Vanadium and Largo Resources (LGO: TSX-V)

Vanadium is primarily used as an alloying agent for iron and steel. It is also used in catalysts for the production of maleic anhydride and sulphuric acid. In addition, 13-15% of world vanadium production is used via titanium-vanadium alloys for aircraft hull construction.

Vanadium occurs in deposits of titaniferous magnetite, phosphate rock and uraniferous sandstone and siltstone, in which it makes up less than 2% of the host rock. Significant amounts of Vanadium are also found in bauxite and carboniferous materials, such as crude oil coal, oil shale and tar sands.

According to the U.S. Geological Survey, preliminary data of U.S vanadium consumption increased 4% from the previous year. Think about that for a second. Growth of 4% in a year when the United States is undergoing an economic slowdown, if not a recession. Furthermore, these are simply statistics from the United States, when you include the statistics from BRIC countries; demand for Vanadium is expected to increase at a compound annual growth rate of between 7% and 8% for the foreseeable future. Among the major uses of vanadium, production of carbon, full alloy and high strength low-alloy steels accounted for 25%, 30%m and 32% of domestic consumption, respectively. In 2007, U.S. steel production was expected to be 2% to 3% lower than that of 2006. Research from the U.S. Geological Survey indicates that vanadium pentoxide prices ranged from $5.70 to $8.30 and averaged $7.40 for 2007. Ferrovanadium prices ranged from $15.25 to $38.50 and averaged an estimated $19.60 for the year, about 4% higher than that of 2006.

According to an October 2007 research note put out by Patersons of Australia:

“The global market for vanadium is currently 56,000t of contained vanadium (V) per annum which equates to 70,000t of FeV80. Expected annual growth rates for the vanadium market of 7% imply an additional 4,900kt of FeV80 consumption coming into the market each year. New supply into the market over the next two years including Windimurra totals 10,300t of V, implying the market will at least remain in balance or even deficit should any supply side issues arise (which we regard as likely).”

The world’s largest producers of Vandium are China 29%, South Africa 25% and Russia 15%. The bulk of the Chinese and Russian supply is as co-product from magnetite iron sources and its growth is linked to expansion of co-production facilities which are relatively unique. Only Panzhihua and Chengde in China are known to have expansion plans (~8kt in 2009). This growth is needed to meet forecast market demand. Closure of small high cost and high polluting operations in China and increased export taxes will partially offset any planned growth there. The power shortages in South Africa have affected the supply side of vanadium.

The following excerpt is from the May monthly review of the Sevenoaks Opportunities Fund L.P. The 2 fund managers Kyle Mckay and Neil Andrew just happen to be 2 ex-Leeward hedge fund employees. Leeward hedge funds was setup by M. Brendan Kyne, a frequent guest on BNN (Canadian Financial News Network) that recently closed its doors as Mr. Kyne decided to devote his time to managing his own money. The Sevenoaks Opportunities (Hedge) Fund L.P. is up 18.30% year to date.

“Vanadium, much like molybdenum, is used to strengthen steel. Global supply of vanadium is roughly 100k tons, with South Africa accounting for roughly 39%. Power shortages have been rampant in South Africa and, to make matters worse, they are not expected to improve until 2012. Meanwhile, there are very few new vanadium mines set to come on-line over the next few years. Additionally, the near-term supply of vanadium is also likely to be affected by delays linked to the Chinese earthquake. With the demand for vanadium expected to grow 7-8% a year for the next few years, it is becoming increasingly likely that the global supply of vanadium will fall short of demand for the foreseeable future. In short, we believe that the price of vanadium has further upside and are beginning to position accordingly.”

Largo Resources (LGO: TSX-V)

Shares Issued (Basic) – 114 Million

Market Capitalization – C$ 136 Million

Institutional Ownership – 55%

Cash – C$ 1.5 Million (as of May 30, 2008)

Convertible Debt – C$ 4.5 Million



Largo has 2 advanced projects – the Maracas Vanadium project in Brazil and the Northern Dancer Tungsten Molybdenum project in the Yukon.

The Maracas project is the highest grade vanadium deposit in the world. It is located close to infrastructure in the mining friendly Bahia State in Brazil. The deposit has a NI 43-101 measured and indicated resource of 22.5 million tonnes of 1.27% vanadium pentoxide (V2O5). The deposit includes 8.7 million tonnes of 2% V2O5 (vanadium pentoxide) that is to be milled in the first 10 years and 406 million pounds of potential of Iron vanadium (FeV) (>$14 billion in metal value). Largo already has an off-take agreement with Glencore International, one of the world's largest suppliers of commodities and raw materials to industrial consumers. The deposit had a scoping study done in December 2007 and expects a complete feasibility study to be completed in July by Aker Solutions. The scoping study outlined an open pit operation with a low strip ratio of 3.33:1 and mill throughput of 1600 tonnes per day. With a targeted annual production of 5000 tonnes iron vanadium (FeV), estimated costs of < $5/lb, recovery rates of 63.4%, the scoping study calculated a NPV of $212 million at $5/lb vanadium pentoxide (V2O5). Largo is targeting production from the Maracas project in mid 2010.



Largo has plenty of upside solely from the Maracas project and the Northern Dancer Tungsten Molybdenum project in the Yukon is simply icing on the cake. The stock has has had a tremendous run in the short term and will probably move highger but I think time and general market malaise will allow one to pick up the stock around the C$ 1.20 level or slightly lower. I could be very very wrong about timing the stock so please do not rely on my comments. If you like the prospects for Largo Resources, Please - Please do your own due diligence.

Lastly, the stock was brought to my attention while I was watching an interview with Mr. Peter Imhof of Sprott Asset Management on BNN on June 18, 2008. Mr. Imhof picked Largo Resources (LGO: TSX-V) as one of his top picks. Click here to watch the entire interview (Fast forward to the 19 minute and 45 second mark to hear Peter talk about Largo Resources)

Investment Risks

Without limitations, some of the risks include reserves and resource risk, development risks, permitting risks, off-take agreements, commodity price risks, geo-political risks, exchange rates, weather related impacts etc.

