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Calandra Report: NRE African rare earths play is a rare find

Thom Calandra , The Calandra Report
1 Comment| August 9, 2013

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TIBURON, California -- I am bidding for another 56,000 shares of Namibia Rare Earths. I will meet NRE (TSX:T.NRE, Stock Forum) executives and geologists a second time next week, here in California.

I received (Thursday) 6,100 of the order at 19.2 cents U.S. I am trying again today for more.

I hope to see the Namibia property in September. The principals in our first meeting about a month ago vowed to carry through a strategy of developing strategic elements outside of China, perhaps with a partnership. NRE has about 6 million shares that are under the control of a Toronto entity that originally purchased the stake for Namibia's treasury cash. (See: Article)

I believe the shares are for sale and available via Dundee at about 20 cents Canadian.

NRE (in Canada) has about $14 million in cash, which is about the size of its market cap. The founders, from Nova Scotia, assure me they will not seek another financing. A new director, Bill Price, is a well-known private equity banker from this San Francisco neck of the woods.

NRE is a breakaway from Burkina Faso gold miner Etruscan, which Gordon Keep's Endeavour Mining (TSX:T.EDV, Stock Forum) absorbed a couple of years ago.

The NUGT (NYSE:NUGT, Stock Forum), a Nasdaq-traded leveraged fund that triples price movement on metals juniors, rose 25 percent Thursday. The 3x Direxion basket will complete a 1-for-10 reverse split later this month; I am not sure if it is good or bad for metals equities owners. The nominal result, aside from odd lot amounts that will return to cash, is that a hypothetical $6 price will become $60.

NUGT's bipolar short-sale mate, DUST (NYSE:DUST, Stock Forum), will undergo a 2-for-one split on Aug. 25. So DUST's price, on a hypo-$70 stock, will become $140.

NUGT at its low nominal prices in recent months has become a volume leader in market trading. The 3X bull is averaging about 30 million shares a day the past three weeks.

Paul Bourque's BCSC this week gave the green light to East Africa Metals' (TSX:V.EAM, Stock Forum) disclosure of infill drilling results in 2010, when EAM operated as Canaco Resources at Magambazi in Tanzania. The B.C. Securities Commission had been concerned that Canaco and CEO Andy Smith should have revealed the seemingly positive results immediately. The BCSC three-person panel heard 11 days of testimony in January of this year and decided the Tanzania infill drill results were not material, and "that the company acted appropriately in granting certain stock options prior to the disclosure."

Mr. Smith, a geologist, was Qualified Person on the material aspect of Canaco's disclosure decision. He had offered to be interviewed well before the January 2013 hearing. Mr. Bourque's staff members at the BCSC declined on a number of occasions, Andy Smith tells me.

"It seemed to be a witch hunt by the BCSC, carried out in the context of the debate over the need for a national regulator," he said. East Asia Metals as Canaco Resources saw its shares crushed after the promise of Magambazi resulted in a gold resource of fewer than 1 million ounces.

EAM is what remains of the Tanzania-focused operator. I own the shares, to my great regret. My takeaway on Magambazi, after the resource was published and investors, already jumping ship months earlier, entirely abandoned the stock, is that Mr. Smith squandered what seemed to my eye to be a rich gold resource.

How? He allowed the exploration drilling and connect-a-dot resource report for the Canaco project to be a remote control operation. I believe Mr. Smith should have been at Magambazifull time in the months that its engineer/contractor was preparing that resource report.

As for the regulatory matters: I do not understand the relationships among the various Canada securities agencies. Still, I know that the options issued to Canaco execs and directors were never exercised. I doubt if the high-priced options, as they turned out, even vested before Canaco stock sunk into the pennies.

So perhaps this is or was a witch hunt.

I also know that the Canaco case, and others, take a long, long time up there. Huckster Frank Callaghan's Barkerville Gold Mines (TSX:V.BGM, Stock Forum) was and is another running drama in Vancouver for 12 months or so. Many other examples up there.

Mr. Callaghan has been telling me for weeks, if not longer, that Barkerville shares will resume trading "soon." I think it is a year now that BGM shares have been off the boards on the Venture exchange after a run in with the BCSC and a wildly optimistic resource report for its gold project up in them thar hills of BC.

Is he self-delusional (i.e., believes his own beeswax)? I cannot make that call just yet.

Still, if a national regulator were to trump Canada's provincial ones, we might hope the new entity accelerates company actions and longstanding trading halts, at the very least.

Coming next week: As we enter the second year of our revised TCR, a TCR family member asks me to reflect on my strengths as a reporter/researcher (one that I know of: my personal connections in the biz) and on my failures (several: way too friendly with those connections, among others). I will reveal the dialogue in a coming report; I plead guilty as charged in advance of the report and hope to get harsher with our target investments and their principals.

Here and there: Zodiac Exploration (TSX:V.ZEX, Stock Forum) has done a splendid job of promoting its California San Joaquin Basin efforts after what has been a miserable three-year history of digging around for oil. The shares, which I discussed a few weeks ago after interviewing its principals on the telephone, also are getting a push from Occidental's increased drilling in the Monterey shale of the basin. We'll see. ZEX shares, which I was fortunate to purchase at 6 cents Canadian, are now at 8 cents on thick volumes. To make up for the lost promise (and cash, some $50 million-plus) of its IPO a couple of years ago, the shares will need to recapture 40 cents or better. I think Zodiac controls between 75,000 acres and 110,000 acres in the basin and is somewhat surrounded by Occidental Petroleum properties (NYSE:OXY, Stock Forum). Peter Halverson took over as Zodiac chief executive in December 2012. ...

I like the way Bellhaven Copper & Gold (TSX:V.BHV, Stock Forum) shares are acting. I expect fresh reports from Julio Benedetti/Paul Zweng/Millie Paredes' Colombia and Panama gold-copper explorer in the coming week or two. BHV is not one of our TCR 8 but it is my largest holding, and yes, I am in the red on those shares, which we here at home have owned for three-plus years. The stock is an extreme speculation for those who do not own it. I am expecting porphyry results from La Mina/Garrucha that continue to show solid pure gold grades, with credit copper. La Mina, the thinking goes, could rank soon, theoretically, as one of the lowest-cost (cap-ex) gold properties in the world. We shall see.

Your neighbourhood,

Thom Calandra


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Peter Haverson -- correct spelling for Zodiac CEO -- thom
August 9, 2013

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