What happened since the downturn starting August 1?TOC closed on Friday at $1.02 on 142,800 shares, but the really good part is the sell orders are beginning to thin out and at the close there were 16,100 shares on the bid at $1.02 and no one filled it, in fact sell orders were basically clear well into the upper $1.10 range. TOC traded 461,000 shares for the week. How does this trading volume and timing relate to the downturn in price that started at the beginning of August.?
First, we all know that timing is critical to the cycle of any junior resource play. We have all heard that timing the market is critical to winning, old sayings like, "buy low and sell high", "buy on rumors and sell on news", and one I really like is "buy big positions when no one else wants to buy, thus getting the lowest leveraged price position as possible".
Seondly, the more successful winning strategy is to conduct extensive due diligence and buy stocks that have been largely de-risked, i.e. extensive drilling already undertaken (TOC has over 21,000 m of drilling already) and seasoned management that has a record of providing return to investors. Having said this, the last winning strategy is LUCK, everything needs to come together in the context of the overall markets, i.e. high gold prices, growing markets, and strong consumer confidence that allows for the raising of capital, all leading to investors to speculate and not sell.
In the context of the above, let me examine the trading pattern of TOC since August 1 when essentially its share price began a serious retreat into the $0.80 range. The price at the begging of August was about $1.55, trading volume for August was 1.5 M, followed by 1.2 M in September, and another 795,000 so far for the month of October. The price eventually bottomed in the low $0.80 range and traded for there for several weeks. In my opinion (for what it is worth), the pullback in price was largely due to timing and people sold because there was not going to be any drilling until November. There was no material change and essentially everything remained intact. In fact, there was a very positive event to effect a spin out of their copper play at Roger's Creek into a larger more robust copper play, for this shareholders in TOC at the completion of this event will receive 1 share in the newco for every 6 shares in TOC (ie. 60,000 shares in TOC will get you 10,000 shares in NewCo for free. Getting free shares is also a motivation for people to buy.
Since the low in October, the price has surged to over $1 as three events in my opinion have occurred, 1) shareholders who took profits at higher prices have re-entered the play (these are people who understand the value of the play and are market timers, so they sold and bought back in), 2) a new category of investors have begun to take positions as the behind the scenes promotion shows what the path forward for TOC is going to be, and 3) some that bought higher, believe in the company, bought more to average down and build a bigger position.
I believe there are many elements that support the next timing cycle, for example, I believe there is the potential for numerous press releases, such as completion of the spin out of Roger's Creek, beginning of trench sampling and bulk sample processing, beginning of drilling (which will lead to several press releases over time to completion of assays), exploration of El Picacho, and the list goes on. Timing of the North American exploration cycle is also very important, i.e. nice weather in Mexico and the drilling season is just starting, whereas in contrast to the nothern drill programs that will mainly be going to sleep.
Lastly, with over 21,000 m of drilling, with economic grades released and having identified a robust structure, an open pit mine is very possible. I believe what will set the price free is when TOC releases an economic 43-101 resource for everyone to see the real potential of TOC. The size of the resource is what is going to attract the more serious investor and potential companies who want to acquire Pilar.
If I can Blue Sky for one moment, I believe there is well over 500,000 oz of gold already identified by drilling, even perhaps more, put on top of this it is much cheaper to go to production with an open pit mine rather than more typical hard rock shaft mines. And I think the theory is supported when you look at other operating mines in the Sonora area, i.e. open pit, economic grade at 0.41 g/t, thus at the price of gold over $1,700 an ounce and the cost to produce likely in the $1,100 range, there is a lot of profit to be made. Simply do the math.
It should be a very, very interesting and rewarding next 12 months, and perhaps for the really big win, 24 months. It has already been a year and a half since the price was less than $0.20, so another 12 to 24 months will pass quickly. I always ask myself, how often do good plays like this come along, my answer is always, not very often.
I watched the trading over the last few days, people are having to reach to buy back positions and establish new positions. I also wouldn't be surprised to see TOC raise some capital soon to propel drilling and exploration. Cash is always KING in a junior mining company.