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WGI Heavy Minerals (WG: TSX) and Passport Capital – The Gloves Come Off

Passport Capital Responds To The Sale Of Transworld Garnet India Limited for Approximately US$19.5 Million By WGI Heavy Minerals

On June 17, 2008 hedge fund Passport Capital put out a press release that requested the board of WGI Heavy Minerals to delay their scheduled June 25, 2008 annual shareholders' meeting “as a result of WGI's failure to provide full details regarding the previously announced Transworld Garnet India (Pvt.) Limited (TGI) transaction.”

Passport alleges that not only did WGI Heavy Minerals fail to disclose the complete details of the agreement reached with V.V. Mineral, but that the company turned down a US$25 million for the TGI assets (US$5.5 million higher than the V.V. Mineral agreement) from a credible third party in the heavy minerals industry.

Passport also feels that WGI has intentionally delayed the filing of documents with regard to the agreement with V.V. Mineral in an attempt to lock in as many shareholder votes as possible before the annual shareholders' meeting. Passport also asks a number of questions of the board, beginning with whether the transaction is subject to V.V. Mineral obtaining financing and regulatory approval? Their next question asks if there will be any regulatory approvals be difficult to obtain in India, a country where WGI has already stated that government interests have tried to seize WGI's holdings in the past? Lastly, Passport asks whether WGI attained a fairness opinion with regards to the TGI transaction?

Passport’s intentions are best summed up in the line “As a higher-priced transaction would allow for more cash to be distributed to shareholders, Passport asks whether WGI entered into the best transaction possible or did it enter into a transaction with V.V. Mineral in a hasty attempt to placate shareholders in the circumstances of the current proxy contest?” Passport goes on to say that they are ‘value investors’ and are not attempting to arrest control of the board or the cash resources of WGI. The press release says “If Passport's director nominees are elected, Passport will have no greater ownership or financial interest in WGI than it has today and no greater ability to determine the outcome of future board elections. The only way that Passport can benefit from the election of its director nominees is by increasing WGI's share price, an improvement that will benefit all shareholders.”



Beach Minerals Company (BMC) - The Third Part Referred To By Passport Capital

On June 18, 2008 a company known as Beach Minerals Company (BMC) put out a press release stating that they had presented WGI Heavy Minerals with a “Cash Offer Option for USD 20 million” in December 2007. On April 22, 2008 BMC says that they sent an amended offer – “Cash offer for USD 25 Million USD to WGI Board and also assured a supply quantity of "60,000 M/T of Materials per annum for period of 3 years, which can be renewed further.” BMC asks of shareholders in WGI Heavy Minerals to investigable why the company’s board sold their Indian Subsidiary TGI at 19.5 Million USD, when BMC had already offered for 25 Million USD for the same?

BMC’s "Letter of Intent" and "Supply Agreement" referred to in the press release can be accessed at http://files.newswire.ca/730/LetterofIntent.pdf and http://files.newswire.ca/730/LetterofIntent2007.pdf

WGI Heavy Minerals Responds To Passports News Release

Finally, after the markets closed on June 18, 2008 WGI Heavy Minerals (WG: TSX) issues a press release responding to Passport Capital’s questions and allegations. The press release says that Passport Capital LLC “contains a series of false statements as part of its efforts to gain control of the WGI Board of Directors at the Company's June 25, 2008, Annual General Meeting.”

The board of WGI Heavy Minerals responds to Passport’s press release by saying that during the process of auctioning of its Transworld Garnet India (Pvt.) Limited assets, it did not “receive an offer superior to the V.V. Mineral transaction. No other offer or proposal was received that met the four criteria to maximize value for shareholders established by the current Board at the outset of the TGI sales process and previously disclosed by the Company.”

The criteria were:

“1. Maximum cash proceeds. This was achieved through approaches to all likely bidders in the global industry and a competitive bidding process which established the fair price for the asset.

2. A sales and distribution agreement that would provide a large and steady supply of high-quality heavy minerals for WGI's international distribution network. Only the V.V. Mineral offer provided for this.

3. That the transaction not be conditional on financing. As WGI has repeatedly stated, the V.V. Mineral offer has no such conditions; other bidders did.

4. A high likelihood that the sale could be completed within a reasonable time. V.V. Mineral provided assurances that it could complete the transaction; other bidders did not.”

Pertaining to the US$25 million offer mentioned by Passport Capital, the board of WGI said that the offer was a non binding porospa that was rejected because the “cash component was only US$10 million; the third party had no demonstrated any ability to deliver the volume quality and dependability required for the sales and distribution agreement, based on WGI's past experience with it; the third party had no financing in place; the third party could not provide assurances that it could complete its proposed transaction within a reasonable period.”

With respect to Passport’s allegations of WGI intentionally delaying the filing of public documents relating to the sale of Transworld Garnet India (Pvt.) Limited, the board of WGI replies by saying that it “issued a news release with all material facts promptly after signing of the purchase agreement.” They also mention that a material change report and copy of the purchase agreement were filed on SEDAR before Passport issued its news release and 3 days before the time allotted by securities regulations.

Laslty, the WGI press release reiterated that the company’s annual meeting remains scheduled for 10:a.m. Toronto time on June 25, 2008. However, the location has been changed to the University Ballroom East in the Park Hyatt Hotel, 4 Avenue Road, Toronto, Ontario.

So the dance begins. While both sides seem to have credible points, the third party to this dispute - Beach Minerals Company (BMC), i.e. the one that Passport alleges made a superior offer does say that its offer is a “Cash offer for USD 25 Million USD to WGI Board and also assured a supply quantity of "60,000 M/T of Materials per annum for period of 3 years, which can be renewed further.” I haven’t delved into the nitty gritty of the deal, so I can’t comment much further but on the surface the offer does look superior. However, WGI does make some valuable points about this offer being subject to financing and that the company could not provide assurances that it could complete its proposed transaction within a reasonable period. The key to identifying if this were the right deal for WGI Heavy Minerals depends on whether or not WGI attained a fairness opinion on the deal.

If the board of WGI Heavy Minerals insists of having their annual meeting on June 25, 2008 – we might see some sort of resolution to this dispute depending on which way shareholders place their votes. In the meantime however, given that WGI has announced this US$0.80 special distribution to WGI shareholders, the share price has moved up greater than 50%, reversing its year long downtrend. Regardless of the outcome of this dispute, I like that Passport Capital is trying to unearth value for itself and in turn shareholders of WGI Heavy Minerals.

