₪ David Pescod's Late Edition October 3, 2006
KIRKLAND LAKE GOLD (T-KGI) $8.07 +0.34
I don’t know about your screen, but ours was about 95% “red” today as the junior mining and oil and gas sectors took it on the chin big-time - with oil leading the way down over $2.00 and gold did what it’s been doing lately - following the price of oil. Gold today got clobbered losing 20.00. In the sea of red, there was one story, though, that stood out – Kirkland Lake, which did show a little bit of green as the stock moved up $0.34. They have been coming up with some incredibly rich drilling results of late and today showed more of same. It obviously hit a sweet spot on the 5300 foot level cross cut and today they announced significant mineralization, including 9.6 ounces per ton over 10.7 feet. According to Kirkland’s Chief Exploration Geologist Stuart Carmichael in today’s news release, “We believe the 9.60 ounce intersection correlates with the 1.11 ounce intersection in hole 50-740 giving potential dimensions of 575 feet of strike length and 280 feet in dip in this new mineralized system.” Kirkland Lake is the amalgamation of several former producers’ right beside each other in the Kirkland Lake camp and had been one of the countries and world’s biggest producers. Obviously they are finding more stuff and the grade is good. I guess the only problem is that it is at a depth – 5300 feet is getting down there.
CONNACHER OIL & GAS (T-CLL) $3.28 -0.16
RALLY ENERGY (T-RAL) $2.95 -0.01
We are working on a little bit of a challenge here, as Allan Laird suggests that this dip in natural gas prices is just a temporary thing and he is a big believer in natural gas. We remain just a tad worried, particularly if we get a warm winter. So Laird has decided that he is going to pick three gas stocks and we’ll pick three oil stocks and between now and July 1st whosever stocks perform better owes the other the proverbial bottle of wine. Andy Gustajtis, is helping us put together our three stock picks and it looks like one of them will be Connacher Oil and Gas. Interestedly, Dick Gusella of Connacher was presenting today at the COPIC Conference in Toronto and Gustajtis suggests that it is a very compelling story.
He notes that one of Gusella’s comments was that there is a chance that within five years, Connacher has a shot at producing 40,000 barrels a day, yet with no further dilution in the stock - that sounds like it could be a very good long-term story!
We actually have several “friendly observers” down at the COPIC conference in Toronto, one of whom is Kerry Sully and the ex-Ranchman’s boss is doing an update on his own CGX Energy, but he is also the guy that previously picked up on the Connacher story back at $0.70 at the same COPIC conference. So he took in Gusella’s presentation today and his comments? Many of which were quite aggressive. First of all, he pointed to all the numbers that were associated with the presentation and suggested “it’s important to realize that these are all independent numbers out of GLJ. One should feel fairly comfortable with them”, but he suggested the difference in asset value predictions based on different oil prices suggests “a net asset value of $9.00 to $10.00 wouldn’t be too far out.”
Also on Gusella’s suggestion that they might be able to have four pods up and producing 40,000 barrels a day within five years, Sully suggests that yes—it’s the first project that takes all the time and paperwork to get up and running. Your second, third and fourth should be a bit easier and “remember, much of their plant is built pre-fab style in Edmonton and then moved up to the site and they miss all the busy goings on in the over-heated Ft. McMurray.”
When asked for a second pick from the conference, Sully suggested that Rally Energy is very interesting and their assets in Egypt are very much just like a manufacturing of oil project for the huff and puff projects at Issaran. They will just keep expanding Andy says, and it looks like it’s low risk growth.
GOLD $577.10 -20.50
We go to Canaccord mining analyst Graeme Currie for a little hand holding today and ask him if he could tell us the hour, day and month that this correction (and it’s been a brutal one) for the junior mining sector is going to end. I can’t remember a time the market has gone this quiet and it’s been so pummeled, but there you go. Currie figures we are probably in for a bumpy road for October, but reminds us that he is still bullish for the sector long-term. He also points to a sudden lack of liquidity as yesterday only 89 million shares traded, which is about half of what it had been doing up until recently. As far as gold, which lately seems to be following oil, he figures we are in a trading range for much of the next 6-12 months between the recent role of $550 and $730. “Six to 12 months in that trading range” he says. As far as stock picks, he remains with one stock that has made him look pretty good over the last while and that’s Aurelian which he suggests he would buy on weakness. But as far as that goes, he could say that about many other stocks as well (that’s the buy on weakness, I mean!)
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