OceanaGold Corp has some community relations issues to manage

Mar 30th, 2011 – Comment

Their recent sell off is connected to some problems with the Human Rights Commission related to the demolition of houses near their Didipio project in Luzon, Philippines.


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Lou Schizas is an equities analyst, investor, entrepreneur, professor and television and radio personality – and a true believer in the happiness-inspiring powers of capitalism.


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Hi Lou,

Thank-you for all your education and insight. My question is about OceanaGold. Despite rising gold prices this stock has been taking a beating this past year. I suspect related to management changes? It is currently trading with good value metrics (P/E of 14 and P/B of 1). Recently it has been up trending (today adding 6%). Could you put it to the charts for me. Your technical analysis and insight would be very helpful.

Happy Capitalism back to you

Thank-you

Dave

Hi Dave,

Thanks for the assignment and kind words. Your support is very much appreciated. OceanaGold Corp.(OGC TSX) operates in two areas of interest, New Zealand and Philippines. Their recent sell off is connected to some problems with the Human Rights Commission related to the demolition of houses near their Didipio project in Luzon, Philippines. They also had to deal with their Q4 results that indicated a 10% drop in gold production.

The Human Rights Commission has recently written to President Aquino asking that OGC’s mining licenses be revoked. The noise from these issues hit the stock in late December of 2010 when the company had to respond media reports and did so by issuing a press release. When it comes to politics it is a mixed bag at the best of times. In my house we don’t call it polytricks for nothing! In a foreign jurisdiction anything can happen. Lets consult the charts for some clarity.

The three year chart illustrates the break in the uptrend that started in late December of 2010. What had been a great move from the $0.14 lows of December of 2009 has been put on hold as the company deals with the complaints filed with the Human Rights Commission. The RSI and MACD both signaled a shift in momentum from buyers to sellers in September of 2010. OGC went on to test support along its 200 day moving average in November of 2010, caught a bounce into December when it finally broke down.

The six month chart depicts the double top in December of 2010 that pretty much screamed that it was time to hit the silk. In addition there were signals from both the RSI and MACD that the holidays were over and it was time to put the tree on the curb. The breach of the 200 day moving average in mid January of 2011 was a message from the three wise men to get out of dodge.

From this snapshot it looks like OGC wants to hold onto support at $2.60. If it can start to build a base at these levels and get on the right side of the polytricks in play regarding Didipio the shares have a good fundamental story. Lets keep in mind however that the advance from $0.14 represented a twenty seven bagger to the highs of late 2010. I wouldn’t be holding my breath for a repeat of that performance.

Happy Capitalism!

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