Sunday, April 19, 2009

TNR Gold TNR.v: Junior surges 69% on Lithium Charge. TNR.v, SQM, WLC.v, CLQ.v, CNY.v, GM, F, GOOG, AAPL, RIMM, BYD, TTM, FCX, RTP, BHP, OIL, OIH

CS. Case study of investment in Lithium and Next Big Thing in a highly speculative environment.

As we have mentioned on Friday - we are dealing here with High Voltage situation - do not try it at home. Who knows what will happen next?

"And, TNR Gold (TSX: V.TNR , Stock Forum) Friday reported the acquisition by staking of the 640 acre Fish Lake Valley property in Nevada, which the company believes has geological features similar to those that have acted as a trap for lithium brines in Clayton Valley. Its shares climbed 69% to 11 cents."

Move on the six months chart looks impressive, but put it into perspective on the one year chart below. Company was sliding down the slope fast from last September with fading hopes for existence of any intelligent life on earth after Lehman Brothers collapse.
We never trust to anything in business before we challenged it and so should you. You already know about our stubborn insistence on decoupling of developing countries from developed ones, of people who have the money from people who only have debt and the most important: of you and your money should you think that somebody could make you rich. You can find all scientific facts proving it on this blog. So we investigated further this strange situation. Company has being showning some signs of life and even kept lights in the office as we were told by IR all that time: everything was done in order to prevent Mr Market from allegations that stock price should be cheaper then property titles. For every seller in that market was a buyer. Brave souls and stupid minds? Management and insiders were buying according to fillings. What these Geos could know about modern finance? Can they even comprehend the stability of mortgage business in its subprime safest bet? How could they even trust their own money to themselves and not to proven by markets and congressional hearings hedge fund managers? A lot of questions and we have some untested theories.

Maybe these Geos know that you can not find properties in the couple of weeks, develop them in a couple of months and put into production in a couple of years when the mood of the Mr Market will change? Maybe they did not believe in the End of the World or maybe they are just plain stupid - but insiders are buying only in one case: when they believe in fundamentals of the company. Things can go Thousand times wrong: they can not control Market, Economy or give ideas to Warren Buffet, but when they are putting their money into the game you can be sure in one, but important thing - they will buy only when they believe in their dream.

When should anybody else buy? Never, according to effective market theory. The problem is that Mr Market can not really sustain its mode for a long time: one day it is in depression - another one - it is flying with euphoria. So it is much more safe to wait until stock will position itself for more or less sure 10% bet: will rise and trade above 5 dollars for one year, its valuation will be at least over 500 mil market cap and 20 trustworthy analytics from solid Investment Banks will be working at night to bring you wealth and their recommendation BUY.

This time it was not different from the classic theory: Market also hesitated on Friday after the news announced day before for a couple of hours before taking off in a launch mode. It's Depressive Maniac disorder disappeared at least for a day after a shot by Lithium medicine. Why it is important - not because somebody should rush into buying and chasing this stock, but because we can see the direction and market perception of valuation, which will be changing fast with new Mr Market mode. We will retest the lows in general markets after this Bear market rally, there will be a lot of opportunities along the way, but fast action in research field is needed in situations where disparity of market valuation and underlining value are so apparent.

Our theory of any potential factors supporting such an advance includes a few observations:
- free float is not as big as fully diluted share float: 69% advance was on less then 1 million shares traded,
- all properties supporting valuation above 0.35CAD last spring, when the last significant PP was done are still there and in more advanced proposition either to the J/V partners like El Salto, EL Tapau and Alaska or with J/V partners like Los Azules,
- commodity prices are up from their lows and show direction with all news from Chinaabout strategic buying,
- country defaults have not happened in case of Argentina,
- company aggressively moved into hot Lithium story , acquired three properties within three weeks and diversified its country risk dramatically adding Canada and Nevada in USA,
- last added property in Nevada is in Clayton Valley: maybe speculators were encouraged by recent reports on market activity in Juniors in that area:

"Clayton Valley - the Saudi Arabia of Lithium?
"...Clayton Valley is home to the only lithium producer in the United States. This plant extracts lithium from brines pumped from aquifiers below the valley and has been in production since 1967. The plant is designed to produce 1.2 million kg of lithium per year and to date has produced an estimated 50 million kg of lithium. Rodinia's property is adjacent to this production facility.
In 1975, I.A. Kunasz of the American Institute of Mining, estimated the mineral endowment of Clayton Valley to be 750 million kg of lithium. A more recent study by Price, Lechler, Lear and Giles in 2000, suggests that significantly more lithium was released into the Clayton Valley catchment by the weathering of high lithium bearing rocks. They suggest that as groundwater enters the basin, it appears to be dissolving lithium minerals accumulated in valley sediment and is partially recharging the lithium content of the brine, while mining operations have been ongoing. "Replenishment of brines comes from surrounding Rhyolite, which are the most lithium rich in the world. Brines in the area have concentrations as high as 1000 ppm Concentrations as low as 166 ppm have been used in lithium brine pool extraction methods."

- in order to be balanced in our research we have to mention that insiders are not selling any stock for a long period of time in this case. What are they thinking? To be so greedy and stupid. What kind of spin they put on all others in stable business, who are getting shares in order to sell them to public at high valuation to ensure safely shareholding? It is definitely a sign for further investigation.

We do not think that any of the above can guarantee that this stock will be trading above our safety threshold of 5 dollars and will be covered by 20 analytics thinking about your wealth overnight with their Buy recommendations in the nearest future. We will continue to monitor this situation.
Post a Comment