Buy, Sell or Hold Dynasty Metals and Mining (DMM:TSX)

On January 30th /08 Canaccord Adams analyst Wendell Zerb released an update on Dynasty Metals and Mining.



Company Profile

Dynasty Metals and Minerals Inc. is a geographically focused mineral exploration/development company with a solid portfolio of gold/silver and copper projects located in Southern Ecuador. The company currently has a gold equivalent inventory of over 6.25 million ounces. The Zaruma gold project is expected to advance to small scale production in Q2/08.

Event

In a note entitled “Slight Delay at Zaruma – New Assumptions Create a Minor Target Adjustment” Zerb explains the reasons behind his Speculative Buy recommendation –and C$14.10 target.

Takeaways From The Event

Dynasty’s Zaruma project is located in south central Ecuador and according to a press release put out on January 29th/08 by the company’s President, they are “rapidly progressing the development of our project, with production now expected to commence towards the end of the second quarter of this year. The project is on budget.” With prefabrication underway and the ball mill expected to be delivered and installed within 6 weeks, 17,000 tonnes of ore has been stockpiled. Zerb anticipates “mining should commence at Zaruma by late Q2/08 and [is] forecasting 2008 production of 31,000 ounces of gold at an average cash cost of US$291/oz. This is based on [his] projection that production will start in the 45,000 oz per year range, ramping to 78,000 oz Au/annum. Company guidance is for production of about 100,000 oz per year (300,000 t/y) at cash costs of US$200/oz. [H]e expects Dynasty to exploit several veins systems at Zaruma and feed a central mill facility. The company received the last of its necessary permits from the Ecuador Ministry of the Environment to construct and operate a mill capable of processing 500,000 tonnes of ore per annum at their Zaruma Gold Project in April 2007.

“The Zaruma area is host to a 15 kilometre long epithermal polymetallic vein system within intermediate and mafic Tertiary volcanics and associated NW trending structures.” A preliminary assessment done in August 2006 for the Zaruma project outlined a 250,000 t/y operation over a 10.5 year mine life, with an initial capital estimated at only US$25 million. Dilution was estimated to be 15-30% and recoveries were forecasted to average 87%. Life on mine cash costs were expected in the assessment to average US$174/oz gold.

Jerusalem Project

Dynasty’s 100% owned Jerusalem Gold Project comprises one concession, located in the Zamora Chinchipe Province of south eastern Ecuador, about 40 km east of Zamora. Jerusalem has a preliminary economic study that outlines a combination open pit and underground mine producing 70,000-105,000 ounces of gold per year (plus by products). The company just “received approval from the Ministry of Mines & Petroleum of the Terms of Reference to be included in the Environmental Impact Study ("EIS") for Jerusalem. Prior to this approval, the Terms of Reference were presented to, and accepted by, the local community. The Company intends to comply with all of the requirements and technical procedures for the approval of the EIS from the Ministry of Mines & Petroleum, which, when fulfilled, will give them final approval to construct and operate the plant and mine.” Confident in receiving this approval, Dynasty has already purchased the ball mills, crushers, conveyor systems and the land on which the plant will be constructed. “The company has proposed an operation similar in size and processing methodology as that which will be employed at Zaruma.”

Dynasty Copper-Gold Belt

The Dynasty Copper-Gold Belt is a previously unexplored mineralized corridor, approximately 90 km long and 20 km wide, and runs along a north east trend that begins in Peru and extends to Dynasty's Zaruma project. The property is located in Loja Province, south western Ecuador, covers 969.16 km2, and consists of fifty-two concessions at altitudes ranging from 600m to 1800m above sea level. Dynasty is 100% owned but five of the project concessions are subject to a 1% net smelter return royalty payable to a related party. “To date, the company has identified numerous zones of porphyry-style alteration with associated hydrothermal alteration, stockwork, and vein swarms associated with precious metals. Geological mapping and geochemistry has outlined numerous zones of potential Cu and Au/Ag mineralization.

"The Dynasty Goldfield covers a 13x4 km area within the company's Dynasty Copper-Gold Belt. Principle targets include the Papayal, Cerro Verde, and Trapichillo area quartz-sulphide vein swarms and stockworks." Up until now, the work has focussed on over 10 vein systems. At Papayal, within an area of about 3x4 km, approximately six zones of quartz veining and stockwork swarms have been identified. In November 2007, Dynasty announced a NI 43-101 resorce for the project of 1.17 million ounces of gold equivalent in the Measured & Indicated class and 1.31 million ounces in the Inferred class. At present, they are operating two diamond drill rigs and are expecting two more rigs to be delivered shortly to further explore the property.

Valuation and Price Target

Assuming a 3% NSR royalty and a 37.5% income tax rate due to the turmoil surrounding the implementation of new mining taxation legislation in Ecuador, Zerb arrives at C$14.10/share as his 12 month target for Dynasty. The target is also based on "a 0.85 (was 0.90) multiple on his current NAV (5%) of C$548 million (using a peak gold price scenario of US$1,000/oz - was C$528 million using peak gold of US$850/oz)." It is because of the early stage development of the projects, a production timeline based on preliminary economic studies only and a comparison of how other pre-production companies are currently valued, that Zerb applies the multiple discount that he does. However, once production begins, Zerb expects "an industry multiple of 0.80 to 1.20 times to apply to Dynasty." Zerb expects production at Zaruma to begin in Q2/08 and at Jerusalem in Q4/09 and a Canadian $ to US $ exchange rate of 1:0.95 as we approach his peak gold price scenario. He also assumes future equity dilution of 4 million shares, resulting in a total of 33 million shares outstanding, which he assumes adds $30 million for capital expenditures.

With regards to Dynasty’s projects that have NI 43-101 compliant resources but have no feasibility work published, he values these assets using an in situ valuation. "For the Dynasty Goldfield resource ounces, we use an in situ value of US$50/oz and have assumed the company will continue to expand the mineral resource by 25% over the next 12 months."

Investment Risks

Without limitations, some of the risks include geo-political risk in Ecuador, development risks, commodity price risks, exchange rates, etc.

Video - January 30th 2008 - Check out Peter Imhof’s opinion of Dynasty Metals and Mining on BNN. Peter is Co-Manager of the Sprott Small Cap Equity Fund.(Fast Forward to the 20 minute mark)

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Buy, Sell or Hold Corridor Resources (CDH:TSX)

On January 28th /08 Jennings Capital analyst Gregory Chornoboy released an update on Corridor Resources.



Company Profile

Corridor Resources Inc. is a junior energy Company with operations in Atlantic Canada. The Company has 2P reserves of 143 Bcf in the McCully Field in New Brunswick. Full exploitation of McCully should provide development opportunities for several years, not including multi – Tcf potential in the deeper Frederick Brook and Dawson Settlement formations. In addition, Corridor has a portfolio of high risk – high reward exploration plays both on and offshore in Prince Edward Island and Quebec.

Check out Corridor’s latest presentation given by Norm Miller, President and CEO at the Mid-Winter Global Energy Conference in New York, January 28, 2008

Event

In a note entitled “Corridor Announces 2008 Budget” Chornoboy explains the reasons behind his Buy recommendation – Above Average Risk rating and C$12.30 target.

Takeaways From The Event

On January 24th, 2008, Corridor announced a $71 million capital and operating budget for 2008 as approved by its Board of Directors. Principal use of the $71 million will be related to drilling and completing additional natural gas production wells in its McCully Field in southern New Brunswick. The base budget was based on the Company’s expected cash flow using very conservative expectations and Chornoboy expects “Corridor to easily meet the base budget cash flow and get into the contingent expenditures,” which might increase the capital expenditure budget to $82 million.

According to the press release, Corridor designed its 2008 budget “to be affordable within the Corporation's projected fiscal capacity, including approximately $20 million of capital carried forward from Corridor's 2007 fiscal year plus approximately $50 million of expected net cash flow from McCully production during 2008. The base budget assumes that no additional funds will be utilized from other sources such as equity financings, increasing corporate debt or selling assets. The budget has been prepared based on several conservative assumptions regarding expected capital expenditures, production volumes and sales gas prices. Revenues from gas sales are based on a conservative average production forecast of 34 mmscf/day (25 mmscf/day net to Corridor), an average sales gas price of US$7.25/MMbtu at Henry Hub (NYMEX) and a US$ on par with Canadian$. The production forecast has been based on exponential decline curve projections. The US$7.25/MMbtu gas price is currently approximately $1.00 below the forward strip price for the remainder of 2008. Operating expenses are based on experience gained during the first six months of full field production.



The total 2008 base capital budget as set forth below is forecast to be $70.9 million net to Corridor's working interest. The budget projects that eight new McCully development wells and one exploration well will be drilled and cased by the end of September, 2008, at an estimated net cost to Corridor of $43 million (includes $5.5 M of net costs for well E-67 approved in 2007). Capital costs for drilling and completions do not reflect some of the cost reductions beginning to be achieved and apparent in drilling and well completion operations during recent months. The well completion budget is $18.8 million net to Corridor for fracturing and testing at McCully. Additional funds have been allocated to other activities, including $5.0 million for tying in new wells to the gathering system, $2.0 million for 3-D seismic over the east flank of the McCully structure and $2.1 million for gas plant maintenance and other corporate assets.”
With regards to Corridor’s yearly production estimate of 34 MMcf/d (25 MMcf/d WI), Chornoboy expects these estimate to “be easily met or exceeded.” The company currently produces around 30MMcf/d and Chornoboy expects this to increase to “37 MMcf/d once all the newly completed well are tied in.” He believes that the production rates from the “new wells will increase as the frac’ fluids are recovered.” While most of the wells already on production, will be past their initial production phase he writes, in tight gas wells like the Hiram Brook, production will “ usually drop dramatically during the first year (by as much as 50%), before turning a corner and declining very slowly thereafter. Chornoboy goes on to say that he belives that “gross production could get up to 55 MMcf/d by year end 2008 with some wellsite compression and de-bottlenecking.”

