Fall will be a very active time for Tocvan. It was another wild, end of summer, ride for Tocvan last week. The first shakeout started on Monday and cascaded into rapid selling from Anonymous (313,000 shares) and other nervous investors, for a total of 610,000 shares. It started again on Thursday with two market sell orders from CIBC, followed by unusually high trading in the US (220,000 shares), a volume that I have not seen for a long time.
The price closed well below $0.40 by the end of Thursday, with Anonymous making several rapid sell orders within the last few minutes, pressing the price down further. Things suddenly changed and turned around on Friday with the price closing at $0.435 on only 69,000 shares.
It wasn't just the price recovery on Friday that I found interesting, it was the disappearance of most of the sell orders by Anonymous.
What does this mean?
Anonymous has been almost exclusively on the sell side each and every day for months, if you watch the trading board, they place stock for sale at every penny and even half penny, while constantly selling stock below, pushing the price lower and lower. That changed dramatically on Friday when sell orders were removed (first time). Perhaps Anonymous is finally nearing the end of their position, i.e. running out of stock or the broker fell asleep. I noticed that Anonymous was more aggressive on the buy side in the last two days, buying 138,000 shares, perhaps investors that were sold out by their brokerage are now having second thoughts as timing is much better.
The Fear of MIssing Out (FOMO) after one has owned stock for a long time can be a very powerful motivator to buy back in again. Brokerges will often tell you things that are in their best, I have had that happen a few times in the past.
We are heading into an active fall season for Tocvan when the news cycle will increase, i.e. drilling to resume and release of assays from the summer exploration program (potential new discoveries). Brodie has mentioned in a press release that the "Major" has completed their due diligence and discussions will be ongoing in the near future. These, and other potential new events, will likely be catalysts going forward.
It is all a game of speculation for some, buying and selling, taking advantage of any negative or positive news stories, while never looking longer term.
Excluding the abnormal selling in the US markets (which seemed to be one large trade of 200,000 shares), perhaps someone exiting through a pre-arranged trade, the volume was very high in Canada this week at over 900,000 shares, with more than 500,000 shares being sold by Anonymous alone. I keep mentioning Anonymous because they have been the largest seller.
I have been watching the trading in Tocvan since my first investment back in January 2020. I noticed Anonymous stepped up their selling after the significant price run back in 2021, likely profit taking and/or investors exiting the resource markets in general at that time. Part of this decline over time was not only due to Colibri selling 5 M shares in the market, but it has also been rumoured that a large brokerage may have exited their client's positions (perhaps as much as 20 M shares or more).
This seems to hold true in the data, for example, since January 2020, Anonymous sold about 74 M shares but bought only 40 M shares, putting them at a NET negative position of about 34 M shares. Anonymous is generally used by International sellers, large block sellers, and offshore accounts. The good part, all of this stock has been absorbed and Tocvan is now in a more advanced stage due largely to Brodie Sutherland who assumed the role of CEO.
Where does this trading whiplash and price swing last week leave us?
I don't believe the "Sky is Falling" as suggested by some. There are a lot of reasons why people buy and sell stock and it is almost impossible to know what started the selldown on Monday and the last few weeks. Some have said the potential ban on open pit mining in Mexico may have spooked investors, as it has certainly been felt by other companies that are exploring in Mexico. Others point to this large brokerage selling out clients in Tocvan as evidenced by the significant selling by Anonymous over the last two years as I mentioned above.
Here is my view on the open pit mining ban in Mexico for what it is worth.
First, I highly doubt that there would be a total ban on open pit mining in Mexico. This is being pushed largely by the heavily populated areas such as Mexico City where many of the older open pit mines are located. Mining started a long time ago and was largely responsible for the rapid population growth in the surrounding areas, unfortunately, unforeseen problems back then have surfaced, such as the scarcity of water and pollution impacts.
In general, Mexico has been in a multi-year drought that has impacted agriculture and water supplies, and certainly the densely populated areas such as Mexico City have been impacted the most. The old Government leaving power over-reacted to the situation, and have taken a heavy handed and not well thought out approach by trying to ban all open pit mining.
There is a different view in other areas of Mexico, for example, the annual Congreso Internacional Minero mining conference to be held in Hermosillo, Sonora sees over 10,000 attendees from around the world. It is estimated that $9 B USD is being spent to bring 26 projects to production by 2028. Mexico is one of the largest producers of gold and silver in the world. There are 530 active mining projects worth Billions in revenue, sustaining in excess of 200,000 direct and many more indirect jobs, not to mention supporting the families of these workers.
Sonora, where Tocvan's Pilar project is located, hosts 25% of the active exploration and mining projects with 47 Canadian mining companies active in the area. This area is very remote and doesn't impact the larger populated cities. It would be political and economic suicide to support and pass this primitive resolution as it is written.
Here is a link to the proposed ban on open pit mining, among other things.
Mexico has a much bigger problem with cartels, drugs, and crime than they do with open pit mining. The job losses, not to mention investment in Mexico would be crippling if this were to happen. Who would invest in a country that could destroy your investment at the stroke of a pen (the safe guard is 2/3 approval requirement within both levels of Government). Politicians know this and their jobs could be in jeopardy. This passed the Lower House by ONLY a SMALL committee, and from what I understand, this is not even fully supported by its own party at the Lower House (essentially being pushed by a minority of House members, i.e. politicians of the opposite party). Finally, constitutional changes would require a 2/3 MAJORITY of both Houses. Simply put, a complete mining ban is unlikely to happen.
From what I have read, I do believe a more moderate approach will be taken by Mexico's new President, Claudia Sheinbaum, given her qualifications and background. She is an environmental scientist, former Mayor of Mexico City, and a balanced scientist who understands the impacts to employment and balancing environmental issues. Over 80% of Mexico is a vast wasteland that is rich in resources such as gold and silver where this type of activity will likely be restricted but NOT banned, perhaps with more conditions, especially with new companies acquiring property in Mexico. Tocvan is a legacy company that has a proven record of hiring local people and is well liked within the community due to the jobs they support and the potential jobs they will create.
Thus, NO, I don't believe the "Sky is Falling" in Mexico due to the potential partial ban on open pit mining, however, I do believe the resource sector has been severely impacted due to the steep decline in investment over the last few years. This will correct itself eventually, money will rotate down from larger resource plays into juniors that are at an advanced stage, such as Tocvan.
As my dad always said, "don't listen to the chatter, trust your analysis". Sure there will be winners and losers, but in the long run, good science will eventually win out.