December 14, 2002

Ballard Power Systems Inc. (BLD on TSE, BLDP on NASDAQ), Burnaby, BC, Tel: (604) 412-3195. Price: Dec 13/01: $18.62, 52-week range: C$61.30-10.55.  Last mention of the company in this newsletter was on Nov. 23/01 when at $46.31 the suggestion made was that the share price appeared to be rich compared with this letter’s initial review at $27.62 on Aug 31/01.  As breakeven operations, now a year later, appear to be a little bit closer Ballard shares could once more be attractive for the long haul.  Some products are getting closer to market launch, such as two Coleman Powermate fuel cell generator products (AirGen), one designed for industrial use, the other a commercial/residential unit.  Ballard signed a new 3-year contract with Honda, initially calling for delivery of 32 Mark 902 design fuel cell stacks for installation into their test fleet through 2005.  This will make it harder to dislodge Ballard as a supplier long-term.  On December 9, the company announced a 5-year plan structured to lower costs.  Involved in the plan is the combining of 3 of the 4 divisions into one, fuel-cell generation related one, while keeping the material products division stand-alone.  Ballard will continue to have operations in Burnaby, B.C., Dearborn, Mich., Lowell, Mass. and Nabern, Germany.  Over the next 12 months there will be a reduction of 400 employees down to the 1000 level.  The company has obtained a preliminary agreement from Daimler-Chrysler AG and Ford Motor Co. to provide $97 million of financing over the next 5 years, beginning after Dec 31, 2003.  In the meantime, Ballard has floated a new stock issue of 7.7 million shares at C$20.25, raising $156 million.  This will increase shares outstanding by 7.3% to 113.1 million shares.  As per the recent agreement, Daimler-Chrysler and Ford will not participate in this equity issue, their ownership being diluted slightly to 22.4% and 18.6%, respectively.  Q3 revenues of US$28 million beat most expectations.  Management provides guidance for revenue of US$82 million in 2002 and between US$110million and US$120 million for 2003.  The company had cash of US$293 on Sept 30/02million so that now with the equivalent of US$390 million after the current stock issue, Ballard will be financially strong in coping with continued cash deficits over the next 4 years.  Several models incorporating growth rates in cash flow through the year 2015 and discounting back to present day value indicate a stock price range of US$16-22.  Taking the mid point US$19, or C$30, can assist investors in establishing a potential trading price to this volatile stock.

Bombardier Inc, (BBD.B on TSX), Montreal, QC, tel: (514) 861-9481, Price: Dec 13/02: C$5.50, 52-week range: C$17.39-3.13.  This is the first mention of the company in this newsletter.  Bombardier is a major manufacturer of regional and business aircraft, trains and motorized recreational equipment.  It generates annual revenues of approximately C$22 billion and normally has an order backlog of better than twice that amount.  With a combined total of 1.4 billion class A & B shares outstanding, the current market value amounts to C$7.7 billion.  The announcement that Paul Tellier was leaving Canadian National as president and CEO to assume the same roles at Bombardier came as a surprise.  This may add comfort to institutional investors who have in the past applauded Mr. Tellier’s accomplishments at CN and who have, recently, been having credibility debates with current BBD management.  This may very well be the shot in the arm Bombardier stock required.

Christopher & Banks Corporation (CBK on NYSE), Plymouth, MN, Tel: (763) 551-5000. Price: Dec 13/02: $21.30, 52-week range: $44.80-20.60.   Last mention of the company in this newsletter was at $22.42 on Oct 9/02 and first mention was at $7.29 on April 8/00, adjusted for splits.  After having recovered somewhat in October, CBK shares have been hit hard once more in the last month, reacting unfavorably to the lack of growth in sales of existing stores. After having reported that same store sales in both September and October were flat, the company reported that same store sales in November were actually down 5%.  Management went on to point out that last year’s period contained an additional week of post-Thanksgiving sales and just that alone accounted for 4% of the 5% drop.  For the quarter ended Nov 30, 2002 total sales increased 18% to $92 million and for the 9-month period sales increased 26% to $243 million. The company will be announcing Q3 earnings on December 19 and management expects that they will come in at the low end of the previously forecast range of $0.43 to $0.45 per diluted share.  This would bring 9-month earnings to $1.06.  The company should be considered as a growth company.  It now operates 439 stores compared with 353 a year ago and is programming to open a further 100 stores in each of the next two years.

