AOI up 400%, Calvalley a Friday takeover target, as well as a progress update on my new (free) TSXAlerts service
Stockhouse Ticker Trax is equity specific research (Canadian listed and market cap < $300 million) published every Monday to paid subscribers. Our free Friday column may feature companies previously featured to paid subscribers (with a minimum one month delay) or discuss topics of interest to the general investment community and relevant to overall portfolio management.
I. Junior oils doing very well in Africa
II. Summary of events and gains for TSXAlerts (new)
While the junior oil & gas stocks struggle for attention and fair value in North America, Africa seems to be the flavor of choice in 2012. The Chinese have made huge investments there over the past several years but juniors are now beginning to reap the benefits of early entry.
Africa Oil (TSX: V.AOI, Stock Forum; $7.90)
Africa Oil is a newer company with assets in Kenya, Ethiopia, Mali and Somalia. In late 2011 you could buy AOI for $1.20. By May the stock had risen almost 1000% to $11.40. While it has given back a good portion of those gains, the rate of return in 2012 has still been dramatic.
If you look at the image below from 2006, you will see that Ethiopia and Kenya are not even listed as significant oil plays. Yet discoveries over the past couple years means that map will now change dramatically.
You will also note that a good portion of the oil in Africa is in regions with huge political risk or questionable human rights practices – Egypt, Libya, the Congo, and Angola (I am sure that list can easily be expanded).
Even in light of the risks, money is not afraid to pour into these exploration and production plays. Junior mining exploration plays in Africa are trading at very depressed prices (even the golds) yet investors both big and small throw caution to the wind and pile into African oil.
On Friday it was announced that Calvalley Petroleum (TSX: T.CVI.A, Stock Forum) was the subject of a takeover attempt at a 60% premium to Thursday’s closing price. The stock is up 70% Friday on subsequent news explaining why shareholders should wait for a higher price.
If you look at Calvalley’s assets, they are in Yemen and Ethiopia. Not the most stable regions in the world but when it comes to oil, investors are prepared to assume the risk.
Taipan Resources (TSX: V.TPN, Stock Forum – halted at 60 cents) is in the process of trying to acquire Lion Petroleum through a reverse takeover. When this deal first emerged mid May they were able to move the stock from 25 cents to 84 cents in a couple weeks. The overall structure of the new deal appears very sloppy but considering Lion has a massive land position (oil exploration) in Kenya, they will likely manage to float a fairly high valuation on this.
Note: I own shares in privately-held Lion Petroleum that were purchased almost three years ago. I feel they are butchering the share structure with this Taipan proposal so if it goes through and you see Taipan trading with the new assets, I would research it very carefully before making any investment decisions.
Long story short – a person will want to keep an eye out for attractive oil plays in Africa - there doesn’t seem to be a shortage of money for them.
Colombia is another country with some excellent junior oil exploration and production plays but unlike Africa, they seem unable to attract the same speculative dollars. With the strength of Africa (even in light of the risks), Colombia is a region I am watching closely in hopes more money begins speculating there. I hope to introduce a very promising Colombian oil producer to paid Ticker Trax subscribers mid month (priced in the mid 30 cent range).
II. TSXAlerts – Overview & summary of events
I recently introduced a Twitter feed and Stockhouse board for those interested in shorter term ideas focused on the TSX and TSX Venture. Twitter severely limits the number of words so the Stockhouse board allows me to expand notes – I do the posts in tandem.
I previously thought Twitter was a complete waste of people’s time (it still is in the majority of cases – do we really need to know when someone is cooking dinner?).
However, for stock and news alerts it is terrific. Not only is it free and instant, but they have an option that allows you to get the “tweet” via text message. When markets are quiet I post nothing as risks run high. Otherwise maybe one or two ideas or abnormal activity / news per day. If we ever get a nice sector rally, this would work exceptionally well.
Here is a summary of events for the past couple weeks
CHM alert at 96 cents. Traded as high as $1.20 and currently at $1.08 [up 12.5%]
> noted Ticker Trax update on junior gold valuations with averages down to $34/oz
> CPN at 27 cents. Traded as high as 30 cents. Currently .29 [up 7%]
> ELR at 17.5 cents. Currently at 23 cents [up 31%]
> Alert on MMT at $1.11. New dividend would yield 20% annually. Currently $1.43 [up 29%]
> BGM at $1.21 – alerted that Friday’s news would generate substantial trading activity but also warned on our Stockhouse board that there were several “concerns” (with respect to the news release and management). The stock went on to trade at $1.60 and was one of the most active juniors on the TSX this week. Since then, those same concerns have resulted in a drop below 90 cents. Friday it is trying to test the dollar again.
> LGO at 25 cents on news of large financing. Currently 27 cents [up 8%]
No Posts July 4th and 5th
Disclosure: Danny Deadlock does not currently own shares in companies discussed above with the exception of ELR (40,000 shares) noted on June 25.