SHARING THE PAIN Another company experiencing Volta-style trading activities.
The institutional dumping is killing the junior resource market.
FEAR IS BECOMING EVIDENT AND PREVALENT.
Warren would say that this is a good thing.
We need pitch black before the market comes back.
GOLD CANYON COMMENTS ON RECENT SHARE PRICE AND TRADING VOLUME CONCERNS
In response to enquiries, Gold Canyon Resources Inc. has commented on the company's recent share price weakness and higher-than-normal trading volume, which over the past several months have raised concerns among its investors. Volatile stock market conditions, particularly for junior mining issuers, and continued concern for the global economy have no doubt contributed to the decline. However, Gold Canyon management is unaware of any specific reason, other than these continuing general market conditions and market trading influences unrelated to Gold Canyon's business discussed below, for the recent weakness in Gold Canyon's common share price as there have been no particular events or material changes in the affairs of the company to support the decline.
In fact, the company continues to move forward with its flagship property, the Springpole gold project in Northwestern Ontario, as well as develop its rare earth interests in Malawi pursuant to the existing REE joint exploration agreement with the Japan Oil, Gas and Metals National Corp. Gold Canyon has cash reserves of more than $10-million, considered to be sufficient to finance current operations through the short to medium term without the immediate need to raise more capital. In the circumstances, management believes that Gold Canyon's current share price significantly undervalues the company, and with the support of Gold Canyon's board of directors, is currently examining various initiatives and strategic options to remedy this situation.
Management has recently engaged in significant consultation with Gold Canyon shareholders, investment brokers, analysts, institutional traders and investment bankers regarding potential contributing factors to the company's share price weakness and large trading volumes and believes the following may be attributed, at least in part, to the recent downward pressure and larger trading volumes in the market for Gold Canyon shares:
- Market participants have indicated that, due to investor fatigue with the mining sector, both retail and institutional, and prolonged mining sector weakness, resource money managers are experiencing higher than normal redemption challenges in their funds and managed accounts, causing them to sell shares to raise the cash needed to make redemption payments. With respect to Gold Canyon's shares in particular, the continued recent demand has resulted in bids to buy at reasonable valuation levels, providing the sellers with better liquidity than is the case with many other mining issuers, and indeed than had historically been the case with Gold Canyon until very recently.
- Gold Canyon had historically issued a large number of flow-through common shares, which, because of the associated tax treatment in Canada for qualified flow-through mining expenditures undertaken by the company, carry a much lower cost base than regular shares. The lower cost base allows resource money managers to sell these shares at prices that, despite declining market prices generally, are still profitable, providing more attractive optics than selling at a loss.
Gold Canyon management believes there is reason for optimism. Redemptions are typically a late-cycle phenomenon and should start to moderate as the market attempts to develop a bottom, removing one of the primary selling catalysts while higher volumes may indicate that "smart money" buyers are stepping in to take advantage of these current attractive valuations in Gold Canyon shares. Also, the holdings of "spent flow-through" shares are now somewhat reduced, which could eliminate the benefit to investors of selling low-cost base shares that are still in a profit position.
More generally, market analysts have suggested there have been hints at a potential turnaround in mid to late 2013. Notwithstanding potential improvements in the outlook for the global economy generally, and potential related benefits to the mining sector in particular, Gold Canyon continues to pursue various initiatives with a view to enhancing shareholder value including: