₪ Pescod's Late Edition 4/21-4/21/08
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David Pescod's Late Edition April 21, 2008
Aurelian Resources Inc. (ARU $3.73 -$1.31)
Corriente Resources Inc. (CTQ $3.28 - .82)
Dynasty Metals & Mining Inc. (DMM $2.66 - 1.39)
Ouch! It looks like Correa, and his crew in Ecuador are once again creating chaos for the miners in Ecuador. One wonders what next as Correa seems one month pro mining and the next week like his comrade in arms Chavez, in Venezuela definitely not pro- mining. One has to remember that this is the same chap that nationalized most of the oil and gas assets in the country so what next.
Today Canaccord’s Wendell Zerb, writes “a surprise mining mandate was tabled and approved by Ecuador Constituent Assembly late last week. This mandate describes important changes affecting the mining industry and is being promoted as a way to ensure responsibility to communities and the environment. This mandate however also contains what we believe are negative initiatives which, if taken at face value, could profoundly affect Aurelian’s ability to advance its current mineral deposits.”
Zerb, has changed his recommendation on the company from a speculative buy and a $13.00 target to a hold with target under review. Ouch!
CIBC lowers their target from $20.00 to $12.00 and wrote. “ Uncertainty is the operative word in this investment. As such, ARU carries a Speculative qualifier that is likely not suitable for all accounts. The quality of the deposit, however, is not in doubt. As one of the biggest pure gold deposits found in the past decade, it is coveted by those losing reserves. Takeovers could offer good premiums to current trading levels. Prices of US$6.50/sh could be offered if the government took a 50% carried interest and the suitor used multiples that were based off of gold prices $150/0z less with a double the discount rate. All three punitive measures are unlikely.”
Analyst, Eric Zaunscherb, at Haywood though is no where near as optimistic as he drops his target from $12.00 to $6.00 and he writes, “The Fruta del Norte project is world-class and was a “must own” for senior producers. But a small group in Ecuador’s Constituent Assembly proposes measures that could see expropriation of Aurelian’s land position and the creation of a National Mining Company that could expropriate all or some of Aurelian’s rights. No appeal or compensation would be allowed”, he writes.
BIRCHCLIFF ENERGY (BIR-T $12.23 +.65)
We mentioned Birchcliff Energy, several times over the last few months for one simple reason … one of Canada’s billionaire’s and high profile philanthropist, Seymour Sphulich, continues to boost his interest in the company. Some how, if there is a billionaire who keeps making money by investing huge amounts in a small number of companies one should watch what he does don’t you think?
Sphulich now owns 18% —of the company and Birchcliff and several others have received media attention, as the Globe and Mail has a good series on some of the mid cap oil and gas companies in Canada, which have been making quite a come back, shows how with the high oil and rebounding gas prices the sector is bouncing back nicely.
It also does a good piece on Birchcliff giving some interest on the company and its interest in northeastern B.C.
Interesting, to see the comments on how Alberta’s decision to raise royalties has definitely hurt the Alberta Treasury, as far as land sales, which seen revenue cut to a third of what it used to be, but because of the Bakken play in Saskatchewan, land sales there have tripled, and because of the Big Horn play in other areas of B.C. , land sales have also tripled.
Meanwhile, on Birchcliff the analysts are having a hard time keeping up to the stock, and as of the latest R James has raised their target to $13 from $11, GMP has raised their from $12 to $14, and Genuity Capital which doesn’t seem to like this story has finally raised their story from a lowly $7.95 to $10.50. CIBC meanwhile, has a $12.50 target.
David Pescod's Late Edition April 22, 2008
OILEXCO (OIL-T $15.32 + .05)
DELPHI ENERGY (DEE-T $ 2.75 - .04)
TUSK ENERGY CORP (TSK-T $ 2.21 - .08)
We catch up with Josef Schacter, who is just back from India, where he was touring some of Niko facilities as he has long be affiliated with that company and, of course we asked Schacter to get it out of the way before we go any further...just to say “I told you so.”
Schacter, has been a long strong bull on natural gas for the last year, and for most of the first six months of that time, people with natural gas stocks wanted one thing, and one thing only, OUT OF IT. It was brutal, the Canadian dollar was going up, costs for rigs went through the roof, and of course Alberta raised their royalties, plus gas prices when through the floor.
Now all of a sudden, its different, as rig rates are more reasonable, trained crews are available, gas prices have soared to levels not thought of, and Schacter was one of the very few people singing that song, when most people didn’t want to hear about it.
So yesterday he say’s “yes everything has gone according to Hoyle, we saw 400 plus on our index, we saw oil hit our target of $118.00, and we have seen natural gas hit our $10.00 target plus.
As far as gas prices going ahead, he suggests, it’s going to depend very much on weather as a hot summer could pickup demand for electrical use, and also there is hurricane season as well that could move gas to as high as $12. an mcf.