In contrast to Corridor’s budget price of US$7.25/MMBtu (Henry Hub), Chornoboy uses US$7.80/MMBtu as his average 2008 forecast.



News From Prince Edward Island

At Green Grables #3, where Corridor had to stand down on the completion and testing operations due to a casing leak, plans to attempt to re-enter and repair the damaged casing in the spring and, if successful, resume fracturing operations at that time. If fracturing operations cannot be completed at this well for mechanical reasons, Corridor will evaluate the Green Gables #2 well to perform fracturing and testing operations there. Chornoboy writes that since “diagnostic work has shown the leak to be at a casing collar at a depth of 186 metres. This may provide options for repair that would not have been available if the leak were deeper. In the best case, it may be possible to unscrew the casing from the damaged point, replace the collar and rerun the casing. The probability of this working perfectly however, is low – a lot of things have to go right mechanically. We believe that the more likely scenario is either a cement squeeze or a patch of some sort. In any event, it will be much easier to deal with at the shallow depth.” If the test of Green Gables #3 is successful, then Corridor will likely complete Green Gables #2 to obtain additional productivity.

Corridor is preparing to abandon the New Harmony exploration well on Prince Edward Island following the recent completion of testing operations. Formation salt water was recovered from the interval 3273 to 3280 meters during testing operations. This interval had been fractured during completion operations undertaken in late December, 2007. The well at New Harmony is part of a Corridor farm-in on PetroWorth Resources' Exploration Licence 03-02 announced on May 11th, 2007.

Valuation and Price Target

Chornoboy maintains his Buy recommendation and C$12.30/share target based on a reduced resource potential at Price Edward Island of 250 Bcf from 375 Bcf but substantially higher price forecasts for natural gas (Henry Hub) prices and the inclusion of 2009 DACF.



January 29. 2008 - Check out this video of Henry Groppe, Principal at Groppe, Long & Little along with Dean Orrico, Managing Director & CIO of Middlefield Capital giving their outlook on Crude Oil, Natural Gas and Oil & Gas Equities.



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Buy, Sell or Hold Aurelian Resources (ARU:TSX)

On January 29th /08 Dundee Securities analyst Mark Smith released an update on Aurelian Resources.



Company Profile

Aurelian Resources Inc. (TSX: ARU) focused on their wholly-owned Condor Project, consisting of approximately 95,000 hectares in south-eastern Ecuador. Fruta del Norte (FDN), their flagship epithermal gold-silver deposit, was discovered in April 2006 and has a NI 43-101 compliant initial inferred resource of 13.7 million ounces of gold (58.9 million tonnes grading 7.23 g/t gold.

Event

In a note entitled “Overblown News Reports Create Buying Opportunity as Infill Drilling Continues to support the FDN Resource Model” Smith explains the reasons behind his Market Outperform – High Risk rating and C$14.00 target.

Takeaways From The Event

On January 25th, 2008, a Reuters news articles reported that “Ecuador’s leftist government seized hundreds of mining concessions held by local and foreign companies as it sought to overhaul the rules for the growing sector.” However, the reporters Alonso Soto and Alexandra Valencia later retracted and wrote that “Ecuador's deputy mining minister told Reuters Friday's move would not affect the country's biggest companies, which include Canadian miners Aurelian Resources, Corriente Resources and Iamgold Corp.”

In response to the news article, Aurelian put out a press release saying that “its concessions were in good standing, and that it was in active discussions with the government of Ecuador with the goal of outlining a stability agreement wherin FDN could be brought into development.” The company also reported that they “have been in regular weekly meetings with Ecuador's Ministry of Petroleum and Mines since early January. Discussions are proceeding well, with all parties at the table keen to arrive at an agreement that benefits the country as well as our investors. The goal is to establish royalties, taxes and other requirements for development of FDN as well as discussing draft mining laws and policies that will govern the rest of our concessions. The government is aiming to complete these discussions in March.”

Aurelian’s press release also reported infill drilling results from 4 holes, two on each of Section 3450N and 3550N, which are 50m north and south of the Section 3400N. These results are important “as some 23% of the 13.7 million ounce inferred resource at FDN reports to sections 3400N as intercepts used by Micon to determine the inferred resource were drilled at 100m north-south spacing.”



With the drilling of the 2 holes at Section 3450N, the tally for holes on this section now totals 5. According the Smith’s estimations “the intercepts largely encountered conform to the expected outline defined by the resource block model (see figure above). Mineralization remains open at depth, and several holes encountered mineralization in the footwall, outside of the model limits. The weighted average uncut gold grade of the 5 holes is 10.9 g/t gold, while the weighted average cut grade is 10.5 g/t gold.” This is somewhat in the middle of the 13.3 g/t gold and 7.78 g/t gold cut grades reported by Micon for the 3400N and 3500N Sections, respectively but slightly lower than the weighted average cut grade of 10.9 g/t gold, based on contained tonnes. Overall, Smith believes that” infill drilling on Section 3450N to date appears consistent with expectations.

With respect to Section 3550N, the 2 reported holes were the first to be drilled in that section. Referring to the figure below, Smith writes “it would appear that the intercepts are slightly narrower than that anticipated by the resource block model. Mineralization remains open at depth and up dip. The weighted average uncut gold grade of the 2 holes is 9.8 g/t gold and none of the results needed to be cut.” These grades appear to be significantly higher that the 7.78 g/t and 6.02 g/t cut grades that Micon reported for Sections 3500N and 3600N, respectively and 41% higher than the weighted average cut grade, based on contained tonnes, which was 7.0 g/t gold. In interpreting these results, Smith writes “it is too early to draw conclusions on this data- slightly narrower widths imply lower tonnage, but this could easily be more than offset by higher grades.”



Aurelian also reported drill results from their regional target Papaya, which indicates gold mineralization continuing to the north of FDN. Although the results were not of economic interest they do underscore the widespread nature and occurrence of gold in their concessions.

With the new Ecuadorian Mining Act expected before the summer, Smith feels this “should bring clarity for potential FDN predators.” He goes on to write “were it not for political uncertainty, ARU may no longer exist, as the asset has to be coveted by every producing gold company. The timeline, while never certain, appears drawing to a close. May has been touted as a deadline for passage. Clarity is approaching.” Smith expects the new law to include a royalty (he assumes 5% NSR) but feels the act could also “reduce or eliminate the recently announced windfall tax, which appears to be designed for the oil sector.”

Valuation and Price Target

With regards to the windfall tax, Smith writes “at current prices, the windfall tax would have no impact on our ARU target, which assumes a long term gold price of $600/oz, far below the current spot of over $920/oz where the windfall tax would kick in if contracts were signed today.” Smith maintains his Market Outperform rating and 12 month target of C$14.00, based “largely on a 5% DCF model assuming a long term gold price of $600/oz, with a 0.85x DCF multiple to account for current geo-political risk in Ecuador, which many see clarity in coming months.” He continues to believe that “Aurelian, and its world class deposit will ultimately be the target of a takeover, possibly with competing bids.”

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Buy, Sell or Hold Aurelian Resources (ARU:TSX)

On January 24th /08 CIBC World Markets analyst Barry Cooper initiated coverage on Aurelian Resources.



Company Profile

Aurelian Resources Inc. (TSX: ARU) focused on their wholly-owned Condor Project, consisting of approximately 95,000 hectares in south-eastern Ecuador. Fruta del Norte (FDN), their flagship epithermal gold-silver deposit, was discovered in April 2006 and has a NI 43-101 compliant initial inferred resource of 13.7 million ounces of gold (58.9 million tonnes grading 7.23 g/t gold.

Event

In a note entitled “Scarcity Has A Price And It’s Higher Than Here” Cooper explains the reasons behind his Sector Outperform – Speculative rating and $20.00 target.

Takeaways From The Event

Cooper’s investment thesis is as follows “Aurelian holds the rights to a very large
profitable gold deposit in an era where there are few similarities. We think that there will be the potential for multiple bidders for the company as gold producers have outgrown Mother Nature's supply capabilities.”

Cooper believes that one of the main characteristics of the Fruta Del Norte (FDN) deposit is its high grades. He estimates that 35% of the ounces grade more than one-half ounce per ton. With initial underground costs for the operations in its first years estimated to be less than $150/oz, discounted cash flow analysis (11%if considering only an underground operation) or 13% for a more valuable underground/open pit combination) indicate that the company trades at 1x NPV using $800/oz gold (valuation includes royalties of 4%).

With Ecuador currently in the midst of assessing new mining laws which will be incorporated into constitutional reform, mining laws are scheduled to be determined before mid year thereby removing much of the political uncertainty (regarding royalties and profit sharing between Aurelian and the Ecuador government) overhanging the stock.

Cooper expects that initial mining at FDN is going to be based on a method known as long hole mining, which is similar to the extraction method used at the Hemlo camp in Canada. He estimates a mining rate of approximately 4,000 tonnes/day initially rising to 12,000 tonnes/day if the operation remains an underground mine.

