₪ David Pescod's Late Edition February 19, 2008
LAKE SHORE GOLD (T-LSG) $2.01 +0.11
Have you wondered how come with gold at $900 plus, many of the mid-tier gold's have been doing absolutely nothing? In fact many of them weakening? Well folks, it’s that kind of market. The only gold stocks people care about have been the big ones—the Barrick’s, the Kinross’s and the Yamana’s. Maybe if gold keeps going up, people will eventually care about the other companies.
Concerns have been, high costs to build mines, the lack of capital for some projects and in Canada, the high Canadian currency and costs of building anything.
But today if you are a follower of Lake Shore Gold, many of your problems were just solved as Hochschild Mining decided to put $64 million or earn a 19% interest in Lake Shore Gold and they did it at a nice premium to the market.
It’s nice to see someone cares and now Lake Shore has all the money it needs to put the Timmins West Mine and Bell Creek Mill into operation.
NATURAL GAS $8.98 +0.32
STEALTH VENTURES (V-SLV) $0.81 +0.01
The debate continues as we continue to hear from analysts and former analysts and their thoughts on whether a person should be sticking to oil plays or go into the beaten up natural gas sector. One former analyst tells us that he still very much prefers oil and his reason is that he sees drilling numbers in the United States staying quite high plus he expects a big impact from shale gas down the road.
A second analyst points to another big reason for staying away from gas (at least in Canada) and that’s the Canadian dollar. It used to be that all our costs in Canada were in Canadian dollars and our revenue in American, which was a great deal two years ago, but suddenly that has gone out the window and it has cost the Canadian producers 25% to 30%.
Andy Gustajtis, one of our favorite stock pickers from a year ago, where it seemed that everything he touched seemed to fly, has had some grief over the last while (like all of us). He is now turning bullish on gas with the following points:
1. Natural gas prices have recovered nicely from $5.50 to almost $9.00 currently.
2. Natural gas storage is now at a three-year low.
3. Drilling costs have now dropped 30-50% from where they were a year ago.
4. Many natural gas stocks are now trading at levels of a third of where they were two years ago.
One of the junior stories he’s keen on is Stealth Ventures and the chart shows you how it has faired over the last while and it hasn’t been pretty.
D&D Securities does a research report on Stealth (if you would like to give a read, just contact Debbie at Debbie_lewis@canaccord.com) and they take a look at the company and mentions the company’s strengths and as well, it’s challenges.
We don’t want to dwell on the negative but when Andy talks about the challenges, they’ve got more than a few. One is the market disappointment as the company has bally-hoed a huge 1.5 TCF coal bed methane project in Nova Scotia. They are still working on it, and so far, there have been no positive results at all.
Secondly, the company has decided they are going to take a look at potential projects in China. When was the last time folks, you’ve heard of a Canadian-based resource company that has gone to China and actually made money for its investors? Reasons to worry?
Meanwhile, they have a low productivity, shallow gas play in Wildmere, Alberta which could see as many as a 1000 locations drilled over the next couple of years, depending on how many wells they are allowed to drill per section. That could make quite a difference.
Also, they have escaped the increase in the royalty net from the Province. It looks kind of interesting, but if you would like to see the report, again, contact Debbie.
TOURNIGAN GOLD (V-TVC) $1.07 -0.05
AURORA ENERGY (T-AXU) $8.90 +0.02
Ah! The good old days...six months ago, people definitely cared about uranium stocks, they were flying and in the last two years they went from a handful of stocks to almost 600. How times have changed and even some of the big stocks are selling at 50% and 60% off and many of the juniors are 60%, 70% or 80% off. It’s ugly.
Right now, if you need to raise money for a uranium company it’s not impossible, but it’s in the neighborhood. We just wonder with all the difficulties in uranium, how many will be around in time.
Meanwhile, because of problems in the sector, Canaccord’s Toni Wallis has done a revaluation of many of the uranium stocks she follows and points to some of the problems facing the industry such as permitting delays, long time lags for assay results and delays in economic assessments and they’ve changed their valuation of uranium stocks to about $8.00 a pound for measured and indicated plus $5.00 a pound for inferred resources.
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