₪ David Pescod's Late Edition August 16, 2007
COVENTREE INC. (T-COF) $3.70 -0.20
REDCORP VENTURES (T-RDV) $0.28 -0.09
Ever since February we’ve been writing and we expected a correction…but this is a little bit beyond that.
This is approaching something you come across every decade or so something you tell the grandkids about, how you survived the crash of…whatever.
How come oil and gas stocks and mining stocks are getting clobbered because of something about some subprime thing in the United States that is now affecting world markets, forcing the Istanbul Stock Exchange down 11% houses of a Brazilian treasury auction failed and gold sell $21.00 (American dollar is that strong), but every once in a while there can be a connection.
Coventree is a Canadian based company involved in commercial papers, mortgages and the like and the stocks has been clobbered and of course there are a lot of questions being asked about how the company could survive in this market.
Meanwhile, little Redcorp is a B.C based mining operations that is engaged in the building of the Tulsequah Chief mine and mill. As such, they had raised almost $240 million and guess where a $102 million of that had been placed.
From a press-release today, Redcorp suggests “they invested on the recommendation of its bank, HSBC bank of Canada a total of $102.2 million in the following E notes with 5 separate trusts managed under the Coventree Capital Group.” Those notes were not paid on maturity dates and remain outstanding. The balance of Redcorps investment of $137 million has been invested in the Royal Bank and other deposits is HSBC bank of Canada, Royal Bank of Canada, CIBC and TD bank.
This looks like a safer alternative these days, doesn’t it folks. All those confusing weird things out there that might have given you a percent or two higher in return suddenly look a lot less appealing than money stashed in a straight forward bank, a flight to quality.
Meanwhile, Redcorp trades 50 million shares today and obviously there's more than a few people worried that some of their money maybe at risk of disappearing. On the other hand, if this credit mess does get sorted out it might become a decent punt…
IAMGOLD CORP. (T-IMG) $7.60 -0.60
URANIUM ONE INC. (T-SXR) $10.13 -0.56
And we thought yesterday had been bad…we sat in a conference call with Kevin MacLean who runs some of the better performing of the mining related mutual funds in Canada such as Sentry Select , Precious Metals Fund.
Needless to say, there were people looking for some advice on what next and from the conference call, we could tell that there's obviously people who don’t have grey hair, that have never seen a market crash before and heaven forbid didn’t know yet what margin call was which is a little bit spooky.
As far as comments on the market, MacLean suggested that his 2 favorite commodities at this time for the next 5 years would be gold and uranium. That might not been a good idea for today, but in the longer term it does sound appealing.
His comments on uranium is in the short term as much as 5 million pounds of production that was expected this year will be delayed to next year and there will also delays for next year.
He also points out that even if there's a recession all the utilities that run uranium powered facilities still need their uranium. He does admit some confusion on what to expect, as analysts use anywhere from $45 to $125 a pound as their estimate of value for uranium, but he expects utilities to be back in as buyers shortly.
As far as nickel - with a huge run to $24, and a big correction to current levels - he’s a big believer that $12.00 will be the floor!
MacLean happens to be in a lot of cash going in to this time of year simply because summer tends to be not a rewarding time in the market, so many of his funds were running high levels of cash and he mentioned that he was nibbling at different mining stories.
One tid-bit of good news was he suggested that with the amount of selling going on, he wouldn’t be surprised to see the mining stories turn quickly once the crisis is over.
Disclosure: IAMGOLD CORP / URANIUM ONE 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.) REDCORP VENTURES LTD: Canaccord has recently led a financing for (Whatever company).
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