Gold Aura (ASX-GOA)

Share |

Some time ago I recommended Gold Aura (GOA) as a speculative buy on the basis of its Croydon project. The potential remains, but has been somewhat diminished by more recent results. The suite of minerals and grades returned are attractve, though the ore widths are narrow and at considerable depth. A great deal of money would be required to outline a target, so you can place this one on the 'warch and see' list. Further information at Google Finance and my discussion forum.

-----------------------------------------
Andrew Sheldon www.sheldonthinks.com

Gryphon Minerals (GRY.ASX)

Share |

Gryphon Minerals is a high calibre gold stock with a great suite of projects. I suspect for the near-term this company will not perform well. It still has alot of work to do on its projects, so I can see alot of dilution ahead and slow progress. For this reason I am inclined to suggest investors wait on the side. There has been some very positive exploration results, but given a value-comparison with other stocks, Gryphon looks over-valued, so I would not be surprised to see it fall back to the 38c support. They do however remain cashed up with $5.2mil in the bank. Some of this will need to be spent moving to 100% equity in their flagship project in the West African state of Burkina Faso. See Google Finance for more info and my discussion forum.

-----------------------------------------
Andrew Sheldon www.sheldonthinks.com

Macmin Limited (MMN)

Share |

Macmin wshould be good for a trade at the current support level. The company is the only pure silver producer in Australia, and with silver prices at record levels and heading higher, it would have to be compelling reason for a rally. This mine should have a future given the outlook for silver, but I question whether the reserve base is there. Clearly they do as well since they have just raised $20mil. The company also has a 14% stake in New Guinea Gold Corporation, a TSX-listed company which holds various gold-Mo interests in PNG. Looking at the tenure of the exploration results to date, they really need to go out on thin limb. But there might be a good rally in them yet.
-----------------------------------------
Andrew Sheldon www.sheldonthinks.com

IMX Resources (IXR), previously Goldstream Mining (GDM.ASX)

Share |

IXR Resources, previously called Goldstream Mining, has always has a suite of world-class assets so its surprising that it has over the last 8 years that I have known the company, they have done very little with them. Part of the problem I think has to lie with the executives, and there seems to be some recognition of that because the board has had a reshuffle in recent times. I'm not aware of the problem, but I suspect that their JV partners did not have to meet financial commitments, so they placed a low priority on their projects. There has long been a complaint about South African companies tying up resources...maybe this was a contrived arrangement to do just that, a scheme that would satisfy those wanting 'Black Empowerment'. I dont know. Performance is what matters, and they haven't delivered. In a mining boom might we expect a better board?

Well the company is being restructured as IMX Resources, and they intend to farm-out their iron ore project to a Chinese company to establish a cashflow. They intend to retain their listed investments, which are worth around $US85mil"
1. They have 39.5% stake in Uranex (UNX.ASX) - a uranium explorer
2. They have a 51% stake in Continental Nickel, a Toronto-listed company (TSX:CNI)

IXR has some 164mil shares on issue at 57c worth $93mil. The implication is that the company is trading at the value of its listed investments. The board makes the argument that these assets are worth more to shareholders in the IXR Group - clearly that is not the case since these listed securities are worth $85mil according to the latest presentation (check figures), so its great assets are worth $5-8mil. Mind you one of the stocks is vendor securities - so they can't be sold for 2 years (that would be newly listed Uranex). As you can see from the chart volatility IMX makes for great trading. I would be inclined to recommend it to investors as well at this point because of the low value places on the projects, and the fact that one is getting close to development.
-----------------------------------------
Andrew Sheldon www.sheldonthinks.com

Glengarry Resources (GGY.ASX)

Share |

Glengarry Resources (GGY.ASX) is perhaps one of the best stocks I have some across at an exploration stage for some time. They are delineating what looks like a very attractive orebody. There are a number of attractive features:

1. The width & consistency of copper grades

2. The high grade intersections they are making - makes me think the original inferred resource will be upgraded - by 40 to 60% - but thats a guesstimate based on the drilling results.

