The current pull back in gold prices has hit some gold mining stocks harder than others and should now be viewed as an entry point for our ‘opportunity cash’. One such stock is High River Gold Mines Limited, so we took the opportunity to acquire more of their shares today at $2.48 and we are signalling an additional BUY on this stock from a short term trading perpective.
Taking a quick look at the chart we can see that this stock has been sold down from a previous high of around $3.45 so today’s price levels offer a considerable discount. The technical indicators are almost at the bottom of their respective ranges indicating that the worst is behind us.
This stock may still fall a little further but we are of the opinion that the downside is limited. We are also expecting gold to put in a short rally over the next couple of weeks so this purchase fits well with both our long-term holdings and our short term trading account.
Part of the reason for the 'sell off' of High River Gold may lie in its recent financial statement where they said:
“Net loss for 2007 was $12.0 million, or $0.05 per share”
Enough to give some investors the jitters!
However, if we read deeper into this financial statement we find that all looks good to us. For instance;
“The groundwork has been set for 2008 gold production to double from 2007 levels”
- “Project specific working capital financing totalling US $25 million, private placements totalling $23.95 million, and a $100 million "bought deal" financing were completed to put High River and its mines on a strong financial footing going forward. High River, fully funded and with future cash flow from its two new mines, expects to be well positioned to capitalize on merger and/or acquisition opportunities accretive to the share price”.
“Total long-term financial liabilities decreased in 2007 due to the repayment of a portion of debt related to mine construction”.
Each mining stock will exhibit unique behaviour during a sell off, some will fall only slightly, others a little further and for some, the pendulum will swing right past a reasonable resting place. These aberrations may only exist for a short time, so it is up to us to recognise them and be ready to act swiftly in order to take advantage of them. So, following our ‘heads up’ in yesterdays portfolio update we have made our move.
As always don’t go too mad on this one and keep some capital on hand for there might be another opportunity coming your way shortly. A number of mining stocks look attractive at the moment, however we need to keep one eye on the calendar as the merry month May approaches.
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