David Cameron and Boris Johnson

Once upon a time at a famous school in La-La Land, Cammy Cam and Boris Bunter were sitting under an oak tree plaiting yellow ribbons and scoffing buns.

“Penny for your thoughts, fatty,” said Cam.
“Jolly good buns,” said Boris.
“No, I mean proper thoughts like Mao had.”
“If you must know, I was thinking about a tart.”
“Haven’t you had enough?” said Cam, shocked at his friend’s greed.
“I can never get enough!” Boris smirked, “particularly when they’re someone else’s. What’s this you’re swotting up?” he asked, picking up the book Cam had been reading.
Cam pursed his lips and tried to look intelligent.
“It’s called Utopia.”
“Is it about Japs?” asked Boris.
“No,” said Cam.
“Yaboo, swiz,” moaned Boris, “I like books about Japs.”
“Let me explain,” Cam said excitedly. “You see this tree we are sitting under?”
“Pretty hard to miss it,” mumbled Boris.
“Just think how super it would be if one could sell off all the forests in the land and give civil society groups a chance to buy them.”
“That seems a bit silly,” said Boris dismissively. “They can buy trees whenever they want.”
“Not trees that we already collectively own.”
“Who do you mean by ‘we’?” asked Boris.

Cam looked despairingly at his fat friend. He was so out of touch with the people’s needs.

“I mean you and me and the rest of our pals and everyone else in the country. We will all be in it together.”

From over by the river Ozzie was approaching. He looked cynical and glum.

“What’s up, Ozzie?” cried Boris. “Lost more money at the races? I suppose you backed Deripaska again? Come and listen to Cam’s new idea. What are you going to call it, by the way?”
“Something really grand and important,” said Cam. “Maybe ‘Jolly Good Society.’”
“Will there be any gingerbread men in it?” asked Boris. “I love gingerbread men; they’re yummy!”
“No, there won’t, they’re staying in Ulster,” said Cam.
“Oh, boo-hoo,” wailed Boris.
“What about ‘Big Society’?” asked Ozzie. “Sounds better than ‘Jolly Good’?”
“Eureka!” shouted Cam. “That’s a really cool name!”
“So what’s this Big Society going to do?” asked Ozzie. “Oh look, Nobby Clarke’s appeared—can he be one of the gang?”

“I thought you were confined to your room,” said Boris.
“Used my Get Out of Jail Free,” said Nobby. “Not that you need one; you can come and go as you please these days.”
“Cam has invented a fab new game called Big Society and he is just explaining the rules,” said Boris.
Cam said that the idea was to put more power and opportunity into people’s hands.
“What people?” Ozzie sneered.
“I mean the citizens, communities, and local government.”
“A bit Liberté, Fraternité, and ‘Let them eat cake,’ isn’t it?” asked Nobby.
“Pompous old windbag,” Ozzie muttered.
“Did I hear the word ‘cake’?” asked Boris. “Goody goody!”

Cam was on a roll.

“We will give communities the right to take over local state-run services, we will train a new generation of community organizers, we will support the creation of neighborhood groups, and we will never surrender.”

A crowd was gathering.

“We will encourage people to volunteer. We will support the creation and expansion of mutuals, cooperatives, charities, and social enterprises. We will give public-sector workers a new right to form employee-owned cooperatives, and we will abolish Regional Spatial Strategies.”
“What are they?” cried a voice.
“I don’t know, but we’ll abolish them,” said Cam.
“That’s Marxism!” someone shouted from the crowd.
“Bollocks—that’s Thatcherism!” cried another.
“All the same thing,” muttered Ozzie.
“What about the Church? Where do they stand?” called an altar boy.
“What Church?” grunted Boris.
“Good point,” said Cam.

Around them things were getting out of hand as more and more people flocked to join the mob.

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“What about law and order?” implored an Albanian crime victim.
“We will oblige the police to publish detailed local crime statistics every month,” Cam promised.
“It will take them more than a month to write!” said a man in a Mackintosh raincoat.
“Why do you say that?” asked Cam.
“Because I am a policeman and you, by the way, are in danger of causing a disturbance.”
“Furthermore,” Cam went on, “we will create a new ‘right to data’ so that government-held data sets can be requested and used by the public and then published on a regular basis.”
“We’ve already got that!” shouted a bigoted old woman.
“He’s called Julian Assange!” yelled another.
“Anyway, who’s going to pay for this Big Society?” continued the bigot.
“The banks are,” said Cam. There was a general outburst of laughter.
“Who are you kidding?” they hooted. “Which planet was it?”
“We are going to have a special Big Society Bank and they are going to help small- and medium-sized businesses.”
“Never!” howled the mob.
“It must be hard being a stand-up comedian,” said an ex-undergraduate who couldn’t afford the fees.
“And they will be doing this for nothing, I suppose,” inquired an old campaigner.
“Well, not exactly,” said Cam. “They will be charging a normal commercial bank rate plus a bit to make their bonuses stack up.”
“Making profits, then.”
“It’s a wizard plan,” Cam screamed above the din. “It’s going to be called Project Merlin and I will lead the initiative personally to victory!”

Another wave of raucous laughter followed.