Columbia Sportswear Company (COLM on NASDAQ), Portland, Ore., tel: (503) 985-4128. Price: Dec 13/02: $46.61, 52-week range: $47.75-27.46. Last and first mention of the company in this newsletter was at $31.31 on Oct 9/02.  The company reported good Q3 results when sales increased 8% to $331 million and net income 15% to $57 million, or $1.42/sh.  The third quarter is always the most important period for Columbia since it is during that period the company ships its fall and winter goods to retailers such as Kohl’s and JC Penney, two of its larger customers.  The company also announced that its spring 2003 orders are up 15%.  These two set of figures assist analysts with forecasting earnings for 2002 and 2003.  Consensus appears to be that earnings will come in at $2.45/sh for 2002 and $2.80 for next year.  These compare with $2.23/sh reported for 2001.  A case can be made that COLM stock could trade at a 20 multiple to 2003 earnings, implying a potential share price of $56.

Electromed Inc. (MED on TSX), St. Eustache, QC, tel: (450) 491-2100.  Price: Dec 13/02: $0.38, 52-week range: $0.70-0.15.  This is the first mention of the company in this newsletter.  Electromed is a designer and supplier of cardiovascular image and information management systems with current installations in 65 hospitals and cardiology centers in North America and Europe.  The company took on size in 2001 through its acquisition of California-based ComView Corp.  On December 5, 2002, the company announced that Dennis Wood acquired 31.8 million treasury shares for $4.5 million and was appointed Chairman of the Board.  This brings the amount of shares outstanding to approx. 117.8 million shares, on a fully diluted basis.  Mr. Wood has an option to acquire a further 5.7 million shares from a previously controlling shareowner.  One of his first moves was to hire Mrs. Sue Gunther as an executive v-p of corporate development.  Mr. Wood and Mrs. Gunther made their marks by building up C-MAC Industries prior to its buyout by Solectron Corporation for $4.1 billion.  They have their worked carved out.  The company announced that they are restating the last five quarterly reports in order to conform to the new standards relating to good will impairment as recommended by the Canadian Institute of Chartered Accountants.  The auditing firm, Samson Belair Deloitte & Touche, have objected to the restatement and have consequently resigned.  The company has appointed KPMG as the new auditor.  Current management expects revenues to increase by $2 million to reach $10 million in 2003.

GTC Transcontintal Group Ltd. (GRT.A on TSX), Montreal, QC, tel: (514) 954-4000. Price: Dec 13/02: $37.36, 52-week range: $42.44- 25.05.  Last mention of the company in this newsletter was on Oct 9, 2002 at $36.24.  The company reported October 31, 2002 year-end earnings of $2.95/sh, bang on their guidance estimate.  Some analysts were disappointed with the Q4 profit of 91 cents/sh up from last year’s 60 cents.  They were expecting 94 cents.  Consolidated revenues remained stable at $1.8 billion.  Margins improved significantly.  Operating income margins before depreciation and amortization came to 17.1% for the year compared with last year’s operating margin of 15.2%.  Margins in Q4 were 18.8% versus 16.6% in last year’s final quarter.  Reported earnings per share were based on more stock outstanding this year, 44.3 million shares in the recent quarter compared with 41.3 million a year ago.  Management expects difficult market conditions to continue in 2003 without any significant increase in advertising spending until the second half.  To increase earnings next year, the company will have to rely on productivity improvements and cost reductions, some of these related to cross-selling initiatives brought about by acquisitions made in 2002.  Management is now projecting fiscal 2003 earnings per share of $3.20 to $3.35, down from an estimate of $3.30 to $3.60 made earlier this year.  A 14 multiple to the stock of this well-managed company points the way to a $45 level.

