While on my favorite topic - the enormous, needless risks taken when investing in mining shares, I want you to read a posting I saw this afternoon on GATA's website,www.lemetropolecafe.com. It was written by yet another miserable owner of junior mining shares, describing the EXACT scenario played out in hundreds of companies I have either owned, worked for, or observed over the past five years. If you still believe junior miners are "cheap," please read this missive carefully.
Share Suppression
I have another example to add to the list of junior miners that are being heavily managed, after you pointed out the growing short interest on Golden Minerals last week. Agroup of us have large positions in Explor Resources, whose flagship property in the Timmins camp may turn out to be one of the best gold discoveries in years. Even though the company has successfully completed tens of thousands of meters of very successful drilling, along with an impressive initial 43-101 resource, the share price has continued to fall during the past year. Particularly when a financing is in progress.
We've noticed some odd patterns regarding how this stock trades, but in the past two weeks the manipulation has gone off the charts. Of course the company is presently in the midst of raising money. In the past year or so, it has been common to see the share price get knocked down minutes before the market close on Friday afternoons, causing it to go into the weekend in the red. It's also been a regular occurrence to see the share price build in anticipation of good news and then every time a positive release is put out, the share price is hammered on the same day and subsequent days. January 31st of this year was a prime example: share price goes up, positive news released (114.8 g/t over 7.8 meters), volume goes over 2 million shares, share price goes from 40 cents to 47 cents and then one unnamed seller dumps over 800,000 shares knocking the price back down to 41 cents by the end of the day. We keep hearing rumblings about profit taking, but like JPM with silver futures, this activity does not look like someone is trying to sell for profit. It looks more like they are trying to push the price lower and possibly covering short positions before they fail to deliver them back into the legitimate owner's account (another plug for direct registration of equities to keep your broker's grubby hands off your shares).
After the PDAC convention we met with the CEO of Explor Resources and were able to reaffirm our conviction in this gold discovery (and talked about the merits of advertising with GATA on Chris' email dispatches). During the meeting the CEO related his experience of buying sizable blocks of shares on the open market, with the expectation that the price would strengthen. Even though his orders were much larger than the asks pending, each time his entire block was swallowed up instantly without any change in share price. This is where it gets really interesting.
Upon returning home, our network decided to add to our positions with the stock near 52 week lows. On Monday a member put in an order for 100k shares and poof - gone. Followed right after by a 500 share lot at half a cent lower. Again, another 100k shares - gone instantly, followed by 500 shares at half a cent lower. Then throughout the day TD sold over 300 trades for 500 share lots (minimum board lot) to keep the price below 24 cents. The next day we had an order waiting at the open for 400k shares. Again, gone instantly with no change in share price, followed by 500 shares at half a cent lower. Our group bought over a million shares last week and volume was near a million shares per day, and the price went lower. For the past couple weeks all large orders (volume has been high as new buyers have come forward) have been filled automatically, accompanied by endless trades for 500 shares throughout the day. It's still happening now for anyone to see (click and scroll to bottom). I've never seen anything like it. It's so blatant that everyone is talking about it.
The small 500 share orders are being sold by TD while the larger orders are coming from TD and Canaccord. TD's compliance says it's from their institutional client arm and they are currently looking into it. The securities commission is being alerted to what's happening as well. I'm not sure what to expect. From what we know of the cartel, they would do anything to knock the excitement out of a discovery that is modelling a potential 30M ounce discovery. I remember how much excitement Bre-X caused and I'm sure anything even slightly resembling that would have a big bulls eye on its back. Time will tell if anything comes of it or if will be another ongoing CFTC silver investigation that goes nowhere. Good luck to AUM, EXS and all the juniors.
To further emphasize this investor's misery - as PHYSICAL gold and silver prices rise year after year - here is a chart of the aforementioned "Explor Resources" over the past three years, hitting all-time lows as we speak...
...as well as the ratio of the TSX-Venture (Vancouver) stock exchange - the best available proxy for junior mining shares - to the price of gold over that period. Not only is it sitting at multi-year lows, but I believe it will continue to be DEAD MONEY until the Cartel is finally beaten, at which time the window for meaningful appreciation (before the inevitable windfall tax and nationalization rumors) will be extremely narrow. Moreover, given the massive escalation of industry risks, I would be shocked if more than a few dozen of the literally thousands of junior miners will have the opportunity to meaningfully outperform PHYSICAL gold and silver, notwithstanding the inevitableincreases in capital gains and dividend taxes that will set the risk/reward bar still higher.
