₪ David Pescod's Late Edition December 13, 2006
FORSYS METALS CORP (T-FSY) $3.60 +0.21
When you are in the junior mining exploration game, there are simply so many things that can go wrong, not the least of which is the simple act of trying to find a commercial mining deposit—the odds aren’t all that great!
While individually you can find the odd hot hole here or there, your odds of finding a commercial deposit are probably no better than 1 in 500 and some would suggest probably no better than 1 in 1000. That’s where the game starts!
Then there is all those things like problems with partners, problems with joint-venture agreements and then of course you get into the interesting stuff where you finally find something and a government might decide to change the rules when you actually got something worth while, all sorts of people might decide that you should be sued for this, that or the other thing. And of course, there is always paperwork!
Forsys Metals has been working on the Valencia uranium project in Namibia and with uranium prices going so well, the stock has been performing okay. Except there was that one little problem with paperwork...apparently for a couple of days, their permit under which they were operating in Namibia was no longer operational. Now that creates more than a few days of near-panic for those closely following the story, don’t you think?
As of today though, everything is fine as the registration of TECO, the holder of the Valencia permit has been restored and Forsys has now agreed to acquire the remaining 10% of Valencia they didn’t own.
Apparently Forsys controls about a net 19 million pounds of U308 as a defined resource at Valencia. Exploration is ongoing with hopes to find additional reserves on the Main Zone. They are working on prefeasibility studies and in a hot uranium market, this story could go farther.
Canaccord analyst Toni Wallis and Graeme Currie have a good background information report on this story, and a current target of $4.65.
Interesting to see the uranium stocks get clipped a bit yesterday as the Department of Energy in the U.S.A. reportedly releases some of their enriched supplies according to the Wall Street Journal, but many have bounced back today.
For a copy of Canaccord’s report, just e-mail Sandra at Sandra_wicks@canaccord.com.
He’s one of our favorite market commentators by far...Donald Coxe works with the Harris Group based out of Chicago and is also associated with the BMO folks here in Canada. From time to time you might see him on ROB-TV and you know that he’s one of the first analysts out there to get on the commodity bandwagon.
He has just taken a very interesting sabbatical and gone to India which gives him a look at India at two very different ways. First of all it was where his father was born and spent much of his life and also, to see first hand what is going on currently in India.
He comes with another report that you would expect from him on a monthly basis—34 pages of a little bit of economics, a little bit of history and always, some entertainment along with the much looked-forward to investment recommendations.
We note, he writes, “if oil prices stay in the $60 range through winter, and neither the Fed nor the ECB has tightened further, the stage will be set for a commodity bull market that will make the lustrous returns of recent years look pallid.” He has noted though that oil-related stocks have not fared well in the last few months.
As far as investment recommendations:
1. When the Fed and ECB finally switch to easing, they will unleash a new kind of commodity stock bull market—one driven primarily by multiple expansion, rather than by soaring commodity prices.
2. The base metal mines’ shares will continue to be driven primarily by (1) takeovers and rumors of takeovers, and (2) redeployment by portfolio investors of the profits from takeovers into a rapidly-dwindling supply of quality mining stocks with long-lived unhedged reserves in politically secure regions.
3. OPEC’s cutbacks may soon bring global crude production into line with very modest growth in demand. Oil stocks will not be market stars again until investors conclude that oil demand runs ahead of global production capacity, and OPEC once again become irrelevant.
Note that earlier in his piece, he suggests much higher valuations are necessary for those Canadian oilsands with their long life reserves.
4. Gold shares are back in vogue as the metal responds to the drooping dollar. They deserve an overweight position in investors’ portfolios—not because inflation is going to reach levels that would scare more than Ben Bernanke, but because the dollar will eventually reach depths that will scare more than Ben Bernanke.
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