3 Speculative Resource Stocks With Recent Insider Buying January 11, 2013Posted by Ishmael Chibvuri in Latest Articles!!!.
The S&P Metals and Mining Index (XME) was down both in 2011 and 2012 as shown in the chart below:
Three years of negative returns in a row is pretty rare, so there’s a good chance the mean reversion for the sector will start this year. In this article I will feature two gold mining stocks and one platinum mining company which have all seen recent insider buying. None of these three companies are included in the S&P Metals and Mining Index but two of these companies have had down years in 2011 and 2012 just like the mining index. One of these three companies had an up year in 2011 and a down year in 2012. Two of these three companies did not have any revenues in 2012 which makes them highly speculative plays.
1. Richmont Mines (RIC) has produced over 1,300,000 ounces of gold from its operations in Quebec, Ontario and Newfoundland since beginning production in 1991. The company currently produces gold from the Island Gold Mine in Ontario and the Beaufor Mine in Quebec. With extensive experience in gold exploration, development and mining, the company is well positioned to cost-effectively build its Canadian reserve base through a combination of organic growth, strategic acquisitions and partnerships.
· Nicole Veilleux purchased 3,000 shares on January 3 and 5,000 shares on August 8. Nicole Veilleux currently holds 35,000 shares or 0.1% of the company. Nicole Veilleux is Financial Director of the company.
· Ebe Scherkus purchased 60,000 shares on September 26 pursuant to a private placement. Ebe Scherkus currently holds 60,000 shares or 0.2% of the company. Ebe Scherkus serves as a director of the company.
· Christian Pichette purchased 10,000 shares on September 26 pursuant to a private placement. Christian Pichette currently holds 50,100 shares or 0.1% of the company. Christian Pichette is Executive Vice-President and Chief Operating Officer of the company.
· Paul Carmel purchased 23,000 shares on September 26 pursuant to aprivate placement and 20,000 shares on August 8. Paul Carmel currently holds 53,000 shares or 0.1% of the company. Paul Carmel is President and CEO of the company.
The company reported the third-quarter financial results on November 8 with the following highlights:
|Net income||$0.3 million|
|Net cash per share||$1.94|
|Gold production||16,691 ounces|
Richmont expects 2012 gold production of approximately 65,000 ounces. 2013 production is forecasted to be 65,000 – 70,000 ounces, down from 85,000 – 95,000 ounces previously. This revised 2013 guidance does not include potential bulk sample ounces from the company’s Monique and W Zone advanced exploration projects.
The stock dipped on November 29 after the announcement of a closure of the Francoeur Mine and a suspension of exploration activities on the Wasamac gold property. There have been four different insiders buying and there have not been any insiders selling the shares during the last 6 months. The latest insider buy transaction was on January 3. There are two analyst buy ratings, two neutral ratings and 0 sell ratings, with a average target price of $14.00. I have a long position in the stock currently.
2. Rainy River Resources (RRFFF.PK) is a Canadian precious metals exploration company whose key asset is the Rainy River Gold Project [RRGP], a large gold system centred in Richardson Township (part of Chapple Township). As of December 3, 2012, the company had approximately $107 million in cash and cash equivalents and short-term investments, and remains well funded for its ongoing activities, including 1) completion of a feasibility level study on the RRGP; 2) continuing to grow the existing resource through exploration; 3) conducting a condemnation program in areas identified for potential mine facilities; and 4) continuing regional exploration. RRGP is very well located in northwestern Ontario, near the U.S. border. It is accessed by a network of roads and is close to hydro-electric infrastructure. The Rainy River district has a skilled labour force and is one of the lowest-cost areas for mineral exploration and development in Canada.
· Garett Macdonald purchased 912 shares on January 2 and 654 shares on October 1 pursuant to a purchase/ownership plan. Garett Macdonald currently holds 3,566 shares or less than 0.1% of the company. Garett Macdonald is Vice President, Operations.
· Gerald Shields purchased 1,009 shares on January 2 and currently holds 20,509 shares or less than 0.1% of the company. Gerald Shields is Vice President, General Counsel, Corporate Secretary and Director of the company.
· Nicholas Nikolakakis purchased 1,263 shares on January 2 and 904 shares on October 1 pursuant to a purchase/ownership plan. Nicholas Nikolakakis currently holds 2,167 shares or less than 0.1% of the company. Nicholas Nikolakakis is Vice President and Chief Financial Officer of the company.
· Mike Mutchler purchased 1,263 shares on January 2 and 904 shares on October 1 pursuant to a purchase/ownership plan. Mike Mutchler currently holds 52,167 shares or less than 0.1% of the company.Mike Mutchler is Vice President and Chief Operating Officer of the company.
· Kerry Sparkes purchased 1,068 shares on January 2 and 765 shares on October 1 pursuant to a purchase/ownership plan. Kerry Sparkes currently holds 1,833 shares or less than 0.1% of the company. Kerry Sparkes is Vice President, Exploration.
