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Sunday, November 15, 2009

A Look at Two Junior Canadian Miners

I want to share some basic analysis and charts of two Junior Canadian Miners (that most of you have probably never heard of) that I like a lot, have followed for about 2 years and have traded successfully several times.

Dynasty Metals and Mining - DMM.TO / DMMIF

Dynasty is a junior gold producer and explorer with properties in Ecuador. It has mines with some pretty serious ore grades (11-12 g/t). And it is a producer, after ramping up for awhile (it's first pour was on Sept 28 this year). There is a lot to like about their setup and if their mines production costs bear out with their estimates, they would have one of the most profitable mines around.

However, Ecuador has had a few issues, including bond defaults in the last year. This might affect DMM or it might not. Tough to say. But there is some political instability in the region (but I suppose that is true in California too, so what can you do).

I don't normally to EW counts on individual company charts as they can be too emotional and subject to manipulation. There is enough volume and market capitalization that I am less concerned here, but that is always a risk. So reader beware.

The chart looks very bullish to me. Since 2007, the move down looks and counts like a double zigzag, which is a corrective pattern. And since the bottom, the correction really looks done, as the next set of moves look like impulses up. There reason why I bring this up now is that I wanted to wait for a bullish confirmation signal after the last pullback this year (what I am labelling as a 2? on this chart). The past couple of weeks have seen a **huge** increase in volume with a large price breakout on positive technical indicators.

If I am right about the count (and I do not have 100% confidence in it, I do not know the larger degree wave structure or how these new impulses fit in. So I am only tentatively labeling them as 1? and 2? and if correct we would be near the beginning of 3 up), then the next move up would be very serious indeed.

Hathor Exploration Limited - HAT.V / HTHXF

Hathor is a Junior Explorer of primarily Uranium Properties. Most of their properties are in Northern Canada, but a few in Australia, USA, Kazakhstan, and Namibia. But what is compelling about Hathor is that their core properties are in the Athabasca Basin in Northern CA, which is where all of the most recent high grade Uranium deposits have been found the past several years. Many of their recent drills have met expectations based on preliminary surveys.

A compelling aspect is that their properties are easily accessible with ore veins relatively near the surface. These are some potentially high quality / high profit mine setups. I also like that they have trimmed their debt position to 0!! and their cash position to C$28M (per their Sept 09 report).

I recall last year that they also had some gold mines (or gold by-product from Uranium) but their is no mention of that on their website or their corporate presentation anymore. Perhaps they have already sold the mineral rights? At any rate, Hathor is very much a leveraged "future" Uranium play (they are an explorer) but with some potentially very profitable properties.

So here is the chart. It has been consolidating for about a year now and until recently, I had no idea how it was consolidating. But I think it has tipped its hand that it is a triangle. HAT made its all time high over a year ago and it is now consolidating right below that level in a bullish continuation triangle. I don't think it is ready to break out yet, as we are working on the E wave. However E waves can overshoot ... they can also undershoot. We had an attempted breakout of the trendline last week and then a move back down. This next pullback could be the last move before a breakout (I can count it as a three)

And since Hathor is a Uranium explorer, the Uranium u3o8 chart seems particularly relevant. Here they are for long and short term. Uranium had its parabolic runup and catastrophic crash the past few years, but it looks like it has been basing and trying to establish a bottom at the $40-45 level. Is this "the bottom" for Uranium? I have no idea. But I suspect this "a bottom". I think we will be trading up for while before it starts heading down .... if it starts heading down again.

Uranium price charts from http://www.uxc.com/

Disclosure: I have long positions in HAT.V (HTHXF) and DMM.TO (DMMIF)
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