daytrading feb 25 afternoon, page-2

Boart Longyear is the place to be if you want a big winner soon. Boart has fallen 92.8% in share price since its recent peak of $4.80 in 2011 compared to current sales of 34c. The share price has fallen around 23% since it reported yesterday but I think the market has got it wrong. Here is a Canadian article issued last night which I believe shows the, not too distant, future for the mining world.

Small miners set to start again

Boart is the largest drilling company in the world and concentrates on gold exploration with 44% of its business in gold drilling. The gold price has turned around over the last two months and gold shares have recovered quite strongly. The gold price is hitting a new four month high as I write. The small miners will raise cash, and drilling costs are now way cheaper than they were in the boom times so they will be going back in. It is not happening in a big way right now but it is not far away.

The Boart headline results sounded terrible but it was all about the writing down of the unused drilling equipment and the retrenchment of half the staff. It still has a net tangible asset backing of US$50c after those write downs. Both its operating cash flow and its free cash flow were positive for the year, even though they included large tax payments relating to the previous year profits.

The new CEO joined Boart last year and was previously the CEO at Newmont where he worked for around 7 years. In his first year at Newmont, he did huge write-downs and produced a massive loss as he has done at Boart. After that year, there was never another loss during his tenure at Newmont. This is what I think will happen at Boart.

Boart issued US$300 million worth of bonds in September last year and used the money to pay off the bulk of its bank debt. In its announcement yesterday it advised that it is not in breach of any of its covenants.

Ever since the mining boom ended, Boart has been a target of the short sellers. Currently, there are 34.7 million, or 7.54%, of the shares short sold. This figure is six days out of date but the latest available. Yesterday and today there has been more huge short selling. Yesterday’s ASX daily figures quoted Boart’s gross short selling for the day at 3.86 million shares. When the market turns up, these guys are all going to have to buy those shares back.

Boart is cash flow positive, its debt is in order and there are good signs that the market is about to turn around.

In December, Boart fell to an all time low of 25.5c and a month later it touched 50.5c. That shows how Boart moves and what will happen when it does turn around again.

We, shareholders, would love to see Borat become erect again. All it would take to turn it around very quickly is for 10% of you day traders reading this today to join me as shareholders in the company. It is heavily oversold.

GPASAS