Gabriel Resources Ltd. – New Recommendation

FULL DISCLOSURE: I do not currently own this stock (but I plan to start buying). I have no inside knowledge of this company. I do not know of any newsletter writers who are currently recommending this stock (if I’m wrong on that one, please let me know), although Raymond James back in March suggested an upside target of $6.50 per share.

Here’s the story:

Gabriel Resources has the rights to a potentially very profitable gold mine in Romania. You can read more on the Gabriel web site. The Company’s principal asset is its 80% direct ownership interest in a Romanian company, Rosia Montana Gold Corporation (RMGC), which holds two mineral licenses in Romania, (Rosia Montana and Bucium). Minvest S.A. (Minvest), a Romanian state-owned mining company, together with three other private Romanian companies, hold a 20% interest in RMGC, and the Company holds the pre-emptive right to acquire the 20% minority interest.

Here’s the problem:

Two weeks ago Romania had a presidential referendum. The president, who supports the development of the Rosia Montana project, survived impeachment and won by a wide margin. Unfortunately, the new environment minister is against the development of this project. Even worse, it appears that the general public is against the project due to environmental concerns. You can read more about it; the National Post did a story on it on May 16. According to the National Post, Attila Korodi, the new Minister of Environment and Sustainable Development, is quoted as saying the project is a “priority to investors, but not to Romania.”

No elections are scheduled until 2008, but the current political turmoil could lead to earlier elections, and a change of government could increase the chances of getting the necessary permits. In fact, today, the Romanian president is demanding early elections. (Read more here).

Management is top notch, and stresses not only profitability but also good governance and environmentally sound mining practices.

The chart doesn’t look great (here’s one from 11:00 am Friday morning), as the stock is below it’s 50 and 200 day moving averages.

However, the long term trend line is still intact, and a bottom around $4.00 may indicate support, and the RSI and MACD look good.

This is a highly speculative play. If they don’t get the permits they want, the company may be worthless. If they can start mining, it’s a huge win.

My plan is to start putting small amounts of money into this one, buying more on pullbacks.

Again, this is for risk capital only; don’t bet the farm on it.

 

 

I have owned GEA.TO – Gold Eagle Mines Ltd. for a while. A top of $10.37 was reached on February 26, before Gold Eagle fell to $8.30 on March 5, 2007. It subsequently rose and fell, for bottoming out at $8.55 on Friday.

insert chart here

As the chart shows, we have been in a down trend since February 26. The question now, of course, is do we have a base around $8.30, or will the down trend continue (since obviously we can’t be going up and down at the same time)? I currently have 5% of my portfolio in Gold Eagle, which may be high for a stock on the down trend, if in fact it is.

My plan: I’ll watch to see how it opens on Monday; if Gold Eagle opens down, I’ll sell half of my holdings. If it opens up, I’ll sit tight, on the assumption that $8.30 is a base. Time will tell which way this will resolve itself.