But, as far as what’s next for the oil and gas market, he is cautioning people particularly about oily stocks. His suggestion is that the big decline in oil inventory in the United States has been mainly because foggy conditions in the Houston shipping canal, which has delayed the landing of a lot of cargo. He wouldn’t be surprised to see a big build in inventory over the next couple of weeks should that problem be taken care of, and if and when that happens he wouldn’t be surprised to see a correction in oil prices, and with it, a correction in the oil index from around 400 to 330 to 350.
We are also going into the shoulder season, which is traditionally weak for natural gas prices, but he thinks this year its going to be different. This time instead of natural gas prices weakening he thinks it will be the oil prices that weaken, and natural gas stocks will continue to attract attention.
When we get to stock picking, he does note that one of his favorites, Sterling Resources , has had significant delays in when they are going to be drilling their big North Sea plays so when we get to his idea of stock picking, he can only come up with two stocks in the short term, because he has noticed so many oil and gas stocks have performed so well the oily’s are due for a correction, and the gassies aren’t cheap.
On his top two, he goes with Oilexco (OIL-T), a long term favorite, which would be drilling the Moss target in the North Sea now (results expected by mid to late May — it’s deep), and that’s a big target. His suggestion is that, if successful that target alone could increase Oilexco’s value somewhere between $5.00 and $10.00 a share, plus at year end their production increases dramatically from around 23 to 24 thousand barrels a day, to almost double that number.
For a second pick, he goes with much neglected Canadian Superior (T-SNG ), currently drilling additional targets off shore Trinidad, which has been an area of the world blessed with natural gas supplies.
He admits that yes, natural gas prices that have to be sold in Trinidad go at $1.00 an mcf, but he says that because of their association with British Gas and their trains, the additional gas goes for much better prices.
CANADIAN SUPERIOR (SNG-T $3.18—.02)
Schacter suggests that their next well off of Trinidad could have an absolutely enormous impact on Canadian Superior, so it will be interesting when his Monthly Report for Maision Placement comes out in the next few days what number he uses for the potential on this one play. We note that Global Hunter Securities out of the USA has upped their target on Canadian Superior to $7.50
Based on their one success off Trinidad that the market hasn’t appreciated, and what could be next, we buy a few just in case.
David Pescod's Late Edition April 23, 2008
ARISE TECHNOLOGY APV-T $2.33 + 0.11
The chart to the left of Arise Technologies has shown you just how bad the market correction has been for the last couple of months. Who would have thought that a stock at a time energy prices are so high, yet so close to production, in an area such as solar could be so absolutely slapped about by the market, just tells you the times we are in, and hopefully getting close to being out of.
It has been absolutely brutal, but Arise has rebounded. Also the Investment Banker who first talked to us about this story way back when it was under a dollar is Andy Gustajtis, and just about now when we need a little hand holding, it was the perfect time to be talking to Gustajtis, who is just back from Korea, (actually this conversation was several days ago) Gustajtis, told us that his trip to Korea made on him a huge impression, as he suggests the country of over 40 million people has a booming economy.
‘Koreans are well educated, motivated, and currently have incomes that are not to far from North American levels’, he said.
They are also playing a significant role in the world economy these days. He asks,” why can’t you see countries such as India, China, Vietnam, and others following the Korean and Singaporean model, and reaching the same levels of industry consumption and income that has been achieved in Korea? “
Remember in Korea, he said, this country had basically nothing 30 years ago.
As those countries evolve which he believes they will, they are going to need ever increasing amounts of oil, cement, uranium, copper, you name it. We have gone through a correction in a bull market for natural resources that he believes could be going on for the next twenty or thirty years, not just ten that some people seem to be talking about. Obviously, the trip made an impression.
As we mentioned earlier, we were mainly looking for some hand holding, like when is this market mess going to be over, and where does he think some of his favorite stories are going to be by Christmas.
First of all, we should point out that Gustajtis, was one of the few people giving some credence a while ago when no one cared about the Quebec low lands play, so he is currently enjoying the run that his suggestion of Junex has been through, but as to his list of favorites several of them have suffered big time like many stocks in this recent market correction.
CORRIDOR CDH-T $ 7.80 –.21
PETROLIFERA PDP-T $ 9.80 –.45
We asked him to pick where he thinks the stock prices will be on six of his favorite stocks between now and the last trading day before Christmas. According to Andy some of the best performing companies by the end of this year will be: Arise Technologies, Corridor Resources, Connacher Oil & Gas, Petrolifera Petroleum, Sustainable Energy and Pacific Energy.
For those following Arise Technologies, one should be aware of the news out on the company in the last few days as they made plans for further additions to the company over the next few years. Gustajtis also mentioned that several German analysts are now following the company, which probably helped this stock in the past few weeks. As to comments regarding some of his favorite companies, he mentions that Connacher, should do well, as the production between the Great Divide and conventional sources is now flirting with over 10,000 barrels a day equivalent, on its way to roughly 13,000 and some time soon approval for the next pod.
