Any thoughts on the following: Vannessa Ventures Limited (OTC BB: VNVNF)
August 24, 2001
Volume IV, Issue 72
Email : info@otcjournal.com
URL : otcjournal.com
To OTC Journal Members:
We receive hundreds of small stock ideas from our members, and occasionally we find something that fires up the imagination. In one of our sister newsletters a member told us about Infowave Software (TSE: IW), and we featured it at $3.80 in October of 1999. It hit $65 in March of 2000.
In recent months we have had dozens of requests for ideas in the Mining Sector, and in late July we received an idea from one of our members which we found intriguing. We did a little research, made a phone call to management, and have decided to bring this unusual situation to your attention. Successful microcap mining stock investments are rare, but when they hit they can be exciting and highly profitable. This weekend's idea is not for everybody. For those members seeking ideas in the neglected Mining Sector, here's one for you to check out after this quick reminder.
A Reminder for Next Wednesday: Upcoming Envoy Interview
Next Wednesday, August 29th, we will have the final in our four part series of audio interviews. Geoff Genovese, the President of Envoy Communications (NASDAQ: ECGI) will be our guest. We feel this is by far the most undervalued situation we follow, and we know many of our members are shareholders. Don't miss that edition.
Please send questions for Mr. Genovese to ecgi@otcjournal.com. We will ask them on your behalf.
Special Situation: Vannessa Ventures Limited (OTC BB: VNVNF)
If you have no interest in a high risk mining situation read no further. This edition is not for you. However, if you're not afraid to look at a potential high flyer, proceed.
Mining stocks are not for everyone, but followers of the mining sector fervently believe with religious zeal. We have minimal experience with mining stocks, but we know how to follow big money. Investors have made millions piggybacking on the investments of the Oracle of Omaha, Warren Buffet. There's a similar situation with Vannessa. A Billionaire with a legendary Midas Touch owns 40% of the company. Details further down.
We are not calling this idea a Trading Alert or a Profile. We publish this idea in response to our members who believe gold stocks are coming back, and consistently ask us for mining ideas.
The OTC Journal has no formal relationship of any kind with this company, and the idea came from one of our members. MarketByte LLC, the parent company of the OTC Journal owns no stock in this company, and none of our editors own any stock.
Mining Stocks- In a Solid Uptrend
Prior to publishing, we took a quick look at the mining sector. To our surprise mining stocks have been in a solid uptrend which began last November.
The Gold Index was at 42 last November, and stands at 58 today (up 40%). Here's a list of the three largest mining stocks which are considered the bellwethers in this group:
* Placer Dome (NYSE: PDG)- $8.38 in November- $11 Now (Up 31%)
* Barrick Gold (NYSE: ABX)- $13.56 in November- $16.67 Now (Up 23%)
* Homestake Mining (NYSE: HM)- $3.81 in November- $8.74 Now (Up 130%)
Vannessa Ventures Limited (OTC BB: VNVNF)- Positioned For Potential Explosive Growth
The OTC Journal will not cover Placer Dome, Barrick Gold, or Homestake Mining. If you want information on these stocks there are hundreds of sources and many analysts following these names. The information would have no value. We try to find smaller situations which you would be unlikely to discover on your own. This information has value, and it has substantial risk.
The Vannessa idea caught our eye due to the convergence of unusual factors which could bring this stock onto the radar screens of Precious Metal Investors.
Vannessa describes itself on its corporate web site as a company who's objective is to "maximize shareholder value through the acquisition, exploration, development and mining of high quality gold and diamond properties in Central and South America. We focus on these regions because Central and South America contain some of the world's richest mineralized areas, yet they remain relatively unexplored".
You can learn a great deal about the company at www.vannessa.com, where there is a comprehensive amount of information including financial statements, projects in development, and press releases.
According to Fred Peschke, the company's CEO, there are 46 million shares issued and outstanding. About 70% are held by insiders. At its last audited financial statement (March 2001) the company had over $7 million CDN in cash.
The stock closed on the OTC Bulletin Board at $.46 per share on Friday, August 24th near the bottom of its trading range. The 52 week low on the stock is $.40.
Mining Operations
The Company has been in the development stage for the last two years. According to Mr. Peschke, diamond mining operations will begin at the Company's Maple Creek Site in Guyana within two weeks depicted in this map.
In addition, the company plans to expand its diamond mining operations into two other sites in Guyana, and one in Venezuela.
Gold mining sites have been identified and Costa Rica, Venezuela, Brazil, and Guyana. All of the company's planned operations are detailed on the web site found at www.vannessa.com.
While these development projects could start the company down the road to success, the explosive and exciting aspect of this story relates to a property in Venezuela.
The Las Cristinas Site in Venezuela
This site represents the exciting upside potential in the stock. Our member who showed us the idea claims the stock will rapidly surge one or two points if this project comes to fruition. This represents a chance to make 3 to 5 times your money based on today's closing price.
Fred Peschke, Vannessa's president tells us the Venezuelan government has informed the company there are several legal questions in front of their approval, but he believes the legal obstacles can be overcome in the near future.