“You and whose army?” shouted a redundant one-legged soldier.
“He’s right, you know,” said Foxy, who had only just arrived. “We haven’t got one.”
“Lord Wei has given me his word. I have a document to prove it,” shouted Cam.
“That’s what Chamberlain said!” came the response.
“I’m afraid to say that Wei just left,” Foxy whispered to Cam.
“We know what you’re up to,” slobbered a man with horrible lips who was standing opposite Cam. “You think you can break up the public sector by getting rid of public servants and trade unions. You think that you can get thousands of poor sods to work for nothing while their businesses go under because the banks won’t provide them with the help they need. And in the meantime you and your greedy private-sector chums can get as fat as that pulpit poof scarecrow over there.”
“I say steady on,” grumbled Boris.

Police reinforcements were arriving, and just in time, as people had begun exchanging blows.

“I never even got onto health and welfare and things like that,” said a disappointed Cam.
“Better leave it, old chap,” said Boris, “and while we’re about it, I would chuck that utopia rubbish in the river.”
“What a shame,” muttered Cam, tearing up the pages and hurling them into the stream. “So much for ideology; it never even floated. Do you think there was a leak?”
“It was riddled with holes,” said Boris, “rather like old Major Currie’s Back to Basics. Come on, let’s go round to Cleggy’s for a kick-about.”
“He hasn’t got a ball,” said Cam.
“He is the ball,” said Boris, and they both burst out laughing.

Cam suddenly grabbed Boris’s arm.

“I’ve just had a brilliant idea,” he cried, “It’s called multiculturalism.”
“Why not leave it for another day?” Boris chuckled.
“All right,” said Cam.

And they all lived in coalition ever after.

My object all sublime
I shall achieve in time—
To let the punishment fit the crime—
The punishment fit the crime.

Was that a New Year’s resolution of Prisons Minister Crispin Blunt I was quoting?

Actually, they were lines from Gilbert and Sullivan’s The Mikado, in which my godson was to play the part of The Lord High Executioner that evening.

I was leafing through the program while we circled in preparation for landing at Farnham following our visit to Bellzone, a mining project in Guinea, West Africa.

Our steward said that he was surprised by the delay, as air traffic had earlier been reported light.

Our trip to Guinea had been interesting, and we had concentrated our time visiting the iron ore project in Simandou and the bauxite resources to the north of Kalia as well as the rail and port facilities.

It was just before lunch on the final day that a respectable-looking middle-aged gentleman had thrust a pamphlet into my hand and persuaded me to read it.

The pamphlet outlined the story of missionary pastor Michel Loua of Jacksonville, Texas, a convert to Christianity who unfortunately got caught up in the politics of Guinea’s presidential election. He had been thrown into one of the country’s prisons and on the night of November 14th was tortured, shot through the heart, and had his body mutilated. It was reported that to enhance his own leadership, Guinea’s president had sent soldiers to the prison to offer Michel Loua as a human sacrifice.

Inside the pamphlet were copies of photographs portraying conditions in the prison. They were deeply shocking.

I dug into my briefcase to find them, and just as I laid hands on them the steward reappeared in the aisle.

“If you look out of the window on the left-hand side, you will see a plume of smoke.”

He was right. Near to the coast a thin smoke column drifted gently up into the sky.

What we were witnessing—and the reason for our delay—were the last vestiges of the New Year’s riot at Ford Open Prison.

What a contrast from Guinea’s barbaric conditions!

Was it not for the situation’s seriousness, what happened at Ford could easily be taken for a joke.

Ford is an Adult Male/Category D prison, capable of housing over 550 men and operated by Her Majesty’s Prison Service.

The prison’s governor is lesbian Sharon Williams, who separated from her husband to live with one of her officers, an unsavory-looking creature named Jackie Jefcut. Today’s prison story is a scriptwriter’s dream. Turn Ford into a soap opera, and EastEnders would never get a look in.

Lesbian Sharon Williams answers directly to Prisons Minister Crispin Jeremy Rupert Blunt, Member of Parliament for Reigate, formerly an officer in the 13th/18th Hussars who left his longsuffering wife Victoria to “come to terms with his homosexuality,” more commonly termed “coming out of the closet.”

Crispin Blunt in turn answers to Justice Secretary Kenneth Clarke, who—surprise, surprise—doesn’t think jail really works and would prefer to see community-service sentences handed out instead.

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From what we know of places such as Ford, the inmates would likely oppose Mr. Clarke’s idiotic ideas. It is not easy to find a place to live that boasts gymnasiums and snooker halls; somewhere which has television, radio, and newspapers; a place which offers five-choice menus which must contain one hot, one cold, one vegetarian, one dairy-free, and one halal option to meet prisoners’ diverse cultural and nutritional needs. A place with easy access to alcohol and drugs. (Forty empty vodka and brandy bottles were found at Ford after the riot as well as assorted stashes of heroin and cocaine.) No wonder half the world would give its right arm to move to Britain. If they were allowed, they would book their prison beds ahead and not even wait to commit whatever crime it takes to earn a place. By way of greeting, new arrivals are given a welcome pack containing tea, coffee, sweets, and almost unbelievably—cigarettes! (Try lighting up a cigarette in any other gentleman’s club and you would probably be asked to resign.) If you happen to be an addict, you are also given hot chocolate to ensure a good night’s sleep. Oh, and thanks to Mr. Blunt and in order to avoid “fruit riots,” prisoners can expect to be served only perfectly sized and shaped apples. Good God!

