I admit I was very hesitant about Colossus at first, it seemed like one of these explorers that had acquired a project that nobody else really wanted because of various issues, but after some research I would say they're not looking too shabby.

The mcap is ~C$100M today at C$2.30/share, and only as late as december was the price at C$0.50. They have about $30M cash and basically no debt.

The flagship project of CSI is the Serra Pelada deposit which was discovered in 1979. It is an extremely high grade gold-PGM deposit and it saw a huge inflow of artisanal miners during a few years - until the pit where mining took place collapsed and pretty much shut the whole operation down. The property has seen exploration since 1980 and in 2007 it was moved into the hands of a Brazilian company (COOMIGASP) which then optioned 75% to CSI in exchange for a R$18M exploration expense plus a cumulative payment plan decided by the size of the deposit (5-7M Oz = R$275.1M (US$123.8M)) as well as covering costs for the mining operation.

It's estimated that the artisanal mining in Serra Pelada uncovered about 2M Oz of gold (PGM's not included) during the active years. As mentioned earlier this is an extremely high grade deposit which is clearly shown in one of the most prominent drill-cores: 43m of 4709g/t gold, 204g/t platinum and 1174g/t palladium. The company leaves no estimates of the amount of metal now available in the ground, but based on earlier estimates and the current size of the deposit as delineated by drilling I would say there's possibly about 5-7M Oz of gold eq. at today's prices.

The extremely high grades would make for very inexpensive mining. If there really is 5M Oz of gold eq. then that would be worth $4.5B at $900/Oz and even after the splitting up of profits to royalty-holders and other payments, this could easily mean a total net profit of somewhere like $1B. I'm just throwing this number out pretty loosely, but if you consider that a deposit of a few million Oz at grades of 1g/t gold would be profitable then this is not an unrealistic estimate - it could even be higher.

The other project of Colossus is the Natividade and although it has shown some interesting results it is still a very early stage project and one would do best to wait for more drill results before making any kind of guesses there.

Although Colossus will most likely make a good profit from the Serra Pelada, I would still warn that my estimates of the amount of metal in the ground may be way too high and also one should consider the fact that the project is probably going to have to be an open-pit type because the rock material is so unconsolidated that the material (40m or so) above the mineralized areas will have to be dug away. Further the project is not in a great location as far as infrastructure goes and so the start up of the mine could prove to be more expensive than what many think.

The mcap of today is somewhat moderate with the appreciation of the last few months - for example if one were to compare Colossus to Starfield (which I covered last week), Colossus still really has no determined resource whereas Starfield has a resource already that is much larger than the potential one of Colossus and a much MUCH better expansion potential. Starfield is valued at about half of Colossus. Still the grades of Colossus are so good that it will take prices so low for precious metals that they will basically have to be given away for Serra Pelada not to be a profitable operation. So, on the whole I wouldn't go nuts about buying Colossus today, but I wouldn't go nuts about selling if I was holding, either.

As the financial crisis continues, a lot of people are asking a lot of questions and a lot of people are trying to answer them. I have yet not heard one account of what will happen that has left me feeling sure about what's going on. I've written a few times on this blog about some of my different takes on what's going on - still I'm pretty much in the dark as everyone else and I'm constantly re-evaluating the situation.

By far the most common thing talked about is the great depression. A lot of people seem to think that this is just another depression with a possible inflationary twist - I would count myself as one of those people - from time to time. Just recently I wrote a piece partly covering the IT-bubble, where I was trying to point out that it was overcome fairly painlessly; and from some recent considerations I think that this crisis could actually be overcome with far less pain than what many are saying.

I've mentioned it myself before (as have many others), that the debt-GDP ratio in particularly USA has risen a lot since the late 70's. This is generally the argument to show that this has basically the same premise as the great depression (GD). But the debts causing the GD had come about in only a few years time (roaring 20's), whereas the debts of today have come about over the course of 30 years. When comparing the debt-GDP graph to the one of interest rates it looks pretty clear that the two follow each other. When things crashed in the beginnings of the GD (or during it's entire course) - there were certainly never zero interest rates like today.

The debt that preceded and made the GD come about was created in a financial environment that was very different than the one of today. The loan-economy, if you will, was something new and the people in charge of interest rates were unfamiliar with the impact that too high interest rates would have. Today pretty much everyone has loans and most of us see loans as a great way to afford things that we want and that we will be able to pay off during the course of our lives. It's all very simple - if it is possible to borrow a lot of money without it ever becoming too expensive to maintain, then people will be doing so - it's a very handy way to get cars, houses and so on, without having to save all that money first.

So, what might be passing most people by is that this could be a new type of economy, where a very large part of the population want to use loans to make their lives better and easier; Therefore, one might actually have to adjust economic thinking to a new healthy level of debts in society that runs much higher than it used to back in the early 1900's. To me it's a bit annoying reading these constant comparisons of what happened at a specific time in history and how todays events seem to follow the same pattern - almost as if it is the exact same thing - which it never is.

