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05 / 04 / 12

Gabriel Resources (GBU.to): Kudos to Trevor Turnbull of Scotia Capital

This humble corner of cyberspace often makes a song’n’dance about calling out pro-anal ysts on their mediocrity so it’s only just, right and fair to highlight the good stuff too. Today we shine the light and applaud Trevor Turnbull for his courageous (cos believe me, calling sell in the crony-laden world of Canadian juniors isn’t for the whusses), smart and ultimately 100% correct call on Gabriel Resources (GBU.to) he made on April 10th 2012. Here’s the link to his report of that day and here’s what the top bullet points said:

Former Minister of Enviro, Korodi Reappointed:
Downgrading to 3-Sector Underperform

Event
■ Romania has officially named Attila Korodi as Minister of the Environment again. Mr. Korodi was responsible for suspending the technical review of Rosia Montana in 2007.

Implications
■ Mr. Korodi continued to express doubts about the potential environmental impact in an interview last year. Although he did not seem to be unilaterally opposed, it was our impression he favoured a slower mining rate and potentially a greater stake in the economic benefits for Romania that are already substantial.

■ We view this as very negative despite the progress made to date by the currently empanelled Technical Assessment Committee.

■ We are not changing our valuation of $4.51 per share, but we are reducing our target multiple to 0.40x for the project, 0.42x overall when cash is included at 1.00x our valuation. The net result is a one-year target of $2.00 per share.
 
Recommendation
■ We would not own Gabriel until the government’s position is clarified.

Here we are, May 4th, nearly a month later and here are excerpts from this Reuters report out today:

BUCHAREST, May 4 (Reuters) – Romania’s new leftist government, expected to gain parliament’s backing on Monday, pledged a moratorium on shale gas exploration and will analyse whether to continue with Europe’s largest open-cast gold mine project.

………..

It will also investigate whether a plan by Rosia Montana Gold Corporation (RMGC), majority-owned by Canada’s Gabriel Resources Ltd, is in the national interest.
The project aims to use cyanide to extract 314 tonnes of gold and 1,500 tonnes of silver in the western Romanian county of Alba but has dragged on for 14 years, still needs an environmental permit and has drawn fierce opposition.

And here’s a chart that shows just what GBU.to has done since April 10th, the day of Turnbull’s downgrade and $2 target price call:

And oh look, here we are at $2. We also note the high volume on April 10th which was likely due at least in part to Turnbull’s call. Therefore those clients at Scotia who read and acted on his call should give the dude a phone call and say thanks, because that was a darned good pol risk call, folks. Kudos deserved.

disclosure: no position whatsoever in GBU.to

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