₪ David Pescod's Late Edition April 18, 2006
RALLY ENERGY (T-RAL) $2.23 +0.27
DIAMOND TREE ENERGY (T-DT) $6.77 -0.13
Yesterday analyst Andy Gustajtis gave his three top
picks and one of them, Rally Energy, certainly has responded
on cue. Today they announce their oil and gas production
numbers with a quarterly update and production has flown
up to the 4500 barrel a day level. Not bad at all.
When we talk with company President Abby Badwi, he
talks of the changes for both him and the company over the
last while. When he took over last July, he was semi-retired
and enjoying time in Palm Springs plus some time in Calgary.
But Rally, with most of its assets in Egypt, but also
smaller parcels in Pakistan and Canada, was going through
several management changes and obviously, he filled the
missing piece.
A new business plan was put up, a new slate of executives
and obviously excellent drilling results in Egypt are
delivering the goods and the market certainly paid attention
today.
Badwi tells us that while their projects are somewhat delayed
in Pakistan and they expect to sell some of their assets
in Canada shortly to raise $10 or $15 million, that capital
could be put to use in Egypt. He points to a 42-well, two
year program in Egypt that could continue to increase production
dramatically and points to a company target of 6700
barrels a day by year-end. Wow!
Reserves are up by a factor of four over the last while he
suggests, and production is up by a factor of two. More
importantly, he suggests that Rally now has some sense of
stability with management and the days of revolving chairs,
has ended.
With his international connections, we ask him to make a
stock pick. The usual rules apply—can’t pick anything he is
a director of or another company he has an interest in and
he reminds us that the last time we asked him this, he
picked Petrolifera Petroleum (PDP). Needless to say that
stock soared, but he obviously benefited from his association
with Dick Gusella, Connacher and Petrolifera’s head
honcho.
Today when asked for a pick, he figures he will go for
something not quite as pizzazzy, but Diamond Tree, currently
trading at $6.77, he would not be surprised to see trading at
$9.00 down the road.
WOLFDEN RESOURCES (T-WLF) $3.90 +0.06
One part of the “Junior Mining Weekly” that Canaccord analyst
Graeme Currie, Wendell Zerb and associate Tony Wallis publish that we
always find intriguing is the section that they call “INK SPOTS”. Canaccord
employs INK Research to work out what they can find what insiders
have done with their stock trading activity.
For instance, it is interesting to note that in the last 12 months, folks
at Atna Resources have purchased $461,000 worth of shares and sold $1.2
million. Or that insiders in Bear Creek Mining have purchased only
$300,000 in equity in the last 12 months and sold $4 million worth. Or
that since February 6th, they sold 50,000 shares while buying none. Insiders
of EuroZinc have bought $1.4 million in equity and sold almost $4
million worth. Likewise, insiders have purchased $4.1 million worth of
Gammon Lake Resources, but sold $28.6 million worth of equity.
Insiders have kids to feed, mortgages to pay and trips to Mexico to
finance just like everyone else, so there’s nothing wrong with making a
buck. It’s just that when you see so little purchases compared to so
much sold, it does make you wonder. On the other hand, when you notice
some companies where insiders are buying a lot more than they are
selling, it makes you think that at least they might think they can sell
their shares for higher prices than its current trading at, or maybe there’s
something deeper that we haven’t figured out.
That’s why we find two companies that we are following of such interest.
One is BrazMin—that it is finally back at work in the Rain Forest area
of the Amazon, where for three to four months of the year, they are shut
down because of the rainy season. In the last 12 months, insiders have
only sold $52,000 worth of BrazMin. Obviously, despite the stock more
than doubling, they are not cashing in yet!
How about Wolfden Resources? Insiders over the last 12 months have
purchased $303,000 worth of equity, but sold only a third of that and
since April 5th, insiders have purchased 7000 shares and sold none.
Wolfden is, me thinks, going into an interesting part of their corporate
history. Just recently, they purchased the Izok base metal property from
Inmet in return for Inmet receiving 13.5 million Wolfden shares.
Shortly down the road, Wolfden will divide itself into a gold company
owning interest in the Red Lake area and a base metal company with all
its assets up in the NWT. They have several of those. The suggestion by
some followers is that Wolfden has a list of shareholders that seem to
either like the gold and dislike the base metal holdings, or love the base
metal and dislike the gold. Break up the company in two, and there is
probably more value than it offers as the one.
We are buyers of Wolfden and hope to feature an interview with Ewan
Downie shortly! |
