Winners – GWG, MCP, Entry On SQQQ

Winners:
GWMGF – +23%
MCP – +20%

Loser: ZSL -4.5% exit price – $18.48.

ZSL had some solid gains Friday but the gap lower on Tuesday is what caused me to let this one go. Good portfolio management limited the downside risk on this one and silver has since surged so this turned out to be a loser, but not a detrimental loss.

On June 16th I said the bottom was put in on Great Western (GWMGF) and entered at $.623. The stock traded lower during the day making a bottom at $.574 but no new low was made after that day and the stock is now trading at $.81 for a gain of 23%. Short term downside would be the 50 MA and short term upside would be $.90.

On the same day I said that MCP was also a safe buy as long as it stayed above the $46.40 low and since then, it is up 20% though MCP was up as much as 25% a few days ago.

With the tag of the double top today, I went short the Q’s via SQQQ at $21.98. The reason why I like this short so much is because the upside is for the Q’s to fall back to 2840, (2%) (roughly 4% on SQQQ) and 2770 (4%) (roughly 8% on SQQQ), while the downside is less than 10 points. Confirmation above 2880 would be a sell but that level is only 8 points away so the downside risk is very limited.

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Great Western Minerals Looking Into Exxaro And Richards Bay

TORONTO (miningweekly.com) – Great Western Minerals could more than double production at its South Africa rare earths project if it strikes a deal to extract the valuable elements from waste that companies including Exxaro Resources and Richards Bay Minerals generate from their titanium operations.

Great Western CEO Jim Engdahl said that his company was in talks with miners that produce monazite as a by-product to reprocess it, which could create an opportunity for both sides.

Monazite hosts both rare earths and radioactive thorium, and Great Western earlier this month won a licence to store radioactive materials at its Steenkampskraal mine in the Western Cape.

“The problem that the other mines have is that they do not have a licence to store and process thorium,” Engdahl told Mining Weekly Online.

“We have an opportunity to deal with a problem that other mines have, and turn that into an opportunity for them as well as us.”

Speaking in a phone interview, he said that TSX-listed Great Western was talking to “several” companies in this regard, declining to name them.

Exxaro Resources and Richards Bay Minerals, a joint venture that mining giants Rio Tinto and BHP Billiton own, are the biggest companies that produce monazite as a by-product in South Africa, from their titanium operations.

Neither company was available for comment on Thursday evening.

“It could add many, many years to the life of the project, and increase production by at least two times,” Engdahl said.

Great Western aims to start producing at Steenkampskraal in the first quarter of 2013, and in April already unveiled plans to double output to 5 000 t/y.

http://www.miningweekly.com/article/great-western-eyeing-rare-earths-from-sa-titanium-tailings-2011-05-26

Earlier last month GWG not only released plans that would double their YOY production (approx 2700 will now be approx 5000) from the Steenkampskraal project, but they also cut the production timeline down to Q1 2013 which beats other estimates that were previously as far away as 2014-2016. According to this article, they could yet again double production if they complete a deal to purchase minerals from either of these two titanium that are left over from production.

GWG is making all the right moves and is a much better valuation than Lynas at this point. They are expanding their reserves and taking advantage of every opportunity that presents itself.

Lynas now faces a shareholder bid for asset:

THE contentious attempted sale by Lynas Corporation of a rich rare earth and metals deposit to a related party has taken a new turn, with two prominent dissident shareholders preparing an audacious bid to pinch the prized asset from under the nose of the miner’s chief executive, Nic Curtis.

Melbourne-based software millionaire Mark Suhr and the chairman of online recruitment website Seek, Bob Watson, are finalising a formal bid for the Crown and Swan deposit this week, capitalising on the dramatic collapse of the rare earth miner’s proposed deal with related party Forge Resources.

The lawyer acting for the two businessmen, Chris Curran, of Turner Freeman, said Lynas had backed itself into a corner by readily accepting Forge’s offer. He said the board would have trouble justifying a rejection of a similar or improved offer so soon after declaring the asset non-core and ready for sale.

