Venezuela miners up as gold gains momentum

The column I wrote last month on GRZ and KRY seems well-timed. Both mining companies with a great exposure to Venezuelan political influences, have seen their share prices drop very rapidly in 2006, after having performed relatively well in the first four months of 2006. Now that gold is busy breaking through its old resistance at $660, cheap mining companies seem to attract some interested investors again. Gold Reserve Inc (GRZ) has gained more than 50% since its low on 29 January. Not surprisingly, Crystallex International Corp (KRY) took a bit longer to get moving. In the end, GRZ was much cheaper than KRY at the time of my previous writing and as expected, the gains that GRZ has booked are much more substantial. However, it needs to be mentioned that there is still no update on the Government of Venezuela regarding the issuance of mining permits to foreign companies. This means that the recent gains in both stock prices are mostly due to a rising gold price and can partly be attributed to the stocks simply being undervalued. The permits are still pending, but fact is that the Government of Venezuela does not have enough know-how to completely take over operations from foreign mining companies. Knowing this and knowing that the permits are said to be in the administrative phase (and therefore the last phase), investors shouldn't have to wait too long until gains start to reach triple digit figures.

Disclosure: Joey Keasberry currently holds a long position in GRZ.