As we expected, the short-term market rally in late May/early June proved to be a great opportunity to “significantly reduce or eliminate exposure to the overall U.S. stock market.” While the commodity stock indices, comprised of large-cap commodity stocks, have rallied back vs. the overall stock market, many junior mining stocks have remained in the doldrums. For those who haven’t yet redeployed capital into undervalued commodity stocks, we believe the recent weakness in these stocks represents a great long-term buying opportunity.
As many of our readers know, Metalline Mining (MMGG) has been and continues to be our favorite stock and best idea for long-term upside potential. We have shown MMGG’s chart and highlighted particularly good buying opportunities based on technical analysis buy signals 2 different times so far this year, first at the beginning of the year in our original, most detailed report and then in early May on the breakout from consolidation. Both times MMGG proceeded to rally sharply (tripling in 2 months at the beginning of the year, and then doubling in 6 days in May, moving above the stated $5 target from the cup and handle buy signal), as you can see in the below chart:
In this update, we are highlighting our 3rd particularly good buying opportunity on Metalline Mining based on technical analysis. As you can see at the bottom of the chart, our 2 previous TA buy alerts coincided with MACD buy signals triggered by MACD crossing above its trigger line from a low level. After the sector correction of the last few months caused impatient investors and momentum investors to sell out, pushing the stock down below 3 to retest the previous consolidation area and the 200 day exponential moving average, a 3rd MACD buy signal has just been triggered with MACD at a more oversold level than the first 2 times. The selloff also filled the gap at $3.00 that was left from the early May rally. Closing above $3.00 on Friday is another bullish signal.
Fundamentals Better than Ever
In addition to the technical analysis looking great here, the fundamentals for Metalline are better than ever, as detailed in previous updates.
In the next few months, the following events should help MMGG move higher:
1. Listing on the American Stock Exchange. Lots of investors, especially funds and institutions, won't buy a bulletin board stock, so have been waiting for Metalline to get listed (likely under a new symbol/name on Amex) to buy. While the company has still not formally announced its application for listing, it did disclose their intent to file the application back in May.
2. New drilling results to reinforce results released the last few months indicating very high-grade silver and another high-grade zinc deposit in addition to the 5 billion pounds of drill-proven zinc.
3. Mine plan completion. This key part of the feasibility study on their proven zinc deposit will show most of the costs involved in mining the zinc. It also may allow the company to remove the silly cautionary note at the end of every press release stating they have no known reserves, which has been scaring investors away.
4. Resolution of the Mexican presidential election. By law, a winner must be declared by September 6. Clarification of this mess should provide a big lift to Metalline, especially if Calderon, the pro-free trade, pro-jobs, pro-U.S. candidate who won the first count, prevails. Mexico would then be seen as a politically stable country friendly to U.S. business and would be very accommodative to a big new employer setting up a big mine and employing lots of Mexicans. The current uncertainty that has affected MMGG and other Mexican mining stocks will be gone once there’s a clear outcome.
5. Road show to Europe. After the stock gets listed, management will meet with European institutions on a road show which should bring in a whole new group of shareholders.
6. Depletion of usable zinc inventories. A large part of the current 186,700 tonnes of LME zinc stocks is in New Orleans and unavailable for use because of contamination after hurricane Katrina. As the usable stocks get used up, it will be interesting to see what happens to the price of zinc if they can't make the New Orleans inventory available. At the recent pace of depletion (over 30,000 tonnes per month over the last year), that could happen within the next few months. Even if all of the New Orleans inventory becomes usable, the current stocks will last less than 6 months if the trend in the below charts continues.
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Disclaimer: Great Investments may have a position in all or some of the stocks discussed in this blog, but is not paid by any company to promote their stock. Great Investments contains opinions, none of which constitute a recommendation that any particular security, transaction, or investment strategy is suitable for any specific person. Great Investments does not provide personalized investment advice.
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