Gold has bounced around today, climbing as high as $1,515 overnight and finding support at $1,500…as of 8:45 am Pacific, the yellow metal is off $6 an ounce at $1,506…Silver is down a dime to $34.78…Crude Oil is up 78 cents at $95.55 while the U.S. Dollar Index has fallen one-fifth of a point to 74.34…the greenback has been under some pressure after hawkish comments from European Central Bank president Trichet, suggesting another ECB interest rate hike is forthcoming (the ECB’s monthly policy meeting is next week)…the euro has hit a fresh three-week high against the U.S. Dollar in response…the Greek crisis seems to have stabilized which is giving the markets comfort…Prime Minister George Papandreou has just won a parliamentary majority in favor of an implementation law for a five-year austerity plan required under an EU/IMF bailout package…the number of Americans seeking unemployment benefits was mostly unchanged last week, evidence that the struggling U.S. economy isn’t generating many jobs…the Labor Department reported this morning that unemployment benefit applications ticked down 1,000 to a seasonally adjusted 428,000…applications have topped 400,000 for 12 straight weeks…they had fallen in February to 375,000, a level that signals sustainable job growth…they stayed below 400,000 for seven of nine weeks…however, applications then surged to an eight-month high of 478,000 in April and have shown only modest improvement since that time…the four-week average, a less volatile measure, has been stuck at about 426,000 for a month…China’s economy is expected to grow a robust 9.5% in the first half of 2011 and retain much of the momentum the rest of the year with little chance of a hard landing, a government think-tank stated in a report published today…the State Information Centre (SIC), in the research report published in the official China Securities Journal, forecast that annual inflation would be 5.3% in the first half and 4.9% for the whole of 2011, overshooting Beijing’s target of capping full-year inflation at 4%…but that does imply that inflation levels in China may have peaked for the moment or are about to peak, consistent with views expressed recently by the country’s premier…China’s annual inflation rose to a nearly three-year high of 5.5% in May and is expected to hit 6% for June…the CDNX is trying to finish a rough month of June on a positive note…the Index is up 9 points to 1901 and a close above 1900 would be nice to see…for the first half of this year the CDNX was down 17% entering this morning’s trading…we do expect a much better second half, perhaps similar to the recovery in 2004 after the market was in the doldrums from April through the end of July…Silver Quest Resources (SQI, TSX-V) has recovered as we expected it would after announcing a $12 million financing the other day…SQI, which is very active in the Yukon at the moment and also holds a valuable 25% interest in the northern portion of New Gold’s (NGD, TSX) Blackwater deposit, gained 9 cents yesterday and is up another 7 pennies this morning at a new 52-week high of $1.15…SQI should be one of the go-to plays on the Venture this summer…Currie Rose Resources (CUI, TSX-V) is up half a penny at 16.5 cents…we’re expecting news soon from CUI with regard to the start of its summer drill program in Tanzania…many highly prospective targets are going to be tested during the company’s most extensive exploration campaign ever…Adventure Gold (AGE, TSX-V) released its third quarter financials last night (ending April 30) and they show the company’s working capital has actually increased since the end of January (the end of its second quarter) to $3.5 million from $3 million, thanks in part to the Quebec exploration tax credit…this is a company that knows how to optimize every dollar it has…AGE is also extremely effective at leveraging its large property portfolio…drill programs are in progress at three of AGE’s properties at the moment including Pascalis-Colombiere which is rapidly developing into a very valuable asset…we’ll be focusing more on this property in the near future which will include comments from AGE President and CEO Marco Gagnon from an exclusive interview with BMR…Pascalis-Colombiere is a gem that the market hasn’t discovered yet and we believe it could propel AGE to new all-time highs over the summer…we suspect joint venture partner Agnico-Eagle Mines (AEM, TSX) has now completed 4,000 metres of drilling at AGE’s promising Dubuisson Property that straddles a five-kilometre segment of the prolific Cadillac-Larder Lake Gold break contiguous to the Goldex Mine Property…drilling commenced in April and results should be coming out over the summer…as of 8:45 am Pacific, AGE is unchanged at 57 cents…Spanish Mountain Gold (SPA, TSX-V) has announced this morning that it’s undertaking a $15 million private placement at 60 cents per share (each of the 25 million units includes a half warrant exercisable at 70 cents per share)…director Ian Watson is expected to take down 20% of that offering…Spanish Mountain is advancing a potential multi-million ounce deposit 70 kilometres northeast of Williams Lake in the B.C. interior…SPA is up a penny at 61 cents…it has shown strong support in the 60-cent area…current Gold prices make that project look extremely attractive…iSign Media Solutions (ISD, TSX-V) seems to have found a bottom just below its 100-day moving average (SMA)…it fell as low as 35 cents this morning but has rebounded to 39 cents, up two-and-a-half pennies on the day…
June 30, 2011
June 29, 2011
The greenback is under pressure today with strength in the euro, and that has given Gold a slight lift…as of 6:45 am Pacific, the yellow metal is $4 higher at $1,506…Silver has climbed 28 cents to $34.22, Crude Oil is up 35 cents to $93.24 while the U.S. Dollar Index is off one-fifth of a point to 74.86…Copper, which is up 8 cents to $4.18 a pound, continues to look strong which is a positive sign…the Greek Parliament has voted to back a package of deep spending cuts that should help clear a path for the release of funds and potentially a second bailout for the country by the European Union and International Monetary Fund…a second vote on the implementation of the law is due tomorrow…the head of the country’s central bank, George Provopoulos, told the Financial Times that Greece would be committing “suicide” if its Parliament failed to back austerity measures aimed at averting a catastrophic default…it has been a rough month for the CDNX, the worst since November 2008 with a drop of 228 points or 11%…the Index has declined on 15 of 20 trading sessions so far this month with just today and tomorrow to try and regain some lost ground as the month and the quarter come to an end…the correction since March 7 has wiped 24.5% off the value of the CDNX…however, that’s still a very normal major correction by historical CDNX standards and could even extend a little more before a bottom is finally put in…technically, it’s also a very healthy pullback after an advance of 1122 points or 83% over an eight-month period from early July last year to early March…John updates the CDNX chart below…
As of 6:45 am Pacific, the CDNX is up 7 points at 1873…a weak CDNX this month has not prevented Adventure Gold (AGE, TSX-V) from continuing to climb…AGE is up 10% for June so far (through yesterday) and has climbed 18% this year vs. an 18% drop for the CDNX…that should tell investors something…AGE has gained 76% since we added it to the BMR model portfolio about nine months ago and we’re more optimistic than ever about this company’s future given how they have several projects that are proceeding extremely well…we expect to post Part 1 of our interview with President and CEO Marco Gagnon tomorrow which will focus on AGE‘s Pascalis-Colombiere Gold Property adjacent to Richmont’s (RIC, TSX) Beaufor Mine…Pascalis-Colombiere includes the past producing L.C. Beliveau Mine that still has depth potential, but what’s really becoming interesting is the near-surface mineralization Adventure Gold is discovering to the west of L.C. Beliveau…that’s an area that Phase 2 drilling at the moment is concentrating on…we believe Richmont is paying close attention to developments at Pascalis-Colombiere…drill programs are also in progress at three other AGE properties while the company also has significant plans for its Granada Extension properties…AGE remains in a strong cash position…the stock blasted through its 50-day moving average (SMA) yesterday and is looking very bullish from a technical perspective as John outlines below..
