₪ David Pescod's Late Edition April 17, 2007
DYNASTY METALS & MINING (V-DMM) $7.18 +0.48
On the weekend the “left-wing” President of Ecuador, Rafael Correa, learned that he obviously has the support the people, as in a referendum he was given the approval to change the constitution, which probably makes the politics of Ecuador, led by the left-winger, more murkier then it was before. Are we another step closer to seeing another Chavez?
Needless to say, many of the Ecuadorian stocks yesterday fell off, such as Aurelian Resources (ARU), Corriente Resources (CTQ) and the like. One stock, however, was flying — as Dynasty Metals and Mining announced that they received the last necessary permits from the Ecuador Ministry of the Environment to construct and operate a mill capable of processing 500,000 tonnes of ore per annum on its Zaruma Gold project, in southern Ecuador.
Needless to say, this is a big step for the company and the Zaruma project may be of modest size containing a measured resource of 1.5 million tonnes, but a good grade of 13 grams per tonne and it also has an additional 1 million tonnes of indicated resources and another 3 million tonnes of inferred resources all at roughly the same grade.
If you include all classifications, they just might have more than 2 million ounces in place and not a lot of shares out at only 30 million fully diluted (which offers a ton of leverage).
We also saw something else of interest, in that over the last while people have been focusing on stuff like nickel, uranium, copper and the like and gold has been the “less” precious metal. The big move yesterday, might be suggesting, though, that gold still has it’s place of interest.
WESTERN CANADIAN COAL (T-WTN) $2.17 -0.18
It was only a small article, but it was on many services including Bloomberg and it was quoting Mark Mobius who runs the Templeton Asset Management Fund and he was talking about coal and China.
It looks like with the booming economy in China, the country that has been a “net-exporter” of the commodity may very shortly become an “importer” three years ahead of expected.
The article points out that, “Power use in China, the world’s biggest coal producer, is rising 13% annually, and utilities are building power plants at a record pace. The nation generates 78% of its electricity from coal and imports from Australia, Indonesia and Vietnam.”
Meanwhile, the chart on Western Canadian Coal (to the right) looks like a lot of Canadian coal companies that surged when coal prices had a move two years ago, but have weakened since as prices settled down.
I suspect that once again if China becomes the story a lot of coal stocks that have been clobbered might once again regain some luster!
UTS ENERGY CORP. (V-UTS) $4.56 +0.05
The “knock” on analysts these days seems to be how come they always have so many “buy” recommendations and what might be important—a suggestion to “sell” we almost never see ...
We can understand why they don’t want to say “sell” too often, though, as it makes investors mad, it makes the management of the company livid and needless to say any hopes that your company might have for doing a financing for the company, which makes Brokers money, probably just got kissed “good-bye” should you say “sell”!
Needless to say, it is always interesting to see that “four” letter word being used out there and yesterday Genuity Capital and analyst Phil Skolnick had an intriguing comment on UTS Energy — moving it from a “hold” to “sell” (following Friday’s share price increase of almost 10%).
We find their comments interesting on selling a potential oil sands with so many people out there so bullish on the oil sands.
The comments from Genuity where — “Strong share price performance may have been due to the reiteration of large resource potential on lands outside the Fort Hills project and associated expected near-term takeout potential. Despite this, we do not believe that the strong move was justifiable.” They continue, “We remind investors that finding bitumen Bbls is the lower-risk part of the business and is not unique to one company. The high-risk part and key to value creation is profitable and timely project execution, which continues to become more difficult.” Skolnick continues, “While some may feel the extra resources make UTS an attractive takeout candidate, we believe that the likelihood of a nearterm event is low for the following reasons:”
1. Rising costs and political risk have reduced the allure of oil sands.
2. The white knight potential of UTS’s partners, Petro-Canada (PCA-T: $46.75, Not Rated) and Teck Cominco (TCK.A-T: $88.06, Not Rated), limits a potential acquirer to these two, in our view, and neither may be in a rush.
He also points out that, “UTS’s management estimates that, at a US$50/Bbl WTI oil price, the company is worth less than $2.00/ share when just including Fort Hills. The low valuation further limits takeout potential.” Skolnick has a target of $3.85 (down from $4.00) but there are other opinions out there.
Salman Partners just re-rated some their top picks and UTS was amongst them. Meanwhile, BMO has moved it from marketperform to out-perform—one of these analysts might be right ....
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