₪ David Pescod's Late Edition August 14, 2007
NATURAL GAS: $6.94 +0.15 (September Contract)
CRUDE OIL: $72.38 +0.76 (September Contract)
Natural gas has been down and out for a while because of a combination of much more than expected drilling in the southern 48 states, and busier than expected LNG shipments to North America.
The one thing that can move natural gas markets of course is weather…particularly big weather (ie: hurricanes). We all saw what hurricane Katrina did sending prices to close to $15 an mcf, so what is it that the few remaining bulls in the natural gas business are following these days ... well hurricane patterns of course.
Last year various American agencies that were involved in weather predicting suggested a near record year for hurricane activity ... they were dead wrong and the few hurricanes that did appear went right up the middle of the Atlantic.
Once again this year the agencies are saying the same thing, expecting record years and so far there has been nothing, but the season doesn’t end until October. This is what those with high hopes are looking at, the website nhc.noaa.gov which tracks hurricanes, all they need is one big hurricane to go into the Gulf of Mexico where 24% of United States natural gas originates and make a mess of the area and suddenly gas would be good again.
It’s called Tropical Storm #4 and some gas bulls are hoping for the best (or worst).
COVENTREE INC. (T-COF) $2.37 -6.13 (Halted)
The subprime mortgage problem in overall ugly financial markets hits Canada in a big way as Coventree, a big player in the commercial paper market is absolutely hammered. Suddenly it has big trouble borrowing money itself and is in big problems.
We had a conference call with Canaccord’s Nick Majendie yesterday who previously was taking a little grief because the funds he managed were underperforming the market a bit because he had expected a correction and interestingly, has a large position in reverse participation notes...in other words, hoping the markets would go down and he would benefit. Suddenly he is looking rather good and being quoted widely in the press. In our call of yesterday, he notes he wouldn't be surprised to see a market correction of 10% to 20%, but he also suggests that when the market turns, financial institutions such as banks, could leap out of the gate and it looks like he’s also a believer down the road in both gold and energy markets.
SELKIRK METALS (V-SLK) $1.07 -0.12
Another ugly day on the markets and it doesn’t matter anymore whether you are in blue chip bank stocks or the rough and tumble of the junior mining exploration business, you are not having a lot of fun. We had started asking where was the correction way back in February and of course, you never know what touches off corrections, but when times are too good for too long, you know something’s coming. Now things are getting a little bit painful, but the good news is that you’re starting to hear the voices that signal you might be near a bottom ... “I can’t take it anymore, sell everything…”
In the mining sector there has been some brutal hits. Take a look at Selkirk Metals, down significantly, but there’s something about the junior mining exploration sector people should be aware of...if the junior explorer you are involved with needs money, in this market, they are “S.O.L”. The ability to finance right now has almost disappeared. A company like Selkirk with money in the bank and a big program ahead of itself all paid for, at least fundamentally is sitting well. If Ruddock Creek works out as many followers think it could/should, this is hopefully just a 2 for 1 sale.
GAMMON GOLD (T-GAM) $9.03 -0.52
There’s been some particularly ugly charts generated with the market correction of late, but Gammon Gold has got to be one of the worst, and numbers out recently have some worried that things could get even worse. The company reported production of a mere 58,000 oz of gold at an operating cost of US$614.00/oz from its Ocampo and El Cubo operations in Mexico.
Canaccord’s Wendell Zerb had assumed production of 81,000 oz at cash cost of US$356.00/oz. Zerb also points out that despite raising over US$170 million last quarter, the current cash balance is currently only $32 million.
Ouch! “A new management team” Wendell Zerb writes in a note on a recent report has “outlined numerous changes being implemented with regards to personal and general operations, but he continues however there is no indication that turn-around will come quickly.”
Meanwhile, the company because of recent developments has been hit with several law suits. Zerb lowers his 4 month target down from $13.60 to $9.30 and calls it a hold, which might be polite.
For a look at the report email jennifer_lagdamen@canaccord.com.
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