A “Bottomless Pit”! Many events seem to occur in cycles and mining stocks are no exception. What is a Bottomless Pit Abyss? Just for an example, let’s say we have a Canadian mining stock named “Deep Drillo Mining,” a small company that has a cash position of $5 million as well as having 800,000 drill indicted ounces of gold. For this example, let’s say that Deep Drillo has 50 million shares outstanding.
Next, we will take a look at charts for the price history of Deep Drillo shares. Remember that a chart is a history of what investors would pay for a stock(s) at specific times. A chart is the picture that is worth a thousand words.

Now, for example, let’s say that “Deep Drillo” had a price high at $1.45 and a low of .30 cents over the last three years. By examining the chart we can see in the past that strong investor buying came in whenever the stock dropped into the price range of around .40 cent to .30 cents. And when the stock was selling at or near $1.15 – $1.20 or above, some investors would be selling making a top. That is viewing the chart from a historical perspective which clearly shows what happened at what price.
Let’s explain a “Bottomless Pit Abyss”? It is when a stock breaks support and sells below its historical price range; it goes into a price sell off where little or no historical buying support seems to occur or has existed in the past. In a “Bottomless Pit”, stock is being sold by frustrated shareholders to “just get me out of that darn stock” with little forethought. And it does not have to occur with heavy volume, it can be very on low volume. And too often that stock(s) is literally being thrown away at a very low price and often at extremely low valuation levels using any of several different fundamental valuation gauges. Investors should keep in mind that a bottom is made when the last frustrated investor in a stock sells his or her shares-often in utter frustration.

 

Coupled with that Bottomless Pit abyss is the fact that so very few stocks, particularly those making lows garner comprehensive research coverage. In ninety nine percent of the cases, nobody is recommending the company nor writing any research coverage suggesting that investors should be “accumulating” the stock(s). And yes, that is despite the fact that it may have been heavily recommended at a much higher prices. Moreover, you may have noticed that brokerage recommendations rarely if ever are made when stocks are making important and underpriced bottoms and are exceptionally undervalued. It never happens! Never? Well, hardly ever! You have to look elsewhere for clues of undervaluation and do the analysis yourself. And most investors can do it just as well if not far better than the so called expert analysts.

 

Now let’s say that “Deep Drillo” drops in price to below its historical price low of .30 cents. Maybe it is “being dumped” at .20 cents or .15 cents or so. Some shareholders may react with alarm and sell their own shares, but it may be the time for some in-depth analysis. The stock may be down in price for rational fundamental reasons but one may also find that the officers and directors (insiders) of the company are buying the shares that are coming to the market for sale and taking the opportunity to buy the shares from the impatient, frustrated or uninformed shareholders letting them go. Insider transactions information is readily available and free; it is vital to monitor it.

 

Some investors will employ “dollar cost averaging”, a method of putting in bids at lower price levels. It allows for accumulation at cheaper prices that will lower an investors average cost per share. Investors will simply bid for the shares that are at “on sale” levels. Over the years we have bought stocks while they were selling in the Bottomless Pit and often, though not all the time, it has given investors superb capital gains. And keep in mind that investing is the only business that when a “super sale” on stock(s) occurs, few investors participate. Think about that.

 

These Stocks may be in the undervalued “Bottomless Hole Abyss.”
CANADIAN ZINC CORPORATION, symbol CZN, .44 cents, is a Canadian junior developmental exploration mining company based in British Columbia…major asset is their Prairie Creek Mine…43-101 reserves and resources are substantial and we see the strong likelihood of expansion of their resources and reserves. CZN has a very high asset value per share using a very conservative valuation method. Sprott Asset management owns 11% of the shares, Chinese Investors hold 8%; a total of 38% of shares are owned by institutions. Far off last year’s price of $1.35, price low may be an opportunity. No debt and a cash position of $14,675,567 plus other marketable investments of value today at $10,567,897.

Mine production could begin in 18 months. In our estimation, the value of the production facilities and infrastructure (does not include any reserves or resources) already in place is approximately $235 million. Why is CZN selling at such a low price? Our opinion is that it is due to long time delays which could finally be coming to an end. We think that a proper value based upon what it has in assets and resources is between $1.20 to $1.60.

 

CANCOR Mines, symbol KCR on CNSX, .08 cents, is a Quebec based gold and base metals exploration company with active exploration projects in Quebec and Algeria. Cancor has resources in Quebec that are 43-101 compliant. The five year price range has seen a high of .40 cents to a low of .02 cents. Very few shares are available below .15 cents, it is quite illiquid. In autumn of 2011, a $3,000,000 private placement was done at .20 cents per share……. It was taken totally by one large European investor based upon a private valuation.
Most importantly is Cancor’s focus on its four gold properties in Algeria. The historical data from previous exploration suggests exceptional potential. In 2011, 2290 samples from extensive recent trenching and channel sampling returned excellent results. Officers and directors own 27% of the shares; their buying has been exceptionally heavy over the last three years. Institutions own 9%. Key point: Results suggest extraordinary potential for their gold projects in Algeria based upon their recent trenching and channeling results as well as drilling results done in the 1970’s by Russian geologists on one of their Algerian projects. Today, KCR has a cash position of over $3,450,000, no debt and the ability to raise capital if necessary.

 

CARTIER RESOURCES, symbol ECR, .27 cents, recent price high of .52 cents, is a gold, base metals exploration company based in Val d’Or, Quebec. It has nine exploration projects-three are active. Cartier is currently drilling on one project and is “drill ready” on two others projects. Moreover, Cartier has what we may consider as an exceptionally large copper property. We note that very heavy buying of officers occurred well above its present price. Moreover, officers’ buying last year was heavy at .40 cents. Drilling focus and officers buying indicate a strong effort for success. Not too liquid at all-we interpret that as few shares for sale-a good sign! ECR has a relatively small number of shares outstanding of and a cash position of over $4,600,000. Weakness may be a superb opportunity.

 

BUCHANS MINERALS CORPORATION symbol BMC, TSX.V is an Eastern Canadian exploration company focused on developing its base metals properties and deposits in and around the famous Buchans mining camp in central Newfoundland. The Buchans mine was one of Canada’s richest base metals mines between 1928 and 1984 while producing zinc, copper, lead, silver and gold. As well, Buchans also has a manganese property in New Brunswick which due to its size and history, we believe to be of significant value and enormous potential. In both areas, New Brunswick and Newfoundland, we feel that Buchans offers a very strong possibility to eventually have operating mines on line.

 

This following makes it perhaps more interesting: Recently, Buchans was temporarily recommended by an advisor and the stock rallied up to .12 cents quite quickly on extremely heavy volume. As the recommendation did not last, the stock retreated down to the .04 cents to .05 per share cents level giving it a market cap of under $10 million which we find as quite undervalued. However and almost simultaneously with that price decline, Minco PLC of Ireland entered into a contract with Buchans for Minco to spend $3.5 million for the purpose of advancing one of Buchans Newfoundland projects to the pre-feasibility level.

On top of that and of great importance, Minco has just finalized a $1,000,000 private placement investment of Buchans shares by Minco and also received a further $1,000,000 payment from Minco to evaluate Buchan’s manganese project in New Brunswick. Today, Buchans has over $2,400,000 in cash with no debt. Based upon our analysis, Buchans merits close attention, particularly during its price weakness caused by the selling (“dumping”?) of the shares at prices that we consider to be exceptionally undervalued. Take a very close look here in view of what may prove to be very imprudent selling. MTF