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Bottom-Fish Action
 Tue Jan 16, 2007
Bottom-Fish Action Report for Week of January 7-13, 2007
    Publisher: Kaiser Research Online
    Author: Copyright 2007 John A Kaiser

 

Bottom-Fish Action Report for Week of January 7-13, 2007

New Year Funk Stabilizes as US Dollar Uptrend Pauses

The market funk which began on January 3, 2007 continued without pause as TSXV losers substantially outnumbered gainers until Thursday January 11 when green finally reappeared as the dominant color on most stock quote lists. The turnaround coincided with the first down day for the major currency US dollar index which translated into a rebound in the price of gold. Spot copper, after a brief recovery perhaps linked to news that US mortgage applications surged during December after a long period of decline, tested $2.50 per lb on the downside Friday when American retail sales figures for December revealed stronger than expected growth, further dampening hopes for interest rate cuts any time soon. Oil dropped as low as $52 per barrel before recovering somewhat as the market chose to focus on warm weather in the eastern United States and Europe where the big news was that the polar bears in a Russian zoo had finally fallen asleep. The market seems to have shrugged off President George W. Bush's Iraqi urge to surge which now paints Iran as the root of the American failure to accomplish anything productive in the Middle East. For now the market is more concerned that lower oil prices will prevent the American economy from falling apart sufficiently to justify lower interest rates. Venezuela's Hugo Chavez, oblivious to what lower oil prices mean for his political survival, announced plans to nationalize the telephone and electricity industry. If there is any conspiracy that would be most relevant right now, namely one that serves a rather broad spectrum of interests, it would be the "creation" of lower oil prices to bring big swinging oil dicks like Vladimir Putin, Hugo Chavez and Mahmoud Ahmadinejad back in line. That sounds a lot more productive than suppressing the price of gold to preserve an illusion of financial stability.

Although the junior market was letting out a discernible sigh of relief by the end of the week, it is too soon to draw any conclusions and I remain pessimistic that a meaningful January Effect will still put in an appearance. Daily TSXV volume has remained in the 160-170 million shares range, well below the 180-210 million range that characterized December before the Christmas break. As I've been grinding through the data compilation process I have been struck by how well so many juniors have done since the May-June 2006 sell-off. Most of these charts have an uptrend that developed a rounding top in December which during the past two weeks deteriorated into a "dangling leg" pattern that inspires visions of falling off a cliff. Given the unlikelihood that a narrative will emerge in the short term that banishes the cyclical bears to the dungeon, and given the reality that quite a few speculators will have hefty capital gains taxes to pay in April, these high priced juniors are vulnerable to selling by speculators raising money to pay their tax bills. My suspicion is that most of the tax-related selling pressure will have relieved itself by the end of February, thanks, ironically, to the uncertainty about the Sword of Damocles which is inhibiting the Third Leg from launching into orbit. The March-April window could turn into a market rally as it did in 2006 when everybody thought that the 2006 January Effect "was" the climax and expected the usual post-PDAC fizzle, but this time around if it does happen again there will be anxiety that the "Sell in May and Go Away" pattern will assert itself as it did last year for the first time in many years. The new pattern which had emerged in 2000-2005 was that the "May" sell-off would begin in early March right after PDAC. It is my contention that we are still sufficiently early in this bull cycle to count on "fear" to inspire speculators to take care of business early. The 2007 surprise could be that a rally gets underway during March and does not fizzle until it hits the summer doldrums in late June or early July.

Above Bottom-Fish Range Within Bottom-Fish Range Below Bottom-Fish Range Recently Closed Out
Updated this Week New 2 Year High New 2 Year Low New Bottom-Fish High New Bottom-Fish Low

Bottom-Fish Recommendations made from January 7, 2007 to January 13, 2007
Company Date
Price Recommendation Action Net
Cash
Net
Stock
Gain New Status
Anooraq Resources Corp (ARQ-V) 1/9/2007 $1.17 Spec Cycle Sell 100% Hold 0% Sell 2,041 @ $1.17 $2,391 0 139% Closeout Hold 0%
Ashton Mining of Canada Inc (ACA-T) 1/9/2007 $1.15 Spec Cycle Sell 100% Hold 0% Sell 1,333 @ $1.15 $1,466 0 47% Closeout Hold 0%
Stornoway Diamond Corp (SWY-T) 1/9/2007 $1.12 Confirm Spec Cycle Hold 100%
$0 3,448 286% Spec Cycle Hold 100%