It’s easy to find illegal mobile phones on which to contact your dealer. From time to time the inmates stage comedy workshops and vampire fancy-dress parties or, according to Lord Brocket, bring girls in from outside for special entertainment.

Whereas standards are loose regarding prisoners, a strict eye is kept on the staff to ensure they behave. In July 2010 when burgers containing pork were accidentally served to some of the Muslim inmates, managers of Ford Open Prison were made to apologize.

It is all intolerable nonsense.

The idea that two prison officers and four support staff were left in charge of 496 prisoners over New Year is utterly derisible. How would it be if instead of wasting public money making futile inquiries into Tony Blair’s lies on Iraq, we were to spend some of it building new prisons and training prison warders to administer them?

Ford’s drink-fueled extravaganza, for that is what it amounted to, was best summed up by the POA deputy general secretary as like “a scene out of Benny Hill,” with the helpless few pursuing the prisoners with breathalyzer kits in vain attempts at who knows what. It seems fitting that at the time the riot was reported to Crispin Blunt, he was happily enjoying himself at a party thrown by the dwarfish leader and Speaker of the House of Commons, John Bercow.

On the financial front, Bellzone has achieved significant milestones in the short time since listing. The iron ore market is strong globally. Bellzone’s assets are strategic to Guinea, and Bellzone has demonstrated effectively that it can work with almost any regime.

Today the price stands at 84p, and we forecast a medium-term target of 200p.

I am also delighted to report that Kenmare Resources, tipped by Takimag Sharewatch in September at 19p, continues to rise and at close of business on January 6th, 2011 stood at 32.15p—an increase of 69.2%.

Time perhaps to get behind the bars!

Coleen Rooney

Now is the winter of our discontent
Made ever more wretched by this lack of sun.

Caught in a blighted, anarchic winter’s grip, Britain is beset by swine flu, influenza B, H2N3, and a host of other diseases. Heathrow Airport, condemned by Cardinal Kasper as a Third World country, is in frozen disarray. Football’s not coming home again, the coalition is at loggerheads over tuition fees, the students are protesting, and horror upon horror, worst of all, on December 10th the Duchess of Cornwall was twitted with a stick on her way to the theater. Hardly cricket, but better leave cricket out of it while England’s batsmen tumble like skittles in Australia.

Student demonstrators, aided by Rent-a-Mob and supporters of Save the Fox, rampaged like disgraceful hooligans last week in Central London, damaging property and menacing police. One student even wound up swinging from the Cenotaph. He was later identified as Charlie Gilmour, son of Pink Floyd’s David Gilmour, who in 1979 helped to produce The Wall, one of the greatest albums of all time. The song “Another Brick in the Wall Part 2” opens with the words, “We don’t need no education,” a dogma which our Charlie evidently strives to uphold—rather successfully as it happens! He also didn’t “need no thought control,” as the lad was said to be on acid at the time. He also claimed not to know what the Cenotaph represented; impressive stuff for a second-year history student and clear proof that teachers really must have left that kid alone. It was encouraging to note that our current prime minister, in the tradition of prime ministers before him, declared that the demonstrators would face the full force of the law—a “You wanna watch it or I’ll go and fetch my dad” kind of threat. It doesn’t amount to much.

This holiday season, the incredible shrinking force has its work cut out arresting merry motorists, stemming squabbling in the gay-dwarfist community, issuing cautions to Christmas-rights activists, and prosecuting women who throw cats into rubbish bins. Still, “the full force of the law” sounds a comfortingly grandiloquent note to an eau de nil nation with the middle-class values of a wind turbine. For that is what Britain has become: a malformed low-road meritocracy. A crumbling relic of a bygone age. A nation of whiners in search of obscurity, competing with gusto to be the first to reach the pool’s bottom. When we finish last in the Eurovision Song Contest, we blame the Eastern Bloc and the voting system, whereas in truth we deliver dreadful songs from the dreadful Lloyd Webber and seriously consider people such as Katie Price, better known simply as “Jordan,” to represent us. Oh dear, oh dear, there is truly something rotten in this sceptered isle when our children’s role models are Cheryl Cole, Simon Cowell, Russell Brand, and the awful Coleen Rooney. What a fountain of honor!

The same applies to the World Cup. Surely it would be more sensible to try and win the bloody thing than to keep moaning about the bent Sepp Blatter. I’m perfectly certain it doesn’t bother him.

Enough of such pessimistic talk! Christmas is here, and to this column’s followers I bear good tidings of great joy!

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In their December 18th edition, The Week (after being tipped by The Daily Telegraph in mid-October) named Petra Diamonds their top share, up 82.05%. At Takimag Sharewatch, we had spotted Petra in early September, and today the stock is up a massive 110%–a fantastic result.

Nor have our other stocks disappointed.

Aquarius Platinum, tipped on September 7th at 306p, is currently 374p—up 22%.

Kenmare Resources, tipped on September 28th at 19p, is currently 27.08p—up 42.5%.

Petropavlovsk, tipped on November 2nd at 939p, is currently 1115p—up 18.74%.

