Canaccord Capital Corp. - Graphite by David Pescod


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Canaccord Capital Corp. - Graphite by David Pescod

  1. 1. e-mail: e-mail: March 12, 2012 OREZONE GOLD (T-ORE) $2.50 +0.02 NOVUS ENERGY (V-NVS) $1.04 -0.05 Orezone Gold NORTHERN GRAPHITE (V-NGC) $2.14 +0.04 FLINDERS RESOURCES (V-FDR) $1.80 -0.03 CEDAR MOUNTAIN EXPL. (V-CED) $0.27 +0.005 Today we finally caught up with Mike Halvorson who has, over the years, become one of the most respected mining guys in Western Canada (and hey folks, he does a lot of oil and gas as well) but these days he is trying to slow down a bit. He is only on a couple of boards these days, but has spent much of the last several weeks in Africa representing Orezone Gold at several mining conventions on that continent. His wife Jude was along and Mike tells us that they just love their time spent traveling through some of the magnifi- cent game parks in Africa and also touring through wine country. He also suggests that Capetown, South Africa is one of the most gorgeous cities you can ever visit and he highly recommends for those who like to travel, that it’s a place you have to visit. But back to business. While the chart on Orezone tells you that it, like many other companies in the gold sector, are not having the most fun these days, resource estimates out in a couple of months will finally tell us how big and what grade Orezone might be for its Bombore gold project in Novus Energy Burkina Faso. The reason we were trying to catch up with Mike today is he is also on the board of directors of Novus Energy. Novus is Hugh Ross’s company, but previously Halvorson and Ross had teamed up with a company called Gentry Resources that had one of those happy endings as Gentry was sold and bunch of happy shareholders resulted. As far as what next for Novus, Halvorson tells us that with the recent take-over of Compass Petroleum it would give Novus a valuation of somewhere between $1.50 and $1.60 a share. In the meantime, he suggests with their huge land holdings of the Viking play, they have probably enough land to support another 10 years of drilling. As far as the rumors of take-overs, Mike admits that there have been several tire kickers come by company, but as far as the bottom line, he suggests that no, none of the potential buyers have made a real offer. We certainly notice the huge volume Novus has had over the last couple of months. Obviously, we are not the only ones following that story.
  2. 2. David Pescod T: 780.408.1750 Debbie Lewis T: 780.408.1748 Toll Free: 1.877.409.1750 Page 2 Meanwhile we ask Mike what he sees looking forward inthe commodity sector and as far as gold, he suggests that Northern Graphitethe long-term trend is still up...but in the meantime, hesuggests this volatility is going to shake out an awful lotof players and hurt a lot of companies. He admits thatthere are lots of companies these days that don’t have thecash in the kitty that they should have and that means hesuggests, that “with dramatically reduced budgets, theywill not have the money to spend on exploration that theydid before and many deals could go begging. Many com-panies won’t even be able to carry their land commitmentsand some companies will disappear.” In the oil sector...he suggests we are probably in the$90 to $110 range and if things get crazy in the worldscene, there might be a brief spike to the high side, he justdoesn’t see any cause or reason for it to be outside of that$90 to $110 range. As far as a sector and a stock pick for us of companiesthat he might not be involved in...he suggests it’s time tobe looking at the graphite sector. As far as graphite,Halvorson compares the current situation to the rare earthscene about two years ago when John Kaiser exposedhow Chinese and international demand for rare earths wasgrowing dramatically and prices would sooner or later goup because the Chinese which has controlled the produc-tion and had brought prices way down, they are also find-ing demand in their domestic economy rising as well. Now Halvorson suggests graphite may be goingthrough the same demand, particularly with the huge andgrowing demand for lithium batteries and other more mun-dane uses that could be anywhere from nuclear reactorsto electric cars to steel. Cedar Mountain Exploration The one story that does attract his attention in this sec-tor though is Northern Graphite which could see an $80 mil-lion mine and mill put in place at Bissett Creek, which isabout 100 km east of North Bay Ontario. It’s 17 km fromthe Trans-Canada highway and close to infrastructure,according to their presentation which might be worth alook/see. From the slide the company gives, you also notice thatit’s a deposit that is at surface with no over-burden, a lowwaste to ore ratio and conventional open-pit mining doesthe trick. Although we’ve all noticed that nothing seemsto happen on time or schedule or budget in mining, kind oflike oil and gas, the company is expecting commercialproduction as early as the third quarter of 2013. As far as ways to play the game, there are three companies he suggests a person look at. Flinders Resources has a projectthat was built complete with mill in Sweden some time ago and sits on care and maintenance basis. He suggests that careand maintenance in Sweden of such a level that they might have to just push a few buttons and they could be back on produc-tion. We ask Halvorson to play stockbroker and give us a target on the stock and he is not shy at all...$5.00 is the number hecomes up with. But he says if a person is looking for a flyer on the sector, they should look at Cedar Mountain Exploration fortheir Graphite Creek project in Alaska. Take a look at their presentation he says and while the company has done limited workfor those who consider flyers, this might be one, he suggests. DEB’S DITTY: It’s okay to pretend we’re Irish on St. Patrick’s Day. We pretend we’re good on Christmas, don’t we?