New trade for December 30th, 2010.
This stock came to CRI's attention lately from a desire to take a position in the 'rare-earths' metals market. The fact that there are many suggesting there is a bubble forming in the rare earth metals market to this investor suggests that to the contrary, there is plenty more room for appreciation. Couple this un-euphoric investment atmosphere with an insatiable consumer demand/appetite for Lithium as an alternative power source and with what appears to be a growing political chess piece and you have the makings for a serious supply squeeze at some point down the road.
The real trick with these types of investments however is to be constantly hunting for signs of value as once these markets get going in earnest, the concept of 'value' quickly disappears.
With the above in mind, we come to CRI's latest acquisition, Jourdan Resources Inc. (JOR.V).
While doing a recent VCIM screen, JOR quickly jumped out as a potential candidate. The stock was the subject of a 4:1 roll back in October (news link). The stock currently has 19.5 million shares outstanding and is trading at .94 price to tangible book value per share. Their assets are 100% owned exploration rights to uranium and rare earth metal properties in and around Quebec (web site). First Gold recently discovered a major rare-earth deposit in the area and Jourdan happens to have staked the property right besides them. While this is no guarantee of finding anything, they often say the best place to look for a mine, is right beside another one.
While I don't expect the moon, a typically healthy stock can trade up to 3 times book value or in this company's case, close to $.40 per share. So what is going to get the company there? In Canada, we have government sponsored exploration tax credits that must be used on an annual basis (known as Flow-through financings). While too complicated to get into in depth here, just take away for this that there must be work done on a Canadian property, in the subsequent calendar year, in order to qualify for the tax credit. To this end, the company recently raised a little more than 1 million dollars (through a flow-through financing) that must be spent directly on their Canadian properties. The company has indeed stated that there will be major work done on their Lithium property in the coming months (news link). Lots of catalysts..
With the rollback now done and a significant financing taken care of, this company is currently in the best position an exploration company could be in. They have to property, they have the cash and they have a year to do something. In essence, this is a new stock that is trading at a discount to the actual assets of the company just waiting for any good news to 'pop'.
3 month price chart
A look at the past three month's price action in Jourdan suggest that the stock has cleaned itself up and establishing a base. Considering the substantial financing recently announced at $.15 and $.20 (flow-through) it is understandable why this stock would be putting in a 'floor' in and around these levels. Additionally, a 50% retracement of the substantial rally in October would have brought prices back into the $15 area. That has happened and one might argue that while the correction has taken place, the stock has been under accumulation.
3 year weekly chart
Summary
As both an industrial and political component , rare earth metals (and in particular Lithium) are still very much in the world's spotlight. Jourdan is an example of a Canadian exploration company with Canadian rare earth metals properties (including Lithium) that will be doing work and producing news in the coming quarters. Technically, the stock has recently consolidated a substantial move higher seen through the fall. One might argue that through the consolidation the stock has been under accumulation. Considering too the seasonality of the market, a typical spring (May/June) top should produce healthy returns if aquired in and around current levels. As well, because of the recent financing at these levels, there ought to be a risk 'floor' established here until the hold period expires (April 1st, 2011).
CRI feels there is a good chance to double invested dollars at or near $16 and as a result is buying. Once filled, orders will be placed to sell half of the position at $.32 working on an open ticket...
Remember, make sure the system you are using is at least 66% accurate and for heavens' sake, don't put more than 5% of your risk capital into any one play.
That's all for this post,
Brian Beamish FCSI
The Canadian Rational Investor
the_rational_investor@yahoo.com
the-rational-investor.com