New Bottom-Fish Highs
Company
Volume High Low Close Chg Status
Buchans River Ltd (BUV-V) 97,500 $0.600 $0.350 $0.600 0.200 BF MP Buy $0.20-$0.29
Golden Valley Mines Ltd (GZZ-V) 4,852,800 $0.730 $0.580 $0.650 0.050 BF TP Buy $0.20-$0.29
Gold-Ore Resources Ltd (GOZ-V) 3,969,700 $0.850 $0.660 $0.770 0.070 Spec Cycle Hold 100%
Solitario Resources Corp (SLR-T) 63,300 $4.950 $4.510 $4.630 -0.280 Spec Cycle Hold 100%

Lithic raises $3.8 million and is set to drill Crypto

Lithic Resources Ltd (LTH-V: $0.45) has raised $3.8 million through a private placement of 9,591,700 units @ $0.40 including a half warrant exercisable at $0.60 in year one and $0.80 in year two. Unlike just over a year ago when the Bay Street boys sent Lithic's CEO Chris Staargaard back to Vancouver with orders not to come calling again until Lithic had a story worthy of their attention, when Lithic announced a private placement in early December the phone started ringing off the hook with unsolicited private placement participation requests from not just sophisticated investors, but, you guessed it, even Bay Street brokers who simply took the stock for themselves. Although the financing was spread among 118 parties, a good chunk was placed by Steve Todoruk of Rick Rule's Global Resource Investment Ltd brokerage firm in southern California. Todoruk used to be the promoter of a former bottom-fish called Abacus which did quite well during the nineties before getting killed by weak metal prices. In a reversal of the normal progression Todoruk went from promoter to retail broker and moved south of the border where he has put his keen eye for a good story to work. Lithic now has more than enough money to fund a 10,000 metre drill program on the 100% owned Crypto zinc project in Utah scheduled to begin in May or June. Even with this financing Lithic still has just under 42 million shares fully diluted and the Crypto project is sporting an implied value of only $19 million. The objective at Crypto is to upgrade the reserve status of an existing resource that already has an in situ value of $2 billion at current zinc prices, and to double the resource through geophysics guided exploratory drilling. The market seems to be waiting for some sort of signal, but with the story now funded there is no reason the stock cannot move up sharply. Lithic's major shareholder, the RCF group, continues to put advanced projects through its due diligence grinder with an eye to using Lithic as a funding vehicle just as it did a few years ago with Eurozinc. Before Crypto was funded this prospect represented big dilution risk, but now I think Lithic will be trading above a buck before any such transaction hits the newswires.

Newfoundland's old Buchans camp ready for another shot

Zinc is the driving force behind the breakout in the price of Buchans River Ltd (BUV-V: $0.60), which I recommended as a medium priority bottom-fish buy in the $0.20-$-.29 range on February 25, 2005 at a time when the market was abuzz with Messina's Boomerang VMS discovery in Newfoundland. At the time I'd also recommended another junior, Royal Roads Corp (RRO-V: $0.45), which was exploring its Daniel's Pond VMS deposit, but when that stock flamed out amid heavy selling and at least one of its insiders was implicated in the Barrick-Placer insider trading scandal, I took my losses and closed out that bottom-fish cycle on December 31, 2005. Earlier this year, however, a Nova Scotia based junior called Acadian Gold Corp (ADA-V: $1.22) which is run by Will Felderhof and Terry Coughlan with behind the scenes support from Dennis Macleod did a friendly takeover bid for Royal Roads. On June 27, 2006 Acadian Gold offered one Acadian share for 2.5 Royal Roads shares, which a key Royal Roads shareholder group representing 43% of the stock accepted. By the time the offer expired on August 23 shareholders had tendered 30,213,971 shares or 78% of the stock in exchange for Acadian stock. No effort was made to acquire the rest of the stock, and a short while later Royal Roads conducted a $3.2 million financing at $0.22 which positioned new players in a junior whose float had shrunk drastically.

On October 2 Royal Roads made a similar friendly takeover bid for Buchans River, offering $0.10 and 0.75 Royal Roads shares for each Buchans share. Buchans River was taken public in 1997 by John Tuach and Brian Grant who had made a fortune staking and vending properties during the Voisey's Bay area play. They had assembled most of the old claims covering the Buchans VMS camp on the theory that not all the lenses of this rich mined out deposit had been discovered. Billiton thought so too and optioned the project, but dropped it after the merger with BHP without drilling any of the geophysical targets their geologists had generated. Tuach and Grant owned most of the Buchans stock while their Newfoundland friends and relatives owned the rest. The stock was illiquid and management lacked the skills needed to finance the project and develop an audience for the story. Even after the resource sector bear market had turned into a bull in 2003 Tuach and Grant focused their efforts on selling the company to a new group. The problem was that they wanted too much for the shell, and zinc was still in the sink. Acadian Gold, eager to expand its exposure to Newfoundland VMS projects, made a deal through Royal Roads that gave them control of a junior with a marketable zinc story and a very small float. Grant and Tuach tendered 70% of their position to Royal Roads, keeping 3,149,850 shares. Royal Roads ended up with 59.3% on December 15, and extended the offer until January 26, 2007.

