We have a couple more cash-rich stocks to follow up on this week. One is a very nice silver play trading about 30% below cash value and another is a grossly discounted biotech with $45 million in the bank and trading in the low to mid 30-cent range is available for a 55% discount to its cash value. The small stocks have weakened this past week but a bear rally is still a very strong likelihood before spring and the stocks we're currently following should do very well again in a recovery rally.
Silver Bear Resources (TSX: T.SBR, Stock Forum, 41 cents)
www.silverbearresources.com
Cash: $24 million (63 cents/share)
Shares outstanding: 38 million
There is a strong case building for silver and it’s worth taking a hard look at this sector along with gold.
The company's 2009 exploration budget is $12 million. If their cash balance ends 2009 at $10 million (26 cents/share) they may be well on track for 100 to 200 million oz. of high-grade silver.
A few months ago in this same region of Russia, Polymetal announced the acquisition of Ovoca Gold's Goltsovoye Silver Deposit. The price was US$31 million for 69 million ounces (47 measured and 22 inferred). Valuation was US 45 cents per ounce. Silver at the time averaged $10/oz - they discounted capital costs and the NPV of future cash flow to arrive at this price.
If Silver Bear can prove up 100 million ounces, it is reasonable to assume the deposit should be worth something in the range of $45 million ($1.18/share). If they achieve their goal of 200 million ounces in 12 months, the valuation goes over $2/share. That is based upon $10 silver - not the prices we are seeing now or may see in the future.
Their 100% owned Mangazeisky project consists of an exploration licence covering an area of 570 square kilometres hosting 16 known silver anomalies located within the Republic of Sakha, Yakutia, in the Russian Federation, approximately 400 kilometres north of the capital city Yakutsk in the Verhoyanskiy district. Silver Bear has focused its exploration on the Vertikalny vein, a high-grade, subvertical silver vein.
Recent drilled results reported very high grade silver in the range of 600 g/t. Those results are consistent with results of earlier drilling as the Vertikalny vein demonstrates excellent geometric continuity."
Stated Corporate Objectives:
- Complete Canadian Institute of Mining (CIM) compliant inferred resource estimate for Vertikalny in February, 2009;
- Complete a Russian technical and economic conditions report by June, 2009;
- Complete 10,000 metres of exploration drilling during the 2009 field season;
- Target to define a CIM compliant resource estimate for the Vertikalny vein of up to 250 million ounces of silver during the first quarter of 2010.
Political risk of Russia is "moderate" and the property can only be accessed during certain times of the year. This has been well discounted into the share price and as silver prices continue to strengthen, speculators will overlook initial logistic concerns - especially if they prove up anything close to 100 million ounces.
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YM Biosciences (TSX: T.YM, Stock Forum; 35 cents)
Shares outstanding: 58 million
Net cash: $45 million (78 cents/share)
The biotech sector is weak but while most small companies in this sector struggle to finance and survive, a select few like YM are sitting on huge piles of cash. This not only ensures their survival over the next couple years but could eventually lead to some nice mergers or acquisitions.
At this price you not only buy significantly discounted cash of $45 million, but an important drug that they hold the license to that carries a value of ZERO. When you read how advanced it is in many countries around the world (and how successful), it’s hard to imagine the market deems it as worthless.
The company is the licensee for the drug nimotuzumab for North America, Europe, Japan, Korea and, Australia. The drug is currently undergoing advanced trials in Canada and the United States, while being advanced in several phase III trials by YM's licensees and other companies advancing the drug internationally. Nimotuzumab is already approved for sale in a number of countries.
Nimotuzumab holds the potential to maximize the benefits of radiotherapy while avoiding the toxic side-effects of many targeting drugs. It has been used in over 3,000 patients and in more than 30 clinical trials in more than 10 tumour types.
- In Canada they will soon be running trials on patients associated with lung cancer and brain cancer
- The National Cancer Centre of Singapore is running a Phase III trial of more than 700 patients with cancers of the head and neck, citing the drug's preferential safety profile compared with other EGFR-targeting cancer drugs.
- Two of YM's licensees for nimotuzumab in Japan and Korea initiated an 80 patient trial associated with gastric cancer
- YM's licensee in Europe is running trials associated with pancreatic cancer
Disclosure: Danny Deadlock owns 25,000 shares of YM Biosciences (TSX: T.YM) and 25,000 shares of Silver Bear Resources (TSX: T.SBR).