Can investors profit from sizzle alone?

Jan 11th, 2010 – 3 Comments

APA will have to raise funds in 2010 to advance their business case and keep the drills turning to generate the excitement about their vanadium- titanium- iron properties. In their last quarterly report APA indicated that they had less than $200K in cash.


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apella

Hi Lou,

I bought some shares of Apella Resources (APA) and would like your opinion on short and long term investing in this company.

Would appreciate your answer.

Vera

 

Hi Vera,

Thanks for the assignment. Apella Resources Inc. ( APA TSXV) is a junior mineral exploration company focused on deposits of vanadium- titanium- iron in Quebec. The company claims that their Lac Dore project is the largest vanadium-titanium- iron deposit in North America, and second largest in the world.

Vanadium is used primarily in producing high strength steel but the sizzle in the telling of the tale is the potential use of vanadium in a new battery system for hybrid and electric vehicles. The Vanadium Redox battery is said to hold a bigger charge that will extend the range of hybrid /electric vehicles and take less time to recharge. In these situations I always ask can investors profit on sizzle alone?

I always take the potential of new technology and ask if the developers and proponents of the innovation can survive and thrive up to the point that the market accepts the product in sufficient volume to sustain the business. The base case for APA has to be on the use of vanadium in the steel business. There is said to be a tight market for the mineral with global demand being supplied by mines in South Africa, Russia, China, and Australia.

 

apaThe three year chart provides a view of the advance from the late 2008 lows and the golden cross that surfaced in May of 2009.

 

 

 

 

apa2

The six month chart shows the spike high at $0.34 in mid December on drill results reported by the company. The subsequent pull back held onto support at $0.20. The MACD appears to be making an effort to turn higher and perhaps indicate a bounce off support.

 Average daily volume over the last 3 months is 584,470 shares which is good but lets not forget we are looking at penny stock.

 

Junior exploration companies are by their very nature high risk. APA will have to raise funds in 2010 to advance their business case and keep the drills turning to generate the excitement about their vanadium- titanium- iron properties. In their last quarterly report APA indicated that they had less than $200K in cash.

 

Happy Capitalism!

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