₪ David Pescod's Late Edition August 29, 2007
GOLDQUEST MINING (V-GQC) $0.60 -0.13
PACIFIC RIM MINING (T-PMU) $0.93 +0.01
AURELIAN RESOURCES (T-ARU) $6.30 +0.15
Today, Goldquest Mining announced some updates on their Las Animas project in the Dominican Republic and the headline was 19 Metres Grading 3.07% copper, 3.91% zinc with some gold and silver credits. To us, these were not bad results at all and in fact in normal times, probably would have gotten a person excited ... but in today’s market, Goldquest does a lot of volume, but is down on the day.
We go to Canaccord mining analyst Graeme Currie for an explanation of “what the hey is going on” in this market and he was most obliging. “We are in the middle of a flat-out liquidity crisis” he suggests and “it has nothing to do with individual stocks or the market, but more specifically, the environment we are in.”
“We have had a massive liquidity crunch” he suggests and “when people find out that securities which are rated Triple A are found not to be safe, what do they do?” “People run from risk, seeking safety, wherever that might be and hence, the massive liquidity crunch.”
Currie suggests that “in a market like this, the big players are simply waiting, trying to find out where the bottom is, keeping track of their cash and waiting for the time that rational times might reappear and waiting for that moment to step up to the plate.”
He suggests, “It’s at times like this when people adjust their risk horizon and the risk exposure that you would expect junior mines and junior oils as well (two of the riskiest sectors of the market) would be two sectors that would be most affected.
Currie does have some grey hairs (not as many as ourselves), but he suggests that “panics or credit crunches or in bad times in the past, you’ve seen most of the bad news out of the way in the first four weeks.” He suggests, “somewhere between 70% and 80% of the debacle is probably behind us, but the market is simply waiting for some sort of assurance we have seen the bottom.”
“The fundamentals in the junior mining sector haven’t changed” he suggests and “when you are looking for bargains, it’s not so much that there’s new names, it’s just the environment that is different.”
When we do press him for names that people should be bargain hunting in, he says, “there are no real changes” as his favorites remain much the same. Names like Metallica (MR), Pacific Rim Mining and Bear Creek (BCM) and while it does have a little bit of country risk, Aurelian Resources tops his list.
We hope like Currie, that three months from now when this has all sorted itself out, we were able to take advantage of these times, but it’s obviously a phase in the market where there is more than a little fear than greed.
ACCRETE ENERGY (T-GZ) $4.10 +0.14
KODIAK OIL & GAS (AMEX:KOG) $3.72 +0.13
ANDERSON ENERGY (T-AXL) $3.80 +0.10
DELPHI ENERGY (T-DEE) $1.37 -0.02
We’ve written a lot about natural gas over the last year mainly because it’s ironic to see such times where oil prices can be so bullish and natural gas prices can be so absolutely horrific.
With a summer that wasn’t that hot, no hurricane through the Gulf of Mexico to interrupt production, more than expected LNG shipments to the United States, we currently have natural gas prices flirting with yet a new low for the year. Things are even worse in Calgary because the Canadian dollar has appreciated so much, the net revenue to Canadian producers has thus dropped and also by the time you pay the pipeline tolls to get gas from Canada to the U.S. markets, what’s left isn’t that much. At these prices, even the best operators have trouble making money.
The only good news is that it only takes one cold winter to change things, but then to count on the weather?
The chart of Accrete Energy shows what is generally thought to be one of the better-run natural gas companies and how it has fared over the last three years. They had a great time and then lately, despite their well-thought of expertise, here they are ... flirting with new lows for the year. But that’s what is going on in the sector as you look in the paper and see a large number of gassy companies hitting new 52-week lows. When does it end?
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