As of 6:45 am Pacific, AGE is off 4 pennies at 56 cents…Gold Bullion Development (GBB, TSX-V) has been holding support near its rising 500-day moving average (SMA) and is poised for a much better July in our view…it’s currently unchanged at 40 cents…Visible Gold Mines (VGD, TSX-V) closed at 19.5 cents yesterday, giving it a market cap of just $9.3 million which is just slightly ($2.8 million) above its cash value…given the scope and potential of the company’s Joutel Project (Joutel is a significant former Gold-Silver producer and VGD‘s Joutel land package is more than 10 times the size of Granada), VGD has to be considered a steal in the 20-cent area…the company is in the final preparation stages for a major drill program at Joutel…Silver Quest Resources (SQI, TSX-V) has increased its financing to $12 million from $10 million…the stock fell eight cents yesterday on the financing news but any weakness in SQI should be viewed as a gift at this point considering the company’s interest in the northern portion of the Blackwater deposit and its 17 properties (85,000 hectares) in the White Gold district of the Yukon…SQI‘s 2011 exploration program in the Yukon will include at least 15,000 metres of drilling and total expenditures of at least $5 million…the Yukon will be hot this summer and so too will SQI…a company we haven’t mentioned before that we like in the White Gold district is Ethos Capital (ECC, TSX-V) – we suggest investors perform their DD on that one…ECC is unchanged at $1.13 in early trading…
June 28, 2011
Gold traded as low as $1,495 this morning but is now strengthening…as of 8:00 am Pacific, the yellow metal is up $7 an ounce at $1,504…Silver is 34 cents higher at $33.92…Crude Oil has climbed $1.40 to $92.01 while the U.S. Dollar Index has reversed and is now down one-fifth of a point at 74.99…investors are watching to see if Greece’s Parliament will approve austerity steps that are a precondition for international aid that the country needs to avoid a default…thousands of Greeks are protesting the cuts and privatization measures in the streets of Athens – too bad they didn’t keep their government in check years ago when spending was growing wildly out of control…the population needs to buy into the plan, however, or it’s going to be very difficult to implement whatever the Greek Parliament approves going forward…below is an interesting chart from comparing the performance of Gold vs. Oil over the last decade…
Gold has obviously outperformed Oil significantly since the 2008 Market Crash…in fact, since July 2008, Gold has gained 50% while Oil has fallen nearly 40% from its $147 peak…as the chart above illustrates, Oil appears to be trading in an upsloping channel which is approximately parallel to the gradient of Gold…it’s clear that Oil has a definite demand destruction problem if the price climbs too fast while Gold has a totally different demand dynamic…that’s why we’re not too concerned if Oil were to fall another 10% or so from current levels which is possible given the apparent desire of the White House to use strategic reserves as a short-term economic stimulus tool, sort of Obama’s version of QE3…the growing view of Gold as an alternative currency is a demand enhancer for the yellow metal…there are so many fundamental factors driving Gold that physical buying, much of it from emerging countries as part of the “love trade” that Frank Holmes has so effectively analyzed, will continue to give strong support during periods of temporary short-term technical weakness…total Gold ownership as a percentage of global financial assets is still trivial – less than 1% according to some reports which is well below the historical norm…that percentage can be expected to increase in the years ahead…the U.S. Dollar continues to lose its status as the world’s “reserve currency”…holders of large reserves, most notably China, have been gradually diversifying away from the Dollar…in the first four months of this year, for example, no less than 75% of the $200 billion expansion on China’s foreign reserves was invested in non-U.S. Dollar assets according to a report this morning in the Financial Times…as of 8:00 am Pacific, the CDNX is up 2 points at 1870…Silver Quest Resources (SQI, TSX-V) has announced a $10 million financing in a hard cash ($1.00) and flow-through ($1.15) combination…the stock fell by as much as 9 cents on the news this morning to 98 cents…it’s now trading at 99 cents…we view any weakness in SQI as an opportunity for long-term investors given the growing resource at the Blackwater Project where SQI holds a 25% interest in the Davidson (northern) portion…New Gold Inc. (NGD, TSX) is drilling Blackwater aggressively and results from 22 holes from SQI‘s section were reported yesterday, several of which were outstanding including 318 metres grading 1.39 g/t Au in BW-162…Blackwater is a terrific asset for New Gold which is a producer we like a lot…a smaller producer that has strong upside potential is Richmont Mines (RIC, TSX) which is 14 cents higher at the moment at $6.81…many producers, including Richmont, are trading at very attractive price-earnings multiples and it’s important to point out as well that a drop or leveling off in Oil prices will help their bottom lines…Oil is a significant component of the cost structure for a producer…iSign Media Solutions (ISD, TSX-V) continues to be very volatile but this morning it found support at its rising 100-day moving average (SMA) at 36.5 cents after dropping for the seventh consecutive session…buying into weakness and selling into strength has certainly been the successful trading strategy with ISD which has excellent liquidity…the stock is now up a penny at 40 cents…a very promising summer is shaping up for Adventure Gold (TSX-V) which is up a penny this morning at 55 cents…we’ll be explaining in greater detail later this week why we believe AGE is such a gem…
June 27, 2011
Gold has traded in a range of $1,490 to $1,506 so far today…as of 8:25 am Pacific, the yellow metal is down $3 an ounce at $1,499…Silver is off 44 cents at $33.88…crude oil is down another 51 cents at $90.65 while the U.S. Dollar Index is off one-third of a point at 75.37…the market will be paying close attention to events in Greece this week but you know the U.S. is in rough shape when the L.A. Dodgers have to file for bankruptcy protection which they have done in a Delaware court this morning…perhaps the entire state of California is next…the CDNX appears to want to test last week’s low of 1882…it’s currently off 19 points at 1886…as our Saturday article detailed, one cannot rule out the possibility of a drop below 1800 in the CDNX which is what this market may have to do to finally bottom out…having said that, now is definitely the time in our view to be accumulating quality juniors – the CDNX could turnaround very suddenly – as the second half of the year looks a lot more promising after a very normal major correction during the first half…the long-term bull market remains completely intact…Gold has suffered some technical damage and a drop to as low as $1,425 (worst case scenario) can’t be ruled out as John’s chart outlines…however, physical buying in the Gold market, particularly from emerging economies, remains very robust and that has always supported prices when the short-term technical outlook has deteriorated…Gold‘s primary trend remains highly bullish…
From one form of stimulus to another…QE2 ends this week but the White House has come up with its own version of QE3 in the form of lower oil prices…the decision by the International Energy Agency (IEA) and the U.S. Department of Energy (DOE) to release oil from strategic reserves around the globe was not about an oil emergency but rather a deliberate attempt to force crude prices lower in order to stimulate economic growth in the United States and elsewhere…more intervention from the IEA and the DOR should be expected…it’s estimated that a drop in oil prices into the $80′s could be worth as much as an extra half point for GDP growth in the United States over the second half of the year…oil is already down 20% from its April 29 peak…since oil is such a major component of the cost structure for producers, lower crude prices are welcome news for them as long as Gold holds up reasonably well which it should…a dark shadow has been cast over mining and exploration in Peru which is the world’s largest Silver producer…due to politically motivated protests from a bunch of backward thinking neanderthals, the Peruvian government has pulled the licence on Bear Creek Mining’s (BCM, TSX-V) Santa Ana mine and halted all new concessions in the Puno province of southeastern Peru for three years…BCU of course is getting hammered this morning, down $1.22 at $3.94 after trading at an all-time high of $12 in early March…the company is now threatening legal action…this only goes to show how critical it is to invest in companies in “safe” jurisdictions, but history has shown that even parts of Canada are sometimes very risky (what the NDP did to mining in British Columbia years ago is a classic example)…it’s not so much commodity prices but fringe groups and government actions that threaten our investments in the mining sector…Bayfield Ventures (BYV, TSX-V) is flying this morning after cutting a major Gold and Silver intercept at its Burns Block Property in the Rainy River district of northwestern Ontario…hole #71 returned 79.50 metres grading 8.66 g/t Au (starting at a downhole depth of 15.5 metres) and included a bonanza zone grading 60.05 g/t Au over 11.20 metres…BYV gapped up to 82 cents and is currently up 24 cents at 83 cents…it has traded as high as $1.00 this morning…technically, the stock faces significant resistance in the 90 cent to $1.00 range but it does have the potential to run…it’ll be interesting to watch how it trades through the rest of today – one test will be to see if it can hold above its opening price…obviously the best time to get in on a stock is prior to when good results come out which is why we’re so excited about Adventure Gold (AGE, TSX-V) at the moment…the market hasn’t quite picked up yet on the exploration success AGE is enjoying at its Pascalis-Colombiere Gold Property near Val d’Or…a 5,000 metre Phase 2 program is now underway and we’re expecting more stellar results given the location and history of this property and what has been reported already by Adventure Gold…in addition, down the highway, Agnico-Eagle Mines (AEM, TSX) is well into a 4,000 metre drill program at the promising Dubuisson Property and some nice numbers could come from there…drills are turning on four of AGE’s properties at the moment…the stock is unchanged this morning on light volume at 54 cents…SilverQuest Resources (SQI, TSX-V) reported results from 22 holes this morning at the Davidson Property, the northern portion of New Gold Inc.’s (NGD, TSX) Blackwater Project that SQI holds a 25% interest in…about 40% of the holes delivered strong results, a decent average, and show a continuity of mineralization to both the northwest and northeast of the resource area…hole #162 was particularly impressive as it cut 318 metres grading 1.39 g/t Au…New Gold is drilling 20,000 metres at Davidson in an effort to expand resources…SQI is up on the news this morning, 3 pennies higher at $1.07…Seafield Resources (SFF, TSX-V) continues to shine…it’s up another 3 cents to 34 cents which puts it exactly at its 200-day moving average (SMA) where it will likely encounter major resistance…the stock is in overbought territory, so there is a risk of a pullback before it’s able to re-energize itself for a push to higher levels…
June 26, 2011
Investors should keep a close eye on Romios Gold (RG, TSX-V) this summer as the company has started a $6 million exploration program, including 12,000 metres of drilling, at three advanced and highly prospective projects in the Galore Creek area of northwestern British Columbia, a copper-Gold rich region with improving infrastructure. Drilling at Romios‘ Trek Property commenced June 2 (10,000 metres is planned) while some drilling will also take place this summer at the Dirk and Newmont properties. As always, perform your own due diligence but Romios‘ 26,000 hectare land package does offer tremendous exploration upside in our view.
