emed mining update

Firstly, I have to declare a not too small long position in EMED at 12p – held for over 2 years and with no leverage. The stock is currently priced largely at the same level as 2 years ago.

Why have I held this share for so long, through such a volatile market for small caps?

Well, EMED is a long story, with various twists and turns in recent years as the company has attempted to re-open the Rio Tinto mine in Andalucia Spain – it’s principal asset. For various reasons, including probable corruption in past local council administrations, the re-opening has been delayed somewhat. Come to think of it, this is a small understatement, this has been delayed since 2008.

Now though, finally in 2012, a new Local Government and some effort from Officials within the Madrid Government will soon see EMED get the necessary permissions to re-start the mine. Conservative predictions, and in looking at the chart below which is very constructive – displaying a rising MACD and a possible ‘golden cross’ (50 day rising through the 200 day moving averages with the share price above both) should hopefully have this at 18p prior to an announcement (it reached a high of 23p before but with 25% less shares in issue).

Assuming the permit is issued, I expect a quick move to 33p (broker targets in fact go upto 48p) and, as is always the case, then a pull back until production starts in late 2012 – shares never move in a straight line. My own personal sale target is 32.5p – which will represent a decent profit if all goes to plan! Even this week in choppy markets a lot of progress has been made in the price with volumes building nicely too – always a good sign. Next resistance is at 14p – so still a good 20% from here.

As always with AIM, the twist is in the relative illiquidity and the market maker basis of the stock (our favourite City whipping boys after the bankers!) and which both make for high volatility. Still, a closely held share like this also offers a great bet when  positive events take over as price movements to the upside can also be swift.

Permitting is expected Q3 so after all these years…not long to go now?

City Unslicker