AGF Funds and Erdene Gold Inc. (ERD: TSX)

Event

June 12, 2008 AGF Funds announced:

“that as a result of the acquisition of 5,000,000 shares, AGF, on behalf of its clients, now has direction over 7,186,600 shares (or 10.188% of the outstanding shares calculated on a fully diluted basis) of Erdene Gold Inc. (ERD.T).”

About AGF Management Limited

AGF Management Limited is one of Canada's premier investment management companies with offices across Canada and subsidiaries around the world. AGF's products and services include a diversified family of more than 50 mutual funds, the evolutionary AGF Elements portfolios, the Harmony asset management program, AGF Asset Management Group services for institutional and high-net-worth clients, as well as AGF Trust GICs, loans and mortgages. With approximately $52 billion in total assets under management, AGF serves more than one million investors. AGF trades on the Toronto Stock Exchange under the symbol AGF.B.

About Erdene Gold (ERD: TSX)

Erdene Gold Inc. is a diversified mineral exploration and development company with projects focused on high-growth commodities and near-production assets. In addition to the multiple exploration projects in Mongolia, , the company has North American industrial mineral and coal projects with near-term cash flow potential.

The North American, near-term cash flow projects include a 25% interest (partnered with Xstrata Coal - 75%) in the Donkin coal project in eastern Canada, currently at the prefeasibility stage. In addition, Erdene has royalty agreements with JM Huber Corporation and Ready Mix USA as operators and developers in the southeast U.S. for the Company’s kaolin clay and aggregate projects. Erdene continues to actively explore for additional industrial minerals opportunities in North America that are located to provide strategic market advantage to the growth areas of the eastern seaboard of the U.S.

The company's Mongolian exploration properties are focused on base metals (molybdenum and copper) led by the Zuun Mod molybdenum project, precious metals (gold) and energy (coal). Erdene has also established strategic alliances and joint ventures with industry leaders such as Xstrata Coal who are fully funding the Company’s Mongolia coal projects through to feasibility. The base and precious metal projects are operated by the company's experienced exploration team.

With regards to Erdene’s 100% owned Zuun Mod Molybdenum Project in Mongolia, on May 28, 2008 the company announced its first National Instrument 43-101 (NI 43-101) compliant resource estimate for the project which included:

“a Measured and Indicated Resource of 467 million metric tonnes ("Mt") at an average grade of 0.044% molybdenum ("Mo"), at a cut off grade ("cog") of 0.03% Mo equating to 453 million pounds (Mlbs) of contained Mo metal. In addition, there are 141 Mt of Inferred Resources at an average grade of 0.039% Mo equating to a further 121 Mlbs of contained Mo metal. The Mineral Resource starts within 18 metres of surface and the mineralization remains open at depth.”

An independent preliminary assessment is ongoing and a drill is on site is preparation for additional drilling. The company expects a pre-feasibility study to begin on receipt of the preliminary assessment in mid 2008.

Investment Risks

Without limitations, some of the risks include reserves and resource risk, development risks, permitting risks, off-take agreements, commodity price risks, geo-political risks, exchange rates, weather related impacts etc.

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Gold Wheaton – The Gold Counterpart of Silver Wheaton

Event

June 12, 2008 – Investors in a shell called Kadywood Capital Corp. (KDC.H: TSX-V) were informed of a change in the name of their company to “Gold Wheaton.” Furthermore, the new Gold Wheaton announced that it had entered into its first two transactions to acquire by-product gold and precious metal streams from producing and developing mines. The Chairman and Chief Executive Officer of Gold Wheaton, David Cohen introduces Gold Wheaton as a “pure play on gold and related precious metal by-product production.” Gold Wheaton “will have immediate strong income and cash flow and it is our intent to grow this business aggressively. Upon completion of these initial two transactions and the proposed equity financing, Gold Wheaton will be well positioned for growth with current cash flow and a project pipeline,” said Cohen.



Takeaways From The Event

Gold Wheaton’s first transaction included an agreement to purchase 50% of the contained gold, platinum and palladium in ore mined and shipped from certain of the existing mining operations wholly-owned by FNX Mining Company Inc. The mining operatiosn include: “PM and 700 Deposits at the McCreedy West Mine; (ii) the Levack Footwall Deposit, Rob's Zone and 1900 Zone at the Levack Mine; and (iii) the 2000 and North Deposits at the Podolsky Mine.” This transaction will cost Gold Wheaton “Cdn$400 million payable in cash, Gold Wheaton common shares, Gold Wheaton warrants and the lesser of (a) US$400 per gold equivalent ounce (subject to an inflationary adjustment three years after the anniversary date) and (b) the then prevailing market price per ounce of gold. The Cdn$400 million will be satisfied by the payment of Cdn$175 million in cash, the issue of 350 million Gold Wheaton common shares valued at Cdn$175 million and Cdn$50 million which will be paid six months following the closing of the FNX Gold Purchase Transaction by the issuance of Gold Wheaton warrants on the same terms and conditions as the warrants to be issued pursuant to the equity financing referred to above.”



The company’s second transaction included an agreement with Redcorp Ventures Ltd. Whereby Gold Wheaton has agreed to purchase 100% of the life of mine payable gold production from Redcorp's Tulsequah Chief Mine located in British Columbia and any other mines within a defined project area. Redcorp is currently constructing its Tulsequah Chief Mine and the mine is expected to begin production in latter half of 2009, producing approximately 50,000 ounces of gold per year. This transaction will cost Gold Wheaton “US$90 million plus US$400 per ounce produced, subject to an inflationary adjustment. The upfront payment to be made to Redcorp will be payable as to US$10 million on receipt of the required material environmental and operating permits and the balance on a drawdown basis once Redcorp has expended all funds (other than US$80 million) required to complete construction and commissioning of the Tulsequah Chief Mine and upon satisfaction of certain funding conditions. Gold Wheaton will also pay an ongoing per ounce payment to Redcorp equal to the lesser of (a) US$400 per ounce (subject to an inflationary adjustment in the fourth year after production commences) and (b) the then prevailing market price per ounce of gold. Gold Wheaton will not be required to contribute to any capital or exploration expenditures in respect of Redcorp's mining operations, over and above the upfront payment.”



