Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Dollar Pulls Back, Commodity Stocks Stay Hot

Commodity stocks remain extremely hot in the current market. From copper and gold, all the way to steel and molybdenum. Stocks like Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) are at 52 week highs while even stocks like United States Steel Corporation (NYSE:X) has broken dramatically higher in recent weeks. It is getting harder and harder to find a good investment in a commodity play.

There is a solid speculative play I bought. It, like all small caps, carries a lot of risk but could give forth a massive reward. The stock is Tri-Valley Corporation (AMEX:TIV). This stock has its hand in multiple commodities. They drill for oil, mine for gold, copper and molybdenum. I love that this company does it all. All of these commodities have been hotter than the sun in terms of making the underlying stocks run. In the latest quarterly report, the CEO said, “Oil and gas revenues continue to grow as we move forward on our plans to increase production from our two main California projects. During the quarter we expanded the 30-day steam cycles on two of the three remaining oil wells at the Pleasant Valley oil sands project in Oxnard, California, and we completed the initial steam cycle on the fourth well at our Claflin project near Bakersfield. At the same time that production has increased, we have driven production costs down significantly through reductions in headcount and a strict focus on cost controls.”  In addition, he also stated. “Our mineral assets in Alaska continue to represent additional opportunities to generate returns for our shareholders. Yesterday, we announced our interest in moving forward on the exploration and development of our Shorty Creek Prospect, near Fairbanks, Alaska, with the assistance of an experienced partner. Recent studies have indicated a potentially large porphyry copper, gold, and molybdenum system on the Shorty Creek property, which covers an area approximately eight miles in diameter. With the operational and financial assistance offered by a partner, we believe we can more quickly monetize the Shorty Creek asset. We have also initiated efforts to evaluate strategies to maximize the value of the high grade, high brightness calcium carbonate deposit at our Admiral Calder mine near Ketchikan. The high grade, high bright calcium carbonate there is considered to be among the top one percent (1%) of such deposits in the world. Our focus is on accelerating the monetization of these mineral assets to enhance shareholder value.”

These comments by the CEO are bullish for a commodity stock that has dropped from $1.00 in October to the $0.50 range. It also represents a double bottom on the chart. Most other commodity plays are making new yearly highs. Especially with the market cap size this company holds. The one drawback and the probable reason for the recent decline is the company is short on money. The CEO did cover this in the latest quarterly announcement.  He said, “Finally, during the quarter, we increased our stockholders’ equity to $5.9 million from $4.6 million at the end of June, through the issuance of 355,000 shares of restricted Series A preferred stock. With this additional equity, our stockholders’ equity is very close to the $6 million minimum required for our continued listing on the NYSE Amex, LLC, exchange. We anticipate raising additional capital during the fourth quarter and are exploring strategies that will minimize dilution to our existing shareholders. To expand the options open to us, we recently signed a Sales Agreement with C.K. Cooper & Company for the potential sale of up to $3 million of common stock under an at-the-market (“ATM”) equity offering program.”

It would seem to me that the recent decline in TIV has factored in any future dilution. The value of the land in Alaska should be solid and any partnerships could send this shooting higher. At the current $0.50 level, it looks to be a solid reward play. I picked some up myself at $0.50.

Gareth Soloway
Chief Market Strategist
#1 Rated