₪ David Pescod's Late Edition April 19, 2006
CASSIDY GOLD (V-CDY) $1.00 +0.05
FRONTIER PACIFIC MINING (V-FRP) $0.80 n/c
We kid Jim Gillis, the President of Cassidy Gold, from time to time just
how the heck does he maintain control of Cassidy’s exploration in faroff
Guinea, Africa when he and the company is headquartered in Kamloops,
B.C.? He suggests that Kamloops is a great place to be headquartered
because just up the road you have Highland Valley, one of
B.C.’s biggest mining operations and in Kamloops itself, you have several
mining companies that maintain offices from Placer Dome to others.
It means that there’s a lot of geological types in town for ideas,
consulting and conferring, plus it’s a fraction of the cost that you
would pay to maintain similar staff and people in Vancouver.
Plus, he maintains, that if you ever have to go to Vancouver, Toronto
or wherever, you are just a few hours down the road or a quick
plane ride away.
Either way, Cassidy is suddenly attracting big attention with some
of its latest drilling results on their Kouroussa project in Guinea, which
included some results of 17 grams of gold over 14 meters and 16
grams over 28 meters. Those are some pretty whiz-bang numbers and
obviously it has the markets attention.
Cassidy is not quite a cheap as it used to be anymore because with
recent financings, they are now up to 68 million shares outstanding
fully diluted, and Gillis confirms that they are still only using resources
and that’s resources (not reserves) of 433 thousand ounces that they
used back in June of 2005.
They hope to have an updated resources statement sometime in
June and obviously, he suggests the market has expectations that they
will be able to move that number to over a million ounces sometime
soon.
As to the Kouroussa property in Guinea, he suggests that every
time they drill, they seem to be coming up with more interesting results
and so far, they’ve explored almost 50 square kilometers on that property.
Sooner or later though, he suggests they are going to have to
focus and be able to get that resource number moved into reserves, so
the market will give it its due respect.
The property so far is prolific and currently there are three drills at
work, although he suggests that finding drills is difficult these days.
“Goldfields is almost begging for access to some of them for their
nearby properties”, he suggests.
The pressure is on though to get things done as they are not too far
away from the rainy season, which goes from June until September
and not a lot can get done that time of year. The only thing that gets
growing then is the grass, which grows tall (11 feet high) and thick and
is suddenly hard to move through, around, over or whatever.
He also suggests they’ve got a lot more targets to be looking at on
their huge, scattered property and still some of the most obvious targets
are the old Artesianal workings that were done over the years by
natives and he suggests “almost anytime you drill under those workings,
you find something of significance”.
The volume on Cassidy’s stock tells you that suddenly the big
boys are taking an interest in it. He points out that Dundee now owns
almost 20% of the story and Sprott Securities has also taken an interest
as well, so some of the funds obviously think they will be able to
move bigger numbers into the reserve category down the road. Either
that, or be disappointed.
Meanwhile, one worries about them going quiet when they do get
into the rainy season.
When we ask Gillis to make his bet on commodity prices, he asks,
“aren’t we due for a correction around here?” When pressed, he figures
that gold could see $700 by Christmas, but he wouldn’t be surprised
to see a big correction before we get to that number. Mind
you, he chuckles when he gives that price prediction because he simply
says, “I’ve been so wrong, so often” and finds so many commodity
prices that we currently have as lofty.
When asked to pick a stock for us and remind him that we would
expect a double from him, he goes with Frontier Pacific Mining, currently
drilling their uranium property and should have results out
sometime soon. He’s a big fan of their geologist leader, Peter Tegart
who he has lots of faith in.
OILEXCO INC. (V-OIL) $4.64 +0.05
STERLING RESOURCES (V-SLG) $2.01 +0.03
We’ll call him “George” and we figure he is as good a source as
we could find on what’s going on with Oilexco/Sterling and drilling
on their Disraeli project. George gives credit for the recent pop
in Sterling’s stock to Josef Schachter who mentioned it on ROBTV
and also is helping the company get their public relations
word out. Having said that, he suggests Doug Casey and his
newsletter, suggesting those that were in early and cheap, take
a little profit gets the blame for the recent correction. As far as
the project itself, he suggests it spudded last weekend and expects
32 days for it to drill to the 9000 feet level. It’s also going
to be an expensive well, a little more expensive than people
think and he wouldn’t be surprised to see it hit almost $20 million
Canadian. The target is the Tay Sands on the shallow target,
which could have 10 to 30 million barrels recoverable and
the deep Jurassic target could have 30 to 150 million barrels
recoverable, with the shallower play having the better odds of
success. Success is what Oilexco needs after three high profile
misses in a row. Considering the number of plays they’ve been
able to look at because of their smart move in tying up a very
rare commodity—the rigs that can drill in the North Sea for a
long, long time, they’ve has access to a lot of data. But when
you pick three plays in a row and they come up dry, that hurts a
guy’s reputation a bit. If they come up with a fourth miss…..Of
interest is that the well is proceeding under tight-hole status, so
obviously for whatever reasons, they don’t want too much
speculation about work as it goes forward, but because Oilexco
is paying so much of the costs on the Sterling-ventured play,
another dry hole here could be costly and hurt Oilexco’s reputation
as well, despite the fact they are getting ever closer to finally
having some cash flow from their big Brenda play.
COPPER $2.9884
ZINC $1.4473
Yesterday, Canaccord mining analyst Wendell Zerb moved
EuroZinc from a buy to a hold, but the stock has done so well
that anyone along for the EuroZinc ride, has faired quite well.
The EuroZinc becoming a hold is not the story though. It’s
revising near and long term expectations for metal prices that is
the real story. Canaccord has decided to change some of their
expectations for metal prices and they are doing so in a market
that no analyst has ever seen before. We are definitely in a new
world for commodity prices and what to expect next, could be
just about anything!
Either way, Canaccord is now expecting their copper to average
$2.38 a pound in 2006 (which is up from $1.94) and expecting
copper to be $2.00 a pound for 2007, up from $1.56. The long
term outlook for copper though remains at $1.05 a pound.
For zinc, the new prognostication is forecast for $1.16 a
pound for 2006, up from $0.88 a pound, and $1.11 a pound for
2007, up from $0.78 a pound. But the long term outlook for zinc
remains at $0.52 a pound.
To get at expectations for cash flow earnings and the likes for
most mining companies, you’ve got to use some metal prices to
base your judgments on and its better to be conservative than
overly aggressive. But still, I’m glad we don’t have to figure
where metal prices are going to be a year or two down the
road—it’s going to be a tough job.
Meanwhile, around this sector, we do some charts where copper
and zinc are now...a lot higher than those numbers. |