According the Gold Wheaton’s press release, through the two transactions with FNX Mining and Redcorp Ventures, the company expects to:

“purchase approximately 30,000 ounces of gold equivalent production in 2008, growing to approximately 162,000 ounces in 2010. These two initial transactions should result in Gold Wheaton's annual production averaging approximately 100,000 gold equivalent ounces for the next ten years.”



Lastly, the press release reported Gold Wheaton’s intentions to raise Cdn $200 million equity financing on a best efforts basis, by engaging Paradigm Capital Inc., as lead agent, together with Canaccord Capital Corp. and GMP Securities L.P. as co-bookrunners and a syndicate including BMO Capital Markets and Brant Securities Limited. The company expects to sell 400 million subscription receipts to raise the Cdn$200 million at a price of Cdn $0.50 per subscription receipt. Insiders have committed to purchase over Cdn $30 million of the offering. Each Cdn$0.50 Subscription Receipt will entitle the holder to acquire one Gold Wheaton common share and one-half of one common share purchase warrant of Gold Wheaton, without payment of additional consideration. Each whole Gold Wheaton warrant will be exercisable for one Gold Wheaton common share at a price of Cdn$1.00 for a period of five years after the closing date. The offering is expected to close on or about July 8, 2008. Pursuant to the closing of the offering, Gold Wheaton will have approximately 808 million common shares outstanding (on an undiluted basis) of which approximately 43% will be held by FNX Mining.

So why am I bringing this company to your attention?

Well, it’s mainly due to the involvement of one man – Frank Giustra. Mr. Giustra has put together a number of very successful resource companies and his network of connections, expertise and experience are second to none in the industry. The press release says “At or prior to the closing of the FNX Gold Purchase Transaction, the board of directors of Gold Wheaton will be reconstituted to include four directors, David Cohen, Frank Giustra, Terry MacGibbon and Francesco Aquilini.”

Frank Giustra is currently President and Chief Executive Officer of Fiore Financial Corporation and was former Chairman of Endeavour Financial and Yorkton Securities Inc. Mr. Giustra was also a founder of Wheaton River Minerals Ltd. and Lions Gate Entertainment Corp. He was also recently behind the creation of company Peak Gold that of late announced a 3-way merger with Metallica Resources and New Gold, creating Canada’s newest intermediate gold producer. Mr. Giustra currently holds in excess of 10% of Gold Wheaton’s (currently Kadywood Capital Corp. (KDC.H: TSX-V) outstanding shares, according to SEDI filings.

Not to leave out the other members of Gold Wheaton’s management team, David Cohen co-founder and Chairman of Eastern Platinum Ltd. and former President and Chief Executive Officer of Northern Orion Resources Inc.

Terry MacGibbon is the founder in its current form, the former President and Chief Executive Officer and currently the Executive Chairman of FNX. He is a registered professional geologist with over 35 years of international experience in the mining business and is a certified director, Institute of Corporate Directors, and a director of several Toronto Stock Exchange listed companies.

Francesco Aquilini is Managing Partner of Aquilini Investment Group, a private real estate investment firm with diverse holdings that include the Vancouver Canucks NHL franchise.

Kathleen Butt is a Chartered Accountant with over 15 years experience in the resource sector and a previous tax manager at Ernst & Young LLP (Vancouver).

My Take

I don't know if now is the correct time to purchase shares of Gold Wheaton (the stock is currently halted) but first glance tells me that this company could grow to be the gold counterpart to Silver Wheaton (SLW: TSX). I say I dont know if this is right time to purchase shares in Gold Wheaton due to the overhang of the massive financing. However, once word gets out about the prospects and caliber of management team, I'm sure a number of newsletter writers will cover the stock as they did with Mr. Giustra's previous company - Peak Gold. Once word gets out - the stock is off to the races. I do urge everyone to keep in mind that after the financing (considering the share price remains at today's closing of $0.60/share) the company will have an approximate market cap of $635 million.



Investment Risks

Without limitations, some of the risks include reserves and resource risk, development risks, permitting risks, off-take agreements, commodity price risks, geo-political risks, exchange rates, weather related impacts etc.

If you like this post, please take a moment to suscribe to my feed or Stumble/Digg it using the appropriate links at the bottom of this post! You can also post a link to it on relevant forums/bullboards. Also, feel free to debate, discuss or comment on the any of the stocks you see on this page in the comments section.

Note: The graphics are courtesy of a Gold Wheaton investor presentation that can be found on www.goldwheaton.com

Private Placement – Potash North Resource (PON: TSX-V)

Official Website: http://www.potashnorth.com/



Company Profile

Potash North Resource Corporation is a junior resource company focused exclusively on the exploration, evaluation and development of 2 subsurface potash permit applications (KP416 and KP417) totaling 185,000 acres in the Saskatchewan Potash Basin, immediately adjacent to Mosaic and Potash Corp.’s producing Esterhazy operations and 45 KMs north of Potash Corp.’s Rocanville Mine. These permit application areas have been named the “Potash North Project.”

Historical drilling on the permit application areas has yielded encouraging results. Global potash production is currently dominated by a few majors who are running at or near full capacity. There have been no new potash mines on the prairies in almost 40 years.

As exploration and evaluation of the permit application areas are taking place, Potash North intends to adopt a “top down” approach, forming financial alliances with international buyers to maximize leverage for shareholders.

Event

On June 11, 2008 – the TSX Venture Exchange Daily Bulletin reported that the TSX Venture Exchange had accepted for filing documentation with respect to a Non-Brokered Private Placement announced May 12, 2008 by Potash North Resource Corp.

Details of the Private Placement

Number of shares: 24,000,000 flow-through shares
Warrants: 24,000,000 share purchase warrants to purchase 24,000,000 shares
Number of Placees: 80 placees
Purchase Price: $0.35 per share

Private Placement Participants

0783648 B.C. Ltd. (David Lyall) for 150,000 shares (Vice President of Institutional Trading and Sales, Director of Haywood Securities)

Seth Allen for 30,000 shares (used to be an Investment Advisor with Cannacord, not sure if he still is)

Peter M. Brown for 150,000 shares (Chairman and Director of Canaccord Capital)

William Burk for 75,000 shares (Head of Institutional Equity Trading at Salman Partners)

Tom English for 96,150 shares

Cal Everett for 100,000 shares (Institutional Sales with PI Financial Corp.)

