In this issue
We are running a
little late with
this week's
report but we
have a good
story below to
share with you.
But first, we
think this is a
good chance we
will be seeing
new highs in the
price of gold
within days and
there are many
excellent
companies
selling at
bargain prices.
As I like to
say, 'Better
Early-Than Never',
so perhaps you
should be
getting
involved.
We realize that
some analysts
are greatly
hedging their
position in the
precious metals
sector, fearful
of another
major collapse
in the financial
markets with the
precious metals
tanking also.
Yes, this is a
possibility but
when and from
what levels?
Everyone seems
to agree that
eventually the
precious metals
will be 'the
place to be'.
Currently our
view is to go
with the up
trend and
continue adding
to positions but
keep some buying
power in the
event of
substantially
lower prices.
One company
worthy of your
interest and due
diligence is
Endeavour
Financial.
Endeavour Mining
Capital
(EDV-TSX) was
one of the first
finance groups
in Canada to do
five year,
free-trading
warrants. When
they took over
Wheaton River
Minerals in
2002, they did
multiple
financings as
they grew the
company and
eventually
merged it with
Goldcorp. Over
the years,
Endeavour did
the same with
Northern Orion
Resources,
Bankers
Petroleum and
even with their
own company.
These long term
free trading
warrants were a
big draw for
institutional
money to venture
into the junior
resource sector
this decade. I
think they
greatly
increased
exposure and
liquidity into
our market.
The original
Endeavour
warrants expired
in November
2008. But they
didn't waste any
time creating a
new set, and
these ones are
much more
liquid. Like all
resource stocks,
Endeavour was
caught in the
downdraft of the
2008 market
collapse. They
were one of the
first to
re-capitalize,
raising CAD$115
million at $1.77
in February
2009. Along with
that, they
issued
32,487,500
warrants, symbol
EDV.WT.A:TSX,
with a strike
price of
CAD$2.50 and an
expiry date of
February 4,
2014.
Endeavour has
recently started
to get active,
and the warrants
have responded,
already doubling
to 80 cents. The
stock spent most
of the spring
and summer in
the $1.40 -
$1.60 range. The
company was
working on a
$400 million
financing with
money from the
Middle East. As
yet, that hasn't
been completed.
However, come
September they
found an
opportunity to
spend some of
that money. They
spent $53
million taking
control of
Etruscan
Resources Inc.
(EET-TSX), an
80,000 ounce
gold producer in
West Africa.
It was a deal
that I thought
showed the
smarts of this
team. Etruscan
would have gone
bankrupt at the
end of
September, with
a bank loan
coming due. But
Endeavour put
the money up,
and then more
money that would
remove a good
chunk of an
onerous hedge
that Etruscan
has. Endeavour
convinced the
banks to convert
some of their
debt to equity,
and to stretch
out the hedge so
Etruscan would
not have to
deliver so much
production each
month.
The net effect
was that with
the increased
cash flow
resulting from
Endeavour's
work, their
financing did
not change the
Net Asset Value
of Etruscan. So
they saved
shareholders
from
annihilation and
didn't dilute
them either.
Endeavour's
stated business
model is very
simple: take
control of three
junior gold
producers and
merge them. They
did this last
year with New
Gold (NGD-TSX).
Endeavour merged
Peak Gold,
Metallica
Resources and
New Gold
together. Each
was trading well
below their Net
Asset Value
(NAV). Now New
Gold trades at
1.5x NAV. That's
value creation.
(As New Gold
shows, the
valuation
difference
between the
junior and
intermediate
producers is
huge right now -
almost double
per ounce of
production.)
Now that the
first company
transaction has
been completed,
I expect the
other two to
follow quickly -
within the next
two or three
quarters. The
goal, at the end
of the day, is
to have a
250,000 ounce
producer with
lots of
exploration
upside and a
clear financial
and share
structure. And
Endeavour will
own at least 51%
of it.
Here at
PreciousMetalsWarrants.com
our specialty is
warrants.
However, the
basic question
always is, ‘a
warrant on
what’? What is
the underlying
company and do
you like their
story and
fundamentals?
We like to use
the expression,
“We’ve Done
The Math – You
Pick The
Company”
In the case of
Endeavour
Financial, we
really like the
company, their
story and where
we see them
going with their
new strategy.
Secondly, the
leverage
potential for
the warrants is
wonderful and
the warrant
ranks high in
our new Rankings
of All Warrants.
We personally
own a small
position in the
Endeavour
Financial Wt A
and foresee the
warrants out
performing the
common shares
better than 2 to
1 in the next 18
to 24 months.
In conclusion,
whether you
invest in the
common shares or
the warrant A of
Endeavour
Financial, we
think it would
be a great
addition to your
portfolio.
For those
readers and
subscribers
unfamiliar with
all of our
services:
•
PreciousMetalsWarrants.com
provides an
online database
for all warrants
trading on the
natural resource
companies in the
United States
and Canada.
•
InsidersInsights.com
tracks the
buying and
selling of
corporate
insiders with a
focus on the
junior mining
and natural
resource
sectors. Buy and
Sell Alerts are
issued as deemed
relevant based
upon our
analysis.
There are many
great
opportunities
presented in
each of these
services and we
encourage you to
get on board
with us soon.
Dudley
Dudley Pierce Baker - Owner/Editor - Guadalajara/Ajijic, Mexico
Lorimer Wilson - Director of Marketing and Contributing Editor - Toronto, Canada
Bruce Ross - Webmaster and Administrative Assistant - Phoenix, USA
