Kalahari is a desert

Dec 4th, 2009 – Comment

When I read the following in any report it gets me a bit antsy. “The company does not have sufficient working capital to meet its obligations for the next twelve months.” Understanding the nature of junior exploration companies and their never ending quest for new money to advance their projects is one thing but to be sitting on $16,887 in cash is quite another.


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Kalahari

Any thoughts on Kalahari Resources? I have bought in twice – once well above 30 cents and once at 3 cents – but also, my confidence wanes even in the midst of their current upward trend to the 7-8 cent range. I am thinking of bailing out and cutting my losses – more like a scuff then a cut though.

Richard

Hi Richard,

If you were at a buyer at $0.30 you have been invested in Kalahari Resources Inc. ( KLA TSXV) for a long time and should consider tax loss selling on those shares. When I look a the case for KAL the comments from the Management Discussion and Analysis filed with SEDAR on October 30,2009 gives rise to sober second thought about the opportunity.

When I read the following in any report it gets me a bit antsy.  ” The company does not have sufficient working capital to meet its obligations for the next twelve months.”  Understanding the nature of junior exploration companies and their never ending quest for new money to advance their projects is one thing but to be sitting on  only $16,887 in cash is quite another.

KLA is developing their Lamaque gold property in Val d’Or property in Quebec but in their last filing they were only able to spend $17,792 on exploration. Plus with gold trading over $1100 and ounce you have to ask how high a price do they need to get investors interested in their play?

KLA

The three year chart shows the advance that started in November of this year as KLA consolidated their control of Lamaque and announced a 6,000 meter drill program.

KLA2The three month chart provides a good view of the recent action and the resistance the stock is meeting at $0.08. Volume has been a pattern of spikes then thin trading which suggests that there isn’t a ton of players at the tables for this tournament.

What KLA needs is capital and if you look at the last two rounds of financing they have been at low prices and haven’t provided the company with sufficient capital to fund themselves for the next 12 months.

The company plans to increase their gold resources to a 1M ounces in 2010 and to improve their visibility in the market and to build a better website. But to accomplish these goals they will have to raise new money. Same old story.

I would suggest that you sell the $0.30 shares for a tax loss and let the $0.03 shares ride into the new year to see if what appears to be an experienced management team can find an oasis in what has been a long thirsty trek through the desert.

Happy Capitalism!

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