The J. Jill Group (JILL on NASDAQ), Quincy, MA, tel: (617) 376-4300. Price: Dec 13/02: $14.98, 52-week range: $27.50-12.00.  Last mention of the company in this newsletter was at $17.69 on Oct 9/02.  After having reported a strong third quarter ended Sept 28, 2002 when sales increased 22% to $80 million and net income by 28% to $3.6 million, or 18 cents/sh, the company has revised its outlook for the fourth quarter.  Sales are now expected to be within a range of $102 million and $107 million, down from the previously forecasted $106 to $110 million.  Diluted earnings per share for the fourth quarter are now expected to be within a range of 25 cents/sh and 30 cents/sh, down significantly from the previously forecasted range of 41 cents/sh and 43 cents/sh.  For the full year, revenues would be $342 million and earnings would become 90 cents/sh, still up importantly from last year’s 70 cents/sh.  The company ran into poor reception on one catalogue mailing and also miscalculated on a sweater classification from a fashion trend perspective.  Management now finds itself in the position that they will have to win back investor confidence, possibly with a string of better performances.

Jos. A. Bank Clothiers, Inc. (JOSB on NASDAQ), Hampstead, MD, Tel: (410) 239-5715.  Price: Dec 13/02: $22.56, 52-week range: $27.34-6.05.  Last mention of the company in this newsletter was at $17.10 on April 15/02.  First mention was at $8.30 on Nov 23/01.  The company has capitalized on renewed demand for men’s clothing and has taken advantage of both online marketing as well as weak competition at the mall.  For the Q3 ended Nov 2/02, sales increased 15% to $58 million and net income 42% to $1.9 million, or 26 cents/sh.  For the nine months, sales increased 15% to $165 million and net 115% to $4.5 million, or 65 cents/sh.  The company opened 16 new stores during the quarter and now has 159 stores in 30 states.  The company has also recently teamed up with to feature a complete line of classic men’s clothing on Amazon’s Apparel & Accessories Store.  Management is providing guidance of earnings this year of $1.40/sh, up from last year’s $1.05.  The company intends to open up 350 stores over the next five years bringing the total then to 500 stores.  With only 7 million shares outstanding, the stock carries good leverage to go along with the anticipated growth.

Kohl’s Corp. (KSS on NYSE), Menomonee Falls WI, tel: (262) 703-1893, Price: Dec 13/02: $59.81, 52-week range: $78.83-44.00.  Last mention of the company in this newsletter was at $67.22 on Nov 23/01 and first mention was at $47.82 on Sept 28/01.  Kohl’s continues to be considered the blue chip department store growth company.  For Q3 ended Nov 2/02, sales increased 22% to $2.1 billion, comp store sales increased 5.9% and net increased 33% to $133 million, or 39 cents per diluted share.  For the 9 months, sales increased 25% to $5.9 billion, comp store sales increased 8.1% and net increased 39% to $364 million, or $1.06 per diluted share.  Although comparable store sales increased 18.3% in October over a strong month a year ago, such was not the case in November when comp store sales decreased 3.4%.  As was the case with other retailers, Thanksgiving this year was later, weather played a factor and November was being compared once more to a strong month a year ago.  The stock market appears to be paying too much attention to the comp sales stats on a month-to-month basis, perhaps explaining the recent drops in share prices.  It may be well to remember that Kohl’s is in full expansion mode.  It now operates 457 stores compared with 382 a year ago.  In 2003, it plans to open 80 new stores, 35 during the first quarter and 45 in the fall season.  Of the 35, 28 stores will constitute entry into Southern California.  Out of the 45 stores in the fall will be first time entry into Phoenix, AZ and Las Vegas, NV.  Thus, Kohl’s is a company combining growth in annual square footage of 20% with 5% to 6% gains in comparative store sales, all ingredients inherent to a growth retailer.  Consensus earning estimates call for $1.90/sh this year, compared with $1.45 last year and for $2.25/sh in 2003.  A 30 multiple to this implies a share price of  $67.50 over the near term and perhaps more over the long haul.