A number of bottom-fishers have asked me if they should tender their shares to the offer, to which the answer is an adamant "no". The purpose of this "takeover bid" is not to acquire the assets of Buchans River, but to acquire control of a resource junior with a very small public float and a portfolio of projects which under new management could be polished up. In late December Buchans River completed a flow-through private placement of 2,275,000 shares at $0.33 to fund a drill program in the historic Buchans camp. Since then the stock has started to rise as speculators came to appreciate that with only 18 million shares fully diluted and 100% control of an old VMS camp as well as various projects farmed out to others, Buchans River represented very good speculative value. I expect the price of Buchans to charge through $1 as the new CEO, Warren MacLeod, son of Dennis, unpacks the treasures Tuach and Grant had accumulated and stuffed into Buchans River. As the market capitalization of Buchans inflates, the primary beneficiary will be Royal Roads, which in turn is controlled 58% by Acadian Gold. In terms of higher stock prices, Buchans River offers the path of least resistance. The market does not lie, and everybody knows how to do arithmetic, right? Buchans River is a keeper.

Stornoway wraps up Ashton amid further kimberlite dyke news

Stornoway Diamond Corp (SWY-T: $1.15) received 96.5% approval from shareholders of Ashton Mining of Canada Inc (ACA-T: $1.17) on January 15 for the plan of arrangement which is expected to become effective on January 16. Stornoway has not revealed how many shareholders opted for cash. I sold my modest Ashton position last week after issuing a 100% sell recommendation to close out the Ashton bottom-fish cycle while maintaining the Stornoway spec cycle hold 100% recommendation. I suggested that Ashton shareholders with larger positions opt for Stornoway shares and count on a post merger price lift. Last week Stornoway released DMS results for its Aviat project. The AV2 kimberlite yielded 72 cpht from 2.2 tonnes consisting of "bright white" diamonds, but the Upper AV8 kimberlite yielded only 26 cpht from 2.5 tonnes consisting of diamonds described as a mix of "white, grey and brown stones". Results for the Middle and Lower AV8 sheets are pending. The diagram below shows the relative location of the Aviat bodies.

The upcoming Middle and Lower AV8 results need to resemble those of the AV67 and AV2 bodies rather than the Upper AV8 to keep hopes alive that a series of stacked sheets offer sufficient tonnage to justify a development scenario.

Last week Shear Minerals Ltd (SRM-V: $1.16) released additional caustic fusion results for its Churchill dykes which shored up micro diamond curves that already indicated high macro grade potential from small samples. The Notch, Jigsaw, Kahuna and PST002 curves continue to demonstrate 100 cpht plus potential, with PST002 resembling the Snap Lake curve most closely. The Churchill dykes appear to offer better grade potential than the Garnet Lake dyke of Hudson Resources Ltd (HUD-V: $0.76) where a 357 kg sample has furnished a curve suggesting a macro grade in the 40-60 cpht range.

The Garnet Lake dyke is located in Greenland and has sufficient thickness and areal footprint to justify comparison with Snap Lake. Little is so far known about the quality potential of the Churchill and Garnet Lake dyke systems. While Garnet Lake appears to be lower grade, its curve hints at a bimodality which could signal the presence of a diamond population with large size potential. The Garnet Lake kimberlite contains pyrope and eclogitic garnets, both of whose chemistry indicates good diamond potential, whereas the Churchill kimberlite is dominated by just exceptional pyrope chemistry. Hudson is processing a 60 tonne mini bulk sample collected last summer. With an implied project value of only $20 million for its 100% owned Saraftoq project (Garnet Lake), Hudson has plenty of upside compared to Shear ($165 million IPV for 51% owned Churchill) and Stornoway ($235 million IPV for 70% owned Aviat) if pending results deliver a grade better than 40 cpht and evidence of large, gem quality diamonds. Keep a close eye on Hudson.

