Carpathian Gold Inc. is a speculative buy

Oct 7th, 2011 – Comment

The stock caught a bounce off support at $0.45 and is currently clawing its way back toward $0.60 …..


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Hi Lou!

I always enjoy your column (though I live in fear of finding that I own a stock you say is headed for the depths…)

Here’s a slightly-scary one that I’m curious about – CPN – Carpathian Gold. It has been rollercoasterish, though Barrick Gold has bought a 9% share in the company. What do you think?

Thanks for any insight,

              Jocelyn

 

Hi Jocelyn,

Thanks for your kind words but please keep in mind that my analysis provides a snapshot of what is in the mix for a stock. I get more right than wrong but I never get them all right on the downside or the upside. I depend on investors to conduct their own due diligence to ensure that the shares of a company meet their individual risk profile.

 Carpathian Gold Inc. ( CPN TSX) is developing gold deposits in Brazil and Romania. The RDM project in Brazil is under construction and is expected to begin production between late 2012 and early 2013. The RVP development in Romania is expected to start production in 2016. The goal of management is to transition the company into an intermediate producer with annual output of over 400,000 ounces of gold per year. The current estimate is for a 20 year mine life. 

As you mentioned Barrick’s 9% stake in the company adds some weight that has to be considered in the evaluation. The charts will provide additional factors to adjudicate.

 

 

The three year chart tells the tale of a stock that has been giving investors fits over the last couple of weeks as it backed off the highs at $0.72 and retreated all the way back to $0.45 before catching a bounce back to $0.52. Needless to say this is not a stock for widows and orphans. It is a junior exploration company transitioning towards its goal of becoming an intermediate producer. You have to expect it to test every single nerve you have left!

 

 

 

 

 

The six month chart illustrates the signals generated by the RSI and the MACD that a sell off was beginning in mid September of 2011. The stock caught a bounce off support at $0.45 and is currently clawing its way back toward $0.60 which is the lower support level of the uptrend that it was riding before the selling dragged it down.

CPN is a speculative investment and has to be treated as such. But given that the case for gold remains solid, company management  is steadily moving its projects from exploration to production, and the momentum indicators are turning higher, the case for an investment is not without merit.

 

Make it a bountiful Thanksgiving with your loved ones and happy capitalism!

 

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