₪ David Pescod's Late Edition March 4, 2008
BREAKWATER RESOURCES (T-BWR) $1.18 -0.10
Breakwater Resources, the junior miner that produces zinc,
copper, lead, gold and a bit of silver at four small mines (the El
Mochito, El Toqui, Myra Falls and Langlois) announced their
results the other day and the analysts weren’t particularly
happy. In fact, Orest Wowkodaw of Canaccord was downright
snarly and reduced his expectations for the stock from $2.10
and a buy recommendation to a sell with a target of $1.00.
Much of it has to do with higher costs and higher spending.
Wowkodaw writes, “Breakwater reported a Q4/07 GAAP
loss of $38.3 million or $0.09 per share. After adjusting for a
$28.5 million write-down for Myra Falls, an $11.3 million unrealized
loss on conversion rights, and a $3.2 million provision for
a tailings facility at Myra Falls, we estimate the company reported
Q4/07 operating earnings of $4.7 million or $0.01 per
share.”
While little Breakwater may not have a lot of money left after
costs, what it does have is a whole bunch of shares outstanding
at 420 million plus. Lots and lots of paper.
While Canaccord’s Wowkodaw might have lost the faith,
there are lots of other changes by analysts and they are
frankly folks, all over the place. Cormark has reduced their
target from $3.10 to $1.60; CIBC has dropped their target from
$2.75 to $2.25 and TD has cut it to a hold from a speculative
buy with a target going from $2.00 to $1.50.
For those who want a look/see at Wowkodaw’s report, email
Debbie at debbie_lewis@canaccord.com.
ANDINA MINERALS (V-ADM) $4.18 -0.11
DETOUR GOLD (T-DGC) $19.00 -1.00
GENCO RESOURCES (T-GGC) $3.30 +0.08
GOLD $966.00 -18.20 (Ouch)
We were whining a little bit about how come with gold
surging (at least until today) most of the mid-tier gold producers
and many of the explorers are doing sweet-tweet. In
fact, many are going down while only a handful of the big
guys—the Goldcorp’s, the Yamana’s, the Kinross’s and the
like, are participating and enjoying the current run. We
wonder what’s going on? And when are we going to have
some fun?
We are centering our concern right now on Andina Minerals
which seems to be proving up a relatively large, but low
grade deposit in Chile and not too far from a handful of
other producing mines and yet here we are in a safe country
with a large asset and no one seems to care.
We take our displeasure to Haywood mining analyst Andrew
Kaip and ask for an explanation. While Kaip likes
Andina and expects it to go to $5.70 if not higher down the
road, he says Andina, like several others lacks something
important... “sex appeal.” That kind of takes us back because
we wonder, okay, what about rocks and the like
could possibly have sex appeal?
One of Kaip’s favorite stories Detour Gold has been taking
charge these days like several of the other big ones,
but in talking about sex appeal, his idea of an example is
Genco Resources. Genco is involved in silver exploration in
Mexico and with silver just busting through $20.00 (once
again, until today) there is a bit of sex appeal there. But to
Kaip, the idea of this form of appeal is when a resource
looks like it is going to become a much larger resource
and change from a small operation to a larger producer
and profitable and possibly even a mid-tier silver producer
down the road.
“It’s time of revolution in its recognition and evaluation”
he suggests as Genco is currently his top silver pick
and top precious metal pick. While he has a $7.00 target
currently, he has hopes that as the district proves itself (or
disproves itself) could possibly see number much higher
down the road as drilling continues.
I don’t know how exciting all that sound to you, but
over the phone you could almost feel the excitement, at
least in his voice.
But back to Andina. Kaip suggests that it is trading at a
significant discount to some of its peers, but then there is
the lack of sex appeal with a big, but low grade deposit in
Chile that some people still worry about whether it’s economic
or not.
He does point out that there is a mine less than 30km
away with similar grades and is profitable. And he also
points out that when it comes to costs and the like,
Andina, should down the road have production costs very
similar to Detour Lake because they use different methods.
“It’s probably going to take a while” Kaip suggests for
Andina to dispel concerns about Andina’s location (it’s at
the 13,000 foot level in the Chilean mountains) but over
the next few months as they continue to announce new
reserve and resource numbers and get to the scoping
studies down the road, he expects the Company to prove
its value.
For those who would like some aggressive reports on
Andina by Canaccord analyst Steven Butler who has a
$9.00 target, and for Andrew’s report on Genco, e-mail
Debbie at debbie_lewis@canaccord.com.
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