La Senza Corporation (LSZ on TSX), Montreal QC, tel: (514) 684-3651, Price: Dec 13/02: $10.19, 52-week range: $16.25-6.50.  Last mention of the company in this newsletter was at $13.50 on Sept 6/02.  This time around the company did disappoint investors, along with themselves, with Q3 results.  Sales for the third quarter ended Nov 2/02 increased by 6% to $95 million, while comparable store sales were flat.  A loss of $1.3 million, or 10 cents/sh, was the result for this period.  For the 9 months, sales increased 7% to $277 million, comparable stores 3.9% and net income was $1.1 million, or 9 cents/sh.  A number of factors created the downfall in the third quarter: unseasonably warm temperature altered buying habits, the US west coast dock shutdown contributed to bottlenecks in the Vancouver harbour and the death of the Bohemian trend in fashion in July-August affected sales at Suzie Shier and Anne-X.  Management feels optimistic about the fourth quarter when the company’s primary product, lingerie, normally enjoys its highest demand.  While this newsletter in the September 6/02 edition indicated that earnings this year could attain $2.10/sh, it now appears that the company will be lucky to meet with last year’s level of $1.72.  Growth prospects are still very much in place.  La Senza does have operations in 12 other countries besides Canada and still has plans to expand into the US market in a careful manner, possible with 3 to 4 stores in the Boston-New York areas.  The company has in addition discussed the possibility of developing leased departments within an existing US department store chain.  The company has a good balance sheet.  Its equity holding of Wet Seal shares are worth $6 per LSZ share, not giving much value to the bulk of its operations, including its 581 stores.  Over the next year, shares could very well trade at 10 times earnings, or $17, and still allow room for further long-term growth.

Mothers Work, Inc. (MWRK on NASDAQ), Philadelphia, PA, tel: (215) 873-2220, Price: Dec 13/02: $35.69, 52-week range: $43.00-8.35.  Last and first mention of the company in this newsletter was at $30.62 on Oct 9/02.  This company being a specialty retailer of maternity wears did not suffer some of the shortfalls of other retailers, such as weather factors and the vagaries of fashion design.  Moreover, as mentioned in our review of Oct 9, management had the clairvoyance to have shipped ahead of time goods into eastern ports knowing that there would most likely be delays at west coast ports.  Consequently, sales increased 15.6% in October to $38 million, same store sales increasing 7.4% and in November sales rose 10.6% to $41 million with sales from comparable stores increasing 7.9%.  Prior to these two months, the company announced results for its fiscal year ended September 30, 2002.  Sales increased 16.7% to $453 million and net income more than tripled to $6.8 million, or $1.61/sh based on the 4.7 million shares outstanding.  The company, the largest designer and retailer of maternity apparel, currently operates 934 locations, made up of 784 stores and 150 leased departments under the names of Motherhood Maternity, A Pea in the Pod and Mimi Maternity.  The company expects to increase capital expenditures to between $20 million and $25 million in 2003 from $9.8 million in fiscal 2002.  This would be in the form of store openings (100), expansions and relocation of existing stores, remodeling of stores and increased investment in management information systems, particularly point of sales systems.  The plan also consists of increasing sales 10% annually, with same store sales increases of 1% to 2% and increasing operating income margins by 20 to 25 basis points a year over the next three years.  If successful, results could be dramatic on a per share basis with so few shares outstanding.  Management is providing a guideline for earnings to come in within a range of $2.55/sh to $2.60/sh in this fiscal year 2003.  A case can be made for MWRK stock to trade at a 17 multiple to this, implying a share price of $44.

