Time to Run
Monday, October 02, 2006
So we ended the third quarter near record highs for the big
cap stocks with the Dow 30 finishing within 100 points of a new all time record
high. The major stocks pretty much spent the third quarter regaining the ground
they had lost over the earlier summer months. This is very important for the
stocks we have added to our portfolio, and the main reason why we have been
adding to our positions at rock bottom prices.
The way we see the markets playing out at this time
consists of a market rally during the fourth quarter (we understand that this
prediction is not really going out on a limb, but please hear us out). The big
Techs we think will continue to lead the market higher, and as a consequence we
think that tech in general will charge higher. This will at first most likely
keep prices depressed in sectors that compete for the speculative dollars,
meaning our uraniums and tar sands plays. Not to worry though, because we
believe that as this market rally strengthens, so will the inflow of new money
from the sidelines.
This is what truly excites us because we think that at
least 2 of our uranium plays have the potential to double their market cap
through the drill bit this season (drilling season that is). We also believe
that Canwest will once again be successful on over 50% of their drill targets.
This news will attract the new capital (those speculative dollars we were
talking about earlier) and because at the same time there is a rally in tech, it
will add to the magnitude of any bull rush into uranium. At this early stage in
exploration it takes just one success to add greatly to the market caps of all
the companies in the sector. So we believe that the greater the run in tech
through the end of the year, the greater the rush of dollars into uranium and
tar sands when drill results begin to come out.
We have constantly stated that Pitchstone is one of our
favorite stocks in the uranium area right now and went further to state that the
stock is a great buy anywhere from $1.20-$1.30. We stuck by our word and more
than doubled our holdings in PXP in the last few weeks. The company will be
drilling on their very prospective land and leaving the bill for SXR to pick up.
The company did however sell the SXR shares and now has roughly $5 million in
the bank. They still posses 300,000 warrants which will most likely be sold
within the next year or two (whenever they use their $5 million through
drilling). Any good news from PXP could potentially cause a huge spike in the
price as we have witnessed in the past due to a small float. The company only
has about 27 million shares fully diluted with a strong balance sheet and an
excellent management team. This all adds up to nearly a great story, but the
catalyst will surely be the drill results from this season.
We are currently looking at adding to our Canalaska
holdings as well. Why wouldn’t we be willing to add to an investment when a
large multinational mining company has put $11 million into CVV's most promising
project? We have heard from our sources within the industry that this JV deal
has upped the asking price for stakes in these projects. We have spoken with
people at different companies within the basin that have real estate near the
major mines, and they all say that they are looking for partners and will use
that dollar figure when negotiating price terms. After viewing all the drill
results and information regarding last drilling season, we firmly believe that
CVV may be onto a world-class discovery. They found a foot of uranium
mineralization and are going to drill that area extensively this season, which
we believe will lead to a large find.
The beginning of October is the month to move into these
small resource stocks as the long, boring summer drained the speculative money
out of the sector. The fireworks begin with the first freeze because that is
when the equipment can me mobilized to the sites and the faster that this is
accomplished the sooner drilling begins and is completed. The old market saying
goes, “buy on the rumor, sell on the news” and this can most definately be put
to practice in our current situation. We will continue to nibble , and when
necessary we will take bites the size your mother warned you about.