Mining service/supply pubcos gaining ground
October 19, 2007
Greetings investors!
Yesterday I wrote about a London AIM listed security with a new laser-based technology that is helping improve diamond recoveries from aluvial gravels.
While that’s exciting in and of itself, I’ve also seen some nice moves of late in more traditional service companies, including Cabo Drilling (CBE.TSX-V). I called that one at $0.35 Cdn or so last winter, and I’m taking some profits now as it pushes $0.80.
Moreover, there’s a nice premium on those returns by virtue of the changing spread on the USD/CAN pair. I bought the stock in U.S. funds when the Loonie was under US$0.91, so that’s a 12% gain on the currency conversion alone.
Now, where to put those gains: Well one possibility is an oil and gas sector supplier (seismic imaging services) called First Growth Corp. (FGC: TSX-V. OTC BB:FGCDF). Currently the company has a backlog for services in South America; they’ve been engaged by Carbones Del Caribe there to assist in the El Hatillo Coal Project in Colombia.
El Hatillo contains a probable 57 million metric tons of coal in an area of 10,000 hectares with a projected initial production capacity of 800,000 tons per year!
This looks big time to me ! FGC’s subsidiary there, Kinetex, has been working hard in S. America to establish a client base, and with a view to extending its primary services into second generation exploration and development opportunities.
If that occurs next year, the company will be looking at exponential growth as it leverages its existing contracts and clients going forward.
The other great thing about getting into plays like First Growth is the chance to get in on the next big mineral or oil and gas discovery. It doesn’t hurt to be the first set of eyeballs on new exploration data!
FGC is trading near its 52 week low of $0.68 Cdn, at 3 times book value, so it’s certainly cheap enough. Though thinly traded, the company has pegged $2.2 million in revenues and claims to be on track for even higher growth in the coming quarters.
Looking good!
Kb
The BarkerLetter on October 18th 2007 in Commodity investing
