TD Newcrest analyst Daniel Earle is convinced that Canaco Resources Inc. has made a world-class gold discovery at its Handeni project in Tanzania.
Why does that matter? Because the last time Mr. Earle made such a bullish call on an early-stage gold company was Ventana Gold Corp., which became a market darling and was eventually taken out in a $1.5-billion deal. It was one of the best analyst calls in years.
In a note to clients on Friday, Mr. Earle mapped out the life cycles of Canaco and Ventana shares side-by-side. See if you can spot the trend:
In both cases, the companies underwent significant corrections along the way to success, and Canaco is in the midst of one right now. Besides general market uncertainty, Mr. Earle believes that Canaco is being held back because of a lack of drill results (due to issues at the lab) and the fact that it recently completed a big financing that filled existing demand. He also wrote that there are concerns about the size of the company’s resource, but he noted that always seems to happen when an early-stage stock undergoes a correction.
Mr. Earle remains extremely optimistic. He has a target of $8.00 a share on Canaco, more than double the current level.