Monday, February 15, 2010

Junior Gold Miners Anyone?

Bloomberg News reports that "the value of mining mergers and acquisitions may more than double this year" to 2006 level of over $170 billion.

I've been looking at several junior gold miners as potential acquisition targets. Here's a comparison chart of these miners since November 2008. Barrick Gold (ABX), a major miner, was thrown in for comparison.

As you can see, Iamgold Corp (IAG) and Allied Nevada Gold (ANV) have already taken off. I'm particularly cross about missing ANV when it broke out of the 3-month base in September 2009. If I am to put money at this point, I would go for the bottom 3: Hecla Mining (HL), Nova Gold (NG), and Great Basin Gold (GBG).

I like NG here. It didn't correct as steeply as the others, and it may be clearing the heavy overhead area, as seen by "volume by price" overlay in the 18-month daily chart below. Also, it didn't break below the trend line support from early 2009. Technical indicators (RSI, MACD, stochastics) all show negative divergence. It has been in a channel, and right now it is right in the middle of that channel. I have no idea whether it goes back down to the lower channel support (around $5.20) or goes up to the upper channel resistance (around $7.20).

With the fate of Euro uncertain vis-a-vis US dollar, I'm not betting heavily on gold stocks. For that matter, the most prudent position right now seems to be "cash".

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