Roking Roca

What can I say, Roca (ROK - venture) is one of the best stock deals I've come across. Every time I punch the numbers I come up with that this stock is going to have in the range of $40 million in earnings this year, exceptional for a $120 million fully diluted market cap company.

What to look for with Roca, they should be releasing a progress report on the mine construction. I expected to see it last week.

The March 4th weekend they will be at the annual PDAC convention in Toronto. If you live in that area it is perhaps an opportunity to check them out in person.

Also, from the home page, check out the interview on RobTV.

And Roca has excellent institutional backing, for example Sprott is the largest institutional shareholder, in for the last PP at $1.40. Currently Sprott owns roughly 11 million shares and 2.8 million warrants.

Roca has been evaluated by Institutional Research Partners and has a strong speculative buy rating with an 18 month target price of $5 US.

If you invested in Roca when I first mentioned it, you could have bought in at about $1.35 and you would be up 24% in about 2 weeks. Congratulations! The show has a long way to go.

http://www.pdac.ca/pdac/conv/index.html
http://www.rocamines.com/s/Home.asp
http://www.rocamines.com/i/pdf/Institutional-Research-Partners.pdf
http://www.institutionalresearchpartners.com/
http://www.sprott.com/

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The Sweetheart AGM - Feb 14 - Roca (V.ROK)

In truth, the formal part of the AGM lasted perhaps 7 minutes and the meeting was closed. It was in the discussions after that the sugar coating of what's to come was outlined, and the enormity of the earning potential that's going make this stock take off like a rocket was revealed.

Not many stocks can justify a 5 bagger return to investors in 5 years, but Roca has already done that for its initial 2002 investors and it has the fundamentals to justify it, and to promise more -- a lot more.

The 15,000% Sweetheart Deal

Roca started as a junior explorer looking for opportunity. They picked some properties, but their direction and focus immediately changed with the MAX molydenum project. A formerly existing mine, Roca saw the benefit of reduced captial costs to get a mine into production, and they also noticed that the former claim holder, Newmont, had not renewed their claims. Roca staked claims for the entire region. Once their position was secure, they negotiated with Newmont to buy their $15 million of research on the property for $100,000, a 15,000% return on investment. And now they had a map to veins of 2% MoS2, ore so rich, its minerals are about $650/ton, an equivalent to a head grade of one ounce of gold per ton.

Roca has plans to mine about 3 million pounds of molybdenum this year, starting around May. They have a contract to sell all of their molybdenum concentrate for around 90% of the spot price at their gate, so no shipping costs, no insurance costs, no roasting costs, the buyer pays all other costs.

The way their mine will work is they will mine 2-3 months, and then stop operations for 1-2 weeks to dig tunnels to the next level of ore. Each new dig will supply them with 2-3 months of ore. To mine 3 million pounds they will need about 150 operating days and perhaps 30 shut down days.

They've budgeted $100/ton for production, even though their report gives a figure of $70/ton. They expect to pay 20-25% taxes on earnings once the tax write-offs are taken. The numbers are monster numbers, about $69 million for their molybdenum, $15 million for production costs, a measly 1/4 million for administration. After taxes, it leaves a whopping $40 million for earnings, in the range of 40-50% eps or a P/E of 2 at the current share price!

The monster numbers are so big, capital costs that were raised through equity offerings will be repaid in perhaps 2 months. Roca has no debt.

And that's only MAX molybdenum.

The $100 million sugar coating

Foremore is another Roca property in advanced stage exploration. This property is central to the Eskay Creek mine and NovaGold's Galore Creek project. It has several large-scale copper, zinc and lead targets as well as gold and silver targets.
They've got a 30 bed lodge for an exploration team, a landing strip and plans to get some drilling done this summer.

But the sugar coating of this rich property reserve is that $1.7 billion dollar NovaGold project is going to build $100 million dollars of roads through Foremore. This year exploration is dependent on flying to the site, but in the next year or two, driving will be possible. This is an enormous value added feature for future development.

Meet you in Toronto?

One of the items at the AGM was to add a 5th director. This is in line with the requirements of the Toronto Stock Exchange. The other requirement that Roca will meet this year is having cash flow from operations. Once the second requirement is met, an applicant can be filed and processed in as little as two months. There is an excellent chance that Roca will become a TSE listing before the year is out.

Disclosure: I loaded up last week. Go Roca Go! All investors are responsible for their own due diligence.

I think Roca is available from Pinksheet for US clients who do not have access to Canadian exchanges through their broker. Yahoo hasn't made Canadian exchanges available yet.

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BHP's $10 billion share buyback - A good move?

Reading that BHP plans to spend an additional $10 billion, bringing the total to $13 billion, buying back its shares stopped me in my tracks.

Due to the record commodity prices, BHP has been making record profits, $6.2 billion in the last six months of 2006.

A share buyback will not add to shareholder value. Indeed, if I was a shareholder, I'd be taking that extra 5% and selling out, at least that was my gut reaction to the news.

