..is not gold as the old saying goes and it may be appropriate to this post. First up a word of warning as this note is about a much smaller and probably more speculative type of share than I normally write about. So widows and orphans please click away now. Right so you agree you are not a widow or an orphan and that you will do your own research before you even consider buying this stock and not come back and blame me if it goes horribly wrong.
Right, with that out the way lets begin. So why am I looking at a smaller and more speculative stock than I do normally. Well as regular readers will know I have recently introduced the Compound income Scores (CIS) and this piece relates to a stock that has popped in towards the top of the list recently. It has a CIS of 100 and a Stockopedia StockRank of 98, a market cap. of about £22m but an enterprise value of just £8m due to plies of cash, it trades on a just under 5x with an indicated yield of 6.5% for the current year and trades on a price to book of 0.71, so as it has all the hall marks of a deep value investment what's not to like?
Well I bet you are thinking it must be pretty dodgy then - and you might well be right because it is wait for it....
a Canada-based exploration, development and mining corporation focused on Southern Africa (Zimbabwe) and listed on AIM! It is called Caledonia Mining (CMCL) and as I say is therefore definitely not for widows and orphans.
They have plans to ramp up production in Zimbabwe on the back of expanding existing mining operations. In a video interview their CFO explains all this is quite some detail and gives a good overview of the situation. He also suggested that he felt the dividend promised for this year could be maintained in 2016 if gold stayed above $1150, but of course quite sensibly, below that he gave no guarantees. So with this one trying to be a low cost producer (aren't they all) it all really hinges on the outlook for Gold price and their ability to ramp up production in the way they expect within the budget they expect. Lots of ifs and buts there potentially and as we all know mining projects often run into unforeseen difficulties so I wouldn't personally take their plans as read.
Any way that's enough from me already as this is quite a speculative play. But if you are that way inclined and want to find out more I suggest you visit their website or checkout a fairly detailed recent note from Edison which set out the background detail quite well, although you may have to sign up for free to access it if you are not already signed up to access their research.
Summary & Conclusion
Undoubtedly a speculative play and I guess you would also have to have a view on where you think the gold price might go from here (see chart above for the price over the last ten years. I know the Money week chartist has been bullish recently on a trading view and there are plenty of gold bugs out there would believe it will go to the moon if the financial system finally collapses under a mountain of debt - who knows I guess you pay your money a take your choice as I always say.
Technically for what that is worth the shares seem to have built something of a base just below the 40p level and having bounced recently look a bit overbought in the short term and 45p might offer some resistance. However, the 50 day has cut up through the 50 day which could be bullish. I guess if 45p can be cleared then it may open the way for a run up toward the gap on the chart and highs from last year between about 52p and 60p - but no guarantees obviously. I'm not sure I'm brave enough to buy it as it's not really my kind of thing.