CANACCORDDavid Pescod 780-408-1750 Debbie Lewis 780-408-1748 Fax: 780-408-1501 Page 2
VULCAN MINERALS (V-VUL) $0.75 +0.03
Yesterday the news was out that Vulcan and their drilling on their Robinson #1 Well project in Newfoundland was at
2200 metres gave the stock a little bit of a lift. It also had us running to catch up with Andy Gustajtis… the oil and gas guy
with Dominick and Dominick. Andy was the guy that came up with a whole bunch of super successful oil and gas junior
picks back in the good old days, but like many dabbling in the junior sector got a little bit beat up when the world looked
like it was ending in the last 6-12 months. Now that things are looking like they are a little closer to normal some of those
junior stocks are once again creating a lot of excitement.
But anyway, to Andy’s thoughts on this Vulcan exploration play...Andy says “If this hits it will be a phenomenal story”
but he does admit that the odds of it hitting aren’t all that good. He figures the odds are not one in a zillion but more like
that of winning a lottery at the church bazaar, probably closer to one in ten. (For those that have trouble with math make
sure you understand that means there is a 90% chance of a miss folks).
Gustajtis continues “There’s not too many companies out there that are drilling wells with other people’s money that
have the potential of hitting something that could be a couple of hundred million barrels in target size. It has good geology
and more than a few good reasons to be drilling the well.” He goes on to say “It’s the first deep well in the basin
and ...class in size and on an active hydrocarbon system.” He continues “If they do hit, it will be one of the sexiest stories”
and he suggests that if it does hit stock could see double digits down the road.
Target depth is about 3600 meters meaning they might be getting a sniff of something in the coming weeks and should
be at depth in about a month. If we look around trying to find high-risk/high-reward plays at the moment this is probably
the biggest one we could see anywhere out there. But when we had Gustajtis we asked him the question what does he
foresee for the natural gas situation and how it might work out? He answers “The consensus view is overwhelmingly
bearish.” He wonders however if he shouldn’t become a contrarian and suggest that all the bad news is out and as it can’t
possibly get any worse.
If you had to guess where gas prices will be down the road he figures in 6 months it’ll be up but maybe only by $1 to
$1.50 in mcf in the next 6 months. He points out that there are still way more than 600 rigs still looking for natural gas in
the United States which means ever more supply. (At current rates of addition to inventory over the next 2 months there
is the chance we could see all the reservoirs in North America full of gas meaning producers will have to shut in or sell
what gas they can for next to nothing, ugly). He wonders if we may not have to learn to live with $3 gas for awhile in the
interim...That’s a very ugly price if you’re a producer of gas.
Meanwhile we get to our favorite question, Andy if you could buy only one stock today what would it be? He answers
this way “Do you feel lucky?...If you feel lucky go with Vulcan Minerals” If you’re not feeling that way his pick would be
one that he has suggested many times over the last while that has been our favorite stock after a trip to Albania, and that’s
Bankers and he is suggesting that despite the unbelievable run it’s already had in the last 6-8 months. We know Tristone
has just upped their target on Bankers from $3.80 to$5.60.
Disclosure:Keegan Resources and Canplats Resources: Canaccord Capital covers thesestocks and has a Speculative Buy rating on them.
(Speculative buy:Stocks bear significantly higher risk that typically cannot be valuedby normal fundamental criteria. Investments in the stock
may result in material loss.)
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