₪ David Pescod's Late Edition September 25, 2007
AURELIAN RESOURCES (T-ARU) $7.27 -0.13
ASCENDANT COPPER (T-ACX) $0.15 -0.065
It’s usually our favorite question in the mining sector, particularly since there's still a lot of beat up stocks in that division of the markets and some are still going fairly cheap.
We catch up with Canaccord’s mining guy Graeme Currie today and asked “if he could only buy one stock today what would it be?” He usually has a list of three or four favorites but when you narrow it down to only one, it helps one focused don’t you think?
Aurelian Resources is his answer and it’s a stock that he’s been following from a long time, way since he recommended it back at $2.00 and that was before a four for one split, so it’s done well. But why recommend Aurelian at this time?
His answer is quite simple “they should have a new reserve report out sometime in the coming weeks, and he says that he would be very disappointed if they wouldn’t be able to come up with 10 million ounces of gold.”
One thing to be aware of with Aurelian though, is that it is in Ecuador and today, the country is definitely making waves. Run by left-wing President Rafael Correa, one doesn’t know what next to expect as far as laws governing oil and gas and mining and today, the mining companies had a bit of a shake-up as Ecuador’s Mining and Oil Industry Minister Chiriboga suspended all mining and administrative operations of Ascendant Copper Corp., and could cancel the company’s concession if the company and government fail to reach an agreement in re-negotiations, Minister Galo Chiriboga said at a press conference, according to the Dow Jones Services.
Meanwhile, Minister Chiriboga said the government is studying other companies with mining operations in Ecuador and officials should determine in the next several days whether those firms could be subject to similar suspensions.
According to the press reports, the Government’s decision to halt Ascendant Copper operations also stems from social conflicts that festered where the company operates, suggesting that local residents were clashing over whether the firms should be allowed there. Ascendant Copper has a 30-year mining concession that expires in 2034. The company suggests it has invested $10 million in Ecuador to date.
Ecuador is potentially very much a mining-rich locale, but considering those who run it, you just wonder about potential inherent risks.
LENNAR CORPORATION (US:LEN) $23.22 -0.96
MELCOR DEVELOPMENTS (T-MRD) $23.89 +0.10
The big news in the United States today was still the abysmal state of the housing market and according to Case/Shiller, property values slid 3.9% in the 12 months through July and today, the headline item was Lennar Corporation (which is the largest home builder in the US) reported the biggest quarterly loss in its 53-year history.
The company had to report costs of $848 million to write down the value of real estate. A third-quarter net loss was $513 million and according to Bloomberg’s, that exceeded the most pessimistic estimates from analysts.
Meanwhile, real estate is now attracting real concern in places such as Britain where real estate prices also went sky-high and more than a few suggest hit unrealistic levels. Now with real estate under the microscope, all of a sudden lending practices in Britain are under the microscope just as they have been in the United States with the Asset-Backed Commercial Paper mess.
Which in a way gets us to Alberta. We found it was kind of interesting that one economist on BNN a few days ago, when asked about real estate markets around North America reported that in the U.S. it’s actually “spotty”. There are some areas of the country that definitely are being hit while others aren’t doing too badly.
When asked where she thinks there are bubbles developing in real estate, one of her answers was Alberta...and wow, could she be onto something there!
Currently in Alberta the natural gas business is in the [explicitly deleted] to be polite and the service sector is hurting. Conventional oil is doing quite well and the Province is in “boom times” big time because of the oil sands projects developing in Fort McMurray.
As we drive around Edmonton and most of the residential areas of Alberta, it’s amazing to see entire subdivisions cropping up where there used to be meadow land and the like. You’d think you were in China when you see some of the developments. But who is buying all these units?
Which gets us back to real estate. What happens if the royalty review (which is expected to be settled within the next three weeks) comes up with some pretty aggressive expectations. With the costs on some of the big oil sands projects doubling and tripling due to labor shortages, costs of steel, drops in productivity, etc., some of the returns on these big projects are now looking awfully skimpy.
If the Province does get too aggressive on expectations for increases in royalties, we would not be surprised to see some oil sands projects delayed, to see if they can’t cut costs in some way.
If something like that were to happen and suddenly thousands if not tens of thousands of people used to having big pay cheques suddenly hit the residential markets in Calgary and the like looking for work, only to find suddenly there isn’t much ... what would that do to real estate price? You probably know the answer and needless to say, real estate stocks in Alberta over the decades have had significant ups and downs.
Melcor Developments is a well-thought of company with good executives and huge land holdings in all the right places. But once again, should we see big oil sands projects put on hold, which way do you think real estate prices are going, after prices in Edmonton in the last 12 months have popped, possibly an unrealistic 55% in one year.
CONDOR RESOURCES (V-CN) $0.56 n/c
Speaking of having mining people focus on “if they could only buy one stock…” Today we visit with John Greig, one of Canada’s more accomplished mining executives. He was formerly involved with Sutton Resources, Cumberland Resources, the company that became EuroZinc and Redfern Resources. Along with former partner Mike Kenyon, he was also a significant player/investor in Canico Resources, which was bought out at one heck of a nice price for their nickel project in Brazil.
Seeing as John continues to be an active investor in mining stories throughout the world, we are still trying to see what kind of a batting average he has at picking stocks. He is just back from visiting the Scandinavian countries to scout out stories that his name has been associated with already—Gold Ore Resources and Blackstone Ventures — companies that after the tour, he tells us he is quite comfortable with. But when we ask him to focus and pick a stock that might appeal to his sense of greed, the name he comes up with is Condor Resources.
He is a big fan of Pat Burns, the personality behind the Condor story who is also one of the leaders of the team that years ago discovered the massive Escondida mine in Peru. The company has projects starting shortly in Peru, Chile and Argentina, they face all the typical exploration odds of success, but Greig suggests this is one that’s got to be watched. For more information, go to their website at www.condorresources.com. |