Since there is no commercial power supply in the surrounding area of FDN, Aurelian has proposed using a nearby river to support power generation. This could possibly keep electricity costs “well below world averages and more importantly build goodwill if extra capacity were made available to local users.”

Cooper estimates $500 million in capital expenditures to build the mine.

Lastly, Cooper writes “with average production growth of major gold producers rising about 70% in the period 1996-02 versus flat to declining since then, the need for more deposits has never been more critical. [He] think[s] that Newmont’s announcement of its inability to replace reserves in 2007 is an omen of things to come for the industry. Companies have exceeded the production capacity that can be provided by both Mother Nature and social obstacles that exist in today’s environment.” With that as a backdrop, he believes the odds are high for Aurelian to be acquired. Furthermore, “Regardless of the probability of unfavorable political events, [Cooper is] convinced the market will apply some discount to Ecuadorian assets. Evidence of the discount is in the current Aurelian share price. But quantifying the right discount is difficult and [he] also knows that political discounts will ebb and flow with general market sentiment. What [he is] more convinced of is that the longer the bull market for gold continues, the more the discount will shrink due to the scarcity factor of the deposit.”

Upcoming Catalysts

1. Drill results will continue to be released and Cooper expects a combination of in-fill information and newly found ounces should corroborate the prior high-grade data.

2. Resolution of mining law is scheduled to be addressed by mid-year which should remove much of the uncertainty about economic participation by Aurelian and the government.

3. A resource update incorporating new drill data is expected to be released in the first half of the year. It is possible that some of the mineralization will move up a category in certainty and there could also be additions to the total ounces contained in the deposit.

4. Scoping studies on the deposit are being worked on with completion later in the year. Cooper thinks he has built in reasonably conservative estimates for mine construction in the present environment of rising costs.

5. He also thinks that clarity is likely to breed corporate interest in Aurelian and suspects that a bid for the shares will come within the 12-18 month investment timeframe.

Valuation and Price Target

On an Enterprise value (EV) per ounce in the ground basis (which is one of the most common valuations methods utilized for early stage development projects but also ignores capital costs, operating costs and recovery costs from ounces in nature to ounces for sale), Aurelian’s “shares sit near the median of simplistic EV/ounce calculations although at almost 50% below the average. When additional economic parameters are considered however, (as ounces are not created equally) [Cooper] believe[s] that FDN is not deserving of a discount that is this high.”
On a Total Acquisition Cost (TAC) basis, Cooper’s evaluation implies “that a takeover bid could be supported by paying a price of $184/oz. for the recovered resources at Aurelian with no value for upside.” This would equate to $17.83/share but the difficulty with this approach is that “for every $50/oz. move in the gold price there is an implied change in the ARU share price of $3.” The suitability of the TAC method lies in its ability to account for recoveries, capex and operating costs and then interweaving
the enterprise value to give a more comparable number on a per ounce basis.

On a discounted (10%) cash flow basis, “Aurelian is trading at a P/NAV of 0.7x compared to peers trading at 0.8x using the lower discount rate (of 5%).”

Cooper has envisaged a number of different valuations methods for Aurelian and he believes that “in the absence of political discounts [he] see[s] the share price being supported at prices above $15/sh.”

Investment Risks

Without limitation, some of the risks associated with Aurelian include, Cooper’s assumption for the gold price to average $1,000/oz in 2009, the expectation that Aurelian is acquired in the next 12-18 months, reserve and resource risks, development risk, country risk (including changes in mining law and government regulations) and economic risk, etc.

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Buy, Sell or Hold Adanac Molybdenum Corp. (AUA:TSX)

On January 10th /08 MGI Securities analyst Steve Parsons initiated coverage on Adanac Molybdenum.

Company Profile

Adanac Molybdenum is a Canadian-listed development company with its principal assets in British Columbia. The company aims to become the world’s first new large scale primary producer of molybdenum in 25 years. It expects construction to commence in early 2008 with commercial production following in calendar Q1/10.

Event

In a note entitled “Adanac Nursing Its Lead at Ruby Creek” Parsons explains the reasons behind his Speculative Buy recommendation and $1.40 target.

Takeaways From The Event

With Adanac quickly progressing towards production, Parsons believes that the project “represents a pure molybdenum play with a head start over several other relative near-term molybdenum producers, positioning the company to benefit from a higher price deck in the early quarters of production, before a material increase in
supply occurs.”

Construction of the access road and associated earthworks have recently begun at Ruby Creek, subsequent to the procurement of a special-use permit from the British Columbia Ministry of Forests. Over the course of winter, the company has plans to “begin mine
pre-stripping and plant site rough grading, install a 550-person camp, and prepare all construction infrastructure.

Adanac is aiming for mine production in Q2/09. Nonetheless, to account for labour and equipment shortages, Parsons estimates the mine to be commissioned in Q3/09. He also estimates that the resources at Ruby Creek “are sufficient to support a standalone operation for 21 years, with life-of-mine average annual payable contained molybdenum production of 8.3 million pounds. During the first five full years, [he] expect[s] production to be substantially higher at 10.7 million pounds as a result of higher grades.”

The most important permit left outstanding for Ruby Creek is the Mines Act Permit, which allows for the operations and construction of the mine. On a more positive note, the “British Columbia Ministry of Energy Mines and Petroleum Resources has issued a conditional permit approving the pre-construction work program.” This allows Adanac to begin site preparation and construction work while it awaits a "decision on the final construction and operating licenses." While a permit has been prepared and both Adanac and the local Taku River Tlingit First Nation have submitted their comments, it is still “expected to undergo a ratification vote by British Columbia’s Ministry of Energy, Mines and Petroleum Resources in early Q1/09.” Additionally, while federal approval is necessary (it does not affect construction), it is expected soon.

Parsons expects Adanac to raise approximately “$783 million to cover construction capital expenditures ($675 million) and capitalized interest ($108 million). To date, the company has raised approximately $52.6 million through equity financings. On the debt financing side, Adanac has indicative terms in place with a U.S. investment bank to manage a proposed debt financing comprising approximately US$450 million of senior notes and US$150 million of convertible debentures. Technical and commercial due diligence is ongoing. The plan includes a break-up fee equivalent to 15% of the difference between Adanac’s market capitalization on October 15, 2007, and on the date of any potential change of control transaction. The break-up fee is limited to between US$2.5 million and $12.5 million.” This still leaves Adanac to raise an additional $151.8 million through equity financing for Ruby Creek.

Catalysts

1. Receipt of the Mines Act Permit

2. Finalization of the debt and equity portions of project financing

3. Potential finalization of off-take agreements

4. Results from an ongoing 14-hole, 7,000-metre exploration drilling campaign
launched in late July 2007.

Valuation and Price Target

Parsons expects the companies net asset value (NAV) to be $279.6 million, or $0.7/share (fully diluted), based on a discounted cash flow analysis (discounted at 8%) of the Ruby Creek deposit (adjusting for working capital). However, presently due to the approximately $630 million of outstanding construction expenditures, he estimates a negative project net present value (NPV) of $0.13/share. Keep in mind, that the project NPV turns significantly positive after the capital expenditures have been made. Among the assumptions, Parsons uses to derive his NAV include 100% of the existing proven and probable reserves at Ruby Creek of 187 million pounds of molybdenum, a resource life of approximately 21 years based on steady-state mining rates of 8.2 million tonnes per year, commissioning production will commence in calendar Q3/09 and commercial production in calendar Q1/10, 170 million shares at $0.95 per share plus 85 million warrants with a strike price of $1.20 per share will be issued to raise $152 million, 100.7 million warrants will be exercised, specifically those with a strike price above $1.02 but less than $1.40, cash taxes will be deferred until capital costs are recovered.



Parsons expects the company to earn net earnings of approximately " $49.0 million ($0.13 per share, fully diluted) and cash flow of $66.3 million ($0.18 per share, fully diluted) in fiscal 2010. Noteworthy is that this represents only four months of commercial production. In fiscal 2011, Adanac’s first full year of production at Ruby Creek, [he] forecasts substantially higher earnings and cash flow of $131.1 million ($0.36 per share) and $195.7 million ($0.53 per share), respectively." He also writes that 2011 should represent a peak in earnings for Adanac, given his lower molybdenum price forecasts in following years.

Parsons target is based on a “blended multiple, using a 45% weighting to a cash flow-derived target (4.0× our 2011 CFPS estimate of $0.53; and a 55% weighting to NAV (1.0× our NAV estimate of $0.76 per share). He uses a cash flow estimate for FY2011 since this reflects the company’s first full year of metal sales.

Investment Risks

Without limitation, some of the risks associated with Adanac Molybdenum include, it having a single asset, the resource being large but low grade that doesn’t benefit from by product revenue, commodity price risk, permitting risk, finalization of agreements with the local First Nation etc.

For More Check Out This Video Done With Larry Reaugh - Executive Chairman of Adanac in January 2008

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Videos - John Embry of Sprott Asset Management & Paul Van Eeden

Video - John Embry from Sprott Asset Management on the outlook for gold and gold stocks at the January 2008 Vancouver Resource Investment Conference



Video - Paul Van Eeden on the subprime mess at the January 2008 Vancouver Resource Investment Conference

Don Coxe Basic Points January 2008

January 2008 - Basic Points - The Year of the Rats



For Mr. Coxe's weekly Institutional and Client Call Click Here

To download Mr. Don Coxe's January 2008 Edition of Basic Points click here (Courtesy Victor Adair)

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Buy, Sell or Hold Bankers Petroleum (BNK:TSXV)

On January 18th /08 Canaccord Adams analyst Rafi Khouri released an update on Bankers Petroleum.



