₪ David Pescod's Late Edition March 21, 2006
PERU COPPER (T-PCR) $3.37 -0.26
NOVA URANIUM (V-NUC) $3.76 +0.10
APOGEE MINERALS (V-APE) $1.04 -0.02
On Sunday new election poles were released regarding the
Peruvian election and it looks like Ultra-Nationalist, Ollanta
Humala is now tied with Free-Marketer, Lourdes Flores causing
even more stress in the Peruvian stock and bond markets.
This has caused Merrill Lynch & Co. to downgrade their
bonds as well as it is causing a little stress for those of us
who own some of the great mining stories in that country.
After having spent some time with billionaire Harry Dobson,
who warns people about “country-risk” and having seen
what Chavez did to shareholders owning stocks like PetroFalcon
(PFC), we are suddenly really adverse to “country-risk”
and took profits (and they were big ones on Bear Creek Mining
(BCM) and a few other stories recently) as we are concerned
about the election in Peru on April 6th.
Not worried at all though and giving the other side of the
story is Jim Dartnell, who is a mining analsyt at Wolverton
Securities. He points to what happened in Bolivia where the
Nationalists/Native Leader did get elected and caused grief for
a certain time, but now that he is in things seem to be back to
normal.
Dartnell points to Apogee Minerals (APE-V), which did lose a
couple of nickels in its stock price, but now it is hitting new
highs as if nothing has happened.
Dartnell who has spent some time in Peru points out that
“the mining sector represents almost 60% to 65% of the GDP
(Gross Domestic Product) in Peru and to muck around with
the way things are going would be just in essence like shooting
themselves in the foot”, he maintains. He also reminds us
that Peru is a little different then what Canadians are used to.
It wasn’t long ago, he says, that there were Guerillas roaming
the country side.
If you take the worst case scenario and the country does
demand somehow a chunk of the mining companies that are
there that would definitely not be good. But, he does suggest
taking a look at Peru Copper. This company that he thinks has
roughly 22 billion pounds of copper in the ground and when
you add the molybdenum credit it moves up to 27 billion
pounds of copper equivalent and he also suggests that after
the recent sell off for concerns of warrants plus the election,
this just becomes too good of a deal.
Even with country risk! When we ask him if he could
only buy one stock today, he is obviously braver then we
are and comes up with Peru Copper, the Catherine McLeod-
Seltzer and David Lowell company, as his top pick.
As a second pick he notes Nova Uranium (NUC) has just
started drilling and he says, “I’m sitting on the edge of my
seat over this story waiting for assays...mind you, those
first assays on three to five holes, to duplicate drilling of
decades ago are probably three weeks away…”.
As far as the mining market in general Dartnell suggests
that sooner or later we have to take a breather and maybe
that’s what we’re going through right now. That doesn’t
mean he is a big seller of many things, but instead of becoming
a “buyer”, he is more of an “accumulator”.
TIM HORTONS INC.
It’s probably going to be one of the hottest stock
issues ever done in Canadian history. There’s not too
many in the retail crowd going to get a sniff of any paper.
Heck, even the institutions have to fight like dogs
to get tiny allotments, but independent research firm
Veritas has taken a good look at “Timmy’s” and has
come up with a report called - “Roll Up The Rim...Buy
this before your double double and enjoy them both”.
In the 23-page report, they suggest that as far as
intrinsic value quotes, “Based on current operations
and modest growth assumptions, Tim Hortons appears
to be undervalued at the suggested offering price of
$21—$23. (Today, it’s raised to a higher level). We
see current operations worth $29 and modest future
growth in restaurants worth another $9 per share, for a
total of just under $38”.
They also give a good history of Tim Hortons which
was founded by the legendary Toronto Maple Leaf
(back in the days when they actually had a hockey
team there) defenseman Tim Horton as a way of supplementing
his hockey income and giving him something
to do in his post hockey career.
Starting in Hamilton, the company has grown to
over 2900 restaurants in Canada and the US….and I
swear we visited many of them and stood in lines in
virtually all of them.
Veritas gives a lot of credit to the management skills
of Ron Joyce who took over the original store in 1965
and quickly became a partner.
Either way, Wendy’s, which is selling off their chunk
of stock, looks like they are going to do quite well with
this. A great report and history on Tim Hortons by the
folks at Veritas.
THEY SAY THAT A PICTURE IS WORTH A THOUSAND
WORDS...WE’LL THAT’S ABOUT 20,000 OR 50,000
WORDS THAT YOU HAVE TO SEE TO BELIEVE!
If you ever wondered where all that oil money is going,
you should see what’s happening in the State of
Dubai, where obviously a lot of oil companies are finding
a new home. You would think this is Beijing the
way buildings are being built and everything from the
world’s tallest tower to Islands being made shaped
like palm trees. To take a look/see at this incredible
engineering and building bonanza, e-mail Sandra at
sandra_wicks@canaccord.com.
P.S. While China currently has the biggest gain in
consumption of oil, it’s the Mid-East region currently
experiencing the second largest gains.
ZINC:
After quite a run in so many commodity prices over the last
year or two, some prices seem to be topping out, but there’s
still a few with lots of oomph. Today zinc hits a new record
high on London as stockpiles continue to disappear. According
to Bloomberg’s report, ongoing demand from China again,
seems to be the story as they are now the largest consumer
for the steel galvanizing metal. Stockpiles for zinc have
dropped 48% in the past year and China, which only became a
net importer of zinc for the first time in 2005 is reported, by
Bloomberg’s to have imported 620,000 tons last year or 6% of
world demand. Meanwhile, with the approval of ETF’s for silver
in the United States, silver also hits a new 22-year high
today. For some juniors to take a peak at—might include Impact
Silver (IPT) for those looking at a cheap way to play silver
based on their Zacualpan play in Mexico and for zinc/copper/
silver, we’ve mentioned Western Keltic (WKM) before and still
think it’s a cheap way to play the metals group.
Disclosure: Peru Copper : Canaccord Capital covers this stock and has a Hold rating on it. (Hold: The stock is expected to generate riskadjusted
returns of 0-10% during the next 12 months.) Bear Creek Mining : Canaccord Capital covers this stock and has a Speculative Buy rating
on it. (Speculative buy: Stocks bear significantly higher risk that typically cannot be valued by normal fundamental criteria. Investments in the
stock may result in material loss.)
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