What I am noticing are several high quality juniors we hold or track showing noticeable signs of life.
Stockhouse Ticker Trax is equity specific research (Canadian listed and market cap < $300 million) published every Monday to paid subscribers. Our free Friday column may feature companies previously featured to paid subscribers (with a minimum one month delay) or discuss topics of interest to the general investment community and relevant to overall portfolio management.
Penny Stock Recovery on the Horizon and Monthly Junior Gold Valuation Update
If you haven't noticed over the past ten days, there has been a significant move in oil, gold, and silver (and platinum with the problems in South Africa). Gold is at $1,670, silver broke $30, and Nymex crude at $96.
What this has created is the start of a stealthy recovery in many of the junior exploration stocks. I mentioned last week to our paid subscribers that I was seeing a decent movement of money into the microcap stocks and this week I am noticing many investors taking advantage of these year-long depressed prices.
Benchmark Pinetree Capital Ltd. (TSX: T.PNP, Stock Forum) at 98 cents is only up marginally so the hundred plus junior exploration stocks in their portfolio have yet to reflect a significant shift in trend. However, this does mean that there is plenty of (significant) opportunity out there.
What I am noticing are several high quality juniors we hold or track showing noticeable signs of life. Levon Resources Ltd. (TSX: T.LVN, Stock Forum) at 37 cents is just one example. We have been bottom fishing LVN for months near 33 cents and there seemed no end of paper for sale - yet Wednesday it rapidly cleaned up to 40 cents once silver hit $30 per ounce. This is a cash rich company in Mexico with a very large low grade silver and metals project. Even 40 cents is cheap but this is the first movement in the stock for two months.
In the past week our Ticker Trax Cash Rich Virtual Vulture Fund list of 90 companies (which I assembled in May) has gone from a loss of 3% to a gain of 3%.
Not a huge number but it’s the first time we have seen a conviction in buying for this large basket of junior exploration stocks - and the 6% gain occurred within the week.
Not included in that 3% is the Thursday takeover of Talison Lithium Ltd. (TSX: T.TLH, Stock Forum) at $6.46. It was added to our Virtual Vulture Fund at $2.90 and produced a gain of 124%. That will be the third takeover since May of stocks I added to the list.
Junior Gold Exploration Stocks
In addition to the positive indicators mentioned above, our list of 60 junior gold exploration companies has also moved to $40.80 per gold ounce (as of August 23rd). This is a 10% recovery from May and it all resulted in the past week. The first two weeks of August the average had fallen below $35.
Here are the gold ounce averages since December 2011 and you will notice the points of extreme pessimism in May and June. The detailed tables are included at the end of this Ticker Trax report.
Gold's recent move was the result of comments from the U.S. Federal Reserve who hinted that another round of monetary stimulus was imminent. This will put more paper (debt) into the system and keep interest rates near zero. Gold traders love this type of news. The commodity moved above its 150 and 200 day moving averages which was a key point of resistance. In theory we could see gold settling in above $1700 by year end.
Silver is often a tag-along buddy of gold so where gold goes, so goes silver. For months now silver prices have remained stable in a fairly tight trading range. However, this week the price bolted higher and across an important threshold at $30. The talk has been that silver is tightly associated with the Euro so when the Euro rises, so does silver. Yet on Tuesday silver started a strong move "ahead" of the Euro and this has many scratching their head.
Levon, as I mentioned above, has been our leverage to silver since 33 cents. Their war-chest of $55 million cash has kept our risk low because the stock traded near cash value. Their proven silver resources (while very large) were also low grade so we needed both a move in silver and broader strength in junior exploration stocks. Hopefully this past week is the first solid sign that will occur by September.
Oil is being fueled by the same comments from the Federal Reserve this week (that fueled gold) combined with a government report last week that showed crude inventories sank for a 4th consecutive week. Supplies fell by 5.4 million barrels when they were expecting 2 million.
Thursday it was also announced by the Navy news service that the crew of a U.S. aircraft carrier were having their home leave cut short and they were to return to the Middle East August 26th to counter any potential threats from Iran. One has to wonder why they would "cut short" this vacation time. Military action in Iran or the Gulf would have a profound impact on oil prices.
Junior Gold Valuation Update for August – Avg $41/Oz
NOTE: Due to limited space for website presentation, we are not able to display various additional notes for many of the companies. This may include additional copper or silver resources that were not taken into consideration for the valuation. Only resources that were specifically reported in a 43-101 report were included. Many of these companies own various other projects or assets that may add additional value. Almost all companies host a Powerpoint presentation on their website and this is a valuable tool for doing further due diligence.
In addition to this weekend column and the bottom fishing research sent to paid Ticker Trax subscribers on Monday, I also provide free MicroCap alerts throughout the week. These are based upon News or Abnormal Price/Volume Activity on the several hundred stocks we track from our own research, brokerage analysts, or 3rd party newsletter writers.