Precious Metals Worked in 2002...We think they will in 2003

Here is our best bets in gold and silver stocks

AXXel's
Precious Metals Group
January 9, 2003
Update of the September 3, 2002 Report

Using, AXXel Knutson's
VTAR

["Volume Trade Analysis Research"]
"Manage the risk...the profits will take care of themselves"

Member NASD & SIPC
197 Mountainview Road - Warren - NJ - 07059
Email: axxel@cantella.com
Telephone: 908.647.5750 FAX: 908.842-9150
Cantella & Co., Inc. is registered in all states. Mr. Knutson's registered states are listed in the disclaimer section. TradingWeapon VTAR [Volume Trade Analysis Research] TradingWeapon & TradingEngine is Trade/service marked by and owned by Axxel Knutson.

Here PRECIOUS METALS: Has been a horror story for about two decades. There was a time when this writer bought gold for clients, through Deak Pererra in New York and arranged for transport of about ½ of it to banks in Austria. Today is not that environment.

NOTE: UPDATED INFORMATION IS IN BOLD AND HIGHLIGHTED

But it was Chairman Paul Volcker, appointed during the Carter administration, that finally taught Congress [and a few presidents] that if they continued to spend that the Fed was not willing to go along with such fiscal irresponsibility particularly after Vietnam. And that he would raise rates... to 15%, to 20% to ...do you want to try for 50%? He was chairman of the Board of Governors of the Federal Reserve System in 1979. He pursued a restrictive monetary policy to combat inflation. He won that battle and that lesson WAS learned by government. It was a turning point in terms of my view of economics that with a strong Fed we would eventually curb governmental spending and that, in turn, eliminated the need for gold and other precious metals in client portfolios and it was SOLD. Indeed, it was August of 1981 when the Dow was at 888 that I published my "DOW 3,000" button-here it is...interest rates were 20%.

Dow 3,000 button, August 1981 [Dow Jones Industrial Average 888]

The FED did ease and put money back into the system in 1982, interest rates fell sharply, and the Great Recovery began. But it was Volcker, and only Volcker, that engineered the Dow 3,000, indeed the Dow 10,000 and eliminated the then need for gold because rationality had returned to the economic scene in the U.S.

Paul [bad glasses, good economics]

But that was two decades ago and we have had gold production facilities closed and above ground stocks reduced. Add to that the current international climate where we continue to purchase crude supplies from the very people intent on killing us. Have we learned our lesson there? Of course not. Did we learn our lesson in 1973 with gas lines three time around the block...am I glad I had a diesel car and could pull right up to the pump in those days, or what?

This is a problem that a Volcker, a Greenspan cannot fix. This problem takes leadership and that is something we are very short of and hence the need for precious metals in portfolios and perhaps some physical gold as well.

What would it take to eliminate the need for precious metals again? How about a gas-guzzler tax at the pump? If your car gets under 20 MPG as mine does, YOU have to cough up another $5.00/gal. If your car gets under 30 MPG you only have to cough up an additional $3.00/gal. If your car gets 50 MPG you get a 50-cent credit at the pump and if your car gets 75 MPG you get your gas ½ off.

Fantasy? Of course. Such a program would take leadership. It would take a president getting in front of a crisis for a change and promoting such an idea and yet giving the American people, let's say, five years, before it takes hold...that would be enough time to change buying habits.

·   Once done: we would eliminate our balance of payments.
·   Interest rates would go to zero and you would have to pay banks just to hold your $$$
·   Our defense situation would eliminate our dependence upon unstable sources of crude
·   Middle eastern countries that hate us would become poorer and less able to aggravate AXXel and you.
·   And we would still be able to get to the Piggly Wiggly in the same time as it takes as now in just about the same level of comfort
·   And there would be fewer Ford Excursions, Chevy Tahoes to crash into your kids killing them whilst the drivers of those beasts sit high up wondering why you did not get out of their way on I-95.

