Kimber Update 7/4/10:

Trading involving the junior gold mining stocks is presently dominated by a small group of profit-seekers. Most market watchers simply do not understand the effects that such a small group can have on price movements involving such thinly traded (small volume) stocks. A relatively small number of people with a few thousand shares to screw around with can cause quite seemingly mind-boggling, and certainly frightening appearing, swings in a stock price. These movements, to the strong hands (i.e. long-term holders), I would like to say, mean nothing, but in fact, even those strong hands suffer from the same human weaknesses we are all subject to: lack of patience, fear of loneliness, uncertainty about our own individual analytical abilities. When a large group starts moving in a direction opposite to an individual man’s, no matter how sure that man might be of his positions, he can be inspired to go against his better judgement and do unwise things. The following story illustrates very well what I am alluding to:

Ben Graham told a story 40 years ago that illustrates why investment professionals behave as they do: An oil prospector, moving to his heavenly reward, was met by St. Peter with bad news. "You're qualified for residence", said St. Peter, "but, as you can see, the compound reserved for oil men is packed. There's no way to squeeze you in." After thinking a moment, the prospector asked if he might say just four words to the present occupants. That seemed harmless to St. Peter, so the prospector cupped his hands and yelled, "Oil discovered in hell." Immediately the gate to the compound opened and all of the oil men hurried out to head for the nether regions. Impressed, St. Peter invited the prospector to move in and make himself comfortable. The prospector paused. "No," he said, "I think I'll go along with the rest of the boys. There might be some truth to that rumor after all."

This brief story gives some of the keenest insights into human reasoning and motivation that you will ever read, so examine it well. At first glance, it just seems like a silly story-- funny because of the clever trick the oil man plays on the others-- a story depicting greed and showing how much it adds to human folly. The ending of the story is the part that brings the most significant message to the sharp student of human behavior, however.

I remember first reading the story years ago and thinking about how ridiculous the ending was. It wasn't until years of human observation and self observation taught me that the desire to not just be right, but to be right with the crowd, is a prime motivating factor involving human behavior. Put very simply, people want to be liked. They want to be admired, and being a part of a crowd, any crowd, creates the illusion of being liked and possibly admired because of the associated sense of belonging.

Being a part of a crowd, especially a crowd in a frenzied fever moving towards some even impossible goal gives a sense of oneness and comfort that few men can turn away from, regardless of that goal’s final outcome and regardless of such participant’s own ultimate personal feelings involving his behavior.

What the oil-man story illustrates is as true involving human behavior as the sun is hot. People will follow illogical paths to nothing or nowhere if they can join a moving, purposeful group and seem to feel like they are part of something important even if for only a short period of time. The punch line of the story is not so much a punch line as a reflection of a deep and pitiful nature of human behavior, a tendency towards a type of pride that implies that if we desire something enough, we can actually create our own realities through the use of our own wills. Groups thinking in a similar fashion can give strength to such a belief within us. It is the oldest of human cravings, the desire for a type of deification, to have control over a world that we have not created as if we had created it. It would be more laughable story if it were not so often to end for so many people so tragically.

Ironically, individuality is a state prized most highly in our society. So highly prized is it that we often allow ourselves in our daily lives to be overly critical of individuals who have allowed themselves to be drawn into a certain group and who have taken on that groups’ behavior without adequately examining the consequences that such behavior might ultimately entail. Such criticism might even extend to ourselves in retrospect after taking part in some shameful group activity. Still, this does not necessarily inhibit us from involving ourselves again in equally shameful activities in the future when the opportunity to bond to a different group might arise. It does not weaken to any great extent the near magnetic pull the group has on us and its ability to subvert our uniquely individual desires. For any of you Star Trek fans, you may remember in the episode, This Side of Paradise, the one where all the crew of the Enterprise get intoxicated by the spore-shooting-eternal-happiness plants, the scene where Kirk finally gets sucked in himself. He calls Spock on his communicator and says, "I've joined you," as hauntingly nefarious yet seemingly beautiful music plays in the background. Remember that and how disappointed, even betrayed, you felt when Kirk finally went over and became a part of the group? Do you remember how relieved you then felt when through the power of his own individual will and emotional strength he once again broke away? If you don't watch this:

http://www.youtube.com/watch?v=eGxJ1MDGpNk&feature=related

Gene Roddenberry, the creator of Star Trek, understood very well the power of group dynamics. He understood that seeming magnetic-like pull of the group and the fantastic irony encapsulated by the fact that all men want to be recognized as superior individuals, want to be liked for their unique, individual characteristics, and yet are so intensely drawn into mindless group activity where all sense of individuality can be lost.

The behavior of the oil man is not a fantasy, and it is a representation of a universal human tendency that is in us all, the tendency to doubt our own understanding if pushed hard enough away from it by the crowd. Interestingly enough, such forces that drive us away from common sense reasoning are like all other forces of nature. The longer they are at work, the greater and more powerful their ultimate results. The longer we are tested in such a fashion, the easier it is to be worn down. We feel this when we feel a desire to unload a position in a stock like Kimber. By any objective standard, Kimber is a better company today than it was two years ago. The drill results are better, the gold price is higher, the reserves are larger, the financial backing is stronger. Why would we think of selling it now at 80 cents when we couldn’t be induced to do so at 50 cents two years ago? The answer comes in part from Vince Lombardi in the statement, “Fatigue makes cowards of us all.” I would change it slightly and say, “Time and fatigue make cowards of us all.” Time and fatigue are our enemies here, not Kimber, not the stock market, not the policies of any government. The enemy is within each of us. It is ourselves. We are all living examples demonstrating the powerful grip the mass mind can have on the wavering individual in times of trouble and stress, the desire for comfort that in those times of stress can be quite overwhelming and can drive men into places that their better judgment would keep them normally far away from but that they would temporarily embrace in order to achieve just a brief respite, some sense of solace that acting against the crowd just cannot ever bring.

