Month: February 2013

CNR and CP update

Hamilton

CNR feb 23 2013cp feb 23 2013

We have no idea what the proper count should be for either of these stocks. Both have gone way beyond our wildest expectations, as has the entire transportation section with the exception of sea going companies that are not represented in the DJT index anyway. So a market-neutral approach may fit the bill. Market-neutral is a term hedge-funds have invented in order to make you believe that you cannot lose money on such a trade. It always works until after you have lost a bundle but this time is different. We propose selling 4 shares of CP and buying 5 shares of CNR. The ratio is not perfect but close enough. The reason is simple, CP is trading at a 42x p/e  against CNR at 16x.  We know these ratios are distorted by very short-term factors but there they are. CNR also yields more. Soon top management will have worked at both places and there will be no secrets left. The two should converge, an approach pioneered on a large scale by Long Term Capital, that should prove successful provided you have the stamina (which they did not). This has already happened. Next they should diverge, each going their separate way as these two companies should given their totally incomparable operations and geography.  Given the clear throw-over on the CNR chart this spread trade should blossom sooner than later. Good luck.

An alternative is simple shorting one or the other or both, we think CNR might do a little better (that is worse) than CP.

HPQ update

Hamilton

hpq feb 23 2013

If you followed the advice religiously , you would have bought at $12.50 and sold yesterday at $18.21 on the open, a gain of 45% in three months. We can now count five waves up which is promising for the future, but not for the immediate future. It is now time to forget that these stock even exists and wait a few months before looking at it again. We do note that the potential for this stock to rise to about $30 exists! Not in a straight line!.

SFF update

Hamilton

SEAFIELD RESOURCES EXECUTES $16.5M DEBT FACILITY WITH RMB RESOURCES INC.

Thursday, February 21, 2013

Click here to view PDF

Toronto, Ontario, February 21, 2013 – Seafield Resources Ltd. (“Seafield” or “the Company”) (TSX-V: SFF) is pleased to announce that it has executed an agreement with RMB Australia Holdings Limited ("RMB") for a CAD $16.5 million loan facility ("Facility"), arranged by RMB Resources Inc., the resource financing division of the FirstRand Group of South Africa. The use of proceeds is to fully fund the bankable feasibility study (“BFS”) for the Company’s Miraflores Deposit and general corporate purposes.

In November 2012, the Company commenced its current ongoing exploration program on the Miraflores advanced-stage gold deposit, which is part of the Company’s Quinchía Gold Project, located in the Risaralda Department of Colombia. The Facility provides the incremental financing the Company requires to complete the Miraflores BFS by the end of Q4 2013.

Facility Terms:

  • Debt term of 3 years at LIBOR plus 7.0% per annum;
  • Warrants issued to RMB to purchase up to 33,000,000 common shares of the Company for 36 months at C$0.10 per common share, subject to TSX Venture Exchange approval;
  • Security interests granted to the lender, which include a first ranking charge over the Quinchía Gold Project and a pledge of the securities and assets of Seafield Resources Ltd. and Minera Seafield S.A.S;
  • Pre-payment at any time without penalty or from proceeds of project financing post BFS;

You take what you can get. This should be good for, maybe , a year and a half, if all goes well. Now that the market has opened it also helped to push the stock up a little bit, 3 cents with volume threatening to exceed a two year high of about 3 mln. shares. The all time high volume was about 70 mln. shares in a day.

 

P.S At the end of the day slightly more than 5 mln shares had traded in a range of 10 to 13 cents and closing at 11 cents, a single cent gain for receiving this lifeline. What seems to be clear is that, should the company meet with success, that is, should the exploration results indeed be “bankable”, then the warrants (and others issued to key personnel, 3 mln plus ) will be exercised and hang like a millstone around this company’s neck. At a stock price of, say, $1.10 this would up the cost by $36 mln. of proceeding. Sounds like the proverbial rock vs hard place situation.