3. Mineralisation close to the service - This will make it easy for them to mine this orebody by openpit, and later sink a decline to chase the main ore zone

4. The occurrence of moderate grade molybdenum at depth, with the positive news that the grades are increasing. One of the deepest holes recorded 35m at 2.09% copper so the mineralisation shows no sign of abating at a depth of 200m. Given the nature of the orebody the company should be able to mine to a depth of 300-350m using open cut techniques.
This is a very attractive orebody, and I suspect this company is going to be taken over. The question is whom by? Well given the open-endedness of the orebody at depth, might Xstrata be interested? But my best guess would be Kagara Zinc, whose Balcoona operations are nearby and they aready have a 19% (blocking?) stake in the company.
The company is not short of cash since they have $5.3mil in the bank, plus $1.5mil in investments so no need to worry about an issue this year. The company has 286mil shares on issue at 10c thats $28.6mil market capitalisation. I think thats very cheap, though I wouldn't necessarily expect the market to get excited just yet. I would suggest though now could be exactly the time to buy with a resource upgrade expected in March, and I suggest there will be financial backers lurking around wanting to put some money into it.
Most importantly this stock is cheap, they are supported by a major backer (Kagara Zinc) and they have cash resources. I suspect the next capital raising will be a convertible note issue, likely to Kagara, and finally an equity issue after feasibility (early 2009). Its the wait that gives me reason to pause. Although 10c is a support, the 8-8.2c level is a far stronger support, so I would be waiting for that level to be reached. This is a company for traders and investors since I believe this mine will have a life in excess of 10-15 years based on the geometry of the deposit and the prospectivity of the region. The open-cut will help fund underground development access, thus avoiding the burden of additional capital raisings down the track.
-----------------------------------------
Andrew Sheldon www.sheldonthinks.com

Sub-Sahara Resources (SBS-ASX)

Share |

Sub-Sahara Resources strikes me as one of the better buys on the market. It has an array of gold interests in Africa, which I suspect will be better appreciated by a Canadian company in the coming years - in the form of a takeover bid. Anvil Mining is another potential suitor having taken a strategic 20% stake in the company. Perhaps just as a take over defence for a 'friend'. The company is capitalised at $35mil, with 500mil shares trading at 7c. Its assets include:
1. Zara JV with Dragon Mining: A 69% stake in the Koka project in Eritrea. It has a 1Moz resource at an attractive grade of 6.3g/t, and the orebody is still open.
2. Nyanzaga JV with Barrick Gold:The Tusker gold deposit remains at the indicated/ inferred level with resources totalling 4.5Moz of gold grading 1.15g/t from 123Mt of ore. SBS has a free-carried stake of 30% to the point of feasibility study. This is a very low grade gold resource but the large size of the deposit will likely justify development at a higher gold price.
3. Lake Victoria JV with Currie Rose Resources: Targeting a 1Moz deposit.
4. Nyakufuru JV with Resolute Mining (<70%):>Resolute is earning up to 70% stake in this project. So far they have identified a 200x800m gold anomaly.

The company has 501 million shares at 7c worth $35million. It has $2.3mil in cash as well as equity interest in Sunridge Gold Corp worth $A12.4million. The market appears to be attaching little value on the company's gold interests. I do not however believe these values are out of place with the generally subdued pricing for junior gold stocks. The Zara gold project is a very attractive project and there is exploration upside here. This season SBS added to 250,000 oz of resources to this project. There are some very high grade zones.
For further info on this stock see Google Finance or my discussion forum.
-----------------------------------------
Andrew Sheldon www.sheldonthinks.com

Dioro Exploration (DIO.ASX)

Share |

Dioro Exploration is a modest-size gold producer from its Frog's Leg project in WA in a 50/50% JV with La Mancha. In addition the company recently purchased the South Kal project from Harmony Gold Mines. This project included 3 years mineable reserves, the Hampton treatment plant. The project is expected to generate cashflows of $52mil at a total cost of $A690/oz. The company has $25mil in cash to help fund the acquisition, however it also intends to spend $10mil on exploration in 2008 to increase the reserves at Frogs Leg.

The attached chart would suggest that $1.40 is a technical entry into this stock, but based on the fundamentals, I think $1.20 is more likely to prove the actual support level. Dioro's share of reserves at Frog's Leg stands at just 350,000 oz, though this has been the case for years. Only now the company is making a concerted effort to lift reserves, to give greater confidence to the longevity of its cashflows, such that a greater value can be placed on its shared mine infrastructure. For a further info on Dioro see Google Finance or my discussion forum.