Volcker was succeeded as Federal Reserve Board chairman by Alan Greenspan in 1987. One might read his book: The World's Money and the Threat to American Leadership (1992)

30-year Treasury Constant Maturity [the numbers raw] Ignore the garbage prior to the rate.

1977 02bb7.75
1977 03RR7.80
1977 04VV7.73
1977 05;;7.80
1977 06<<7.64
1977 07hh7.64
1977 08!!7.68
1977 09gg7.64
1977 10ll7.77
1977 11bb7.85
1977 12$$7.94
1978 01FF8.18
1978 02qq8.25
1978 03jj8.23
1978 04CC8.34
1978 05zz8.43
1978 06qq8.50
1978 07%%8.65
1978 08yy8.47
1978 09BB8.47
1978 10QQ8.67
1978 11hh8.75
1978 12%%8.88
1979 01WW8.94
1979 02LL9.00
1979 03<<9.03
1979 04ZZ9.08
1979 05\\9.19
1979 06888.92
1979 07::8.93
1979 08nn8.98
1979 09mm9.17
1979 10WW9.85
1979 11|10.30
1979 12u10.12
1980 01510.60
1980 02a12.13
1980 03|12.34
1980 04611.40
1980 05R10.36
1980 06))9.81
1980 07}10.24
1980 08_11.00
1980 09!11.34
1980 10V11.59
1980 11)12.37
1980 12)12.40
1981 01k12.14
1981 02:12.80
1981 03$12.69
1981 04;13.20
1981 05C13.60
1981 06<12.96
1981 07y13.59
1981 08|14.17
1981 09E14.67
1981 10:14.68
1981 11/13.35
1981 12/13.45
1982 01\14.22
1982 02F14.22
1982 03F13.53
1982 04b13.37
1982 05>13.24
1982 06[13.92
1982 07313.55
1982 08112.77
1982 09V12.07
1982 10'11.17
1982 11K10.54
1982 12u10.54
1983 01810.63
1983 02i10.88
1983 03C10.63
1983 04;10.48
1983 05v10.53
1983 06[10.93
1983 07Z11.40
1983 08H11.82
1983 09)11.63
1983 10T11.58
1983 11a11.75
1983 12u11.88
1984 01n11.75
1984 02"11.95
1984 03S12.38
1984 04v12.65
1984 05H13.43
1984 06_13.44
1984 07O13.21
1984 08P12.54
1984 09K12.29
1984 10A11.98
1984 11F11.56
1984 12911.52
1985 01%11.45
1985 02611.47
1985 03|11.81
1985 04%11.47
1985 05D11.05
1985 06B10.45
1985 07N10.50
1985 08.10.56
1985 09L10.61
1985 10810.50
1985 11[10.06
1985 12RR9.54
1986 01..9.40
1986 02xx8.93
1986 03]]7.96
1986 04OO7.39
1986 05DD7.52
1986 06**7.57
1986 07ii7.27
1986 08KK7.33
1986 09ff7.62
1986 10XX7.70
1986 11nn7.52
1986 12!!7.37
1987 01337.39
1987 02&&7.54
1987 03))7.55
1987 04??8.25
1987 05,,8.78
1987 06 8.57
1987 07RR8.64
1987 08]]8.97
1987 09SS9.59
1987 10mm9.61
1987 11''8.95
1987 12229.12
1988 01__8.83
1988 02JJ8.43
1988 03AA8.63
1988 04..8.95
1988 05bb9.23
1988 06ww9.00
1988 07QQ9.14
1988 08((9.32
1988 09gg9.06
1988 10EE8.89
1988 11KK9.02
1988 12NN9.01
1989 01338.93
