Tungsten is a minor metal that is seldom thought of as an investment. Indeed most of us would think of it as a dubious investment. After all,the only use anyone knows about is its historic use in incandescent light bulbs and they are going the way of the Dodo bird.
This steel-grey metal has most intriguing properties.It has the highest melting point of all metals, in addition it imparts enormous strength when used as a super-alloy.It is critical for many high-tech,space age uses primarily when used as a super-alloy. Critical uses are for machine tools, gas turbines, space vehicles,nuclear reactors and jet engines. Anything where high strength and heat Resistance is required.
The metal is not cheap. It is currently selling for about $14,000 a ton.
Since the Second World War China has dominated world production producing about 75% of global production.
When China emerged as a capitalist power,one of its first actions was to crush the global tungsten market. It put most of the the world's producers out of business by undercutting them. In recent years, it has radically changed its tactics. There is a considerable belief that China is having difficulties in maintaining production. In any case,it has raised its prices for the metal.
This brings us to the hero of our story. A little gem called North American Tungsten.In 2003,the last turn of the wheel it was driven out of production by China. The company was founded in 1979 and is listed on the Toronto Stock Exchange Venture Market. Since it was founded in 1979 and meets the listing requirements of the Toronto Exchange. I think it is safe to say that it is not a fly-by-night or a pump and dump scheme.
It currently has about 129 million shares outstanding. Its recent annual high was about $1.07. As the result of the world wide recession it announced the temporary closure of its mine. The market responded to this news in its usual calm and reflective manner. It hysterically hammered the stock down to 10 cents a share. It is now selling for about 14 cents a share.
The result is a market capitalization of about $18 million dollars. What this means is that you can buy the whole company lock,stock and barrel for about $18 million dollars. I think it is safe to say that this is below replacement cost. What I love about micro caps in this category is that even a modest amount of buying will propel the stock to the moon. I think we can safely say that the stock is now in the gutter. This is where I buy my stocks. I don't do trend chasing.
Until its recent closure, North American Tungsten had one producing mine. The fairly high cost Cantung Mine in northern Canada. Until it closed this mine which is now on a care and maintenance basis it produced about 4% of the world's tungsten and was the western world's largest producer of tungsten. Its future star is the Mactung tungsten project also in northern Canada. This flagship project is the largest known,high grade,undeveloped tungsten project in the world. It has about 1,430,000 tons of probable and indicated reserves.
According to its most recent annual statement it has six mining properties. To be conservative I place a zero value on the other four properties.
In my penny mining stock speculations I place tremendous importance on the stock's five year trading range and the concept of "reversion to the mean." Let us examine the stock's annual low and high for the last five years.
(2004) .06-.30 (2005) .17-$1.87 (2006) .50-$1.80 (2007) .53- $1.64 (2008) .10-$1.28
(2009) to the present .10-.80.
The astute observer will notice that every time the stock is selling for 10 cents or less it is a bargain. The stock also shows a repeated ability to sell for more than a dollar a share. As long as the price of tungsten does not collapse, this stock should revisit the one-dollar area. When it does I will be aboard.
My position in this stock is 1/4 of 1%. Why so little? I own about 90 penny mining stocks. These are the ultimate high-risk,high-reward vehicles. Diversification is mandatory. If you place more than 1% of your investment capital in any penny stock you are on your own.
1 comment:
Well, proper capital usage and money management can be difficult to do when all you have is a $1250 account and commissions take up to $9 a trade. Under such a burden, one can only make nano-bets, pick four or five stocks, and shoot for the stars.
As for North American Tungsten (CVE:NTC), looking at the chart and the financials it's obvious that it is NOT a chop stock.
Pump and dump schemes' price action is completely different.
First of all, the P&D companies tend to lack any revenues or "real" assets, their most valuable asset after all is the story they're touting!
Then there is the price action. As it is about hype, momentum, and manipulation, the move isn't sustained but explosive, usually moving 400%-2000% in one or two weeks (some in days!) just to crash even faster. Not to say, explosive upside breakouts to higher highs on huge volume tend to equate inmediate crash.
As a example of this, take a look at BBYB back in May 2009
( http://www.google.com/finance?q=BBYB ).
Man, I don't know you, but I manage to find those stocks funny.
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