RE:RE:RE:RE:RE:RE:RE:RE:RE:GPR DOWN ON NEWS??!!!ikny,
You have to take the posts at IKN with a grain of salt. In the case of his post about the dilution at GPL, he was clearly off base and mis-informed. Happens to the best of us!
Ok so let us assume the worst case which is that GPL prints an additional 34 million shares at the current stock price of 75 USD cents per share. So you have to first ask yourself if this is 16 percent increase in the share count represents dilution when at the same time gold production has just increased from a mere 14,000 ounces per quarter to 30,000 ounces per quarter? So my answer is that by virtue of gold production increasing by a factor of 2.1 and share count increasing by 1.16, then the value of a diluted share of GPL will be worth 1.8 times what it was worth before. So does that represent shareholder dilution, and my answer is NO, because the intrinsic value of your GPL shares is still going up!
So please allow me to present a couple of examples of how stocks behave when the gold equivalent production decreases or increases.
On a 25 percent drop in quarterly gold equivalent production which is what Orvana Minerals reported today, the decrease from the prevous quarters production of 31,000 gold equivalent ounces to 23,481 ounces a 25 % drop resulted in an immediate stock price drop of
25 percent from Orvana's recent high at 40.5 cents down to an intraday low of 30.5 cents. That is typical behaviour of a stock after a reported decrease in gold production.
So what happens if the company reports an increase in gold equivalend production from 14,000 ounces to 30,000 ounces as was the case for GPL in the recent news release. So here is what happened. Before the news release, GPL was ranked #45 out of the 70 gold and silver juniors that I track with a valuation of around $13000 USD in market cap per gold equivalent ounce of production. After GPL's news release quarterly gold equivalent ounces jumped to 39,922 ounces, which caused the valuation rank of GPL to drop to #16 out of 70 stocks with a market valuation of $3856 USD/oz. So now the actual intrinsic value of GPL is 2.52 times lower per share than it was compared to its market valuation one week ago. So when gold production increases on a stock, the market does not believe it until the financials come out. Which is why you get monster gap ups in the stock price. Contrary to the conventional wisdom that the market is forward looking, my experience in
tracking valuation moves is that the market always reacts to the news after the fact.
Which is why intelligent investors will choose to buy GPL at this point in time, because of a 200 percent price appreciation is already baked into the future stock price regardless of a mex 16 percent dilution