₪ David Pescod's Late Edition April 5, 2006
EUROZINC MINING (T-EZM) $2.35 +0.22
BREAKWATER RES. (T-BWR) $1.55 +0.16
WESTERN KELTIC MINES (V-WKM) $0.65 +0.09
AURELIAN RES. (V-ARU) $3.03 +2.14
SELKIRK METALS (V-SLK) $0.81 -0.04
Another day on commodity markets and it looks like even
Wall Street and all the Hedge Funds with the big bucks are chasing
commodity prices as many hit or flirt with new highs.
Again, for prices like zinc, silver, lead and uranium—two
years ago no one would have thought current prices any where
possible or believable. But that’s the kind of environment we are
in and the question is, is it getting out of hand? One beneficiary
of all this is that all the mining companies have raised huge
chunks of change, and now they are all out exploring.
Only a handful out of them will come up with something significant
and today Aurelian Resources comes up with almost 1000
feet of 4.14 g/t. The question of course becomes, is this a one
hole wonder or what? With the huge volume in Aurelian today,
it shows you that many people are playing the game of the day.
Just like they used to play internet stocks…
Are things getting too carried away? We repeat the comment
by the Coffin Brothers in their latest Hard Rock Analyst,
thoughts that they might have that one might well heed.
“It’s hard to imagine anyone looking at metals markets as they
entered this quarter and seeing anything but an overheated situation.
When base metals see 4-5% increases in one day. Overheated doesn’t
mean over however, though we have placed a few companies on hold
and will continue that process in the coming weeks and suggest profit
taking as gains continue. When markets reach this stage its important
to find relative value and not just absolute value. Stocks that are usually
“cheap” are getting very scarce, but there are still a few around.
We’ll keep looking for them and bringing them to your attention. One
such stock is Selkirk Metals, which is not yet widely known but capable
of generating the kind of numbers that will get attention later.
Based on trading volumes in both the metals and the exploration markets
its pretty clear someone has got religion when it comes to commodities.
That’s likely to continue though we would not and should
not expect prices to move up like this every month. A breather would
be healthy for all concerned. That may not come until the summer
doldrums—if we get summer doldrums this year. Enjoy the ride but
watch for results. Companies still need to justify these valuations with
good results from the field”.
IVANHOE MINES (T-IVN) $10.82 n/c
We’ve mentioned over some of the last couple of issues that
the concern about “country risk” and in particular, the potential
results of what could happen in Peru with the election being held
within just a few days. The concern of course is Hugo Chavez and
his influence in South America, but it’s not just there. Today, according
to CBC News and the American Press, 3000 protesters
clashed with police demanding that Mongolian President Nambaryn
Enkhbayar resign over a contract they have with Ivanhoe
Mines. The protesters want Enkhbayar’s government to push for
more favorable terms from the massive Oyu Tolgoi copper deposit.
Meanwhile, according to Reuters, Inco has suggested that they
just suffered $10 million in damage because of vandalism. They’ve
halted construction of their massive Goro Project in New Caledonia.
Ten trucks excavated and building materials were damaged
during the attack, but once again it’s a sign of the times. With mineral
prices so lofty, lots of governments were previously just glad
to have the jobs, now want a huge chunk of the action. All of a
sudden, safety of your investment is going to take an interest.
OILEXCO INC. (T-OIL) $4.75 +0.10
For those of us that were a little disappointed that we didn’t
see an increase or like some of us had hoped for—a significant
increase in Oilexco’s reserve numbers in their year end
update, Kerry Sully does a little hand holding for us. Sully,
the ex-Ranchmen’s boss with all that experience in heavy
oil, is the guy who picked Corridor Resources out for us
back at $0.65 and $0.70 and I don’t think there is a better
hand holder out there. The way he looks at Oilexco right
now is a little different than most of us, who just look at the
big cash flow coming down the road and think that’s got to
attract a different kind of investor, and preferably one that
will pay a higher price for the stock. To Sully, one of the
key ingredients still for Oilexco is “the huge portfolio of
plays they have - the likes of which most oil and gas companies
would be envious of”. Some of us are actually a
little worried about that after two high profile misses in a
row, but you have to look at some of the research reports
by Kozak and the like and you are quickly reminded that
yes, they do have a lot of projects that will get the look/see
this year. Please hurry up and find something though!
Disclosures: Oilexco Inc & Eurozinc Mining: Canaccord Capital covers these stocks and has a Buy rating on them. (Buy: The stock is expected to generate risk-adjusted returns of over 10% during the next 12 months.) Canaccord has recently led a financing for Oilexco.
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