Kaminak Gold Corporation (CVE:KAM) (PINK:KMKGF) had a serious spike in trading volume on Monday but no follow up to its price action yet.
The trading activity topped 1.7 million shares during the session, which is a lot considering that the average is only 340 thousand. KAM was recently bouncing against t support at $2 per share. There is significant selling pressure associated with the stock because o f the strong preceding downtrend.
A descending triangle like formation that formed over the past few weeks shows that bulls lose more and more ground with each price swing and even positive news reports doesn’t have a lasting effect.
On January 1, Kaminak announced drilling results from Supremo T2 and T3 zones on their Coffee Gold property in Yukon. Found comparatively small length zones containing gold. Some of the highest grades to date were found, reaching 91.3 g/t over 1.5 meters in one hole. A drilling program for 2012 is still in planning and should commence in late March if all goes well.
This sounds promising but it couldn’t bring the stock price up because it’s already overpriced considering the company’s situation. Their market cap is $142.7 million, while the book value is nearly three times lower at $51.88 million. With no income a rare business can sustain such a valuation.
Fruthermore, as an exploration stage company Kaminak relies on capital stock sales to raise funds. The stock dilution rate reached 48.1% over the past year.
Such a situation allows for further price drops even if the company keeps finding more gold. Until the official resource calculations are published there is no guarantee that investors will be willing to pay more than $2 per share for KAM when its assets are worth only a third of that.