I have written this before: The game is essentially over with Kimber. Gold continues in a bull market that is a long way, years most likely, from ending. Gold is remonetizing as the people of the world continue to lose faith in all fiat currencies. Indeed they need not lose faith in all fiat currencies, just one, the U.S. Dollar, since the U.S. Dollar is essentially the backbone and basis for every other currency in this present world system.

There must be money in order for human commerce and trade to exist, and the money that is used and has been used for that commerce primarily for the last seventy years is dying. It is losing its value in the eyes of the populace, and it is being cheapened every day by government policies that weaken it further.

The only way this will stop would be for a massive restructuring of government entitlement programs that would essentially destroy Social Security, Medicare and just about all government welfare programs. No governing body in human history has be able or wiling to do something like this. It will not happen in our lifetime, and it will not happen here. The dollar will devalue until it collapses and gold will take its place. This is not many years away.

As gold continues higher, miners--those who make their living producing gold--will continue higher as well. Gold will rise faster than production costs, because the production of everything, EVERYTHING, relies on the use of a stable and marketable currency to trade such things in. This is a key point that most men fail to realize.

Commerce, and the ability to carry on peaceable commerce is the glue that since time immemorial has held civilization together in all places and parts of the world. When peaceable commerce breaks down, civilization breaks down. Understand this. When fiat currencies collapse, alternative, hard currencies, must rise, and they must rise more than everything else, because nothing else can be moved around the earth within or outside of communities and countries without money. Money is more valuable than oil, than food than anything, because none of these things can be brought to market and sold without something that functions adequately as money. And without a marketplace, without trade and a means to carry on commerce, civilization, quite simply, cannot exist let alone survive.

So, if you are worrying, do not worry about future production costs involving gold miners or Kimber. Production costs will become irrelevant. It is my view that they already are. It's just that people, even people in the mining industry, cannot see that yet. That is fine with me. It gives me more time to accumulate real hard assets.

Kimber has gold. At this point, without making any further discoveries, the company can mine the gold it already has economically with gold priced at $850 an ounce for at period of at least thirteen and a half years. Eventually, the markets will realize this. In the meantime, do not fall into the oil man's trap, i.e. cupping your hands and yelling, "Government Stimulus Discovered to be the Solution!" and later believing that to be true.

There is no solution except hard work and a return to a time when people have to exchange real labor or creative thought for the money they receive. The US can no longer borrow its way to prosperity. The giant U.S. Visa Card is being taken away.

We are at the end of a long borrowing spree that is about to end. The happier ending we would imagine is that our government can just flip a switch and save us all with their magical powers, but in reality this is not going to happen.

There is no safe place to be in the markets right now except gold, silver and mining enterprises. This is not where the great mass of humanity is, but the great mass of humanity tends very often to be wrong on most things. Fight the tendency to go along with the crowd, no matter what temporary comfort being with the crowd might give to you.

Don't worry about Kimber’s price action. Once again, there is a relatively small group of speculators trading in and out of the stock right now to manipulate the price and move it into places to make a few bucks for themselves. The reason why a stock like this can move from 70 cents to $7.00 very rapidly is that when a serious big buyer does come in, that person or entity will realize that it can only get so many shares for 80 cents and that to get a really big position it will need to start paying up at a much higher price. All these little price gyrations have very little to do with the strong hands, those people in for the long haul.

Involving the takeout that will inevitably come with gold’s continued rise, the dollar’s continued fall and the continued decrease in worldwide mining production, it will necessarily be at a much higher price. The gold Kimber has, rolled into the price of its stock, is just too valuable to let go as cheaply as it is priced now. In other words, someone might be able to by 1000 shares of Kimber at 80 cents on a lucky day, but there is no way anyone is going to get ten million shares of Kimber at that price or any price remotely close to that. Eventually some big miner, to either add to its resource or increase its production, is going to need those shares. And, by necessity, it is going to have to pay a much higher price for them.

Therefore, do not waste your time worrying about inconsequential things. Worry about raising your kids and grandkids and what you will teach them. Nothing can stop the rise of gold and gold miners with it. It will cause a lot of people a lot of pain, but it is coming. Fortunately if you are in this company, you will be spared a big part of that pain. Your family and you will thrive and do well as most people, who have not seen what you are seeing, will be in for a much more difficult time of it. That this type of outcome will occur is inevitable. There are patterns to human affairs that begin slowly and weakly and can be altered little by little when they are young. As they grow larger and more powerful the energy required to alter them becomes much greater until they get to such a size that no man-made interventions can alter them from running to their inevitable concluding actions. This is where we are right now with the rise of the gold market and demise of paper currencies. Paper money is not dying forever, but this paper money is. Gold is remonetizing and will play a much more important role in human interactions and commerce in the years ahead. It’s value will reflect this importance. Count on that. Kimber is a gold exploration company with a very sizable, economic, mineable deposit, and you own it. This is exactly where you should be. You are positioned perfectly albeit uncomfortably for an inevitable outcome that will bring you to a place of great advantage.