His optimistic target for Sustainable Energy is based on them having the right kind of inverter that is made for the alternative energy business, but he notes that the addition of Gregory H. Nelson of First Solar joining the board of directors has got to be taken as a huge vote of confidence. He (one assumes ) given his choice of wealthy retirement must have some belief in the company to start working with them, even if it is part-time.
On Corridor, while it appears disappointing that the hope for the prize of the Dawson Settlement may not be there, he suggests that in the coming weeks there is going to be news on the Hiram Brook shale formation, and he suspects those results are going to be one of two varieties. In the first, we could have disappointing news in that production could be high, maybe as much as 3 mmcf/d, but then dropping significantly showing that they would need fracturing to continue production. On the other hand, it could be 3 million a day production that 60 days later is still at 3 million cubic feet a day, and if that is the case they could be saving 2 to 3 million dollars a well and not having to do any of the fracturing necessary and showing that this shale is of a better quality.
Meanwhile production from Corridor’s McCully field should continue to increase with ongoing drilling (and one does notice pretty nice gas prices.) Petrolifera has increased production nicely lately, although that only gets them back to where they were a while ago, until lack of equipment in Argentina held them back operationally.
SUSTAINABLE ENERGY STG-V $ .26 –.01
PACIFIC ENERGY RESOURCES PFE-T $ 1.24 + .01
What is important to Petrolifera is exploration in Columbia in the second half of the year Gustajtis says, and then near year end some of the biggest targets around to be drilled in Peru. These projects were selected by Company president Gary D. Wine while he worked for Peruvian agencies years ago.
Pacific Energy remains both one of Gustajtis’ most demanding and he thinks potentially most rewarding stories, and is a company that he has raised a lot of money for.
With their offshore production facilities in California now on-stream, production has had a bump, but the company with assets on and offshore California, and much in Alaska, remains highly leveraged (lots of debt) but he expects it could be the best performer between now and Christmas.
Gustajtis has raised a lot of money for the company at higher levels, so there are many cheering he is right, and something to reduce that debt might be good, and even more so, an American listing would be quite helpful we assume.
David Pescod's Late Edition April 24, 2008
FISSION ENERGY FIS-V $ 1.05 -.09
NEW GOLD INC NGD-T $ 7.75 n/c
PEAK GOLD PIK-V $ .69 -.05
We catch up with Al Stewart, of Canaccord fame, and he is one of the people behind the Cordilleran Resource Management Group, that loves to take your money, and try and save you tax dollars, through their flow through funds, plus make some money while they are at it, and they did pretty good from 2002, until 2006 when mining stocks behaved like they should.
In 2002, for instance your cumulative after tax return was 71 per cent on your $10,000.00 investment. In 2003 it got even better to 91 per cent, 71 per cent in 2004 and 52 per cent in 2006, definitely worthwhile going through the exercise.
However, in the last year with the mining markets falling apart it has produced little joy, and your after tax return fell to 20 per cent, and considering the paper and accounting fees you probably have been hit with, whether it was worth doing or not was debatable. If you decide to go with some flow through funds this year, you obviously must believe that mining markets will improve. These are still supposed to be investments, and in the past year more than a few wish they had just paid the taxman.
Stewart gives us his top three picks at this time, and he is never shy from making a few stock selections, one of which he has talked about before, and instead of doubling for him, it’s been halved. His first pick is Fission Energy, which has been involved in the little dispute with Hathor, in the uranium area of Saskatchewan. He suggests that the drilling that Hathor has being doing, is on trend to go in the Fission land and that’s the land that is beyond dispute, and he suspects that Fission Energy is going to have some happy drilling results sometime down the road. (They are expected to start drilling in May).
His second pick is Selkirk , and with the much lower zinc prices we face today, almost half of where they were a year ago, Selkirk, and many others in that sphere have been hurt. Currently 500 meters along on their ramp exercise to prove up more reserves on their lead, zinc properties in B.C., just a hoot and holler away from the trail smelter. The chart on Selkirk is not necessarily a happy one.
These days, the bigger cap companies are the ones that get respect in the markets, and the junior’s simply get abused and beaten up. Stewart, believes that down the road , the new company merging with Peak and Metallica will be producing 250 thousand ounces of gold per year, plus other minerals and the market will give them the respect that is due. We also note, that Seymour Schulich, the Canadian billionaire, who has done so well investing in Birchcliffe, which we have been writing up, now owns 16 per cent of NGD as well. This is a billionaire that tends to make wise bets.
