Stockprowler.com

Stockprowler’s pick this week...

Echo Bay Mines, Ltd. (Warrants) – (Amex: ECO WS)

101180-101 Street

Edmonton , Alberta T5J3, Canada

Phone: (800) 395-4143

Company Web Site: http://www.echobay.com/

Warrants Outstanding: 39.1 million

Closing Price Friday: $0.49

Today’s newsletter marks the return of the Stockprowler series after a more than 3 month absence. Our decision to halt publishing was prompted by the ongoing bear market conditions in equities and our uncertainty over the reality of the perceived bull market in gold. In our last Stockprowler Report dated February 24 we discussed the possibility that a bull market in gold may be underway. Our featured stock pick that week was Golden Eagle International, Inc. (OTC BB: MYNG), a very speculative gold mining stock. Its recent performance has strengthened our belief that gold is about to make a full- blown run… MYNG closed Friday up 115% since our February report.

With few exceptions, Wall Street continues to dismiss talk that the gold bull is ready to run. And because of the resulting media inattention, the average investor is still either unaware of the gold bull or unconvinced that it is for real. Furthermore, the few investors who have any exposure to gold mining stocks are reluctant to make a heavy investment after being nearly wiped out by the Internet/Tech crash of the past 2 years. Though this may soon change as it becomes obvious that a sustained run in the gold price is finally coming to pass aided by a weaker dollar, massive economic and political uncertainty, and widespread disillusionment over US corporate profits.

There are several forces driving the price of gold and ultimately the price of gold mining stocks. Not the least of which is the U.S. dollar. The price of gold has an inverse relationship to the value of the dollar. For years the strength of the U.S. dollar has been reflected in the week price of gold. However, over the past several months, the value of the dollar has declined an average of 6 percent against major currencies, raising concerns that this could be the end of the dollar as the world’s “super currency”. “I think we are at a turning point for the dollar, and we are looking for an extended period when the dollar will be declining in value against other currencies,” David Wyss, chief economist at Standard & Poor's Co. in New York, stated last week.

A declining dollar will make foreigners less willing to invest in the United States because of fear their earnings will be worth less when converted into their home currencies. “Foreign investors could all run for the door at the same time, sending the dollar plunging,” stated economist Mark Zandi recently. Such a development could send gold prices soaring. The U.S. Dollar Index http://futures.tradingcharts.com/chart/US/62 hit a recent low of 111.00. A violation of this level to the downside will cause technical analysts to get very bearish on the U.S. dollar. Furthermore, analysts have indicated that the magic number to watch is 108, and that a plunge in the dollar below that support level could unleash a gold rally of epic proportions with some credible analysts predicting a gold mania/frenzy… with gold topping out at $5000/ounce or higher several years down the road!

Coupled with the declining dollar is the effect of hedging by many big players in the gold mining sector. Many gold mining companies have sold rights to future production at a premium price, and have also purchased option contracts to shield them from a decline in the price of gold. During the lengthy gold bear market, this hedging served them well, allowing these companies to book profits during a devastating decline in the price of gold. Unfortunately, hedging gold producers under-perform the market when the price of gold rises. Most hedging gold producers have now taken action to reduce their hedging activities. The net result will be that the higher the price of gold goes, the more pressure there will be for companies to stop hedging or close down their hedge books altogether… and one by one, the big hedgers are going to fuel this bull market in gold or risk being eaten up by a competitor. It will take years for some of the major players to unwind their positions completely. Until then, this de-hedging in the gold mining industry will be a powerful force driving the price of gold skyward. In addition, a recent CFTC Commitment of Traders Report shows that commercial traders are still “highly short” the market. Should the price of gold continue to rise, these traders will be forced to buy back their positions, a classic short squeeze, which will put still more upward pressure on the price of gold.

There is a large global gold deficit today, with investors buying upwards of 60% more gold each year globally than is mined at all the gold mines each year. As gold demand continues to outpace the gold supply, a gold price explosion is inevitable. Bill Murphy, the former Boston Patriots’ football player who in addition to his years with the ‘Pats’ was a former Wall Street specialist for Shearson Hayden Stone and Drexel Burnham, has reiterated his belief that there is… an enormous gold short position of maybe four to six years of total global gold production and that the only way to unwind these huge shorts is to buy massive, massive quantities of physical gold. If the shorts panic at some point, which seems inevitable, the gold price could even shoot up faster and further in percentage terms than it did in the 1970s… the world has never come close to seeing a gold short position of the sheer magnitude that exists today.

It is the opinion of Stockprowler.com that the ‘global economy’ is on the very brink of collapse. The world has entered an uncertain era and will only become more confusing and fear inducing as time presses on. What economic or terrorist event is awaiting to explode, sending the world into chaos? As Jim Bishop, originator of the popular SiliconInvestor.com message board, Golden Lists, stated recently with reference to the India/Pakistan conflict… “one nuke and $1000/ounce for gold is not that outrageous”. When all factors are combined with the ever-emerging chaotic and dangerous global investment environment today, we certainly have all the ingredients for another Great Gold Rally like the 1970’s. On the downside, this is not something that we can contemplate with any degree of comfort because the world that we now know will have changed beyond recognition…

Long time AMEX listed, Echo Bay Mines, Ltd. at $1.28 a share looks very interesting to us… but even more interesting are the warrants closing at just $0.49 on Friday. The warrants, which don’t expire until November 14, 2003 can be viewed as a long-term (18 month) option already in the money… the exercise price is 90 cents. Given our bullish outlook on gold, this looks like a no brainer. Remember keep your eye on the U.S. Dollar Index http://futures.tradingcharts.com/chart/US/62… if it heads south of 108, these warrants could produce astronomical returns to the speculative investor.

Stockprowler.com readers are encouraged to visit the Echo Bay Mines Ltd. company web site for further information. Stockprowler.com did not receive compensation of any kind from the company or third parties for writing this report. Readers are urged to read the company SEC filings and do their own due diligence before investing in this or any other stock.

Good Trading... Stockprowler