When to cash in? It is always easier to buy stocks than to sell them. It used to be called greed. Timing is everything, but it’s worth remembering the legendary adage, “I always sold too soon.”

Next week I leave with Gimlet for Guinea to reconnoiter what might be our opening tip for 2011. So watch this space next week!

Maintaining our 2010 record will be tough, but in the words Shakespeare ascribed to Brutus:

There is a tide in the affairs of men.
Which, taken at the flood, leads on to fortune….

Our final Christmas hymn is “Onward Christian Soldiers,” after which we can listen to the pope’s broadcast where he highlights some of the controversies afflicting his rotten church instead of apologizing for screwing up London’s traffic last September.

Part II

Last week I wrote about my memorable-albeit-disagreeable encounter with one Daniel C. Leghorn in Bemelman’s bar at New York’s Carlyle hotel. It was there where, fortified by a half-dozen Manhattans, the demented Leghorn had in a moment of confusion and madness mistaken me for a man called David Walsh (deceased), former CEO of a Canadian mining company, heaping all manner of curses on me.

In normal circumstances such a mistake would have been harmless enough, but by dint of my compelling resemblance to Walsh and old Leghorn’s wishy-washy mind, I was Walsh and as far as he was concerned, that made things very wrong indeed.

It was this same David Walsh who had founded a little company called Bre-X Minerals back in 1989 as a subsidiary of Bresea Resources Ltd. For four years nothing of note occurred until late in 1993 when, on the advice of exploration chief John Felderhof, the company acquired a property at the Busang River’s headwaters in Borneo’s jungles and took on a high-living Filipino geologist, Michael de Guzman, to map the ore body. De Guzman’s early estimates of the site suggested around two million ounces of gold. (In 1995 gold was trading at between $300 and $400 an ounce).

Sample after sample was sent off to the laboratories, with consistently spectacular results. By 1995 it was estimated that the site could contain as much as 30 million ounces. In April 1996, investment advisors Nesbitt Burns presented a resource estimate of 42.6 million ounces with an 18-month share target of $200. By year’s end, the estimate had risen to 60 million ounces.

With Bre-X being a small and inexperienced company, it didn’t take long for the vultures to start circling. While Placer Dome considered a takeover, Indonesia’s powerful President Suharto was adding political pressure by suggesting that Bre-X make a deal with Barrick Gold in association with a member of his family. In December 1996 a tentative joint proposal was drafted, but within weeks a fire broke out at Bre-X’s Busang office, destroying key documents. By now gold fever had gripped both shareholder and share price alike, and wild speculation was spreading about a deposit of up to 200 million ounces, making Bre-X (then capitalized at CAD $6 billion) as the century’s biggest gold find. Shares shifted like ‘pass the parcel’ in a Belfast pub. Something was going to explode.

Finally a deal was negotiated with Freeport-McMoran Copper and Gold under which Freeport would run the mine and Bre-X would retain a 45% share. The announcement was made on February 17th, 1997, and Freeport immediately set about doing their due diligence.

One month later on March 19th, geologist Michael de Guzman died falling out of a helicopter while en route to the site. His body was found four days later, partly eaten by animals. Although identified by dental records and a thumbprint, doubts remained over whether it really was de Guzman. The dead man’s skin color was black (Guzman’s was not), a phenomenon the authorities curiously attributed to ant molestation. Adding to the conundrum, not one but four baffled and unsuspecting wives of differing religions turned up to bury their beloved and honest de Guzman.

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In the afternoon of March 26th, 1997, I was sitting in my office in Dowgate Hill watching the Bloomberg reports flash up when one announcement caught my eye. It read, “Freeport—McMoran report no significant traces of gold at Busang.” Across the desk from me, the famously impassive trader Brian Cope—who had seen many financial shenanigans in his long and illustrious city career—displayed the only trace of emotion I ever saw in the man.

“F’off. You’re ’avin’ a laugh!” he growled.

Bre-X immediately demanded fresh reviews and hired Strathcona Mineral Services to look at the project. By now, however, a frenzied sell-off of shares was underway. The company was heading for meltdown. Within 30 minutes it was finished.

In its audit, Strathcona concluded: “The magnitude of the tampering with core samples that we believe has occurred and resulting falsification of assay values at Busang is of a scale and over a period of time and with a precision that, to our knowledge, is without precedent in the history of mining anywhere in the world.”

Tampering with the samples or salting the hole are terms that turn gold company investors into gibbering wrecks. When you look at a gold mine, all you see is a patch of ground with an adit running into it. Everything else depends on faith, trust, professional advice, and what you believe exists hundreds of feet below you. The Bre-X debacle raised a multitude of questions, dragged famous names into disrepute, and caused others to be rebuked. Many junior miners who had looked to the Canadian markets to finance high-risk exploration found that the mechanism for such financing was damaged beyond immediate repair. Thousands were tangled in the Bre-X web’s sticky strands. As late as December 1996 Lehman Brothers were strongly recommending a buy on the “gold discovery of the century.” Some of the world’s biggest mining companies, such as Barrick Gold, Placer Dome, and Freeport-McMoran, were fighting for a piece of the action, as was Indonesian President Suharto and his family. Following Fidelity and Invesco Funds’ examples, mutual fund investment managers were falling over themselves to buy the stock. Bre-X’s key financial advisor J.P. Morgan was still predicting up to 200 million ounces in February 1997 (a capitalization of $70 billion).

