Ampella feeling short-changed
Michael Quinn, 21 June 2012
Paul Kitto ... let's not forget the potential.
GOLD explorer Ampella Resources is being shorted, according to the companys managing director Dr Paul Kitto, but with Kitto extremely confident about the prospectivity of Ampellas ground in Burkina Faso, those that hold their nerve could see the current situation as one of great opportunity.
The company has had a disappointment or two in recent times and this combined with the West African gold space falling out of favour has evidently seen shorters sense an opportunity.
Asked how these sorts of situations can typically play out a fund manager told HighGrade: Normally ends in a trough, most likely below where it should be. The shorters will push the price down and the rest of the markets momentum will keep the downward pressure going. Once it is at a level that the shorters believe is low enough they will pull out and the stock will tend to drift along for a while until either new news picks it up or the general market starts picking up.
A big plus for Ampella despite the selling of its shares is its cashed-up funding position currently understood to be about $A40 million allowing it to continue aggressive exploration without having to contemplate raising equity with a weakened share price.
Kitto is adamant the companys ground has huge potential, and says investors may have forgotten this as Ampella concentrated on drilling out its initial Konkera discovery and market focus turned to project development.
While metallurgical issues have more or less seen first gold production now being flagged by Kitto for 2015 though Kitto dismisses concerns over the metallurgy by pointing out it is only for part of the orebody and can be relatively easily treated in any case promising exploration at the likes of the Doubema, Foumbiri and Wadaradoo prospects reflect some of the potential that could come to the fore in the months ahead.
Respected funds like Accorn and Taurus have evidently continued to be positive about the future, with the latter now holding more than 10% of Ampellas stock and a seat at the board via the recently appointed Michael Anderson.
The well respected Anderson, who until recently was the managing director of Exco Resources, is certainly optimistic despite the tough times at present.
Its at times like these that I absolutely do not miss being an MD, he told HighGrade. The market can be so brutal, but the answer is always the same; stay focused on the things that you can control, keep doing the right things, and you will eventually be rewarded.
It is already clear to me that (Ampella) is indeed focused on the right things; that is, demonstrating the full potential of its project(s). Importantly it is well funded and a number of key investors (not just Taurus, but also Acorn who recently went substantial through on-market buying) have taken advantage of the current opportunity. With plenty of news flow to come, and lots more ounces to find, I am confident that it will ultimately play out well.
finally a green day for amx . some decent volume behind it too.
short covering rally ?
Do you think this is where it all starts to turn around Gooch?
Never can tell for sure , but lets look at what we've got , as far as calling a bottom here:
1. up ~22% from recent 52 week low
2. Some very big volume days behind the recent gains
3. Underlaying support from POG looking good
4. The gold sector as a whole seems to be gaining traction again.
5. Big funds have been buying including specialist resource investment firms acorn and taurus.
6. M and A activity on the increase in the gold space , with 90% premiums being paid for quality assets. Investors are looking for the next target and AMX have KNOWN corporate intrest.
7. AMX have $~40million in the bank with cash burn rate of around $2 million a month (by my calcs) , so next cap raise is miles off.
AMX MD , Paul Kitto added another 800k of amx to his collection.
Has over 4million fully paid now.
Some more $$ in the amx kitty also.
Are we wrong yet TG?
GCIC now on the sell...
Is this going to prompt others to lighten their loads....?
Break of 50c was MAJOR support for AMX.
This one could see a 3 or even a 2 in front of it quite easily now.
Very glad that I took the stop loss hit at 92c
Good luck all holders.
27 ish /30 next level of support has been a short of 2012 stand out..
Damn! WTF happened to this stock? I'm too lazy to read up but last I was active in it was about $2 I think
very close now to my sp target of 0.38c !!!
Sandune credit where credit is due
Except that immediately after he made that post, it rose almost uninterrupted for over 2 months.
Word it sure did. No arguments from me .
Isnt the phrase used "Dead cat bounce"
What's been happening is that two formerly substantial holders have been selling out. One is Dynamic Funds, which previously held around 14m shares. They dropped below the 5% threshold at the end of July. They sold around 1.7m shares during July. Another company, Blackrock, was selling only a bit faster. They started off with around about the same number of shares (14m), but sold down a bit over 2m shares during July, before dropping below the 5% threshold.
We don't know for sure how fast they have sold down and how many they have left or are intending to sell, however it's been around 4 months since then. If they have simply decided to keep on selling down at a similar rate, they each could still have some substantial quantities to go. That's if they have decided to sell out completely. I believe that this may be the case with Blackrock, however I don't think Dynamic Funds will do so, as they have been big holders since 2007 and Ampella made their returns look very good for a few years there. More likely that they're selling down to realize tax losses before year end.
My research suggests that Dynamic Funds had reduced their holdings by 40% up to 30/09/12, meaning they sold an additional 3.9m after July, or at a rate of around 2m per month.
Blackrock are more likely a total seller, given that they started buying from mid-2010, when it was over $1.50 and on its way to $3. Their selling initially started back in April 2012 and I suspect the failure to attract a takeover offer was the final straw for them. They have likely been the main contributor to selling pressure.
Dynamic funds has more transparency than Blackrock. They release regular updates on their holdings. Blackrock does not (so far as I can find).
You can see below what the effect has been having two large holders gradually selling out their holdings over the course of much of the year:For AMX, a few weeks with daily volumes lower than 1m will be a very good sign that the funds are out. Until then, it is likely to remain under pressure.
Tax losses? I doubt it word.
Word whilst I think that has not helped the AMX cause I dont think its the sole reason for the share price decline .
No, agreed. Most gold equities have been on a hiding to nothing for most of this year. There is also the dual issues of a botched presentation of the initial metallurgy results last last year and the fact that Burkina Faso labs were so badly backed up that they received no assays for 6 months at a stretch.
However, the overall weakness in many explorers has been exaggerated in AMX's case by the large overhang from these sellers.
Thanks for your research TW.
Some good suppositions in your post , some of which i know to be very accurate