It's no big secret that the current financial crisis started with too high interest rates which then created the housing crash which in turn gave us the derivatives meltdown (which may or may not be over). All these problems have given a large contraction in demand and a loss of asset values. Still it is possible that all this is temporary and that lending and the world economy will resume pretty much as it did after the IT-bubble. There are real imbalances and deficits that need to be sorted out as well, but that does not have to mean that people will be loosing their jobs (for example read my investing in china or america posts).

Will things resume as normal, or is this debt-hype for real? I know this contradicts what I've said before, but there's a real possibility that things could resume as before, even though things look very gloomy. If people can borrow almost for free, I strongly suspect that they will begin to do so sooner or later - they can't really hold out forever. One should neither discount the generally much higher accumulations of wealth in the world today as compared to the days of the GD. All that money could easily be put to use in still plentiful opportunities of wealth creation.

I could be very wrong here and it's possible that I had it right in my first assessments. Maybe things are falling so hard that they cannot start leveling out or turning up at this point, perhaps we have to suffer a very long time of low economic activity (while people pay off their loans) and perhaps the imbalances created by free trade are too big. Or maybe the real pull-back has already happened and the smart money is already moving back into good stocks that have dropped heavily and are now beginning a long period of appreciation - while 'contrarians' and all the scared analysts are saying that this is just a dead cat bounce...

And perhaps further 'toxic assets' will be paid for by monetization - furthering the inflationary scenario, under an otherwise fairly normal economy. I've talked about the derivatives meltdown before and the AIG-linked milking of US-taxpayers - this thing is perhaps not so much anymore a financial bomb, but really a political one... I urge everyone to watch this interview:

I guess a lot of people have heard of Starfield and their extraordinary discoveries in the Ferguson lake property in Nunavut/Canada. This big piece of land is basically what makes the company; not only does it hold a huge sulphide-nickel-copper-cobalt-PGM-iron mineralization, but lately there have been diamond and gold findings, as well.

The latest resource estimation (indicated and inferred) gives 44.2M tonnes grading 1.01% Cu, 0.67% Ni, 0.08% Co, 0.28g/t Pt and ~1.7g/t Pd. Note that this discovery is still open at strike and depth. What should also be mentioned is that under the latest mining evaluation the PGM metals were not included and it remains unclear how these will be handled.

Because of the special nature of the discovery it will be mined/enriched in an unusual way, I don't want to go into all the technical details, but basically a leach process creates hydrogen sulphur which then reacts with oxygen to produce a lot of heat and thereby making it possible to power the entire mining operation with it and possibly selling what's left over. This process would make the operation relatively inexpensive and environmentally friendly.

The value of what's known to be in the ground today is (very approximate): $1.5B Cu, $2.7B Ni, $3.2B Co, $411M Pt and $482M Pd. Total value is $8,3B. Let's not forget that this discounts the value of sulphuric acid and iron.

The mcap is ~C$50M, they have ~C$6M cash and no debt. On the scoping study base model (which roughly translates to the same valuations as mentioned above), the EBITDA result for the operation is expected to be about C$266M per year, and the initial cost to build the mine would be about C$1.2B (expected to start construction in 2011).

The mineralizations of Ferguson lake are very likely to be heavily expanded, foremost at depth. This makes for a very long lived mining operation that even under these poor circumstances of a financial crisis is looking to make good profits.

With the crash of metal prices the share price of Starfield has gone down from 1.2 to 0.14, where it sits today. What is interesting about Starfield as opposed to Roca mines for example, is that it is a very profitable operation even at these prices and at the same time it is a great leverage opportunity if prices turn up again.

I don't know exactly where the checks are for global price stability of metals these days or coming years, but I don't honestly think it's important. Starfield has a great discovery that will stay profitable a lot longer than many of the other suppliers. Sure the SP can drop heavily next week if metal prices crash further, but for the long term this is a money making machine. Based on the value of what's in the ground, the great expansion potential and the gold and diamond discoveries - C$50M is not expensive. So even for a short-sighted investor this could be interesting as they might actually be bought out.

Only until very recently was Roca Mines on everybody's lips - it was the greatest thing and it was going to make everybody lots of money. And then it fell from over 3.50 down to 0.16 (last close 0.23). It fell for good reasons; since it is a purely Molybdenum play, it had to fall as moly-prices fell. Between '04 and mid-'08 the average price of moly was ~$33, now it's at $8.20.

Buying into a moly-miner is decided by your belief in the price of moly. Knowledgeable people in the industry have maintained for some time that there will be a shortage of moly for some time to come and that prices will on average stay higher. I would think that the spending binge of world governments will affect moly-prices positively and force it higher, since they're spending most of their money on building stuff, which in some cases requires a lot of moly. For example, the world is planning to build a lot of new nuclear reactors (none of which are likely to be postponed) and these suckers take up a lot of moly.