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“We think Lynas have shot themselves in the foot there,” Mr Curran said. “If we put in a similar bid to the one before, they would be in a very awkward position to not approve it.”

The drama is likely to further aggravate Lynas’s major institutional shareholders, who had made clear they wanted no distractions from the rare earth miner’s core promise of bringing its prized Mt Weld rare earths deposit into production.

The planned $20.7 million sale of the Crown polymetallic deposit to Forge had attracted significant shareholder criticism over the asset’s valuation, conflict-of-interest concerns, and perceived inadequate disclosure of the financial benefit Mr Curtis stood to receive.

A 2007 Lynas investor presentation boasted of the Crown ore body’s ”over $50 billion metal content” and ”positive project value”. Lynas had continued to promote the deposit to investors until last year, before deciding the asset was ”non-core”.

Mr Curtis would have boosted his stake in Forge to close to 40 per cent if the deal had proceeded. He owns less than 1 per cent of Lynas.

With the corporate regulator’s attention roused, Lynas was forced to delay its shareholder vote, and was in the process of revising its disclosure documents before the deal was pulled.

Lynas said it decided to abandon the deal based on the feedback from its predominantly offshore major institutional shareholders. It is also understood institutional shareholders were concerned Mr Curtis would have been distracted with his involvement in Forge if the deal proceeded.

With no related-party concerns, the Suhr-Watson bid will not be required to be approved by shareholders. Mr Curran said the bid was “well advanced” and that a Lynas independent director had been “responsive” after being sounded out.

The two businessmen had been instrumental in generating shareholder momentum against the Forge deal. The deal has also triggered concerns over Mr Curtis’s influence on the Lynas board, prompting a push for more independent directors on the board.

Lynas management is understood to be furious with Mr Suhr, with one source insistent Mr Suhr had a history of destroying shareholder value.

http://www.smh.com.au/business/lynas-faces-shareholder-bid-for-asset-20110515-1eo9b.html

Finance and share related issues are unacceptable when you are in a race to get into production in a market that has very few competitors. GWG is extremely undervalued and their IR department should be pushing for a reverse split to increase exposure and possibly uplist into the AMEX in the future.

Equities Bubble 2010?

The Nasdaq is trading at the 2 year high and is currently just 250 points away from it’s 2007 peak, which was a 7 year high and was also the peak before the real estate bubble burst in 2008. The underlying problem with the market being at this level is that economic data completely contradicts price activity.

The Composite is 1400 points off of the lows in 2009 and is outperforming the DJIA and S&P 500. If the Nasdaq can eclipse 2862, it will officially be in a bull market. Wall Street has fared well on news of QE I and II, being that the program is supposed to increase demand, and naturally, inflation. However there is little or no economic data that supports that demand has or will increase.

Unemployment has since dramatically increased and just last friday, U3 reached 9.8%, a number that I feel is understated due to the amount of people that continue to leave the workforce.

Personal Savings is also substantially higher and the 2009 Stimulus had only a brief effect on consumption whereas it seems that QE hasn’t done much outside of slowing down the rate of savings. It seems overkill to present charts because most Americans are already aware of how difficult it is becoming to make ends meet. However I think it’s necessary to point out the discrepancy between economic data and market pressure as these types of contradictions have occurred in the past and have been the cause of major market collapses.

In the same op-ed, these two quotes are stated by Bernanke:

“This approach eased financial conditions in the past and, so far, looks to be effective again,” he writes. “Stock prices rose and long-term interest rates fell when investors began to anticipate the most recent action. Easier financial conditions will promote economic growth. For example, lower mortgage rates will make housing more affordable and allow more homeowners to refinance. Lower corporate bond rates will encourage investment. And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion.”

“Unfortunately, the job market remains quite weak; the national unemployment rate is nearly 10%, a large number of people can find only part-time work, and a substantial fraction of the unemployed have been out of work six months or longer,” Bernanke writes. “The heavy costs of unemployment include intense strains on family finances, more foreclosures and the loss of job skills.”

When price activity continues higher as fundamentals weaken, you get what’s called an asset bubble.