Gents, haven't posted for quite a while but i've been faithfully lurking in the shadows taking in the good, the bad and the ugly postings of this forum. Here's something that came to me from Sprott you all may enjoy reading. Keep up the good work and I remain calm as i hold firmly to my 310,000 shares of Tyhee, cost basis of roughly 17 cents american.

Regards, Pat.

Weaker Resource Companies Could Be Culled,

Believes Sprott's Angeli

Odds are good your natural resource portfolio lost money in the past 18 months. Natural resource markets have been in a rut. Market prices have been in decline. We expected natural resource companies to exhibit leverage to commodity prices, but they drastically underperformed as a whole.

The natural resource market is hurting. Can it fix itself? Can it "lick its wounds" and move on?

For answers to this topic, I turn to Eric Angeli , Investment Executive at Sprott Global. He has worked at large financial institutions, like Morgan Stanley and Bear Stearns, before entering the natural resource field. Part of what he brings to the Sprott Global team is his research into what companies are due for takeovers or mergers. Eric sees three major themes for the upcoming year: bifurcation, greater market efficiency, and a re-emphasis on discoveries.

His first point is that the current market stress will break the companies that are not viable. Their demise will mean more money available to the good companies. One reason for concern during the bull market of 2009 and 2010 was that investors were easily enticed by company representatives hawking stocks to the public, even when the underlying projects were not credible. Now, the money that was squandered in ill-advised projects is gone. The markets have gotten much less frivolous about who they will trust with their investments. Sooner or later, these companies will likely go "no bid," or be taken off the stock exchanges altogether. As fewer companies compete for capital, good companies backed by sound resource projects should be in great demand. While the bad companies go under, we should expect the market to uplift the good ones.

Eric's second point is that the industry itself is coming to terms with the paradigm shift in natural resources. This manifests itself mainly through a degree of capitulation among issuers, more sensible acquisitions from majors, and a resurgence of mergers and acquisitions between resource companies. Many of the natural resource companies in existence today saw a stock price peak around 2009 or 2010. Since then, many have seen a declining market price. They knew that sooner or later, they would have to issue new stock if they wanted to continue to exist. But none wanted to finance in 2012, as they were still looking back with melancholy to the bull market days, and believing that they could hold out long enough to see an upswing in their stock price. Of course, this reversal never came. Now, these companies are becoming more desperate for capital, and they are beginning to offer terms more favorable to investors. This is why there were very few private placements in 2012, but we expect this to change, and in fact are already seeing the change.

Just like investors, majors made many poor decisions during the bull market years. As a result, the industry has written off 50 billion dollars in failed mergers and acquisitions*. In order to recoup and placate their shareholders, majors decided to make only "accretive" transactions. That is, instead of buying reserves requiring millions of dollars and several years to develop, they bought projects that could immediately add cash flow to their balance sheet. In addition, we should see a new wave of mergers and acquisitions. "As capital markets dry up, companies will have to get more creative to finance their projects," says Eric. "Expect to see companies reaching across the aisle to secure a deal." Amalgamation will make the industry more efficient. As multiple companies combine into one, duplicative management teams will be eliminated. Cash-poor companies will look for a partner who can finance them at lower cost.

Eric's third theme is that discoveries will be important in 2013. Part of the reason for a poor overall market in 2012 was a lack of new discoveries, so speculators didn't have much to excite them. Those who deliver are still being well-rewarded. In 2012, Reservoir Minerals, for example, went from 50 cents to 4 dollars. Papillon rose from 60 cents to 2 dollars. Africa Oil increased from 2 to 11 dollars. As Eric stated, "ten-fold moves like these are the reason we got into resource investing in the first place, and that reason still holds true."

So, according to Eric, the current downturn in natural resources is mostly because of the poor decisions made by natural resource management teams and investors alike. What we are experiencing is a normal downswing, and we mustn't let our fear create even more pain for ourselves.

Until Next Time,

Henry Bonner