How to View the Correction (Here and in Sweden)

So we believe that the market correction in the resources is over, but we are not sure as to when the prices will resume their upward march again. At this time we are not as much concerned about them going up as we are with getting our stakes. Much as the race has been on for uranium companies to stake the most promising lands, it is now on for the individual investors to establish stakes in the most promising stocks. We recommended sxrUraniumone when we called the recent bottom as well as an oil sands player Canwest. We stick by those picks especially as SXR pushes ahead with its Honeymoon project in Australia. Now although we added to those stakes, we also look to add to others or even acquire new stakes altogether! So long as the market flatlines, we see a buying opportunity, however no margin at this time because there are times when the market does what you least expect and what you perceived as perfect timing is dead wrong.

Sticking with energy we also see a buying opportunity in Lundin Petroleum (LUPE.ST) as it has become known to us that the Swedes are allowed to buy up to 80% on margin in their country. We believe that this is the reason (and truly the only reason) that Lundin has lost over 25% of its value in the past week. However, we take solace in knowing that only 15% of its shares outstanding belong to small investors. In other words all the recent selling has come as these guys are forced out (due to margin calls most likely) but we are now left with a much stronger foundation to build upon as more financially sound owners come aboard. Our belief is that if you are going to successfully invest in oil, you will have to buy GROWING oil companies, because it still (in some cases) allows for growth with falling prices in resources, and oil is a resource.

At this time we believe that accumulation in the soon-to-be producers is the way to play, and at the time that those stocks begin to recover is when we can once again begin to speculate in the explorers. Cameco is also looking quite interesting at these prices. We are currently working on some company profiles which has been consuming most of our time, and hope to have those up in the next couple of weeks. So keep periodically checking in to see the updates.

Correction...New Buying Opportunity

With the recent market pullback, many of our energy stocks have seen a dramatic drop in their share prices. The oils have been hit nearly as hard as the uraniums, however it seems that the uranium stocks have experienced more of a downfall as a result to not only being in the energy business but mining as well. All mining stocks seem to have been hard hit recently as well as energy stocks. It seems that CWPC has just today hit its last support level at about $5.90 which we see as very fortunate because its next support can be found at the $5 area. Another stock, which recently hit an all time high as most uraniums have done, is SXRuranium which we think is a screaming buy. The company, on the Toronto Stock Exchange, fell to $9.07 where it seems to have hit its last support level, but like Canwest is about $2 off of its recent highs.

In all fairness we are not really sure what to think as to the news that two more board members were stepping down at Canwest in order for "independent" Directors to step in, but it seems strange. SXRuraniumone is most likely consolidating at these levels which should be healthy for the stock as it accumulates 'new money' as it embarks on its new journey (which we believe will be up). It seems that all of the uranium stocks have fallen to their support levels, with Cameco hitting a very strong one in the $37 area. We see this as the speculative money being chased out of investments that the risk could no longer be tolerated or "insured" through their margin.

With many of the companies that we have pointed out now below or close to even at this point, we see this as a tremendous buying opportunity. One in which we can now get into those companies that we previously did not have the opportunity to purchase at a decent price or could not afford at the time. Personally we are looking at SXR on the Toronto as our play during this pull-back but we are seriously considering a move into Canwest, as $2 to the upside (back to its old high areas) is worth more on a percentage basis than SXR moving up $2. However now is the time to diversify in the energy sector and for those of us with plenty of shares of Canwest it is probably wiser to not be greedy and invest in a new company which will shortly be producing from their new mine (SXR). We would also bless a move into PDN.to (Paladin) right now even though its move to the downside has been rather kinder to its shareholders than others'. We still see value from this company because it will be producing about 6 million pounds of Uranium within 3 years and at this price we see that as very attractive.

There is an old saying which we are reminded of as we write this and that is, "Bull markets climb a wall of worry." Well there seemed to be a lack of worry as these stocks were moving strongly to the upside, but after this correction it seems that we now have many stocks fairly valued with the potential for some quick short term profits. We also now have some "worry" in the market regarding these stocks which may keep some people on the sideline in order to buy only at higher prices. Investors are rewarded for taking risks, more so for taking calculated risks, and at this point we believe that the uraniums have found an area to settle at, consolidate, and then hopefully make a move to the upside as they had previously done for nearly 2 months. We see this morning as the perfect time to start our accumulation, and this shall only be halted after a 10-15% move upwards.

