₪ David Pescod's Late Edition April 4, 2006
CANDAX ENERGY (T-CAX) $1.19 +0.10
There’s little doubt that this is probably the play of the day, at least
for the next couple of days. Candax Energy should have results out
very shortly on the Chaal well and it’s very important for the company’s
future, at least in the short term. As analyst Fred Kozak of
Haywood Securities writes in a very recent report on April 3rd;
“Chaal well determines value of the Company. The exploration well
in the Chaal permit was spudded on February 5, 2006. A successful
well could have as much as 844 bcf of associated reserves. However,
the prospect could also contain non-economic quantities of
gas”. While Kozak sticks in a target figure of $1.25, he also writes,
“However, owing to the timing of the Chaal results, we leave our target
price unchanged. An unsuccessful well at Chaal would see a
$0.50 per share reduction in valuation and target price.
For those of us who were in early and cheap with lots of belief in
management and their play, what to do here in obvious. We take
some easy money off the table and wish our buyers some luck.
Meanwhile, there are two interesting commentaries on the company,
the one by Fred Kozak of Haywood, and also just released today, a
very interesting and more in depth comment by Canaccord’s Terry
Peters, who gives it a target of $1.33. For copies of either, just e-mail
Sandra at sandra_wicks@canaccord.com.
WESTERN KELTIC MINES (V-WKM) $0.56 +0.02
With record high commodity prices, the mining business these
days is a great place to be, except for the shortages. There are
shortages of rubber tires for the big equipment, there are shortages
of equipment in general, but most importantly, there are
shortages of skilled labor particularly experienced mine management
teams. Today Western Keltic Mines pulls off a bit of a coup as
John McConnell is named President and Chief Executive Officer
of Western Keltic. Back on March 3rd, we featured veteran mining
man John Greig, who suggested at the time that Western Keltic at
$0.385 was worth somewhere between $1.00 and $1.25. Greig
suggests that McConnell is a very capable engineer that was
working for Winspear on the Snap Lake project and when De
Beers took it over, John was entrusted with the continuation of
the project which Greig says is quite a form of approval.
(McConnell has also worked with Breakwater and Nanisivik) Greig
adds that he’s probably the perfect guy to hire, knowing the current
stage in Keltic’s history where an engineer is needed for both
the development of the project and for someone who has a bit of
the market sense. Greig figures he the right guy to steer this forward.
Greig reiterates that Western Keltic is worth every bit of
$1.00 a share, given Kutcho’s Creek well-known history.
BEAR CREEK MINING (V-BCM) $5.30 -0.50
PERU COPPER (T-PCR) $2.64 -0.12
We’ve mentioned it a couple of times in the last few
weeks and that’s “how worried should one be about the
oncoming election in Peru?” Peru has a significant mining
industry that is very important to the economy and in their
general elections to be held in the next few days, you have
the free-market forces being opposed by an ultranationalist
who reminds one very much of Hugo Chavez in
Venezuela.
If Ollanta Humala gets elected, one assumes it may not
be good for the mining sector and all of a sudden it’s looking
more and more like he’s the guy that is going to win the
election. (A run-off election will be held in May between
the top two candidates if no one gets a majority)
It’s been painful, but we’ve mentioned this because Bear
Creek Mining has been one of our favorite stories and Catherine
McLeod-Seltzer, one of the most successful mining
executives we can find, is the personality that is behind
both Bear Creek Mining and Peru Copper. Our belief is that
these are two of the more significant mining operations
one could see being developed anywhere in the world, but
if some one new comes in and changes the way business
is done in Peru, one assumes that will not be good.
Suddenly the market is paying attention to country-risk.
We had mentioned that we were taking some profits, although
it felt like selling ones children at the time because
we were worried that if the wrong results come out, these
stocks could get smashed. The charts tell you now that
people are definitely getting worried.
While we had debated about taking our profits a while
ago, if you read the latest edition of “The Economist”
Magazine and their take on the Peru election, suddenly one
doesn’t feel as bad about having taken those profits.
Disclosures: Bear Creek Mining & Candax Energy: Canaccord Capital covers these stocks and has a Speculative Buy rating on them.
(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.)
Peru Copper: Canaccord Capital covers this stock and has a Hold rating on it. (Hold: The stock is expected to generate risk-adjusted returns of 0-10% during the next 12 months.)
Canaccord has recently led a financing for Candax Energy.
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