POSITIVE NEW FOR CANACOInspite of what has bappened today, it appears that SOC's claims will not affect Canaco. For those who are nervous take a chill pill and relax.
Rodman & Renshaw View = Positive News for Canaco
Resolution of the Prospecting License - very positive
Canaco had a press release regarding the prospecting license at Magambazi in Tanzania. On 15 September 2010 Sonora had a press release indicating that it had an option on a Primary Mining License (PML) that has been converted into a Mining License (ML). Andrew Lee Smith, the CEO of Canaco met with the Commissioner of Mines in Tanzania who has confirmed the validity and status of Canaco's existing Prospecting License (PL) which provides Canaco with exclusive rights to the area of the Magambazi discovery. The Commissioner has also informed Canaco of the existence of competing rights in the form of a 0.075 sq. km. PML within Canaco's 196 sq. km. Kilindi PL which was previously not indicated as being present within Canaco's PL. The PML is located within the area that Canaco has been drilling while outlining the Magambazi gold trend. After reviewing the facts, the Commissioner has advised Canaco that it has suspended the transfer of the ML to Sonora and will intervene to arbitrate a fair and equitable resolution to the competing interests in order that the project can move forward.
An arbitrated resolution expected - within a week, in our view
All the affected parties have been called by the Commissioner to meet in Dar es Salaam in the next 48 hours for an arbitrated resolution that will be in the best interest of all parties.
Outcome should be positive in our view
In our view, Canaco will be able to acquire the 0.075 sq. km. PML within the Kilindi PL from Sonora once a resolution is reached regarding the price. The acquisition of the land rights should not cost the company over US$ 2 MM in cash and/or CAN shares. The company has over C$ 27 MM in cash and a resolution would be viewed as positive by the market.
Near-term catalysts
· Extension and infill drilling at Magambazi - Ongoing
· Exploration drilling at Majiri Bomba, Semwaliko and other targets
· Mining permit issued
· Initial resource estimate for Magambazi
Maintaining outperform rating and raising price target to C$4.50
We are encouraged by the continuity in structure and grade of the high-grade core and the recognition of the Magambazi Main Lodes and Magambazi North as separate parallel zones of near-surface gold mineralization. Moreover, with a new trend of gold mineralization measuring 6 km in length having been identified, we believe the overall potential of the project has increased significantly. We believe $200/oz is an appropriate resource multiple given the high grade/low cost nature of the ounces discovered to date. Our target price is based on our estimate of 3.5 Moz gold at Magambazi. Based on a per ounce valuation of US$200/oz, we arrive at a net asset value of C$4.47/sh.