So, lets have a look at BHP.
Market cap - $131 billion
Shares - 2,982 million
P/E - 12.8
EPS - 3.45
Price - $44.03

The EPS works out to a healthy 7.8%. But the earnings are only healthy on the surface. They are based on record prices for aluminum, alumina, copper, iron magnesium and molybdenum. Record prices means the share is at record levels, indeed, just 4 years ago the share price was around $10.

A number of commodity prices have declined. EPS can be expected to decline by 20, 30, 40%. Buying back shares will make it so that there are less shares to average the earnings over, but there will also be less assets being held, less cash. Commodity prices have declined enough, the eps will still decline despite having up to 10% fewer shares to average the earnings over.

The commodity market is cyclic, and buying back your shares when they are premium prices simply rewards those who sell. It does not give share holder value to those who hold. The smart money buys low and sells high. BHP is high.

Just 4 years ago the share price was about $10. How much real value has been added in the way of new properties, new resource, new mines, etc.? I am not sure, but the current price is more than 5 times the book price, and 3.9 times the sales.

The ideal time to buy back shares is when they are priced low, then share holders that stay are rewarded.

Alternatively, because the market is so cyclic, put the cash away for days when commodities aren't priced so well. That's when there'll be a fire sale on many asset rich properties, and that's when to buy them.

Indeed, a bet plan would be to wait for the next bear market and line the company with asset rich properties from the fire sale.

BHP reports record profits; pledges $10B buyback

By MarketWatch
Last Update: 2:40 AM ET Feb 7, 2007

HONG KONG (Menafn - MarketWatch) -- BHP Billiton Ltd., the world's largest mining company, announced a surprise $10 billion share buyback Wednesday, sending its Australian-listed shares up more than 5%.

The larger-than-expected share buyback comes amid record commodity prices last year.

BHP BHP reported net profit rose 41% to $6.2 billion for the six month period ending in December, up from $4.36 billion in the year-ago period, bolstered by strong production results for most mineral commodities, the company reported in a statement published on its Web-site Wednesday.

The result is the seventh straight half-year record profit for the miner.

BHP said it will add $10 billion to its previously announced $3 billion share repurchase plan. The equity purchases will take place over the next 18 months and include off-market purchase s as well as open market purchases, the company said.

Analysts said the interim profit was in line with expectations but the size of the share buyback was a surprise to the market.

Shares of BHP rose 5.85% to close A$28.24 ($21.97) on the Australian Stock Exchange Wednesday.

BHP declared an interim dividend of 20 U.S. cents per share, an increase of 14% over the last year's interim dividend.

The miner said it has set aside $17.5 billion for 29 projects across the globe.

BHP said it has repurchased $1.7 billion of stock at an average price of $18.23 since announcing its earlier buy back plan in August last year. Including Wednesday $10 billion pledge, BHP has returned $17 billion to shareholders since August 2004 the company said.

The Anglo-Australian mining group also said 49-year-old chairman Charles Goodyear plans to retire in 2007.

BHP said it saw half-year production records for aluminum, alumina, copper cathode, iron ore, magnesium ore and molybdenum.

Shares of BHP are traded in Sydney and London.

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Roca Mines (ROK - Venture)

Roca -- British Columbia's next new mine.

Roca began operations about 5 years ago as a junior explorer, and is posed to open the MAX Molybdenum mine later this spring.

An agreement to acquire the Max Molybdenum Project was made in 2004. The project previously had work expenditures of $14.9 million spent by Newmont Mines and Esso Minerals Canada from 1975 to 1982. Poor molybdenum prices led to its "demise."

In 2004 over 1100 meters of drill results by Roca confirmed high grade mineralization, -- grades that are an order of magnitude greater than many operating mines -- and the fast track was born. By August 2004 they had acquired 100% interest in crown grants, mining leases, mineral claims contiguous to the original MAX claims and original data detailing previous exploration. By September the mineral resource had been brought up to 43-101 compliant.

In 2005 the company decided to go for a small, fast-tracked mine. In November 2005, working with the mining friendly government of British Columbia, a permit was granted which allowed for the development and operation of an underground mine and onsite concentrator.

By August 2006 the acquisition of Max Molybdenum was complete. In order to fast track production, the company has made use of existing production-sized underground access to the deposit. They have completed the purchase of 1000 tone per day mill and concentrator.

The fast track has not been without a few bumps. Revelstoke had record high snow fall this year, the annual average, 21 feet, had fallen by December leading to construction problems and some delays, making the project fall about 4 months behind schedule. But, the plan was also changed from 500 tonnes per day to 1000 tonnes per day or doubling the planned production.

The numbers work out to about 3 million pounds of molybdenum production planned for 2007, and that can be completed in roughly 150 days, leaving opportunity to potentially increase production. At today's prices, 3 million pounds of molybdenum fetches about $75 million.

Additionally, Roca has other properties for potential development, the Foremore VMS-Gold Project, which has an exploration program for 2007 to investigate the Northern Zone which shows precious and base metal grades within the edges of the system drilled so far. The SeaGold Property is an early stage exploration project covering 40 square kilometers 35 km north of Barrick Gold's Eskay Creek gold/silver mine.

Roca's market cap is a mere $82 million.

Roca is a value-priced cash cow ready to roll.

Check out their presentations.
http://www.rocamines.com/s/Home.asp

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