-----------------------------------------
Andrew Sheldon www.sheldonthinks.com

CBH Resources (CBH.ASX) and Perilya Mines (PEM.ASX)

Share |

CBH Resources is a growing producer of base metals with a number of advanced projects throughout Australia, as well as some $178mil in cash to fund capital expenditure which will expand their earnings power. There is no question that those plans look less appealing than they did 12mths ago since metal prices fell. But with such great projects, still high prices, 24% hedging in place and huge cash reserves, CBH have alot of capacity to expand mine life through more exploration. Their asset holdings are strategically very strong. With a market capitalisation of $353 million, and $179mil in cash, their mine holding are undervalued.

I think it is very likely that discussions between Perilya Mines (PEM.ASX) and CBH will result in a merger of the two companies. There are a number of reasons to think this transaction will proceed:
1. Both companies share alot of synergies
2. The executives of both companies have a long history
3. The CBH & Perilya operations at Broken Hill are closely intertwined, and the East-West spread of operations even makes sense since Perilya in Perth based and CBH is in Sydney.
4. A merged entity would command a significantly greater market premium that the separate entities.
See my discussion forum for these two companies - Perilya and CBH Resources.
-----------------------------------------
Andrew Sheldon www.sheldonthinks.com

Azumah Resources (AZM.ASX)

Share |

About a year ago I downgraded my expectations of this stock. The results to date have been slightly better than I expected, nevertheless the company remains on my watch list only. They have $3.1 million in cash. Whilst I have little doubt there will be a mine in this area, I dont think it will be such a lucrative entry into the market without some more promising discoveries. See Google Finance or my Google forum.
-----------------------------------------
Andrew Sheldon www.sheldonthinks.com

Austindo Resources (ARX.ASX)

Share |

Austindo Resources is developing a 70,000 oz per annum gold mine a few hours drive from Jakarta in West Java, Indonesia. After early problems the project seems to be back on track. In the latest quarterly report the company highlights the fact that underground development has reached the 600m mark, with a further 180m of development required. Most of the plant is already onsite. The company has cash reserves on hand of $12mil after raising $20mil late last year. In the last quarterly the company acknowledges that costs are rising. On that note there is some doubt as to whether the banks will require any additional equity cover. The cash reserves seem rather tight, and given the previous problems there might yet be another capital raising. With 3.7 billion shares on issue - which must be a record - the company doesn't need the extra dilution. The flipside is that they have at around another 6mth before they need to raise that capital, and I thus think the issue is likely to come at a time of rising gold prices. For this reason, I see the current weakness in the stock as a buying opportunity, and I do think the current price support will hold. The project might be experiencing a cost blow-out, but then gold prices are more than compensating. For further info see Google Finance or my discussion forum.
----------------------------------------
Andrew Sheldon www.sheldonthinks.com

Ashburton Minerals Ltd (ATN.ASX)

Share |

Ashburton is another stock I would be inclined to place on my watchlist, but have no particular interest in at the moment. They have discovered a 4km long structure in Brazil with anomalous gold. Its too soon to judge its commercial significance. Updates can be read at Google Finance or my Google Forum.
-----------------------------------------
Andrew Sheldon www.sheldonthinks.com

Argonaut Resources (ARE.ASX)

Share |

Argonaut Resources (ARE.ASX) is an attractive stock at these prices. The company has a number of interesting projects. They have just raised $13mil and are capitalised at $47mil, so their zinc project is looking pretty cheap.
The zinc price mind you is not looking great since its at a support level. I think it will hold this support because of USD weakness, but the continued upward pace of zinc stockpiles does not give one confidence in the zinc price outlook. Mind you, Argonaut are drilling a number of projects at the moment, and there is strong basis for a rally since its fallen considerably to a strong support level.
See the zinc price and stockpiles at Kitco.
This stock actually reminds me of a stock I used to hold called Minotaur Resources. Back in 2001 I think when I was working for a broker, spending way too much time watching the market, when I should have been writing research reports. One late dark night, I found this $2mil stock MNR trading at 14c and it was drilling an 'elephant size' magnetic anomaly' that could have been a huge repetition of the Olympic Dam base metals deposit. As it turned out I was right, but I sold out after 3 months because I did not expect the drilling to take so long. Anyway, the stock sailed to $2.40, and the 20c opts when from 5c to $2.00. I had those as well :) But sold too early because of the fucked disclosure still evident today.
Anyway, this company is like that except its capitalised at $47mil, not $2mil, and this Torrens project they are drilling I believe has been drilled before, so that undermines the speculative appeal because a 2nd geological interpretation is less veracious than the first I believe, even though there is more info. But I do believe in such opportunities. I must say its hard to find these opportunities these days. Anyway its a good punt given the zinc exposure and technical support. See Google Finance and my ARE forum.
-----------------------------------------
Andrew Sheldon www.sheldonthinks.com