Neurochem Inc. (NRM on TSX), Montreal, QC, Tel: (514) 337-6789, Price: Dec 13/02: $7.90, 52-week range: $8.48-2.40.  Last and first mention of the company in this newsletter was at $4.86 on Sept 6/02.  Mention was made at the time that Francesco Bellini and Power Corporation had become important shareholders in the company.  Not only have both added to their holding by buying an additional 1.2 million units at $6.79/unit for $8.1 million (each unit carrying a warrant to subscribe to a further share at $7.81/sh) but Mr. Bellini has taken on the additional role of chairman and CEO.  He believes that the three leading drug candidates Neurochem is developing will rival the AIDS drug 3TC that his former BioChem Pharma developed and ended up selling out to Shire Pharmaceuticals for $5.6 billion.  While much of the stock price pop has now taken place, a continued holding over the next couple of years might turn out all right.

Peyto Exploration and Development Corp. (PEY on TSE), Calgary AB, Tel: (403) 261-6081, Price: Dec 13/02: $10.70Feb 22/02: $5.15, 52-week range: $10.70-3.61. Last mention of the company in this newsletter was at $5.15 on Feb 22/02 and first mention was at $3.75 on Nov 23/01.  Peyto is certainly proving all skeptics wrong by continuing to grow production and earnings.  In so doing, it has become one of the best performing junior oil and gas growth stock in Canada.  During the third quarter ended Sept 30, 2002, natural gas production averaged 45.0 Mmcf/d, a 101 % increase over the average production of 22.4 Mmdf/d a year ago.  Oil and NGL production averaged 2,009 bo/d a 147% increase year over year.  Combined, production was the equivalent to 9,512 boe/d, a 109 % increase over the rate of 4,553 boe/d during Q3 of 2001.  Average production for the 9-month period showed an even better increase, 8,222 boe/d versus 3,511 boe/d during the 9-month period of 2001, an increase of 134%.  In spite of considerably lower commodity prices, cash flow generated produced erstwhile gains, 30 cents/sh for the latest quarter, a 63% gain year/year and 9-month cash flow generated 90 cents/sh a 45% increase over cash flow generated in the 9-month period of 2001.  The company is slated to increase natural gas production substantially, particularly at Sundance, Alberta where compression facilities are being increased by 40%.  In this newsletter’s edition of Feb 22/02, mention was made of potential production averaging 10,000 boe/d in 2003 that could generate cash flow of $1.40/sh.  Production is running ahead with that average being attained in Q4 of 2002.  It now appears more likely that production will attain 13,000 boe/d in 2003 and that cash flow generated could very well come in at $1.75/sh.  Taking into consideration the rate of growth, active drilling programs and an expanding inventory of undeveloped land, Peyto stock could be awarded a premium multiple.  A 7.5 factor to anticipated 2003 cash flow implies a $13 share price.

Real Resources Inc.  (RER on TSE) Calgary, AB, tel: (403) 262-9077.  Price: Dec 13/02: $4.80, 52-week range: $4.90-2.85.  Last mention of the company in this newsletter was at $3.62 on April 13/02 and first mention was at $4.11 on May 12/01.  Q3 ended Sept 30/02 production averaged 4,715 boe/d that produced cash flow of $6.7 million, or 34 cents/sh based on 20 million shares outstanding on a fully diluted basis.  Nine months production averaged 4,837 boe/d and produced cash flow of $20.2 million, or $1.02/sh.  During the most recent quarter, Real made two significant natural gas discoveries, one in southern Alberta and the other in west-central Alberta.  These are already paying dividends since production in Q4 is currently averaging 5,250 boe/d composed of 3,600 bo/d of oil and 10 Mmcf/d of natural gas.  The company was one of the more active explorers in Alberta during 2002 having participated in drilling 115 wells.  In the first half of the year, Real concentrated on developing oil production mainly in the Neutral Hills area of east-central Alberta.  In the second half it focused on natural gas with important discoveries in west-central Alberta, east central Alberta and southern Alberta.  The company is now forecasting average production of 7,000 boe/d in 2003, a significant increase over 2002.  As a result, Real Resources is showing all the signs of emerging as a growth-oriented oil and gas exploration and development firm that should attract wider investor attention.

