Sunset Cove Mining Inc. (CVE:SSM) celebrated the beginning of spring season with a 44% increase in price under no particular news issued. The stock started declining shortly after the opening bell today.
Extraordinary volume and a massive increase in price could be the result of trading in expectation of assay results on the drilling, finalized on Feb. 18. Sunset’s management suggested back then, that these results should be ready by the end of the month.
The stock followed technical conditions – share price failed to close above the resistance at 18 cents. If news don’t come out soon, there would be no reason for it to remain inflated at these levels, thus a gradual decline is possible.
Of course, the trade is risky at the moment, because the news might actually be pending. There was no update from the company amid February, thus it remains a waiting game. The management actually stepped up to make it clear that the reason for yesterday’s trading activity was unknown.
Another reason for a rise in price could actually be the financial reports for Q4 2010, filed on February 28. Although the reaction was delayed, it could be blamed on the poor liquidity of the stock. The update on SSM’s financial position wasn’t very positive.
The company reported:
• 2.5 times increased losses from operations, compared to Q4, 2009;
• No revenues;
• Increase in value of mining properties;
• Tripled number of outstanding shares.
The company is still worth only $800 thousand on paper. Since their properties are not yet mineable, this value should be closely reflected by the market cap. The current market value deviation into the $6 million zone only shows positive expectations by traders, currently not backed up by raw fundamentals.