Top 10 Bottom-Fish Volume Traders
Company
Volume High Low Close Chg Status
Blue Pearl Mining Ltd (BLE-T) 8,063,000 $9.580 $8.230 $8.280 -1.190 Spec Cycle Hold 100%
Golden Valley Mines Ltd (GZZ-V) 4,852,800 $0.730 $0.580 $0.650 0.050 BF TP Buy $0.20-$0.29
Pele Mountain Resources Inc (GEM-V) 4,465,000 $1.450 $1.110 $1.220 -0.030 BF TP Buy $0.20-$0.29
Dynatec Corp (DY-T) 4,026,600 $2.100 $1.980 $2.080 0.070 Spec Cycle Hold 100%
Gold-Ore Resources Ltd (GOZ-V) 3,969,700 $0.850 $0.660 $0.770 0.070 Spec Cycle Hold 100%
Queenstake Resources Ltd (QRL-T) 3,320,600 $0.235 $0.220 $0.235 0.010 Spec Cycle Hold 100%
Stornoway Diamond Corp (SWY-T) 2,742,600 $1.170 $1.090 $1.150 0.030 Spec Cycle Hold 100%
Ivanhoe Mines Ltd (IVN-T) 2,205,400 $11.110 $10.530 $10.900 0.150 Spec Cycle Hold 100%
JNR Resources Inc (JNN-V) 2,095,900 $2.660 $2.100 $2.490 -0.130 BF MP Buy $0.30-$0.49
Skeena Resources Ltd (SKE-V) 1,855,800 $0.270 $0.230 $0.270 0.030 BF MP Buy $0.20-$0.29

Top 10 Bottom-Fish Value Traders
Company
Value High Low Close Chg Status
Blue Pearl Mining Ltd (BLE-T) $70,871,062 $9.580 $8.230 $8.280 -1.190 Spec Cycle Hold 100%
Ivanhoe Mines Ltd (IVN-T) $24,008,947 $11.110 $10.530 $10.900 0.150 Spec Cycle Hold 100%
Alamos Gold Inc (AGI-T) $14,156,481 $9.450 $8.780 $8.990 -0.230 Spec Cycle Hold 50%
Dynatec Corp (DY-T) $8,140,158 $2.100 $1.980 $2.080 0.070 Spec Cycle Hold 100%
Southwestern Resources Corp (SWG-T) $6,544,338 $8.150 $7.700 $8.050 0.110 Spec Cycle Hold 75%
Pele Mountain Resources Inc (GEM-V) $5,629,419 $1.450 $1.110 $1.220 -0.030 BF TP Buy $0.20-$0.29
Metallica Resources Inc (MR-T) $5,161,487 $4.750 $4.320 $4.460 -0.140 Spec Cycle Hold 100%
JNR Resources Inc (JNN-V) $5,028,088 $2.660 $2.100 $2.490 -0.130 BF MP Buy $0.30-$0.49
Corriente Resources Inc (CTQ-T) $4,366,427 $3.990 $3.250 $3.950 0.180 Spec Cycle Hold 75%
Nevsun Resources Ltd (NSU-T) $4,238,020 $2.590 $2.320 $2.410 -0.110 Spec Cycle Hold 100%

Top 10 Bottom-Fish Price Gainers
Company
Volume High Low Close Chg Status
Mountain Province Diamonds Inc (MPV-T) 206,600 $4.260 $3.400 $4.140 0.490 Spec Cycle Hold 100%
Altius Minerals Corp (ALS-V) 240,900 $10.370 $9.460 $10.300 0.410 Spec Cycle Hold 75%
Birch Mountain Res Ltd (BMD-T) 889,500 $2.980 $2.320 $2.950 0.400 Spec Cycle Hold 75%
Buchans River Ltd (BUV-V) 97,500 $0.600 $0.350 $0.600 0.200 BF MP Buy $0.20-$0.29
Skygold Ventures Ltd (SKV-V) 725,500 $1.770 $1.530 $1.720 0.190 Spec Cycle Hold 100%
Exeter Resource Corp (XRC-V) 334,500 $2.140 $1.930 $2.140 0.180 BF MP Buy $1.00-$1.25
Corriente Resources Inc (CTQ-T) 1,207,400 $3.990 $3.250 $3.950 0.180 Spec Cycle Hold 75%
Ivanhoe Mines Ltd (IVN-T) 2,205,400 $11.110 $10.530 $10.900 0.150 Spec Cycle Hold 100%
Full Metal Minerals Ltd (FMM-V) 607,100 $2.650 $2.300 $2.600 0.150 BF MP Buy $0.30-$0.49
Sterling Resources Inc (SLG-V) 457,600 $1.820 $1.650 $1.800 0.120 Spec Cycle Hold 100%

