Small Cap Picks from the Calgary Resource Show

The Calgary Resource Show had lots of interesting small-cap companies that I met with but a few caught my attention. I thought I would share these companies as ones to add to your watch list. I am still of the belief that we are in need of a correction to cool the market off and when this occurs, it may be the right time to load up on some of the these small cap gems.

The first company that caught my eye at the conference was Compliance Energy (CEC-V). Compliance is essentially a coal company that has access to 75,000 hectares of freehold coal and mineral interests and 2,046 hectares of Crown Coal licences in the Comox Coal Basin on Vancouver Island, B.C. Through the Comox Joint Venture agreement, Compliance owns 60% of these interests and Itochu International and LG International own 20% respectively. The company is well positioned to take advantage of the Asian demand for metalurgic coal. They are located in a distressed lumber camp area and thus have access to motivated and experienced workers. The government is also behind compliance's efforts as it is good for the local economy. On the resource front, they have increased their measured and indicated resources to 71 000 000 tons on their Raven Deposit. Another advantage for compliance is an experienced management team that has brought other mining projects into production. One analyst (Fundamental Research) is following the company and has a target price of $1.32. Based on the chart below, you can see that over the next two years as the company moves toward production, there should be some very good upside in this stock. Finally, the company is now in the process of receiving environmental approvals from the Federal and Provincial governments. This is a positive next step in the mine development plan and shows that the management team is serious about sticking to its production schedule.



Another company that caught my attention at the conference was a Junior Rare Earth Metals exploration company called Commerce Resources (CCE). Commerce Resources Corp. is an exploration and development company with a particular focus on tantalum, niobium and rare metal deposits with a potential for economic grades and large tonnages. The Company is specifically focused on the development of its Upper Fir tantalum and niobium deposit in British Columbia, Canada. Commerce is well positioned with sufficient capital to advance the commercialization of a prospectively lucrative mining operation for tantalum and niobium. The company is led by an experienced management team that has just added two key people, Dr. Axel Hoppe and Ian Graham. Both bring experience in the mining industry that will assist Commerce in moving their exploration to development. Tantalum is a rare metal that has the highest capacity for electricity out of all metals. It is used in cell phones, electronics, nuclear power plants, jet engines and wind turbines. The global supply of tantalum is currently 4 million pounds behind the global demand which is having a positive impact on the price of tantalum. Niobium is used as an alloy for the production of harder and stronger load bearing steel. This steel would be used for bridges, buildings,and oil pipelines. Considering the fact that infrastructure around the world is in need of upgrading, demand for Niobium will continue to increase.


Keeping in mind that Tantalum and Niobium are fairly unknown to the investing public, you would be investing at the front end of what I think will be a long term trend.



Finally, for those that are interested in Gold and Silver, I have two companies that came across my radar at the conference that may be of interest to you. The first is called Geologix Explorations (GIX-V). Geologix is primarily a Gold and Copper explorer focused on projects in Mexico and Nevada. What attracted me most to this company is the management team which is loaded with experience and connections. The board has connections to Silver Wheaton who have already committed some financing to the company. Their main exploration property is the TEPAL project in Mexico. It was purchased from Arian Silver last year and already has over 1.5 million ounces of gold proven and 413 pounds of copper. This property has great infrastructure and property that could be put into production very easily. The management team is now focused on developing their properties in Mexico and is anticipating lots of positive news in 2010.



Another Gold and Silver company that I didn't get a chance to meet but who was being talked about by many of the newsletter writers at the conference was Explor Resources (EXS-V). Explor is a junior gold company that is drilling in the Abiti Greenstone Belt (West Timmons Area). They have a huge land position there and there management team has experience working in the area. There has been a renewed interest in the West Timmons area after Lake Shore Gold discovered a large deposit on their property right next to Explor's. What Lake Shore discovered is that the Gold bearing zones are much deeper on the West Timmons side than the East Timmons side. All of the previous drilling in that area went only 300 m deep but the Lake Shore discovery occurred at 900 m. The Explor management team thinks that they can follow the model set by Lake Shore and drill deeper in the efforts of uncovering another huge gold discovery. This stock ran up to $1.60 a share on anticipation of an Elephant discovery on there first 10000 meter drill program. The results from that program were positive but not what the speculators were after and thus a sell-off occurred in the stock. Explore has announced a larger drill program focused on the same area and I predict that once again, investors will push the stock higher with anticipation of a huge discovery. This is definitely a drill bit play but has some pretty major upside potential. The chart below shows the spike that occurred prior to March's announcement.




Overall, there is a lot of excitement in the Junior Resource Sector. Many companies have weathered the financial storm of last year and are now doing what they love to do...find new deposits and develop them. Money is also flowing back into the sector which will allow the scientists behind these companies to do their magic. With commodity prices continuing their bull trend, many junior exploration companies will benefit from the great land positions and drilling that they have begun. There were many other companies that I liked at the conference including: Strathmore Metals (Uranium), Copper Fox (Gold and Copper), Farallon (Base Metals and Silver), Phillipine Metals (Gold) and Orex Silver. One thing to keep in mind is that if you miss one bus, there will always be another. Due your due diligence, research, ask questions and have confidence once you have made your choice.