KGN - Keegan Resouces is a gold exploration company operating in regions in Ghana (Africa).

Recent Highlighs from Q1 of 2012 courtesy of Peter Leeds:

- $200,000,000 in cash (approx. $2.66 cash per share)
- Market Cap ($228M) barely higher than cash on hand
- New and bigger finds reported from current properties
- 57% held by institutions (they see the value here)

First of all, the biggest point is that KGN has $200M in cash. Not cash equivalents, not current assets - cash. This absolutely tramples their paltry debt load of zero.

With 75M shares out, KGN has about $2.66 per share in cash alone. Now that makes NO sense, to have KGN trading at only about $3.00, just above the actual cash per share level.

KGN is certainly highly undervalued. And they are not alone. The entire resource sector is down to what I would call "stupid" levels. Gold miners, silver miners, base metals, uranium... all being ridiculously sold off in the last few months. This has been driven by concerns of a slowdown in China (with expectations that they'll only grow at 8% per year and not 12%... surprisingly many would call 8% growth a slowdown!)

Out of this overdone weakness, your opportunity presents itself. Investors have NO business buyinbg shares of KGN at current levels. That's why the company is owned 57% by institutional investors in the know (and another 10% by insiders, which is neither here nor there - I'm not a believer in insider ownership meaning anything).

While ALL resource stocks are down, most very significantly, we believe that they will recover on their own. We also then expect higher resource prices, especially for gold, and to a significant degree, which will really put the wind at the backs of gold mining companies.

From a technical analysis (TA) perspective, KGN looks to be bottoming out after a rapid 2 month slide from $5.30. Trading momentum has shifted from downward to flat, and indications are the Keegan will either enter:

- a consolidation period

- a bottoming out pattern, followed by a reversal to the upside

Investors interested in KGN will have no problems buying or selling shares. Current average trading volume over the last 3 months is over 300,000 shares per day.

KGN has located about 5M ounces of gold.

Last fiscal year, which ended on March 31st for Keegan, they reported a loss of $13M. Expect more of the same from future financial reports, as they spend money to further their Ghana projects. In fact, Keegan reported significant gold intercepts at it's Esaase claim in southwest Ghana.

A great excerpt from the release reads, "All areas have returned substantial and significant gold values..."

With a market cap of $230M, KGN only has 290K shares short (meaning traders betting KGN shares will go down), which represents a value of less than $1M. While, like insider ownership and trading, we don't put a lot of stake in short percentage, it is clear that very few investors expect KGN to drop much in price.

On January 30th, Keegan also announced that Shawn Wallace (formerly a director of KGN) had taken the helm as CEO. I don't know as much about Mr. Wallace as I would like, but my concern would be that he may overspend. I have no reason to expect that he would, but rather am suggesting that investors may want to keep an eye on it. With $200M, it reminds me of an old saying: "If you have a massive hammer, every problem starts to look like a nail."

The way to watch their spend rate will be to keep an eye on management salaries. That is where it will show up first. Currently, Mr. Wallace makes about $300K per year, certainly not out of line. If that number balloons, it may give you early warning of future issues. Again, I do not expect any problems from this angle.

Overall, none of us have any business getting involved in shares of KGN for these prices, in my opinion. The stock represents a ridiculous value, and a month from now we believe shares will already be on their way higher.