The investing landscape has certainly changed over the last two years, and the news of the Bear Sterns Company being sold to JP Morgan for just 2 dollars a share certainly exemplifies how dramatic the changes can be. For years, investors gorged themselves on financial assets and esoteric derivatives, but this run has come to an end with the implosion of the subprime mortgage market. Once it was shown that a lot of companies were holding paper assets with no true way to value them, the credit markets seized up, leading to a mass exodus out of all those mark to model holdings. Investors wanted something solid, something that, if you dropped it on your foot, it would hurt. Something called a “commodity”.
The common definition of a commodity is an article of trade or commerce, especially an agricultural or mining product that can be processed and resold. In general terms, if we “use it up” (i.e., orange juice, copper, zinc, steel, bacon, etc.) and then need to replace it, it’s a commodity. In the past two years, we’ve seen investors shun the paper-backed assets in favor of the hard assets of commodities. Just about anything that takes a bit of sweat and determination to bring to market is soaring in value. Wheat for example has hit an all time high. So has corn. So has copper, zinc, platinum, and palladium.
But sometimes a commodity can have two or more “uses”, and this is what makes gold and silver such attractive commodities. History has shown both of these to function not only as jewelry and industrial metals, but historically as currency, and as inflation has caused the value of paper money to recede, gold and silver have greatly increased in value. The combination of gold and silver as both commodity and currency metals has driven both to recent highs, and demand is increasing daily.
Red Lake Exploration is now involved in the exploration for mineable metals such as copper, silver and gold in the coastal region of Chile. These areas, such as Chile’s III region, was the mining centre for copper, gold and silver starting in the 16th century. Because the technology of the time was primitive, once the easy fruit was found the mines and scrapes were abandoned in favor of easier pickings further inland. Now, because of increased technological and geologic methods, these areas are considered viable hunting grounds again.
Red Lake could be regarded as holding a bit of a “sweet spot” geographically. Because most metals are found to be in close proximity, finding a trace of copper generally indicates a likely amount of gold and silver as well, not to mention zinc, iron ores, and other less noble metals. Yet in the current market place, all metal and mineral commodities are demanding record or near record prices, suggesting that it won’t take much of a find to produce a significant return.
Exploring for resources is the modern day equivalent of treasure hunting. In days of old, a worn map and some rumors were all that was needed to send hearty explorers into the wilds. Today the maps are geological surveys and topographical maps, and the “rumors” are areas where metals and minerals were found in the past but deemed to be exhausted. Modern technology can turn what was a “spent” mine, into a productive mine through better extraction techniques.
Red Lake, trading under the symbol RLKX, is doing the necessary legwork to hone in on areas with the highest probability of suitable returns. This is the detective work phase, and it is also the most important part of modern prospecting. With gold trading at 1,000 dollars, and silver reaching 20 year highs, a significant find can ring the register for many years. Investors looking for an exploration stage company with solid management and experience should take a look at RLKX. They are certainly working in an area that’s paid off in the past. Keep an eye on them.
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