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Join One Of Our Recent Discussions
Recent comments are shown on our homepage and we have started the discussion with posts about some of the stocks we are watching:
- Cash Offer with 2-Spinouts: Galway Resources (TSXV: GWY) then $1.57 +.22 on 4M+ shares, although their newest release of 3 new high grade gold zones was a week earlier on October 9, 2012. For over a year GWY has been releasing impressive drill results and we wanted to know more - towards adding the stock to our Top 30 Small-Caps list. Three days later the company announced a cash offer of $2.05 per GWY share, PLUS shares in two new companies (0.9 share to hold the Vetas gold project and US$18 million cash, and 1.0 share to hold the Victorio tungsten-molybdenum project and US$12 million cash). Unfortunately we didn't move faster as V.GWY is now $2.23. We'd like to know your thoughts about Galway, their drill program etc. and the potential of the two new SpinCo's and their metals projects?
- Merger: Prodigy Gold (TSXV: PDG) then $0.99 +.30 on an agreement to be acquired by Argonaut Gold (TSX: AR), representing $1.08 per PDG share. Longer-term this seems like an interesting combination of PDG's Magino mine with AR to potentially produce 300-500k Au-oz per year. Any thoughts on where AR will settle out, and its potential looking forward?
- Two More Buyouts: Lorex Technology (TSXV: LOX) agreed to be acquired by FLIR Systems (NASDAQ: FLIR) for $1.30 cash per share. Similarly, Hana Mining (TSXV: HMG) agreed to be acquired for $0.82 cash per share. LOX is new to us but our Guru Trader Tweet has mentioned HMG six times since January 2010, between $1.48 and $2.05. HMG traded as high as $5.68 in December 2010. Both stocks caught our eye last week on high trading volumes with all-cash offers that are slightly higher than where they are trading. Is there more here?
- Two Oil & Gas Plays: Donnycreek Energy (TSXV: DCK) then $2.01 +.21 on 1M+ shares, recently acquired Deep Basin Montney assets in Alberta and closed a $29M private placement. Petroamerica Oil (TSXV: PTA) then $0.25 has been mentioned in our past Guru Trader Tweets and newsletters about the Colombia Oil Boom. On October 1, PTA announced drilling start-up of the Las Maracas-5 well and a production update. Both PTA and DCK have been trending up for months, with PTA's 52-week high of $0.28 made on October 22, and DCK's all-time high of $2.35 made on October 18. What's your opinion of these oil plays?
- Split It: Apple Inc. (NASDAQ: AAPL) makes great products, although overpriced IMHO. The stock doesn't seem expensive with a 13 P/E, ok dividend and strong 1, 5 and 10-year charts. Apple is the biggest company, but it's not a conglomerate like Berkshire Hathaway (NYSE: BRK.A), yet even they have a lower priced share (NYSE: BRK.B). The question is would shareholders be better served if AAPL split 10 for 1, or issued a sub $100 class B share?
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Metals Stocks Set To Outperform Bullion This Time?
Over the past decade it seemed that while commodity metals prices moved higher, prices of mining shares refused to keep pace - let alone outperform as they had done in previous bull markets. As mentioned in our recent newsletters, we believed that metals prices would rally this fall and that junior mining stocks may be finally set to make their move.
Despite generally weak equity markets (S&P 500 -2.0%, DJIA -2.5% in October), gold, silver, platinum, palladium and most base metals prices have moved higher this fall. Our mining stock posts above are just a glimpse of all the consolidation, financing, merger and buyout activity lately. Perhaps together this is an early indicator that unless the economy goes off the fiscal cliff in December, that 2013 could be one of the best years ever for exploration and mining shares versus bullion or ETFs.
Contrarian Resource Plays - Nat Gas, Diamonds, Uranium
The contrarian in us is always looking for low tides that may be ready to reverse trend and break new waves higher again. This time last year we wrote that we like, "beaten up natural gas and diamond plays that have an established resource, for a turnaround sometime over the next year".
While carat prices have mostly recovered from the 2008 economic crisis, diamond-mining stocks have yet to show clear signs of a commodity-price macro-driven uptrend. Similarly, decade low natural gas prices have recovered close to double its sub-$2 price set last April, but this 6-month uptrend is not as easily identified in share prices - as most natural gas companies also produce oil, or are utilities. Small-cap diamond and natural gas exploration plays remain of interest and on our radar.
Uranium investments are very interesting to track, as they tend to establish clear trends with big moves. U3O8 made its record high of $138 a pound in June 2007, one year before oil made its new high of $145 a barrel. Both crashed by the end of 2008 during the economic crisis. Oil has since recovered to now over double its 2009 low, with uranium barely above its $40 trough low.
In 2010 U3O8 prices were again over $70 a pound. Uranium mining stocks were one of the hottest investments right up until March 2011 when Japan's record 9.0-earthquake and tsunami hit the Fukushima-Daiichi nuclear power plant. Our past newsletters describe how the media, public, governments and markets overreacted in punishing anything nuclear reactor related. We've shown how much nuclear power capacity is being built worldwide, and how uranium is not just a long-term growth story, as the world's mined supply doesn't even cover current demand. Japan's nuclear reactors are already being put back online, as practical and economic realities are sinking in.