Calgary based Ron Mannix, the patriarch of Western Canada's billion dollar plus Mannix family, is heavily invested in Vannessa. This is the part of the story that caught our attention. The Mannix family built most of the modern highways in Canada, and is known for having made astute investments in mining companies in the past.
According to Mr. Peschke the Mannix Family now owns nearly 40% of Vannessa. To our knowledge, this is their first foray back into the mining business since selling Manalta Coal LTD in 1997 for a substantial profit.
Here is a reprint of an article which appeared in the August 6, 2001 edition of Canadian Business which tells the story:
Canadian Business - August 6, 2001 - Investing by PETER VERBURG
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Bullion baron
Can Ron Mannix bring his legendary golden touch to a Venezuelan mine? Ron Mannix is back. The Calgary tycoon, who brought his family’s long and prosperous involvement in mining to an abrupt end in 1997 when he sold Manalta Coal Ltd., is once again in the earth-sifting business. But this time he’s after something more lustrous than dirty old coal. A Mannix holding company owns 30% of Vannessa Ventures Ltd. (CDNX: VVV), the Vancouver-based junior mining firm that surprised investors in mid-July when it acquired the rights to develop the rich Las Cristinas gold property in Venezuela. Vannessa, which already owned small diamond and gold deposits in Central and South America, paid just a few hundred dollars for Placer Dome’s 70% stake in Las Cristinas, a deposit believed to contain 11.8 million ounces of gold, worth more than $4.6 billion at today’s prices. Skeptical? You should be.
Las Cristinas has a controversial history. It was for many years at the centre of a legal dispute between Placer and another Canadian junior, Crystallex International Corp. The two companies fought for control of the project all the way to the Venezuelan Supreme Court, with Placer emerging the victor in 1998. Placer began construction on the mine in 1999, investing $116 million. Then the price of gold tumbled, making a large-scale operation uneconomical. When Placer decided to back out, it turned to Vannessa, which had bought into one of Placer’s former holdings, a gold deposit in Costa Rica.
Vannessa is planning to invest $45 million in a small-scale operation at Las Cristinas, mining 100,000 ounces a year from near the surface, to keep costs low. It secured the project for little more than a promise to pay Placer a tiny royalty (less than 3% of gross revenue if gold stays below US$350 an ounce). If gold goes to US$400, and a large-scale operation is once again feasible, the terms change. Placer will take over the mine, reimbursing Vannessa for its investment and paying it a royalty on future production.
The deal looks almost risk-free for Vannessa, but it isn’t. The investment climate in Venezuela has been strained in recent years under Hugo Chavez, the country’s leftist president. Chavez has pursued an isolationist agenda since taking power in a 1998 election, opposing free trade talks with the US and Canada. He has also become embroiled in diplomatic spats with Colombia over his neutrality toward that country’s Marxist rebels.
A recent survey of 100 Venezuelan businesses found that almost half were suspending planned investments in the country, according to a report in The Wall Street Journal. Nearly three-quarters of those polled thought the business environment was bad, and 40% said they feared the Chavez administration may turn Venezuela into another Cuba. An unreliable legal system was cited as the greatest impediment to investment in the country.
The shaky political and legal environment could play into the hands of Crystallex, which has renewed its effort to take control of the mine. Although Crystallex’s legal claim was dismissed by Venezuela’s Supreme Court, its promise to invest upwards of US$400 million to develop Las Cristinas-almost 10 times the amount proposed by Vannessa-could sway the government to act in its favor. Vannessa spokesman Paul Matysek dismisses the recent maneuvering by Crystallex as little more than attention seeking. At the same time, however, he raises the possibility of Vannessa receiving restitution if the government pushes it out of the picture.
Another problem is the feeble price of gold, recently at US$266 an ounce, with no recovery in sight. At that level, many analysts doubt the viability of the Las Crisinas project. Still, Matysek insists that Vannessals plan to mine near the surface will result in production costs of US$150 an ounce or less. If that’s the case and the government doesn’t interfere, the project could turn out to be a brilliant investment for the company, and the Mannix family’s golden touch will be confirmed yet again. But at this stage, given the mine’s controversial history, such an outcome is anything but certain.
Conclusion
After reviewing the facts it was the participation of the Mannix Family in this obscure little company that compelled us to publish this edition. While the amount of money they have invested might be a minuscule portion of their net worth, their participation is significant. You can be certain they have done their homework. There is money to be made following investors with the Midas Touch.
This idea falls into the highly risky category and you could lose all your money, but we know a certain percentage of our readers love situations like this, and are willing to gamble with a small amount of money when something fires up the imagination.
There is a great deal of interest in the potential of the Venezuelan based Las Cristinas property. According to our sources, the go ahead to begin mining the Las Cristinas site could indeed lead to a tremendous surge in the stock. We prefer to share the idea before the event while the stock is still cheap, rather than after the fact when it is higher.
Should you decide to roll the dice on this one, bear in mind the stock is thinly traded. Wait for an entry price near Friday's close if the stock surges Monday morning as the market makers will try to take advantage of you if there is volume by gapping up the stock.
Further coverage by the OTC Journal will be subject to events at the company. We hope you find this idea exciting during the dog days of August.
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