SELKIRK SLK $ .48 + .015
BREAKWATER BWR $ .92 +.02
The five year chart on zinc shows that up until last year zinc prices are simply going through the roof, like many other commodities. The last year though zinc has not fared nearly as we’ve seen it’s price almost halved, at a time when many other metals from gold to copper, to you name it, are still near historic highs, there is little joy in zinc though.
The stock on Breakwater, which is a modest producer of the commodity through four different mines scattered over the America’s, shows how it has suffered with this drop in zinc prices. Another potential producer for way down the road is Selkirk Metals, currently trying prove up reserves on their Ruddock Creek property in B.C. Their stock has also suffered. There is still a big difference between the companies though, in that management at Breakwater has figured out how to return phone calls, and at Selkirk Metals, well that seems to be quite the challenge.
SELKIRK SLK $ .48 + .015
BREAKWATER BWR $ .92 +.02
The five year chart on zinc shows that up until last year zinc prices are simply going through the roof, like many other commodities. The last year though zinc has not fared nearly as we’ve seen it’s price almost halved, at a time when many other metals from gold to copper, to you name it, are still near historic
highs, there is little joy in zinc though.
The stock on Breakwater, which is a modest producer of the commodity through four different mines scattered over the America’s, shows how it has suffered with this drop in zinc prices. Another potential producer for way down the road is Selkirk Metals, currently trying prove up reserves on their Ruddock Creek property in B.C. Their stock has also suffered. There is still a big difference between the companies though, in that management at Breakwater has figured out how to return phone calls, and at Selkirk Metals, well that seems to be quite the challenge.
David Pescod's Late Edition April 25, 2008
RESULT ENERGY (RTE $ .65 + .02)
PANTERRA (PAN $ .51 - .08)
It was just a few weeks ago, we did a full scale interview with Bill Matheson, lead hand, at Result Energy, for a quick update on that junior gassy, that with these kind of gas prices might have its day in the sun again, particularity with all the news coming out of the area where its newest asset is. We’re talking about the Big Horn gas play in Northeastern B.C. that has attracted interest over the last few weeks, with very positive results out of companies like, EOG Resources, and Apache, the American biggies.
On Wednesday, Nexen Resources added their name to the list, suggesting that they have had successful drilling, and have anywhere between 6 and 9 trillion cubic feet of gas in reserves at this time. That’s trillion folks.
In the interview with Matheson, he reminded us that so far the problems with the area are that they have got a very short drilling season, still might have problems with native land claims, and the holes are deep and expensive, sometimes almost ten million a shot.
But, of course if this area continues to heat up, the big companies will find a way to work more than three or four months a year, and make it work. Amongst all those biggys up there, little Result Energy, has twenty sections of land and hopes to add to it.
We look at the charts and wonder if with better gas prices Result can’t see prices this Christmas closer to when gas was at these levels a few years ago and Result was even a smaller company.
Meanwhile, yesterday, Panterra stock was on a tear, and we asked Herve Collect, what’s up? He says, “That when they had gone into a Management meeting in the morning, their stock was 36 cents, when they got out of the meeting it was 50 cents,and there is no news with the company.” (our mystery mining man jokes that they should schedule several more meetings quickly) “Absolutely nothing going on that he knew about”collect tells us when pressed for news, he suggested that Nexen had people looking for where the next gassy shale could be, and of course Panterra has lots of land holdings in what could be considered that kind of stuff. Mind you it is in Saskatchewan, not N.E. B.C., but I guess suddenly gas of any form is getting in demand, as gas flirts with $11.00 an mcf, almost double where it was this time last year
We press Collet to do something else for us, pick a stock, and its got to go way up in the next year...or else! He obliges and suggests if you could only buy one stock, other than his own, it would be a stock that a lot of other people have picked in the past. .. ..Oilexco, which should have big production increases at year end, and he also points out that the current exploration on their Moth play with results out near the end of May could have huge implications for the company.
MARCH RESOURCES MCF-V $ .78 -.02
The new President of Paraguay, just elected, is a former priest, and yet the first day in his new office he said he was going to renegotiate energy issues with Uruguay, and Argentina, to make sure that Paraguay gets “it’s fair share,” the energy crisis continues in South America, and no where is the shortage worse than Chile.
After many delays of getting equipment into the country March Resources, Dave Antony, tells us today that equipment is finally in Chile, on site tested, and should be running their first perf today (perf tells you whether there is gas there, fracs tells you what kind of commercial rates to expect), they expect news very early next week, they will also be giving an update on the Pica two well, also, which is going lickity split compared to the first.
While we had Antony, we asked him for a stock pick, and he suggested Madalena Ventures (MVN). Anthony tells us he likes South America as a place for exploring for oil (he last stock pick for us was Solana, which has already doubled and its assets are in South American) on Madalena, he suggests that they will have results very shortly in a high risk, high reward play in Tunisia, but its their assets in Argentina to be drilled this summer that he finds very appealing.
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