CTS - Contact Resources

[YOUNG_TRADER]

Anyway back on CTS, Niz was spot on,

65c was the breakout and 70c was smashed,

Its funny, I would have thought that 70c would have been the real hurdle,

Well so far 500k bought above 70c with another 500k on the bid above 70c,

The sell side looks pretty thin,

I hope it consoldiates a little at these levels

 

[resourcesman]

Ok, I understand. I just feel strange why companies that hold shares in other companies have to be trade at high discount.
In long term, there is no difference.

Actually, there is a difference in the longer term... the difference is known as agency costs...... there is a risk that the extra layer of management (in this case ARV's management) does funny things with with their investments or does things that are not in the shareholder's best interest.... this would explain a small amount of the divergences, but i guess it shouldnt be that large

GLI/GLC was a case where the NTA per share was consistently above the share price...... there was a risk that management would screw up, which they did at the end, so the price of the shares was always lower than if the whole portfolio were dissolved and the assets were paid back to shareholders

 

[YOUNG_TRADER]

Amazing,

Theres about 400k buying above 70c yet there's only 200k on the entire sell side!

I've had long chats with brokers today, they all like the look of CTS's breakout, they also think that my $1.20 target is reasonable given the projects,

I just laughed, I liked CTS when it was 50c and the opies 30c, they didn't why because it was trending sideways, now it breaks out and they love it, lol

 

[ideaforlife]

Hey. YT. how to get to chat to brokers? Sorry that I've been in the game for only a few months and haven't really understand the rules yet.

 

[YOUNG_TRADER]

lol, I think your misunderstanding,

I use a number of brokers, Bell Potter, Patersons, Hartleys, I always tlak to them, aske them their opinions and thoughts,

I was just saying that now that CTS has broken out they like it, I find it funny, because I always think its best to get set before the breakout,

But then look at Niz, he bought like 2 days ago on confirmation of the breakout and must be doing well, especially since its only been 2 days

 

[springhill]

Well so far 500k bought above 70c with another 500k on the bid above 70c,

YT can you tell me where you access this information ie. the number of buyers/sellers and buys/sells and at what price?

 

[nizar]

YT can you tell me where you access this information ie. the number of buyers/sellers and buys/sells and at what price?

You can view it with WebIress or any other platform which offers dynamic information with full market depth, detail, course of sales.

Alternatively, you can get half an hour delayed course of sales from:
http://stocknessmonster.com

CTS looking good today. From here hard to say, id favour a pullback, maybe a tail to 70c to confirm the support is there. Or maybe it'll go to the moon, lol

 

[YOUNG_TRADER]

You can view it with WebIress or any other platform which offers dynamic information with full market depth, detail, course of sales.

Alternatively, you can get half an hour delayed course of sales from:
http://stocknessmonster.com

CTS looking good today. From here hard to say, id favour a pullback, maybe a tail to 70c to confirm the support is there. Or maybe it'll go to the moon, lol

420k on the buy above 70c about 150k all up on the sell, buying has been relentless and sustained,

I too would favour consolidation but will not complain if it goes to the moon lol

 

[deftfear]

I read it from etrade website. You can check it if you have etrade account. if it is the case, etrade mislead me.

I wouldn't rely on Etrade for market cap, a few months ago they didn't even have the market cap for BHP right...the biggest company on the stock exchange. If they can't get that right, how are they meant to get a small company right?

Right now they have market cap around $128 Billion AUD, when yahoo has it around $200 Billion USD

 

[YOUNG_TRADER]

I wouldn't rely on Etrade for market cap, a few months ago they didn't even have the market cap for BHP right...the biggest company on the stock exchange. If they can't get that right, how are they meant to get a small company right?

Right now they have market cap around $128 Billion AUD, when yahoo has it around $200 Billion USD

As a rule of thumb, when i want to work out market caps I only look at APPENDIX 3B statements because they by law have to disclose all shares, options, warrants and convertible notes, listed unlisted or escrowed

CTS made a really good break out this week and although the sell side is non-existant I expect profit takers to emerge this week,

I will be looking for it to maybe retrace back towards 70c to confirm support there,

I will do a thorough write up this weekend as I have a bit of spare time

Cheers

 

[ubid]

Im sure that would be much appreciated y t from all the CTS followers.

I only bought some oppies on the 12th of July @ 37c following a big rap from my broker, couldnt be happier atm.

I think the share price has a long way to go, next drill results should be interesting.

Cheers Ubid.