The incredible thing is that the Great and the Good were prepared to put their faith in drill results provided by a minuscule Calgary-based company that had never mined an ounce of gold in its life.

I bring up the Bre-X story now because the market for natural resources has recently been running fast and furious. I believe there is still strength in the market, but remember: “Be wary of Greeks bearing gifts,” and when your taxi driver starts telling you what to invest in, it is time to sell everything you own!

Part I

Following my recent tour of the Petropavlovsk gold project in Eastern Russia, I opted to return home by a somewhat circuitous route, spending two days in Haida Gwaii, off Canada’s Northwest Coast, before proceeding via Calgary to New York and thence on to London.

I stopped in Haida Gwaii, formerly the Queen Charlotte Islands, to drop in on Peregrine Lodge, one of the world’s most sensational salmon-fishing lodges. It was here one foggy September morning some years ago that while fishing with my old friend Gavin “Oily” Wilson, a giant in the energy investment field, we both hooked salmon at the same second. While my fish weighed around 30 lbs., Oily’s was some ten pounds heavier. They were good fish. Wild salmon of this size are as strong as sumo wrestlers, and one needs a fair amount of space to bring them onboard. The boats at Peregrine are small, and the ensuing struggle resembled something from Fred Karno’s traveling comic opera troupe, but somehow me and Oily emerged victorious.

Sadly it was too late to do any fishing this time. The season runs from June to mid-September, but the place is beautiful and my memories from Peregrine are good ones—better at any rate than the memories of what happened two days later.

I always stay at the Carlyle when in New York. It is the jewel in the crown of Manhattan. Situated between 76th and Madison, the hotel is as fine as it is famous: comfortable, old-fashioned, chic, and boasting one of the world’s greatest piano bars. It was here that the legendary Bobby Short used to play, a piano player so celebrated in his day that even the street outside is named after him: Bobby Short Place. Bobby had started at the Café Carlyle in 1968 as a fill-in for George Feyer and subsequently became an institution, championing such famous composers as Eubie Blake, Duke Ellington, and Billy Strayhorn. Arriving in town at 9 p.m. on Saturday, it seemed a suitable hour to seek out Joe at Bemelmans bar and have him rattle me up a Sidecar the way only Joe can. The Loston Harris Trio, as good a trio as you will find anywhere, went on at 9:30. They started their set with Cole Porter’s “I’ve Got My Eyes on You” and had moved through “Samantha” to Irving Berlin’s haunting classic “Let’s Face the Music” when I first spotted Daniel C. Leghorn.

He was a short, bowlegged, queer-shaped sort of fellow. Either he had ridden a lot of horses or had rickets as a child. And he appeared to be zoning in on me as he weaved across the floor from the far side of the room.

He stopped less than two feet short of me. Swaying uncertainly, he stared dumbly through nebulous eyes.

“I knows yer,” he began. “Never forget a face. Saw yuz in Calgary.”

He had me at a disadvantage.

“Find any gold there, Mr. Welsh?”

He was clearly confusing me with another, and I told him so.

“My name is Scott,” I said.

That didn’t work. He wasn’t having any of it.

“Oh yeah, Scot today, Irish tomorrow, but you ain’t foolen’ me. You’re Welsh from Bre-X. You cost me my wife and my life shavings [sic]! Don’t care about the wife, but I sure as hell care about the money.”

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Suddenly I realized what he was on about. He had mistaken me for David Walsh, founder of Bre-X Minerals. Obviously he had been in Calgary a couple of days back, overheard me talking about gold, and for some reason assumed I was Walsh. He had probably seen pictures of him in the newspapers. I met Walsh in the early 1990s and knew the story. I also knew that he had been dead for almost 12 years. I certainly wouldn’t have said I resembled him.

My new acquaintance was clearly the worse for wear. He stank of bourbon and was sweating and aggressive. Fortunately, Joe doesn’t stand for any truck in his bar. Mr. Daniel C. Leghorn, for that he informed me was his name, was swiftly ejected into Madison Avenue’s cool night air.

“Remember the name, Mr. Welsh!” he yelled as he departed, “Daniel C. Leghorn. I’ll be back to haunt yer. Don’t you forget it now!”

I was sure that I wouldn’t but was hopeful that Mr. Leghorn would try to forget about me.

For those of you who have never heard of Bre-X, I write this as a reminder that gold mining can be a woolly business. The grass-roots speculative gold investor who dreams of reaping a fortune has to rely on a multitude of signals, estimates, and possibilities to make his dreams come true. The promise of what is termed “blue sky” proves alluring and often leads to disastrous consequences. It is the ultimate high-risk investment, except perhaps for backing restaurants, Tobagan goat races, or theater plays.

Compare betting on gold to betting on horses. To back the Kentucky Derby’s winner, it isn’t good enough to know which horse is quickest, although it helps. You need the weather to be right, the draw to be right, the jockey to be right, the trainer to be right, et cetera. It’s an even harder call when there are fences to be jumped and hurdles in the way.

In the story of Bre-X Minerals, the horse never even made the start.

