Two days ago the company announced that they are abandoning their Barranco de Loba project, the quality of this ore body apparently was below expectations. There will be some write-offs as a result but on the other side the company will not have to put down another $600.000 to exercise the option that they hold.  This project was where the gold might be. At 3967 hectares it is much larger in surface area than the 1287 hectares of the Santa Elena copper project.

What is worrisome is that the stock dropped to a low of 42 cents on relatively high volume. There are clearly motivated sellers coming out of the woodwork. Nevertheless the stock may be getting close to a low.

We singled this stock out as one of the few that would NOT rebound. More recently we took the optimistic side and expressed the view that a small bounce might be forthcoming. So far this has not happened. Yesterday the company announced that Geotech in Aurora (and Brazil) , Ontario will do areal geophysical surveys, more or less like flying a large metal detector over the land by helicopter, to more properly define the location and quality of the ore body. The transaction with Pacific Road is amended (delayed) and made subject to the results of this survey. The phase 1 obligation to buy 2 mln. shares for $2 a piece seems a little out of touch with reality. Combined with warrants this would have added about $7.5 mln to the company’s war chest. Pacific Road has already acquired 1.9 mln. shares in the open market and is allowed only 1.1 mln. more. Given the company’s burn rate and its cash position and the probable limited availability of additional financing we would stay away from this stock.

    In pure EW terms the pattern appears to be that of a double a-b-c. The bottom would be somewhere between here and 20 cents, where the stock was 2 years ago. From there a good bounce may, in fact, develop. The RSI and MACD do seem to support that view.

Cuoro has been the basket case we expected it to be. Then at about 60 cents the possibility presented it self that a large A-B-C from $2.60 to $0.60 ( nice Fibo ratios!)completed itself. Not much has happened to either support or reject that view. If correct, that is if the A-B-C is complete , this stock will easily double regardless of where it might ultimately end. This might be a buy at 0.53 or lower with a stop at around 0.45  When putting in the stop make the range very tight as otherwise you could get molested along the way.

As anticipated the incentive for management by way of options has all but been eliminated with the stock at these depressed levels. From $2.60 to $0.65 is around a nice Fibo 76% so it is possible that the stock will recoup some of its losses, but odds are overwhelmingly against a major rebound given their burn rate, the weakness of one of their backers and our low expectations with regard to the metal itself. Stand aside.