Company Profile

Bankers Petroleum is an unconventional oil & gas company with assets in Albania and the US. The company currently produces over 5,000 bopd from the Patos Marinza heavy oil play in Albania, and 4 mmcf/d from its US shale gas assets. Bankers also has approximately 400,000 acres of shale gas potential land in the US.

Event

In a note entitled “A Pivotal Year” Khouri explains the reasons behind his Buy rating and $1.35 target.

Takeaways From The Event

With Mr. Badwi positioned to take over as CEO on February 1st, Khouri believes 2008“will be pivotal for investors in this heavy oil play.”




So who is Mr. Abdel F. (Abby) Badwi?

Mr. Badwi is an international energy executive and professional geologist with more than 35 years experience in the exploration, development and production of oil and gas fields in North America, South America, Asia and the Middle East. From 2005 until September 2007, he was President and CEO of Rally Energy Corp., an oil and gas company with operations in Egypt, Pakistan and Canada. The management team of Rally Energy Corp., lead by Mr. Badwi and including Messrs Urch and McMurtrie (both of whom have also joined Bankers Petroleum), was instrumental in growing Rally's reserves from approximately nine million BOE to approximately 104 million BOE and production from 2,000 boepd to 8,000 boepd with an associated substantial increase in cash from operations in a short two-year period. Rally's principal area of operations was Egypt, where it had a 100% operating interest the Issaran heavy oil field. Mr. Badwi has been an officer and director of several Canadian public and private companies and is currently a director of Gastar Exploration Ltd., Sustainable Energy Technologies Ltd., Sinchao Metals Corp., Fairmount Energy Inc., ArPetrol Inc. and Rally Energy Corp.

Based on recent presentations, Khouri expects Mr. Badwi to “announce and start implementing, a focused value adding plan on Bankers’ assets, after stepping into the CEO’s position.” At Rally, Mr. Badwi and his team established a 3 year plan intending to develop the Issaran heavy oil field using a blend of Cold Heavy Oil Production (CHOP) and Thermal Heavy Oil Production (THOP). It is Khouri’s understanding that “this team now plans to use CHOP and THOP on the Patos Marinza field to increase oil recovery rates, and thus bookable reserves on the field.”

As of the third quarter of 2007, Banker’s reported improving netback in Albania of “US$19.93 per bbl versus US$16.14 per bbl for Q2/07 – on its Albanian oil production, driven by an increase in the percentage of exported oil versus domestic sales." Third quarter (2007) crude oil production was up 5% over second quarter (2007) production and US Shale Gas production for Q3/07 was 502 mmcf/d of gas and 26 bopd of condensate. The company exported 55% of its Albanian crude oil at an average selling price of $44.37/barrel. On its domestic crude sales, Banker's received an average of $28.31/barrel. The company also announced that it recently started up its "Thermal pilot project in Albania, as well as the first sale of US Shale Gas and associated liquids"(Bankers has several shale gas wells in Oklahoma). As for natural gas prices in the US, the company reported average prices of $5.18 per mcf and $71.46/bbl on condensate sales. As of Q3/07 Banker's reported an increase of $10 million to its bank lines during the quarter, $5 million of which remained un-drawn as of 30 September 2007."

In an interview Badwi did with David Pescod of Canaccord in November 2007, Badwi was asked "With roughly half a billion shares outstanding, this is a big question. You are going to need money. Both these projects are huge and there is still a lot of stock outstanding."

Badwi's response: "One, the stock side first—sometime in the next six to eight months, we are probably going to be looking at a consolidation of shares. But on the funding side, we have to look at cash flow as you know we are generating cash flow from our 5000 barrels a day of production. So that continues to fund our operation with growing production numbers in 2008 and beyond. Two, we have debt facilities available to us. We are banking with an Austrian Bank with a big operation in Albania. They understand the country, they understand its risk and we currently have a $30 million facility that we are looking at expanding it to $50 million. With an increased reserve value over this year and next year, we should be able to access additional debt to develop our assets in Albania. We don’t want to put anymore capital in the U.S. as I explained earlier – we would like to be able to see that this project is self funding on its own either through its own debt facilities or equity dilution within the U.S. subsidiary to fund its own capital program. If we do sell that asset or a portion of it, of course it would provide us with additional capital to deploy in Albania. We hope not to do any equity financings soon so we can continue to have a much stronger share price." (Courtesy David Pescod's Stocktalk Late Edition)

Near term catalysts for the company include a 2007 year end reserve update (expected late this quarter), "quarter over quarter production increases" and "the announcement of a focused value creation plan by the company’s management."

Valuation and Price Target

Since Khouri expects a "Rally Energy style valuation growth over the next 2-3 years," he places Bankers on his Best Ideas List. He calculates a risked NAV per share of C$1.34 up from C$1.18 previously and thus he increases his target price to "C$1.35 (from C$1.20) to reflect [his] new NAV." Since, the company has not providedproduction guidance of 2008, Khouri forecasts "42% year over year production growth, in line with the company's historical production growth for 2007." Khouri's NPV calculations are based on "a DCF model, discounted at 10%, as well as long-term oil pricing of $70 per barrel of WTI, inflated at 2% per annum." In the above calculation, keeping all things constant, if the long-term oil pricing was increased to $80 per barrel of WTI, Bankers NPV would equal C$1.57.

Investment Risks

Without limitation, some of the risks associated with Bankers include, reserve and resource risks, development risk, country risk and economic risk.

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Buy, Sell or Hold Grand Banks Energy (GBE:TSXV)

On January 16th /08 PI Financial analyst Geoff Ready initiated coverage on Grand Banks Energy.

Company Profile

Grand Banks Energy Corp. (V-GBE) is a Calgary, Alberta based junior oil & gas company with operations in Alberta, Saskatchewan, and Manitoba. Grand Banks will focus its future capital expenditures on the high netback light oil opportunities in SE Saskatchewan and Manitoba.

Event

In a note entitled “Williston Basin Light Oil Opportunity” Ready explains the reasons behind his Buy rating and $2.15 target.

Takeaways From The Event

Grand Banks currently produces about 1,400 boe/d with a 55% weighting to light oil and natural gas liquids. “The Tower Creek 2-21 Leduc well was tied in this past summer and currently produces over 22 MMcf/d (gross) or about 500 boe/d net to Grand Banks. Most of the oil production is light and produces from either the Midale formation in Kingsford (SE Saskatchewan) or the Torquay formation in Sinclair (Manitoba).”

Multi-stage fracturing of the Torquay zone could lead to similar upside as the Bakken zone has realized in SE Saskatchewan.
The company has over 20,000 net acres of land located in Manitoba and Eastern Saskatchewan focusing on light oil (also known as Torquay (Three-Forks) light oil play). “The Torquay zone is slightly deeper than the Bakken and is a silty dolomite
instead of strictly a siltstone, however it is potentially a similar candidate for multi-stage fracturing. Both zones are considered “tight” and finding the best porosity through horizontal drilling and strategically placed hydraulic fracturing is crucial.” The company just wrapped up an 8 stage, 64 tonne fracture stimulation on an existing horizontal well and is cautiously hopeful about the increased inflow of the well. Their lands are nearby those of a much larger operator who has drilled several hundred oil wells on this play in the last three years and continues to actively develop the play. “If the technology proves economic in the Torquay, Grand Banks has potentially 10 recompletions and 50 new locations on their existing land that they can exploit.”

Since September 2007 there have been 5 takeovers of companies with major operations in SE Saskatchewan totalling over $1.1 B in value and Grand Banks could potentially be the next consolidation target. Ready believes that “it is only a matter of time before companies in the area recognize the value and future opportunities of Grand Banks and start to pursue a deal.”

While Grand Banks’ Tower Creek 2-21 well will be affected by the newly proposed royalty framework in Alberta, the company is allocating all future capital to its properties in Saskatchewan and Manitoba.

While management at the company has seen a high turnover in the last year, the company is still being run by President, Ted McFeely, who has run it from inception. Even though consultants are currently in place temporarily to make up for the technical deficit, the directors at Grand Banks have been with the company since 2004 and have “effectively led the company to its current position as a large land holder of light oil opportunities. Management and directors own approximately 20% of basic shares outstanding.”

Valuation and Price Target

Ready slaps a Buy rating on Grand Banks and a 12 month target price of $2.15/share. The company has “a low debt to cash flow ratio of 0.7x2008 cash flow and total debt of $14 million against a current bank line of $19 million.” Ready believes that the bank line could be increased to $25 million once a new reserve report in released. The company had a Q3/07 netback of $34.92/boe which Ready believes will increase though Q4/07 and 2008 due to higher light oil prices. Additionally, on a comparative valuation basis, the “company’s EV/DACF for Q307 was 4.4x as compared to the peer group mean of 7.0x and Grand Banks’ EV/(boe/d) was $49,428 compared to the peer group mean of $54,353.” While the market is not recognizing the Company’s value even though the netbacks are higher than the peer group’s and the balance sheet is cleaner, Ready writes “we believe that as soon as the market becomes more aware of the upside in the light oil assets then Grand Banks will trade closer to its peer group valuations.”

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Buy, Sell or Hold Banro Corporation (BAA:TSX)

• 
  On January 16th /08 Haywood analyst Eric Zaunscherb highlighted Banro Corporation as one of his top picks for 2008.
  