Recently the stocks we have been following in this column have been enjoying a fine run of success, which is why it is worth remembering what can and does sometimes happen. Next week in Part II you can read the Bre-X conclusion.

For now, though:

Petra Diamonds are at 96p from 65p, a rise of 48% since August.

Aquarius Platinum is at 397p from 305p, a rise of 30% since September.

Kenmare Resources are at 27p from 19p, a rise of 42% since September.

Petropavlovsk PLC is at 998p from 939p, a rise of 6% since October.

Diu permanente!

Looking back on it now, ‘lunacy’ is the word that springs most readily to mind. It was Easter 1967. I was just sixteen and had signed up to go on a school trip to Russia for the holidays. I say ‘lunacy’ because the idea of taking a bunch of Etonians to Russia would be a tall order under any circumstances; taking a gang of rampant teenage Etonians (the tail-suited male equivalent of St. Trinian’s) to Moscow, Leningrad, and Kiev in 1967, was brave if not bordering on insanity. Russia was deeply communist in those days. They were suspicious of everything Western, and it was harder to get into than Sudan is today. We were issued a comprehensive list of rules and instructed to be on our best behavior at all times. The chances of our abiding by those rules was as likely as Jacques Mesrine agreeing to behave himself in prison. Knowing that Russian students were mad for Beatles records and trendy clothes, we were all armed to the teeth with blue jeans, chewing gum, and 45s of “Please Please Me” and “From Me to You,” which we sold for a whopping great profit. At that time there were only half a dozen of us studying Russian at Eton, which we played to our advantage, sneaking out at night to visit girls and get drunk on repellent sweet champagne and vodka shots. As we were constantly followed, it seems incredible that none of us got into any serious trouble, but somehow we avoided it.

Instead it turned out to be the trip of a lifetime, the memories of which remain as clear today as they were forty-three years ago.

When you are sixteen, your concern for safety and comfort is happily scant, for every hotel was colorless and dingy, with hospital beds to sleep in and light bulbs hanging loose from the ceilings. Much to our delight, the corridors were patrolled by female impersonators sub-impersonating Rosa Klebb and an endless supply of murky men in leather coats and matching hats. It was perfectly wonderful. One thing was absolutely sure, and that was that the chances of seeing, or better still getting to know, a pretty girl were zero. There was no such thing as makeup in Moscow, and most of the girls wore boiler suits or mid-length eau de nil serge skirts. A far cry from today! Oh where, oh where were they hiding?

Apart from the Hermitage museum’s treasures and the Winter Palace’s decadent beauty, we enjoyed watching men fishing through holes in the frozen Neva River and visits to GUM, the Russian equivalent of Harrods pour les pauvres. By the greatest piece of good fortune—for us, that is, but not for him—Marshal Malinovsky had died at the start of our visit, possibly because of it, and he was to be honored with a state funeral in Red Square. Rodion Malinovsky was a Soviet legend, a veritable “hero of our time.” His war record was truly impressive; it was Malinovsky to whom Stalin entrusted command of the 66th Army at Stalingrad. After World War II, he was appointed commander of the Transbaikal-Amur Military District in Russia’s Far Eastern region, as wild and savage a place as any on the globe.

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Moscow overnight became filled with men in uniform, and for us boys the sight of so many soldiers marching through the streets was utterly mesmeric.

Apart from my trip that Easter, I was not to return to Russia for almost half a century. My destination when I did so was Eastern Russia, to a region containing proven mineral reserves estimated to be worth $400 billion.

Petropavlovsk (LSE: POG), Russia’s third-largest gold mining company, is a London-based outfit operating in Eastern Russia’s Amur Region. The company works open pit mines. To extract the ore, grids of holes are drilled, dynamite is inserted, and the ore is then blasted. Petropavlovsk was founded in 1994 by British banker Peter Hambro and Pavel Maslovskiy, once a professor in plasticity at the Moscow Aviation Institute. The company has two principal mines at Pokrovskiy and Pioneer and is busy developing others. The recently commissioned Pioneer operation is both impressive and well organized. The company has overcome uncertainties about equipment availability and the normal commissioning problems. Their aim is to achieve strong growth in gold production over the next three years, and the signs say they will achieve it. The geological team is already working on new non-refractory ore zones in the northeast corner of its mining license at Malomir and in the eastern part of the license. Albyn is Petropavlovsk’s next major gold project, scheduled to contribute 200,000 ounces per annum from 2012 as part of the company’s growth plan.

Recently Petropavlovsk’s share price has dipped due to problems reaching its IPO target for a Hong Kong listing of IRC, Petropavlovsk’s iron-ore unit. I believe this is no more than a temporary blip and makes Petropavlovsk, currently trading at around 939p on the LSE, a good-looking prospect. A target of 1,500p looks easily achievable.

Of the other stocks we have been following since August, Aquarius Platinum, which was at 305p on September 6, is currently at 373p. Petra Diamonds, at 65p on August 12, is currently at 101p. Kenmare Resources, at 19p on September 28, is currently 21p.

A very satisfactory state of affairs.

“I wouldn’t like to go to prison,” said Gimlet. “The idea is a very unpleasant one.” I had to agree with him.

“The conditions are bleak and dispiriting, and the notion of being locked in is perfectly dreadful.”