1989 02>>9.01
1989 03((9.17
1989 04WW9.03
1989 05//8.83
1989 06ww8.27
1989 07))8.08
1989 08II8.12
1989 09998.15
1989 10rr8.00
1989 11ff7.90
1989 12997.90
1990 01__8.26
1990 02888.50
1990 03((8.56
1990 04""8.76
1990 05>>8.73
1990 06jj8.46
1990 07;;8.50
1990 08668.86
1990 09MM9.03
1990 10778.86
1990 11@@8.54
1990 12$$8.24
1991 01MM8.27
1991 02338.03
1991 03qq8.29
1991 04WW8.21
1991 05ff8.27
1991 06ww8.47
1991 07??8.45
1991 08SS8.14
1991 09''7.95
1991 10[[7.93
1991 11FF7.92
1991 12zz7.70
1992 01**7.58
1992 02vv7.85
1992 03ZZ7.97
1992 04@@7.96
1992 05..7.89
1992 06MM7.84
1992 07447.60
1992 08}}7.39
1992 09,,7.34
1992 10""7.53
1992 11@@7.61
1992 12SS7.44
1993 01vv7.34
1993 02RR7.09
1993 03FF6.82
1993 04oo6.85
1993 05mm6.92
1993 06__6.81
1993 07cc6.63
1993 08}}6.32
1993 09??6.00
1993 10NN5.94
1993 11FF6.21
1993 12aa6.25
1994 01006.29
1994 02GG6.49
1994 03SS6.91
1994 04ll7.27
1994 05RR7.41
1994 06HH7.40
1994 07OO7.58
1994 08557.49
1994 09ZZ7.71
1994 10NN7.94
1994 11__8.08
1994 12ss7.87
1995 01BB7.85
1995 02<<7.61
1995 03;;7.45
1995 04..7.36
1995 05QQ6.95
1995 06446.57
1995 07VV6.72
1995 08BB6.86
1995 09rr6.55
1995 10LL6.37
1995 11116.26
1995 12``6.06
1996 01ff6.05
1996 02YY6.24
1996 03ii6.60
1996 04//6.79
1996 05kk6.93
1996 06337.06
1996 07yy7.03
1996 08&&6.84
1996 09%%7.03
1996 10jj6.81
1996 11CC6.48
1996 12KK6.55
1997 01++6.83
1997 02**6.69
1997 03006.93
1997 04$$7.09
1997 05cc6.94
1997 06RR6.77
1997 07TT6.51
1997 08446.58
1997 09KK6.50
1997 10ff6.33
1997 11ff6.11
1997 12EE5.99
1998 01tt5.81
1998 02ff5.89
1998 03((5.95
1998 04[[5.92
1998 05cc5.93
1998 06!!5.70
1998 07HH5.68
1998 08EE5.54
1998 09995.20
1998 10||5.01
1998 11kk5.25
1998 12aa5.06
1999 01GG5.16
1999 02ee5.37
1999 03::5.58
1999 04AA5.55
1999 05HH5.81
1999 06xx6.04
1999 07++5.98
1999 08\\6.07
1999 09@@6.07
1999 10))6.26
1999 11116.15
1999 12''6.35
2000 01HH6.63
2000 02zz6.23
2000 03RR6.05
2000 04NN5.85
2000 05--ERROR:6.15
2000 06445.93
2000 07CC5.85
2000 08EE5.72
2000 09::5.83
2000 10OO5.80
2000 11--5.78
2000 12PP5.49
2001 01zz5.54
2001 02TT5.45
2001 03uu5.34
2001 04]]5.65
2001 05II5.78
2001 06aa5.67
2001 07&&5.61
2001 08gg5.48
2001 09aa5.48
2001 10NN5.32
2001 11..5.12
2001 12555.48
2002 01>>5.45
2002 02ii5.40
2002 03$$0.00
2002 04PP0.00
2002 05gg0.00
2002 06kk0.00
2002 07>>0.00

