2 Gold Stocks And A Potash Company With Recent Intensive Insider Buying

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Includes: ALLRF, PPP, RRFFF
by: Markus Aarnio

According to INK Research, there are now seven precious metals stocks on the TSX with insider buying for every one with selling. That's a near doubling of the ratio since mid-January - and represents a level of lopsided transactions that is usually only seen during major market peaks or valleys. Ted Dixon, CEO of INK Research commented:

"That is the type of insider buying we saw in the broad market during the height of the great financial crisis in late 2008 and early 2009. A similar situation now seems to be in place among gold and silver miners."

In this article, I will feature two gold miners and one potash company with intensive insider buying during the last 30 days. Intensive insider buying can be defined by the following three criteria:

  1. The stock is purchased by three or more insiders within one month.
  2. The stock is sold by no insiders in the month of intensive purchasing.
  3. At least two purchasers increased their holdings by more than 10%.

1. Brigus (BRD) is a growing Canadian gold producer committed to maximizing shareholder value through a strategy of efficient production, targeted exploration and select acquisitions. The company operates the wholly owned Black Fox Mine and Mill in the Timmins Gold District of Ontario, Canada. The Black Fox Complex encompasses the Black Fox Mine, the new Grey Fox property and adjoining properties in the Township of Black River-Matheson, Ontario, Canada. The Black Fox Mine is in production and the Grey Fox Mine, located four kilometres from Black Fox, is in development. Brigus is also advancing the Goldfields Project located near Uranium City, Saskatchewan, Canada, which hosts the Box and Athona gold deposits. In Mexico, Brigus owns the Ixhuatan Project located in the state of Chiapas. In the Dominican Republic, Brigus has signed an agreement to sell its remaining interests in three mineral exploration projects.

Insider buying by insider (last 30 days)

  • Marc Bilodeau purchased 2,035 shares on April 1 pursuant to a purchase/ownership plan. Marc Bilodeau currently holds 2,035 shares or less than 0.1% of the company. Marc Bilodeau is the Vice President of Operations at Brigus Gold.
  • Wade Dawe purchased 16,025 shares on April 1 pursuant to a purchase/ownership plan. Wade Dawe currently holds 2,085,415 shares or 0.9% of the company. Mr. Dawe is the Chairman, Chief Executive Officer and President of Brigus Gold.
  • Jon Legatto purchased 3,663 shares on April 1 pursuant to a purchase/ownership plan. Jon Legatto currently holds 26,015 shares or less than 0.1% of the company. Jon Legatto is Chief Financial Officer of the company.
  • Daniel Racine purchased 25,436 shares on April 1 pursuant to a purchase/ownership plan. Daniel Racine currently holds 407,046 shares or 0.2% of the company. Mr. Racine is Brigus' President and Chief Operating Officer.

Insider buying by calendar month

Here is a table of Brigus' insider trading activity by calendar month.

Month Insider buying / shares Insider selling / shares
April 2013 47,159 0
March 2013 0 0
February 2013 150,000 0
January 2013 300,000 0
December 2012 41,864 0
November 2012 0 0

There have been 539,023 shares purchased and zero shares sold since November 2012.

Financials

The company reported the full year 2012 financial results on March 27 with the following highlights:

Revenue $117.7 million
Net income $19.1 million
Cash $29.8 million
Debt $93.2 million
Gold production 77,374 ounces
Cash costs $762 per ounce

Outlook

  • Gold production for the first quarter of 2013 will exceed 25,000 ounces. Production results for the first quarter of 2013 will be released during the week of April 8, 2013.
  • Recovered gold grades from the underground mine continue to exceed reserve grades.
  • Gold production for the year will be in the range of 90,000 - 100,000 ounces, and cash costs will be within $700-$750.
  • Capital spending for mining operations in 2013 is estimated at $43.5 million.

My analysis

There have been four different insiders buying the shares and there have not been any insiders selling the shares during the last 30 days. The stock has an insider ownership of 18.49%. There is one analyst buy rating, one neutral rating and zero sell ratings with an average target price of $2.10.

The company's Canadian properties host approximately 1.8 million ounces in gold reserves. The stock is trading at a P/E ratio of 9.13 and a forward P/E ratio of 3.17. The company has a book value of $1.04 per share. An updated NI 43-101 resource estimate on the Grey Fox property will be released this month followed by a bankable feasibility study in the third quarter. I have a long position in the stock currently.

2. Allana Potash (OTCPK:ALLRF) is a Canadian publicly traded corporation with a focus on the international acquisition and development of potash assets. The company is currently developing its previously explored, flagship property, the Dallol Potash Project, in Ethiopia.

Insider buying by insider (last 30 days)