He was right, of course, but quite what had inspired such gloomy rumination was hard to say.

“Escape isn’t easy,” he continued. “There are all sorts of obstacles to prevent you.” I said that if I understood things correctly, that was the general idea.

“Locked in!” he said woefully.

Gradually it dawned on me that he was referring to the Chilean miners’ rescue in the Atacama Desert. On August 5th, 700,000 tons of rock collapsed in the San Jose mine, trapping 33 men in a tunnel which most people feared would become their tomb. For seventeen days these hapless burrowers lived through unendurable trauma, for the likelihood was that all of them would perish. The ensuing fairy-tale ending has been widely reported around the world. On August 22nd an exploratory probe penetrated a wall only yards from the miners, which enabled food supplies to be sent down, along with medicine and letters from their families. It was enough to sustain them through the rest of their harrowing ordeal. Meanwhile, a 620-meter escape shaft was being excavated which would allow an oxygen-supplied capsule called the ‘Phoenix’ to bring them safely to the surface. Never before in mining’s history has such a potentially calamitous situation resulted in such plenary triumph.

“What a wonderful ending for the miners,” I exclaimed.

“What miners?” asked Gimlet.

“I thought all that talk about being imprisoned was to do with the Chilean miners.”

“Televisions,” said Gimlet.

Sometimes I wonder if he does it deliberately. Quite how one links televisions to prisons and mines is a long shot, even for Gimlet’s labyrinthine mind.

“What,” I inquired, “have televisions got to do with being locked up, apart from the fact that prisoners today are allowed television sets in their cells?”

“I didn’t say locked up, I said locked in,” laughed Gimlet. “It is an altogether different proposition, except that prison televisions probably work.”

Gimlet had taken out a contract with a company called Tiscali to provide him with television coverage. The Tiscali representative, an oleaginous young man, could not have been more obsequiously attentive. He said that were Tiscali to take responsibility for Gimlet’s telephone and broadband in addition to his television network, this would ensure easier billing and provide a better service. Quite what level of service lesser mortals might expect was gently glossed over.

Nevertheless, the idea of having the various systems taken care of under one roof seemed a sensible one.

“For the soul is dead that slumbers, and things are not what they seem,” quoted Gimlet.

By this I took it that something had gone wrong. The story is not an uncommon one.

Gimlet signed up with Tiscali in May 2009. At first everything went smoothly.

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After eight weeks, however, the television started experiencing connection problems and a technician was sent ’round to sort it out. The trouble was that he didn’t; or rather he did, but not for long. The next time, Tiscali managed to fix the fault online. They asked Gimlet if he had been traveling and explained that whenever he went away he should switch everything off to avoid complications. The next time he went abroad, Gimlet followed their instructions to the letter, but on his return the screen was once again blank. The problems persisted to the point at which Gimlet could stand it no longer. He decided to take his business to Sky. The customer-services operator at Sky was sympathetic and assured him that his troubles would soon be over. Gimlet could have sworn that the voice at the other end of the line was that of the blandandering young salesman he had previously signed up with at Tiscali.

“So did everything work after that?” I inquired.

“Locked in!” he replied. “If you think you can wish Tiscali a jaunty goodbye and head off into the sunset, you are wrong. It is harder to get out of than rehab. To break off relations, you are required to undergo a recorded telephone interview with a person trained in torture. The plan is to coax, warn, threaten, and to generally bully you into submission. First they inform you that you will lose your home telephone line, a statement which is patently untrue; next they insult you by offering you a better deal than the one they first gave you. Finally, they will remind you that you will be charged for a number of additional items which may have escaped your notice when signing the contract. As far as the telephone is concerned, British Telecom will guarantee that you can keep your current number. You will, of course, have to wait a minimum of five working days for a BT engineer to pay a visit. You will be informed by letter of his visit’s date, which could be any time between 7:00 a.m. and 6:00 p.m. Unfortunately they will not be able to provide you with broadband until after the engineer has done his work, and it could take up to 18 hours for the head office to be informed that the engineer is done. Once the paperwork has been completed and if you still wish to proceed with your broadband installation, another engineer will be sent ’round in a minimum of five working days. In the meantime you should receive a new router box through the Royal Mail. This cannot be guaranteed to arrive, but if it doesn’t you will be advised that it hasn’t by registered letter. The registered letter should arrive between 7:00 a.m. and 6:00 p.m., and if no one is in, it will be duly returned to someone.

“Your television service will be taken on by Sky and an engineer, etc….You will also be sent a welcome pack containing your new Sky card. This may not arrive, as many such letters are wrongly addressed. Any attempt to rectify the situation with any of the above-mentioned service providers will require you to answer some security questions which may not prove possible because of discrepancies over your mother’s maiden name. This can be rectified by the account holder writing a letter in person and black ink (Printed).”

Tiscali was sold to Carphone Warehouse on June 30th 2009 and was rebranded as part of Talk Talk in January 2010. Talk Talk was founded in Leeds in 2003.

Unfortunately Gimlet has no new investment tips this week due to technical difficulties. More when he returns from Petropavlovsk, a gold-mining project in far eastern Russia.

The Fat Women by Igor Grabar, 1904.