Top 10 Bottom-Fish Price Percentage Gainers
Company
Volume High Low Close Chg Status
Buchans River Ltd (BUV-V) 97,500 $0.600 $0.350 $0.600 50% BF MP Buy $0.20-$0.29
Birim Goldfields Inc (BGI-T) 857,400 $0.580 $0.440 $0.580 22% Spec Cycle Hold 100%
Intl Northair Mines Ltd (INM-V) 185,200 $0.340 $0.280 $0.340 21% Spec Cycle Hold 100%
Birch Mountain Res Ltd (BMD-T) 889,500 $2.980 $2.320 $2.950 16% Spec Cycle Hold 75%
Karmin Exploration Inc (KAR-V) 54,600 $0.600 $0.520 $0.600 15% BF MP Buy $0.30-$0.49
Mountain Province Diamonds Inc (MPV-T) 206,600 $4.260 $3.400 $4.140 13% Spec Cycle Hold 100%
Skeena Resources Ltd (SKE-V) 1,855,800 $0.270 $0.230 $0.270 13% BF MP Buy $0.20-$0.29
Skygold Ventures Ltd (SKV-V) 725,500 $1.770 $1.530 $1.720 12% Spec Cycle Hold 100%
Lexam Explorations Inc (LEX-V) 1,011,000 $0.650 $0.530 $0.640 10% BF TP Buy $0.20-$0.29
Gold-Ore Resources Ltd (GOZ-V) 3,969,700 $0.850 $0.660 $0.770 10% Spec Cycle Hold 100%

Top 10 Bottom-Fish Price Losers
Company
Volume High Low Close Chg Status
Blue Pearl Mining Ltd (BLE-T) 8,063,000 $9.580 $8.230 $8.280 -1.190 Spec Cycle Hold 100%
Humboldt Capital Corp (HMB-V) 12,600 $3.550 $3.010 $3.050 -0.480 Spec Cycle Hold 100%
Solitario Resources Corp (SLR-T) 63,300 $4.950 $4.510 $4.630 -0.280 Spec Cycle Hold 100%
Alamos Gold Inc (AGI-T) 1,555,200 $9.450 $8.780 $8.990 -0.230 Spec Cycle Hold 50%
Huldra Silver Inc (HDA-V) 22,500 $0.900 $0.720 $0.720 -0.230 Spec Cycle Hold 100%
Intl Barytex Resources Corp (IBX-V) 312,100 $1.720 $1.530 $1.570 -0.160 Spec Cycle Hold 100%
Azimut Exploration Inc (AZM-V) 281,900 $4.450 $4.070 $4.300 -0.150 Spec Cycle Hold 100%
Northern Dynasty Minerals Ltd (NDM-V) 418,800 $9.250 $8.070 $8.700 -0.150 Spec Cycle Hold 100%
Metallica Resources Inc (MR-T) 1,148,700 $4.750 $4.320 $4.460 -0.140 Spec Cycle Hold 100%
Tintina Mines Ltd (TTS-V) 10,200 $0.330 $0.265 $0.265 -0.135 BF TP Buy $0.20-$0.29

Top 10 Bottom-Fish Price Percentage Losers
Company
Volume High Low Close Chg Status
Tintina Mines Ltd (TTS-V) 10,200 $0.330 $0.265 $0.265 -34% BF TP Buy $0.20-$0.29
Huldra Silver Inc (HDA-V) 22,500 $0.900 $0.720 $0.720 -24% Spec Cycle Hold 100%
Medallion Resources Ltd (MDL-V) 107,000 $0.400 $0.350 $0.395 -21% BF TP Buy $0.20-$0.29
Western Troy Capital Res Inc (WRY-V) 25,300 $0.470 $0.380 $0.400 -17% BF TP Buy $0.30-$0.49
Manson Creek Resources Ltd (MCK-V) 188,200 $0.105 $0.095 $0.095 -14% BF MP Buy $0.10-$0.19
Humboldt Capital Corp (HMB-V) 12,600 $3.550 $3.010 $3.050 -14% Spec Cycle Hold 100%
Blue Pearl Mining Ltd (BLE-T) 8,063,000 $9.580 $8.230 $8.280 -13% Spec Cycle Hold 100%
Gateway Gold Corp (GTQ-T) 737,000 $0.960 $0.750 $0.790 -12% BF TP Buy $1.25-$1.50
Beaufield Resources Inc (BFD-V) 851,900 $0.420 $0.365 $0.365 -12% Spec Cycle Hold 100%
TLC Ventures Corp (TLV-V) 16,800 $0.460 $0.440 $0.440 -12% Spec Cycle Hold 100%

New Bottom-Fish Lows
Company
Volume High Low Close Chg Status
No Records

 
 

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