Apogee Minerals (TSXV: APE). Shares: 39M issued, 52M fully diluted. Recent price: C$0.64

by Steve Saville

02/04/2007

APE, an exploration-stage silver/zinc miner with projects in Bolivia, just can't seem to get any respect. The company reported very good drilling results from its Paca-Pulacayo project last week, including intercepts of 151m grading 120g/t silver and 33m grading 313g/t silver, but the market just yawned.

Political risk-related fears are almost certainly responsible for the stock's sluggishness and low valuation. It would be economically illogical for the Bolivian Government to do anything to discourage a company such as APE from progressing its projects since these projects will not be developed in the absence of foreign investment; but, as evidenced by the US Government's ethanol subsidies, economic logic is often overwhelmed by misguided political aspirations.

We don't think the Bolivian Government will end up taking any actions that have the potential to kill-off foreign investment in the mining sector, but it is certainly a risk that investors/speculators need to keep in mind. The good thing about obvious risks, though, is that they can lead to excellent speculations because the stock market will sometimes apply an excessive risk discount. This, we think, is the current situation with APE.

The main reason for mentioning APE again in today's report is that the initial NI43-101 resource calculation for the Paca project is scheduled to be complete by the middle of this month. The market has been largely ignoring APE's drilling results, but in the absence of a worsening political situation in Bolivia the independent confirmation -- the resource estimate is being put together by Micon International -- of a sizeable in-ground resource could grab the market's attention. If nothing else it should allow analysts (us included) to do preliminary estimates of the project's value, thus shining a spotlight on the large gap between the company's low market capitalisation (US$27M at Friday's closing price) and the potential value of its assets.

With reference to the below chart, the stock has dropped back to near the 52-week low reached in October. However, the slide since the early-November peak has the look of a consolidation as opposed to a new leg down. If so then the next move of note should be a rally up to resistance in the C$0.90-C$1.00 range. Breaking through this resistance range would then set the stage for a test of the 2006 peak.