Technically, Romios is looking very healthy with rising long-term moving averages and solid Fibonacci support at 40 cents which also happens to be the 100-day SMA. The stock moved nicely last week off the 40-cent area, climbing as high as 50 cents and closing Friday at 47 cents. As John’s chart shows below, the downside risk with RG at the moment appears to be limited. With 139 million shares outstanding, the company’s current market cap is a modest $65 million which is certainly reasonable given the fact that Trek, Dirk and Newmont are advanced plays in such a prolific region with a major exploration program underway.
Note: John, Jon and Terry do not currently hold positions in Romios Gold.
Independent Research and Analysis of Emerging Junior Resource Companies: Speculative, Undervalued, Home Run Opportunities in Today’s Markets
Welcome to our site, or at least the initial version of it! BMR has been online for nearly two years and strictly through word-of-mouth we have built a loyal following.
We’re continuing with our plans to ultimately build a very unique investment and money-management resource site that goes considerably beyond what we have now. While we focus a lot on the Gold market and trends in the global economy, and of course the technical health of the TSX Venture Exchange (CDNX), an important component of this site will always be original research on small and undiscovered junior resource companies, mostly in the Gold exploration space, that offer very real and significant upside potential. We are extremely selective in the companies we feature and put forward to investors – we prefer quality over quantity. However, investors must understand that these are still highly speculative situations. Our stock coverage is for informational purposes only and must not be viewed or interpreted as “buy”, “sell” or “hold” recommendations. Please read our disclaimer at the bottom.
We use a combination of fundamental and technical factors in determining the value and potential of a stock. In terms of fundamentals we look for a company with a superb project supported by strong management. Management must possess integrity, solid ethics and a determination to succeed and build shareholder value.
At BullMarketRun (BMR) we approach the handling of money from a biblical perspective and this is an important topic we will be sharing with our readers (and listeners) as the site continues to develop. The Bible teaches so much about money and how to handle it and invest it - there are literally thousands of verses on how we should handle the money and possessions that God entrusts us with. By examining the life of Jesus and reading the Word of God, we can all become fully equipped to be successful investors and handle money wisely in order to make it work for us. If it’s the other way around - if you’re a slave to money by being in debt for instance, or if you don’t respect the value of money and spend it foolishly - you’re in trouble and you’ll never be blessed financially. We have a God who thinks big – He created the universe – and He wants us to think big in every area of our lives. When we handle money from a Biblical perpective (His money that we have been given stewardship of) He will bless our financial decisions and an increase of tenfold or a hundredfold is always possible. This all begins, of course, with a personal relationship with Jesus Christ by accepting Him as your Lord and Savior and putting Him at the throne of your life. It is the most important decision you’ll ever make.
BullMarketRun.com (BMR) is completely independent from any companies it covers. BMR accepts no compensation of any kind from any groups, individuals or corporations for coverage of any company mentioned on this site. We accept no advertising either. Our stock coverage is for informational purposes only and must not be viewed or interpreted as “buy”, “sell” or “hold” recommendations. No investment opinion or other advice is being rendered on any stock or company. We strongly recommend that you consult with a qualified investment adviser, one licensed by appropriate regulatory agencies in your legal jurisdiction, and do your own due diligence and research before making any investment decisions. The stocks we cover, by definition, are highly speculative and potentially very volatile. Investors are cautioned that they may lose all or a portion of their investment if they make a purchase or short sale in these speculative stocks. We are not Registered Securities Advisers. Our opinions can only be construed as a solicitation to buy and sell securities when they are subject to the prior approval and endorsement of a Registered Securities Adviser operating in accordance with the appropriate regulations in your area of jurisdiction. It should be assumed that BMR personnel, writers and their associates may hold or dispose of or trade in positions in any securities mentioned herein at any time. Owner/Publisher of BullMarketRun.com is Terry Dyer of Langley, British Columbia.
Visible Gold Mines (VGD, TSX-V)
Visible Gold Mines (VGD, TSX-V) continues to struggle and hasn’t posted an “up” week since the end of March…we see a powerful story emerging here, however, so we would encourage our readers to remain patient with VGD and if possible take advantage of the current weakness…the trigger for a reversal in this stock is going to be the company’s Joutel Project which, mark our words, should generate plenty of excitement…Joutel is a joint venture between VGD and Agnico-Eagle Mines (AEM, TSX) with VGD acting as the operator…several high priority drill targets are being finalized, work begins on the ground within a couple of weeks and the property will be drilled aggressively through the balance of the year…selling in VGD in recent weeks has been technically driven and unrelated to the fundamentals and what’s about to happen on the ground – hence we see a major opportunity at the moment with this company’s market cap not much above its cash value of $6.5 million…recently we posted an interview with VGD President and CEO Martin Dallaire which went into considerable detail regarding Joutel…it’s a massive project with multi-million ounce potential…it’s also a significant former producer that Agnico-Eagle mined from three zones between 1974 and 1993…Joutel was closed prematurely as Agnico-Eagle turned its attention to its huge LaRonde Mine…the theory is that there are extensions to the Joutel deposits as well as potential undiscovered zones elsewhere on that large land package (it’s more than 10 times the size of Granada)…Joutel is a geologist’s dream with a great story and it was Agnico-Eagle that actually approached VGD to take on this project through a joint venture – that’s the confidence they have in Visible Gold Mines’ geological team, in particular senior geologist Robert Sansfacon who was instrumental in the discovery of Osisko’s (OSK, TSX-V) Canadian Malartic deposit…”When we picked up all the Joutel boxes and maps from the Agnico-Eagle exploration offices, it took us two pick-up trucks for all the data,” Dallaire told us…”We were flooded with data but we love it because we have the capacity to analyze all of it and bring some fresh ideas to the project…the trend is very large and there’s a lot of potential for many new mines in the area”…Dallaire, an engineer and entrepreneur from Rouyn-Noranda, understands the mining industry and what an exploration company needs to do to succeed and build shareholder value…he’s fluently bilingual, presents himself extremely well and knows how to run a business and make money…he thinks big but is focused…he has also recruited some key people including Sansfacon who honed his skills for many years with Lac Minerals…in short, Dallaire has put something together you don’t often see in the junior speculative market – a powerful dynamic of business, geological and marketing expertise with a strategic plan to rapidly build value…the company’s niche and sole geological focus is northwestern Quebec where it has acquired several promising land packages, mostly west and north of Rouyn-Noranda…Dallaire is taking an aggressive approach to exploration and he’s targeting under-explored areas and past producing mines where major new extensions are possible…
Cadillac Mining (CQX, TSX-V)
Cadillac was unchanged for the week, closing at 10 cents on continued light CDNX volume…this is a company with tremendous potential given its property packages but management has yet to demonstrate an ability to make things happen in the market and create shareholder value…we are frustrated but remain patient for now because the possibilities with CQX are still incredible, especially considering the current market cap which is just $2.5 million…not often does a company get the kind of opportunity that Cadillac was handed (and still has)…CQX holds a 100% interest in a very strategic piece of property that adjoins Richmont Mines‘ (RIC, TSX) Wasamac deposit, 15 kilometres west of Rouyn-Noranda…the principal Gold structure hosting mineralization at Wasamac dips northerly onto the seven claims held by Cadillac…Richmont started drilling Wasamac a year ago and steadily ramped up its drilling due to excellent results…in February of this year, Richmont reported a nearly five-fold increase in resources (from 285,000 to 1.4 million ounces) at Wasamac…as a result RIC has been one of the best performing Gold stocks on the TSX this year…BMR brought the Wasamac situation to the attention of its readers in December…investors got excited about the story and the potential of Cadillac’s “Wasa” claims…the stock ran to 50 cents by early January and the market was clearly eager to see Cadillac pursue this project as quickly as possible…management’s delay in doing so has been frustrating and has led to a substantial drop in CQX’s share value…the company is also cash poor and needs to raise some money…we give CQX credit for securing an excellent project (Goldstrike) in Utah on fabulous terms but several million dollars is going to be required to tackle Goldstrike in the right way…the best solution in our view is for Cadillac to cut a deal with another company for exploration at Wasamac and the natural partner for that appears to be Visible Gold Mines (VGD, TSX-V) which last December entered into a JV with CQX on its other Rouyn-Noranda area properties…VGD has all the money and expertise necessary to unlock the value of Cadillac’s Wasa claims…Cadillac could let others do the heavy lifting at Wasa and then focus its energies on developing the Goldstrike Project…talk is cheap – the onus right now is on Cadillac to show investors that it can “walk the walk” and make things happen, however they decide to proceed…
