Queries Cusac stock is victim of market malaise

Since 1982, I have accumulated more than 30,000 shares of Cusac Industries.

At a time when Cusac wasn’t making any money, I paid from $1.25 to over $3.50 for the shares. Now that the company is making a profit (25 cents and 26 cents per share in 1986 and 1987) the stock is trading on the Vancouver Stock Exchange at about $1.50.

But why, I wonder, hasn’t there been a greater increase in Cusac’s share price when other issues are selling at a multiple of five to six times earnings? A.M., Roanoke, Va.

As you say, Cusac Industries (VSE) is making money. With revenues coming in from Table Mountain gold mine in northern British Columbia where Cusac holds a 40% net profits interest, the debt-free company reported net income in 1987 of $1.25 million or 24 cents per share compared to $1.2 million or 23 cents per share in 1986.

Operated by Total Erickson Resources (VSE), Table Mountain produced 21,840 oz last year and Cusac’s allocation amounted to about $2.4 million for the 12 months ended Dec 31. As a result, the company also reported a year- end cash position of $1.8 million, up from $94,963 a year ago.

That’s not bad for a company which is also earning a 30% interest in Gulf Titanium’s (VSE) Cruse Belmont gold-silver project near Helena, Mont., which is scheduled to go into production this fall.

Reserves at the Gulf Titanium project of 94,000 tons grading 0.64 oz gold per ton, make it one of the higher grade gold mines in North America, Cusac says.

However, at a time when Cusac is enjoying a fair amount of success, the issue was trading recently at a historic low. On July 20, it traded on the Vancouver Stock Exchange at $1.50 after peaking at $3.85.

While the company’s share price is the subject of some consternation in the Cusac executive suite, a couple of Toronto analysts say it can be explained by a lack of promotion and the current state of the market.

“The company is technically sound but there appears to be no enthusiasm for this kind of stock,” said Yorkton Securities’ mining analyst, Robert Stibthorpe. “What action there is appears to lie with the senior gold producers,” he said.

Based on Cusac’s trading history, another Toronto analyst believes that the stock retains plenty of upside potential. “Most of these stocks eventually come back because the control group will step in and support it,” said the Toronto mining analyst who preferred to remain anonymous.

“Since it traded at $4 back in February, 1987, the Cusac issue has been on a downswing which appears to have culminated in this week’s $1.40 level.

However, it was trading at $10.38 back in 1980 and should find some support at $1.25, the Toronto analyst said.