  

Company Profile

Banro is a Canadian-based gold exploration company with four wholly-owned properties along a major gold belt of the Democratic Republic of the Congo (DRC). The Company has to date identified 4.81 million ounces of Measured and Indicated Resources, plus Inferred Resources of 6.98 million ounces. Work is ongoing to extend Banro's total resource base, with pre-feasibility studies currently underway.

Event

Zaunscherb lists Banro as his #1 Top Pick for 2008 and explains the reasons behind his Sector Outperform rating and $20.00 target.

Takeaways From The Event

Zaunscherb feels “Banro Corporation represents one of the best packages of undeveloped resources available globally,” thus making it consolidation target. Banro is focussed on exploration and development along the 210 km Twangiza-Namoya gold belt in the Democratic Republic of the Congo. According to Zaunscherb, the Twangiza-Namoya gold belt “is one of the great undeveloped gold-hosting regions in Africa,” and this works to Banro’s advantage since it “controls the most prospective ground in the belt.” Not only does Banro own 100% interests in the advanced Twangiza, Namoya, Lugushwa and Kamituga projects, it was recently awarded 14 exploration permits covering 3,130 square kilometres and located on highly prospective ground between its Twangiza and Lugushwa projects. Zaunscherb thinks “very highly” of Banro’s management team for its “depth of Africa-specific technical and financial experience.” The reason Zaunscherb highlights Banro as his #1 Top Pick for 2008 is because “there is a rich pipeline of news and events through 2008 that should provide price catalysts, most important of which may be the resolution of key issues in the DRC itself.”

Zaunscherb sees the company going from no production presently to 200,000 ounces in 2011 and over 600,000 in 2014. With strong management like President Michael Prinsloo, former head of South African operations of Gold Fields from 2002 to 2006, Zaunscherb feels the company is well suited to its mine building assignment in the DRC. Lastly, regarding sovereign risk in the DRC, Zaunscherb feels the risk is about to decline as the “land tenure review is completed and the North Kivu rebellion is quelled,” and he expects a corresponding country wide re-rating.

Upcoming Catalysts

- Completion of prefeasibility studie for Twangiza and Namoya in Q1/08
- Completion of a preliminary economic assessment for Lugushwa in Q1/08
- Release of initial results from the Kamituga drill program and regional exploration
- Completion of the DRC land tenure review in Q1/08
- Stoppage of the North Kivu rebellion and attendant issues through 2008

Valuation and Price Target

Zaunscherb’s 12 month target of $20.00 is sustained by a “1.2xP/NAV multiple applied to a project NAV (9%) estimate of $16.44 per share.” He assigns 70% of his $655 million project NAV estimate to the most advanced Twangiza project. Zaunscherb also mentions that the company is “trading at US$34 enterprise value per ounce, or a 37% discount relative to peers.” Lastly, he writes “early movers with regard to the DRC in general, and specifically BAA, will benefit from acceptance of the incremental risk.”

Buy, Sell or Hold Sterling Resources (SLG:TSXV)

On January 15th /08 Wellington West analyst Malcolm Shaw released an update on Sterling Resources.

Company Profile

Sterling Resources is a Calgary-based exploration and production company with assets in the United Kingdom, Romania and France and a primary strategy of growth through international exploration. In order to minimize capital exposure, management leverages their intellectual capital to form beneficial joint venture partnerships.

Event

In a note entitled “Sterling Kicks-off New Year in Style with Successful Well Test in Offshore Romania” Shaw explains the reasons behind his Buy rating and $4.50 target.

Takeaways From The Event

Sterling’s current portfolio of projects exposes investors to “78.6 mmbbls of net risked resource potential,” leading to Shaw’s “net risked EMV valuation (exploration-weighted) of $6.31/sh.” With gas discoveries now proven at Breagh and the Doina fields and a number of future drilling prospects, Shaw believes “Sterling provides investors with a portfolio balanced between appraisal/development and exploration targets at a low cost of entry.” Sterling currently has ~$27 million in its treasury to finance future drilling.



Romania Update

“Sterling tested a ~97 foot-thick interval from the reservoir section in Doina Sister and achieved flow rates in-line with the neighbouring Doina discovery that tested at a restricted rate of 17mmcf/d – we believe this proves the commercial viability of the Doina trend.”

The Doina Sister well was tested for 14-hours at a fixed rate of 16.5-million standard cubic feet per day through a 48/64th inch choke with a stable wellhead flowing pressure of 1,160-psi. According to Sterling’s January 14th/08 press release these tests results do not reflect the full production potential for a development well due to the limitations of the test equipment.

Sterling was fully funded during the drilling and testing of the Doina Sister well and retains a 65-percent working interest in the large Midia and Pelican blocks which together extend to 1.1-million acres. Going forward, however, it is expected to pay its share of any future appraisal and developmental costs as its partners “Gas Plus International B.V. (15% W.I.) and Petro Ventures International Limited (20% W.I.), exercised their option to participate in the Doina trend.”

In light of the successful well test, Shaw has revised his outlook on the Doina trend and increased his “combined risked NPV/sh for Doina and Doina Sister to $1.19 from $0.41.” Due to improved economics of producing the Doina field, Shaw assigns a “70% COS to a 160 Bcf project that covers Doina and Doina Sister.” He also assigns an “unrisked NPV/sh of $1.70 for SLG’s 65% working interest in the Doina trend," which he believes could be realized in a full success case.

UK North Sea Update

Shaw estimates that Sterling plans to appraise its Breagh discovery in Q2 or Q3 of 2008 and he also expects the company to drill 2 appraisal wells once the plans are finalized with partners. He currently assigns a "70% COS for Breagh in [his] model for recovery of 600 Bcf gross (270 Bcf net to Sterling). [His] risked NPV/sh for Breagh is $2.04 and could be worth $2.92 under a successful development scenario."

Additionally, according to Shaw, "drilling for Block 210/29 and 210/30 is tentatively planned for Q2/Q3 and would put 70-80 mmbbls (gross) in play. Sterling’s interest in the prospect is expected to be 36% following the closure of of the recent farm-out arrangement to Challenger Minerals." This prospect is a “stratigraphic play" that worked successfully for Norway based Revus Energy. “Revus has farmed-in on the prospect to pay 50% of the well costs to earn a 33.5% interest in the prospect. Sterling has received a proposal to drill a well into Block 210/29a;" Shaw currently assigns a 25% COS and risked EMV/sh of $0.58 that could be worth $2.32 in a full success case.

Onshore France Update

Onshore France, the rig is on location and operations on the Grenade 3 well on the St. Laurent permit are expected to commence within the next few days. The well will be drilled as a step-out to the original well drilled in 1975, which encountered a 97-metre column of heavy oil in a highly porous and permeable reservoir at a depth of 2,176-metres. Given success with the vertical pilot, a horizontal sidetrack will be drilled and put on long-term test. Sterling has a 33.425-percent working interest in the block.

Valuation and Price Target

With a number of catalysts in Sterling's future, Shaw upgrades his recommendation from Speculative Buy to Buy while maintaining his $4.50 target. He writes "We believe the successful well test at Doina Sister may provide critical mass necessary for development of the Doina trend fields (Doina and Doina Sister) and reinforces our rating upgrade for Sterling to Buy with future production to support the Company’s exploration portfolio." He comes up with "risked NPV/sh and risked EMV/sh estimates for Sterling of $3.72 and $6.31, respectively, in [his] model."

In conclusion, Shaw believes that "it is an opportune time for investors to own Sterling with two development projects, Breagh and Doina trend fields, that have the potential to drive cash flow of $200M–$250M by 2010 in a success case and plenty of exploration targets yet to drill. Assuming 50% increase to F/D share count and $300 million in debt by the end of 2010, we believe a share price target of $6-$7 could be possible based on existing discoveries."

Here is a video of Josef Schachter of Schachter Asset Management giving his analysis of Sterling's prospects on BNN's Commodities Report on January 11th 2008 (Fast Forward to the 21 minute mark)

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Buy, Sell or Hold Golden Star Resources (GSC:TSX)

On January 14th /08 Wellington West analyst Catherine Gignac released an update on Golden Star Resources (GSC:TSX)



Company Profile

Golden Star is a Denver based gold producer with two operating mines in Ghana. Production is scheduled to increase in 2007 and 2008 with the new BIOX® circuit to treat refractory ores. Golden Star has extensive resources and multiple exploration prospects near existing operations in addition to one of the largest land positions in Ghana.

Event

In a note entitled “Resource Increase at Prestea South; Higher Gold Price Leads to Higher Target of $6.50/Sh” Gignac explains the reasons behind her Buy rating.

Takeaways From The Event

On January 11th /08 Golden Star announced that it had -

“received an updated resource model for the Bondaye and Tuapim deposits located in the Prestea South area of the Bogoso/Prestea concession approximately 20 kilometers south of the Bogoso processing plants. New drill results and the application of an amended resource model yielded a total of 525,000 ounces of gold in the Mineral Indicated Resource category. This corresponds to a net increase of 409,000 ounces of gold in unconstrained Indicated Mineral Resources. The new drilling results utilized for the updated mineral resource estimates have increased the overall grade of the Indicated Mineral Resource from 2.27 g/t to 2.52 g/t.” (Press Release)

Gignac writes “The updated indicated resource estimate is based on drilling completed in 2007, and now totals 6.48 million tonnes grading 2.52 g/t gold or 520,000 oz. This compares to the 2004 estimate of 1.59 million tonnes grading 2.27 g/t or 120,000 oz. A gold price of US$640/oz will be used to update reserves for Golden Star’s mines and projects, including Bondaye and Tuapim. Permitting is in progress, and mining is scheduled to start in 2009.”

