₪ David Pescod's Late Edition May 31, 2006
NOVA URANIUM (V-NUC) $1.85 -0.01
PACIFICA RESOURCES (V-PAX) $0.82 +0.02
We had figured that a correction was coming, but when they
do they are always unpleasant and the degree of the correction
is sometimes stomach turning, especially when you own the
stocks concerned...
Nova Uranium and Pacifica Resources have both participated in
the recent correction in the mining exploration sector in a big
way—both dropping more than 50% in the last few weeks from
their high for the year. Pacifica has a potentially enormous
deposit drilled up significantly during past bull markets, although
not currently compliant under new mining regulations.
It does suffer, though, from the same concerns about northern
locations and short seasons. The company has just announced
the start of an aggressive eight drill 25,000 meter drilling
program that should attract attention, or in this new market
will people pay attention?
At the recent Metal Bulletin’s Zinc Conference, Anders Haker
of Lundin Mining (LUN) pointed out that zinc demand in India
should rise from 0.5 kilograms per person, closer to the demands
of south Korea, which is 8.8 kilograms per person or the
United States, which is 3.5. Haker suspects that because of the
demand in places like India and China, world demand could hit
14.5 million tons yearly versus it’s current 10.5 million today
and where will they find that extra zinc….? To us, a big relatively
safe play in Canada might bear watching.
Nova Uranium, hurting from the market correction is also ailing
from drilling on the Nova B zone on its Mont Laurier project
in Quebec. For some reason the company decided to drill their
Nova B target before Nova A, which is the area that had been
drilled 30 years ago and that had come up with some fairly interesting
results, but once again not compliant with today’s
market regulations. Nova B yielded very little of the good stuff
and now, in a much less pleasant market, Nova A must come
up with something for the company to regain credibility. It’s
been that ugly!
Eric Coffin of the Hard Rock Analyst who has been on this
story since it was under $0.90, says that there is probably nothing
new with the company at this point, although they hope to
feature it in the Hard Rock Analyst this coming Friday.
Results should be coming out shortly on the Nova A zone,
and the question again is will they be good enough? And, if
they do will the market be there to pay attention to it?
CAPITOL ENERGY RES. (V-CPX) $4.99 -0.01
The chart to the right might tell you that very little is happening
with Capitol Energy – after all the chart looks almost as flat as a pancake
for much of the last year.
Not quite right! Not too long ago, they made one of the biggestsweet
old oil discoveries in the last 20 years in Alberta at Dixonville.
It’s helped them increase their production fairly dramatically
to roughly 2,500 barrels a day, but the engine driving the production
at Dixonville is not what it should be and hence they are looking
at something that might remedy that problem—a waterflood.
That is something that is usually only a big company looks at,
with its demand for plenty of capital and lots of expertise, plus
time. They are trying some small scale work on the waterflood for
much of the second half of this year, and if it works expect a much
bigger project next year.
For punters, this is a play to start watching, because if this waterflood
works the next 12 to 18 months could see multiples of the
current stock level. If it works, if not…..well??
For a great look-see at this company and what waterfloods are
about, Jim Welykochy of Genuity Capital has done a great report
and for copies email Sandra at sandra_wicks@canacord.com.
Disclosure: Canaccord has recently participated in a financing for Pacifica Resources.
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