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Baja Mining Shares Make a Comeback and Secure Stock Challenge Victory for Arielpls
August’s Stock Challenge concluded today. In total we saw 9 lead changes throughout the month. Once again, junior mining stocks dominated the selections of our members who cracked the Top 10.
The breakout story for August’s Stock Challenge belongs to Baja Mining (BAJ:TSX). Before we get into the details of the winning selections, Baja’s collapse over the past year needs to be explained. View Baja’s 52 week chart below:
Baja is a mining company who has seen its share price collapse in value from a 52 week high of $1.15 to a 52 week low of just $0.04. The significance of that 52 week low for this competition is the fact that Baja Mining had bottomed at $0.04 just two days prior to the start of August’s Stock Challenge. The company has faced significant financing hurdles for the Boleo project which is expected to cost a couple hundred million dollars more to construct than previously estimated.
In July, Cecilia Jamasmie of Mining.com stated that “But what has really crushed the miner’s market value was an announcement a little over two months ago that the company's Boleo project will now cost $1.143 billion to construct, a 21.5% increase.”
Jamasmie went on to state that “Before the cost run-ups, first flagged at the end of March, Baja forecast $890 million would be needed to build the mine.”
In addition to the cost estimate increase, Baja’s CEO resigned a few months ago. Just last month Baja announced that class action proceedings have been commenced against it and certain of its present and former directors. Also in July, the company announced that “as previously advised, its cash forecasts indicate that it will have insufficient funds to maintain current levels of effort beyond August 1, 2012.”
Many investors might shy away from such a situation, but one member at Pinnacle didn’t. As the saying goes, “it’s always darkest before the dawn”. And although Baja’s future performance is anyone’s guess, the company’s shares pulled-off one heck of a rally to close the month out. On Monday of this week, Baja Mining shares closed at just $0.065. Just two days later, on Wednesday, Baja shares closed at a whopping $0.17 per – good for a 48 hour gain of 160%. The shares in Baja spiked on the back of news from the company (released Aug 28, 2012) which stated “Baja Mining Corp. ("Baja") (TSX: BAJ)(OTCQX: BAJFF) reports that the Korean consortium (the "Consortium") has contributed US$90 million to its subsidiary Minera y Metalurgica del Boleo S.A. de C.V. ("MMB"), completing Stage I of the financing announced by Baja on July 26, 2012.
The Korean Consortium now owns a majority interest (51%) in MMB. However, the formalities required to transfer the shares and transfer control have not yet been completed.”
(Click here to read full press release)
Naturally, with such a quick spike, the final two days of the month saw some serious profit taking in Baja shares. However, the share price managed to close the month of August at $0.13 (hit a high in August of $0.20). And considering Baja started the month trading at $0.055 per share, its 31 day performance was remarkable (gained roughly 135%).
The 18th century nobleman, Baron Rothschild, coined the phrase "The time to buy is when there's blood in the streets." Perhaps Pinnacle member arielpls was keeping that phrase close at hand when picking Baja for August’s Stock Challenge. Arielpls selected Baja Mining right around the exact day it hit its 52 week low of $0.04 (after falling from a high of $1.15 within the last 12 months). It was a gutsy call and one that deserves serious credit. Arielpls has been a member of the Pinnacle community for just over a year and the Quebec native’s second pick was Douglas Emmett Inc. (DEI:NYSE), a real estate investment trust. DEI increased marginally throughout August and combined with BAJ, arielpls finished with an average return of 69.20% - good enough to give this Pinnacle member the Stock Challenge victory.
Coming in second place was Frank Tabbert, the three-time Stock Challenge Champ. At the start of this past week, it looked as though Frank Tabbert was about to become the only Pinnacle member to ever win 4 Stock Challenge titles, but in the end it wasn’t to be. The Ontario native, who has been a member of the Pinnacle community for more than three years, was running away with the Stock Challenge until arielpls got hot in the final few days. Despite falling short of the victory by nearly 13%, Frank Tabbert had an impressive and balanced attack in this month’s challenge. He selected Comstock Metals (CSL:TSXV), which went from $0.18 per share to close at $0.32 in the month of August, and Northern Gold Mining (NGM:TSXV) which went from $0.265 to $0.36. His overall return for the month of August was a very respectable 56.82%.
Rounding out the top 3 was another previous Pinnacle Stock Challenge champ, Liloptimist. The California native also selected Comstock Metals (CSL:TSXV). His second pick, which went on a rollercoaster ride throughout the month of August (in true Pinksheet fashion), was DiMi Telematics International (DIMI:OTCPK). Thanks to the hot start from DIMI, Liloptimist jumped out to an early triple digit lead in the Stock Challenge, but it was fleeting. DIMI went from starting August at $0.05 per share to hitting $0.165 within the first week! But, in the ever volatile world of penny stocks, it quickly collapsed back down and closed the month at $0.0425 – which makes it no longer eligible for September’s Stock Challenge as it does not meet the $0.05 per share threshold. Needless to say, Liloptimist still managed to finish with an average overall return of 35.09% - just enough to edge out minerjoe (who has put together two top 5 finishes in the last 3 months) by a fraction of a percent.
August’s Stock Challenge wraps up the summer investing season. While many pundits continued to preach the ‘sell in May and go away’ philosophy before the summer began, our members at Pinnacle proved what a flawed strategy that is when it comes to junior mining investing. As we’ve always reiterated here at Pinnacle, nothing pays like discovery; so why should investors sell junior resource stocks in May? The late spring and summer months represent drilling season. Drilling season is when new discoveries are made. By selling in May one is shutting the door on the potential of hitting a home-run by way of a new discovery. Sure, the ‘talent pool’ may have shrunken during this latest economic and market downturn (as many junior miners are low on capital and therefor can’t afford significant drill programs), but cream always rises to the top. Our members have proven yet again that no matter what the market environment may be, there are always profits to be had.
Congratulation to our new Stock Challenge Champion, arielpls - it was a well-deserved victory. This is arielpls’ first Stock Challenge victory and we welcome the new champ as our 53rd member of the Stock Stars Hall of Fame!
In addition to becoming an inductee into our Hall of Fame, arielpls receives 1000 reputation points to his Pinnacle Profile along with the highly coveted Stock Star. As well, arielpls will receive our Stock Challenge ‘Winner’s Wear’ to ensure the victory is recognized by all his friends back home. Our champions receive the winner’s only Pinnacle Package - which includes the finest of garments fit for a champion: The Stock Challenge Champ Hoodie and a Pinnacle Digest dri-fit golf shirt (for those summer days on the links). Wear them with pride arielpls!
* Click here to get a sneak peek at arielpls’ selection for September’s Stock Challenge.
Good luck to everyone in September,
The Pinnacle Team
August’s Stock Challenge Statistics:
Highest Return: 69.20%
Lowest Return: -23.32%
Average Return: 2.60%