Hi Lou,
I have a question regarding Prophecy Resources (PCY). It recently merged with Red Mountain and I don’t understand the reason of the merger, considering that Prophecy operates mainly in the Canadian nickel-copper sector, and Red Mountain concentrates it’s activities in the thermal coal business. Also, do you have any comments on the chart ?
Thank you,
Alexandru
Hi Alexandru,
I think that when you look at mergers and acquisitions in the junior exploration sector the major driver is usually compatibility of the management teams and a shared vision of the benefits of pooled resources. A merger also helps the combined company diversify its risk, geographically, and over a number of different projects. Now that they are married lets see what the future might hold for Prophecy Resource Corp (PCY TSXV)
The three year chart shows a stock that really took off in October of 2009 as John Lee joined the company. Lee has been out making acquisitions and has focused on deals for undervalued, advanced stage assets that have helped lift the price of PCY shares considerably. Lee was quoted in the ” Northern Miner” saying that he is three deals away from where he wants to take the company.
At this point the advance seems to be flattening out after taking off from the $0.02 range to approaching $0.60 since October of 2009. It wouldn’t be prudent to expect a thirty bagger every four months.
The six month chart provides a closer look at the breather that PCY is taking. The stock is holding onto support on its 50 day moving average but the RSI indicates that the stock has come out of an overbought situation which tends to indicate that some of the more enthusiastic buying has dried up.
PCY recently closed over $2M in private placements that will allow it to advance some of its projects and acquire other assets. Keep in mind that as a result of the merger Red Hill shareholders now control 65% of the new company with John Lee sitting at the top of the deal he brokered.
I wouldn’t want to shoot this running horse but I want you to make sure that you take profits when they are available especically in the junior exploration sector because of the higher risk.
Happy Capitalism!