In Depth Analysis: Raymond James Oil Sands Conference

On Monday May 9 CanWest took part in the Raymond James Oil Sands Conference through its majority owned subsidiary OILSANDS QUEST INC. This conference featured the tried and true of the oil sands in Alberta such as Suncor, Imperial Oil, and Synenco as well as the newcomers to the group. The OILSANDS QUEST presentation consisted of much of what current investors who have done their due diligence on the stock already knew, with some interesting new information.

The company stated that they currently have 850,000 acres of exploration permits after their first relinquishment, and expect to have 508,000 acres after their 2006 relinquishments (but as we already knew they are still trying to have this delayed due to the Saskatchewan government taking so long with approving the drilling permits). They described this land as the largest land holding in the tar sands of any company and described their plan of bringing the sands into production through ventures. If the sands prove to be economical the company will seek partners to come into the projects (expected to be between4-6, which we believe depends not only on how economical the sands are but also on the breadth of the projects and interest) while maintaining a 20-40% interest in each project. We would expect the first sale to be the most important for the company because it will set a benchmark for the equity percentage it is able to retain in the following transactions, but once again that all depends on the level of interest in the projects.

The company also displayed a slide that displayed the Chesapeake Bay area showing the type of geological formation they are seeking in order to establish where the tar sands may or may not be. We think this might be part of their "thesis" which was described earlier that they did not want to divulge at the time. So the company is most likely drilling in these basins now and began drilling on their 150 hole Phase II program this past winter, but expect it to be completed next winter due to its size and weather conditions. The company also stated that the environment is practically unscathed at this point so they face less regulatory hurdles as the environment will not be faced with the Pollution Growth Effect (this is simply an effect that takes place where as new projects are added their pollution outputs add exponentially to the current pollution problems).

In 2005 the Company spend $5 million on land and site infrastructure, $6 million on Phase I drilling. In 2006 the Company then spent $5 million on drilling and geophysics and expect to spend another $20 million on Phase II drilling. The company expects to spend $35 million total and stated that the bulk of this money has already been raised at this point. This bodes well for current shareholders as dilution should not be a problem as the company appears to have these expenditures paid for mostly.

What makes this company special is that it is in a previously untouched province where currently the problems in Alberta do not exist. There is plenty of water in Saskatchewan which appears likely to last into the future and a large base of labor from which to draw. Both of these resources seem to be in very short supply in Alberta where the oil sands business is exploding. The company will also have access to transportation routes while having a minimal impact on the environment once again.

The Company stated, "uncertainties have been addressed" and the results are "consistent with our geologic model" because the "materiality of resource has been proven". They noted Norwest classified the resources as "Discovered Resources" which had been previously announced and stated that they expect a full evaluation of the Phase I drilling program to be out in August. The Company stated, "We are confident Phase II drilling program will result in commercial viability of Firebag East." So as the CanWest and OILSANDS QUEST remain bullish, so do we.

CVVLF (CVV.V): This is our priority right now as they should have some big news out soon, news that could rival CanWest's first announcement of its drilling program. This company reminds me a lot of CanWest as it was an infant in that it has many projects with one currently under development. Also today the Company announced that it had staked an additional 250,381 acres of land in and North of the Athabascan Basin. They added to their Poplar and NE Project and created the Grease River claim. Grease River previously had work done on it by the Canadian Government and it contains up to 1.60% U308 on surface testing with another area containing 1331 ppm of Uranium. As previously stated we see this stock as a potential double on good news and a worse case scenario would put it down 40% on bad news. We should know soon as to which way we are headed and hope for the best.

UREGF (URE.TO): The Company recently announced that it was going to sell its holdings in Canada for cash which will undoubtedly help in bringing their Wyoming holdings into production. We see this as a positive as it will keep the company from diluting its shares by being forced to raise cash to build out infrastructure on its site.

