François de Champlain - 10/03/2011 Good news after good news; financing secured, wealthy partners found…whatever happens far away, Canadian iron ore companies can’t stop and won’t stop. Chinese wouldn’t let that happen howsoever. Investors start to catch on to the fact that the country is building the biggest iron ore sector in the world in Québec. Meet Adriana, the little sister with the biggest resources in Canada.

While iron ore maybe doesn’t sound like the sure shot that silver was in the last few weeks, it still could continues to stay the most lucrative sector around as it currently is the biggest driver of the bulk commodity trading. In fact, the ishares silver etf did exactly the same (18,5%) in the last month than the average of the iron ore companies near Fermont/Shefferville, Québec. Well, not as good as Adriana Resources with its 30% in the last month, thanks to its 28% in the last 3 days. You probably ask yourself: why wasn’t it much eye popping then? Well 18% or even 30% in the last month was nothing compared to the 100% we were used to every single month with those companies. As it looked like the sector (like the economy) lost a beat… there was nothing wrong with seeking security in these bold days. But here we are today, with good news still piling in this sector, but bad news coming from all around the world...

So what can we do? At this point it might sound silly to warn you about an upcoming correction since you probably wait for it since October (I hope not). It looks to be for real this time though. It surely is a cautious move to secure some profit, to keep a certain amount ready to reposition after the so-called storm and maybe to hedge a little some some. But you can’t have your cake, and eat it. It’s a choice we make. In both cases, here is a promising stock on the move. If you are on hold these days, you may at least put it in your watch list.

Adriana Resources has the largest iron ore deposit in Canada with the potential of becoming one of the largest in the world. To put things in perspective, Canada produces fewer than 40 million tonnes or iron ore a year right now. The Adriana’s deposit is so massive; the company could produces greater than 50 million tonnes of iron ore a year during 75 to 100 years! Read that again. It is more than the whole country! The defined resources are 6.3 billion tonnes with potential in excess of 15 billion tonnes. Now you know. Also, the pellets of iron are very high grade (67% to 69%) and the government is very mining friendly. The mine is 160 km up from Shefferville and the company has also 60% interest in a Brazilian mine.

Furthermore, since Canada is one of the only countries in the world with emerging iron ore production, it is no surprise that China is looking here. It is well known that Chinese steel companies are desperate to secure iron ore supply and would like to rely less on the “big three” producers (BHP Billiton, Rio Tinto and Vale) since those three abandoned an annual pricing system for Chinese steelmakers in favor of quarterly agreements when spot prices were at unprecedented highs of about 200 US$ a ton. That requires the Chinese to be very aggressive in securing supply with earlier stage companies. That’s why in recent weeks, there have been a flurry of Chinese deals with Canadian juniors, and more are expected.

Adriana got its share of the pie in the last few weeks as the company announced a strategic partnership with the Chinese company WISCO (or should we say WISCO got its share...it depends of what the pie is between the gigantic amount of Chinese money or the huge load of iron ore, anyway they are both very content). If you recall, WISCO did the same with Consolidated Thompson just after the crisis and after with Champion Minerals. But WISCO doesn’t only buy 20%-25% of those companies. It has major stakes in the joint ventures that will develop the projects and it helps them finding more financing and more importantly it helps them with the Chinese part of the equation, even if Adriana already has a director with strong experience in Asia. Talking about management, there ain’t any newbies on board. The CEO of Adriana has 35 years of experience as president and CEO of Hudbay Minerals, Silk Road Resources and CFO and CEO of Breakwater Resources among others. Other directors have plenty of experience at Lundin Mining, Eurozinc Mining,etc.

So if we put it all together. It looks like the management doesn’t stay in those companies forever and that Chinese are pretty serious about getting those iron mines. It wouldn’t be the bravest stand from any analyst to say: “it smells the takeover”. Wow. Bold. For my next trick, I'm going to take a look with you at the technical part.

Thursday February 10th 2011

We can see that the stock stopped its untenable rocket ascent by the end of January (purple slope) when it did nearly 300% in 3 months. Then, as the economy went sideways we tend to believe Adriana did the same but as the yellow slope suggests, we are still going up and there ain’t any reversal pattern yet. In fact, as the green arrows show, the support line switch from 1,17$ to 1,30$ during that span, which is a good sign. Then, the stock nicely did 28% in the last three days on very high volume from insiders. Yesterday, it did a little breakout of its 1,55$ resistance and today, it closed just shy of its 1,70$ -1,71$ next one. We’re at an important turning point, so it will be interesting to see if it can keep on going and pass through this one, or comes back siting on 1,55$, or again just falls back in the 1,31$ - 1,55$ range. A smart move would be to wait and watch if it passes through the resistance. Otherwise the stock is good for a pullback. The on balance volume is bullish as are the moving averages. It surely isn’t the timing of the year but there seems to be something going on with this stock. I just wanted you to know. Usually 28% in three days would have been anything but surprising if we weren't talking about those specific last three crappy days!

If we quickly do a little comparison with Adriana’s brothers, it looks like Adriana is the one left to the cons or something. Bigger resources for a smaller cheaper company… Maybe it has a delay to catch up. Maybe investors didn’t take notice yet. One thing’s for sure though, we always look at stocks after they just jump 300% and ask ourselves, why I didn’t know before!? Well now you know. We are before.

Come back real soon for specific free analysis on more promising stocks.

Your stock picker

François de Champlain

Click here to come back to my main analysis driving iron ore and read about more similar companies!!!

Disclosure: Positions held.

Analysis report

This is a free technical analysis of Adriana Resources Inc. The goal of this analysis is to help you finding success in your investments. Become a member and you will have access to more of our analyses on demand

http://stockmarketgps.com/News/adriana.html