₪ David Pescod's Late Edition June 22, 2006
NOVA URANIUM (V-NUC) $1.23 -0.08
PERU COPPER (T-PCR) $6.09 +0.01
BLUE PEARL (T-BLE) $1.97 -0.05
The Coffin Brothers behind the Hard Rock Analyst started following Nova
Uranium under $1.00, so even with this market correction they are still looking
okay on this story. However, we started following it at much higher levels
and given the current market correction in the junior mining sector, it’s causing
us troubles.
With drilling results announced two days ago on Nova, the stock has skidded
to say the least. When we touch base with three of the folks that follow
this story, the reactions are all a little different and all interesting.
Jim Dartnell of Wolverton Securities might be a little enthusiastic, but his
response is that most of it has to do with the difference in market conditions
now versus a few months ago. He asserts that given the drilling announcements
the other day, if that had been put out two or three months ago, they
would have had to have halted the stock and on the opening it would have
gapped up. Today, he would rate it a buy for a trading opportunity.
“But it is a different market today,” he suggests and “We are going to
have to see gold consolidate at the $560 level and the junior mining sector as
a whole take two or three months of base-building before things probably get
going in the fall.” He has had his own troubles with Peru Copper, his favorite
story when it faced adversity with the elections in Peru. Now he is enjoying
the ride a lot better. Blue Pearl is another one of his favorite stories.
The Coffin Brothers in their Hard Rock Analyst today write on Nova and
suggest “Though not indicating the broad bulk tonnage style of mineralization
that had been hoped for, they did indicate that the target does have
some decent sections of good grade...This is a good result, at depths shallow
enough to consider open pit mining if there is any continuity to the zone.”
They add that, “Yesterday’s selling that pulled the stock down 25 cents was
an appropriate, disappointed reaction to the lack of an immediate bulk tonnage
potential in the results. Today’s dilution of stock was an over reaction”
they write. They also suggest, “Today’s closing valuation of $20 million is
less than a large number of companies with nothing other than a vague uranium
concept on the books. Given the company’s strong share structure, we
think the stock is oversold and is likely to bounce back from this level, once
the disappointment is done with.”
Another analyst following this story (although he hasn’t published on it
yet so we can’t use his name) suggests that geological setting for Nova’s
project suggests there will be problems with continuity. On the other hand
he suggests, “if they even have a fraction of the 70 million pounds of uranium
they hope to have, given that they own 100% of the project, and it’s in
an immediately accessible area where exploitation of the resource could be
quick and relatively easy, at this market cap it’s a story one has to start
watching.” We have to remind ourselves that this is still an exploration project,
despite the fact that some of us had bet drilling results of 30 years ago
should have made this appear much easier than it has become.
OILEXCO INC. (T-OIL) $5.92 +0.85
Who would have thought a while ago in the high flying junior
mining sector that one of our better performing stocks
would be Oilexco of all things! But with the spanking the mining
stocks have had, suddenly the more sedate world of oil
exploration looks almost safe in comparison.
Today Oilexco announces some production testing and
their 15/25b-D1 flowed oil at a maximum rate of 6,301 barrels a
day. Hole 15/25b-D2 well flowed at 9,700 barrels a day and well
15/25b-D3 flowed at 10,400 barrels a day.
Needless to say, those are pretty decent numbers and already
some folks are envisioning a company that could be doing
almost $3.00 a share cash flow early next year if these numbers
hold up.
We do have to remember those production numbers could
peter out rather rapidly as production tails off rather quickly in
this area, but if they have any success on any of their other
exploration plays, suddenly that problem would be taken care
of as well. We are told to watch closely, developments on their
Disraeli prospects and we suggest that when they start drilling
their Laurel prospect, Oilexco is going to have a big following
as people discover the potential size.
COASTPORT CAPITAL (V-CPP) $1.35 -0.10
If one was unaware of the suddenly changed atmosphere
over the junior mining exploration game, I guess one of
the best examples today might be Coastport Capital. Drilling
on their La Plata poly-metallic massive sulphide project
they have come up with yet more drilling results today
and how about hole LP-06-02. It intersected 6.7m of
massive sulphides and the grades averaged 11.1 g/t gold,
77.9 g/t silver, 1% copper and 3% lead. And are you sitting
down……..23% zinc! Unbelievable! That’s as close
as you get to a 10 out of a 10 in the old days of rating
drilling holes, up until Aurelian Resources came along and
changed the scale. If one was looking for a rationale for
why this stock actually sold off on that news you would
have to stretch, but I guess you could suggest that the
tonnage implications for Coastport aren’t that large just
yet, but oh the grade ...
Disclosure:
Peru Copper: Canaccord Capital covers this stock and has a Hold rating on it.
(Hold: The stock is expected to generate riskadjusted returns of 0-10% during the next 12 months.)
Oilexco Inc: Canaccord Capital covers this stock and has a Buy rating on it.
(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 Inc.
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