Are the tough days for MagIndustires Corp. stock (TSE:MAA), (PINK:MAAFF) finally over? For now, judging by the shares’ performance this year the answer is probably “yes”.
After the recent crisis that led MAA to its 52-week low of $0.235, the stock started to climb. Since the beginning of 2011 MAA has advanced by 15% to $0.270 per share.
Somewhat astonishing is the enormous trading volume realized during Friday’s session. The turnover of 11.3M is four times the average and made MAA the second most actively traded stock on the Toronto Stock Exchange (TSE).
There are no recent news that could explain the stock’s behaviour and the huge volume spike. The last information from the company came shortly before Christmas. MagIndustries announced it has entered into a Letter of Intent with TSC Capital Ltd. (TSC) in regards to a proposed investment by the latter in the company.
The final effect of the deal will be as follows: MagIndustries expects to raise a total of $185 million, while TSC will come into possession of approximately 55% of the company’s outstanding shares. But this will happen only in case TSC is satisfied with the results of the due diligence that it will conduct on MagIndustries by March 2011.
With no news in the last two weeks, we must search for other clues. People on the stock forums are startled by Friday’s trading volume too. Some of them even suggest the current rise might be a result of speculative buying.
Currently, MagIndustries Corp. is developing a potassium chloride production plant to be located at Mengo potash property. The facility is expected to start functioning not earlier than 2012.
It looks like investors at present do not have enough confidence in the company. Perhaps they are somewhat bewildered by the fact that after the planned placement MAG will have over 750 million shares (!) outstanding. At the same time, the company has no production and it is not known if the funds raised will be enough to build the fore-mentioned plant. Besides, MagIndustries has almost a 30M long-term debt that also deserves attention.