Gignac expects the company to shortly announce that “design recovery rates at the Bogoso processing plant have been achieved.” She anticipates “significant increases in gold production” since the plant has the capacity to process up to 5 million tonnes of ore per year. Additionally, haul road construction is in progress and the first ore from the Hwini-Butre and Benso deposits should start being delivered to the Wassa plant in Q3/08.

Gignac expects the company to produce of 115,000 ounces in 2008.

Valuation and Price Target

“As Golden Star demonstrates sustainable throughput, grades and recoveries at the Bogoso mine, the shares are expected to attain higher trading multiples more in-line with peers.” Gignac expects Golden Star’s fourth quarter to be the best (operating and financial) of 2007, with higher production and lower costs. With major capital spending out of the way (at least for this year), profitability should pick up. “The discounted net present value is now estimated at $875 million or $3.97/share. Additional resources and working capital add an additional $2.58/sh to obtain a net asset value of $6.55/share.”

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Buy, Sell or Hold Petrolifera Petroleum (PDP:TSX)

On January 11th/08 RBC Dominion Securities analyst Jason Bouvier initiated coverage on Petrolifera Petroleum (PDP:TSX).



Company Profile

Petrolifera Petroleum Limited is a Canadian oil and gas company engaged in exploration and production activity in South America. Petrolifera's production base stems from its 100 percent-owned Puesto Morales/Rinconada Concession in the Neuquen Basin, Argentina. In 2005 and 2006, several significant new light oil discoveries were made on this concession. A total of 20 wells were drilling at the end of third quarter 2007.

Petrolifera also owns two major petroleum and natural gas exploratory licenses covering over five million acres in the Marañon and Ucayali Basins of Peru. These blocks are considered to have substantial potential as they either are on trend with or offset significant crude oil or natural gas and condensate accumulations and are considered to be well-situated from a geological perspective.

Petrolifera also holds a 100 percent interest in more than one million acres of exploratory rights in Colombia.

Connacher Oil and Gas Limited (CLL:TSX) of Calgary, Alberta was responsible for the creation and financing of Petrolifera and owns 26 percent of Petrolifera's shares. Connacher also provides management services to Petrolifera.

Event

In a note entitled “A Pure Play on South America's Oil & Gas Potential” Bouvier explains the reasons behind his Outperform, Above Average Risk rating and $11.00 target.

Takeaways From The Event

Petrolifera produced 7,563 boe/d in Q3/07. However, “As several of the company's plays are still in the exploration phase or at the beginning of a waterflood program,” Bouvier expects “meaningful production growth to occur in the second half of 2008 and early 2009 as the waterflood program takes effect and exploration efforts can be brought on-stream.”

Petrolifera has accumulated a significant land position (7 million net acres) in South America and will concentrate the bulk of its 2008 capital budget in Argentina (~54%) and Peru (~40%). In Bouvier’s opinion, the “Argentinean assets offer a good mix of exploration and development opportunities, while Peru and Colombia offer significant exploration upside.” He estimates Petrolifera has “positioned itself to add value at an above-average rate (25%+) over the next few years.”



Argentina

Puesto Morales – these concessions represent a 100% of Petrolifera’s current production of 7,563 boe/d. The block covers 125 km² and contains oil and natural gas fields. Till date, the company has drilled 38 wells in the area and only encountered one dry hole.

Rinconada block – is located east of the Puesto Morales block and covers 210 km². “The stratigraphic Sierras Blancas play at Rinconada is featured on seismic as a large structural high. PDP has not yet encountered the regional oil-water contact, suggesting a large aerial extent. The wells drilled have had hydrocarbon columns of 150+ feet (not necessarily net pay).”

Gobernador Ayala II – Petrolifera was awarded a 100% working interest in this 43,000-acre block in May 2007. “The block is offset by heavy crude oil (19° API) accumulations being developed by another producer.”

Vaca Mahuida – “In May 2007, PDP was awarded a 100% working interest in the 253,000 acre Vaca Mahuida concession, which is contiguous with the lands at Rinconada. With recent success at Rinconada, this block is considered highly prospective for crude oil from the Sierras Blancas formation. The company farmed out 50% of its work commitment and retained a working interest of 75%. In 2008, PDP plans to acquire approximately 1,100 square kilometers of 3D seismic, and to drill three exploration and four development wells.”

Puesto Guevera – a 100% working interest was granted to Petrolifera in September 2007 for his 165,560 acre concession. The block is on trend with and contiguous with the Vaca Mahuida Concession southeast of the Rinconada Block. As part of the bid, the company is committed to reprocessing existing 3D seismic coverage on the block, to shooting 100 square kilometers of new 3D seismic, and to the drilling of one 2,000 meter well within the first three years of the award date.



Peru

Maranon Block 106 – is 1,997,500 acres in size and encloses Corrientes, the largest oil field in the Marañon Basin with reserves estimated to exceed 200 million barrels of medium gravity crude oil and “cumulative production of 170 million barrels. Due to the environmentally sensitive nature of the area and remote location of the play, drilling costs are expected to be high, in the range of US$20 million per well to depths of up to 3,500 meters. PDP plans to complete a seismic program in the first quarter of 2008 with the first exploration well in 2009.” Block 106 will be drilled in 2009.

Ucayali Block 107 – is approximately 13,000 km² (3,205,000 acres) in size and on trend with the massive Camisea Field, which is “estimated to contain reserves in excess of 16 Tcf and 850 mmbbl of condensate and continues to be developed. Other significant fields in the basin include Aguatyia (440 Bcf and 20 mmbbl), Agua Caliente (15 mmbbl) and Maquia (15 mmbbl).” Petrolifera is currently shooting its 2D seismic program in Block 107 with encouraging preliminary results. The company is also advancing discussions to secure a suitable heli-transportable drilling rig for use in drilling a well or wells on Block 107 during the latter months of 2008 and into 2009.



Colombia

The company “holds a 100% ownership of the Sierra Nevada License in the region of the lower Magdelena Basin as well as a Technical Evaluation Agreement (“TEA”) at Turpial in the Middle Magdelena Basin.”

Sierra Nevada License – is 210,000 acres in size. Petrolifera is expecting to drill its first well in the second half of 2008 on the Sierra Nevada Licence. This concession is approximately 125 km ENE of the La Creciente gas discovery made by Pacific Stratus earlier this year, and is immediately north of the Guama concession that Stratus has recently acquired. Stratus has announced that it has over 600 Bcf of proved plus probable reserves and 800 Bcf of potential resources at La Creciente. The Sierra Nevada licence is immediately offset to the north (El Dificil field) and southeast (Chimichagua filed) by two 300+ Bcf fields. As obligated by the terms of the license, Petrolifera has “committed to reprocess 300 kilometers of seismic, the drilling of a 13,000-foot well within 18 months from signing (estimated cost of approximately US$5 million) and further ongoing geological studies.”

Turpial TEA – covers 113,000 acres “in the Middle Magdelena Basin and lies between the large oil accumulations of the Velasquez and Cocorna Fields (estimated ultimate recoverable crude oil reserves of ~200 million and 120 million barrels, respectively).”

Valuation and Price Target

“Our (2006) blow-down NAVPS (futures) of $5.52 does not include the upside potential of the company's waterflood program or its exploration upside in Argentina, Peru or Colombia. Given Petrolifera's significant land position and robust drilling inventory, we feel that a 2.0x P/NAVPS target multiple is reasonable, which implies a target price of $11/share (see Exhibit 4 for details).” However, Bouvier does acknowledge that “the company may be able to attain higher success rates” than he has assumed, thus providing additional upside to his risked valuation of $11/share.

Risks

Risks include oil prices, capital costs, currency levels, geopolitical risks, success with the drill bit and success of the company’s waterflood program.

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Best Ideas For 2008 From Canaccord Adams

On January 10th /08 the research team at Canaccord Adams released their Outlook and Top Picks for 2008.



While the research team at Canaccord Adams believes a US recession has already begun, they are optimistic about the continued expansion in China. They pinpoint the Chinese economy as the “primary driver of growth over the coming year” but believe that US economic growth will recommence in 2009.

Their key themes for 2008 include:

Infrastructure – The team at Canaccord Adams believes that with global infrastructure spending amounting to “tens of trillions of dollars over the next 5 to 10 years,” the demand for commodities, wireless telecommunications and engineering services will continue to persist.

Sustainability – In the face of a worldwide demand for commodities and pressure on governments to pay attention to environmental issues, there exists a push towards renewability and technical improvement in energy creation/consumption and recyclability of basic materials.

Eclipse of the US economy globally – With global Central Banks transferring assets out of US dollars in non dollar denominated assets, the team at Canaccord Adams argue that “Gold and other global currencies are inextricably on the rise over the long term,” as a result of “a transfer of wealth from west to east.”

Demographics – with the aging of baby boomers in OECD countries and the emergence of a younger generation in emerging economies, one is likely to see a “profound impact on healthcare, housing, trade, travel and tourism, savings, interest rates and the need for yield.” The report also sees global interest rates declining in the longer term.

