Let this thoroughbred run

Oct 30th, 2009 – Comment

RBI operates the Chirano Mine in Ghana and the Tasiast Mine in Mauritania which are forecast to produce 400,000 ounces of gold in 2009 at a cash cost of $385 per ounce. They have no debt, no hedging, their capital projects are fully funded, and they have $155M in cash.


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redback

Hi Lou,What is the future of RBI-T, I bought some a of couple months ago, should I hold them or take profit?

Aziz
Brampton, ON

Hi Aziz,

It is always nice to get a question about a stock with the word profit in it! Not that it makes the decision any easier but at least it is the better of many options! You have invested in a very successful gold producer with Red Back Mining Inc. (RBI TSX) which has two operating mines in West Africa and good prospects for increased production. With a stock that is up over 300% from the lows it is tempting to look at taking profits but you might not want to shoot this running horse just yet.

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RBI operates the Chirano Mine in Ghana and the Tasiast Mine in Mauritania which are forecast to produce 400,000 ounces of gold in 2009 at a cash cost of $385 per ounce. They have no debt, no hedging, their capital projects are fully funded, and they have $155M in cash.

In addition RBI has an extensive land position and a seasoned management team. The company will report Q3 results on November 3, 2009 which will be a flex point in the trend. When I look at the news issued by the company over the last year it appears that they have been very successful in managing their operations and investor expectations.

The stock recovered nicely from the financial panic of late 2008 and has benefited nicely from the rising price of gold.

The rise in the stock shows a nice trend line to the upside and lots of testing of support along the 50 day moving average as it has advanced. There is also a golden cross in place on the chart and a sharp double bottom signaling the reversal of the downtrend.

These patterns all contribute to a better than average chart.

The three month chart gives us a good view of bounces off the 50 day moving average and the gap up in yesterdays session.

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The RSI and MACD have both turned up indicating the three day rally from $13.00.

I like the story, the charts are not indicating a breakdown, gold prices are strong, the company has no debt and its production is not hedged.

Put the rifle down and let this horse run.

MAKE IT A BIG HALLOWEEN AND HAPPY CAPITALISM!

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