Kaiser Report- Redfern moved to "Strong Buy"
Redfern Resources Ltd (RFR-T: $0.40)
TP BF Buy ($0.30-$0.49 for 2000)
The market did not pay much attention to an announcement by Redfern Resources Ltd (RFR-T) on February 28 that it would reorganize itself at the next AGM in June. No, Redfern is not planning a rollback. The company presently owns the Tulsequah Chief project directly, and in order to stuff this asset into a wholly owned subsidiary it must complete some fancy legal maneuvers. Such a housekeeping event should not merit more than a yawn, but in Redfern?s case it signals that management is getting the urge to inject some fresh life into Redfern. The news release indicated that the reorganization would allow Redfern to ?independently pursue new opportunities to enhance shareholder value?. I asked Redfern?s president Terry Chandler what that meant, and he conceded that it did not rule out branching off into the non-resource sector if the right project came along. However, he emphasized that the management of Redfern has had its greatest success in the resource sector (ie Sutton). For the past 15 years Redfern has been beavering away at the Tulsequah Chief polymetallic deposit in Northwestern British Columbia, and for the past couple of years the project has been bogged down by environmental hassles stirred up by an American environmental group and local natives. Low metal prices have not helped the situation, with the result that Redfern?s long-suffering shareholders are desperate for some new joy. The Canadian government has been applying a slow motion stonewalling strategy to the American demand that the government reject the validity of its own permitting system (much as the environmentalists got Battle Mountain?s Crown Jewel permits in Washington overruled) and submit itself to an international environmental kangaroo court. Redfern would now like to conduct a $3 million reserve expansion drill program whereby it would drill deep holes to test for down dip extensions of the known lenses. This will involve drilling 900 metre holes from an underground station and wedging them off. The resource presently stands at 7,557,949 tonnes of 1.32% copper, 1.23% lead, 6.63% zinc, 2.51 g/t gold and 105.25 g/t silver (US $140 rock value). Redfern has only about $1 million in working capital left, but it does own 4,078,426 shares of Eurozinc Mining Corp. (EZM-V: $0.70). The Eurozinc position is less than 10%, so Redfern is free to sell its shares. Eurozinc has been a favorite of mining analysts thanks to its Aljustrel zinc-copper deposit and milling facility in Portugal. Breakwater has been rumored a number of times as a potential bidder for Eurozinc, which recently adopted a poison pill. The company is in the final stages of a feasibility study that it hopes will let it arrange project financing or coax out a serious takeover bid. Because Eurozinc is in what everybody hopes is a temporary slump, Redfern is reluctant to tap this asset to raise cash. Last November Redfern sold some of its oil and gas properties for $560,000. Redfern has 21,132,167 shares issued for a market cap of less than $10 million.
By putting Tulsequah Chief into a subsidiary Redfern would have the flexibility to pursue a strategy similar to that of Corona Gold and Kazminco where these resource juniors acquire a technology project and spin off their resource assets through a dividend in specie. Given that I think Redfern will overcome the final permitting obstacles, that reserve expansion drilling will be successful, that metal prices are still at the beginning of a major bull cycle despite the recent oil price related hiccup, that Eurozinc will soon trade at higher prices with a possible buy-out that converts Redfern?s stock into $4-8 million in cash, and that a management team flush with the Sutton success will find an exciting new story to relieve the boredom of Redfern?s long suffering shareholders, I am elevating Redfern to a top priority bottom-fish buy in the $0.30-$0.49 range. |