Top Picks in Metals and Mining

Andina Minerals (ADM:TSXV)
Rating: Speculative Buy
Target Price: C$9.00

Rationale: Cheap on a valuation basis “(market capitalization per ounce of approximately $40/oz versus junior average of $90/oz), the open-ended nature of the existing 7.13 Moz resource which is expected to expand further on the next resource update” and the company is an M&A consolidation target.

Axmin Inc. (AXM:TSXV)
Rating: Speculative Buy
Target Price: C$1.50

Rationale: The company is a near term low cost gold producer with an expanding resource base. Axmin is set to release a feasibility study on its 100%-owned Passendro
gold project (Central African Republic), complete an environmental impact assessment for the Passendro project and begin construction of the project. Additionally, it is also scheduled to release resource updates on its Kofi gold project (Mali) and its Nimini Hills gold project (Sierra Leone).

Centenario Copper (CCT:TSX)
Rating: Buy
Target Price: C$12.50

Rationale: The company has considerable leverage to copper prices, plans to use a low risk conventional SX-EW heap leach processing, is a near term producer which is fully funded. Moreover, approximately 80% of the capital cost is based on a fixed price/unit basis, the water, power and a major portion of the required acid has been sourced already and investors are still exposed to exploration upside.

Lake Shore Gold Corp. (LSG:TSX)
Rating: Speculative Buy
Target Price: C$3.40

Rationale: With an excellent portfolio of exploration assets (Bazooka, Blakelock,
Canopener, Casa Berardi and Thunder Creek) and the recently acquired 1,500 tpd Bell Creek mill (and related facilaites), Lake Shore Gold is poised to become a “a central processing location for the Timmins West, Bell Creek and Vogel-Schumacher projects starting in H2/08.” Additionally, at Thunder Creek, the company has “identified high-grade Au mineralization along a host mafic/ultramafic contact; a similar geological setting to the Timmins West ultramafic zone.”

Tournigan Gold Corp. (TVC:TSXV)
Rating: Speculative Buy
Target price: C$4.80

Rationale: Tournigan has a resource of 600,000 ounces gold in the measured, indicated and inferred resource categories at its high-grade Curraghinalt gold project in Ireland, it has 1.37 million gold equivalent ounces in the measured, indicated and inferred categories at its Kremnica project in Slovakia, 4 uranium licenses in eastern Slovakia with a recently updated inferred resource at Kuriskova of 36.3 million pounds U3O8 based on 2006 drilling.

Yamana (AUY:NYSE, YRI:TSX, YAU:LSE)
Rating: Buy
Target price: US$21.25

Rationale: The company is cheaply valued “(P/NAV 1.18 versus senior/intermediate capped average of 1.46) and has a superior production growth profile.”

Top Picks in Oil and Gas

Breaker Energy (WAV.A:TSX)
Rating: Buy
Target Price: C$8.00

Rationale: The company has a strong balance sheet, consistently makes production targets, has access to a large undeveloped land base of over 300,000 acres, is growing production and is attractively valued “(trading at 4.7 times the 2008 debt-adjusted cash flow estimates, below the peer group average of about 5 times).”

Niko Resources (NKO:TSX)
Rating: Buy
Target Price: C$115.00

Rationale: Niko has an excellent balance sheet, has imminent production growth and F2009 will be Niko’s largest drilling year in its history.

Oilexco Incorporated (OIL:TSX, OIL:LSE)
Rating: Buy
Target Price: C$24.00

Rationale: As a consequence of discoveries made in 2007 and the acquisition of North Sea assets in late 2007, the company now has the potential to produce up to 80,000 bbl/d by the end of 2009. Moreover, the company has “further production upside potential due to future activities on the 72.7%-owned block containing the Coronado, Morro and Manhattan prospects as well as the remaining blocks that Oilexco was awarded in the 24th Licensing Round in early 2007.” The C$24.00 target price is based on 7.4 times 2008E debt-adjusted CFPS but only 3.3 times 2009E debt adjusted CFPS, using US$65.00/bbl oil.

Buy, Sell or Hold Oilsands Quest (BQI:AMEX)

On January 9th /08 TD Newcrest analyst Mark Friesen initiated coverage on Oilsands Quest.

Company Profile

Oilsands Quest Inc. is a public company (Amex: BQI) engaged in a variety of projects in the oil and gas industry in Western Canada with an emphasis on the oil sands. The company is aggressively exploring Canada's largest contiguous oil sands land holding, which is located in northeast Alberta and northwest Saskatchewan. The Company has made a significant discovery (Axe Lake) on its Saskatchewan lease (~120km NE of Fort Murray) and is at the stage of trying to prove commerciality of the resource.

For additional information, check out Oilsands Quest's November 2007 presentation

Event

In a note entitled “Raiders of the Lost Barrels” Friesen explains the reasons behind his Speculative Buy rating and US$5.75 twelve month target.

Takeaways From The Event

The company’s main attraction is its “large 100% WI largely unexplored land base (largest contiguous land block in the oilsands).” While less than 5% of the land package has been explored the company has already discovered “approximately 1.5 billion bbls of bitumen in place (our estimate of approximately 650 mmbbls recoverable).” However, Friesen cautions that “While this success cannot be extrapolated over the remaining unexplored land position, it seems reasonable that much more remains to be discovered on the company’s leases.” For instance, management has provided its own estimates of original bitumen in place for Axe Lake and the potential on its other acreage to the tune of 10 billion bbls. Friesen has “not assigned a value to this degree of resource potential” to his target price.

Friesen further adds that management plans to “continue to maximize the value of its assets by way of de-risking the reservoir through field tests and possibly even a pilot project.” Longer term, management intends to “bring a partner into Axe Lake for the ultimate development of the discovery.”

Valuation and Price Target

Friesen bases his target price on “a $/bbl of estimated discovered resource methodology.” Since according to the resource estimate provided by McDaniel & Associates as of October 31st/ 07, which calculated “a low estimate (P90) of 1.117 billionbbls of bitumen, a best estimate (P50) of 1.344 billion bbls and a High Estimate (P10) of 1.547 billion bbls, Friesen “assumed that 85% of 1.5 billion bbls fall within a potential development area and that of these resources a 50% recovery factor is achieved.”

Risks

Risks include the non-existence of “overlying Clearwater Shales (i.e., no cap rock),” at the Axe Lake discovery which essentially means that reservoir would be considered non producible. Additional risks include business risks of the company and industry, “including but not limited to: loss of key employees, drilling success, volatile commodity prices and operating costs, product supply and demand, government regulations and taxes, exchange rates, interest rates, environmental and weather concerns.

Buy, Sell or Hold Franco-Nevada Corp. (FNV:TSX)

On January 8th /08 Wellington West analyst Leonie Soltay released an update on Franco-Nevada Corp.



Company Profile

Franco-Nevada is a resource sector royalty and investment company with an established portfolio of mining and oil and natural gas royalties and certain equity interests in North America and Australia, which has historically produced stable cash flows. The Royalty portfolio consists of 190 royalty interests in precious and base metal companies and over 100 royalty and/or working interests in oil and gas properties.

Event

In a note entitled “Entering 2008 with Increased Confidence for Franco-Nevada” Soltay explains the reasons behind her Buy rating and $20.00 target.

Takeaways From The Event

“Franco-Nevada provides investors direct leverage to gold and energy prices with minimal exposure to cash and capital costs through the company’s portfolio of royalties.” This means that it is “a low-risk investment with ability to generate stable long-term cash flow to support growth and dividend payments.” Soltay notes that the company’s earnings are divided as follows; approximately 40% from precious metals and 40% from oil and gas. Furthermore, Soltay emphasizes the “blue-sky potential for the company through strengthening gold prices and Arctic Gas. In the event gold rises to US$1,000/oz we estimate a ~40% increase in cash flow (and ~20 to 25% upside to valuation), and if the development of Arctic Gas becomes more of a reality we estimate an additional $2 to $10+ per share to our $20/share valuation.”

Soltay is also bullish on the outlook for gold and mentions that “A US recession, heightened inflation pressures, additional rate cuts and further weakening of the US dollar are supportive for strong gold prices.”

Valuation and Price Target

Soltay increases her target from $18.00 to $20.00 “with the view that Franco-Nevada will benefit from strong gold prices (~30% of revenues are derived from gold royalties) and limited cost exposure in the coming year.” Her target price is a result of reapplying “2008E multiples to [her] 2009E estimates,” taking into account “gold price forecasts of US$700/oz in 2008E, US$675/oz 2009E, US$650/oz 2010 and US$600/oz long-term.” The outcome: an increase in the target price to $20.00 from $18.00, suggesting a “still reasonable 20.0x multiple to Franco-Nevada’s 2009E EV/EBITDA, relatively inline with the royalty peer group.”

So how bright is the future for Gold? "$2000/oz by 2010" says Robert McEwen, Chairman and CEO of US Gold (UXG:TSX, UXG:AMEX) in an interview on BNN – January 9th, 2008.

Investment Picks For 2008 From Versant Partners and Research Capital

Versant Partners



“Versant believes 2008 will be a challenging year after having several successful stock calls in 2007. Our 2008 picks give investors a broad selection across sectors. Generally, our picks have a higher return and higher risk profile vis-à-vis the index. We believe these picks will be strong performers versus the respective sectors and the portfolio of our selections will outperform the index."

