CALGARY, CANADA -- This is only my third week on board the Good Ship Ticker Trax but you will notice a theme (at least for the time being): clean balance sheets and cash. I might love penny stocks, but I hate high risk. While the two often go hand in hand, the risk can “usually” be managed.
From February to August of 2010, penny stocks were the black sheep of the stock market. Everything from small cap to large cap was doing very well since March 2009, but this year most everyone sat around waiting for a correction and avoided the microcaps and junior exploration stocks.
Fortunately that all changed heading into September, but as we often find out, the first sign of a broad-based correction and you best batten down the hatches as your small stocks will be the first thing thrown overboard.
Markets were over-heated and due for consolidation if nothing else. That started a week ago and may have reached its peak Tuesday. That doesn’t mean to say the wall of worry is over, but it does mean we have gone through a healthy correction and commodities in particular continue to look very good. China wants to slow its growth, but tell that to more than a billion people who are getting a taste of what the rest of the world has consumed for decades. India will be no different.
So two months into a resource stock rally, one that was rocked by sellers earlier this week, and I am asked to provide extra insight for Ticker Trax subscribers. I could throw caution to the wind and play the most popular trends, but when many charts have gone vertical in two months, I was not prepared to throw subscribers under the bus for the sake of “blending in.”
So for the month of November (and maybe December), while the markets try to figure out where they want to go, I will maintain a focus on strong cash positions. This goes a long way in managing risk. Cardero (TSX: T.CDU, Stock Forum) was the first week in this current price range, and last week was Medwell Capital (TSX: T.MWC, Stock Forum), also in this price range. Medwell attracted little interest because it’s a boring biotech with assets. Cardero buyers pushed the stock about 10 percent higher – much like what occurred earlier this month with other junior resource companies. It’s pulled back a bit but fortunately the fundamentals (and cash) are there to support it during market selloffs.
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This week we’re looking at a stock with significant cash and exposure to Gold, Copper, Uranium and Lithium.
Western Uranium (TSX: V.WUC, Stock Forum; $1.00)
www.westernuranium.com
Shares Outstanding: Approx. 60 million
Net Cash: $41 million (68 cents/share) – as of June 30, 2010
Shares of sister company Western Lithium (TSX: V.WLC, Stock Forum; $1.16): 19.7 million worth $22 million (37 cents/share)
www.westernlithium.com
Cash and the investment in Canada-traded WLC are worth $1.05/share, which means exploration projects carry zero value by the market. From the low or mid 80-cent range this is a well-balanced play.
I followed WUC back in 2009 and while we made a bit of money on it, I dropped coverage in the spring of 2010 when it was stuck on a treadmill. Throughout all of 2010 this company has been unable to break this 80-cent range. Occasionally I see large crosses low or mid 0.80's but two of them occurred very recently. Both days were just over one million shares and near 85 cents. When markets sold off this past week, WUC tested 81 cents but recovered quickly.
Uranium stocks have perked up nicely since early October and we know how well copper and gold have done. If lithium can perk up again, WUC will provide exposure (and spread risk) across several very good sectors.
Project profile
1) Western Uranium recently established a new corporate entity to conduct exploration in South America. The new company, Meryllion Minerals, will be run by Dr. Willem Fuchter, PhD, PGeo. A geologist with worldwide experience in gold and base metal exploration. Meryllion acquired an option to purchase the 14,000-hectare Cerro Amarillo-Cajon Grande copper-gold property located in the Malargue district, in the province of Mendoza, Argentina.
2) December 2009: WUC acquired 14,000 hectares in La Rioja, Argentina. The region is geologically similar to producing basins in the western U.S. that were mined and produced > 500 Mlbs of Uranium.
3) Western Uranium is earning a 70 percent interest in a copper/gold project located in Baza, Spain. The property is a large regional exploration target in southeast Spain, located in an established iron mining district. A regional and site-specific sampling program has identified high gold and copper values at surface. This property has not benefited from modern exploration techniques. Drilling is expected to occur this winter.
