David Pescod's Late Edition March 7, 2006
SILVER
ZINC
URANIUM
It’s the biggest mining convention in the world, that’s the Prospectors
and Developers Association Convention in Toronto and one
quick run around the Toronto Convention Centre leaves little doubt
about that in one’s mind. They say there’s somewhere between
14,000 and 16,000 delegates registered and I swear on Monday, they
all had to be there at the same time.
No longer the annual get-together for northern Canadian mining
stories with a chance to get together with Bay Street, now when you
see the enormous Brazilian pavilion and the size of the Chinese
delegation, you know that this is just huge and world wide. There
are more countries with booths here from Africa than I’ve ever heard
of and countries represented from Asia that you’ll never be able to
spell!
More mining equipment to examine, more technology to explore
and of course, hundreds upon hundreds of junior miners for investors/
speculators to meet and quiz. London, England can only dream
of something of this scale!
We are here to ask a few questions such as which commodities
look good—when is the correction coming...and how bad will it be?
We are due. We ask about commodities because that might narrow
down the stories you might want to speculate on—and some materials
are seeing inventory levels edge up. Usually a precursor to
prices heading down.
In our totally unscientific pole, we ask several dozens of people
with a mining background and the top three commodities picked
were uranium, silver and zinc. I suspect that a year ago, the same
question would have had answers of oil and gold as the favorites,
but now there seems to be new parameters in play.
With all of the new power facilities needed around the world, particularly
in Asia, uranium seemed an obvious choice and currently
supply is tight and in the short term, probably gets tighter. The talk
on silver centers on the launch of exchange-traded funds and
whether there is simply enough silver out there to be purchased by
those ETF’s when they do get launched. Zinc has become an economics
101 issue—big demand and no new supplies coming on
stream...for years.
Also mentioned, but not nearly as frequently are tungsten
(Chinese had exported it, but now they need a whole bunch of it)
natural gas—there is currently a glut, but many bet it won’t last for
long and even sugar. Sugar, not for the sweet stuff, but as an energy
source—look what they are accomplishing in Brazil.
Gold does still have a few fans as does copper, but many don’t
think it will outperform the top three. We note in our pole not a single
suggestion of commodities like nickel or aluminum and very few for
oil.
As to what next for the junior resource sector which has been extremely
generous and only had one little hiccup in the last six to eight
months, we ask 50 people and you get 100 answers. Mainly, most
suggest that we are in a bull market for commodities that should go
for years—but many note that the correction when it comes, usually
happens in March to May and many joke that maybe the ten dollar
drop in gold price yesterday was the start. The joke being that the
PDAC is usually the start of the weakness in the junior resource sector.
KODIAK EXPLORATION (V-KXL) $2.80 -0.45
If you’ve got some good drilling results or some advances,
why not feature it at the PDAC, when you know
there is going to be a big audience and could create some
additional attention. Kodiak Exploration had news that attracted
a buzz at the PDAC on their Caribou Lake copper/
nickel/PGE property 90 kilometers southeast of Yellowknife
in the NWT. Yes, the booth was busy. Also busy
with the big move in silver last week was Bear Creek Mining,
the Peru-based junior miner led by Catherine
McLeod-Seltzer. Also doing big business was Don Moore
and his team at Nova Uranium, but we take our hats off to
the crews that have to man these booths for four straight
days working long hours and then have to visit the presentations
and parties at night. A long, long day.
TVI PACIFIC (T-TVI) $0.15 -.005
We bumped into Cliff James, one of the mining guys we have to watch because
of his oil and gas play—TG World Energy. Their Tenere play in Niger
with the Chinese National Oil Company we think will become a significant
play...when it finally starts. They say patience is a virtue, but drilling that was
supposed to start last November, now looks like it will be June/July. Meanwhile,
he points to his other company TVI Pacific. We’ve ignored it because
there are 400 million shares outstanding—that’s too much—too little leverage
and maybe a negative knock on management for having to print that many
shares—not getting shareholders money worth and so forth. However, he
does point out that their Canatuan mine is now going into production and it
should throw off huge cash flow. He suggests they will be throwing off as
much as roughly a million US a month cash flow. That’s a lot of money. So
let’s see, go with our principals of avoiding all stocks of companies that have
printed too many shares—or give in to innate sense of greed. After all, TVI is
trading for mere $0.16 a share.
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