Coalspur Mines Ltd. is a speculation on the market for thermal coal

Jan 19th, 2015 – Comment

At this point with an established downtrend,choppy trading, and a weak market for thermal coal, I would advise that you review your investment thesis and what exactly got you to hit the buy button.


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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,

I have 647,000 shares of Coalspur mines bought @$0.02. Please suggest or advise if I should hold it or get out of this stock. Also if I wish to stick with this stock for 6 more months what are the chances of its going up or down?  Waiting to hear from you.
Thanks
Deepak

 

Hey Deepak,

Thanks for the assignment. Coalspur Mines Ltd. (CPT TSX) is a thermal coal development company with 55,000 hectares of leases near Hinton, Alberta. The Company’s Vista project is a surface mineable deposit that will be developed over a number of phases. The site has access to Canadian National’s mainline and port allocation agreements with Ridley Island Coal Terminals located at the Port of Prince Rupert, British Columbia. Management estimates a thirty year mine life once first coal is shipped in 2016. The cash cost per ton is expected to come in at less than US$60.00.

Great story but you need to be aware of the risk associated with this stock. The market capitalization is only $9.62 million which is quite small. The company has no revenue so it must issue shares to fund its operations. Currently there are over 641 million shares outstanding and average trading volume over the last thirty days is 966,730 shares. The research conducted on your behalf also indicates that thermal coal prices have been under pressure. These factors make CPT a highly speculative stock with a lot of things that need to go right to create value.

An inspection of the charts will assist in defining the trend, support, and resistance associated with your shares.

 

CPT

The three-year chart depicts a stock that has been selling off since May of 2012 when it traded for $1.73. There is an established downtrend in place and a death cross that surfaced in May of 2013 when the shares were trading for close to $0.60. The take away from this case is not to get married to a stock and to take the opportunity to get off a ride and preserve capital.

You may have been attracted to the excitement of having found the bottom on this trend and the potential of reaping the rewards of your contrarian view. What experience has taught me is that its pretty difficult to call an absolute bottom or an absolute top. The best approach is to ride a trend until it ends and in this situation the trend is still down.

 

 

 

 

 

 

CPT2

The six-month chart tells me that there are not many investors interested in this stock and that it could be difficult to trade out of your position to capture profits. At this point with an established downtrend,choppy trading, and a weak market for thermal coal, I would advise that you review your investment thesis and what exactly got you to hit the buy button. Finally ask yourself if this kind of speculation fits your unique investor profile.

Make it a profitable day and happy capitalism!

Categories: Thermal Coal
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