Alloy Resources (AYR.ASX)

Share |

I am not suggesting you buy this stock. On the country, I think you should sell it. But I would put it on your watch list because its doing interesting things in Laos, and I suspect they will become a winner in a year or two. Its exploring for gold & copper in the same areas as Oxiana and Pan Australian Resources. The company has fallen to 8c, likely on the recognition that the company will need to raise cash....that means dilution of course. The company has just $1.2mil in the bank.
I have created a Google forum where I can place comments on reports as they become available.
-----------------------------------------
Andrew Sheldon www.sheldonthinks.com

A1 Minerals (AAM.ASX)

Share |

A1 Minerals (AAM.ASX) would have to be one of the better buys around at current prices. Quite apart from the trading opportunity, it makes a lot of sense to sit on this one to realise the benefits of this strategic gold resource. You could be forgiven for thinking this company is slow to develop its resource - true enough - but I suggest the reason is they are attempting to lease, buy or toll treat their ore through a processing plant rather than having to finance plant construction. I think the plans to build a plant are really 'fluff' or just a backstop. There are several existing plants in the area that could process the ore, so it seems much more likely that 'a deal will be done' that will offer so much more value to shareholders. Very quickly AAM could be in production. Given that gold is going to $2400/oz by my thinking, there is no reason to hurry. This stock makes a lovely passive investment. Fortuitously the stock has fallen back to an important support as investors loose patience. The problem of course is that plant operators also see the strategic value of their plant and are likely holding out for a higher gold price. I however dont see how waiting longer is helping AAM's cause. A higher price means A1 Minerals has to pay more for a new plant, or the existing plant operators can extract more value from A1. It makes me think I should be investing in the plant owner. I think the plant owners know more about the outlook for gold than the A1 board. The company has a number of interesting exploration targets that add speculative upside to the stock. They have $5.9mil in cash, so with a market capitalisation of just $16mil, thats valuing the gold resource at roughly just $10mil, but it has a conservative 0.7mil oz x $A300/oz profit margin = $US200mil. Looks very cheap. You of course would have to discount those cashflows likely to be extracted over 5-7 years, so lets say $120mil. With a strong $A likely, I will suggest $A100mil. And there are these other projects that are at an early stage of assessment.
------------------------------------------
Andrew Sheldon www.sheldonthinks.com

Bendigo Mining (BDG)

Share |

There are times when you know you are just about to make some money because all the charts you look at some positive signs. Its like an alignment of the moons, something that doesn't happen enough, but it gives you the confidence to throw all your money at the market and say 'Yes'. On those occasions I can make $35-50K in a matter of a month. In actual fact these are the moments when I make 90% of my income, so you need to fight the tendency to overtrade and 'seize these moments'. Picking the right stocks is key. I am currently working on a report to help you do that.

Bendigo Mining is an emerging gold producer. Based on the nuggetty nature of its gold, it is difficult for the company to establish the veracity of its grade control system without proceeding to trial mining. This will occur from mid-2008. I dont see a great deal of price movement before then, but the stock should gain some support from a strong gold price. Currently the stock is trading at a strong technical support.
Nuggetty gold results in considerable statistical variance that can skew ore reserve calculations. The only way to ultimately determine how much gold is in the lode structures is to mine them. Historically these reefs produced an average of 10-11g/t of gold. The company has an operational gold treatment plant on-site and $58mil in cash. This places a value on the mining operation of just $110mil. Given the implied resource, this is a very low value. There is however the prospect of difficulties at the start of operations because its not the easiest operating conditions. ie. Narrow, often variable, discontinuous reef structures. See my Google Finance forum.
-----------------------------------------
Andrew Sheldon www.sheldonthinks.com

Why are spec stocks so cheap?

Share |

Investors in speculative stocks could be forgiven for thinking they have lost their minds. How do you account for the fact that gold and copper prices in particular are trading at highs, yet gold & copper project sponsors, even miners like MRX are languishing at lows. Well MRX were up 15% yesterday. A sign that their fortunes are about to change, but how do we explain these events?

My explanation is that markets are increasingly driven by fund managers rather than mom & dad investors taking the proverbial 'punt' on a 'spec'. I think this trend is gathering momentum because the lack of support for specs has resulted in even the mom's & dad's abandoning the sector. So where is all the money going?

I think money is flowing into those areas that suit investors in the 'New World Economy', and I will outline for my reasons why.
1. Commodities trading: Commodities have become the 'new fashion' in investment. Previously this class of security was considered too risky because of high volatility, low liquidity, but the use of derivatives does offer lucrative returns. Better still growth in this security class has increased liquidity. I attended a conference on Commodities for Fund Managers in Tokyo 2 years ago, and there was alot of interest.
2. Blue chip equities: There is I think a great preference for blue chips for several reasons including the capacity for investors to place funds in managed funds that only invest in large companies. Small companies just dont meet their liquidity requirements, nor can they be happy with the string of failed companies, whether its Perseverence Mining, Gleneagle Mining, Lafayette Mining, Highlands Pacific, and others. Add to this the capacity of the investor to leverage their investment with CFDs or margin loans and I think the rationale for the trend away from specs has some merit. I think that is why we are seeing the exceptionally low value being placed on specs.

I think the executives that run speculative companies have a lot to answer for precipitating this trend. I dont think they are wholly responsible, but the poor disclosure, due diligence and lax standards of work highlight a growing problem for the sector. I might add that to some extent small companies are on the receiving end of incompetent services, given the shortage of qualified service providers. Shortage of skilled geoscientists are forcing miners to employ dodgy practitioners I guess. But by the same token, I think there is a failure of executives to apply quality control checks.

I think this increases the disparity between spec and blue chip pricing. Far from heralding the end of the sector, I think it just increases the upside if you can find the right companies. But more generally I think it will mean that rallies in specs will be short lived for most stocks, so specs become trading opportunities rather than investments unless they can demonstrate 'sustained value'.
-----------------------------------------
Andrew Sheldon www.sheldonthinks.com

McMahon Holdings (MAH.ASX)

Share |

McMahon Holdings is an Australian mining services provider, and as such is greatly benefiting from the strength of the resources sector. The flipside is that service providers too are having a challenge managing costs and completing projects because of labour shortages.
McMahon appear to have reached a support level at $1.30 per share. Though given the poor earnings & dividend yield of 6.2% and 2.2% respectively, might we expect them to fall back to $0.97-1.00, as its a far stronger support level. These are historical figures mind you, so you might want to wait to see the latest earnings growth figures. For more information on McMahon see Google Finance and my discussion forum. -----------------------------------------
Andrew Sheldon www.sheldonthinks.com

Golden Cross Resources (GCR.ASX)

Share |

Golden Cross Resources (GCR) has hit a major support level, and has recovered a little. This company has a commanding position in the East Australia's Lachlan Fold Belt, which has been the centre of a number of important porphyry copper-style copper-gold discoveries like Cadia Hill. It is developing a large-scale project, though its not as promising as larger deposits, it has alot of merit with strengthening gold prices.

-----------------------------------------
Andrew Sheldon www.sheldonthinks.com

Metals X Limited (MLX.ASX)

Share |

Metals X Limited is a stock that can easily be compared to Minara Resources, which is capitalised at $A2.6 billion. The difference is that Metals X has some tin projects in Tasmania, but they have world-class nickel resources, its just that Minara is already in production. MLX is capitalised around 10% of Minara, but is just 2 years out from nickel production. The MLX nickel project can be expected to have a similar scale of production. In the short term it seems destined to range trade between 25-45c, but nickel stockpiles are showing signs of flattening, so might we expect to see some interest in them. I dont see them falling to the 13c support in this climate. This is a good long term stock. Read more at Google Finance and see my discussion forum.
-----------------------------------------
Andrew Sheldon www.sheldonthinks.com

Alkane Exploration (ALK.ASX)

