Between the rocks and the financings

Oct 23rd, 2009 – Comment

The Star Diamond Project has an estimated cost of $1.6B to get to production and the commissioning of the mine is not just around the corner.


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shore

Hi Lou,
I would appreciate your opinion on Shore Gold SGF-T
Not long ago it was showing nice progress in price at about $1.34 and now is seems to be frozen at this low price of about $1.01 or so. Do you know why? Thank you very much for your answer- Toni

Hi Toni,

Shore Gold Inc. ( SFG TSX) has been developing their diamond play at Fort a la Corne in Saskatchewan for some years now. Their most advanced project is the Star Diamond Project. Here’s the rub with any development situation. They have yet to build a producing mine and that means that they have to raise money continuously.

The Star Diamond Project has an estimated cost of $1.6B to get to production and the commissioning of the mine is not just around the corner. The allure is the opportunity to harvest 20M carats over a 12 year mine life.

sgf1

The three year chart gives us a good view of the reversal of the downtrend that started in late 2008 and has carried SGF to its current levels.

The chart looks to be forming a cup and handle which is a continuation pattern.

sgf2

The three month chart provides a better view of the handle being formed. The RSI and MACD both signaled a retreat from the highs. There is support at $1.00 which we want SGF to hold.

The rise to the 52 week high of $1.68 was driven by news released in late August of a positive pre-feasibility study and in September by another release that reported an increase in the resource estimate for the Star Diamond Project.

On September 23 SFG reported a private placement of shares and flow through shares to raise$27.5M. The common shares were offered at a price of $1.05 which took some of the upside out of the stock.

Shore Gold Inc. has a long road to travel and lots of money to raise to get to their goal of harvesting the diamonds that they have been hunting for the last 14 years.

For my money there is a trade on the cup and handle pattern but remember to take profits when they are available.

MAKE IT A BIG HALLOWEEN AND HAPPY CAPITALISM!

Categories: Diamonds
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