3 Basic Materials Stocks With Recent Intensive Insider Buying

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 |  Includes: AUNFF, DNN, LEGPF
by: Markus Aarnio

The basic materials sector has been the worst-performing group YTD with a loss of 1.5%.

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In this article I will feature three basic materials stocks that have seen 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 increase their holdings by more than 10%.

1. Denison Mines Corp. (NYSEMKT:DNN) engages in the exploration, development, mining, and milling of uranium in Canada, Zambia, and Mongolia.

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Insider buying by insider (last 30 days)

  • Steve Blower purchased 4,000 shares on May 28 pursuant to a private placement. Steve Blower currently holds 4,000 shares or less than 0.1% of the company. Steve Blower was appointed Vice-President, Exploration of the company on September 1, 2012.
  • David Cates purchased 25,000 shares on May 28 pursuant to a private placement. David Cates currently holds 26,475 shares or less than 0.1% of the company. David Cates was appointed Vice President Finance, Tax and Chief Financial Officer of the company on January 1, 2013.
  • John Craig purchased 20,000 shares on May 28 pursuant to a private placement. John Craig currently holds 103,000 shares or less than 0.1% of the company. John Craig has served as a director of the company since May 9, 1997 and was appointed Lead Director of the Board in 2010.
  • Michael Schoonderwoerd purchased 4,000 shares on May 28 pursuant to a private placement. Michael Schoonderwoerd currently holds 4,864 shares or less than 0.1% of the company. Michael Schoonderwoerd was appointed Vice President Controller of the company on January 1, 2013.

Insider buying by calendar month

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

Month Insider buying / shares Insider selling / shares
May 2013 53,000 0
April 2013 0 0
March 2013 0 0
February 2013 0 0
January 2013 0 0
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The month of May has seen all of the insider buying this year.

Financials

The company reported the first-quarter financial results on May 8 with the following highlights:

Revenue $2.3 million
Net loss $5.5 million
Cash $26.9 million
Debt $0.2 million
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On May 28, Denison Mines closed a $14,950,000 financing.

Outlook

The company's 2013 planned exploration & development spending are expected to include:

Canadian exploration $9.9 million
Canadian development $3.5 million
Zambia $3.5 million
Mongolia $1.7 million
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Competition

Uranium production is international in scope but is characterized by a relatively small number of companies operating in only a few countries. Five producers produced over 65% of the estimated world production in 2012 and about 72% of the world's production came from only four countries, namely Kazakhstan, Canada, Australia and Niger. Kazakhstan passed Canada in 2009 as the largest producer, a role Canada had held for 17 years.

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. There is one analyst buy rating, two neutral ratings and one sell rating with an average target price of $1.20. The company has a book value of $0.67 per share. I have a cautiously bullish bias for the stock currently based on the intensive insider buying.

2. Aurcana Corporation (AUNFD.PK), a junior mining company, engages in the production and sale of copper, silver, lead, and zinc concentrates.

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Insider buying by insider (last 30 days)

  • Sadek El-Alfy purchased 1,000 shares on May 24 and currently holds 1,000 shares or less than 0.1% of the company. Sadek El-Alfy is Vice President Operations.
  • Salvador Huerta purchased 30,000 shares on May 24-28 and currently holds 75,000 shares or less than 0.1% of the company. Salvador Huerta is Chief Financial Officer.
  • Lenic Rodriguez purchased 35,000 shares on May 23 and currently holds 222,500 shares or less than 0.1% of the company. Lenic Rodriguez is President, CEO and Director of the company.

Insider buying by calendar month

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

Month Insider buying / shares Insider selling / shares
May 2013 66,000 0
April 2013 0 0
March 2013 0 0
February 2013 0 0
January 2013 0 120,000
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The month of May has seen all of the insider buying this year.

Financials

The company reported the first-quarter financial results on May 17 with the following highlights:

Revenue $12.8 million
Net income $0.4 million
Cash $18.6 million
Debt $21.5 million
Silver production 592,504 ounces
Total cash cost (net of by-products) $7.79 per ounce
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Outlook

Identified growth opportunities support potential for combined annual production of up to ~10mm oz. Ag equivalent per year.

Competition

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Aurcana has the third largest primary silver mine in the North America.

My analysis

There have been three different insiders buying the shares and there have not been any insiders selling the shares during the last 30 days. The company has an insider ownership of 9%. The stock is trading at a P/E ratio of 30.49 and the company has a book value of $0.37 per share. I have a cautiously bullish bias for the stock currently based on the intensive insider buying.

3. Legacy Oil + Gas (OTCPK:LEGPF) engages in the acquisition, development, exploration, and exploitation of oil and natural gas properties in Canada.

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Insider buying by insider (last 30 days)

  • Randal Brockway purchased 20,000 shares on May 28 and currently holds 186,666 shares or 0.1% of the company. Randal Brockway serves as a director of the company.
  • Paul Colborne purchased 35,000 shares on May 17-28 and currently holds 648,981 shares or 0.4% of the company. Paul Colborne is Chairman of the Board.
  • James Pasieka purchased 71,196 shares on May 28-29 and currently holds 173,975 shares or 0.1% of the company. James Pasieka serves as a director of the company.

Insider buying by calendar month

Here is a table of Legacy Oil + Gas' insider trading activity by calendar month.

Month Insider buying / shares Insider selling / shares
May 2013 126,196 0
April 2013 123,608 0
March 2013 0 0
February 2013 27,500 0
January 2013 60,000 0
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The month of May has seen the most insider buying this year.

Financials

The company reported the first-quarter financial results on May 13 with the following highlights:

Revenue $100.8 million
Net loss $0.2 million
Net debt $543.3 million
Oil equivalent production 17,451 boepd
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Outlook

As a result of the acquisitions, and giving effect to production declines and timing of closing the acquisitions, Legacy increased its guidance for 2013 average production to 19,000 Boe per day (90 percent oil and NGLs) and increased its guidance for 2013 exit rate production to 21,500 Boe per day (91 percent oil and NGLs), representing a 20 percent increase over 2012 exit production. Royalties are expected to average 15.7 percent and operating and transportation costs are expected to average $16.25 per Boe. With the increased production and cash flow, Legacy expects to spend $310 million in capital expenditures in 2013.

Competition

The oil and natural gas industry is competitive in all its phases. Legacy competes with numerous other participants in the acquisition, exploration and development of oil and natural gas assets and in the marketing of oil and natural gas. Legacy's competitors include resource companies which have greater financial resources, staff and facilities than those of Legacy. Legacy believes that its competitive position is, on the whole, equivalent to that of other oil and natural gas producers of similar size and at a similar stage of development.

My analysis

There have been three different insiders buying the shares and there have not been any insiders selling the shares during the last 30 days. The company has an insider ownership of 2.4%. There are 16 analyst buy ratings, one neutral rating and zero sell ratings, with an average target price of $9.97. The stock is trading at a forward P/E ratio of 16.56 and the company has a book value of $10.24 per share. I believe the stock could be a good pick below the book value.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in OTCPK:LEGPF over the next 72 hours. 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.