Cascadia Minerals Ltd V.CAM

Who is Right on ATC?

[WHATisMONEY]

DAVID PESCOD STOCKTALK  LATE EDITION, September 16, 2010

ATAC RESOURCES (V-ATC) $6.48 +1.25

GOLD $1276.70 +8.00

I suspect the only thing people care about when following

a mining analyst is how good he is at picking targets and we

suspect that same mining analyst doesn’t get a lot of respect

or sympathy on all the concerns he may have when

making projections for that exploration play that could make

a difference to an investors portfolio.

For instance, you start with metal prices. Copper has

had a nice bounce back, but where is copper going to be six

or 12 months from now? Are we really going to have some

sort of major recession...or not? Will gold continue to attract

attention and climb to ever higher levels and justify

some prices we are seeing these days for some precious

metal stocks? And then of course you get into calculating

just how big different deposits might be that various companies

are drilling. Does this vein extend that far...or just this

itty bitty bit further? Who knows, it could become a whopper

of a deposit...or as in most case, not so.

Then of course there is the politics and that is an everchanging

scenario as who would have thought people

would spend billions of dollars to buy precious metals or

other mining deposits in Argentina (of all places). That used

to be the place to avoid, but these days the place to avoid

are places like Oregon and many other areas of the United

States—the supposed threshold of capitalism! Note, the

rules change.

So the analysts, when they make their projections, gets

little sympathy if he is wrong and there are just so many

ways he can be wrong. But every once in a while it is interesting

to follow some analyst who has decided to make a

big, bold step and could be either really right...or not so.

Macquarie Equities Research analyst Michael Gray made

one of those steps today in projecting an $11.00 target for

ATAC Resources in the next 12 months in a headline report

titled, “New Potential +20moz Carlin-type gold district (?)”.

Please notice the question mark because once again, these

are an analyst’s best guesstimates.

Gray writes, “We estimate a preliminary
.2-3.2bn NAV

range (have you got that reader—that’s a valuation on their

project of somewhere between $200 million and $3.2 billion….

do you notice the discrepancy?) based on our four scenarios,

and use a probability weighting to derive at a 12-

month valuation of $1.1bn.

We rate ATAC Outperform, with a 12-month target of

C$11.00.” Gray adds, “ATAC is highly speculative and

suitable for risk-tolerant investors only.” (Now that’s an

understatement, but then if you are in speculative mining,

that’s the game you are in).

Gray writes, “Our primary focus in this report is

ATAC’s Osiris target, which we believe has many geological

similarities to Nevada’s Carlin Trend. For various reasons

discussed, our confidence in Osiris is significantly

greater than would normally be the case for a one-hole

play, however, we must caution investors that Osiris remains

an early stage play, and at this stage our analysis

and valuation are inherently speculative.”

Gray’s report is being widely read on the street and is

given the credit for the big move in ATAC’s stock today.

But once again, to have an $11.00 target implies that they

would need 10 million ounces to justify that kind of market

capitalization. And considering as Gray mentions, that

they’ve only got a few holes into the play so far, this is

quite the leap of faith. With winter coming on in the

Yukon, things could get quiet, although ATAC will be announcing

additional drilling results over the next while,

but we still wonder if over the winter attention won’t drift

to other plays in the world. It will be interesting to see

where the stock is, come this spring.

Just to show that not everyone has that big hope for

ATAC, Paradigm Capital came out with some comments

from their mining team today with a brief report on ATAC

titled, “More Smoke out of Osiris”.

They write, “Our current valuation of ATAC is based on

our expectation for a 1Moz resource at Tiger, a potential

resource at Osiris of 0.6Moz, and a further 0.6Moz in discovery

potential. We believe the upcoming drill results

from Osiris, Conrad, and Eaton, prior to the end of the drill

season, could be transformational…”

They add, “ATAC currently carries a market capitalization

of roughly US$500M” (that was before today’s move

which raised it to roughly US$600M). The report continues,

“Given a range of values for in-situ ounces of $150/

oz—$200/oz, the market appears to be discounting a Rau

resource of 2.5Moz-3Moz, which exceeds our Rau resource

of 2.2Moz. Given the limited information available

to us, we do not believe this is unrealistic, and though the

market appears to be ahead of the drill bit, new drill results

are forthcoming and at that time we will review our

estimates.”

The Paradigm team currently has a 12-month target on

ATAC of $4.45. Let the games begin!