Habanero Resources Inc. (CVE:HAO) (PINK:HBNRF) share price gained significant 16.7% on Friday under a heavy trading volume as a reaction to a new property purchase.
Habanero announced on October 07, 2011 the company acquired Grande-Vallee North aluminous clay prospect near Murdochville in Quebec. A technical report and other disclosures obtained suggest the deposit has a density of 2 tons per cubic meter with 800 million to 1 billion tons of indicated mineral resources at the depths of up to 100 meters. The prospect borders Orbite V.S.P.A Inc.’s (CVE:ORT.A) Grand-Vallee property.
The fact that the company obtained a new property doesn’t change the fact that their stock price has little space to appreciate. Currently, Habanero holds a market cap of $7.6 million, which already includes the initial gains forced by the news announcement.
The underlying book value of the business is close to $2.5 million, and exploration stage companies usually carry a P/B of up to 2, which is already exceeded in this case. It means that any further price gains will not be backep up by fundamentals of the business, but only by demand of the stock itself. Liquidity issues can play a major role in such a case as well, and HAO stock holds a poor record.
