PEZ again...

I posted a chart of PEZ.V back in June, when it looked like it was ready to finish consolidating. I am continuing to keep an eye on it as it is still showing encouraging signs:

Candente revisited

I posted on Candente this past February as the chart was showing a strong set-up. The stock got a huge boost after listing on the Lima Stock Exchange in Peru and has been consolidating since. Recently the stock has begun another leg up and is now making new all-time highs.

I have followed this company for several years now and have had the opportunity to watch them build the company over that time. When Candente announced their intentions to proceed with developing Canariaco themselves, they were met with some skepticism that explorers could become mine-builders. As the project advances, the market appears to be starting to recognize their evolving status. Environmental and feasibility studies are underway and it is clear that this project will have relatively low start-up costs and very fast payback (less than two years at current copper prices).

Candente is also currently drilling their El Oro gold project in Mexico. The company has a 30% interest in the project and is working with Canaco to develop it. The area where Candente is drilling is the site of historical mining operations. This was the site of one of Mexico's most prolific gold mining areas and there are reasons to believe that a significant amount of ore still remains there.

A wild card that was recently added to the hand is the Tres Marias property in Peru. This property, like El Oro, hosted mining operations historically. Operations were conducted down to the 75-meter level, but all indications are that the mineralization continues below that level. The main vein runs north/south, has been mapped on surface for 1/2 a kilometer, traced for another 300 meters and is open in both directions.

Here are a couple of excerpts from the press release announcing the property:
"Silver values from surface sampling and historic mine dump piles have grades of up to 68.08 ounces per ton (oz/T) (2,334 grams per tonne (g/t))."

and

"The high sulphidation alteration zone extends along a ridge for one (1) km and includes lithologically and structurally controlled vuggy silica and hydrothermal breccias in various surface exposures. Anomalous gold values of up to 4.0 g/t were obtained from grab samples of the vuggy silica material."

Although the stock has had a great run so far this year, there is a lot of news in the pipeline that could continue to attract attention to this company. The stock is arguably undervalued just based on Canariaco alone, but significant results at El Oro will begin to provide Candente's precious metal assets with greater visibility.

Forum Uranium...

Forum is representative of much of the junior uranium sector. The stock has gotten a 50% haircut in the April to July timeframe. Just a little off the top. Whoops. This is a speculative situation, but they have the right ingredients that are key to exploration success for any uranium junior: highly prospective portfolio of properties, top-notch geological talent, cash in the bank. Like many charts I have been looking at recently, this one appears poised to break out. We will see what happens next.

PEZ dispenser

On the threshold...

Stock of du jour

JER Envirotech

Sometimes I refer to certain small-cap stocks as "lottery tickets"...speculative, but with huge potential. I started following JER Envirotech (JER.V) three years ago. The missteps and management faux pas that have occured over that time period weave a tale of woe that has resulted in the stock selling at about the same price now as it was back then. That's the bad news.

The good news is that the company still has extremely viable products and they have completely overturned the management team and brought in industry professionals who are businessmen (as opposed to inventors and entrepreneurs). Despite the 3-years walk across a bed of nails/coals (take your pick), I think that the wheels are finally on the rails and things are coming together in the way that is required for the company to get traction, which is why I mention it now.

Thumbnail of the company:

- Wood-plastic composite products, using polypropylene and organic fibers such as sawdust, rice husk, palm fiber, etc.
- Technology was developed in conjunction with the Natural Resources Council of Canada. Canadian gov't owns the patents, company has an exclusive license to use them. This should discourage infringement by larger players.
- One product line consists of pellets that can be used as input to injection-molding applications (coat hangers, car parts, and on and on and on).
- The other product line is 4' x 8' sheets. This is the only company that can extrude WPC panels of that size. Also can produce variable thicknesses, depending on the application. Plywood is no good in tropical (think Asian) markets, due to insect infestation and rot. This stuff does not rot, but has performance characteristics that meet or exceed plywood. Due to deforestation in Asia, there ain't a lot of plywood there anyway. Cement panelboard is used in many applications where JER would compete. WPC panel board is cost-competitive to cement panels and has superior performance characteristics.
- The company has recently replaced the entire management team, but if you read through the bios of who they have brought in, it is clear that they are now building the RIGHT team to take this company to the next level. Earlier team were nice guys...but not businessmen. They just closed a non-brokered private placement to raise $2.6MM and are doing a brokered PP to raise another $5MM. This will give them the runway they need to execute their plan.

The stock is not likely to do anything for some time, certainly at least until they get the larger PP done. But NOW is the time to start doing DD on it if this is the kind of story that interests you. I bought into the company through a PP, before the company was public. The PPs they are doing now are at the same price level where I bought...three years ago. That stinks, but at least they are now headed in the right direction.

So...what is the potential? They are running trials with several companies that are testing the pellets and the panels for various applications (clothes hangars, car parts, building material, deck underlayment for yachts, for example). We need to see these trials turn into customer adoptions and then the revenue will start to ramp steeply. The company has production facilities that are operational in Delta, BC and Malaysia, with plants under construction in the Philippines and in planning in India.

During a conference call with the (new) CEO a couple of months ago, he said that he thinks that they can go from $3MM in revenue in 2007 (projected) to $30MM in 2008. If they can achieve a 10-fold increase in revenues within the next year and a half, then I think the stock will reflect it. Longer term, they are thinking much bigger numbers than that.

I bought the company because it was the most boring thing I could find. I was tired of companys with "exciting" products that were actually solutions in search of a problem. To me, this seemed like a no-brainer and it still does. Contrary to some popular opinion though, products do not sell themselves. It takes a village...ooops, no it takes the right management team to make it happen. I think the right team is now in place, but the market needs to see proof that they can execute their beautiful vision. This creates a window of opportunity for those who are seeking diamonds in the rough.

It's not without risk, but given the developments over the last few months, I feel that a large amount of risk has been mitigated and the markets for their products have not disappeared. All they need to do now is execute, execute, execute.