₪ David Pescod's Late Edition February 13, 2008
BANKERS PETROLEUM (T-BNK) $1.07 +0.13
Canaccord’s oil and gas guy Rafi Khouri leads an article today on Bankers Petroleum with “The Rally Continues.” Anyone who has been following Bankers for a while, knows exactly what he means by that. If you don’t you are obviously new to this story.
Today the company updates past activities and it looks like they’ve got a much nicer price for their heavy oil in Albania and slightly higher than expected production. Today it gives the stock a bit of a boost, but from the news, one thing obviously stands out...and that’s that their business plan that they hope to announce in March is going to be all-important.
GLOBESTAR MINING (T-GMI) $1.60 +0.05
Today industry biggie, Rio Tinto predicts that commodity prices could rise significantly later this year. In a press release today, the suggestion is made that if the U.S. economy recovers along with strong demand for China, a bounce could happen in commodities that people just don’t see. And when it comes, it could shock people according to Mr. Tulpule, who is with Rio Tinto.
Meanwhile, there are also other tidbits out there today with Credit Suisse suggesting we could see a spike in copper prices coming shortly. Once again, it’s demand in China, energy problems in big producing Chile, and a whole bunch of big projects everywhere that were expected to supply the world with plenty of copper facing huge capital increases and many of them simply being delayed.
Which gets us to Wendell Zerb, Canaccord’s mining analyst. When we talked with him yesterday, he said, “when we get to the mining sector, everything sucks!” There is no talk about LME inventory or breccia discoveries, so I am assuming this is just a new technical term he has come up with!
But we’ll go on to something different and that’s the phases of the mining cycle for a mining discovery. It’s usually well-known to most junior mining speculators, but most still tend to focus on one thing and that’s the discovery.
Ah! The excitement, the pizzazz, the potential of little ABC Mining Company that may have just foundsomething huge that could change your lifestyle.
While odds are long, maybe one in a thousand or these days with so many new mining companies out there—maybe one in 5000, that you can have that little junior, it’s the rest of the cycle that is forgotten by many speculators. Particularly after that one in a thousand has discovered something, the years that is spent actually doing the engineering, the environmental studies and the money raising to actually build a mine, that takes time and it is usually boring. And that folks, is when these junior stories that are hoping to become bigger, become boring and cheaper.
And then along comes another phase of the mining cycle that most speculators avoid and that is when a mine is finally about to produce something few junior stories ever do...cash flow. And that’s when you see mining stories start to attract another type of animal...not the speculator, but the investor.
During this time of course, there are all sorts of problems and delays that could happen, but when you finally do have production and cash flow, the investor can be there in a big way, particularly in a commodity market that could possibly get even better.
Given that we are in one heck of a market correction, it is amazing to see that we can still see some commodities such as copper screaming to new highs as power concerns again, cripple Chile and demand elsewhere remains strong.
It’s probably a time to be revisiting Globestar’s Cerro de Maimon mine, which will be coming on stream this summer, don’t you think? So far, no talk like so many projects of cost over-runs, yes, there’s been a little of delay here and there, but it still looks like everything is on stream and while we must remember that this is a rather modest project, the number of copper mines coming on stream over the next few years is going to be very few and copper prices could become very rewarding.
We wonder how much time is left before one of Wendell Zerb’s favorite stories (Globestar) which he has a target of $2.75—just when it might be hitting new highs...finally!
Today we average down.
ITHACA ENERGY (V-IAE) $2.75 +0.06
Yesterday we talked about Fred Kozak who is one of the analysts following Ithaca Energy and he gave us an update and again, he is giving Ithaca a $4.50 target for down the road.
Also one of the analysts following Ithaca is Warren Verbonac of Octagon who gives a $6.00 target, and right about now, we wouldn’t care which target they actually hit, we like either of them.
To take a quick look at what Warren Vebonac said about Ithaca yesterday, here are his points and remember Warren was the analyst who picked one of last years top performing oil and gas stocks—Pan Orient, so needless to say, we hope he’s as right on Ithaca as he was with Pan Orient.
Here are his points for Octagon clients from yesterday:
• Ithaca’s first well on the Polly structure (80% interest) encountered 10 feet of effective reservoir in the part of the well-bore for which tests were conclusive. No water was encountered during the MDT wireline tests. Polly’s pre-drill estimate was 10 million - 60 million barrels of recoverable oil.
• The rig is now moving to the nearby Manuel prospect (73.4% interest), which although considered riskier, has a larger target of 100 million-250 million barrels of gross recoverable oil.
• The next location at the Athena (Ithaca 70%) discovery is expected to commence drilling shortly.
• Ithaca is assembling a strategically important presence in the Greater Beatrice Area. Production from Beatrice is estimated at 1,800 bd; Basil could add over 5,000 bd. With the addition of the Athena volumes, Ithaca could become a significant junior producer in the North Sea by the end of next year, with production exceeding 15, 000 bd.
• We believe there is significant upside to the Company’s stock price once the market appreciates Ithaca’s emerging status. We maintain our BUY rating and $6.00 target.
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