Share |

Alkane Exploration is developing a gold mine at Tomingley in Central West NSW, and not far away in Dubbo is developing a VERY large zirconia-niobium-yttria project. The last time I looked they were still proving up the commercial viability of the process route. This deposit has some 200 years of reserves at initial mine capacity, so there is project upside, and it has very low overburden strip ratios. The stock has been trending up over the last few years, and its very volatile, so I would suggest its a stock to trade. Entry is at 30-34c. The target price is 53-55c resistance. For further info see Google Finance and my discussion forum for this stock.
-----------------------------------------
Andrew Sheldon www.sheldonthinks.com

Marengo Mining (MGO.ASX)

Share |

Marengo Mining is a small player developing a world-class gold-copper project in Papua New Guinea. The project is not far from the Ramu Nickel project being developed by Highlands Pacific. Though if I'm not mistaken I believe poor hedging decisions forced them to sell Ramu to the Chinese. They have over a billion tonnes of ore of low grade copper & gold, but the low overburden costs should
make this a low cost mine. Both copper & gold prices are very favourable, but this is a long term project, so I would be more inclined to trade this stock, since it might not be operational for another 3 years. The stock is currently drifting towards a technical support. Gold looks like going higher (from $US905/oz), copper I suspect is close to resistance at $US3.75/lb. Anyway I like Marengo at 19c support as a trade. That capitalises the company at $US38 million.
For further information go to Google Finance or participate in my discussion forum for this stock.
-----------------------------------------
Andrew Sheldon www.sheldonthinks.com

Lepanto Consolidated Mining Corp (PSE.LC)

Share |

Lepanto Consolidated Mining Company is a Philippines-listed gold mining company. As of Dec'06 the company had reserves of 1 million ounces of gold, though it was not profitable according to its latest financial statements by Google. Unbelievable given the gold price. I dont know much about this stock, though it has fallen to a strong support level. On technical grounds I like them, but the fundamentals look dubious. See Google Finance and my discussion forum for any news updates.
-----------------------------------------
Andrew Sheldon www.sheldonthinks.com

Apex Mining (PSE.APX)

Share |

Apex Mining is a Philippines-listed gold miner with a project in northern Luzon. Last year a major UK-Canadian miner Crew Gold took a major stake in the company, with the intent of tripling output from 500tonnes per day of ore to 1500tpd. This is a 2 million oz resource company if I'm not mistaken, with the promise of more. The disclosure of this company, as is customary in the Philippines, is very poor, so I would pay close attention to the charts. The stock appears to have good support at $5.00, though late last year the stock fell to $4.00, so it remains to be seen if it falls back to this support. A downgrade of reserves or delays upgrading the project would surely do that in the current market. I would be a little cautious with this stock. Hold above $5.00 support. The best source of data is clearly going to be the parent company in the UK or Canada. If you would like to read more on this stock - see Google Finance or my discussion forum.
-----------------------------------------
Andrew Sheldon www.sheldonthinks.com

Philex Mining Corporation (PSE.PX)

Share |

Philex Mining Corporation is a Philippines listed gold-copper producer that has drifted lower despite recent strength in the market copper & gold prices. The company I understand has a JV with a major international mining company in Mindanao. The project is a large-scale, long life mine that will generate healthy earnings, which is already evident in the income statement - see Google Finance or my discussion on this stock.

The attraction of this stock is that appears to be getting support at $9.00, and that it has a stake in a major gold-copper mining project, and thus a nice flow of inflation-adjusted earnings. We should be cautious however if this stock falls below $8.00, as the next support level is $6.00. I dont see any reason for this happening in the short term, though copper prices are close to a peak. It remains to be seen just how robust copper demand will remain. For this reason I prefer a pure gold producer. But I would look for support above $9.00.
Another alternative to Philex is its listed parent company Manila Mining (PSE.MA) - see Google Finance or my discussion of this stock.
-----------------------------------------
Andrew Sheldon www.sheldonthinks.com

Copper stocks to watch

Share |

Copper stocks are looking good if the current price action is anything to go by, though you will need to look at my commodities blog for the details - http://hot-metals.blogspot.com. Clearly with copper prices getting alot of support from institutions, we can expect copper prices to perform well as it becomes the new play thing of institutions looking for asset classes that are inversely correlated to stocks and property. Commodities are a great hedge against a falling USD, and there is no question institutions see metals going sideways. I suggest they are likely to favour food prices more, but they will hold a portfolio of both. I note that Matrix (MRX-.ASX) stock was being bought by directors at current prices.
Other metals are pretty subdued.
-----------------------------------------
Andrew Sheldon www.sheldonthinks.com

RED 5 (RED.ASX) - another prospect for a breakout

Share |

Red 5 is another stock that has the potential to break out this week. The 10c level is the resistance. Aside from a strong gold price, there is the scope for developments on approval of mining title, or further exploration results.