NOW ON TO THE STOCKS:

January 8th, 2003 UPDATE: After a steady rise above $300 an ounce last year, gold sped to a six-year high of $350 an ounce this week after a relentless 22-year slide. On Tuesday it had eased to $347. We think that the move for gold is not yet over...it has, after all, taken a decade and a half off from the high at $850/oz. Further, we think the gold and silver stocks are measurably behind the metals in terms of price and hence our very bullish stance.

Newmont Mining [NEM-28.85] the leader in the group and very undervalued. In the interest of FD, my family does own this issue]. After a nice move in the first quarter, NEM has been consolidating that $18 to $32 move and it now appears that the consolidation is finished. STRONG BUY. Here is the recent news: "Newmont Mining Swings to 2nd-Quarter Profit, Sees Gold Prices Rising

DENVER --Newmont Mining Corp. (NEM) swung to a profit in the second quarter as gold prices rose and sales surged.

The gold-mining company Wednesday reported second-quarter net income of $66.7 million, or 16 cents a share, compared to a net loss of $31.6 million, or 17 cents a share a year earlier.
The latest result was two cents a share ahead of a consensus estimate of analysts surveyed by
Thomson First Call. Sales jumped 94% to $712.3 million from $365.8 million for the same period in 2001. The company expects even stronger results in the second half of the year and said it is on track to reach full-year earnings of 40 cents to 50 cents a share, before mark-to-market adjustments, first announced in May. At a conference Monday, Newmont President Pierre Lassonde said the price of gold could rise to $350 a troy ounce over the next 18 to 24 months, stating, and "We're fully confident" of the price rise.

Low interest rates, a decline in the dollar, and fears of a double-dip recession in the U.S. could all help push up demand for gold. At the same time, mining and production of the precious metal are expected to be lower following a plunge in global exploration during the past five years. Mr. Lassonde said gold is at the "very beginning of a bull run." First Call currently projects 2002 earnings of 53 cents a share."

January 8th, 2003 UPDATE: [NEM-27.96] they were correct in their assumption of increasing prices for gold. So are we. Strong Buy, still. The stock has a superior double bottom at the low $20 range and we think it can attack the 30's and perhaps the $40's.

Newmont chart courtesy of Clearstation.com

Barrick Gold Corp. [ABX-15.50] very similar in terms of the development of the price of this stock. The base is mid teens and there we are again. STRONG BUY. Here is the news link: http://biz.yahoo.com/bw/020725/252031_1.html.
January 8th, 2003 UPDATE: $15.41 very much behind the metal in terms of price. Strong Buy, still.

TVX Gold [TVX-13.24] holding better than NEM or ABX but also with more air beneath. The VTAR numbers are quite positive and we rate a "STRONG BUY." The company has moved to the profit column.    January 8th, 2003 UPDATE: $15.11 the bottoms were at ten and there were about three of them. Strong buy to kiss goodbye to the teens in our opinion...no guarantees, mate.

Echo Bay Mines [ECO-$0.95] not the quality, but not the price either...still in the base with spikes to $1.25 plus...capable of attacking that number. Company still has major problems. See news: http://biz.yahoo.com/prnews/020730/latu115_1.html. There are much better choices. January 8th, 2003 UPDATE: $1.21 and now on top of the base. Buy.

Ashanti Goldfields Corp [ASL-4.97] an African miner and with the risks associated with the continent. Here is the link for news: http://biz.yahoo.com/bw/020806/62063_1.html. ASL appears quite positive and we rate as "Buy." January 8th, 2003 UPDATE: $6.15 and we upgrade to "strong buy."

Anglogold, Ltd [AU.-22.37] and a bargain in the group. Strong Buy. And the links for news and balance sheet. January 8th, 2003 UPDATE: $34.95 and a bargain it was. We see no reason to back off. Strong Buy, still

SILVER

Coeur d'Alene Mines [CDE-2.01] an exceptionally strong issue with a move that saw the stock lift from the base at 70 cents to $2.25. That move is consolidated and now we have very low speculative levels pushing toward that recent high. Again in FD, I own this issue. The company is restructuring debt, increasing production and lowering costs per ounce. STRONG BUY. January 8th, 2003 UPDATE: $1.99 and a wild ride for sure but with much improved prospects and balance sheet. Strong Buy. [FD-I own this issue-FYI].