Abcourt Mines (ABI, TSX-V)
Abcourt continues to be unloved at the moment and dropped another penny last week to 11 cents…volume has dried up significantly and ABI hasn’t enjoyed a 1 million+ share day since May 16…the drop-off in volume is actually a good sign as that’s what typically occurs near the end of a decline…Abcourt has traded in a narrow range between 10.5 and 13 cents over the last 34 sessions…the stock, which now has 149 million shares outstanding for a market cap of $16.4 million, is ripe for a takeover given the value of its assets which is why we still have an interest in it…ABI’s decline from a 52-week high of 25.5 cents in late March was brought on by the closing of a financing (35 million units at 18 cents), a sharp drop in Silver, overall CDNX weakness, and selling by MineralFields Group…ABI’s 100-day moving average (SMA) is now in decline and will provide resistance for now around 16 cents while the declining 50-day is at 13 cents…it’s going to take some significant news or bullish new overall market sentiment to drive ABI through resistance over the next month or two, so investor patience will be required here…the company released more results from its Abcourt-Barvue Silver-Zinc Property June 13 including 20 metres grading 108.33 g/t Ag and 1.49% Zn, and 4.5 metres grading 239.43 g/t Ag and 2.00% Zn… metres grading 300.99 g/t Ag and 3.05% Zn in AB-11-24, and 10 metres grading 129.48 g/t Ag drill results to date should significantly upgrade and increase all-category reserves and res0urces…more drilling will take place at Abcourt-Barvue later this year…the rig was just recently moved to the Vendome Gold-Silver-copper-zinc property approximately 13 kilometres south of Abcourt-Barvue…the last set of results from the company’s Elder-Tagami Gold Property near Rouyn-Noranda came out May 16…mineralization continues to expand to the west and the east of the former underground Elder Mine which is now being dewatered…the Tagami area to the north, meanwhile, has untapped potential including some higher grades…the latest NI-43-101 resource estimate of 216,000 ounces was released in the summer of 2009…the possibility of Abcourt expanding that resource beyond 500,000 ounces certainly exists given the encouraging results to date (look what Richmont has done at Wasamac)…the heavy accumulation that began in Abcourt in December was no fluke in our view…this is a company with significant assets that could justify a substantially higher valuation…nearly 60 million shares of ABI changed hands on the CDNX in December and January – record volume for this stock, accompanied by a price jump from 14.5 cents…while the stock price is now slightly below that level, the record volume in ABI since late last year (take a look at a 10-year chart) is still a very bullish sign…Abcourt has been under significant accumulation and our best guess is that some savvy players like the assets in the ground…continued drilling success and higher prices for Gold, Silver and zinc would be exciting developments for this stock which has a history of major moves…from mid-2005 to early 2006, Abcourt rocketed from 15 cents to nearly $1.40…
Greencastle Resources (VGN, TSX-V)
Greencastle was up half a penny last week at 17.5 cents on very light volume of just 77,000 shares…the company released its Q1 financials June 9 which show working capital of 16.4 cents per share ($7.5 million)…oil royalties have declined significantly – just $212,000 for the first three months of 2011 vs. $355,000 over the same period a year ago which underscores the need for VGN to make some major changes as Primate just isn’t the cash cow it used to be…the fact Tony Roodenburg is no longer at the helm of Seafield Resources (SFF, TSX-V) is a positive development in our view for Greencastle…Roodenburg had been trying to ease his way out of Seafield since 2009 without much success until last month…he’ll now be able to focus almost exclusively on Greencastle which has been a favorite project of his for many years…we suspect he’s going to take a serious look at spinning out the oil assets or the Gold assets into a separate company…something needs to happen here to move this company forward and boost shareholder value…Greencastle’s market cap of $8 million means the stock is now trading just half a penny above its cash value…history shows that whenever this occurs in VGN, a terrific buying opportunity has opened up though investors must be patient…it’s interesting to note that the stock’s rising 500-day moving average (SMA) and its 1000-day SMA, which has flattened out, have converged at 17 cents where there is exceptional support… Greencastle tripled over a six-week period from late October to early December…since the beginning of January, though, the stock has struggled due mostly to impatient investors frustrated with the lack of news…patience is definitely required with VGN or one shouldn’t invest in it…over the years the successful strategy with Greencastle has been to accumulate on weakness when the stock is near cash value and then sell into strength when something develops…with $7.5 million in working capital, three Gold properties (including land near the Blackwater Project) and monthly cash flow from an oil royalty, it doesn’t take a rocket scientist to figure out that Greencastle does offer excellent value at current levels…the long-term chart remains very encouraging with rising 200 and 300-day SMA’s that are in no danger of reversing at the moment…it’s also important to note that Roodenburg, a large shareholder in VGN, refrained from selling any of his holdings during the late 2010 run-up in the share price…this is different from past bullish in the stock and adds further credence to our view that we haven’t seen the highs in this cycle yet from Greencastle – it’s poised for what we believe could be a massive breakout sometime this year…Pinetree Capital has also accumulated more shares in Greencastle, so there’s every reason to be very optimistic regarding this company’s prospects…Greencastle is up 21% since we added it back in to the BMR model portfolio last October…
Sidon International (SD, TSX-V)
Still very quiet on the Sidon front…the company hasn’t been able to recover yet from its fall in March, one day after the CDNX correction began, on poor drill results from its Morogoro East Gold Property in Tanzania…the stock was up half a penny last week thanks to a couple of decent volume days, closing at 3.5 cents…there has been no news from the company since March 14 when it announced a proposed private placement at 8 cents and an option to acquire an 80% interest in a 50-square kilometre property adjacent to Canaco’s (CAN, TSX-V) Handeni discovery in Tanzania…the six shallow holes drilled in December at Morogoro East failed to produce significant results, the best hole showing 3 metres grading 1.7 g/t Au…the company has drilled four deeper holes with results for those still pending…what the initial six holes have given Sidon, however, is a better understanding of the Morogoro geological structure which will aid in any future drilling…exploration, especially at such an early stage, is never easy and disappointing early results don’t necessarily mean a property doesn’t hold excellent potential…the company is also trying to develop a placer operation at Morogoro…there is certainly the possibility of better days ahead for Sidon but the lack of news and the continuing weakness in the share price is not encouraging…from a technical standpoint, the stock has fallen to a support area and is in deeply oversold territory…the climb back up, however, won’t be easy and the company may have to look at a consolidation of its capital on a 1-for-5 basis at least…Sidon ran as high as 26.5 cents last winter but is now off a penny-and-a-half since we introduced it to BMR readers just over a year ago at a nickel…the company currently has approximately 140 million shares outstanding for a market cap of $5 million…
Gold Bullion Development (GBB, TSX-V)
Since early March, Gold Bullion has traded mostly between its rising 300-day moving average (SMA) and its rising 500-day SMA with the former being resistance and the latter being support…the stock spent all of last week hovering around the 500-day and closed Friday at 38 cents, a loss of half a penny for the week…volume has been relatively light on the move down from the mid-to-upper 40′s…the declining 100-day SMA, currently at 47 cents, has provided stiff resistance since the breakdown in February…our expectation is that the 100-day will flatten out in July and then begin to reverse to the upside at some point over the summer, marking a clear reversal in trend…Slow Stochastics and the Chaikin Money Flow (CMF) both show the stock is in oversold territory at the moment…higher lows and higher highs on the RSI(14) since April is encouraging…GBB’s initial 43-101 resource estimate for the LONG Bars Zone, expected during the third quarter, should re-energize this play…the market is a forward-looking machine and those who follow GBB won’t be waiting until after the 43-101 comes out before getting positioned appropriately in the stock…the company’s current market cap of $63.5 million puts a value of just $21 an ounce on Gold in the ground at Granada if one were to assume the 43-101 will outline approximately 3 million ounces in the measured, indicated and inferred categories…that’s just a hypothetical number on our part at the moment but whatever number GENIVAR comes up with, we believe it should exceed the 2.4 to 2.6 million ounce conceptual figure that Gold Bullion gave in April of last year…based on all the drill results to date, this appears to be shaping up as a half-gram deposit with a higher grade starter pit and massive volume…it’s all about volume at Granada which is why the drills have to keep turning and why we want to see more than just two rigs in the LONG Bars Zone which has such incredible potential…Gold Bullion released fresh drill results from Granada May 12 which were consistent with previous numbers…hole #173 was the star of the batch of 25 holes…it provided additional evidence that the north and northeastern parts of the Eastern Extension are highly intriguing…#173 cut 80 metres grading 1.36 g/t Au within a total intersection of 363 metres of 0.35 g/t Au…a 1-metre section of high-grade (89.83 g/t Au) was hit near the bottom of the hole below 300 metres…#173 was collared approximately 115 metres northeast of #55 and 100 metres east-northeast of #108, two stellar holes released last fall…this is critical – assays are still pending on 9 holes (165, 168, 178, 183, 241, 243, 246, 254, and 257) north of #55 drilled over an east-west distance of about 250 metres and a north-south distance of 200 metres…results from those nine holes will go a long way toward confirming just how prospective these parts of the Eastern Extension are…#241 is the most northerly of those holes…meanwhile, hole #200 in the southeast portion of the Eastern Extension (northeast of discovery hole #86) returned an impressive interval of 48.50 metres grading 1.68 g/t Au within a total intersection of 210.5 metres of 0.44 g/t Au…results from the second most northerly hole drilled north of the Preliminary Block Model suggest more drilling is definitely required in that area…hole #31 hit a modest 18.5 meters grading 0.64 g/t Au close to surface (36 to 54.15 metres) and another 28 metres grading 0.59 g/t Au between a depth of 125 to 153 metres…where’s there’s smoke, there’s fire, and our theory is that there could be a significant trail of mineralization running north of the Preliminary Block Model and connecting with what has been discovered over the northern part of the Eastern Extension…six more holes (213, 214, 215, 217, 221 and 224 and 224) from the southwest portion of the Preliminary Block Model returned mixed results – we were hoping to see a couple of exciting holes from that area but that hasn’t materialized yet…overall, Gold Bullion continues to hit long intersections of lower grade mineralization over a wide area at Granada…this is a massive project with much more drilling required but the multi-million ounce model that Frank Basa has in mind remains intact…drilling is also underway in LONG Bars Zone 2 near the old Aukeko Property (2 kilometres east of Phase 1 discovery hole #17) and if Gold Bullion is able to connect these two zones, look out…GENIVAR’s Nicole Rioux, the head geologist for Granada, is genuinely excited about the Aukeko area and she is normally quite conservative in sizing things up…a couple of excellent results from this area could really ignite this play and based on all the historical information we have reviewed from “LONG Bars Zone 2″, the chances of a “hit” in this area have to be considered very good…the company provided an update on its Castle Silver Mine Project June 8…the 6,000 metre Phase 1 drill program is nearing completion and a strong new vein structure was intersected at the first IP target…a 43-101 technical report on the property has also been released…assay results from the 10 holes drilled so far are still pending…GBB plans to spin-off this asset into a separate publicly traded entity…GBB is up 443% since we introduced it to BMR readers in late December, 2009…
Currie Rose Resources (CUI, TSX-V)
Currie Rose is well positioned for a successful summer as the company gets set to launch a major drill campaign at its properties in the Lake Victoria Greenstone Belt of Tanzania…our expectation, based on Currie Rose’s latest news release, is that drilling will begin this coming week…the stock’s rising 300-day moving average (SMA), currently at 15.5 cents, has provided rock-solid support throughout the year…the Chaikin Money Flow (CMF) is at its lowest level since late January, showing selling pressure has intensified recently, but we view that as a bullish contrarian indicator and a reflection of the weakness this month in the CDNX…the stock traded as high as 17.5 cents Friday on the strongest overall volume (CDNX plus other markets) in 16 trading sessions…it closed at 16 cents, up half a penny for the day and unchanged on the week…CUI’s chart is quite favorable in our view and suggests a breakout above resistance in the low 20′s is only a question of when, not if…the 100-day SMA has flattened out since late May and the sure sign of a major reversal is when this turns decisively to the upside…from a fundamental perspective, the company is busier than ever with its projects in northwest Tanzania as outlined in a news release June 9…we’re particularly excited about the Sekenke Project which has “blue sky” written all over it…Sekenke is why we decided to start following CUI when it was trading around a dime last fall…results from satellite imagery provide additional evidence that Sekenke is a highly intriguing geological target and part of the same northwest trending structure that hosts Canaco’s (CAN, TSX-V) Handeni Project…satellite imagery has also shown that the structures at Sekenke are coincident with a strong alteration envelope…what’s unique about this project is that it surrounds and runs in between two former high grade Gold mines including Tanzania’s original producer…this greatly increases the chances of a discovery as it’s unlikely the former mines were fully exploited or explored as techniques a century ago in this industry obviously weren’t what they are today…CUI has a terrific chance to hit it big at Sekenke and we also wouldn’t be surprised if the company takes a shot at acquiring the former Sekenke Mine…that’s speculation on our part but it makes sense from a strategic point of view…pre-drilling exploration work continues at Sekenke to pinpoint the best targets and in the meantime the company will begin drilling very soon at its Mwamazengo discovery at Mabale Hills…geochemical analysis has outlined a continuous anomaly over a few hundred metres that runs parallel to the west of the discovery where previous drill results included notable high-grade intercepts such as 34 metres grading 3.60 grams per tonne gold, 12 metres grading 9.11 g/t Au, 63 metres grading 2.59 g/t Au and 31 metres grading 5.97 g/t Au…CUI also has two other important targets at Mabale Hills, Sisu River and Dhahabu…while its Tanzanian properties are the market’s major focus, Currie Rose could also benefit over the summer from continued good exploration news out of Trueclaim Exploration (TRM, TSX-V) which is currently conducting an 8,000 metre drill program at the Scadding Gold Property near Sudbury…Trueclaim, which continues to release encouraging assay results, has earned a 51% interest in Scadding and can acquire a full 100% interest by completing a feasibility study, paying $2 million to Currie Rose, and giving Currie Rose a 3% net smelter royalty…CUI announced a joint-venture deal January 25 with Australian-based Liontown Resources for Currie’s Jubilee Reef Gold Project in Tanzania…CUI’s focus is on the Sekenke and Mabale Hills Projects, so finding a partner for Jubilee Reef made sense…the deal commits Liontown to at least 5,000 metres of drilling at the property this year which will give Currie Rose a minimum of 23,000 metres of drilling at all of its properties in 2011…while Currie Rose has had its market cap shaved by more than half, from a high of nearly $40 million late last year to the current $14.2 million, what hasn’t changed is the quality of this company’s project portfolio which remains as high as ever…Currie Rose has all the cash it needs ($2 million) to complete an initial major round of drilling (10,000 metres) in Tanzania this summer, so there will not be any dilution of the stock at current levels as confirmed by President and CEO Harold Smith…
Adventure Gold (AGE, TSX-V)
We remain very excited about Adventure Gold…as one of our readers commented, it’s a “gem”, one that we’re convinced the market will really begin to appreciate as the summer progresses…AGE, which was off a penny for the week at 54 cents, has significantly outperformed the CDNX this year and we have every reason to believe that trend is going to continue…last week, we spoke with President and CEO Marco Gagnon and arranged an interview with him, likely to take place during the coming week…Gagnon is a sharp operator who knows how to maximize every dollar spent…he also has the strong backing of Montreal investment firm Windermere Capital which holds just under 20% of AGE as disclosed January 21…the company has five active key projects, two of which are being drilled by joint venture partners Lake Shore Gold (LSG, TSX) and Agnico-Eagle Mines (AEM, TSX)…AGE is currently drilling its very promising Pascalis-Colombiere Gold Property and its Lapaska Property as well, both near Val d’Or…so drills are turning on four AGE properties at the moment while the company continues to examine potential drill targets at Granada…on June 16, Adventure Gold gave the market a pleasant surprise when it reported results from the first two holes of a drill program at Lapaska…AGE is the operator of this project which Mazarro Resources (MZO, TSX-V) can earn a 70% interest in (30% to AGE) under which we consider to be quite favorable terms for Adventure Gold…the Lapaska Property is located along the Cadillac-Larder Lake Gold Break and the first two holes returned solid results at shallow depths…LP-11-16 cut an interval of 1 g/t Au over 103.4 metres (from 45.3 to 148.7 metres), including 10.3 g/t Au over 3.8 metres, while LP-11-17 returned 1.2 g/t Au over a 156.9-metre interval (25.2 to 182.1 metres)…LP-11-16 included a Gold halo of 564.1 metres grading 0.3 g/t while LP-11-17 featured a Gold halo of 245.5 metres grading 0.8 g/t, providing evidence of a potentially strong Gold system…both holes were drilled perpendicular to the strike of the vein system in the Lapaska Central zone and are therefore close to true thickness…this will be interesting to watch and the market will be eagerly awaiting additional results to size up the potential of this play…at the end of May the company reported significant news regarding Pascalis-Colombiere…AGE has started a 5,000 metre Phase 2 drill program at the property after releasing more highly encouraging drill results including 4.8 g/t Au over 33.1 metres in hole #20 (plus lower grade halos over significant widths)…the intent of this program is to further define the Gold system, leading to a resource calculation which is already being worked