₪ David Pescod's Late Edition April 6, 2006
PERU COPPER (T-PCR) $3.08 +0.52
BEAR CREEK MINING (V-BCM) $5.34 + 0.28
ESPERANZA SILVER (V-EPZ) $2.02 +0.18
CRYSTALLEX INTL. (T-KRY) $6.59 +1.45
This is probably becoming a trader’s delight, but an investor’s
nightmare and we are talking about the Peruvian elections being
held this Sunday and the effect it may or may not have in the mining
industry.
With each new poll being out, it’s affecting stock markets and in
particular, mining companies that are involved in Peru and one has
to remember that Peru has a fairly developed mining business, but
much greater potential. Two of the more talked about companies
are Catherine McLeod Seltzer’s Bear Creek Mining and Peru Copper
that also has the legendary mine finder David Lowell behind it.
The concern is about who gets elected as President. The conservative
candidate Lourdes Flores represents a free-market economy
and rival Ollanta Humala represents very much the unknown.
With the politics of a Hugo Chavez sweeping South America, concerns
are that if he gets in, there could be change and it could be
quite negative.
Remember, his brother is serving time in jail for having fomented
a small Revolution that saw people killed. Wouldn’t you
like that guy out of jail and running the security forces of the country?
Today, there is a new poll out according to Reuters that shows
conservative candidate Flores has 27.6% support compared to
24.9% for Humala. Former President Alan Garcia has 24.9%. One
needs a 50% lead to be elected, so one assumes there will be run
off in about a months time, which means traders are going have
many more polls to look forward to and investors—many more
results to worry about.
Last night, the madman himself, Cramer of NBC TV and Mad
Money fame, does a huge spiel on Crystallex. Crystallex has a huge
concession that’s been known about for decades that never seems
to get developed for a variety of reasons, not the least of which is
that it’s in Venezuela! With Hugo Chavez changing the rules
weekly if not daily, one wonders whether it will ever be developed.
Which of course, gets us to the madman Kramer, who seems to
be in love with it. Has he totally forgotten the politics of Venezuela
as he assumes that Chavez will sooner or later come around to
basic economic sense? Is Kramer oblivious to this political storm
that may be sweeping South America?
We don’t think he understands what’s going on in South America
and contemplate shorting Crystallex.
BRAZMIN CORP. (T-BZM) $2.70 +0.20
PACIFICA RESOURCES (V- PAX) $1.36 +-0.24
FIRESTONE VENTURES (V-FV) $0.69 +0.06
WESTERN KELTIC MINES (V-WKM) $0.69 +0.04
EAGLE PLAINS RES. (V-EPL) $1.62 +0.12
As we worry about the current state of euphoria in the
junior mining sector yet again, Canaccord analyst Graeme
Currie does his usual good job of hand-holding. Metals
prices continue up he points out, volumes on the markets
continue to go up and stock prices continue to move as
well, he points out. What’s to worry? Well, I guess that’s
our role. We ask him again, if he could only buy one
stock, what would it be? BrazMin is the answer.
Meanwhile, to show you the changing status of the
world, all of a sudden people at cocktail parties instead of
talking about sex or internet stocks, suddenly they seem
converse in things such as zinc prices and Peruvian politics.
It was just a few weeks ago that when we were asking
Wendell Zerb for a stock we should own, he mentioned
that Western Keltic was dirt cheap, but he also pointed out
that Firestone Ventures, the Edmonton-based story run by
Lori Walton was in the middle of a very intriguing play.
Just a few days ago while we were in Mexico they came
up with some drilling results that were frankly out of this
world. Not were they only fantastically rich, but it was
from surface which would make for great mining.
We should point out though, that this was on a very
narrow chunk of drilling, but now it gets interesting to see
if they can duplicate this drilling as it goes along grid.
When we talked to Lori, she points out that this project is
only a few miles away from the Pan-American highway
and other facilities and that with the current warrants they
have in the market, it should raise $2.3 million for the company
which will fund them for the next while.
An interesting tidbit here...when Lori was a teaching
assistant at the U of A, who was one of her students?.....
Oh yes, Canaccord mining analyst, Wendell
Zerb!
With her flaming red hair Lori is one that stands out at
conventions like the most recent PDAC where we last saw
her, but she says “no” - she’s never had a nickname...
much to serious for that kind of stuff.
Meanwhile if you follow zinc, another obvious company to
have followed has been Pacifica Resources for their enormous
project in the NWT. It also (like Western Keltic’s Kutcho Creek
project) has been known about for decades and every time
commodity prices have a run, it once again attracts market attention.
Today, Pacifica gives a corporate update, and the market
is appreciative.
Pacifica recently closed a $20 million financing and announces
today approval of a budget of at least $8 million for the
Selwyn project in the Howard’s Pass district of the Yukon. They
are spending lots of money and a second 40-person camp is
being established for operations this spring and summer.
They plan 25,000 meters of diamond drilling, but then this
project as we’ve mentioned, has been looked at many times
before. Although the project is not 43-101 compliant, indicated
mineral resources from previous drilling suggests a deposit
with 33 million tons grading 5.5% zinc and 2% lead and the inferred
mineral resources total a whopping 112 million tons
grading 5.4% zinc plus lead.
For those looking for a zinc play, they should be looking at
the updates announced by the company in today’s reports.
We had to corner someone today to make a stock pick, so
why not Don McInnes. McInnes is currently the hyper active
leader of a group of companies—Blackstone Resources, Western
Keltic (which has pulled off a real coup, hiring John McConnell
as their President—which could be a key move in getting
Kutcho Creek moved into development stage) and Plutonic
Power. McInnes today suggests that the markets are attracting
lots of new money into the market (that’s an obvious) and he
suggests that it’s not just him and us as players in the market
anymore.
He suggests “this move in commodity prices looks very real
to him and suggests it’s going to last for several years”. If he’s
right, we suspect Pacifica, Western Keltic and Firesteel will
have higher prices down the road.
As far as making an independent stock pick that will make us
an honest buck, using the usual rules—you can’t pick your own
stock or one he is involved in (although he is an investor) he
comes up with Eagle Plains. He suggests that the stock is going
to be divided up between its different assets here shortly and
figures the different assets are probably worth more divided
than a single one. He wouldn’t be surprised to see majors take
out one of those smaller assets.
Disclosures: Bear Creek Mining and BrazMin Corp: 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 BrazMin Corp.
Canaccord has recently participated in a financing for Pacifica Res.
If you would like to receive the Late Edition, just e-mail Debbie at debbie_lewis@canaccord.com |
