Gediminas Jasionis
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Canadian Zinc Corp. (TSE:CZN) (OTC:CZICF) Traders Play It Safe

by Gediminas Jasionis May 17, 2011
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czn_chart.pngCanadian Zinc Corp. (TSE:CZN) (OTC:CZICF) stock is cautiously rolling down ignoring the company's latest plans to raise a few millions, but the determination of sellers remains questionable.

CZN share price is approaching the lower limit established by last price bounce on the current downtrend in the beginning of May. Trading volume is somewhat rising, but still doesn't pop above the average 373 thousand.

Traders have a questionable support at 83 cents and resistance at a price of $1.01 per share. The stock is prone of sudden spikes and gradual declines. The last time such a wave was created by the company's offering to sell $5 million worth of units.

According to the press release issued on May 11, 2011, Canadian Zinc is looking to strengthen their financial base by selling a common share and half a common share purchase warrant units at 90 cents per piece. The agent also gets an over-allotment option to purchase up to $1 million of additional units and will be paid generous commissions of 7% in cash and 7% in broker warrants.

Canadian_zinc_logo.jpgThis is a good signal for investors, despite the dilution caused by it as the company has at least shown it is ready to move forward. The proceeds will be used to develop Prairie Creek Mine in Northwest Canada. 

There were no other news for the two months after the company published its annual results in mid- March 2011. The fillings show a decent situation even before the recently announced fundraising:

  • $4.4 million in cash, $42.3 million in marketable securities;
  • Low debt;
  • Revenues flat and minuscule;
  • Capital position sustained by selling stock.

The most recent market cap of $112 million is only twice the book value of $53 million. This is a cautious valuation given to the companies with little progress and might change when they complete the funding round.

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