on…Pascalis-Colombiere encompasses the past producing L.C. Beliveau Mine (Richmont’s Beaufor Mine is just a few kilomeres away)…we found a comment from Gagnon in the June 2 news release quite interesting…“Following positive drill results and the permitting process, an open-pit or an underground operation could be producing in the near future“…we believe Richmont Mines (RIC, TSX) may have interest in this project…earlier this year we met with AGE’s Jules Riopel, VP Exploration, regarding the company’s strong portfolio of properties…he was very keen at that time on Pascalis-Colombiere and given the drill results, his bullishness on this property appears to have been justified…the former L.C. Beliveau Mine was a very profitable operation between 1989 and 1993, producing nearly 170,000 ounces of Gold for Cambior…meanwhile, Agnico-Eagle is well into a 4,000-metre drill program at AGE’s Dubuisson Property near Val d’or…Dubuisson is contiguous to the Goldex mine property and also straddles a 5-kilometre segment of the prolific Cadillac-Larder Lake Gold break…also of immediate interest is AGE’s partnership with Lake Shore Gold on the Meunier 144 Property where deep drilling is still testing the down-plunge extension of Gold zones located at the Timmins and Thunder Creek deposits…the current initial deep drill hole onto the Meunier JV property is continuing and has reached a core length of 2500 metres with another 500 metres to go…if a discovery is made, AGE will instantly explode higher…AGE’s latest financials, released April 1, show the company with $3 million in working capital at the end of January…we first mentioned Adventure Gold to our readers in an article September 29, just a couple of days following the company’s announcement that it had acquired land at Granada, when the stock was trading in the low 20′s…we officially added AGE to the BMR model portfolio at just 34 cents October 28…Adventure Gold has been around only since late 2007…AGE is clearly a keeper for the long haul and we wouldn’t be surprised to see a major breakout in this play over the summer…
GoldQuest Mining (GQX, TSX-V)
GoldQuest came to life last week, climbing as high as 25 cents and closing at 20 cents for a gain of a penny-and-a-half…there was no news from the company, so the buying was probably the result of investors deciding the stock had simply become oversold and undervalued after falling from a high of 48.5 cents in early February to a low of 16.5 cents earlier this month…there’s no question that GQC presents a great opportunity for patient and long-term investors…Chairman Bill Fisher certainly saw a deal he couldn’t refuse – he recently picked up 211,000 shares in the open market between 18 and 20.5 cents according to insider trading reports…GQC’s prospects remain solid as the company has an outstanding portfolio of projects in the Dominican Republic and Spain…the stock’s 300 and 500-day moving averages (SMA’s) continue to rise and are in no danger of rolling over anytime soon, so a long-term uptrend definitely remains in place…for now there is major resistance right around 30 cents in the vicinity of the declining 100-day and the still-rising 200-day…a test of those moving averages should be expected over the summer…the substantial drop in the share price from a high of 48.5 cents in early February was due to general market weakness and selling from speculators whose expectations may have been too high regarding initial drill results from the company’s La Escandalosa Project in the Dominican Republic…in addition, the company has stopped all drilling in the DR until probably August in order to conduct extensive IP surveys over Escandalosa and other properties…overall assay results from Escandalosa were decent though far from spectacular…the final set of assays for seven holes came out May 16…the best intersection from Escandalosa Sur, where an initial 43-101 inferred resource of 400,000 ounces was outlined last fall, was 20 meters grading 1.32 g/t Au…results from this area overall (21 holes) were somewhat disappointing though more drilling is required and will take place later this year…however, the company drilled three holes at the Hondo Valle target 1.6 kilometres to the north (outside the resource area) and all three intersected significant mineralization including 29 metres grading 2.18 g/t Au in hole #65…that’s the thickest and highest grade mineralized section drilled to date at Hondo Valle…the theory is that mineralization trends north from Escandalosa Sur to Hondo Valle…GoldQuest is now carrying out a 16-square kilometre IP survey and magnetic ground geophysical survey from 2 kilometres north of Hondo Valle to 2.2 kilometres south of Escandalosa Sur…this will be completed by the end of July and GQC will then use the data to pinpoint key targets for an additional 3,000 metres of drilling…GoldQuest also has other promising projects in the DR (in particular, Loma Oculta – formerly Las Animas – where an exploration program aimed at identifying new drill targets is now underway) in addition to its lead-zinc-silver deposit in Spain…GoldQuest’s potential has not diminished whatsoever yet the share price has dropped by about 60% from its early February high…the company released a 43-101 resource estimate March 2 on its Toral zinc-lead-Silver deposit in Spain…it showed slightly lower grades but much higher overall tonnage than the previous historical non-compliant estimate…as a result, total resources came out 15% higher…resources in the indicated category are 4.04 million tonnes grading 11.8% lead and zinc (5.3% lead, 6.5% zinc) as well as 41 g/t Ag and 0.11% Cu… inferred resources are 4.67 million tonnes grading 9.8% lead and zinc (4.44% lead, 5.4% zinc), 32 g/t Ag and 0.14 Cu…Toral has significant exploration and development upside as a majority of the historical drilling (40,000+ metres) was conducted over one relatively small part of the property…the zone of sulphide mineralization is open along strike to the northwest toward a known lead deposit as well as along strike to the southeast and downdip…the project is also an ideal candidate for a fast-track to production…the deposit is close to a power line, highway and rail line…a large smelter is located just 300 kilometers away by rail…GQC is up half a penny from when we introduced it to BMR readers last fall…
Seafield Resources (SFF, TSX-V)
Traders playing the swings in Seafield recently have likely done quite well…volume has come back into Seafield and the stock has been volatile lately, bouncing back and forth from the low 20′s to the low 30′s…the 200-day moving average (SMA) at 34 cents is providing resistance at the moment while there is plenty of support in the low-to-mid 20′s (the rising 500-day SMA is at 25 cents)…SFF closed Friday at 31 cents, a gain of 7 pennies for the week…volume on all exchanges for SFF last week was a whopping 14 million shares, so clearly the street has renewed interest in this play…the company announced the closing of a $3 million private placement at 30 cents May 24 with a “strategic” long-term investor and also released an updated 43-101 resource estimate for its Miraflores Property…that project has gone from an inferred resource of 776,000 ounces (at a cut-off grade of 0.5 g/t Au) to a measured and indicated resource of 1.2 million ounces and an inferred resource of 354,000 ounces (at a cut-off grade of 0.3 g/t Au)…another round of drilling will begin shortly at Miraflores…there was big news out of Seafield May 9 with a change in management which has to be considered a bullish development…Cesar Lopez, who has a strong background in South American exploration management and development, is the company’s new Chief Executive Officer…he replaces Tony Roodenburg who remains as a director…Tom Henricksen, meanwhile, has taken over as Vice-President, Exploration, from James Pirie who also has stayed on as a director…Henricksen has over 35 years of mineral exploration experience and has spent the last 15 years on projects in South America…Seafield exploded from the low 20′s to an all-time high of 77 cents in just one day last December but then proceeded to give up all of those gains…the company’s Quinchia land package in Colombia has a great deal of untapped potential and Seafield is also sitting on nearly $20 million in cash…the company announced April 5 that drilling has commenced at Santa Sofia, about 1 kilometre north of Dos Quebradas where drilling continues…Seafield geologists have identified a promising porphyry target measuring 1,050 metres in length and 850 metres in width at Santa Sofia with soil values up to 2.3 g/t Au…on March 7, assays were reported from the first three holes completed at Dos Quebradas with hole #2 intersecting 511 metres grading 0.58 g/t Au…the hole ended in mineralization…hole #1 delivered 269 metres grading 0.37 g/t Au while hole #3 was drilled to define the eastern limit of mineralization and returned no significant results…significant intercepts well outside areas of historical drilling would start to get the market excited…the geological case for Seafield’s Quinchia land package is compelling and we’re looking forward to more results from Dos Quebradas as well as initial assays from Santa Sofia…patient investors have an opportunity to do extremely well with this play given the geological merits of Quinchia and the real potential for 5 million+ ounces from several potential deposits…we have confidence the new management group will unlock value by bringing fresh insight and new energy to this play along with a more aggressive exploration approach…Seafield has gained 300% since we made it the first company in the BMR model portfolio in the summer of 2009…its current market cap is $48 million…
TSX Venture Exchange, Gold & General Weekly Roundup
Both Gold and crude oil slipped significantly last week but the CDNX actually posted a small gain of 7 points to finish the week at 1905, the first weekly advance in a month. The Index fell to a yearly low of 1882 last Monday, slightly below its rising 300-day moving average (SMA) and the November 2010 bottom, before rebounding sharply Tuesday and Wednesday. It managed to close above 1900 Thursday and Friday despite some renewed selling pressure due to the drop in precious metals and crude oil (interestingly, the TSX Gold Index also climbed last week, 1.4%, despite the $38 or 2.5% drop in Gold).
