Kaiser Rec:
Birch Mountain Resources Ltd -
Birch Mountain leads Kaiser's 1999 portfolio
Birch Mountain Resources Ltd BMD
Shares issued 24,622,290 1999-04-12 close $1.5
Tuesday Apr 13 1999
MYSTERIOUS FORCES FLOAT PRAIRIE GOLD
by Stockwatch Business Reporter
Douglas Rowe's Canadian precious metals and diamond play, Birch Mountain Resources, now leads letter writer John Kaiser's recommendations for 1999.
Mr. Kaiser tipped Birch Mountain a medium-priority buy at 30 cents on Dec. 11, 1998. It was the only time he has recommended the stock. Birch Mountain closed Monday on the Alberta Stock Exchange at $1.50, down 10 cents from Friday's close on volume of 26,711 shares. No other letter writer followed by Stockwatch has recommended the stock that is one of this year's surprise performers.
Birch Mountain's performance helped boost Mr. Kaiser's 1999 bottom-fishing portfolio to a 17.75 per cent gain.
The reasons for Birch Mountain's dramatic rise over the last month are not abundantly clear. One analyst says whatever is driving the stock, its search for diamonds in Northern Alberta has nothing to do with it. "Based on geological information of the diamond exploration program, there is no reason for the stock to be going up," he says.
A number of brokers offered no rumours about the stock, and even the insightful, speculative and details-oriented Mr. Kaiser has not provided to his subscribers any fresh insights, speculations or details about his star performer.
In his original recommendation, Mr. Kaiser did not say why he liked the one-time junior capital pool, although for many the reasons are abundantly clear. He noted Birch Mountain's run to $8 in January 1996 was based largely on its links to Robert Friedland and for venturing into then-hot Indonesia. In May 1995, Diamond Fields Resources director Richard Garnett was named chairman of Birch Mountain, whose board also boasts Calgary hockey icon Lanny McDonald. The company in December had a modest cash position of $800,000; additionally, Mr. Kaiser's buy tip came in spite of what he called its "controversial" Prairie gold model that hopes to locate gold and platinum in shale. Precious metals are not often found in shale.
Birch Mountain's recovery caught hold about a week after March 1 results were released by Tintina Mines and NSR Resources from their Asphalt and Buckton properties in Northeastern Alberta, which is also Birch Mountain's main area of interest. Tintina and NSR are searching for shale-hosted base metals, but also hope to find diamonds; traces of precious metals have been discovered. Even though the March 1 results were inconclusive at best, they coincided with recent highs for Tintina and NSR reached on March 2.
Birch Mountain owns 500,000 of Tintina's 7.1 million shares. The company picked up 500,000 units of Tintina in a September 1996 private placement totalling $625,000. The units consisted of one share at $1.25 and one warrant exercisable within a year at $1.50. Birch Mountain coincidentally invested $208,333 in another private placement for 300,625 units of NSR. Each unit consisted of one share at 69 cents and a warrant exercisable within a year at 83 cents.
The relationship was deepened at the same time with a three-way property deal in which Birch Mountain acquired an option to purchase a 51 per cent interest in the Tintina-NSR-held Fort McKay property. The cost was $700,000 if Birch Mountain paid within six months, or $1-million within 12 months.
In November 1998, the three companies agreed to amend the Fort McKay deal to provide Birch Mountain with more time to continue its evaluation of the property. In the agreement, the expiry date on the option was extended to Sept. 18, 1998 and the price revised to $1.2-million.
To date there has been no indication from Birch Mountain that the money was paid. In a March 12, 1999 statement, however, Birch Mountain updated drilling activities on Fort McKay and reiterated that Birch Mountain "holds an option to acquire up to 51 per cent working interest in the property."
During the past month, Birch mountain has issued a no-material-change report and an update of activities at its three most active properties -- Athabasca, Fort McKay and the Birch Mountain block.
Many of Birch Mountain's statements mention the Prairie gold model and it is this rather speculative aspect of the stock that has drawn the most comment from the stock's on-line supporters. Silicon Investor's Birch Mountain thread was established on March 11 after its first spurt of activity.
Birch Mountain's manager of exploration, Dr. Hugh Abercrombie, is scheduled to give a 30-minute speech at the Calgary Mining Forum on April 22, which has impressed many members of the forum. The topic is "Birch Mountain's Prairie Gold Model: A Low Temperature Variant of Carlin-Type Sentiment-Hosted Gold Deposits?" Dr. Abercrombie is an adjunct professor at the University of Calgary.
Birch Mountain stock, which slid steadily since mid-1996, hit bottom at 12 cents in August 1998 -- along with much of the junior market -- in spite of buy recommendations six months earlier by Yorkton Securities. At that time, Yorkton liked Birch Mountain's exposure to Alberta diamonds near Ashton Mining's Buffalo Hills play. The market responded favourably but only briefly to the Alberta diamonds move (it reached 95 cents in February 1998), which involved a joint venture with Lytton Minerals and New Indigo Resources. Lytton and New Indigo amalgamated on March 2 as Tahera Corp.; Tahera is now exploring for diamonds in the Northwest Territories.
During the last month, Canaccord Capital was the largest net buyer of the stock. In the last 30 days, it bought 392,335 shares while selling 71,510. Yorkton bought 537,639 and sold 472,609. The total number of shares traded since March 13 is 1,403,840. On March 11, a day of particularly high volume that immediately preceded the March 12 no-material-change statement, 569,102 shares traded.
Mr. Kaiser's current portfolio gain of 17.75 per cent compares with a nine per cent gain last month. At that time, Pacific Rim Mining led the way with a double from its December buy price of 81 cents. Pacific Rim continues its winning ways, closing on Monday at $1.80.
As of Monday, the California cheap-stock writer's gainers led losers by a surprisingly slim margin of 52 to 48.
Mr. Kaiser's second and third strongest stocks were both gold explorers. Oro Nevada Resources closed on Monday at $1.46, up from 36 cents since Dec. 11 amid speculation surrounding a private placement and an acquisition. On March 25, Mr. Kaiser said Oro Nevada was a hold. Latin America-focused Aquest Minerals closed at 50 cents, up from 10 cents December, based largely on speculation surrounding its acquisition of a private Guatemalan gold mining company and early results from that company's Anabella property. On March 31, Mr. Kaiser repeated his buy recommendation on Aquest.
The negative side of Mr. Kaiser portfolio was once again led by Queenstake Resources (at 24 cents from 62 cents since Dec. 11), followed by Borneo Gold (at eight cents from 23 cents), and Alamos Minerals (at 23 cents from 52 cents).
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