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 Thu Jan 17, 2008
Tracker 2008-04: Is Ascot a tedious gravel play or a hot gold play?
    Publisher: Kaiser Research Online
    Author: Copyright 2008 John A Kaiser


Tracker 2008-04

January 17, 2008

Ascot Resources Ltd (AOT-V: $1.45

Is Ascot a tedious gravel play or a hot gold play?

Synopsis: Ascot Resources Ltd (AOT-V: $1.45) is a John Toffan controlled junior which cannot make up its mind whether it is a plodding tortoise intent on shipping gravel to Californian concrete makers, or a dashing jackrabbit trying to make a high grade gold-silver discovery high in the mountains above Stewart that brings back the glory days of the Snip deposit. Assay results for a drill program conducted last fall on the Dilworth project are imminent, but because Dilworth is a whisper story with very little published documentation, I am inclined to view Dilworth as a piece of glitter borrowed through the promise of a future balloon payment to serve as bait for speculators with fond Eskay Creek memories who will soon enough find themselves switched to being stuck with a gravel mining and barging story. Because of the shabby manner in which Ascot has handled its Dilworth disclosures, there is no basis for me to offer any optimism that it will turn into a major discovery. The Swamp Point gravel barging story does mesh well with my American infrastructure renewal thesis, but because management is not particularly helpful in communicating with the outer circle, I think it is best to let the inner circle have Ascot all to themselves. After spending years in the gutter while John Toffan dreamed about gold while Ken Carter worked on industrial minerals, Ascot came to life in March 2007 after announcing its option of the Dilworth mystery play. The stock surged above $2.50 twice during 2007, but now seems to be ailing as shareholders fret about the Dilworth results and worry that a US recession based on a construction slump will not help Ascot secure an off-take agreement for its Swamp Point gravel on profitable terms. I am closing out the Ascot bottom-fish cycle (low priority buy at $0.10-$0.19 on January 5, 2000) with a Sell 100% recommendation to lock in a profit of 663%.

Ascot Resources Ltd (AOT-V: $1.45) has closed a $16.7 million financing at $1.75 for common and $2.00 for flow-through stock brokered by Dundee and PI. The funds will be used for continuing development of the Swamp Point aggregate project located at tidewater 50 km south of Stewart in northwestern British Columbia. Ascot insiders had generated the Swamp Point project in 2002 and sold it to Ascot in 2004. A permit for Swamp Point was obtained in August 2006, and the first load of 145,000 tonnes was barged out in April 2007 using a temporary facility. Ascot's target market is the California concrete market. In December it announced receiving a term sheet for a ten year 750,000 tonnes per year off-take agreement from a California concrete firm. Ascot expects to have the engineering for a permanent loading facility done by mid January, with construction done by the last quarter of 2008. Ascot is also awaiting assays for a 35 hole drill program conducted on the mysterious gold-silver Dilworth project near Stewart that it optioned in March 2007 from Boliden and Rick Kasum for $10 million in cash payments over 4 years. Apart from disclosing some short intervals of high grade surface sampling results (ie 2 metres of 21.7 g/t gold and 2,474 g/t silver from the 49er Zone) Ascot has said nothing about Dilworth other than to mention that "mineralization consists of a series of northwest striking, steeply dipping quartz veins and alteration zones" that have been tested over a 2 km length. Ascot's web site has a bunch of photographs in the Dilworth section, but no descriptions or diagrams of this expensive project which requires a $9.1 million balloon payment in March 2011.


Given the lack of public information available about Dilworth and management's unwillingness to return calls seeking broader information, one has to conclude that the stock's run to a high of $2.63 in October 2007, which started from bottom-fish levels right after the Dilworth option was announced, was due to a whisper campaign. Ascot's failure to get the full $23 million it set out to raise in late November suggests that the market has caught on that Dilworth was the glamorous bait needed to finance the not-so-glamorous Swamp Point aggregate operation. Judging from the soggy stock price it appears the market is digesting the earlier 3,080,000 private placement shares done at $1.50-$1.75 in July 2007. The $1,350,000 Dilworth program was completed in early October and the assays are still pending; one assumes that this is due to the huge backlog at assay labs. John Toffan continues to be Ascot's biggest shareholder, though last year Pinetree Capital also became a significant shareholder. Having Pinetree as a shareholder since August 2007 has not stayed the wonderful thing this was in early 2007. Based on 61.7 million shares fully diluted and the current stock price the 100% owned Swamp Point and Dilworth projects have implied project values of $90 million. Given that Eskay Creek became the focus of a takeover battle that placed a value of $800 million on the gold-silver discovery, Ascot's Dilworth IPV has lots of room for upside. But what is Ascot, a future industrial minerals producer, or a potential gold discovery? Ascot was made a low priority bottom-fish buy at $0.10-$0.19 on January 5, 2000. Bottom-fishers who bought at those levels and hung on are sitting on significant profits north of 600%, double that at the dual price peaks achieved in 2007. The only reason to hang on at this stage is to see what the drill results are for the Dilworth mystery play. My decision is to close out the Ascot bottom-fish cycle with a Closeout Sell 100% recommendation at $1.45 to lock in the gain of 663%.

*JK does not shares in the securities mentioned herein


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