Mining Stocks Sell Off but I Remain Bullish

Good Morning Readers.

Here’s what I know and here is what I don’t know.

For reasons passing understanding, the entire mining sector has been selling off this week. It is important to take into account that this selloff has come at extremely low volume which is not surprising to me because of the holidays this week.

Yesterday I had a nice conversation with Ron Malashewski who is head of investor relations for Avalon Rare Metals (AVL) and he told me that he had a spoken with some of his colleagues that morning and told them that they can expect to see more red on the board for the miners for a while. I asked him if there were any “Loch Ness Monsters” up there at Avalon that would cause the selloff and he told me no. He told me that he was at a loss to explain this sell off and could only attribute it to the algorithmic trading that goes on. He told me that before he came to work at Avalon he had been a stock broker and because he is also an investor in Avalon he keeps an eye not only on his company but the miners as well. We agreed that all of the miners were getting crushed but that he felt this was simply profit taking as the traders that are on the floor this week in both New York and Toronto hold a stock for an average of 5 minutes. The fact that all of the mining stocks are trading at anemic volume shows that there is no institutional buying going on. Below find a chart of AVL which clearly shows that this is simple profit taking and not a long term trend. I did some research on Rare earths and was surprised to find that in the last month Rare Earths ran up a staggering 37.3%. Today they are down 4%. A visit to this link will bear out this claim.http://www.tickerspy.com/index/Rare-Earth-Stocks?refer=yhoo_5246_RAREE

Another stock that surprised me today was International Tower Hill Mining (THM). I used this pull back to add to my stake @ $9.60. Tower Hills Mines recently updated their global mineral resource estimate for the Money Knob deposit at its 100% controlled Livengood Gold Project near Fairbanks, Alaska. THM has recently has upgraded over 50% of the gold resource from the Company's previously reported June 2010 resource model, significantly improving the confidence level of the overall deposit. THM is just 60 miles from the Fort Knox project that is owned by Kinross. Kinross is a major miner of gold. With the fort Knox mine coming to the end of its life I can only assume that Kinross will be trying to acquire this Livengood project. Yesterday I spoke to Ryan Kho who is the associate of Shirley Zhou, Vice-President of Corporate Communications. Ryan was a consummate professional. Pry as I might he would not speak about any acquisition that might be in the works. He only said that at this point they are proceeding with the development of the Livengood project.  The only fly in the ointment (which is good news for THM) is in light of the new discovery of the 50% upgrade in the gold that has been found in the Livengood project the CEO, Jeffery Pontius has said that there have been 12 CA’s visit the site. We also discussed Mr. Pontius’ appearance on Jim Cramer’s “Mad Money.”  I take this as a very bullish indication for the company. Below is a chart of THM.

One stock that has been a major disappointment is the Lynas Corp. (LYSCF). I have an email into the CEO and am trying to find out what is going on over there in the land down under. There are rumors but I will not dignify them until I hear back from the company. When They respond to my concerns I will certainly report them to you. The attached chart supports my thesis that this pullback is more than simple profit taking.

In conclusion, there have been pullbacks on all of the mining companies however it is my belief that this sector is the right place to be at this time.

Stay tuned for more updates.