One can argue for and against a rising moly price, but I think that the fairly high and persistent price of moly these last few years seems to show some long-term stability and the sudden fall since this summer looks a bit artificial, so the price will probably move a bit higher.

Basically what makes up Roca is the so-called MAX-project where a mine was recently started. This project holds about 100M pounds of molybdenum, at grades varying from about 2% down to 0,2%. The Ore-body extends towards depth where it remains open - it has been compared to other moly projects that have the same structure, where there are very large high-grade mineralizations at greater depth; this remains a very intriguing possibility.

At the latest reported quarter of the company's operations, they showed a net loss of ~C$5M. The cash-cost per pound of moly was at $5.80 and the MAX-mine produced 679,697 pounds during the quarter at average grades of ~1%. The revenues were C$8.3M (Sept 1 - Nov 30). The company currently has no debt and through recent financing a $2-3M cash position.

I assume that the company is working on cutting down a lot of the unnecessary costs to try and make the loss as small as possible. The exploration properties are pretty much on hold now and I would be suprised if the loss wasn't smaller in the coming report. Considering the low cash-cost of $5.80 I think they might be able to make this a profitable operation at these prices (very uncertain however!).

Today the undiluted mcap of Roca is about C$23M and with a yearly production of, say 2.5M pounds, that's revenues of $20.5M if prices stay the same and after cost of production, a result of $6M. If prices of molybdenum would rise to $12, then the result from the mine operation would be $15,5M, instead. The great increase in revenues with increasing moly-prices is pretty obvious here...

Just based on todays profitability of the MAX-mine I would not buy Roca shares. This is purely a play on the possibility of rising moly prices, since the leverage would be really good here. And as prices move up the company would go ahead with an expansion of operations, and make even more money. As stated above - I beleive in a slightly higher moly price, but this is still very uncertain. I simply can't tell if a few trillion of government spending is going to really do it and as I explained in my previous post, we should perhaps look for signals such as a massive auto-industry bail-out before we can safely say that the governments of the world are really willing to spend any amount to get things going. For some people the signals may already look strong enough to jump on the inflationary rocket-ship... and I would say there's a clear overweight in favour of inflationary price appreciation.

Around the beginning of the new millenium the world suffered huge losses in stock markets, mostly attributable to the speculative boom of the IT-sector. There are a lot of people around today who are still mentally scarred over the incredible losses that they suffered there. We all know of the response to this contraction - a strong lowering of interest rates that created a housing bubble in most of the west.

The losses suffered from the housing bubble are much greater and at the same time we've had huge bank-losses from derivatives and bad loans along with a very broad stock market crash. Now jobs are starting to disappear and people who are deep in debt stop spending money - furthering the fall in demand. This outlook is indeed grim - but the responses this time have been much more dramatic.

Just the other day the G-20 promised to throw another tsunami of money at this thing and with zero interest-rates and yet more money being thrown around - how can we not 'recuperate'? I know that I've said that things are bad - and they are - but by the looks of it, the crazy spenders in the governments and central banks could yet prolong this from being a total crash by another couple of years.

Very often during the last year there have been comparisons made with the great depression, where some have claimed that the actions taken back then were no good, since they didn't put a stop to the depression. Well, the situation is very different - back then the interest rates were never at zero, only briefly did they touch 2% and then stayed around 3-4% most of the time. Governments did not throw money around like today - one big reason for that would be the basis of money in gold.

Pretty much all governments of the world have vowed to spend money until this thing is over with. And why doubt them? They really have no restraints - except for the belief in the value of paper money. And this is where inflation comes in. As people become more and more aware that the boom is created falsely out of the printing presses, then as confidence in the money wanes, inflation will begin hitting us hard.

As paper money becomes more worthless everyone will finally be even more broke than they would have been if the governments would not have started throwing money around. But by then the problems will be so huge that the world would have to somehow start over - monetarily speaking.

Can anything stop the inflating depression from happening? Well, as I mentioned - the politicians might notice the danger in loss of confidence in the paper money; so the thing to worry about would really be if they actually start to show restraint - as paradoxical as that is! Because then they'll be doing what they did during the great depression, that is, just prolonging the agony. If we want to get this thing over with somewhat quickly it is either through severe inflation or severe deflation - not something in between. The politicians have taken the inflation road already, and although its certainly not good - it would be better if they would stick with it.

So, unless they show restraint - which I doubt - we will see an artificial boom in all assets in the coming years that will be followed by severe inflation and finally a complete break down of the system. I guess one important signal to watch closely would be if the auto industry will be bailed out - if not, then bunker down for a great depression deja vu!