The Energy Overview

The oil market has been quite volatile as of late as they quickly rose to $75 and then subsequently fell closing today below $70. It seems that gasoline inventories have been drawn down at a much slower pace than many believed that they would, thus resulting in the fall in the futures market. Many are stating that we will see $100 oil before we ever see $30 oil again, and we agree. Even with the recent fall in prices, nearly 10% at this point, we believe that it is just a short term pullback in a bull market. For oil to ever see $30 again we would have to see a huge drop in demand which even if the market did, it is our opinion that at this stage in China and India’s economic growth we would not see that large of a drop because they would simply absorb the excess capacity. The other event that could cause oil prices to fall in a dramatic fashion would be a huge 180 degree shift in American foreign policy. This is not likely to change in our opinion as George W. still has two more years in office and the Middle East is still a hot bed of controversy. Iran will not be attacked in the next year and maybe not for two more. Now if America attacks Iran, oil will shoot up to $100 and if they do not, then Iran will develop their nuclear capabilities and once they do we will see $100 oil. So either way we will see $100 oil because attacking Iran takes their 4 million barrels per day off-line, and if we do not attack them it will make the world that much more of a scarier place. Pretty much we are “damned if we do, damned if we don’t.” However, once oil reaches $100 per barrel the United States has literally trillions of barrels of oil locked up in oil shale out in Colorado and Utah. This price makes producing this oil shale more than economical, and will then help bring down the price, but these are all forward looking statements. We say stick with uranium as it will go up due to the increase in demand for this resource as oil increases as will the other natural energy resources. Uranium should see higher demand growth than the rest of its peers due to the fact that each pound can make more power than any other material. Our point is that a $100 barrel of oil is exponentially more expensive than a $100 pound of uranium due to the fact that the pound of uranium can produce so much more power.

Our previous thoughts on preserving our US Dollars through the investment of foreign uranium producers seem to be paying off quite nicely. We notice that Australia has continued to raise interest rates in an effort to keep their property market in Sydney as well as other parts of the country from experiencing a total implosion. These rate hikes should continue as the mining sector (all commodities for that matter) heats up and more money is thrown in that direction. The Canadian Dollar is doing nicely as well as it has recently gotten to the 9/10 mark of a US Dollar. Both of these currencies are rising against the US $ just as the Fed is raising rates! What is more is that the media is reporting that Bernanke is going to continue to raise rates in the near future as the deficits (either one) continue to rise. This is bearish for the US $, and seems to support our hypothesis stated in previous writings. Also keep in mind that as the US $ is the currency in which the world’s resources are priced, so as it falls the prices for these resources go up. So maybe this is another reason that commodities are up (oil included!!!) and Americans will just have to adjust to being forced to paying more $ which the world seems to be recognizing that maybe there are extremely too many out there. Also important to note with Chinese salaries going up is the definition of inflation…too many dollars chasing too few goods-which is what is happening in the commodities markets with the Chinese and Americans (and to a lesser degree India) competing for the same products. For those sophisticated investors (or maybe it would be best to describe them as COURAGEOUS) maybe shorting bonds would be a decent play, this is not a recommendation, just one of our ideas at this point because we are still very bullish on ‘The Uranium Movement’ and believe that is where we should be allocating our capital.

Canalaska (CVV) recently announced that they were listing on the Frankfurt open market exchange. This makes us think that management is feeling very good about the results coming out, otherwise they would not be adding a new listing (note how close that it is to when they expect to be releasing drill results). Also Canwest (CWPC) our oil sands play which has treated us very well will be taking part in a conference sponsored by Raymond James on May 9. Should the company’s biggest cheerleader show up, OilsandsQuest CEO, show up for this conference there should be some fireworks. Maybe even the announcement of their 2nd phase of drilling, which could potentially add 2 points onto this stock the day of considering that they would be announcing this news at the same time they were talking to many analysts who still have not caught on to this hidden gem in the oil sands because they are on the other side of the border. It seems whoever operates in Saskatchewan, not by the name of Cameco, is neglected by the large US investor base no matter what key industry they are in.

To finish up we would like to focus on our reasons for focusing on the small resource stocks and not focusing on “the undervalued blue chips”. Although we agree that many are greatly run and have also grown their profits handsomely, we believe that these stocks are staying put, relatively (they may go up but inflation should wipe out much of those gains in our opinion). We think that investors paid up so much for these stocks during the Internet Boom that even though they have come down to this level you must also remember that their revenue growth has come down to this level as well. Investors pay up for growth, and if they are looking at a smaller time frame, then their premium will not be as high as if they were looking five years into the future. Many of our friends have asked us about Cisco and Intel as well as General Electric. If you want a dividend, cash intensive business or a maker of a quickly commoditizing business, then one of these stocks might just be for you, if not go for growth. Remember these resource stocks may seem scary, but they have real assets and real demand as the world becomes enlightened and begins to build the future energy sources which will require a steady flow of uranium. Diversification is never a bad thing and we encourage it, however “The Uranium Movement” is what we are currently focusing on and shall continue to focus on until we believe that there are other better investing opportunities out there.