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Lou Schizas, Schizas' mailbag
Lou Schizas, Schizas' mailbag

Lou's Mailbag

Magma: Hot to the core Add to ...

Lou,

Any thoughts on this stock Magma Energy Corp. I was looking for another stock & by mistake opened up this page. Should I continue to research this company?

Thanks, Jim.

Hi Jim,

Thanks for bringing Magma Energy Corp. to my attention! You have to love it when you are in the habit of doing research and you come across an interesting opportunity by chance. Another case of the harder you work, the luckier you get!

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I like the story from a number of different angles. Magma is in the business of tapping into the heat generated by the molten core of the earth and is a pure play geothermal energy company. If you recall your high school science class, there was always a section on the geology of the earth, including the molten core.

The key to exploiting this resource is to locate areas where the molten core of the earth is close to the surface of the planet. MXY has since 2008 raised $162-million to develop their business plan and has made some good early moves.

They have acquired a stake in a private geothermal company in Iceland. Iceland is a country that has exploited its geothermal potential aggressively over the last 70 years. Strategically, you have to like the acquisition, if for no other reason that it gives the mangement at MXY a window into a long term industrial development cycle.

The company also acquired an operating plant in Nevada, where it plans to expand production and it also has an active exploration program to identify new opportunities in the Western Hemisphere.

MXY just went public in July at $1.50 per share and has produced a nice pop for those who got in on the issue.

The three-month chart shows that the uptrend from July has been broken and that there is support at $1.90 and resistance at $2.05.

As a longer term play, I like the story and really like the management. When an investor asks me to look at a company, I always look at the people involved to see who is driving the bus. In researching MXY I found that Altagas Income Trust owns 5 per cent of the company and that David Cornhill who created lots of wealth at ALA.UN is on the board of MXY.

A company that generates electricity without burning any fuel, a seasoned management team, and a plan to consolidate the geothermal sector though acquisitions. Thanks for bringing MXY to my attention.

Happy Capitalism!

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