Marko Ferenc for 10,000 shares

Raymond E. Flood for 175,000 shares (Director and Founding President of Ivanhoe Mines)

Matthew Gaasenbeek for 150,000 shares (Head of Capital Markets, North America for Canaccord Adams)

Colin Gibson for 300,000 shares

Darcy Higgs for 7,000 shares (Vice President of Retail Sales at Haywood Securities)

Hesham Magid for 65,000 shares

Tahani Abdel-Magid for 20,000 shares

Erminia Minicucci for 100,000 shares

Christian Owen for 100,000 shares

Kirsten Pejman for 75,000 shares

Potash One Inc. for 6,583,850 shares (needs no explanation – go to http://www.potash1.com/s/Home.asp for more information)

Rahim Rajwani for 30,000 shares

Warren Robinson for 100,000 shares

Colin Rothery for 60,000 shares

Sabina Saemann for 10,000 shares

Robert Sali for 1,000,000 shares (member of the board of directors of Vostok Nafta Investment Ltd - an investment company with the business concept of using experience, expertise and existing network to identify and invest in assets with considerable value growth potential, with the focus on Russia and the other CIS states and Chaired by Lukas H. Lundin)

Martin Tielker for 10,000 shares (Investment Advisor with Haywood Securities)

James P. Veitch for 100,000 shares

Ivano Veschini for 100,000 shares (Investment Advisor with Bolder Investment Partners)

[If anyone knows the significance or current occupational status of any of the names that I have not addressed, please leave a comment or send me an email]

Investment Risks

Without limitations, some of the risks include reserves and resource risk, development risks, permitting risks, off-take agreements, commodity price risks, geo-political risks, exchange rates, weather related impacts etc.

If you like this post, please take a moment to suscribe to my feed or Stumble/Digg it using the appropriate links at the bottom of this post! You can also post a link to it on relevant forums/bullboards. Also, feel free to debate, discuss or comment on the any of the stocks you see on this page in the comments section.

Update on WGI Heavy Minerals (WG: TSX)

Event

A week after receiving a dissident proxy circular from hedge fund Passport Capital (see prior post “WGI Heavy Minerals (WG: TSX) and its Activist shareholder – Passport Capital" June 3, 2008), WGI Heavy industries announces today that it has entered into an agreement to sell their investment in Transworld Garnet India (Pvt.) Limited for a cash consideration of 836,000,000 Ruppees, approximately US $19.5 million, to V.V. Mineral, of Tamil Nadu, India. WGI's share of the proceeds is approximately US $17.3 million consisting of its 74% equity interest and the repayment of debt financing.

The news release also says that WGI has “signed a three-year distribution agreement with annual renewals with V.V. Mineral covering garnet, ilmenite and other minerals that may be present in the beach sands mined by V.V. Mineral. The distribution agreement provides WGI with an assured minimum supply of 60,000 metric tons annually of garnet, which is a significant increase over current production rates. Garnet grades and quality levels will be consistent with material currently supplied to WGI by TGI. Additional quantities of garnet will be supplied as V.V. Mineral's capacity expands. In addition, WGI will act as a broker for the sale of V.V. Mineral's ilmenite products and will have first opportunity to negotiate contractual arrangements for other minerals with V.V. Mineral once production begins.”

“The Board of Directors of WGI is currently intending that, following the closing of the sale to V.V. Mineral, the Board will distribute US $0.80 per share in cash to the Company's shareholders.”



Takeaways From The Event

Whether or not this announcement was precipitated by Passport Capital’s dissident proxy to replace WGI’s directors and management with directors of its own choosing, I do not know. I do believe that pressure from Passport Capital on the company’s management is a good thing. With WGI Heavy Minerals (WG: TSX) currently trading at the $0.80 level and the company announcing a cash distribution of US $0.80 per share, I smell an opportunity.

Link to news release: http://www.newswire.ca/en/releases/archive/June2008/11/c2712.html

Investment Risks

Without limitations, some of the risks include reserves and resource risk, development risks, permitting risks, off-take agreements, commodity price risks, geo-political risks, exchange rates, weather related impacts etc.

If you like this post, please take a moment to suscribe to my feed or Stumble/Digg it using the appropriate links at the bottom of this post! You can also post a link to it on relevant forums/bullboards. Also, feel free to debate, discuss or comment on the any of the stocks you see on this page in the comments section.

Company Update on Vale (RIO: NYSE)

Event

On June 10, Companhia Vale do Rio Doce (Vale) announced that its management had approved and will submit to the Board of Direcotes a proposal of a public offering of common shares and preferred class A shares, with a maximum value of US$ 15 billion. The company also said that is the offering is completed, the net proceeds will be used for general corporate purposes, which include the finance of its organic growth program based on an investment plan of US$ 59 billion, strategic acquisitions and increased financial flexibility.



Company Profile

Companhia Vale do Rio Doce (Vale) is a diversified metals and mining company. The Company is a producer and exporter of iron ore and pellets and a producer of nickel. It also produces copper, manganese, ferroalloys, bauxite, precious metals, cobalt, kaolin, potash and other products. Directly and through affiliates and joint ventures, the Company has investments in the aluminum, coal, energy and steel businesses. Vale operates, among others, eight hydroelectric power plants in Brazil and two in Indonesia. The Company is headquartered in Rio de Janeiro, Brazil.

Click here to view previous coverage of Vale (RIO: NYSE) from May 9, 2008

Takeaways From The Event

Responding to the announcement from Vale, Citigroup analyst Alexander Hacking writes “Vale is seeking approval to issue $15bn of new equity, which seems destined for M&A. Vale’s shares are down 5% at time of writing. Yet, today’s announcement merely confirms what we already knew one month ago (i.e. more M&A is coming); we have no new information on targets.” Hacking sees M/A as the most likely use for the funds, given the company’s low debt ratios and that projected cap-ex spending is well below operating cash flows.

Hacking finds the $15 billion figure a little low, since a run at Freeport McMoran Copper and Gold, which is he thinks is Vale’s most likely target, would likely then require greater than $50 billion of debt to avoid a second public offering. Furthermore, Hacking does not see Xstrata as a target given relative shares prices. Hacking lists Vale’s stated preferences to be: coal, copper, aluminum (and nickel if allowed). In that regard, Hacking sees Freeport as the most likely pick, given Vale’s preference to add more copper to its portfolio. Hacking sees Alcoa as a less likely target given the nature of its assets. Fording Coal could be a possible target, but there complications arising from its relationship with Teck Cominco, which in itself is not for sale (in Hacking’s opinion).

