No question we all want as little dilution as possible moving forward. However things break down, this is going to be an exciting year for CZN with permits, increased production in Fiji and drill results from Tally to look forward to. Tally is especially exciting as it brings some Blue sky potential.
Here is an article I found last May. The timing might of been a bit premature in hindsight but it would seem to be relevant now.
Buying a "bottomless pit" junior market? Canadian Zinc, Cancor, Cartier, Buchans
Thu, 05/31/2012 - 17:13 | montreal
Buying mining stocks in a “Bottomless Pit Abyss”
A “Bottomless Pit”! Many events seem to occur in cycles and mining stocks are no exception. What is a Bottomless Pit Abyss? Just for an example, let’s say we have a Canadian mining stock named “Deep Drillo Mining,” a small company that has a cash position of $5 million as well as having 800,000 drill indicted ounces of gold. For this example, let’s say that Deep Drillo has 50 million shares outstanding.
Next, we will take a look at charts for the price history of Depp Drillo shares. Remember that a chart is a history of what investors would pay for a stock(s) at specific times. A chart is the picture that is worth a thousand words.
Now, for example, let’s say that “Deep Drillo” had a price high at $1.45 and a low of .30 cents over the last three years. By examining the chart we can see in the past that strong investor buying came in whenever the stock dropped into the price range of around .40 cent to .30 cents. And when the stock was selling at or near $1.15 – $1.20 or above, some investors would be selling making a top. That is viewing the chart from a historical perspective which clearly shows what happened at what price.
Let’s explain a “Bottomless Pit Abyss”? It is when a stock breaks support and sells below its historical price range; it goes into a price sell off where little or no historical buying support seems to occur or has existed in the past. In a “Bottomless Pit”, stock is being sold by frustrated shareholders to “just get me out of that darn stock” with little forethought. And it does not have to occur with heavy volume, it can be very on low volume. And too often that stock(s) is literally being thrown away at a very low price and often at extremely low valuation levels using any of several different fundamental valuation gauges. Investors should keep in mind that a bottom is made when the last frustrated investor in a stock sells his or her shares-often in utter frustration.
Coupled with that Bottomless Pit abyss is the fact that so very few stocks, particularly those making lows garner comprehensive research coverage. In ninety nine percent of the cases, nobody is recommending the company nor writing any research coverage suggesting that investors should be “accumulating” the stock(s). And yes, that is despite the fact that it may have been heavily recommended at a much higher prices. Moreover, you may have noticed that brokerage recommendations rarely if ever are made when stocks are making important and underpriced bottoms and are exceptionally undervalued. It never happens! Never? Well, hardly ever! You have to look elsewhere for clues of undervaluation and do the analysis yourself. And most investors can do it just as well if not far better than the so called expert analysts.
Now let’s say that “Deep Drillo” drops in price to below its historical price low of .30 cents. Maybe it is “being dumped” at .20 cents or .15 cents or so. Some shareholders may react with alarm and sell their own shares, but it may be the time for some in-depth analysis. The stock may be down in price for rational fundamental reasons but one may also find that the officers and directors (insiders) of the company are buying the shares that are coming to the market for sale and taking the opportunity to buy the shares from the impatient, frustrated or uninformed shareholders letting them go. Insider transactions information is readily available and free; it is vital to monitor it.
Some investors will employ “dollar cost averaging”, a method of putting in bids at lower price levels. It allows for accumulation at cheaper prices that will lower an investors average cost per share. Investors will simply bid for the shares that are at “on sale” levels. Over the years we have bought stocks while they were selling in the Bottomless Pit and often, though not all the time, it has given investors superb capital gains. And keep in mind that investing is the only business that when a “super sale” on stock(s) occurs, few investors participate. Think about that.
These Stocks may be in the undervalued “Bottomless Hole Abyss.”
CANADIAN ZINC CORPORATION, symbol CZN, .44 cents, is a Canadian junior developmental exploration mining company based in British Columbia…major asset is their Prairie Creek Mine…43-101 reserves and resources are substantial and we see the strong likelihood of expansion of their resources and reserves. CZN has a very high asset value per share using a very conservative valuation method. Sprott Asset management owns 11% of the shares, Chinese Investors hold 8%; a total of 38% of shares are owned by institutions. Far off last year’s price of $1.35, price low may be an opportunity. No debt and a cash position of $14,675,567 plus other marketable investments of value today at $10,567,897.
Mine production could begin 18 months. In our estimation, the value of the production facilities and infrastructure (does not include any reserves or resources) already in place is approximately $235 million. Why is CZN selling at such a low price? Our opinion is that it is due to long time delays which could finally be coming to an end. We think that a proper value based upon what it has in assets and resources is between $1.20 to $1.60