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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 $33.10, or 57.3% 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. MAG Silver Corp. (NYSEMKT:MVG) engages in the acquisition, exploration, and development of mineral properties in the Mexican silver belt.

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Insider buying by insider (last 30 days)

  • Michael Curlook purchased 3,500 shares on June 24 and currently holds 3,500 shares or less than 0.1% of the company. Michael Curlook is Vice President, Investor Relations and Communications.
  • Mason Hill Advisors, LLC purchased 429,025 shares on June 24 - July 3 and currently holds 6,450,224 shares or 10.7% of the company.
  • Larry Taddei purchased 3,500 shares on July 5 and currently holds 5,500 shares or less than 0.1% of the company. Larry Taddei is Chief Financial Officer of the company.

Insider buying by calendar month

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

MonthInsider buying / sharesInsider selling / shares
July 201384,6000
June 2013351,4250
May 201300
April 201300
March 2013011,883
February 201301,000
January 20130100,000

There have been 436,025 shares purchased and there have been 112,883 shares sold by the insiders this year.

Financials

The company reported the first-quarter financial results on May 15 with the following highlights:

Revenue$39,463
Net loss$1.7 million
Cash$37.8 million

Upcoming milestones

With the completion of the AMC Study which recommended the advancement of the Juanicipio project, MAG Silver and Fresnillo now have a framework on which the joint venture Technical Committee can build upon for the continued advancement of the project. The AMC Study indicated a project development and production schedule of approximately 3.5 years. Although Minera Juanicipio has not formally made a 'production decision,' Fresnillo, the operator, is reporting publically that Juanicipio will be in production in 2017.

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Competition

Competition in the mineral exploration and production industry is intense. MAG Silver competes with a number of large, established mining companies with greater financial resources and technical facilities, for the acquisition and development of mineral concessions, claims, leases and other interests, as well as for the recruitment and retention of qualified employees and consultants and the equipment required to continue the company's exploration activities.

My analysis

There have been three different insiders buying the shares and there have not been any insiders selling the shares during the past 30 days. The management owns 3.6% of the company. There is one analyst buy rating, zero neutral ratings and zero sell ratings with an average target price of $20.00. The company's main asset, Juanicipio, will be in production in 2017. The Juanicipio mine has a Net Present Value of $542 million at $23.39 silver price. The company has a book value of $2.13 per share. I have a cautiously bullish bias for the stock currently based on the intensive insider buying.

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2. Trinidad Drilling (OTCPK:TDGCF) provides land and barge drilling, and coring and presetting services to the oil and natural gas industry in North America.

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Insider buying by insider (last 30 days)

  • Lesley Bolster purchased 271 shares on June 30 pursuant to a purchase/ownership plan. Lesley Bolster currently holds 720 shares or less than 0.1% of the company. Lesley Bolster is Chief Financial Officer of the company.
  • Brent Conway purchased 772 shares on June 30 pursuant to a purchase/ownership plan. Brent Conway currently controls 15,390 shares or less than 0.1% of the company. Brent Conway joined Trinidad Drilling in 2001 as Chief Financial Officer and in 2012 was promoted to President.
  • Darcy Reinboldt purchased 813 shares on June 30 pursuant to a purchase/ownership plan. Darcy Reinboldt currently controls 3,868 shares or less than 0.1% of the company. Darcy Reinboldt is Executive Vice President, U.S. Northern Operations.

Insider buying by calendar month

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

MonthInsider buying / sharesInsider selling / shares
June 20131,8560
May 201300
April 201300
March 201300
February 201300
January 201300

There have been 1,856 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 8 with the following highlights:

Revenue$247.2 million
Net income$32.7 million
Net debt$490.2 million

Outlook

To date in 2013, industry activity levels have been lower than at the same time last year; however, indications are becoming more positive for the second half of the year and beyond. Improving natural gas prices add cash flow for producers, and while prices have not risen high enough to generate a rush back to dry natural gas drilling, a continued increase could see additional gas drilling in 2013. Trinidad views improving natural gas prices as a positive for the industry but believes that stable oil prices at the current level are enough to drive reasonable activity levels, particularly for modern, technically advanced equipment.

Competition

Competition could adversely affect Trinidad's performance as Trinidad's primary market areas are highly fragmented and competitive. The fact that rigs are mobile and can be moved from one market to another in response to market conditions heightens the competition in the industry and may result in an oversupply of rigs in an area. Land drilling companies and other oilfield service companies compete primarily on a regional basis, and the intensity of competition may vary significantly from region to region at any particular time. If demand for drilling or production services improves in a region where Trinidad operates, competitors might respond by moving in suitable rigs from other regions. An influx of rigs from other regions could rapidly intensify competition, reduce profitability and make any improvement in demand for drilling or production services short-lived.

My analysis

There have been three different insiders buying the shares and there have not been any insiders selling the shares during the past 30 days. There are 15 analyst buy ratings, three neutral ratings and zero sell ratings with an average target price of $9.19. The stock is trading at a P/E ratio of 17.57 and a forward P/E ratio of 9.91. The company has a book value of $7.43 per share. I believe the stock could be a good pick at the book value.

Source: 2 Basic Materials Stocks With Recent Intensive Insider Buying