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Daily Market Headliners Wednesday, January 28, 1998
Andrew Muir, CFA, Mining Analyst Jason Blanchard, Research
This publication is a market commentary not to be construed as a
source of buy or sell recommendations.
MARKET PULSE
N DJI +102.14 68,573,600
T TT +138.58 88,284,670
V VV +5.11 22,225,268
T GL +188.91
Merger mania gripped the market Tuesday, fueling a 3.14% jump in the
base metals group. Bolstered by consolidation in the financial
services and energy sectors, investors speculated that a similar fate
awaits metal producers. Investors were encouraged by recent comments
by an executive at Rio Tinto PLC regarding an improving takeover
environment for metal stocks. Advances outstripped declines 650 to
390 and overall, 12 of the TSE's 14 stock groups rose. Among
Toronto's other resource stocks, the forest products group rose 2.83%
while the energy sector posted a 2.70% gain, as oil prices continued
to rally. The gold group rose 2.77% as Comex gold closed up US$3.70 at
US$300.50 an ounce. In the speculative market, investors are coming
back with steady accumulation in high profile plays such as the S.
Voisey's Bay and the Sud Nafta oil/gas wildcat.
HEADLINERS
RODERA DIAMOND ("ROD-V") PACIFIC ROYAL VENTURES ("PFY-V") - Rodera and
Pacific Royal will spend $1.3 M each on their various joint venture
projects in 1998 and one or more of which will be drilled. The Norman
Wells oil and gas project is especially prospective given its location
in a prolific oil-producing region. This particular area was subject
to a 15-year moratorium on exploration and is considered to have
similar potential to the historic Norman Wells oilfield to the
northeast which has produced over 130 M bbl to date out of a proven
reserve of 235 M bbl.
ULTRA PETROLEUM ("UP-V") - Gross December production from Ultra
Petroleum Corp. interest acreage at Stud Horse Butte in Jonah Field
and Lizard Head on the Pinedale anticline totaled 656 million cu. ft.
of gas and 6000 barrels of condensate. Average Rocky Mountain Index
gas price for Ultra's Wyoming production in December was $2.07 per
thousand cu. ft. Of the ten wells drilled so far at Stud Horse
Butte, 5 wells are fully completed, 4 wells are partially completed
and one well is awaiting completion. Four wells were financed by
Western Gas Resources and six wells are being financed by Halliburton
Energy Services. After project payout, Ultra will have a 51% net
revenue interest in Stud Horse Butte wells. Before payout Ultra has
varying interests currently averaging approximately 10% net revenue
interest.
SENNEN RESOURCES ("SN-V") - Acquisition of Three Coal Deposits in
Australia Mr. Douglas Hyndman, President, and Ian Rozier of Sennen
Resources, announce that the Company has signed a Heads of Agreement
to acquire a 100% interest in three large coal deposits in Queensland,
Australia. All three, being the Onaview, Middlemount and Collingwood
deposits, are located in established coalfields in central and
southern Queensland. The total consideration to be paid will be Cdn.
1.4 M and the issuance of 8 M shares. The Onaview Deposit contains
172 M tonnes of recoverable, high volatile, low sulphur thermal coal
with overburden (strip) ratios of less than 7.5 to 1. The Collingwood
Deposit contains 85 M tonnes of measured, and 30 M tonnes of
indicated, open-cut coal reserves with a strip ratio of between 5 to 1
and 7.5 to 1. The Middlemount Block contains both open-cut and
underground reserves of thermal and coking coal. The Booroondara area
contains a total of 254 M tonnes of coal with all seams taken into
account, with 113.3 M tonnes of low to medium volatile, low sulphur,
bituminous coal occurring in two seams, each Based on the
documented reserves in the three deposits, and using an ascribed value
of only A$0.10/tonne for only the Measured Resource, the value of
these deposits is estimated to be $35 M. Ten recent BLM Coal Land
Sales in the U.S. have an average price/recoverable tonne of coal of
A$0.43 for an undeveloped resource.