Hacking writes that he was surprised Vale’s wasn’t more aggressive in pursuing Macarthur Coal or even Bumi.

Lastly, he writes that other potential M/A ideas could involve gold, potash or steel but “these all seem unlikely, and inadvisable, for a variety of reasons.”

Hacking maintains his Buy/Medium Risk recommendation and US$48 per share target for Vale.

Investment Risks

Without limitations, some of the risks include reserves and resource risk, development risks, permitting risks, off-take agreements, commodity price risks, geo-political risks, exchange rates, weather related impacts etc.

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Private Placement – Uranium North Resources (UNR: TSX-V)

Official Website: http://www.uraniumnorthresources.com/s/Home.asp



Company Profile

Uranium North Resources is exploring a diverse property portfolio of over 3 million acres in northern Canada. This distinguishes Uranium North as the only junior uranium explorer with significant and prospective land holdings in what the company believes are Canada's three most prospective basins for high grade uranium deposits, the Athabasca, Thelon and Hornby Bay Basins.

Event

On June 9, 2008 – the TSX Venture Exchange Daily Bulletin reported that the TSX Venture Exchange had accepted for filing documentation with respect to the first tranche of a Non-Brokered Private Placement announced May 7, 2008 by Uranium North Resources.

Details of the Private Placement

Number of shares: 12,327,031 flow-through shares
Warrants: N/A
Number of Placees: 69 placees
Purchase Price: $0.30 per flow-through share

Private Placement Participants

Jeff Willis for 100,000 shares (Investment Advisor with Haywood Securities)

Patricia Tanaka for 10,000 shares (Chief Financial Officer for Uranium North)

Stewart Swette for 35,000 shares (Investment Advisor with Haywood Securities)

Alfred Stewart for 200,000 shares (Geological Consultant with Cordilleran Resources Management Group)

Kerry Smith for 100,000 shares (Senior Mining Analyst with Haywood)

Robert Sheppard for 100,000 shares (Vice President & Investment Advisor with Haywood)

Tin Seltzer for 112,666 shares

Catherine Seltzer for 200,000 shares (Chairman of Pacific Rim Mining, Bear Creek Mining and founder of Arequipa Resources)

Pacific Investment Corp. for 600,000 shares

James MacDonald for 333,333 shares

Michael Lee for 5,000 shares

Scott Hunter for 200,000 shares (Investment Advisor with Haywood Securities)

Darcy Higgs for 175,000 shares (Vice President & Investment Advisor with Haywood)

Daniel Faure for 100,000 shares (Director, Technical Advisor to Uranium North)

Nancy Curry for 20,000 shares (VP of Corporate Communications for Diamonds North Resources)

Atsuko Chuman for 50,000 shares

Brian Christie for 25,000 shares (Mining Analyst with National Bank Financial)

Bolder 08 FT LP for 333,333 shares (Limited Partnership most likely run by C. Channing Buckland – mining financier and founder of Bolder Investment Partners)

Risks

Without limitations, some of the risks include reserves and resource risk, development risks, permitting risks, off-take agreements, commodity price risks, geo-political risks, exchange rates, weather related impacts etc.

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Buy, Sell or Hold Extract Resources (EXT: TSX)

Event

On May 29, 2008 Eric Zaunscherb of Haywood Securities initiated coverage on Extract Resources (EXT: TSX)




Company Profile

Extract Resources Limited is based in Perth, Western Australia. The Company's primary business focus is in the African nation of Namibia, in which it has a large land position of 2653km2 over several licenses. While the projects have various mineral occurrences, Extract's main objective is based around the potential of the uranium (U3O8) rich provinces in Namibia, particularly within the alaskite belt that hosts the world class Rossing Mine.

Takeaways From The Event

Zaunscherb writes that Extract’s 100% owned Husab project combines scale, exploration, technical upside and is a must own for investors and growing uranium producers. The Husab project is located in Namibia: “one of the best jurisdictions for uranium development” says Zaunscherb. Namibia is table, democratic and pro development. Extract has made a discovery in the Rössing South project, south of the world class Rössing mine. The Husab prohect is scheduled to deliver an initial resource based on 30,000 metres of drilling in July from the Ida Dome prospect but by year end Zaunscherb expects “resources from both Ida Dome and the new Rössing South prospect trending towards our modelled resource of 115 million pounds of U3O8 in all categories.” In October 2007, a scoping study on the Ida Dome prospect highlighted the potential for an open pit mine with robust economics; “producing an average 2.9 million pounds U3O8 per annum at a cash cost of US$29 per pound, life of mine.”

With regards to valuation, Zaunscherb estimates a ‘conservative’ project NAV of $242 million “with considerable uncaptured upside from an exploration, technical and financial perspective.” Zaunscherb writes that Extract is trading at approximately “0.8x project P/NAV as compared to 0.9x for development peers.” Assuming, a resource of 115 million pounds of Uranium, Exta=ract is trading at an “Adjusted Enterprise Value per pound of resource of $4.01 vs. a mean of $7.35 for peers – the Company’s exploration success at Rössing South remains insufficiently recognized by the market.”

Investment Risks

Without limitations, some of the risks include reserves and resource risk, development risks, permitting risks, off-take agreements, commodity price risks, geo-political risks, exchange rates, weather related impacts etc.

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Buy, Sell or Hold UEX Corporation (UEX: TSX)

Event

On June 4, 2008 David Talbot of Dundee Securities initiated coverage on UEX Corporation (UEX: TSX)



Company Profile (Courtesy UEX Corporation website)

UEX Corporation is a Canadian uranium exploration company formed under agreement between Cameco Corporation and Pioneer Metals Corporation. UEX began trading on the Toronto Stock Exchange in July 2002 and is an active explorer in the Athabasca Basin in northern Saskatchewan, which is the most important uranium-producing district in the world, accounting for approximately 30% of global primary uranium production in 2005. UEX has a total of 19 projects either 100%-owned, joint ventured or under option totaling approximately 390,000 hectares (962,000 acres) located in the eastern, western and northern perimeters of the Athabasca Basin.

