Potential gains for commodity companies
Doug Ashbury
Northern News Services
Yellowknife (Jan 15/01) - Energy and energy-related companies could be the most promising investment opportunities in the North.
"There is enormous upside in the North on things relating to energy, or oil and natural gas service companies," said Todd Ferguson, an investment advisor with TD Evergreen, part of TD Securities Inc.
"The North is going to benefit a great deal from resources."
Much of the focus in recent months has been on commercializing the Mackenzie Delta's nine trillion cubic feet of proven natural gas reserves.
Pipeline construction companies like TransCanada Pipelines, Westcoast Energy and Enbridge Pipelines also present investment opportunities because, depending on which company or companies, build a potential pipeline, Ferguson said.
"Even people contemplating buying a home could benefit," he said.
With an increase in activity in the North, that means real estate will likely be in greater demand.
And that will push prices up, Ferguson adds.
"Urbco represents a neat opportunity, depending on the extent of development."
In recent years Calgary-based Urbco Inc., a publicly traded company, increased its land holding in the North significantly. In Yellowknife it has become the largest owner of rental units controlling just over 1,000 apartment units.
On how the investment opportunities compare between oil and gas, and other commodities, Ferguson said, "Proving up a big natural gas find could generate big speculative returns compared to proving up a nickel mine.
"Most speculative gains will be on the energy side, as long as prices are high."
But, adds Ferguson, developing a resource in the North remains very expensive.
Commodity prices can fluctuate dramatically and that will have an enormous affect on the viability of a given project, he said.
"The commodity price has to be there because of the enormous capital costs."
Diamond companies represent another investment opportunity. Dia Met Minerals' sale price could trigger a jump in other diamond company stocks.
Directors of Dia Met Minerals, 29 per cent owner of the Ekati diamond mine in the NWT, put the company up for sale late last year after two major shareholders announced they were seeking buyers for their holdings.
If Dia Met goes up significantly, it could cause a re-evaluation of other diamond company stocks.
That would be good for the share price of companies like Aber Resources, 40 per cent owner of the Diavik diamond project, and Tahera, hoping to develop its diamond-bearing Jericho pipe in Nunavut into a operating mine.
But, adds Ferguson, just as there is upside potential to investing in companies operating in the North, there is a down side as well.
If Dia Met sells for less that its current share price, that could easily "have an adverse affect on other diamond stocks."
