Technical analyst Clive Maund discusses why he is upbeat about Tanzanian Gold.
Tanzanian Gold Corp. (TRX:NYSE; TNX:TSX) stock got clobbered by a big financing last December, and then it got beaten down further to a low in March when the entire market caved in, including gold stocks, so it has remained "under a cloud" since the financing, never really recovering with the sector in April, and it is only in the past week that it has started to perk up, as we can see on its latest 6-month chart below.
It is now clear that a base pattern has been building out since last December that has allowed time for sentiment to recover and for its moving averages to start to swing into a more positive alignment. An especially positive development is the improvement in the volume pattern that has led to a marked improvement in the Accumulation line in recent weeks. This, coupled with momentum (MACD) swinging positive, suggests that it is getting ready to break out of this base pattern at last.
It is thus encouraging to see that on the 18-month chart it has broken out of the downtrend in force from last July just over the past week. This chart also shows that, in addition to the nearby resistance level marking the upper boundary of the recent base pattern, there is another level of significant resistance on the way up centered on 75 cents, however, given how rapidly the outlook for gold is improving, it is considered unlikely that these resistance levels will prove to be much of an impediment.
On the fundamental front there have been a string of very positive developments for the company this year, which include:
- First was the doubling of Measured and Indicated Resources from 1 million ounces to 2.3 million ounces.
- Second was the Buckreef review which included discussion of the oxide plant start-up and imminent gold production, and new indications of a potential underground component in the larger sulphide mine plan.
- Third was the work done by SGS Lakefields to give the company the ability to discuss a potential plan for a mining operation 3 times that described in our 2018 Pre-Feasibility Study with production of 150,000-175,000 ounces gold per year.
- Finally, the news of the work toward final feasibility and project based (non-dilutive) financing for two separate mining operations, to be achieved with the assistance of PWC (Price Waterhouse Cooper).
Zooming out again, the 6-year plus chart shows to advantage the entire giant base pattern that has formed in Tanzanian Gold at a low level since early 2015. This chart begins to make clear how historically cheap the stock is.
Finally, the 18-year chart makes the stock look even more cheap as we can see that it is now at a very low price compared to the heady days of the 2000s and going into 2011, when hope triumphed over reason. The ironic thing is that, now that the company is much closer to attaining its goals with respect to the development of its mines, against the background of a gold price that is headed to the moon, because of the impending hyperinflation which the Fed is already enthusiastically feeding, the stock price is historically at a very low level, way below where it was in the 2000s, implying that we should soon see the triumph of reason over despair.
Tanzanian Gold Corp. was mentioned as a most promising gold stock in the Precious Metals Sector Alert posted at 3.30 pm last Thursday and it was nice to see your buying drive a sharp move higher in the stock during the last half hour of trading.
The conclusion is that Tanzanian Gold is a strong buy here for all time frames, only qualified by the observation that we could see a minor dip over the short-term as it is a little overbought, although there may be no dip at all.
Tanzanian Gold website.
Tanzanian Gold Corp, TRX, TRX.ASE, trading at $0.62, closed at A$0.623 on 8th May 2020.
Originally posted at 1.50 pm EDT on CliveMaund.com on 8th May 2020.
Clive Maund has been president of www.clivemaund.com, a successful resource sector website, since its inception in 2003. He has 30 years' experience in technical analysis and has worked for banks, commodity brokers and stockbrokers in the City of London. He holds a Diploma in Technical Analysis from the UK Society of Technical Analysts.
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Charts provided by the author.
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The above represents the opinion and analysis of Mr Maund, based on data available to him, at the time of writing. Mr. Maund's opinions are his own, and are not a recommendation or an offer to buy or sell securities. Mr. Maund is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations mentioned in his reports. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications. Although a qualified and experienced stock market analyst, Clive Maund is not a Registered Securities Advisor. Therefore Mr. Maund's opinions on the market and stocks can only be construed as a solicitation to buy and sell securities when they are subject to the prior approval and endorsement of a Registered Securities Advisor operating in accordance with the appropriate regulations in your area of jurisdiction.