rI at the close, April 26, 2012
Canada’s benchmark stock index on Thursday posted a second straight positive close following three consecutive losses on mixed economic messages.
The S&P/TSX composite index rose 34.78 basis points, or 0.29 per cent, to close at 12,145.85. Materials declined after Goldcorp Inc., which reported first-quarter earnings after the close on Wednesday, and Potash Corp. of Saskatchewan failed to hit analysts’ estimates. Goldcorp shares dropped 6.03% to $38.05 on Thursday, while Potash fell 3.21% to $42.25.
The S&P/TSX Composite Index rose 0.29% to 12,145.85, as the TSX/S&P Capped Materials Index dropped 0.6% and the heavily weighted TSX/S&P Capped Diversified Metals and Mining Index fell 0.5%.
In The Street’s metals and mining section, Richard Suttmeier writes up a number of major minors for being in the sights of his “death cross”, “A “death cross” is the opposite of a “golden cross,” when the 50-day simple moving average falls below the 200-day.”
Suttmeier says each of the following are cheap: Barrick Gold, AngloGold, Goldcorp, Harmony Gold, IAMGold Corp. and Newmont Mining. Each has experienced the “death cross” before gold and has set a 52-week low on Monday this week.
The truth that too many investors are painfully aware of, however, is that many, many miners have reached 52-week lows recently.
As ResourceInvestor.com asks, “Where is the bottom”, author Ron Hera suggests that based on a number of metrics gold and silver miners are oversold. Although gold and silver prices appear to be consolidating at current levels (if somewhat volatile), mining stocks are off as much as 30% from 52-week highs.
Matt Badiali of Stansberry & Associates tells Gold Report that just at t-shirt makers become more valuable when the price of t-shirts increases, so gold stocks share price should increase with the price of gold. The problem is, for many companies that hasn’t happened in some time. In fact, in many if not most cases lately, the opposite has happened.
Badiali sees upside in a number of juniors, including ATAC Resources Ltd. (ATC:TSX.V). He knows the management and has been to the project, and has seen 597% increases in his investment.
He also sees upside in Riverside Resources (TSX: RRI) for its management, partners, experienced managment, and relatively low share price. Pretium Resources (TSX:PVG), with its interestingly spelled logo, is another potential winner for Badiali, in part because of closeology: It’s located near Seabridge’s massive KSM winner and is a high-grade gold and silver deposit.
All this is really a way of saying, “BUY BUY BUY.” It’s easy to find explorers and miners that are undervalued at the present, the question is, “which?”
Here are a couple attractive picks based on ongoing news and market conditions.
SilverCrest Mines (TSX.V:SVL) is excellent cash flow from its Santa Elena project north of Hermosillo in the mine-friendly, sunny top-mining jurisdiction of Northern Mexico. The company continues to exceed production targets, is cash flow positive, has paid off its debt and is expanding at Santa Elena. The company is rapidly growing resources at its La Joya project as well, in Durango, Mexico. Ongoing drilling at this project is achieving outstanding results. The project is also a hedge for the company, in that it’s diversifying into copper and potentially other base metals, too. All this, with talk of more acquisitions during this slow market, and yet the company’s share price is significantly off it’s 52-week high of about $3 per share with strong volume.
Another stock we’re closely watching is Prodigy Gold. The company more than doubled its share price over the past year, but has presented an excellent buying opportunity recently as it dropped with the rest of the boats in the harbour. This multi-million ounce gold deposit in Wawa, Ontario is a past producer that once had rich veins and now presents an outstanding open pit opportunity with low costs and an NPV of almost $1 billion, continued long, higher grade intercepts and great potential for increased resources and reserves (again!) in the near term.
The company peaked at $0.90 in January but has drifted to $0.66 per share recently.
According to Norther Miner, “Northern Securities mining analyst Kwong-Mun Achong Low reasons that the most likely takeover candidates (in alphabetical order), are Belo Sun Mining (BSX-T), Probe Mines (PRB-V), Prodigy Gold (PDG-V), [our emphasis] Rainy River Resources (RR-T), Sandspring Resources (SSP-V) and Sulliden Gold (SUE-T), and claims they could all be of interest to Iamgold or “any company” for that matter that is “looking for significant exposure in the Americas.””