It's ironic how all the uranium good news recently has so far only resulted in even lower prices. That's what makes uranium a contrarian resource play today, as the market's momentum and price trends don't seem to recognize the fundamental positives. As any contrarian sector starts to turn around, focus on the strongest and best-positioned companies, as these tend to move first and farthest!
URZ Outperforms All Tracked Uranium Investments
Uranium prices stubbornly continue to be the weak outlier in an otherwise seasonally strong metals environment. While precious and base metals continue to build technical support, with many believing that gold will take out previous highs and $2,000 an ounce over the next year, uranium prices have not yet participated. Instead, the spot U3O8 price has fallen another $4.00 to $42.50 a pound, down another 8.6% over the past month.
Here’s how the uranium stocks, ETFs and holding companies that we track have performed, based on month-end closing prices on October 31 compared to September 28, listed from worst to first:
- Uranium Resources (NASDAQ: URRE) -19.6%
- Fission Energy (TSXV: FIS) -13.4%
- Denison Mines (NYSE: DNN) -12.8%, (TSX: DML) -11.6%
- Uranium Energy (AMEX: UEC) -9.6%
- Ur-Energy (AMEX: URG) -8.1%, (TSX: URE) -7.2%
- Paladin Energy (TSX: PDN) -7.8%
- Uranium One (TSX: UUU) -7.7%
- Global X Uranium ETF (NYSE: URA) -7.5%
- Uranium Participation (TSX: U) -5.0%
- Cameco (NYSE: CCJ) -0.5%, (TSX: CCO) +1.1%
- Uranerz Energy (AMEX: URZ) +1.8%, (TSX: URZ) +3.8%
This includes a variety of uranium miners, from small-cap exploration and development companies to some of the world's largest uranium producers. Not included are integrated majors like BHP Billiton (NYSE: BHP) and Rio Tinto (NYSE: RIO) that produce uranium but are more influenced by precious metals and other base metals prices.
URZ has not just outperformed every other pure uranium investment that we track; it's the only name on the list that's not down over the past month! This seems even more impressive when you compare news flows of these various uranium companies, with URZ not releasing any news for almost two months prior to October 23rd.
Uranerz Energy Receives Deep Disposal Well Permit
Uranerz Energy (AMEX: URZ)(TSX: URZ)(FF: U9E) has been our featured uranium company since late 2010. Around then uranium was the hot sector, and Uranerz seemed ideally positioned to become America's next uranium producer. The company already had NI 43-101 resources of 19M+ pounds of U3O8, with 30+ projects to explore and develop in a prolific uranium-mining region.
URZ was one of the best performing uranium stocks back then, doubling in just a few months from under $3 to almost $6 as the company achieved several financing and permitting milestones. Then suddenly Fukushima hit all uranium investments hard, and most have still not recovered.
Summary of Uranerz Energy accomplishments since March 2011:
- Initiated Powder River Basin drilling program (205 wells drilled as of August 15, 2012)
- Added to the Russell Family of Indexes (one of only two uranium small-caps still listed)
- Final NRC permit approval (Nuclear Regulatory Commission)
- Commenced construction of the company's first mine (plant is near completion)
- Signs processing agreement with Cameco (sales contracts with Exelon and another utility)
- Production well and development updates (discovers new U3O8 trend, Monument Project)
As you can see, Uranerz Energy has been busy! Since Fukushima the company hasn't missed a step in its exploration, development and mine construction plans. However, when looking at URZ' current $1.55 share price, with 6.65M shares sold short as of October 15, you might wonder how close this company really is to becoming a uranium producer. After a quiet period since August, the company may have delivered the last piece of the puzzle and your answer in its October 23 news release:
"Uranerz Energy Corporation announces that the Wyoming Department of Environmental Quality has issued the Class I Underground Injection Control (deep disposal well) permit for the Company's Nichols Ranch ISR Uranium Project located in the Powder River Basin of Wyoming, U.S.A. This deep disposal well authorization is the last permit required to begin operations and commercial uranium production at Nichols Ranch.
'The receipt of the deep disposal well permit concludes a long but successful effort to obtain all of the regulatory permits and licenses needed to construct and operate an ISR uranium mine in Wyoming,' stated Mike Thomas, Vice President of Environment, Health and Safety.
'With this final permit in hand, Uranerz will focus on installing two deep disposal wells this winter while completing the remaining construction activities,' stated Company President and CEO, Glenn Catchpole. 'We are all very excited at the prospect of becoming America's next ISR uranium producer in 2013.'
The Nichols Ranch ISR Uranium Project is expected to become the first new uranium mine built in Wyoming since 1996. The project is licensed for a production level of up to two million pounds of uranium per year with initial annual production targeted for 600,000 to 800,000 pounds after ramp-up. The project will also serve as a platform to develop the Company's other Powder River Basin properties with enhanced economics for adjacent and satellite projects."
Nichols Ranch Aerial View, Sept. 2012.
More URZ Mine Construction Photos: Uranerz.com/s/Photos_Nichols_Ranch.asp
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