 

[bliimp]

Reading the CTS thread from the beginning, I noted the following on 7th May :-

Note his departure at the same time from Artemis (ARV), a company based out of the same office as CTS..........

This comment related to the resignation of the Managing Director (MD) of CTS ... who was also a non-executive director of ARV!

OK ... so what is the significance? ... let's get a time perspective.

1. On 13 March 2007, ARV the diversified Australian resources company lists on the ASX following an IPO
2. On 7th May, the MD resigns from both ARV and CTS positions
3. On 10th July, ARV takes on a 6% stake in CTS

Perhaps the MD had a conflict of interest (the ASX announcements by CTS and ARV mentioned no reason for resignation) ... so if that was the case, then the intention to take a stake in CTS must have been made between the 7 week period from 13 March to 7 May ... or it may have been on the agenda from the beginning ... with Mega Uranium in the know!

Why should Mega Uranium be in the know?

Mega Uranium, the TSX listed company, through its wholly owned subsidiary Redport Ltd holds a 10% interest in ARV ... and has held that interest from day 1!

In fact, in the 10th July ASX announcement by ARV on their 6% stake in CTS, ARV footnotes with "ARV Special Adviser Tony Grey has been appointed to assist Artemis in the development of the Company’s assets. Mr Grey has over 30 years experience in the resource sector including as founder of Pancontinental Mining Ltd, Chairman of International Ferro Metals Ltd and director of Mega Uranium Ltd".

How convenient! A director of Mega Uranium giving "specialist advice" to ARV!

And Mega Uranium has been very, very active in the past year or two with acquisitions of uranium juniors in both Australia and overseas ... and is currently cashed up with a $112m warchest ... refer to http://news.ninemsn.com.au/article.aspx?id=272102.

All I am doing is hypothesising ... and don't want to turn this into a Sherlock Holmes saga ... I suppose there is nothing wrong in a company having an interest in a takeover target ... in this case Mega Uranium really has "10% of 6%" which is really a 0.6% interest in CTS ... but the things that stand out are

1. The CTS-ARV-Mega Uranium connection
2. How ARV appears to have had the intention from day 1 to quickly take the initial stake in CTS
3. The guiding hand of a Mega Uranium director to assist ARV
4. The sudden increase in SP and Volumes in CTS since the initial stake ... when nearly all other uranium stocks have been out of favour

Add this to Young Trader's fundamental analysis, and I start to think that a takeover is imminent!

 

[YOUNG_TRADER]

wow, Bliimp,

I haven't even started doing my write up, but I doubt that I would have made the Mega Uranium link,

You may really be onto something here, I was always curious why ARV took a stake in CTS, I mean its not like its an obvious fit or anything, ARV's main project is near MOL's Molybdenum Spinefex project, whereas CTS is just one of the most undervalued U plays in the ASX on a peer comparison,

Its informative "Sherlock Holmes" : posts like yours that may me so thankful I am a member of ASF,

And looking at the charts of other U plays you're absolutely right, CTS is one of the few to have risen so strongly in a flat U market,

If it is a takeover offer I'm betting that the intial offer will be $1-$1.20 (using $15 per Lb of Uranium as an EV)

Thanks again Bliimp

p.s. Ubid, I'm curious who's your broker? And what exactly was the rap?

Reading the CTS thread from the beginning, I noted the following on 7th May :-



This comment related to the resignation of the Managing Director (MD) of CTS ... who was also a non-executive director of ARV!

OK ... so what is the significance? ... let's get a time perspective.

1. On 13 March 2007, ARV the diversified Australian resources company lists on the ASX following an IPO
2. On 7th May, the MD resigns from both ARV and CTS positions
3. On 10th July, ARV takes on a 6% stake in CTS

Perhaps the MD had a conflict of interest (the ASX announcements by CTS and ARV mentioned no reason for resignation) ... so if that was the case, then the intention to take a stake in CTS must have been made between the 7 week period from 13 March to 7 May ... or it may have been on the agenda from the beginning ... with Mega Uranium in the know!

Why should Mega Uranium be in the know?

Mega Uranium, the TSX listed company, through its wholly owned subsidiary Redport Ltd holds a 10% interest in ARV ... and has held that interest from day 1!

In fact, in the 10th July ASX announcement by ARV on their 6% stake in CTS, ARV footnotes with "ARV Special Adviser Tony Grey has been appointed to assist Artemis in the development of the Company’s assets. Mr Grey has over 30 years experience in the resource sector including as founder of Pancontinental Mining Ltd, Chairman of International Ferro Metals Ltd and director of Mega Uranium Ltd".