Reitmans (Canada) Limited  (RET.A on TSX), Montreal, QC, Tel: (514) 384-1140, Price: Dec 13/02: $23.25, 52-week range: $25.40-11.01.  Last mention of the company in this newsletter was at $23.10 on Oct 9/02 with the first mention being at $12.87 on Jan 23/02 (all prices reflecting the 100% stock dividend on Sept 24/02).  The third quarter, ended Nov 2/02 is the first reporting period containing results of the Shirmax Fashions operations acquired on June 5, 2002.  Sales were $207 million, comparable store sales increased 0.9% and net income was $8.2 million, or 48 cents/sh.  For the nine months, sales were $535 million, comparable store sales increased 4% and net income was $27 million, or $1.57/sh, based on combined A & B shares outstanding of 17.4 million.  The integration of Shirmax is progressing on schedule but the company is facing a tough market as evidenced with November comparable store sales down 6.3%.  The company will be busy in adjusting the number and positioning of the stores of the combined operation.  An example of this was the opening of 21 new stores in Q3 and the closing of 11.  As of Nov 2/02, there were 814 stores under the following banners: 329 Reitmans, 153 Smart Set/Dalmys, 124 Penningtons, 28 RW&CO., 71 Addition-Elle, 42 Addition-Elle Outlet, and 67 Thyme Maternity stores.  An additional 14 stores are scheduled to open in Q4 and 9 to be closed.  Phase 1 of the installation of the automated merchandise handling equipment in the new 330,000 sq.ft. Montreal distribution centre is complete with the Reitmans division in operation.  Other divisions will move in within six months.  Management expects that this facility will be fully operational by August 2003.  This will pare operating costs significantly and contribute to earnings over the next few years.  Under the present structure, the center could supply a further 200 stores but the plant is designed in such a way that it can be easily expanded.  In this newsletter’s Oct 9/02 edition, the observation made was that earnings for the year ending January 31, 2003 could come in at $2.40/sh.  Due to the slower Q3 results this should now be modified to $2.00/sh, an impressive increase nevertheless from the $1.77 of last year.  A 15 multiple points the way to a $30 share price level.

Repadre Capital Corporation (RPD on TSX), Toronto, ON, tel: (416) 365-8090, Price: Dec 13/02: $10.80, 52-week range: $11.27-4.00.  Last mention of the company in this newsletter was at $8.39 on May 31/02.  Shareholders will be asked at a special meeting to be held on Jan 6, 2003 to approve a merger into IAMGOLD Corporation on the basis of 1.6 shares of IMG for each share of RPD.  In the viewpoint of this newsletter this is a disappointing event because of the growth potential of Repadre on a stand-alone basis.  Understandably, this will make IAMGOLD a more liquid stock.  It should provide a means of Messieurs Nathanson and Pugliese to dump more IMG stock into the market place.

Resolute Energy Inc. (formerly Equatorial Energy Inc.) (RSE on TSX), Calgary, AB, tel: (403) 232-0300, Price: Dec 13/02: $2.13, 52-week range: $2.93-1.55.  Last mention of the company in this newsletter was at $2.10 on July 26/02 when known as Equatorial Energy.  New management is now in place and RBC Capital Partners has increased its ownership by open market purchases to 14.6%, just behind ARC Energy Venture Fund’s 15.4% stake but ahead of Manulife’s 13.3% interest.  Production inched higher in Q3 both in Canada 4,721 boe/d and in Indonesia, 2,107 bpd.  Management is keen on consolidating its property portfolio in Canada, lowering production costs and concentrating into certain core areas.  An example of this is the start of a 44-well shallow gas development program in southeast Alberta.  It is the company’s intention to withdraw from Indonesia, but at the right price and in the meantime is hopeful of increasing oil production at the Sembakung field by means of a waterflood injection program.  Management is aiming for production to increase to an average of over 8,000 boe/d in 2003, compared with 6,900 in 2002.  This could produce cash flow of 70 cents/sh compared with 57 cents for 2002.  Applying a 4 times multiple implies a share price of $2.80.

