“Albania’s Forgotten Commodity Treasure”

by Travis Johnson, Stock Gumshoe | November 21, 2007 3:39 am

Albania
Albania
You border on the Adriatic
Your land is mostly mountainous
And your chief export is chrome

OK, so for those who are not old Cheers fans, I just had to include that little snippet for you … one of my favorites.

Feeling very old now. But how often does one have the opportunity to write about Albania? The only other thing they’ve been getting credit for lately is being the only country in the world where President Bush is genuinely popular.

But on to the main point: This is another resource/mining stock from Taipan[1], in a teaser ad for Andrew Mickey[2]’s Small Cap Commodity Prospector newsletter. It’ll run you $1750 if you want to sign up now.

Or if you just want to know the name of this little commodity company, well stick with your friendly Gumshoe — we’ll figure it out.

What do we know about this company?

The share price is around $2, and Mickey says the “conservative” target is $15, but he thinks it could go to $30. Or $25. He throws around a lot of pie-in-the-sky target numbers, all of which can give you visions of Daddy Warbucks dancing in your head.

They’re sitting on assets “conservatively valued” at $1.5 billion, but their market cap is $50 million.

They IPO[3]’d on October 19 on a “major exchange.”

Their primary holding is indeed a large district in Albania, that has been mined in the past, where they plan to use modern mining techniques to find and extract much more valuable ore than the Russians, Chinese and Albanians were able to in years past.

Mickey says that this mining area was previously hidden by a prison camp, which adds some nice color. And the main reason he believes this is a winner is that there are 17 “volcanic massive sulfide” deposits, which apparently are concentrated ore areas that result from volcanic action eons in the past and are the holy grail for mineral exploration. They also call them “Volcanogenic Massive Sulphide” deposits, and I’ve also seen them referred to as “volcaniferous,” so if you want to do some research those are all options[4].

So … what is this little microcap company that has rights to a 344 square kilometer area or, per Mickey, 132 square miles) in Albania?

Methinks it must be …

Tirex Resources (TIRXF on the pink sheets, TXX in Canada[5])

The IPO did indeed start trading on the Canadian TSX Venture Exchange back on October 19. The bad news? It started trading at 50 cents, and has shot up almost in a straight line since then to today’s $2 or so. Their market cap is actually up a bit over $60 million now thanks to price appreciation, but it certainly was at $50 million a few days ago.

There are not actually all that many warrants[6] outstanding (800,000, as far as I can tell), compared to some mining companies, probably because they just went public and got a big bucket of money, though there are also a couple million stock options that vest over five years.

And they’re going to need that money. They raised $5 million dollars in the offering in Canada (too bad they didn’t price it at a buck, they would have raised twice that), based largely on the strength of their aerial electromagnetic survey of the area, and they are underway with a $2.5 million exploration program right now that will involve ground work and actual drilling, with much more capital-intensive work to come after that.

So … I won’t pretend that I’m a geologist, or an expert in Albanian politics or anything like that. I’ll just tell you that the main thing I would look into if I were interested in this company (and it does sound like an interesting company, especially if the VMS deposits are anywhere near as lucrative as Mickey is claiming — real “company maker” deposits), is time.

Basically, “How long is it going to take?”

Though much of the area has already been mined (9 of the 17 VMS areas have been mined to some extent, though the previous miners ignored Zinc and some other minerals and focused solely on Copper), it is definitely inactive currently.

The Phase 1 project, which is all they’re talking about so far (at least, as far as I can tell), is projected to take about six months and cost $2.5 million. Where will they move after that?

How long before they can complete their surveys and actually get enough test drilling done to make a hugely capital intensive investment in actually building a mine (or mines)?

There is some infrastructure in place — roads, electricity, some old processing plants that may or may not be worth anything … how long will it take, and how much will it cost, to get all of that up to speed to make sure they can not only mine the ore, but move it to a port?

This may indeed be a spectacularly compelling mining company investment idea, but I’m guessing that we’re talking about (wild guess here) probably many years before they actually produce any minerals (five years? Ten years? I don’t know). During that time, if history of some other mining companies I’ve looked into is any indication, there will be many, many runs up and down in the stock price as the prospects brighten and dim and as investment requirements loom large.

Maybe Mickey will be right and they’ll shoot up to $30, or maybe they’ll get there in 2018, or maybe they’ll drop right back down to 50 cents. I have no way of predicting, and though they do have some significant hope because of the mining history of the region and their intiial surveys, remember that they have not yet released their first drilling results — those results could easily move the stock significantly in either direction, in my humble opinion.

For those interested in digging deeper, there are some thorough presentations on the Tirex website, and you can consult SEDAR for the official filings, which include the official technical summary report for the Mirdita Project that gives most of the real specific details about their plans and the geology and mining history of the region.

Any experts on mining, Albania, VMS or anything else are more than welcome to chime in — as with so many things that I don’t understand very well, and mining is certainly near the top of that list, I’m trying to be a bit cynical.

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