How convenient! A director of Mega Uranium giving "specialist advice" to ARV!

And Mega Uranium has been very, very active in the past year or two with acquisitions of uranium juniors in both Australia and overseas ... and is currently cashed up with a $112m warchest ... refer to http://news.ninemsn.com.au/article.aspx?id=272102.

All I am doing is hypothesising ... and don't want to turn this into a Sherlock Holmes saga ... I suppose there is nothing wrong in a company having an interest in a takeover target ... in this case Mega Uranium really has "10% of 6%" which is really a 0.6% interest in CTS ... but the things that stand out are

1. The CTS-ARV-Mega Uranium connection
2. How ARV appears to have had the intention from day 1 to quickly take the initial stake in CTS
3. The guiding hand of a Mega Uranium director to assist ARV
4. The sudden increase in SP and Volumes in CTS since the initial stake ... when nearly all other uranium stocks have been out of favour

Add this to Young Trader's fundamental analysis, and I start to think that a takeover is imminent!

 

[YOUNG_TRADER]

Before I put up my full analysis (about to do it)

I think I should give a bit of background info re CTS's Peru Uranium projects

The 2 main projects in Peru are Corachapi and Pinochio, are located in the Macusani District of Peru where companies such as Solex, Vena, Frontier Pacific, Strathmore Minerals and other Canadian Uranium companies have been working away for a few years now,

Whats amazing though is of the entire Macusani DistricT, Corachapi and Pinochio are by far the best and most advanced projects,

Corachapi, or "Chapi" as its referred to in historical IPEN reports I dug up, was the second most advanced deposit and had a JORC resource of 1.6Mt's @ 0.15% U which was based mostly on the extensive work done by IPEN (Peruvian Institute for Nuclear Energy) and IAEA (UN International Atomic Energy Agency) these invloed drilling, trenches and adits

Natuarally I was sceptical of the "historic" figures, as if this deposit was sop good, how did CTS manage to get it so cheap?

Well lots and lots of digging up greatly increased my confidence, particularly one report which was prepared for the Canadian companies Frontier Pacific Mining and Solex Resources also greatly increased my confidence,

See report here http://www.frontierpacific.com/pdf/report_macusani.pdf


Moreover work done by CTS, trenching, assaying etc constantly verified the historical results, also if you check the other companies web sites you will see that they too are having results similar to what the historical reports suggested,

http://www.frontierpacific.com/macusani.php

http://www.solexresources.com/s/Home.asp

http://www.strathmoreminerals.com/s/Macusani.asp

http://www.venaresources.com/Peru/Divisions/Macusani/

What you will see is that Macusani is fast emerging as the new Uranium province of the world, kinda like Nambia, only the grades are much much higher,

So with my confidence almost 100% in Corachapi, or "Chapi" as it was originally known as being a very high grade deposit thats very shallow ie within max 20m of surface, lets move on to Pinochio which was the most advanced deposit, historical IPEN and IAEA reports suggest this was a trial mining site where several hundred tonnes of hige grade Uranium was easily produced back in the 1970's and 1980's

So with all that said, I think you can see why I compare CTS with MTN,

Both have deposits which are worth Billions of dollars, and like CTS, MTN's was based on nearly all historical work, as such the market never properly valued MTN, letting its share price languish at 60c when I knew all along a peer comparison suggested that fair value was many many multiples of that, today MTN is at $6! thats a 1000% return in little over 12months, IMO the only Uranium stock that offers such fundamental potential is CTS,

Working off a base of 50c, I would not be surprised to see CTS return similar returns, time will tell.

Anyway CTS analysis to follow shortly, enjoy chewing the fat, questions welcome,

I encourgae everyone to read the report and visit the websites attached to see how the other Canadian companies have been fairing in Peru

 

[YOUNG_TRADER]

I have had a few quries and would like to clarify something,

Firstly I am not comparing CTS to MTN as a peer comparison or anything like that,

My use of MTN is that many should recall that MTN's share price languished at 60c, giving it a mkt cap of $36m even though it held a deposit worth Billions, the key was that there was little to no mkt confidence in the JORC and as such MTN's SP lagged all others on a Peer comparison, I firmly knew then that MTN was undervalued, but it took a price catalyst which was the take over offer to make the mkt wake up to its potential,

I see the same with CTS, its deposit is real, just like MTN's always has been, but just like MTN, for whatever reason people question Corachapi's validity etc etc,