Absolute Software (ABT:TSX)
Jan 4th Closing Price: C$ 17.34
Recommendation: Strong Buy
Target: C$ 26.00
Analyst: Tom Liston,

Allen-Vanguard (VRS:TSX)
Jan 4th Closing Price: C$ 4.89
Recommendation: Buy
Target: C$ 10.50
Analyst: Neil Linsdell

Arius Research (ARI:TSX)
Jan 4th Closing Price: C$ 1.05
Recommendation: Speculative Buy
Target: C$ 2.00
Analyst: Douglas W. Loe

BioMS (MS:TSX)
Jan 4th Closing Price: C$ 3.88
Recommendation: Buy
Target: C$ 12.25
Analyst: Douglas W. Loe

ExelTech Aerospace (XLT:TSXV)
Jan 4th Closing Price: C$ 0.23
Recommendation: Buy
Target: C$ 0.40
Analyst: Cameron Doerksen

Geologix Explorations (GIX:TSXV)
Jan 4th Closing Price: C$ 2.47
Recommendation: Speculative Buy
Target: C$ 4.25
Analyst: Ian T. Parkinson

Le Chateau (CTU.A:TSX)
Jan 4th Closing Price: C$ 13.85
Recommendation: Strong Buy
Target: C$ 19.75
Analyst: Neil Linsdell

Solium Capital (SUM:TSX)
Jan 4th Closing Price: C$ 2.15
Recommendation: Buy
Target: C$ 3.50
Analyst: Justin Kew

Thomson Creek Metals (TCM:TSX)
Jan 4th Closing Price: C$ 16.72
Recommendation: Buy
Target: C$ 24.25
Analyst: Ian T. Parkinson

Western Wind (WND:TSXV)
Jan 4th Closing Price: C$ 1.52
Recommendation: Strong Buy
Target: C$ 4.20
Analyst: Massimo Fiore

Research Capital



"Our portfolio of Top Investment Picks for 2007 provided an average return of 34.9% compared to an S&P/TSX Composite gain of 7.2% for the same period – an excellent level of performance by RCC’s analysts. Weighted by market capitalization, our portfolio return was a stellar 55.5% for 2007 – a more comparable performance metric to the S&P/TSX Composite Index.
While our investment choices for 2007 were heavily weighted in resource stocks, the resource stocks did not provide substantial gains to our portfolio. Instead, good stock selections in Industrial Products, Consumer Products, Technology, and Airlines/Aerospace provided superior investment returns for 2007.
This year, our portfolio is heavily weighted toward equities with market capitalizations of less than $400 million. We are confident that once again a portfolio of RCC’s Top Investment Picks will provide investors with superior total returns."

Aeromechanical Services Ltd. (AMA:TSX)
Closing Price: C$ 1.26
Recommendation: Buy
Target: C$ 3.00
Analyst: Jacques Kavafian

CY Oriental Holdings Ltd. (CYO:TSXV)
Closing Price: C$ 0.68
Recommendation: Buy
Target: C$ 2.25
Analyst: Stuart Morrow

Pan Orient Energy Corp. (POE:TSX)
Closing Price: C$ 15.16
Recommendation: Buy
Target: C$ 18.00
Analyst: Bill Newman

Hanwei Energy Services (HE:TSX)
Closing Price: C$ 5.45
Recommendation: BUY
Target: C$ 8.50
Analyst: John Chu

Foraco International SA (FAR:TSX)
Closing Price: C$ 3.25
Recommendation: Buy
Target: C$ 4.10
Analyst: Barry D. Allan

Geologix Explorations Inc. (GIX:TSX)
Closing Price: C$ 2.22
Recommendation: Speculative Buy
Target: N/A
Analyst: Wayne Hewgill

PolyMet Mining Corp. (POM:TSX)
Closing Price: C$ 3.24
Recommendation: Buy
Target: C$ 6.00
Analyst: Anthona Curic

VRB Power Systems Inc. (VRB:TSXV)
Closing Price: C$ 0.19
Recommendation: Buy
Target: C$ 1.40
Analyst: Jon Hykawy

Grey Island Systems International Inc. (GIS:TSXV)
Closing Price: C$ 0.33
Recommendation: Buy
Target: C$ 0.90
Analyst: Nick Agostino

BioMS Medical Corp. (MS:TSX)
Closing Price: C$ 3.89
Recommendation: Speculative Buy
Target: C$ 10.00
Analyst: Maria Luckevich

Don Coxe Conference Call & Video

For the Mr. Coxe's weekly Institutional and Client Call - Click Here

To read a PDF transcript of the January 4, 2008 call - Click Here (Courtesy BeEarly)

To watch a Don Coxe video interview on Canada's BNN TV on January 4, 2008 - Click Here (Courtesy BNN)

Buy, Sell or Hold TG World Energy (TGE:TSXV)

On January 3rd /08 Wellington West Capital Markets analyst Malcolm Shaw released an update on TG World Energy.



Company Profile

TG World Energy Corp. (TSX-V:TGE) is a Calgary-based, junior international oil and gas exploration company. On March 18, 2006, TG World Energy Inc., a wholly-owned subsidiary of TG World, entered into a major exploration project through the formation of a joint venture with Brooks Range Petroleum Corporation (“BRPC”). The BRPC / TG World Joint Venture was formed as an exploration strategic alliance covering a large area of mutual interest on the Alaskan Central North Slope. The Company’s indirect interest in the Alaska Joint Venture includes a 25 – 35% working interest in approximately 340,000 gross acres of lease lands and an Area of Mutual Interest under which additional lands may be acquired.
Through a wholly-owned subsidiary, TG World holds a 20% carried interest in the Ténéré Block, an oil and gas concession in the Republic of Niger, Africa, measuring 71,155 square kilometres (17.3 million acres). The Ténéré Block contains the northern half of the Termit - Ténéré Rift. The southern half is adjacent to the Agadem Block, where six oil discoveries and one gas discovery have been announced. CNPCIT, a unit of CNPC, holds the other 80% of the Ténéré concession and acts as operator of the project.

Event

In a note entitled “TG World Activity Set to Heat Up as the Big Freeze Descends on the North Slope” Shaw explains the reasons behind his Speculative Buy rating and $2.10 target.

Takeaways From The Event

TG World Energy is getting ready for their winter program on the Alaskan North Slope where Shaw estimates “a risked exploration value of $3.21/sh (~$14/sh in a full success case).”



TG World “plans to begin completion and testing activities on their North Shore #1 discovery in early January 2008 – we expect the well could flow anywhere from 1,000-2,000 bopd from the 70 foot-thick pay column identified in early 2007.” The North Shore #1 well reached a final total vertical depth of 10,319 feet (13,309 feet measured depth) in the Ivishak formation (See April 11, 2007 news release http://www.tgworldenergy.com/article.php?id=34 ). The well is approximately 1,100 feet west of and appears to be comparable to the 1974 Mobil Gwydyr Bay South No.1 well, which flowed at an average rate of 2,263 bopd on production test from the same formation. “TG World has a 35% working interest in this well and the entire Gwydyr Bay land package.”

Furthermore, Shaw writes “The company has identified two satellite structures near the ~2 mmbbl North Shore discovery that could hold 3-9 mmbbls of additional potential – both of these satellite structures could be reached from the existing North Shore pad" and he expects TG World to drill at least one of these satellite structures this winter.

Shaw expects the company to begin operations in the first week on January, weather permitting and as soon the icy roads allow for transportation of heavy equipment.

In Shaw's risked NPV/sh estimate of $0.33, he carries 5 mmbbls of gross recoverable resources (1.75 mmbbls net) based on his expectation that TG World successfully tests North Shore #1 and at least one of the two North Shore satellites proves to be a discovery. His valuation of North Shore is based on a total gross peak production rate of ~3,500 bopd (~1,000-1,200 bopd net to TG World) from 2 production wells coming on-stream in Q2 2009.

"Upon completion of testing activities at their North Shore #1 well, TG World is expected to begin drilling the Tofkat #1 well in their Titania prospect area. We calculate a risked value of $0.56/sh ($2.31 unrisked) based on 65 mmbbls of potential. “TG World has a 25% working interest in Titania has agreed to pay 35.7% of the ~US$10 million well costs.



In the Niger, "TG World hopes to drill a third well (following 2 unsuccessful wells drilled in 2007) into the Ténéré Block in 2008 and is currently waiting to evaluate 573+ kms of infill 2D seismic data before selecting a location to drill.” Shaw reminds investors that "historic wildcat exploration success in Central African rift basins in approximately 1 in 3." He also expects an update from the company regarding activities in the region in early 2008. Currently, Shaw does not assign any value to TG World's Niger assets but writes "each discovery in the 100 mmbbl range could be worth ~$1.00 per share net to TGE’s interests."

Valuation and Price Target

With a number of catalysts in TG World's near future, Shaw reiterates his”
Speculative Buy recommendation and $2.10 target." He believes the company’s stock price is "well-supported by the risked NPV of North Shore ($0.33/sh) and the company’s strong cash position of ~$30 million ($0.25/sh)." Furthermore, he adds "For the portfolio of prospects currently in our model, we estimate a risked exploration value of $3.21 per share for the 25.5 mmbbls of net risked potential."

Shaw expects "the Tofkat #1 well to be the most highly anticipated well of this year’s drill program, given the upside potential of $2.31/sh in a 65 mmbbl gross success case." Shaw also reminds investors that the company has "a number of other high-impact targets in the prospect inventory and that the company is fully funded for 2-3 seasons’ worth of drilling."

"Assuming a successful well test at North Shore #1, combined with what we believe is a strong probability that at least one North Shore satellite discovery will be made, we expect that TG World will be in a position to begin producing oil from North Shore in Q2 2009 at a net rate of 1,000 bopd."

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