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Here’s a look at Pinecrest Energy, Plains Creek Phosphate and Castillian Resources, three resource companies that were volume leaders on the TSX Venture Exchange last week.
A look at last week’s TSXV resource volume leaders reveals just how unpredictable and volatile junior mining stocks can be. Analysis reveals that the market can react negatively to announcements that are purportedly positive and that sometimes stock activity can surge for no apparent reason.
Over 45 million Pinecrest Energy (TSXV:PRY) shares were traded from mid-week to week end.
On Wednesday, the company announced plans to merge with Spartan Oil (TSX:STO) by acquiring all of the company’s outstanding common shares.
Pinecrest has a significant position in Slave Point, an emerging light oil play focused on the greater Red Earth area in Alberta. Spartan holds a position in Alberta’s Cardium light oil play and the Bakken light oil play in Southeast Saskatchewan.
The combined company is expected to have an enterprise value approaching $1 billion with an attractive suite of high-netback light oil projects. Subject to the completion of the transaction, Pinecrest’s board has also approved an initial annualized dividend of $0.155 per share, which translates into an 8.3 percent yield based on a price of $1.87 for Pinecrest’s shares.
Under the agreement, 2.738 common shares of Pinecrest will be exchanged for each outstanding Spartan share, representing a deemed price of $5.12 per Spartan share and $1.87 per Pinecrest share.
“We don’t see this as a sale transaction. We see this as a transaction where we’re building something that’s better than either of the two companies individually,” the Winnipeg Free Press quoted Spartan’s CEO, Richard McHardy, as saying.
Though Pinecrest has outlined a list of positive attributes associated with the deal, its stock price has been declining, falling nearly 8 percent since November 20, the day before the announcement, when the stock closed at $1.87. At last on Monday, its shares were trading at $1.75.
Plains Creek Phosphate (TSXV:PCP) took the title of TSXV volume king on the final day of trading, with over 9.8 million shares exchanged.
Plains Creek is a junior miner focused on advancing its Farim phosphate project, located in Guinea-Bissau, to production of 2 million metric tons of phosphate rock per annum for a minimum of 25 years. The company has a very attractive production agreement with the government that includes 100-percent ownership, no government taxes, license fees or other costs, and a 2-percent tax-deductible royalty on production.
Studies and investigations on the Farim project have been underway since February 2011, and as work progressed a number of alternative production scenarios were investigated to maximize project value, reduce the time to production, minimize development capital and accommodate phosphate market demand and the changing political climate in Guinea-Bissau.
On Friday, Plains Creek announced the filing of two feasibility studies for two respective production alternatives: a 1-million-tonne-per-year beneficiated phosphate rock concentrate project and a 1.3-million-tonne-per-year direct-shipping option phosphate rock project.
These two production alternatives address the first phase of the development, the company noted. The second phase is to mine and process the remainder of the project’s phosphate deposit, “including the production of up to 2 Million tonnes per year of beneficiated phosphate rock concentrate with an open pit mine, processing plant, pipeline, and port construction, which will be assessed in a separate feasibility study,” Plains Creek added.
Shares closed up 50 percent at $0.015 on Friday. By Monday, the stock had cooled off and was last down over 33 percent, at $0.01. The stock is down over 81 percent year-to-date, with a 52-week range of $0.00 to 0.08.
Castillian Resources (TSXV:CT) was a rather inexplicable TSXV volume leader. After two days during which over a million of its shares were exchanged, its trading volume grew to nearly 4 million shares on Friday, making Castillian the second-most active resource stock.
The company is focused on advancing its flagship Hope Brook gold project in Newfoundland. Castillian exercised an option that allowed it to acquire a 100-percent interest in the property earlier this month. It also announced the closing of an option agreement whereby Ryan Gold (TSXV:RYG) was granted the opportunity to earn a 10-percent interest in the project after incurring $2 million in aggregate exploration spending.
Castillian’s most recent news came on November 19, when the company filed an NI 43-101 compliant technical report for the property. The Hope Brook gold project is now estimated to contain 590,000 indicated ounces of gold and 548,000 inferred ounces.
Despite these developments, the company’s stock is down about 28.5 percent over the past 30 days. Shares closed flat at $0.25 amidst last week’s heavy trading. At last on Monday, the company’s shares maintained that price.
Securities Disclosure: I, Michelle Smith, do not hold equity interests in any of the companies mentioned in this article.