It’s still too early to tell whether the CDNX has finally bottomed out at 1882. However, based on all the technical and fundamental evidence that we’ve examined, our stance is that the second half of this year is likely to be much better than the first half. What we’ve witnessed since early March is a normal CDNX correction (24% so far from the March 7 high of 2465 to the June 20 low of 1882) within an ongoing bull market (or, if you wish, two significant corrections back-to-back). At the moment the CDNX is either in the final wave of a 5-wave motive phase, suggesting there could be still be some additional weakness and perhaps one last plunge marking a capitulation, or we’re at the very beginning of a new uptrend with the 1900 area turning out to be The Great Wall of Support like 2300-2400 was for two-and-a-half years from early 2006 through mid-2008.
As summer progresses, particularly by August, we’re expecting plenty of good exploration news from many companies (perhaps even a major discovery or two which would really help to ignite the market) and Gold should start to kick into high gear by later this summer as it traditionally does.
As readers know, the CDNX can be extremely volatile. As an investor, how you respond to that volatility and manage it is critical. Many people, guided by their emotions and driven by greed or fear, panic the wrong way in both directions. Do yourself a favor and save yourself some money – don’t panic and start throwing stocks overboard if the CDNX were to drop by another 100 points or more. It may happen and it may not, but be prepared for it and take advantage of it if such an event were to occur.
We’re encouraged by the fact that major CDNX market bottoms in 2002, 2003, 2004, 2005, 2006, 2007 and 2010 (seven of the last nine years – there was no major correction in 2009) – all occurred after the CDNX fell just marginally below its 300-day SMA, typically by no more than about 6% (2007 was the only exception when the Index suddenly plummeted more than 15% below its 300-day and then quickly jumped more than 30%).
Last year, of course, the CDNX traded slightly below its 300-day SMA for a brief period before bottoming out at 1343 in early July. It then gained a staggering 84% (1122 points) over the next eight months. Approximately half of those gains have been erased which has to be interpreted as a very normal pullback. With rising 200, 300 and 500-day moving averages, this long-term bull market remains intact.
Investors should be prepared, however, for the possibility of one final shakeout in this market which, should it even occur, could send the CDNX down as much as another 10% before a bottom is finally put in. The Fibonacci 38.2% level is 1782 as John pointed out last week. This is also just above a trend line on a linear chart (as opposed to a logarithmic chart) from the 2008 low, and slightly below the 1000 day SMA which continues to decline and is currently at 1792. In addition, it’s important to point out that the 500-day SMA has provided impeccable support throughout CDNX bull markets over the last decade when this SMA has been rising as it is now (and there’s no danger of it rolling over). The 500-day is currently at 1719, so that’s our “line in the sand”. It’s possible that level could be hit on an intra-day basis during a capitulation move that marks a bottom in the market.
Given the fact the CDNX has gained an average of 27% by the end of the year from the low of every major correction over the last decade, there’s a strong probability based on historical evidence that by the final trading day of this year (December 30) the CDNX is going to be sitting somewhere between 2159 and 2390 (1700 approx. + 27% and 1882 + 27%). From the current level of 1905, that would represent a gain of anywhere from 13% to 25% (of course the gain could be higher at some point prior to the end of the year).
Our “big picture” outlook for the CDNX, therefore, is very bullish. It’s almost impossible to get in at the very bottom of the market or to get out at the very top, but you’ll do well if you can be within 10% of either. There are many quality junior exploration companies whose shares are worth accumulating at the moment for investors who have more than a 72-hour time horizon, stocks that will perform very well in a 13-25%+ advance by the CDNX over a 6-month period. Longer term, we see this Index hitting new all-time highs.
Major Developments On The Economic Front
The “big picture” theme of the week, of critical importance to investors, was the clear indication of a coordinated global effort to jump-start the economy.
Make no mistake, President Obama decided to use the Strategic Petroleum Reserves (SPR) as an economic lever (an article in the Financial Times gave ample evidence that Obama’s fingerprints were all over that plan). For only the third time in history, the International Energy Agency (IEA) and the U.S. Department of Energy (DOE) chose to release oil (60 million barrels or 2 million barrels a day for one month beginning July 1) from the strategic reserves around the globe (according to Barclays, the U.S. holds 56% of these reserves, Japan 24%, Europe 14% and South Korea 6%). This was not only a clear reminder of how regulators or governments can very easily create downside risks in markets, but it was an obvious attempt – and a successful one – to knock down prices with an increase in supply. Crude oil fell by over 4% Thursday, below important technical support at $95, after the decision was announced. The failure of OPEC to come to an agreement on an increase in production at its June 8 meeting, thanks to stiff opposition from Iran, Venezuela and Algeria, gave a sense of urgency to the White House and others, though the plan to release some of the strategic reserves was hatched as soon as the crisis in Libya started. Libyan oil production has collapsed from a pre-crisis level of 1.6 million barrels a day to just 200,000 barrels (Libya also produces one of the most sought after crude oils in the world due to its low sulphur content).
Additional interventions by the IEA and the DOE should be expected (they are still at approximately 96% of capacity) as it seems clear that major countries, led by the United States, are determined to put a lid (temporarily at least) on oil prices and keep them within a range (say, in the $80′s to low $90′s) that will help boost economic growth. Consider this to be Obama’s version of “Quantitative Easing”. Oil is now down 20% from its April 29 peak. It’s estimated that a drop in oil prices into the $80′s could be worth as much as an extra half point for GDP growth in the United States over the second half of the year.
The problem with using oil as a short-term tool for immediate economic stimulus is that the strategy dismisses likely long-term consequences and it also fails to take into account The Law Of Unintended Consequences. Politicians, especially ones who are trying desperately to get re-elected such as Obama, have a tendency to be very short-sighted with their policy decisions. There will be consequences down the road, likely in the form of even higher oil prices and higher inflation, from this kind of unprecedented market intervention (strategic reserves were supposed to be for “emergency use only”). Governments always find a way to screw things up which is why the U.S. and many other countries are in such a fiscal mess. Obama’s downfall is that he sees government as the solution, not the problem (Obamacare is a typical example and it has brought uncertainty and higher costs to businesses of all sizes which in turn is not good for the economy/employment growth).
There are long-term structural supply-demand dynamics at play in the oil market which will ultimately take prices much higher in our view. Saudi production (reserves are gradually depleting) remains below peak 2008 levels despite global demand reaching new highs. China, for example, reported last month that its oil demand is up 9% year-over-year. That demand will only increase with lower prices. Demand from other emerging countries is also very strong.
Meanwhile, there was an all-out effort by the European Union last week to bail out Greece with a critical vote next week in the Greek parliament on a new package of austerity measures which is expected to pass, if only by a narrow margin.
And comments from Chinese premier Wen Jiabao in Friday’s Financial Times were highly interesting as Jiabao strongly suggested that monetary tightening measures in that country are over for the time being. Jiabao declared victory over domestic inflation, saying that the government has successfully reined in price pressures. “China has made capping price rises the priority of macro-economic regulation and introduced a host of targeted policies…these have worked,” he wrote. “We are confident price rises will be firmly under control this year…the overall price level now is within a controllable range and is expected to drop steadily.”
