₪ David Pescod's Late Edition April 24, 2006
S&P/TSX VENTURE COMPOSITE INDEX 12351.08 -86.14
COPPER RIDGE EXPLORATION (V-KRX) $0.195 +0.02
WESTERN SILVER (T-WTC) $29.59 -0.51
QUATERRA RESOURCES (V-QTA) $1.74 +0.14
STEALTH VENTURES (T-SLV) $2.07 -0.21
SILVERCREST MINES (V-SVL) $1.39 +0.10
SHERWOOD COPPER (V-SWC) $3.51 -0.16
PANTERRA RESOURCES (V-PAN) $0.37 n/c
It’s Joe Martin’s Cambridge House Resource Investment Conference in Calgary, which is an oil town that has discovered mining, at least by Calgary standards. Last year the show was deserted.
This year (at least on Sunday) the place was packed and greed was in the air! We are here at the conference to pick up on the latest gossip, look for some new potential doubles, get some wisdom from some of the veterans of the business and get some answers for the “One Big Question”.
With those with some grey hair, that have followed the commodity cycles, you know that over the last few decades the mining sector hasn’t been too generous. Two or so good years, are usually followed by a decade or so of famine. So just how far are we into this cycle? How much longer for this good time to continue, because we know—like high-tech and other cycles these things end.
Gerald Carlson is a veteran of the junior mining game and currently is the President of Copper Ridge Exploration (V-KRX). We get him to use the baseball analogy and ask, “What inning do you think we are in, in a nine-inning game?” He suggests, it’s a long way away to go and he thinks that we are already in the third inning.
He also uses those terrible, scary words, “It’s different this time!” You’ve heard that one before, but his reason is the same as ones you’ve heard before—the demand for metals from Asia as billions of people move up the economic scale. They want a cell phone, a car, a home, a fridge and those things all need metal.
Carlson has grey hair and has seen many cycles, but he reiterates “It’s only the third inning!”
We go to some very interesting presentations, one by Dr. Michael Berry, PHD. He is a former academic at the University of Virginia, who got into money management and now writes the Morning Notes, which is must reading!
He is also a safe person to eat with, by that we refer to a previous meal for speakers that Joe Martin hosted in Vancouver a few years ago. At the meal, one market monitor suddenly gagged and choked on his meal. He was sitting just across from us and it was an experience to see just how quickly a person can get into real trouble. Quick as a cat, Berry stands up behind the person and does the Heimlich maneuver and out pops the chunk of food that had created the grief and the world is once again okay! A good guy to eat with!
He is also an interesting fellow for investing. He is presenting here on what he calls “Discovery Investing”, he doesn't care what sector you are in whether it is high-tech—look at Apple when it developed the IPOD, or ABEONIX, how about Boeing when it came up with 737, years ago or now with the 787, or Bio-Medical—ID Bio-Medical he uses as an example– developing new drugs. He says you want to find a company that is on the verge of discovering something major that can add huge value. And yes, he is into resources big time!
He has just come off a huge one with Western Silver (just look at the chart). One should remember, though, that he has been in this story for a long time and mentions that he has been in every Private Placement that they have done.
Patience, he reiterates, is a virtue and it’s also partly a bet on people. He is also a big believer in taking risks—he refers to many resource stocks as penny stocks or penny dreadfuls, but he suggests to retire these days successfully you are going
to have to take some risks as bonds and other investments simply don’t deliver the goods to take care of that retirement for you.
When we do corner him for his three favorite resources stocks, he lists off Stealth Ventures (V-SLV), Quaterra Resources (VQTA), and
. Oh yes, he suggests that we are three years into a 10 to 15 year bull cycle for resources, in other words the third inning.
Which gets us to Robert Swenarchuk. He is with Manex Resource Group and he is also the Senior Vice President Quaterra. He is suggesting that Berry has bought into recommending Quaterra, partly because the management that ran Western Silver before it was bought out is now taking over Quaterra’s leadership of the ranium project. When we ask Swenarchuk, “what inning do you believe we are in?” Swenarchuk, whose hair—or at least the hair that does exist on his head—is silver, suggests we are in the third inning and relates a story to back up his estimate.
He refers to Bob Bishop, who gave us an address at the conference, and Bishop said that he was having lunch with a typical American with several degrees but also including an MBA. Well educated. He asked him, “what he thought the price of gold was”, the MBA answered, “Oh, isn’t it around $400.00?” “It just shows you that there are lots of people who have yet to discover the commodity booms”, Swenarchuk says. Okay we need some stocks that could move! We say to Swenarchuk, “what’s your top pick and it can’t be a stock that you have a conflict of interest in, or are a director of, or whatever and of course we want some performance.” He answers, Stealth Ventures and he even gives us a target….$7.00 to $10.00 in six months! Sounds aggressive to us, but we would take it. That’s way ahead of our ideas! (We hope by now that you have read last week’s interview that we did with Stealth Ventures President Robert Bell.)
Later in the day, we MC’d a panel with two of our favorite market prognosticators Eric Coffin of the Hard Rock Analyst and Jim Letourneau of the Big Picture Speculator.
Eric is looking for a correction in the market over the next couple of months and he also suggests that we may be a little farther into the baseball game than others, as he is suggesting that we are probably in the fourth inning. But, there is lots left, he suggests, and be prepared to buy the dips! Amongst the biggies he favors stocks like Teck-Cominco and Goldcorp and amongst the juniors he likes Sherwood Copper (SWC), Selkirk Minerals (SLK) and SilverCrest Mines (SVL).
Jim Letourneau is worried about metals peaking and is looking more at natural gas, which is bottoming, and suggests that he would rather be buying something that is bottoming ready to head up! He talks of PanTerra Resources (PAN), Richards Oil & Gas (RIX), the potential for Falcon Oil & Gas (FO), as well as Stealth Ventures (SLV).
We ask these two prognosticators to focus and if they could pick only one stock, what would it be? Coffin picks SilverCrest Mines (SVL) and Letourneau picks Stealth Ventures (SLV).
There’s that name again! A few days ago we were worried, considering the risks involved with Stealth, that we owned too much. Today maybe worry that we own too little! They believe they have about 1.5 trillion cubic feet of gas in their coalbed methane play in Nova Scotia, the question is how much can they recover?
And, drilling starts shortly to answer that question. Estimates run anywhere from 10% to 50% of that gas could be recovered, 10% would be a major disappointment and 50% would be phenomenal success, but I suspect most people should be keying on a number between those but preferably higher to the 50%.
To be continued…………...
Disclosure: Goldcorp: 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.)
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