Confirmation that GPR.TO is undervalued relative to other mining companies

GPR.TO ( Great Panther Silver ) has been followed on this blog for a while, and recently there has been an interesting development within this stock.

This massive triangle that began at the start of April. I would like to make a case of a break out of the triangle which will lead to a substantial gain in GPR.TO.  This gain may overshoot true valuation and have a pull back but I am expecting at least a 10% move.

Complicating this situation was the announcement of a $24 million Bought Deal which closed on April 12th, but was announced March 24th.  When this was announced, the stock quickly advanced to around 4.80 an all time high for this stock.  However, this began this triangle to find the true value of this stock.  The key here is, on April 12th, the underwriters instantly exercised the over-allotment option.  The stock price this bought deal was executed at was $4.20.

"We are very pleased with the strong investor support for the Company as evidenced by the over-subscription," said Robert Archer, President & CEO.

My last part of this case that this stock should at least be over the $4.20 mark comes from some analysis of three mining companies: GPR.TO (Great Panther Silver), FVI.TO (Fortuna Silver), AXR.TO (Alexco Resources).

Using a Canadian Silver ETF (HUZ.TO) to describe price movements in silver this graph shows that a convergence between the HUZ.TO and GPR.TO is likely.  Compared to all other mining companies GPR.TO has not kept up with the silver moves.  The right hand axis is the scale for Silver and the left hand axis is the scale for the mining companies.

Also some historical correlations from January 1st, 2010 to April 19th, 20th

Correlation GPR<->HUZ    0.610178314
Correlation GPR<->TSX    0.404853301
Correlation FVI<->HUZ    0.51851121
Correlation FVI<->TSX    0.416605769
Correlation AXR<->HUZ    0.559390905
Correlation AXR<->TSX    0.442104414
Correlation HUZ<->TSX    0.512571887

GPR.TO has the highest correlation with HUZ.TO, however in the past 10-20 days this correlation has broken down.  I expect that when investors have a signal that this stock is about to move, the move will be fast and furious, barring any collapse in silver.