UEX operates its 100%-owned Hidden Bay Uranium Project, its Riou Lake Uranium Project and the Black Lake Uranium Project, which is a joint venture with AREVA Resources Canada Inc. ("AREVA", formerly COGEMA Resources Inc.), 87.2% UEX - 12.8% AREVA as of December 31, 2006. UEX has an additional 10 projects under option from AREVA, which includes the Shea Creek Uranium Project, and one project under option from the Japan-Canada Uranium Company, Limited, all of which are operated by AREVA.

Takeaways From The Event

With an initial budget of $30 million and a further ~$10 million from Areva, UEX is primed to report significant news in 2008 including “explorations results, resource estimates, a feasibility study and likely a Project Description to kick off permitting.”

Talbot writes that UEX’s Horseshoe, Raven and West Bear deposits have NI 43-101
compliant resources of 1.6 million pounds U3O8 plus 23 million pounds of historical resources within close proximity to two active uranium mills.” As drilling continues to expand these deposits. Talbot expects to see better grades and increased ounces. In fact, Talbot hypothesizes that “Hidden Bay has the potential to produce almost 40 million pounds U3O8 beginning around 2013 given positive feasibility studies and permitting.”

UEX’s Shea project is made up of 3 world class uranium deposits - Anne, Kianna and Colette. While no resource estimates are available for these projects in the public sphere, Ta;bot infers that Shea Creek could potentially hosts between “118 and 146 million pounds of U3O8 at grades exceeding 3.0%.” UEX is currently focussed on expanding the footprint of the deposit. He writes “Preparations are being made for the sinking of one to two 950m deep shafts and development to support underground resource delineation at Shea Creek. Scoping, geotechnical and hydrological studies are underway with the expectation of filing a Project Description to kick start permitting by year end. Mine construction likely won’t come cheap, but the project could have lower operating costs as grade is king and rock quality appears to be an improvement over many of the other large Athabasca deposits. Dundee hypothesizes that Shea Creek has the potential to produce ~10 million pounds U3O8 annually beginning around 2017 given positive feasibility studies and permitting.”

In the short term, Talbot sees developments at Hidden Bay providing more of a catalyst to UEX’s stock price, notwithstanding “high expectations from Shea Creek. Potential operations at Hidden Bay have the ability to vault UEX into uranium producer status. This cash flow may benefit shareholders by helping UEX reduce the need for future dilutive financings to fund its share of Shea Creek capital requirements.”

Talbot sees UEX as a takeover target. With AREVA being UEX’s partner at Shea Creek, Cameco holding a minority equity interest, development progress, resource growth and better grades “could likely attract an offer from a company interested in obtaining a foothold in the prolific Athabasca Basin.”

Talbot believes that UEX is a core holding for uranium investors. He also notes that UEX’s stock price is strongly correlated to positive exploration results. Talbot initiates coverage with a Buy rating a 12 month target of C$7.65/sh. He bases is target price “on a 2009E discounted cast flow at 10%, adding per share value for 2008E year-end cash non-modeled mineralization at both Hidden Bay and Shea Creek.” As of March 31, 2008 UEX had cash and equivalents of $43.1 million.

Investment Risks

Without limitations, some of the risks include reserves and resource risk, development risks, permitting risks, off-take agreements, commodity price risks, geo-political risks, exchange rates, weather related impacts etc.

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Don Coxe Video - June 5, 2008

Don Coxe was on BNN today espousing a portfolio strategy that will help investors walk a fine line between recession and inflation.



Link: Click here for the video

In other Don Coxe related news ...

The Coxe Commodity Strategy Fund announced today that the Over-Allotment Option granted to the Agents for its recently completed initial public offering has been exercised in full and an additional 3,750,000 Class A Combined Units have been issued for $37,500,000. The total gross proceeds of the offering including as a result of the exercise of the Over-Allotment Option are $297.5 million. The focus of the Fund is to provide investors with long-term capital growth by executing the commodity investment strategies of Donald G.M. Coxe. Mr. Coxe will act as the Fund's Portfolio Consultant allowing investors the first opportunity to gain direct exposure to Mr. Coxe's well-publicized views on the commodity super cycle.

The Fund will invest in an actively managed portfolio consisting primarily of equity securities and will provide exposures to commodity-related securities with the approximate target weightings established for the Fund by Mr. Coxe in the agriculture, base metals, steel, energy, and precious metals sectors. The portfolio is expected to be well diversified within these sectors and to consist primarily of exchange-traded equities, but may contain debt securities, cash and/or cash equivalents.

Considering that the Over-Allotment Option for the fund was gobbled up, one might surmise the demand for the fund and Mr. Coxe's expertise. It will be interesting to see how this fund performs, as Mr. Coxe is only a consultant to the fund and not responsible for picking individual stocks (I suspect).

Don Coxe Basic Points May 2008

Basic Points: Traders of the Lost Arc (May 30, 2008)



To download Mr. Don Coxe's April 2008 Edition of Basic Points click here (Courtesy Green Light Advisor Blog)

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

WGI Heavy Minerals (WG: TSX) and its Activist Shareholder – Passport Capital

Event

On June 3, 2008 Passport Capital, a San Francisco based global investment firm
with approximately US$4.5 billion of assets under management announced today that it had filed a dissident proxy circular in which it recommended that WGI's shareholders vote FOR a slate of directors proposed by Passport.

Takeaways From The Event

Fund managed by Passport collectively own or control an aggregate of 3,080,500 common shares of WGI, representing approximately 13.1% of the currently outstanding common shares, making them today the largest shareholders of WGI.

The news release goes on to say that

“Passport believes that a complete change of leadership is absolutely necessary to unlock the value that exists in WGI. Since the time Mr. Covell Brown took over as Chairman of WGI in November 2004, WGI has lost 87% of its share value. During such time, in Passport's opinion, the WGI Board has been complacent about operational under-performance and has lost the faith of many shareholders. In addition, the WGI Board has approved excessively high director and management compensation which seems to indicate that it is more preoccupied with its own interests than with those of WGI's shareholders. In Passport's view, this deplorable situation is no longer tolerable and the status quo is unacceptable.

