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Private equity buyer Waterton Global Resource Management Inc. is closing in on an acquisition of another gold mine in Nevada. The investment firm is planning to buy the property from Colorado-based gold and copper giant Newmont Mining Corp. The underground mine is called Midas, and it is already pumping out yellow metal.The Associated Press

Hi Lou,

I am wondering what your perspective is on YellowHead Mining?

It seems to me the next 1-to 6-months will see significant upside for investors with room for more growth in the coming years.

Thanks for your feedback.


Hey Florent,

Thanks for the assignment. YellowHead Mining Inc. is focused on the development of the Harper Creek copper/gold project in British Columbia which boasts substantial reserves and a 28 year project life. The company just announced an $8-million convertible debenture financing that will be used to complete the environmental assessment process which is the next milestone for the company.

What needs to be understood is that YMI does not have a mine and as such generates no revenue. The market cap for the company is $10.15-million and the average daily volume over the last 30 days is 36,028 shares. These factors make this a high risk investment.

The charts will better inform my thoughts on this investment.

The three-year chart outlines a race to the bottom that started in 2011 when the shares traded for close to $2.00. There is an established downtrend line with a death cross that surfaced in May of 2012. What is also evident is that YMI has melted through every level of support along the retreat. Two years of lower highs and lower lows do not a profitable investment make.

I would imagine that you are bottom fishing this stock hoping to see a bounce off this rock bottom. You may get a move up in 2014 after tax loss selling has abated but at this time there are no signals supporting that outcome.

The six-month chart is like a chalk outline at the scene of an accident. Thin choppy trading and resistance along the 50-day moving average put additional caution flags out on the track for the more conservative investor. Even if you have an appetite for a high risk investment you would be advised to be patient with YMI. It may give you the pop you are looking for in the new year but until buyers are willing to step up with orders the best course of action is to put the shares on your watch list.

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