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The SPDR S&P Metals and Mining ETF (NYSEARCA:XME) was trading as high as $77.44 in April 2011. The index is currently trading at $33.32, or 57.0% below the April 2011 peak.

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In this article, I will feature two 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. Luna Gold Corp. (OTCQX:LGCUF) engages in the acquisition, exploration, development, and operation of gold properties in Brazil.

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Insider buying by insider (last 30 days)

  • Luis Baertl purchased 150,000 shares on June 21-28 and currently holds 13,493,100 shares or 12.9% of the company. Luis Baertl serves as a director of the company.
  • John Blake purchased 5,000 shares on June 23-27 and currently holds 5,000 shares or less than 0.1% of the company. John Blake is President, CEO & Director at Luna Gold.
  • Geoffrey Chater purchased 10,000 shares on June 28 and currently holds 10,000 shares or less than 0.1% of the company. Geoffrey Chater serves as a director of the company.
  • Titus Haggan purchased 8,100 shares on June 28 and currently holds 101,930 shares or 0.1% of the company. Titus Haggan is Vice President Exploration.
  • Mark Halpin purchased 6,000 shares on June 11-28 and currently holds 66,300 shares or less than 0.1% of the company. Mark Halpin is Vice President Corporate Development.
  • Keith Hulley purchased 5,500 shares on June 28 and currently holds 15,000 shares or less than 0.1% of the company. Keith Hulley serves as a director of the company.
  • Duane Lo purchased 5,000 shares on June 26 and currently holds 35,000 shares or less than 0.1% of the company. Duane Lo is the Chief Financial Officer of the company.

Insider buying by calendar month

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

MonthInsider buying / sharesInsider selling / shares
June 2013189,6000
May 201371,0000
April 2013107,0000
March 201300
February 201300
January 201300

There have been 367,600 shares purchased and there have been zero shares sold by the insiders this year.

Financials

The company reported the first-quarter financial results on May 14 with the following highlights:

Revenue$17.3 million
Net loss$0.6 million
Cash$14.9 million
Debt$30.6 million
Gold production17,203 ounces
All-in cash cost$1,033 per ounce

Outlook

The company remains on target to achieve annual gold production between 95,000 and 105,000 ounces at an average annual cash cost of $705 to $715 per ounce of gold.

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Competition

Luna Gold faces competition from a number of large established companies with substantial capabilities, and greater financial and technical resources than Luna Gold has. Luna Gold competes with these other mining companies for the acquisition of prospective, explored, developing and developed mining and mineral properties, as well as for the recruitment and retention of qualified directors, professional management, employees and contractors. There is also significant and increasing competition for a limited number of suitable properties and resource acquisition opportunities and, as a result, Luna Gold may be unable to acquire such mining properties which it desires on terms it considers acceptable.

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My analysis

There have been seven different insiders buying the shares and there have not been any insiders selling the shares during the past 30 days. The company has an insider ownership of 14.4%. The company's P&P reserves are 2,355,276 ounces of gold. The stock is trading at a P/E ratio of 6.84 and the company has a book value of $1.18 per share. I believe the stock could be a good pick below the book value.

2. Major Drilling Group International Inc. (OTCPK:MJDLF) provides contract drilling services for companies primarily involved in mining and mineral exploration.

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Insider buying by insider (last 30 days)

  • Edward Breiner purchased 2,100 shares on June 10 and currently holds 15,000 shares or less than 0.1% of the company. Edward Breiner serves as a director of the company.
  • Denis Despres purchased 3,620 shares on June 28 and currently holds 9,320 shares or less than 0.1% of the company. Denis Despres is Vice President, North American Operations.
  • Jean Desrosiers purchased 6,000 shares on June 17 and currently holds 15,000 shares or less than 0.1% of the company. Jean Desrosiers serves as a director of the company.
  • Kelly Johnson purchased 6,000 shares on June 26 and currently holds 6,000 shares or less than 0.1% of the company. Kelly Johnson is Vice President, Latin American Operations.

Insider buying by calendar month

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

MonthInsider buying / sharesInsider selling / shares
June 201317,7200
May 201300
April 201300
March 201313,2000
February 201300
January 201300

The month of June has seen the most insider buying this year.

Financials

The company reported the fiscal 2013 full year, which ended April 30, financial results on June 5 with the following highlights:

Revenue$695.9 million
Net income$52.1 million
Net cash$38.7 million

Outlook

The current economic environment will continue to significantly impact drilling in the short to medium-term, particularly on gold projects where the company has a significant presence, and the company is experiencing further delays and cancellations as compared to the quarter just completed.

Despite the difficult environment, the company expects operations to generate positive cash flow in fiscal 2014. The company will continue to focus on cash management by limiting capital expenditures, by reducing inventory and by closely monitoring costs.

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Competition

Competition for drilling services is often conducted on a regional basis due to the high costs of relocating drill rigs. Factors considered in the award of drilling contracts include price, experience of the work force, drill rig availability and suitability, condition of equipment, reputation and customer relations, although price and reputation are the major considerations.

My analysis

There have been four different insiders buying the shares and there have not been any insiders selling the shares during the past 30 days. There are six analyst buy ratings, three neutral ratings and one sell rating with an average target price of $8.83. The stock is trading at a P/E ratio of 10.83 and a forward P/E ratio of 14.90. The company has a book value of $6.80 per share and the stock has a dividend yield of 2.80%. I believe the stock could be a good pick at the book value.

Source: 2 Basic Materials Small Caps With Recent Intensive Insider Buying