  • Farhad Abasov purchased 112,500 shares on April 1 pursuant to a purchase/ownership plan. Farhad Abasov currently holds 1,020,000 shares or 0.4% of the company. Farhad Abasov is President and CEO, Director of the company.
  • Nejib Abba Biya purchased 56,250 shares on April 1 pursuant to a purchase/ownership plan. Nejib Abba Biya currently holds 56,250 shares or less than 0.1% of the company. Nejib Abba Biya is Senior Vice President, Business Development, Ethiopia.
  • Deborah Battiston purchased 18,750 shares on April 1 pursuant to a purchase/ownership plan. Deborah Battiston currently holds 118,750 shares or less than 0.1% of the company. Deborah Battiston is Chief Financial Officer.
  • Brianna Davies purchased 18,750 shares on April 1 pursuant to a purchase/ownership plan. Brianna Davies currently holds 118,750 shares or less than 0.1% of the company. Brianna Davies is Corporate Secretary.
  • Richard Kelertas purchased 37,500 shares on April 1 and currently holds 46,250 shares or less than 0.1% of the company. Richard Kelertas is Senior Vice President, Corporate Development.
  • Richard Lacroix purchased 15,000 shares on April 1 pursuant to a purchase/ownership plan. Richard Lacroix currently holds 115,000 shares or less than 0.1% of the company. Richard Lacroix serves as a director of the company.
  • Lewis Mackenzie purchased 11,250 shares on April 1 pursuant to a purchase/ownership plan. Lewis Mackenzie currently holds 211,250 shares or less than 0.1% of the company. Lewis Mackenzie serves as a director of the company.
  • Peter MacLean purchased 56,250 shares on April 1 pursuant to a purchase/ownership plan. Peter MacLean currently holds 406,250 shares or 0.1% of the company. Peter MacLean is Senior Vice President, Exploration.
  • Jack Scott purchased 56,250 shares on April 1 pursuant to a purchase/ownership plan. Jack Scott currently holds 94,250 shares or less than 0.1% of the company. Jack Scott is Senior Vice President, Strategic Projects.
  • Jason Wilkinson purchased 37,500 shares on April 1 pursuant to a purchase/ownership plan. Jason Wilkinson currently holds 37,500 shares or less than 0.1% of the company. Jason Wilkinson is Project Manager, Ethiopia.

Insider buying by calendar month

Here is a table of Allana's insider trading activity by calendar month.

Month Insider buying / shares Insider selling / shares
April 2013 431,250 0
March 2013 0 0
February 2013 99,500 0
January 2013 0 0
December 2012 0 0
November 2012 0 0

The month of April 2013 has seen the most insider buying.

Financials

The company reported the fiscal 2013 second-quarter, which ended January 31, financial results on March 18 with the following highlights:

Revenue $0
Net loss $3.9 million
Cash $28.6 million

Upcoming milestones

My analysis

There have been 10 different insiders buying the shares and there have not been any insiders selling the shares during the last 30 days. On March 19, 2013, Allana reported positive results from a Feasibility Study on its Danakhil Potash Project in Ethiopia which is based on production of 1 million tonnes per year of Muriate of Potash [MOP] via solution mining. The project's after-tax Net Present Value is $1.32 billion at a discount rate of 10%, based on potash price of $430/tonne. After-tax Internal Rate of Return is 33% and life of mine is approximately 25 years. The capital expenditures for the project are estimated to be $579 million with a payback period of 3.1 years. The production start-up is expected in 2016-2017. I have a long position in the stock currently.

3. Rainy River Resources (OTC:RRFFF) is a Canadian precious metals exploration company whose key asset is the Rainy River Gold Project, a large gold system centred in Richardson Township (part of Chapple Township).

Insider buying by insider (last 30 days)

  • Garett Macdonald purchased 1,627 shares on April 1 pursuant to a purchase/ownership plan. Garett Macdonald currently holds 5,193 shares or less than 0.1% of the company. Garett Macdonald is Vice President, Operations.
  • Mike Mutchler purchased 2,250 shares on April 1 pursuant to a purchase/ownership plan. Mike Mutchler currently holds 54,417 shares or less than 0.1% of the company. Mike Mutchler is Vice President and Chief Operating Officer of the company.
  • Nicholas Nikolakakis purchased 2,250 shares on April 2 pursuant to a purchase/ownership plan. Nicholas Nikolakakis currently holds 4,417 shares or less than 0.1% of the company. Nicholas Nikolakakis is Vice President and Chief Financial Officer of the company.
  • Gerald Shields purchased 1,801 shares on April 1 pursuant to a purchase/ownership plan. Gerald Shields currently holds 22,310 shares or less than 0.1% of the company. Gerald Shields is Vice President, General Counsel, Corporate Secretary and Director of the company.
  • Kerry Sparkes purchased 1,904 shares on April 1 pursuant to a purchase/ownership plan. Kerry Sparkes currently holds 3,737 shares or less than 0.1% of the company. Kerry Sparkes is Vice President, Exploration.
  • Raymond Threlkeld purchased 3,114 shares on April 1 pursuant to a purchase/ownership plan. Raymond Threlkeld currently holds 56,314 shares or less than 0.1% of the company. Raymond Threlkeld is President and CEO of the company.

Insider buying by calendar month

Here is a table of Rainy River's insider trading activity by calendar month.

Month Insider buying / shares Insider selling / shares
April 2013 12,946 0
March 2013 0 0
February 2013 5,000 0
January 2013 7,263 0
December 2012 0 0
November 2012 0 0

The month of April 2013 has seen the most insider buying.

Financials

The company reported the full year 2012 financial results on March 20 with the following highlights:

Revenue $0
Net loss $65.9 million
Cash $102.1 million
Debt $0.1 million

Upcoming milestones

My analysis

There have been six different insiders buying the shares and there have not been any insiders selling the shares during the last 6 months. There are seven analyst buy ratings, two neutral ratings and zero sell ratings, with an average target price of $8.09. The management owns 3% of the company and the institutions own 60% of the company. The company's key asset is the large 100%-owned advanced exploration stage Rainy River Gold Project with an NI43-101 compliant gold resource of 1.2 Moz Measured, 5.0 Moz Indicated and 2.3 Moz Inferred. The average annual production is estimated to be 300,000 ounces of gold with a production start-up in 2016. The pre-production capital costs are estimated to be $694 million with a payback of 3.8 years. I believe the stock is a good pick from the current level based on the intensive insider buying.

Disclosure: I am long BRD, OTCPK:ALLRF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.