up with grades
better than had been expected.

Interesting to see that Orezone’s stock has fared a
little bit better than many others in the $300 correction in
gold price, but the question is, what next for the direc-
tion of gold and Orezone?

When we ask Little for any other speculative stocks
out there that one should be looking at, he suggests
Northern Shield in the Ring of Fire.

MPR on the agenda

The chase by Marty Cej:

The Bank of Canada yesterday cut its forecast for Canadian economic growth and warned that Europe will suffer at least a brief recession, presaging statements from Finance Minister Jim Flaherty later in the day that he will cut the government’s growth projections in the next few weeks and that Europe could trigger another global recession if it can’t resolve its persistent and worsening debt crisis. Today, European leaders will get another chance to fix their troubles and the Bank of Canada gets a chance to explain its latest interest rate decision in greater detail.

The Canadian central bank releases its Monetary Policy Report at 10:30 am Eastern. Linda Nazareth will report from the lock-up as the headlines break and we’ll follow the Q&A with Governor Mark Carney beginning at 11:15. We can expect Carney to field questions on the European mess, the pace of the U.S. economy, the impact of U.S. and European monetary policy on Canada, demand for Canadian exports from developing nations and maybe a question or two on the dollar. We can also expect Carney to field at least one direct question on when he might raise or cut the benchmark interest rate by an enthusiastic young journalist who has been put up to the question by his more experienced, smirking colleagues.

And now that the Bank of Canada has been explicit and as forthcoming with its monetary policy as any central bank can be, we’ll turn our attention to fiscal policy. Minister Flaherty refused to be drawn yesterday on whether the government will be able to stick to its plan to balance the budget by 2014.

Slowing economic growth will make it difficult (impossible?) to meet the government’s revenue expectations while at the same time increasing pressure on Ottawa to shelve planned spending cuts that might exacerbate a slowdown by putting more jobs at risk. And what about Canadians’ household debt levels, which are sitting at U.S.-like levels? And how about the still-booming real estate market? Are Canadians taking on too much risk with interest rates low and home prices continuing to rise?

We’ll also take a look at how interest rates being lower for longer will affect Canadian consumers and companies. Record low bond yields will put immense pressure on banks’ margins and prompt all sorts of accounting gymnastics at the insurers. Are current share prices justified by the outlook for slowing profit growth? And let’s not forget about the impact of puny yields on pension plans. Air Canada is a good example of a pension plan under pressure and it deserves a much closer look today.

And why are we talking about falling earnings expectations, record low bond yields and a slowing global economy? Because European leaders have yet to come up with a credible solution(s) to their debt crisis. Brussels today hosts the 14th crisis summit in 21 months – in fact, it hosts two summits today; a cocktail summit with all 27 leaders from the European Union at noon Eastern, followed by a dinner summit with just the 17 countries that share the euro currency. The 10 non-euro leaders will be shown into an adjacent room where they will sit at fold-out tables and be offered spaghetti or chicken fingers and fries. What markets hope to see is an agreement on detailed plans for bank recapitalizations, a bigger and bolder EFSF and sharper haircuts on Greek debt.

As much as expectations have been massaged lower, a major disappointment today will be priced out quickly and severely by financial markets.

In the meantime, industrial commodities are doing pretty well today after Chinese Premier Wen Jiabao said economic policy will be fine-tuned as needed and the Chinese industry minister said it is studying “stimulative policies” for smaller companies. The market has interpreted the comments as being pro-growth.

It is a big day for earnings. In Canada, we’re tackling Rogers Communications – which appears to have beaten expectations and has named a new CFO; Agnico-Eagle, Goldcorp, Methanex, Open Text and Lundin Mining.

In U.S. earnings, we have Ford, Boeing, Nasdaq, Lockheed Martin, Norfolk Southern, Sprint, Visa, Northrup Grumman and Corning.