4) The company also has two large uranium exploration projects in Nevada (Kings Valley) and New Mexico (Treeline), previously explored by Chevron Resources and Conoco. These have drill defined U308 mineral resources along with exploration potential to host additional pounds of uranium. Cameco is a strategic alliance partner with the right to earn a 70 percent joint venture interest on each economically viable stand-alone uranium deposit developed within any area currently in the company's Kings Valley or Treeline properties.
Oh, and there is that stake in Western Lithium, which is cheap on paper against other lithium companies. Thom Calandra discussed WLC in a report earlier this week about the Global X Lithium Fund (NYSE: LIT, Stock Forum). I’m told Thom has another lithium “idea” coming down the pike. We’ll see. By the way, I own 20,000 shares of WUC.
Thom Calandra: Thanks Danny. I’ve known some of the executives at these two companies for a few years. Like Pamela Klessig, the CEO of Western Uranium. She has a lot to prove to shareholders – and prove up, for that matter. Still, there’s little doubt we’ll see both of the Nevada companies get interest as the world searches for reliable sources of elements used for alternative energy devices. Thanks for weighing in on uranium and lithium, Danny. As for my preferences, well, I am probing geothermal companies right now. I think both WUC and WLC are cheap on paper. (I do not own either.) Later this week, in an article to be distributed first to Ticker Trax subscribers, we’ll cite the lithium company I think looks cheaper than the dirt it owns in the desert. Hint: We mentioned it earlier this week in our report … and it has someone involved who first set me off on the lithium trail and has connections to Japan. Plus, I have a tellurium idea coming. So stay with us.
Candente Gold: Joanne Freeze’s Candente Gold (TSX: T.CGD, Stock Forum) just added 100 hectares to its vast Tres Marias concession in southern Peru. The epithermal silver and gold prospect is the same one I visited with CEO Freeze earlier this year. If I am correct about what I saw across the windswept hills of this 7,900-acre concession in Peru’s Puno District, we have what could be one of South America’s richest “emerging” gold-silver districts 100 percent owned by one tiny company. Those who need a reminder can go back to the Ticker Trax archives for entire on-site coverage and photos. I expect Candente Gold to be publishing drill data soon from the Mexico prospect that gets all the attention: El Oro. Yet in my book – and I know in Ms. Freeze’s Peruvian-themed blood – it is Tres Marias and another clutch of Peru properties that could boost this company into a mid-tier producer of gold, silver and possibly zinc. I own the shares. – Thom Calandra.
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Ticker Trax™ is published by Stockhouse Publishing Ltd. Ticker Trax is an information service for subscribers and neither Stockhouse nor Thom Calandra nor Danny Deadlock is a broker or an investment advisor. None of the information contained therein constitutes a recommendation by Mr. Calandra or Mr. Deadlock or Stockhouse that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. Ticker Trax does not purport to tell or suggest the investment securities subscribers or readers should buy or sell for themselves. Subscribers and readers of Ticker Trax should conduct their own research and due diligence and obtain professional advice before making any investment decisions. Ticker Trax will not be liable for any loss or damage caused by a reader’s reliance on information obtained in the reports. Subscribers and readers are solely responsible for their own investment decisions. Opinions expressed in Ticker Trax are based on sources believed to be reliable and are written in good faith, but no representation or warranty, expressed or implied, is made as to their accuracy or completeness. All information contained in Ticker Trax should be independently verified. The editor and publisher are not responsible for errors or omissions or responsible for keeping information up to date or for correcting any past information. Ticker Trax and Thom Calandra and Danny Deadlock do not receive from any companies that may be mentioned in Ticker Trax. Some of those companies are advertisers or clients of Stockhouse, the publisher. Xtra-Gold Resources was at one time a preferred client of Stockhouse for investment relations, marketing and other commercial but not editorial services, which are never guaranteed. Any opinions expressed are subject to change without notice. Owners, employees and writers may hold positions in the securities that are discussed in Ticker Trax. PLEASE DO NOT EMAIL SEEKING PERSONALIZED INVESTMENT ADVICE. Copyright 2010 all rights reserved.