From my research CTS's Corachapi is real, so eventually the mkt will value CTS in line with its peers as it did with MTN, a price catalyst will come along like I said it would for MTN, it maybe a takeover offer, an Insto getting on the share registry, Mega buying some shares, drilling resluts who knows,

It may happen in 1 day, 1 week month 1 year, it may have laready began, point is when the fundamentals are real, its a matter of when not if

Hope this clarifies the reference to MTN


As for peer comparisons, past takeovers have been done at a value of $15 lb Uranium, however recently a takeover was done at $30 lb Uranium so my guesstimations will begin with current takeover value and then move on to production profiles

Also see these research reports

http://www.intersuisse.com.au/files/JRM Winter 2007 - May.pdf

http://www.uraniumanalyst.com/images/FEC_Contact11April07FINAL.pdf


A quote from Grigor,

The Bottom Line
CTS seems anomalously underpriced at these levels. It would not be difficult to justify a multiple of the current capitalisation, perhaps into the range of $100- $200m even at this speculative stage, in contrast with the current figure of $50m.

 

[resourcesman]

Hi YT,

I noticed that there are 75M options outstanding, and hence on a fully diluted basis, isn't the market capitalisation already $100mill?

 

[YOUNG_TRADER]

CTS​

Mkt Structure

Shares
80m +55m 20c 30/6/08 opies + 10m 50c 30/06/08 opies


Cash
$10m + $15m in options, as I'm assuming all options get exercised o work out mkt cap, I add it to cash balance = $25m in cash


Mkt Cap @ 70c = $100m Current
Mkt Cap @ $1.44 = $210m Target 1
Mkt Cap @ $2.70 = $390m Target 2




Projects



Corachapi Uranium, 100%, Peru
JORC 3.8Mt@ 0.115% U = 9.6M lb's U

This is 1 of the 2 main projects in Peru and is located in the Macusani District of Peru where companies such as Solex, Vena, Frontier Pacific, Strathmore Minerals and other Canadian Uranium companies have been working away for a few years now,

Whats amazing though is of the entire Macusani District, Corachapi and Pinochio are by far the best and most advanced projects,

Corachapi, or "Chapi" as its referred to in historical IPEN reports I dug up, was the second most advanced deposit and had a JORC resource of 1.6Mt's @ 0.15% U which was based mostly on the extensive work done by IPEN (Peruvian Institute for Nuclear Energy) and IAEA (UN International Atomic Energy Agency) this involved drilling, trenches and adits

Natuarally I was sceptical of the "historic" figures, as if this deposit was so good, how did CTS manage to get it so cheap?

Well lots of researching increased my confidence, particularly one report which was prepared for the Canadian companies Frontier Pacific Mining and Solex,

http://www.frontierpacific.com/pdf/report_macusani.pdf

Also the fact that CTS's follow up work yielded results consistant with the historical estimates, and this was found to be the same for the other companies working in the area.

http://www.frontierpacific.com/macusani.php
http://www.solexresources.com/s/Home.asp
http://www.strathmoreminerals.com/s/Macusani.asp
http://www.venaresources.com/Peru/Divisions/Macusani/

Valuation
9.6M lb's U @ $15 lb = $144m = $1.10c CTS
9.6M lb's U @ $30 lb = $288m = $2.20c CTS

These are takeover values, based on peer takover etc,

For project production Grigor assumed the following parameters

• capital expenditure US$25m, I say US$40m• operating cost US$15/lb, I say US$20 lb
• head grade 2,500 ppm, I say 1,250 ppm
• recovery rate 85%, I agree
• annual prod’n 640 tpa U (1.4 mill lb) I agree
• uranium price of US$95/lb, I agree

So I will use more conservative/negative estimates than Grigor

JORC 3.8Mt@ 0.115% U = 9.6M lb's U
85% Recovery = 8.16M lb's U recovered at cost of US$20/lb sold US$95/lb Margin = 8.16M x US$75 = US$612m

Less Cap Ex = US$612m - $40m
Less $72m contingency etc, cost blow outs blah blah
= $500m USD = $625 AUD (USD 80c)

So a rough NPV of the project = $600m AUD = $4+ CTS Note this is a very very rough calculation to highlight the potential of the project if its brought into production,

For now I prefer to use the $15 lb value figure

Pinochio Uranium, 100%, Peru
No real figures to crunch, but this was the only site of historical production by IPEN so there must be some real value here


Kyrgyzstan Projects Uranium, 100%, Kyrgyzstan
JORC 2.079Mt's @ 0.037%U = 1.71Mlb's U
First pass JORC and although its low grade its within 6m of surface and to quote the company is "easy to extract, lies on the doorstep to power, water and labour infrastructure, and is in close proximity to the Kara Balta uranium processing facility."

