Extreme reaction to Ionic's Scoping Study

Extreme reaction to Ionic's Scoping Study

The two stand-out commodities in the last few weeks have been copper and gold, while iron ore continues to be as strong as steel. It is great to see gold back above U$1,800/oz, justifying the breakouts on a number of the gold stocks. However, the renewed enthusiasm has not had a big impact on most gold exploration yet. Sentiment has been improving and this is reflected in the new high for the Metals and Mining Index, but not everything is going up. You still need to be selective.

One would have to say that the extraordinary reaction of the market to Ionic Resources Scoping Study was ... extraordinary. In the ordinary course of events a scoping study should be seen as a useful document in that it gives you an idea of whether or not a project is worth pursuing, on first pass inspection. It is rare that a scoping study gives a project the thumbs down because a company will usually have an inkling of what it is going to say before it is formalised. Whatever the actual scoping study says, it is important to note that it is only +/- 50% accurate. So, it certainly isn't iron clad.

In the case of Ionic's Makuutu project, I could see nothing in the Scoping Study to cause me to sell my shares, but that didn't stop the selling of 257 million shares ($10.5m) by others on the day of the release, and 763 million in the subsequent four days. I picked up another two million at 2.8¢ as I thought the selldown was excessive.