Passport asks that WGI's shareholders read the dissident proxy circular in which Passport highlights a comprehensive plan to turn WGI around so as to unlock value for its shareholders. The new independent directors being proposed, consisting of Donald Siemens, Robert Atkinson, Daniel Burns, John Nugent, Timothy Ryan and Johann Tergesen, are persons with direct industry experience and skills and with a superior track record of producing results for shareholders. Passport urges shareholders to vote the YELLOW form of proxy in order to implement this needed change in WGI's leadership. Passport is a long-term, value oriented investor and funds it manages have been a shareholder of WGI since 2003. Passport's ultimate goal is a stronger WGI that is able to deliver the returns its shareholders deserve.”

About WGI Heavy Minerals (WG: TSX)

WGI Heavy Minerals currently operates garnet mines in Idaho, USA and Tamil Nadu, India; it also operates an abrasives recycling company in Germany, produces ultra-high pressure waterjet replacement parts in Washington, USA and maintains global sales and marketing activities to link their products and service to customers.

For Q1/08 WGI Heavy Minerals reported revenues of $6.9 million, up 10% from the same period in 2007. Abrasives revenues were up 8% as growth in other abrasives (60%) offset a 4% decline in garnet revenue. Abrasives sales volumes dropped 17% but prices increased 33%, fuelling the revenue growth. Waterjet parts revenue jumped 24%, primarily due to continued growth in sales volume. Gross profit margins decreased to 19% in the first quarter compared with 27% in the first quarter of 2007. Contributing to the decrease was extreme cold temperatures and snow in Idaho and at the same time, unseasonal rainfall and flooding in India. The decreases were in garnet & other abrasives decreasing to 18% gross margin in the first quarter 2008 from 26% in the first quarter 2007 and waterjet replacement parts decreased to 21% gross margin in the first quarter 2008 from 26% in first quarter 2007. The Company posted a net loss of $0.68 million, or $(0.03) per share, for the first quarter 2008, compared with a net profit of $0.02 million, or $0.00 per share, for the first quarter 2007.

My Take



While hedge fund activism isn’t new, it definitely isn’t regularity in the resource sector, especially among the micro cap stocks. Hedge fund, Passport Capital is a fairly routine investor in Canadian resource stocks, having invested in Wavefront Energy and Environmental Services, Academy Ventures, Northern Freegold Resources, East Asia Minerals Corp. and North American Tungsten Corp. in 2008 but has never been known to initiate a proxy battle with the management of its Canadian investments. Passport founder John H. Burbank III is an incredibly smart and savvy investor and a simple glance at the 1 year stock chart of WGI Heavy Minerals is telling of Mr. Burbank’s and Passport’s disappointment with the company. In the last year, shares of WGI Heavy Minerals have slipped from $1.30/sh to the $0.78/sh mark at which they currently trade today. I’m not sure if Mr. Burbank and Passport will be successful in their attempt to replace the board of WGI Heavy Minerals but I hope they are simply because their actions might instil some fear and encourage the boards and management of a number of junior resource companies to clean up their acts and focus on creating shareholder value.

Click here for previous coverage of Passport Capital and John H. Burbank III from May 7, 2008

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Overview and Comment on the Uranium Market

Overview and Investment Comment on the Uranium Market

On May 29, 2008 Australian based Resource Capital Research came out with their ‘Uranium Sector Review For June 2008.’



Analyst John Wilson writes “Positive market sentiment has returned to uranium equities, driven by indications the spot uranium price is about to head up and relative stability in the equity markets following the sub-prime rout. While the equity markets remain volatile, the junior end of the resource sector was disproportionately sold down over the past 6 months and the recent bounce has seen may uranium companies’ share prices recover by over 100% from recent lows with further upside expected.”

Wilson points out that in the last month, share prices of majors such as Cameco, Denison Mines, Uranium One, Energy Resources of Australia and Paladin Energy have moved up 10%, up 21%, down 3%, up 15% and up 45% respectively.

While the current US$60/lb spot price of Uranium is down 15% from the US$71/lb price at the end of March, Wilson believes that “Forward indicators (fund implied price) currently indicate an expectation for an upward correction to the uranium price to around US$75 (+25%). In the past 3 months the fund implied price has ranged from US$57/lb to US$90/lb. According to recent market commentary by Trade Tech “[uranium] buyers are beginning to venture back into the market and sellers are less willing to cut prices”.

The number of planned and proposed new nuclear reactors globally, has increased from 222 reactors in January 2007 to 311 reactors in May 2008, a rise of 40%. These statistics can be compared with the 439 nuclear power reactors currently in operation and the 36 that are under construction. Wilson writes that the USA Congressional Budget Office has indicated that nuclear “power would be commercially competitive compared to conventional fossil fuel technologies at a carbon price of US$45/tonne (May ’08). Rising prices of competing energy sources - both spot oil and thermal coal prices, which spiked over US$130/bl and US$130/t respectively (May ’08),
reinforces the commercial potential of nuclear energy.”

Uranium related events of the last 3 months include:

- NamWater (Namibia) announced plans to build a second desalination plant to support water needs of the growing uranium industry. Commissioning is estimated in 2010 and the plant is expected to have a capacity of 25 million m3 per annum. The other desalination plant is already under construction (Areva and NamWater) with commissioning expected in Q4/09 and a capacity of 20 million m3 per annum to serve Areva’s Trekkopje heap leach project.

- Kazakhstan’s new sulphuric acid plant at Balkhash (cap. 1.2mtpa) is expected to be commissioned June ‘08. Kazakhmys Corp is building the plant adjacent to its copper smelter. Capacity is expected to be sufficient for KazAtomProm’s planned ISR uranium mining needs.

- Zambia is expected to issue uranium mining licenses beginning in July 2008. Companies with advanced uranium projects in Zambia include Equinox Resources which released its updated feasibility study for a standalone uranium plant at Lumwana 2Q08 and African Energy Resources (ASX:AFR) which released a Pre-Feasibility Study for its Chirundu uranium project 2Q08.

Company specific news and events from the last 3 months include:

- Uranium One (TSX:UUU) announced it will suspend development at Honeymoon ISR development project (SA) for 12 months.

- Bluerock Resources Ltd (TSX.V:BRD) uranium ore production commenced from the J-Bird project (Colorado) April ’08.

- Hathor Exploration (TSX.V:HAT) reported a significant discovery in the Roughrider Zone at its Midwest NE project in the Athabasca Basin. Intercepts include 15m @ 10% U3O8 and 9m @ 10% U3O8.

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