The JORC's low grade and small size is a bit misleading thoug, see from the drill results, I saw many 1-2m hits at grades of 0.1% U to a max depth of 6m. This would make these deposits some of the shallowest I have ever seen.

All up their are 4 potential deposits, each 3.5km's long by 0.5km's wide, and if we assume 2m's thick of Ore = 10Mt's @0.1% U

4 potential deposits = Could be 40Mt's @0.1% U = 88M lb's U

Even if they only firm up 1/4 of this = 22M lb's U! @ $15/lb = $2.75c more value to CTS


Valuation
Most of the above was POTENTIAL UPSIDE ie nothing really firm yet, so lets just work with the JORC

1.71M lb's U @ $15 lb = $25m = 17c CTS
1.71M lb's U @ $30 lb = $50m = 34c CTS



Management
This appeared to be the weakest part of the company, as Grigor was sceptical of thier abilities,

However I disagree, CTS has managed to source the 2 former senior IPEN Geologists/Engineers who worked on Corchapi and Pinochio, so that is a major bonus in my view,

In addition to this, the companies current Exec Chariman Dr Richard Napier, is also heavily involved with IMCI the group that CTS acquired the Kyrgyzstan projects from, so for the Kyrgyz side of things this is also very positive, in addition to these recent projects, CTS has the automatic right to earn 20% in any of the projects pegged by IMCI

I will agree that CTS needs some better know people on the board, Twiggy or Kiernan may help :

My biggest gripe with management would be a lack of PR, but then I thought the same about MTN management, I have learnt though that eventually mkt will awake to a companies potential



Summary

- Corachapi is worth between $1.10c - $2.20c depending on the EV per lb value applied
- Pinochio adds alot of potential value but can't be quantified at present
- The Kyrgyzstan projects have alot of upside to but for now the JORC adds 17c to 34c in value again depending on the EV used.
- A connection to Mega Uranium has been made, although not 100% established
- Some excellent ex IPEN geo's/techies who discovered and developed the Peru projects
- Exec Chairman's other company IMCI will continue to generate projects for the company in Kyrgyz
- Cash + Opies of $25m = 17c


Total Value = $1.44c - $2.70c
I prefer to use the $15 per lb figure so $1.44 is my value for now

Research reports

http://www.intersuisse.com.au/files/... - May.pdf

http://www.uraniumanalyst.com/images...ril07FINAL.pdf

 

[toc_bat]

Im sure that would be much appreciated y t from all the CTS followers.

I only bought some oppies on the 12th of July @ 37c following a big rap from my broker, couldnt be happier atm.

I think the share price has a long way to go, next drill results should be interesting.

Cheers Ubid.

i bought some (well with my dads money - for him) on the 19th, around the 47c mark (CTSO),

i came across it o the 17th, chart just looked very good, in fact after coming across it on the 17th my memory was jogged and really i followed the cts thread in april and then saw it retrace, only to say to myself that CTS had died in the ****. I was wrong of course, ... mostly wrong when it comes to trading/investing.

ps looking at depth now there are 90,000 shares on offfer for sale! I assume sellers will cme out of the woodwork tho. hope they dont tho.

 

[Sean K]

26 June:

Approaching resistance at 55 cents, and maybe be out of downtrend having found very good support at 50 cents. Looks to be limited downside chart wise here, unless it breaks down through that support, of course. Worth watching closely for a break up IMO.

12 July:

This looks to have changed direction IMO. Breaking some short term resistance after finding a definate floor at 50 cents. Looks likely to move either sideways or back up from this position. Breaking 57 probably more likely to be up, but for confirmation wait for a higher low. Indicators look very good.

16 July:

Might pause around these levels under 65 resistance, but looks like momentum definately on the up to push it through eventually. I think breaking through 65 will definately be the end to the sideways movement even though all time high 70ish will also be resistance. Looking good atm, but of course anything can and will happen.

Good break though 55 in retrospect.

No pausing around 65, which was good for those taking a position on breakout through 55. 65 and 70 were impotant breaks as has been mentioned. Now, TA is less reliable except for support levels on any pullback.

 

[YOUNG_TRADER]

Was expecting a bit more feedback re my research,

Queries, comments etc

Anyway Kennarico is right, 65c and 70c look like really strong support levels, 70c particularly,

There's nearly 800k buying at or above 70c
vs
225k on the sell all up!