Litigation can be a slow grind, everyone knows that. It is a word that frequently scares shareholders no matter what the circumstance. But…there is always a time when the litigation ends and things are settled, which is the time when hanging in there reaps its rewards. In the case of Sphere Resources, Inc. (TSX-Venture:SPH.H) and its shareholders, that day just came.
Five years ago, Sphere entered into negotiations with Kaldora which culminated in an earn-in, option and joint venture agreement dated June 26, 2006 between Kaldora, Duration, DGML, and Sphere regarding the maintenance, operation and acquisition of various mining and gold projects located mainly in Zimbabwe.
Under the Agreement, Kaldora had the right to earn up to 75% of the issued shares of DGML (a company which was then owned mainly by Duration) by investing up to $2,000,000 in DGML over a seven-month period from June 30, 2006. Without going into all the details -- and needless to say -- the plan did not go accordingly.
After litigation and negotiations, as issued in a press release today by Sphere, "Under a deed of assignment agreed by the Company on August 18, 2011; the Company [Sphere] has received a cash payment of $3,000,000, with the balance of $500,000 secured by a promissory note and payable the earlier of June 30, 2014 or the sale of several mines in Zimbabwe collectively or singularly to the value of US$5 million or more."
In short speak, this settlement basically adds $4.5 million to the Company’s coffers which will allow Sphere to spend as needed which will help maintain a solid share structure as the need for any dilution to raise capital for ongoing exploration should be unnecessary, especially in the short term.
News like this can certainly be the catalyst that a stock needs to charge a solid chart.
Technically speaking, the stock chart for SPH.H is sitting at a prime level for potential upward movement. One year ago, the value of a share had touched a penny and then began a multi-month climb to $0.075 before plateauing on a new support level at a nickel before getting its wings again to rise to a 52-week high of $0.12 at the end of March 2011. The share price has slid recently – along with the majority of the markets - and is once again firmly holding support at $0.05.
Classically used technical indicators such as the Moving Average Convergence/Divergence (MACD) slipped into negative territory with the share price retreat and appears to have found a bottom in June as it has been trending back upward towards zero ever since. Followers of technical components look for the break of the zero barrier as it is a sign of bullishness in the overall trend of the stock. Presently, the two main components of the MACD, the 12 and 26 EMAs, are positioned just beneath zero and looking to make the break.
Momentum in the stock is often times gauged by the Relative Strength Index (RSI). Three commonly used time frames for the RSI are the 7, 14 and 21 periods as cumulatively they define near term and longer term momentum. In the case of SPH.H, all three are closely knit and registering readings right in the area of 49. Much like the MACD break of the money line, bullish qualities for a chart are showcased by all three components pushing above 50, which SPH.H appears poised to do.
Moreover, the 50 day simple moving average (which dropped a bearish cross) in July already appears to be flattening and could curl back upward into the 200 dma. This same look happened back in September and October of 2010 when the upward surge from a penny began. As always, these are merely the interpretations of AllPennyStocks.com and like we always state, investors are encouraged to conduct their own due diligence and consult with a financial advisor prior to making any investment decisions.
Given the facts at hand with the news that just hit the wires and a technical chart that seems to be going through a trend shift towards bullishness, Sphere Resources could be ready to make another run towards the old highs at 12 cents as it looks to make its next leg-up.
At Friday's closing bell, shares of Sphere held a 30% premium to Thursday’s close on strong volume.