HIGH RIVER GOLD MINES ("HRG-T") - Company has expended US $6 M in
exploration on the Taparko Project, Africa, since the start of the
programme in the spring of 1996. An initial resource estimate of
1,078,900 ounces of gold in 9,776,000 tonnes grading 3.43 grams was
announced in August 1997 and is contained in three of the ten gold
zones located over a strike length of just 4.4 kms on the Taparko
Shear which has been traced over a strike length of about 20 kms. The
project scoping study outlines an open pit mine with recovery by heap
leach methods which could produce 90,000 ounces of gold per year at US
150 per ounce. The planned work programme for 1998 will include
preparation of a feasibility study and exploration drilling of the
other priority gold -enriched areas based on channel sampling results
from the trenching.
MARKET MOVERS (Previous day's closing statistics)
Gleneagles Pete GPC 1,559,500 .49 +.07 High potential of Sud
Nafta gas/oil well which is testing thick pay zones. Arm waving 200M
bbls and 2 TCF gas over 59 sq. mi area. (3.35% net int.)
Cypress Minerals CYP 790,500 .43 +.06 S. Voisey's Bay player.
Kalahari Resources KLA 681,400 .84 +.10 Enters first deal to
option raw grassroots claims from Sunstate Resources near Western
Copper VMS discovery in Mexico.
Mandorin Gold MGD 638,000 .15 +.03 S. Voisey's Bay player.
Donner Minerals DML 508,422 1.64 +.21 Announces 1.5M PP @ $1.14
for continued drilling in April on S. Voisey's Bay with Teck as
manager.
Cancall Cellular CLE 502,000 .23 +.03 Alliance with satellite
telephone co. Dominik X's 300,000 shs
PCS Wireless PCS 335,800 .43 +.03 Liquidity and volatility for
this junior with good management carving a niche in the emerging
digital audio broadcasting industry. Needs news.
Equatorial Energy OZ 332,500 1.30 +.15 Raising funds to close
40M acquisition of First Dynasty's Indonesian oil assets. Plans to
expand from 3,700 BOPD to 10,000.
Sunstate Resources SUT 310,500 .27 +.01 Kalahari opt. raw
grassroots claims in vicinity of Western Copper, Mexico.
Ridgeway Pete RGW 309,550 1.75 +.25 Walter Ruck co. starts
production of 3,170 MCFPD helium from large reserves in Arizona/New
Mexico.
Venture Pacific VPV 177,500 1.27 +.12 PR firm hired to promote
Nevada casino development still on the drawing board.
Westrend Energy WRN 141,500 .76 +.07 US newsletter writer
predicts $0.47/sh profit from oil rig building business with further
earnings from well logging and carrier business.
Leicester Diamonds LCD 131,500 .21 +.05 Ralph Noyes (ex Hecla)
becomes president with plans to option significant silver projects in
Mexico. John Toffan owns 2M shs of 20M o/s.
Arizona Star AZS 127,550 2.38 +.17 Steady rise in sh$ in sync
with gold. Needs updated report from Placer.
Rodera Resources ROD 126,000 .31 +.02 Dave Duval Co. with
aggressive option strategy for oil/gas projects.
Chapleau Resources CHI 123,000 .65 +.12 Drilling resumes on
Shingle Gulch polymetallic project where results to date have been
sporatic in very narrow zones.
Borneo Gold BNO 100,250 1.01 +.26 Indonesian contracts (COW's)
approved. $7.00/sh hi last Feb. with good trench results that can now
be followed up with drilling. $8M cash
Northern Abitibi NAI:A 537,300 1.38 +.16 Steady accumulation for
April drilling by Teck to follow up 15 m intersection of 1.1% Ni, 0.2%
Co in S. Voisey's Bay. N. Abitibi has 50% int. - Donner 25%.
Red Sea Oil RSO:A 254,400 3.75 +.30 Steady climb pending 2nd zone
flow test that is expected to return at least 2,000 BOPD on top 3,000
BOPD higher in well. Successful testing may justify $5/sh.
Danoil Energy DAN.A:A 195,350 1.55 +.13 Reports $0.64/sh
annualized cash flow with doubling of production to 4,100 BOEPD.
Continued exploration drilling.
Weda Bay WDA:A 57,900 1.00 +.10 Anticipating Indonesian approval
land contracts (COW's) on Ni-Co project where drilling is developing a
mineable reserve.
Chauvco Resources CHV:T 298,693 .56 +24% Bounces back after dry
hole in Remboue East pool. Continued drilling on other zones.
First Calgary Pete FCP:T 271,367 1.15 +13% 5% int. in Sud Nafta
Well.
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