Consumer price inflation in China has been rising since the middle of last year, reaching a 34-month high of 5.5% in May. Politically sensitive food prices have been the main driver of headline inflation, rising more than 10% year-over-year in each of the past five months. Food inflation hit 11.7% in May, feeding fears that persistent price rises could exacerbate social tensions. Most analysts predict that the headline inflation rate will peak soon before starting to decline. According to an HSBC purchasing manager’s index, inflationary pressures have eased in China’s manufacturing sector. Any easing of Chinese monetary policy over the second half of the year, combined with a slight to moderate pick-up in economic growth which has been slowing there recently, would likely have positive implications for global equity markets. China may have engineered a “soft landing”.
On Thursday, John posted a chart on Copper which is holding up extremely well (it’s looking quite bullish in fact) in the face of the current global economic slowdown and all the “gloom and doom” talk you hear on CNN and elsewhere in the media. Copper, which closed at $4.10 Friday, has solid support at $4 a pound. It’s an extremely important metal to watch as it has proven to be a very reliable leading indicator for the global economy.
Gold nearly touched $1,560 an ounce last week before falling sharply Thursday and Friday to close the week down $38 at $1,502. Silver was off $1.58 per ounce to $34.32 while the U.S. Dollar Index climbed to 75.58 from 74.98 the week before.
There are so many fundamental factors in favor of Gold right now that a drop in the crude oil price is not going to send the yellow metal crashing. One must remember, oil is down 39% from its July 2008 peak while Gold is up 50% since that time.
Oil is also a major component of the cost structure for producers, so a softening or leveling out of energy prices is welcome news for a lot of companies.
Given the chart below from John and continued strong physical demand in the Gold market, we see little chance of the yellow metal dropping by more than $75 an ounce from current levels before rebounding once again and charging to new all-time highs. Fibonacci support has proven to be very reliable.
The fundamental case for Gold remains incredibly strong – currency instability and an overall lack of confidence in fiat currencies and governments in general, an environment of historically low interest rates and negative real interest rates (inflation is greater than the nominal interest rate even in parts of the world where rates are increasing), massive government debt from the United States to Europe, central bank buying, flat mine supply, physical demand, investment demand, emerging market growth, geopolitical unrest and conflicts, and inflation concerns…the list goes on. It’s hard to imagine Gold not performing well in this environment. The Middle East is being turned on its head and that could ultimately have major positive consequences for Gold.
We suggest readers check out Frank Holmes’ excellent article (“Investor Alert – Will Gold Equity Investors Strike Gold“) posted June 17 at www.usfunds.com. Holmes has one of the brightest minds in the investment industry and in that article he paints a very clear picture of how Gold mining shares present such a great opportunity at the moment for long-term investors. Some interesting facts regarding Gold from his June 24 alert include:
- The import of Gold and Silver by India has risen 222 percent between April and May 2011 as compared to a year ago. In the month of May alone, imports were a staggering $9 billion, a growth of 500% compared to the month a year ago. To put this into perspective, the yearly average of Gold imports by India is $22 billion, indicating in May alone they already reached 40% of the average;
- Peoples Bank of China (PBOC) has announced that in view of the rising demand for their Panda coins, the output number of Gold Pandas will be raised from the previously announced 300,000 units to 500,000 this year. The smaller coins in the series will have their maximum circulation numbers increased from 200,000 coins to 600,000 for each series. Also, the PBOC says that it is doubling the maximum issuance of silver Panda coins from 3 million to 6 million. To emphasize this growth in demand, issuance in 2010 was just 1.5 million;
- The big rises in the maximum issuance for the smaller Gold coins and the series of Silver Pandas is yet another indication that not only is demand exploding for precious metals among the Chinese growing middle class, but also confirmation that the government is encouraging its citizens to buy precious metals.
June 24, 2011
Gold is experiencing more weakness today after being rocked yesterday by the sharp drop in crude oil prices following the surprise move by major countries to release a small portion of their strategic oil reserves onto the world market…as of 8:00 am Pacific, the yellow metal is off $13 an ounce at $1,508…Silver has declined 57 cents to $34.74, crude oil is flat at $91.07 while the U.S. Dollar Index is one-third of a point higher at 75.64…yesterday’s developments in the oil market, with the International Energy Agency and the U.S. Department of Energy deciding to release 60 million barrels of reserves, are a clear reminder how regulators or governments can create downside risks in markets…the move had to have come at the blessing of Saudi Arabia which tried to push through a production increase at the OPEC meeting earlier this month but was thwarted with stiff opposition from Iran, Venezuela and Algeria…oil is now at a price level that should help, not hinder, global economic growth though governments cannot forever manipulate prices…over the long haul, significantly higher oil prices seem inevitable given the demand-supply dynamic…Gold miners’ profit margins will be aided by lower crude prices as the price of oil is a big component of their cost structure…Gold itself has solid support at $1,500 and the long-term uptrend remains completely intact…expect aggressive physical buying to step in on any move below $1,500 if that should occur…the CDNX has held up well in the face of weakness in Gold (and the broader markets) which is an encouraging sign…the CDNX is currently off a point at 1915…the Index dropped as low as 1894 intra-day yesterday but regained half its losses by the close…some continued consolidation in the CDNX should be expected but the “big picture” outlook remains very positive and we continue to anticipate a strong second half of the year…below is John’s CDNX chart update, showing more consolidation over the immediate term is likely…
Seafield Resources (SFF, TSX-V) has been a strong performer recently, climbing above its declining 100-day moving average (SMA) yesterday for the first time since early March…there is major technical resistance in the mid-30′s, however (the February and March highs plus the 200-day SMA) so jumping on the SFF bandwagon at this point is probably a little premature…however, at some point during the second half of the year we expect Seafield to bust out strongly given the exploration upside of its Quinchia Project in Colombia…SFF released its first quarter financials this morning, showing $18 million in cash as of March 31…subsequently the company also completed a $3 million financing with a strategic investor at 30 cents…Seafield is currently off a penny-and-a-half at 31.5 cents…the more we look at Adventure Gold (AGE, TSX-V) the more excited we get which is why we’ve made arrangements for an interview, likely next week, with President and CEO Marco Gagnon…Adventure Gold, which we first introduced to our readers about nine months ago when it was trading in the low 20′s, is an extremely focused exploration company with a strong technical team and several advanced projects that are proceeding extremely well…Windermere Capital, a Montreal-based investment firm, is a strategic and valuable long-term partner for Adventure Gold and holds just under 20% of AGE as reported January 21…AGE has significantly outperformed the CDNX this year and we see no reason why that trend won’t continue through the balance of the year…AGE is currently off 2 pennies at 56 cents…Romios Gold (RG, TSX-V) is an interesting exploration play in the Galore Creek area of northwestern British Columbia that we’ve been mentioning recently…yesterday, RG jumped 7 cents to 50 cents after announcing preliminary results from a 743-kilometre airborne geophysical survey over the company’s wholly owned Dirk and Andrei properties…we suggest readers perform their DD on Romios – the company has launched a $6 million+ exploration and drilling program over very prospective ground…technically, it’s possible the stock could pull back slightly from current levels as what John sees at the moment is the formation of a minor “cup with handle”…we’ll be posting a full chart on RG over the weekend…Currie Rose Resources (CUI, TSX-V) is unchanged at 16 cents this morning…the company’s 10,000 metre drill program in Tanzania is expected to begin almost any day now…CUI has formed a strong base at current levels and its 100-day SMA has flattened out….with excellent geological prospects and its most aggressive exploration program ever, we’re expecting a major breakout in CUI over the summer…on the economic front, U.S. durable goods rose 1.9% in May, more than expected, while Chinese premier Wen Jiabao has declared victory over domestic inflation, saying that the government has successfully reined in price pressures…the Shanghai Index was up strongly overnight, gaining more than 2% to close at 2746…“China has made capping price rises the priority of macro-economic regulation and introduced a host of targeted policies…these have worked,” Wen wrote in Friday’s Financial Times…”we are confident price rises will be firmly under control this year”…consumer price inflation in China has been rising since the middle of last year, reaching a 34-month high of 5.5 per cent in May…politically sensitive food prices have been the main driver of headline inflation, rising more than 10 per cent year-on-year in each of the past five months…food inflation hit 11.7 per cent in May, feeding fears that persistent price rises could exacerbate social tensions…most analysts predict that the headline inflation rate will peak soon, before starting to decline…according to an HSBC purchasing manager’s index, inflationary pressures have eased in the manufacturing sector…“The overall price level now is within a controllable range and is expected to drop steadily,” Wen stated…any easing of Chinese monetary policy over the second half of the year, combined with a slight to moderate pick-up in economic growth, would likely have positive implications for global equity markets…