A1 Minerals (AAM.ASX) as previously indicated represents good buying. The current price action provides another timely entry at 24.5c. The reason being the imminent break out in gold prices. The stock is a new gold miner, it has been unhinged slightly by the Kevin Rudd tax proposal, so it should gain as Rudd removes his foot from his mouth, and replaces his red Marx Manifesto bed time reading with 'Atlas Shrugged', the best-selling novel of Ayn Rand. Hopefully Kevin has a revelation.
We can see from A1 price action that the 24c resistance now becomes support, and I am looking for a new high of around 35c, so this ought to be a good move. It is destined to come because of the rally in gold prices. The new high will attract investment funds, plus I think the AUD will be subdued since it strong gold will likely be associated with subdued economic news. The resistance for the AUD is 0.8674. The support level is around 0.8540. The back down by Rudd will however be the biggest issue. The other appeal of A1 is the prospect of some appealing gold grades. Their drilling highlighted a lot of high-grade near-surface gold. The prospect of higher than expected gold output should help the stock, as well as average down mining costs per ounce. Its a good story. There is not as much resource upside as other stocks, but with a substantial resource base, a rising gold price, the pit design will broaden, which means an expanding mineable resource. There is also the prospect of some expansion of gold resources, but not as much as the boys in Africa, which control a hundred-plus kilometres of favourable Archean geology. The A1 area though is distinctly high grade, and its already mining, so it is a good short-medium term story.
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Andrew Sheldon www.sheldonthinks.com
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