“Look at the size of those women!” exclaimed Gimlet as four enormous ladies waddled past the window. “They ought to be ashamed of themselves. You would never have seen that kind of obesity in the Champs-Élysées in 1945.”

He was right; they were horribly overweight.

We had been lunching in Fouquet’s to celebrate Gimlet’s winning bet on the Labour leadership contest. He is not normally a betting man, so you could have knocked me over with a quill when he told me in early summer that he had placed £10,000 on Ed Miliband to be the next Labour leader at 10-1 odds. Gimlet reckoned that the bookmakers had made a serious miscalculation:

“Andy Burnham is weak and will fall on thorny ground. Diane Abbott shares a sofa with Michael Portillo on a classless TV show, which makes her ipso facto unelectable. Ed Balls would probably make the best leader but will be eliminated due to his name. That leaves the Miliband brothers.”

Whereas I could almost accept his reasoning regarding the first three, I said that it seemed David Miliband had the thing in the bag.

“While Rome burned, Nero fiddled,” Gimlet replied obliquely. “David Miliband had several opportunities to oust Gordon Brown, but he failed to act. The party will not forgive him for it. He has been a lightweight Foreign Secretary, he has made the fatal mistake of trusting Peter Mandelson, and ultimately his fate will be sealed by the trade unions.”

I didn’t follow Gimlet’s logic at the time, but in the end that is exactly what happened, and now Gimlet was richer for it by £100,000!

We had enjoyed an excellent lunch at Fouquet’s and were sipping a little Vieille Prune before taking the Eurostar back to London.

“Before the Second World War, Britain imported about 55 million tons of food a year from other countries,” said Gimlet.

I have long since given up trying to fathom the machinations of Gimlet’s mind. When he is in his philosophical vein, it is best to let him wander off and wait to see where it leads.

“Rationing was inevitable to maintain stability,” he continued. “The government realized that with the German submarines sinking British supply ships, food would become scarcer, prices would rise, and constraint and control would be crucial. Accepting that tough times called for tough measures, the country held firm through fourteen years of rationing. People didn’t go ’round complaining all the time, and you didn’t have obese women floating about in the Champs-Élysées. They all had very good figures.”

On that point I was in full agreement.

“Speaking of which,” he said, “I think that Osborne deserves more credit for his proposals.”

“About women?” I queried.

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“About figures,” said Gimlet. “He made it plain well before the election that if the Conservatives took charge, the country should expect draconian measures to redress the situation Labour created. In past times, people would have tightened their belts and helped to do their bit, but now they are indolent and greedy. They don’t like having to tighten the belt, and that brings me to gold.”

Now I was properly lost.

“The European debt concern that is being driven by Portugal, Ireland, Italy, Greece, and Spain has undermined confidence in the European banking system; in fact, the euro might even fail as a currency. How, then, do you think investors might best hedge against the eurozone’s financial mess?”

“By buying gold,” I suggested.

“Precisely!” said Gimlet. “And as the euro is the reserve currency for many countries, its fall in value translates to higher prices for gold purchases made in euros. It is interesting to note at the same time that the supply-and-demand divide grows ever wider. Remember, too, that at the turn of the twentieth century South Africa produced 75% of the world’s new gold; today it’s 19%.”

“I wonder how much processed gold there is sloshing about in the world,” I said.

“Estimates put the existing stock at 165,000 metric tons, with around 2,400 tons being added each year, a growth rate of around 1.5%. Now think about this,” said Gimlet. “We have mentioned investor hedging. We know that there is an increasing imbalance in the supply/demand ratio. Consider, then, the areas where demand is growing: China and India, for example. The World Gold Council reported that consumer demand in India rose to 193.5 tons during the first quarter of 2010, up nearly 700% from the same period a year ago.”

I pointed out that in the 1990s there had been a case for arguing the supply/demand imbalance, but that hadn’t stopped gold from plummeting.

“Yes, but you are forgetting that at that time the central banks were still shifting their reserves around. For the last two decades, central banks have been net sellers of bullion, but during the past year that has reversed. Emerging nations have become net buyers of gold. China, for example, has increased its bullion reserves from 600 tons to 1,054 tons. So we have global economic and political uncertainty, a massive $13-trillion indebtedness in the USA, fears of quantitative easing, and the prospect of negative real interest rates. All this seems set to increase demand for gold. Also, if you take into account consumer price inflation since 1980 when gold was $850 an ounce, it is equivalent today to around $2,200 an ounce. Incidentally, how are our recent mining recommendations performing?”

Last week ended well for The House of Gimlet. Petra diamonds, which we recommended on August 12th when the price was 65p, closed on October 8th at 92p. And Aquarius Platinum, which we recommended on September 7th at 305p, closed at 372p.  Mining stocks in general looked strong, and gold closed at $1,346.

“Very satisfying,” said Gimlet. “It is quite probable that we will see some profit-taking in the short term, but the overall prospect for gold and precious metals looks promising. For the cautious gold investor, it would be worth looking at Newmont Mining. It is one of the world’s largest and most profitable gold-mining companies, with proven and probable reserves of almost 100 million ounces.”

Sadly, I had to stop him. It was time to make our way to the Gare du Nord.

Gimlet looked wistfully out at the Champs-Élysées and declared: “If those women out there were worth their weight in gold, they would be fabulously rich!”