Stockchase Opinions

James Paulsen Eastern Platinum Ltd. ELR-T HOLD Apr 09, 2012

(Market Call Minute.) Likes his sector. Fundamentally the company has had problems but he thinks they are turning it around.
$0.385

Stock price when the opinion was issued

precious metals
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COMMENT
Chart doesn’t show anything really exciting. Going down in an up market. In a dipping trend and somewhat short term. If it drops below $1.25, you must exit.
WEAK BUY
Platinum. Likes this as a hard asset play. Investing in platinum group metals tends to be very tricky as most of them are in South Africa, where he has reduced his exposure. Crocodile River mine had a strike and sabotage and stock has been absolutely hammered, so might be a good time to look at it.
DON'T BUY
Platinum as a commodity is doing very well because of their use in auto catalysts. This company has had all kinds of operational issues. Not confident that management can get this under control.
TOP PICK
South African PGM producer. Stock is roughly about $650 million in market cap with half of it in cash. Producing roughly 100,000 ounces of PGM material this year and will double in about 3 years time. Had a lot of operating issues in the last year, which has all been priced in.
COMMENT
Platinum producer in Africa. Market value about $6-$7 hundred million and has about $350 million in cash. Bit of a setback at the beginning of 2011 with a strike and power issues. This is now behind them and was able to generate a very positive quarter. Unfortunately, the mine manager left and had an accident resulting in a mine closure for couple of days. But prices have come off and the stock is suffering from tax loss selling. Can perform really well once the market comes back.
DON'T BUY
Gold, as a metal, has turned back up and this should drag along platinum. Overall earnings are declining about 20% year-over-year. Actual earnings growth is pretty modest at 8% for 2012. Prefers others.
PAST TOP PICK

(A Top Pick Sept 29/11. Down 75%.) Had thought there was a fantastic cash value in this. It is still there at about $150 million. Had thought the South African situation in labour, costs and power issues were priced in but the challenges exacerbated to the downside. Stock is still great. Resources still there and this is trading at cash value but they can’t make money at these PGM levels. If you own, continue to hold.

DON'T BUY

Long in platinum/palladium as he feels the supply/demand fundamentals are really strong, particularly in palladium. This company has financing issues and is in South Africa so it has union and mining issues. Have a lot of fundamental challenges. Would recommend going to Stillwater Mining (SWC-N) instead.

DON'T BUY

Shut down production recently. This type of situation is what usually happens at the bottom of a cycle, although this one may not be around to enjoy the upside of the cycle.