JULY 5 2007 2:30PM - A somewhat meaningless decline in silver and gold today with an encouraging climb off the lows. Nothing has really changed and we are waiting for some technical or fundamental guidance to give us direction.
Coeur was on the move today following an announcement that due diligence on the Palmarejo buyout has been completed and the transaction is expected to close in the 4th quarter. The stock is now trading around $4.00, which is the same level as the day the deal was announced over two months ago. The price is 15% higher, however, than the apparent double bottom at $3.50 carved out over the past few weeks. It is uncertain whether this truly was a bottom but as I mentioned a short while ago, not much else can conceivably go wrong with this company. Coeur will likely trade in a range for a few months but it is about as unloved as a silver stock can possibly get at this point and so it may turn out to be a pretty good contrarian bet over the medium to long term. On the other hand, top management is probably a liability from a strategic standpoint. I will keep an eye on it for now and currently hold no position.
Great Panther was another mover today as the market seems to have finally chewed through the large share supply from previous financings. At the same time, the threat of more financings has been alleviated to some extent as Great Panther has just raised C$4 million via convertible loans. With a positive outcome to a lawsuit involving the Guanajuato project and solid progress anticipated at multiple projects, Great Panther seems to have turned the corner and may be preparing to make an assault on the recent highs above $2.50. I believe good quarterly results will be important in maintaining the momentum. Longer term, I hope the convertible loans will be kept to a minimum because I am not a fan of this type of financing. I don't currently have a position in Great Panther although I may add upon news or earnings announcement.
One company not doing so well today is Apogee. The stock is near a 52 week low on tiny volume. Technically speaking, it has pretty strong support at current levels and is overdue for a rally. The last few times Apogee has rallied, it made 50% moves in a couple of days. Thus, a repeat from near current levels around C$0.45 is probably in the cards. From a fundamental standpoint, new management is hopefully seeking a turnaround after what I believe were some serious missteps in project advancement over the past two years. I don't currently have a position in Apogee but I will be looking to take a speculative stake in the next few days, looking to cash in on the next 50% surge.
Finally, a short update on the trio of Exeter, Southern Arc and Serengeti. First up is Exeter, which recovered nicely from the news that its Don Sixto gold-silver project in Mendoza province of Argentina was halted due to new environmental regulations. I increased my position on the day of that negative news, doubling my stake. Since then, I have taken some profits to lock in a gain of 30% and will likely be buying again in the next few days. I am still looking for a news release with monster silver grades plus strong base metal credits from the Cerro Moro project, which could spark another rally in the shares. Meanwhile, the company announced further drill results that substantially increased the strike length of the high grade veins at Cerro Moro. Such positive results can certainly continue throughout the summer as the drills are kept running full-time, and this should keep a floor under the share price. Thus, I am expecting a profitable trading range to develop for the next several months with an upward bias but no major fireworks until sometime this fall. The situation should allow intrepid investors to establish a position in Exeter at a comfortable pace.
Next up is Southern Arc, which saw its share price get way ahead of itself on unreasonable expectations of a stupendous drillhole at the Selodong project that never materialized. Mind you, the hole was good, but not good enough to support the inflated stock. Through some timely trading, I managed to somehow lock in gains of almost 80% over 2 weeks and I am currently out of the stock. I will wait to see what happens around the C$1.75 level before making another foray. There appears to be no hurry at this point because there could very well be several weeks of price consolidation ahead.
Last but not least is Serengeti, which gained 8% today on anticipation surrounding the imminent release of assay results. I never did buy this stock, partly because I did not understand the company's approach to drilling or the reasons behind the recent fluctuations in share price. While I've gained a better grasp over the past few weeks, there still appears to be a disconnect in my opinion. I can't put my finger on exactly what, but hopefully the new drill results will make things more clear. Until then, I will remain on the sidelines.
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