The price is stagnant for a number of reasons, all of them contribute to why I am buying.
1. TA: The stock had a colossal run up last year from 5c to 40c. Lots of profit takers will move on after such a run, it takes time, and as always there will be a protracted ABC correction as they leave. The correction has to be long enough for them all to depart and a new batch of punters turn up salivating at the next big run. So a 35c run up has resulted in a a 50% (18c) retracement back to 24c. That is normal after a huge run. Five months have elapsed too so we must be near the low, or saw it at 24c. A downward slope of slightly less than 45 degrees is better than a sharp slope on the retracement, and that's what we have. Volume has now dried up. That's a sign the selling is nearly over. Strong hands are holding and just a few weak hands are left.
2. Company: There has been a delay in approvals for Munda. That's a big reason for the sluggishness. In a hot gold market where actual producers are being chased by hot money, hot money is never going to come our way until we are in production. Disappointed punters have moved on to greener pastures. Buying in before they turn up again for the next run up is sensible for us punters with a six month time frame. Mark my words, the price will move nicely when the approvals are announced.
3. Scale: This is a small outfit with few shares. The big boys are never going to go bottom fishing down our end of the pond. That leaves mums and pops, you and me, with limited funds and research capability.
As some have already explained, once we are again in production, this time with far more control over costs and with a much higher gold price, cashflow will be stunning, probably higher than the current market cap ($40m). And as my daughter found out tonight after doing a google search, juniors are usually valued at between 3-4 times cashflow. Either late this year or early next, this company will hit $1.00, and it will still only be worth $150m, fully funding the build of a 500,000 processing plant that will seal its destiny for the next decade.
Anyway, that's just what I think.
AWJ Price at posting:
27.0¢ Sentiment: Buy Disclosure: Held
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