CDE chart courtesy of Clearstation.com

Apex Silver Mines, Ltd. [SIL-13.85] not exactly the same power as CDE, but nearly so. BUY. January 8th, 2003 UPDATE: $15.50 The base remains solid indeed and we upgrade to "strong buy."

Pan American Silver Corp. [PAAS-6.75] revenues up, losses less, production up...Accumulate. January 8th, 2003 UPDATE: $8.22 again with an outstanding base and a crash pattern in July we now think we can get the opposite, a "mirror" move but now to the upside and that takes us to the teens as an objective. Upgrade to "strong buy."

Hecla [HL-4.03] but ahead of itself with the move 70 cents to $5.00. Hold. January 8th, 2003 UPDATE: $5.18 and a recent announcement of a stock offering will likely keep a lid on the stock until the offering is complete, but then some expected press of the highs and that takes us to double digits with some patience. Have the patience. Buy any downside breaks. Strong Buy.

HL chart courtesy of Clearstation.com
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DISCLAIMER

Investment decisions should not be based solely on our proprietary indicators, which are intended as an adjunct to your additional analysis. Please accept these comments as market commentary. We do not intend these comments to replace detailed fundamental analysis. We urge you to accomplish that additional research via your contacts on the Internet or through a trusted financial advisor. If you want additional information on any of the securities discussed within, we will give it upon your request.

This report has been prepared from original sources and company data we believe to be reliable, but we make no representation as to its accuracy or completeness. This report is published solely for information purposes. It is not to be construed either as an offer to buy or sell or the solicitation of an offer to buy or sell any security or the provision of or an offer to provide investment services in any state where such an offer, solicitation or provision would be illegal. Any opinions expressed herein are statements of our judgment on this date and are subject to change without notice and we likely not update that change to you. The opinions expressed are that of AXXel Knutson and are not necessarily representative of Cantella & Co., Inc.. Cantella & Co., Inc., its affiliates and subsidiaries and/or their officers and employees may from time to time acquire, hold, or sell a position in the securities mentioned herein. Brokers with Cantella will likely have differing opinions.

The author of this report, Axxel Knutson, very rarely invests in any of the securities mentioned in these reports nor does his immediate family unless such securities are management companies of mutual funds or indirectly if such equities are included in mutual funds or index options. Equity investment involves risk of capital loss. We recommend that your portfolio be diversified by company size, industry group, and geographic region and by currency.

It should not be assumed that future selections will be profitable or will equal the performance of past selections. Securities listed herein illustrate selections made using proprietary indicators known as VTAR [Volume Trade Analysis Research]. These names, VTAR, TradingWeapon, www.TradingWeapon.com Trading Engine, www.tradingengine.com , Volume Trade Analysis Research, are service marks/trademarks of AXXel Knutson.

All recommendations and commentary are directed toward sophisticated, aggressive traders who have significant experience trading in a volatile market and who possess the financial resources to risk a loss of some or all of their invested funds. Commissions and, if you use margin, interest charges will lessen any return on investment. VTAR [Volume Trade Analysis Research] centers around the proprietary analysis of trading volume, price, general fundamental analysis, beta concerns, group rotation and detailed analysis of risk as it relates to entry and exit points in reasonably liquid stocks.

    AXXel very rarely trades in the same stocks as clients or those written about in his newsletters or spoken about in media appearances with the exception of stock index options and mutual fund management companies. AXXel will disclose positions personally held in any such stocks in newsletters when published. Cantella & Co., Inc. Securities, its brokers and its officers may take and have positions although they receive no advance notice of new recommendations or changes in opinion Those interested in additional information on any stocks discussed within may call at 908-647-5750 or email AXXel at axxel@cantella.com. We do not deal in BB stocks [with the exception of some ADR's]. Refreshing, isn't it?

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