TransForce Income Fund  (TIF.UN on TSX), Montreal, QC, tel: (514) 856-7531, Price: Dec 13/02: $7.34, 52-week range: $8.53-6.77.  Last and first mention of the trust in this newsletter was at $7.65 on Oct 9/02.  This recently created royalty trust based on truck transportation activities produced its first financial results, for the 10-week period ended Sept 30, 2002.  Revenues were $127.6 million and cash flow came to $16.6 million.  If annualized, cash flow is averaging $1.30/unit.  The trust has, to date, declared two monthly distributions of 9.5 cents/unit, implying an annual payout of $1.14/unit.  So far, so good.  At the current payout rate, the units are trading to yield 15.5%.

Tusk Energy Inc. (TKE on TSE), Calgary, AB, Tel: (403) 264-8875.  Price: Dec 13/02: $2.55, 52-week range: $2.78-0.81. Last mention of the company in this newsletter was at $1.56 on Sept 6/02 and first mention was on Feb 14/97.  Company continues to grow production.  Q3 production averaged 2,232 boe/d, up from Q2 average production of 1,860.  Currently, Tusk is producing at a rate of 2,400 boe/d and partly due to success at a gas field in Shane in northwestern Alberta production appears headed for a rate of 3,000 boe/d in Q1 2003.  Meanwhile, Tusk is planning to make an offer to purchase all the outstanding shares of Del Roca Energy Ltd (DRQ on TSX-V) for  $0.64/sh or 0.25 shares of Tusk for each share of Del Roca.  Since there are 22.3 million shs of DRQ on a fully diluted basis, the offer equates to approximately $14 million.  Adding the assumed bank debt of $4 million, the total price of $18 million represents a cost of $30,000/boe/d based on average production of 600 boe/d.  Under the proposed offer, Tusk does not plan on issuing more than 2.8 million shares.  That being the case, total issued shares could increase from the current 19.6 million fully diluted to 22.4 million.  If the offer is successful, Tusk could then be producing at a rate of 3,600 boe/d in 2003, double the rate earlier this year.  The shares can now be held as a long-term growth situation.

Vermilion Resources Ltd.  (VRM on TSE) Calgary, AB  Tel: (403) 269-4884  Price: Dec 13/02: $11.15Feb 22/02:$10.75, 52-week range: $11.50-7.02. Last mention of the company in this newsletter was at $10.75 on Feb 22/02.  First mention was at $4.65 on Dec 26/99.  On Nov 4/02, the company announced a corporate reorganization creating Vermilion Energy Trust that will retain approximately 94% of Vermilion’s assets and a separate listed company ‘Exploreco’ that would be spun off to shareholders and which will hold certain gas weighted assets and approximately 275,000 acres of undeveloped land.  The Trinidad assets would be sold to partner Aventura Energy Inc. (AVR on TSX-V) so that the Trust would end up holding about 71% of AVR shares as well as a royalty interest.  Strangely enough the oil and gas interests in France would also be in the Trust.  Early indications are that the Vermilion Energy Trust may have distributable income of $2.00/unit and if these units were to trade at a 15% yield a price level of $13.30 is indicated.  Add to that some value to ‘Exploreco’ shares (50 cents?).  Shareholders will be asked to vote on the matter sometime in late January.  Meanwhile, Vermilion continues to perform well having produced an average 25,489 boe/d in Q3 ended Sept 30/02 up from a rate of 22,580 boe/d a year ago.


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