· Raymond Threlkeld purchased 1,748 shares on January 2 and 1,252 shares on October 1 pursuant to a purchase/ownership plan. Raymond Threlkeld currently holds 53,200 shares or less than 0.1% of the company. Raymond Threlkeld is President and CEO of the company.
The company reported the third-quarter financial results on November 6 with the following highlights:
|Net loss||$13.7 million|
On December 3, 2012 Rainy River announced that it had closed an offering of 10,455,000 shares at a price of $5.50 per share for gross proceeds of $57,502,500.
The stock has a $10.75 price target from the Point and Figure chart. There have been six different insiders buying and there have not been any insiders selling the shares during the last 6 months. The management owns 3% of the company and institutions own 60% of the company. The company has 5.72 million ounces of gold in the measured and indicated category and 2.25 million ounces of gold in the inferred category. The average annual production is estimated to be 300,000 ounces of gold with a production start-up in 2016. The pre-production capital costs are estimated to be $694 million. I believe the stock could start trending towards the $10.75 price target from the Point and Figure chart.
3. Platinum Group Metals (PLG) is a development stage mining company focused on advancing its 74% owned Western Bushveld Joint Venture Project 1 Platinum Mine. Project 1 is a high grade near surface project in the heart of an area where over $4 billion is currently being invested into new mines and mine expansions.
· Liberty Metals & Mining Holdings purchased 71,600,000 shares on January 4 pursuant to a public offering. Liberty Metals & Mining Holdings currently holds 80,310,551 shares or 19.9% of Platinum Group Metals.
· Kris Begic purchased 10,000 shares on January 4 pursuant to a public offering. Kris Begic currently holds 10,000 shares or less than 0.1% of the company. Kris Begic is Vice President, Corporate Development.
· Eric Carlson purchased 125,000 shares on January 4 pursuant to apublic offering and 130,000 shares on July 16. Eric Carlson currently holds 255,000 shares or less than 0.1% of the company. Eric Carlsonserves as a director of the company.
· Iain McLean purchased 31,250 shares on January 4 pursuant to apublic offering. Iain McLean currently holds 198,089 shares or less than 0.1% of the company. Iain McLean serves as a director of the company.
· Barry Smee purchased 10,000 shares on January 4 pursuant to apublic offering. Barry Smee currently holds 180,100 shares or less than 0.1% of the company. Barry Smee serves as a director of the company.
· Frank Hallam purchased 281,250 shares on December 27 pursuant to a public offering. Frank Hallam currently holds 1,195,764 shares or 0.3% of the company. Frank Hallam is CFO, Corporate Secretary & Director of the company.
· Michael Jones purchased 50,000 shares on December 27 pursuant to a public offering and 23,000 shares on July 12 – October 17. Michael Jones currently holds 1,608,090 shares or 0.4% of the company.Michael Jones is President, CEO & Director of the company.
The company reported the financial results for the year ended August 31, 2012 on November 23 with the following highlights:
|Net loss||$10.59 million|
The company’s objectives for the year ahead are to complete the senior loan facility and other financing and move into a safe and efficient Phase 2 construction of Project 1, to further the geological understanding of the near surface Waterberg platinum, palladium and gold deposit and to further explore the new northern portion of the Bushveld Complex discovered by the company.
Phase 1 construction at Project 1 is expected to be completed on budget. Phase 2 development will commence once the project loan facility and additional financing from the company are available. Phase 2 is to include a second twin decline access south of the central twin decline development, underground lateral development, a milling and concentrating facility and a tailings impoundment area.
In conjunction with ongoing cost estimation work and banking preparations, an updated project schedule for Phase 2 has been completed by the company. Plant and facility construction and commissioning are estimated to take up to two years to complete. Full commercial production is estimated to occur after a two year ramp‑up period subsequent to the commissioning of the plant. The Merensky Reef is scheduled to be mined in the first approximately 13 years of the mine life. Steady state production is modelled at an average annual rate of 275,000 4E ounces of (platinum, palladium, rhodium and gold collectively) ounces in concentrate (on average during the nine years of peak production).
On January 4, 2013 Platinum Group Metals closed its previously announced public offering of common shares. Pursuant to the offering, the company issued 225,000,000 common shares at a price of $0.80 per common share, for aggregate gross proceeds of $180,000,000.
On December 6, 2012 Platinum Group Metals reported that a syndicate of lead arrangers had obtained credit committee approval for a $260 million senior loan facility for the construction of the WBJV Project 1 Platinum Mine.
The stock is currently trading close to its 52 -week lows. There have been eight different insiders buying and there have not been any insiders selling the shares during the last 6 months. There is one analyst buy rating, 0 neutral ratings and 0 sell ratings for the stock currently. First production from the Western Bushveld Project 1 Platinum Mine is scheduled for late 2014. The peak project funding is expected to be $506 million which has been already secured. The stock could be a good pick from the current level leading into the production start-up in late 2014.