PAL

[David Randolph]

From a technical standpoint, PAL is at a crucial point, banging on the $9.80 resistance level (prior support) and the short term descending trendline, tomorrow at $9.80 too.

In fundamental terms, I've held it so far, and I've been losing more than 20% on this stock, so I'm not even close to being prepared to sell it for a loss. I'm confident that the reasons for the palladium bull market are strong enough to make the metal price triple or more and PAL should benefit immensely from that development.

I'll keep on holding PAL.

[David Randolph]

PAL started the day very well, but faced with selling pressure at $10 couldn't hold the line, closing down 1.64% on the day. It was a bearish reaction to the descending trendline.

But I remain confident in Palladium's bull market, which should resume its uptrend shortly, so I'll keep holding PAL, the only mining company in the Main Portfolio.

[David Randolph]

Nothing new on PAL as the stock keeps struggling to get close above the descending trendline, which for today will be standing at $9.8 (the same level as the horizontal resistance).

I'll continue holding PAL.

[David Randolph]

Palladium isn't moving much lately:



But I'm confident that after the current consolidation phase, the long term bull trend will continue, essentially because of two factors:

1) More cars in the world means more autocatalysts which use palladium.

2) Platinum is very expensive relative to palladium now. Palladium's demand should increase as a substitute to platinum.

I'll keep on holding PAL.

[David Randolph]

Good news out for PAL from a company specific standpoint, perhaps what was lacking to move it higher:

• Infill Drilling at NAP's Ahmavaara Deposit at Suhanko Finland Indicates Good Continuity of Widths and Grades
Marketwire (Thu 8:46am)

It would be nice to see it closing back above $9.8.

[Garoh]

Good news out for PAL from a company specific standpoint, perhaps what was lacking to move it higher:

• Infill Drilling at NAP's Ahmavaara Deposit at Suhanko Finland Indicates Good Continuity of Widths and Grades
Marketwire (Thu 8:46am)

It would be nice to see it closing back above $9.8.

david Probably above 10 today 

[David Randolph]

Good news out for PAL from a company specific standpoint, perhaps what was lacking to move it higher:

• Infill Drilling at NAP's Ahmavaara Deposit at Suhanko Finland Indicates Good Continuity of Widths and Grades
Marketwire (Thu 8:46am)

It would be nice to see it closing back above $9.8.

david Probably above 10 today 

Unfortunately no Garoh, closed at $9.68. It seems the chart was prevalent to the good news, but as we've seen in several other occasions, sometimes stocks take time to digest new fundamental information, while they almost always react to key technical points over the short term.

Technically PAL is still fighting with its short term descending trendline. Fundamentally, we've had that good news from a specific company standpoint and it seems Palladium is taking small steps to the North again:



I'll keep on holding PAL.

[berloga]

David,

would you take a look at MTL? It is a mining and steel company out of Russia. It's profits seem to have been growing well. Not too much debt not to be able to pay it off, decent balance sheet. The PE ratio is also less than the industry (8.88 vs 14.5). My friend recommended back in January of this year, when he bought at $25. It trades at $47 now. But can go higher.

Thanks!

[David Randolph]

David,

would you take a look at MTL? It is a mining and steel company out of Russia. It's profits seem to have been growing well. Not too much debt not to be able to pay it off, decent balance sheet. The PE ratio is also less than the industry (8.88 vs 14.5). My friend recommended back in January of this year, when he bought at $25. It trades at $47 now. But can go higher.

Thanks!

Ok, I'll put it here in my notebook to make an analysis next week.

As for PAL, nothing new from a technical or fundamental standpoint. I'll continue holding PAL.

[David Randolph]

Palladium has been trading in a very narrow range lately ...



... but, because of the factors underpinning its long term bull market which I've exposed in this thread, I think it will ultimately make a bullish breakout to new highs above $385 and take PAL with it.

I'll keep on holding PAL.

[David Randolph]

PAL didn't do much yesterday, as it rose 0.86%. Palladium spot was down about 0.1% on the session. No news out. I'll keep holding PAL.

[nexta]

14:05 ET N Amer Palladium reports second quarter 2007 production results Co production in Q2 2007 rose by 16% to 66,651 ounces compared to 57,326 ounces in the comparable period in 2006. The average palladium head grade for the quarter was 2.26 g/t compared to 2.22 g/t in Q2 2006. Production for all by-product metals increased. 1,244,067 tonnes of ore were processed during the quarter at a Pd recovery rate of 73.5% compared to 1,101,543 tonnes of ore in Q2 2006 at a Pd recovery rate of 73.1%. Mill availability for the quarter improved to approximately 90% versus 83% last year. Spot palladium prices in Q2 2007 averaged US $368 per oz compared to US $347 per oz in Q2 2006.

[David Randolph]

We had 2nd quarter production numbers out of PAL yesterday:

• North American Palladium Reports Second Quarter 2007 Production Results
Marketwire (Wed 2:03pm)

Palladium production rose 16% from the year ago level but fell 15.4% from the 1st quarter 2007 level.

I have to admit that I'm not knowledgeable enough to value mining stocks properly, as I'm still studying the subject. So PAL will be the last mining stock I buy for some time, until I know more about the sector.

So, what to do about PAL now?

I'll use the market's valuation to get a feel to where PAL should stand. In Q2 2006 PAL was trading around $8, and it was losing money back then. Now palladium production rose 16% and  the palladium price rose 6%, which means a 23% cumulative effect on revenue. Also, the by-products production and prices also rose. So I would say PAL is worth at least 30% more than what it was worth a year ago, which means a price per share of roughly $10.4.

The initial market reaction was positive, but still not enough to cross over the all important $10 resistance level. Let's see if PAL is able to push above that level today.

Anyway, I see fundamentals as supportive, that is, the stock shouldn't go down, and all the upside from the continuation of the bull market in palladium still exists.

So I opt to keep holding PAL.

[David Randolph]

Very nice bullish breakout from PAL today. I believe the 6-K form the company filed with the SEC today gave some help, the following table is much more clearer than yesterday's press release, at least to me:



So, we had 66,651 oz of palladium at an average price of $368 per oz, and that means $24.53 M in revenue. 5,904 oz of platinum at about $1,275 per oz gives me $7.53 M in revenue. 4,739 oz of gold at about $670 means $3.18 M. 1,310,484 lbs of copper at $3.25 represents $4.3 M. And 716,096 lbs of Nickel at about $21 means around $15 M in revenues.

Summing it all I get $24.53 M + $7.53 M + $3.18 M + $4.3 M + $15 M = $54.54 M in revenues over Q2 2007. Q2 2006 revenue was $31 M.

This means revenue growth from the year ago period was about 76%, much higher than what I thought yesterday (30%), because I wasn't taking into account the by-products to their full extent. It is also very close to what I had in mind when I derived my valuation model, where I have a revenue CAGR of 75%.

I would say PAL is on track with my long term estimates, even without much help from the price of palladium, which I believe is about to explode on the upside. In fact, it had quite a strong day today:



I'll continue holding PAL.

[David Randolph]

We've had another good day in the palladium market and I feel the metal is on the verge of a bullish breakout to new 5 year highs:



I expect this development to put PAL on fire, now that it closed above the 50 days SMA.