For now, the very first reaction seems to be positive on the Toronto Stock Exchange (TSE). Yesterday, the stock moved almost 7% up, on a large for the company turnover. The 2.7M shares traded exceeded four times the average for the company.
SAG has doubled its price since December, when it was traded at $0.04. Nevertheless, it is still below its year-high of $0.095, set in late January.
The future behavior of the stock will be, no doubt, influenced by the changes voted on the annual meeting. The shareholders approved the change of the company’s name to “Cerro Grande Mining Corporation” and the TSX stock symbol from SAG to CEG. They also voted in favor of a share consolidation plan, based on a 10:1 reverse split – ten old shares for one new. New directors were elected as well.
Judging by the chart, we might assume possible support levels for SAG at $0.065 and $0.07 and a probable resistance level at $0.085.
The financial state of the company looks solid and could possibly support a further rise in the shares. In the end of 2010, South reported rising revenue, a positive net income of $1.68M for the fourth quarter of the year, and $3M in cash.
Looking from a different angle, however, there are, maybe, somewhat negative data in the latest company’s financial reports. This is the humble working capital, which was only $0.26M in the end of 2010. The $1.17M, raised through the exercise of stock options and warrants in February, could hardly make things much more different.
Finally, we should note that the company seems overvalued by investors, as its present market value is $68.5M, while the tangible net worth of the company is about $15M. This suggests the current share price looks a bit high and is not supported enough by the company’s fundamentals.
