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A refiner pours bars of gold at Agnico-Eagle's Meadowbank Mine facility in Meadowbank Mine, Nunavut (Sean Kilpatrick/SEAN KILPATRICK/THE CANADIAN PRESS)
A refiner pours bars of gold at Agnico-Eagle's Meadowbank Mine facility in Meadowbank Mine, Nunavut (Sean Kilpatrick/SEAN KILPATRICK/THE CANADIAN PRESS)

Schizas’ Mailbag

Teranga Gold shares still searching for the bottom Add to ...

Hey Lou,

What is your outlook from a medium- to long-term basis on Teranga Gold? They have an operating mine in Senegal, good all-in cash costs, and plans to have debt paid off by end of year. Their fourth quarter 2013 was a little weak and the market recognized this. Otherwise seems like market has little confidence considering it is trading at 4.67 P/E.

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Thanks,

Ricardo

Hey Ricardo,

Thanks for the assignment.

This will be my first examination of the charts for Teranga Gold Corporation. The analysis that I will conduct on your behalf will identify the trend, support, and resistance as of this writing. When it comes to the outlook for the medium- to long-term it is not something that I engage in. What I can accomplish on your behalf is to see if the story is supported by the technical patterns on the charts. I have a number of good contacts in the junior gold mining space and they are all collectively waiting for the price of the commodity to stabilize in the $1,400- to $1,500-an ounce range.

The research undertaken for you identified that management expects to produce 250,000 ounces per year over the period 2014 through 2019 at an all in sustaining cost of $900 an ounce. Clearly an added couple of hundred bucks per ounce makes a big difference to the bottom line.

A look under the hood will help identify how best to proceed with TGZ.

The three-year chart indicates that the vicious downtrend that punished investors throughout 2013 has at least been broken. The MACD and the RSI both generated buy signals in December of 2013 as the stock hit a 52-week low of $0.42. The steep ascent topped out in February near $1.20 where the momentum indicators signalled a sell as the shares got overbought. What is also evident is that there appears to be support at $0.80 which will have to be monitored if you are looking for an entry point.

The six-month chart provides a close-up of the buy signals in December that were cited earlier and the sell signals that surfaced in late February. Currently there is no indication that the selling has abated and that we are about to start a new leg up.

TGZ presents an opportunity but at this stage the best course of action is to increase surveillance and confirm support at $0.80.

Make it a profitable day and happy capitalism!

Have your own question for Lou? Send it in to lou@happycapitalism.com.

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