-----------------------------------------
Andrew Sheldon www.sheldonthinks.com

MRX - close to a break out?

Share |

It seems plausible that we are close to a break out in MRX. Why? Well looking at the chart, we can see that MRX has broken out of its downtrend. There is a firm basis for the start of an uptrend, but skeptics might like to wait for greater confirmation, which would come from a break above 9.5c. But why loose 5% profit on a company which is expanding output by 60%. The fundamentals seem compelling.

-----------------------------------------
Andrew Sheldon www.sheldonthinks.com

Jabiru Metals (JML.ASX)

Share |

JML has been one of my better performers since I recommended them in the 18-22c area. They rose to a peak of $1.70, but have since fallen back to $0.72 in recent times, along with other base metal miners. The attraction was always their high grade volcanogenic base metal deposit in Western Australia. Such deposits also hold the potential for a cluster of deposits, so there was always alot of upside. So reading now the latest report.....there seems little appeal with the Benambra-Stockman project in Victoria, but too early to write-off the exploration potential around the Jaguar-Tectonic Bore project areas.

-----------------------------------------
Andrew Sheldon www.sheldonthinks.com

Australian Biodiesel (ABJ.ASX)

Share |

This stock was a market darling in 2006. Its $1 shares raced to $1.70 before collapsing in 2 years to just 2c. Transfield stepped up last year by underwriting a $16mil capital raising at 5c. According to the company the problems for the company are:

1. Denied economies of scale – the major oil refining companies are not willing to buy their biodiesel, thus denying them access to 80% of Australia’s fuel market.
2. Significant rise in feedstock prices – tallow has risen in price from $450/tonne to $975/tone today due to strong global demand and also drought in Australia.
3. The Federal government hasn’t offer the same level of support as is offered overseas. The government’s 350 million litre per annum target has proved meaningless without mandatory targets
4. These factors have forced the company to cut production from 11.7Mt in 2006 to 10Mt in 2007. Rather than produce at a loss, it has since closed the plant for the foreseeable future. The capacity of its Brisbane plant is 160Mtpa, so it was producing at just 4% of capacity.

Other pertinent facts:

1. Government support would only undermine the short term viability of biodiesel plants since there is a shortage of tallow, palm oil, jatropha and algae feedstocks worldwide.
2. The company has 456mil shares on issue, with Transfield holding a 56% stake. Those shares at 2c = market capitalization of $10mil.
3. Even if the company got its desired mandatory biodiesel limits, what capacity does the industry have to buy cheap tallow at current prices?
4. It has been losing $10mil every year since it started production. See www.abgbiodiesel.com.
5. In the USA, biodiesel production has increased 10x since 2004 to 950mil litres (2006), but this is dwarfed by the 18 billion litres of ethanol production in the USA. In the USA biodiesel production capacity has growth 4x to 3.2 billion litres.
6. In Australia, local operators took at face value government support for biodlesel. The government was targeting 350 mil litres per year, yet the industry developed capacity of 500Ml by 2008. Go figure? They also criticize the government for decimating their sales by withdrawing a tax rebate for users.
7. On the positive side the plant is designed to treat a variety of feedstocks. Its interesting that Transfield underwrote the rights issue. The issue raised $16mil at 5c. Transfield were hardly generous – the issue was at 5c, but not the share price is 2c.

The question is – Is there scope for a deal here? Is it not likely that the newly-elected ALP government will adopt mandatory biodiesel limits. Such a move would make the world of difference to this project, but in a world short of commercial grades of biomass, will it fly with government supportive policies. It should get a kick, but I doubt its viability will be underwritten. Also governments are notoriously slow at making decisions.
See my ABJ discussion forum on Google Finance.

------------------------------------------

Andrew Sheldon www.sheldonthinks.com