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December 5, 2014

BMR Morning Market Musings…

Gold has traded between $1,187 and $1,210 so far today with weakness setting in following the release of a much better-than-expected U.S. jobs report for November…as of 8:15 am Pacific, bullion is off $10 an ounce at $1,196…Silver is down 18 cents at $16.31…Copper is off a penny at $2.95…Crude Oil is down by more than $1 a barrel to $65.46 while the U.S. Dollar Index has surged two-thirds of a point to 89.28

Gold is still on track for 1 of its best weeks of the year after rebounding from the $1,140 area intra-day Monday…in the physical markets, Chinese buying remains steady with premiums unchanged at about $1-$2 today…meanwhile, data from the Istanbul Gold Exchange shows that Gold imports into Turkey more than doubled year-on-year to 46.9 tonnes in November, its strongest monthly imports in more than 6 years…

This morning’s U.S. non-farm payrolls report for November has pushed the greenback to new multi-year highs, putting pressure on Gold but bullion has nonetheless shown resilience…U.S. employers ramped up hiring last month, continuing a stretch of robust payroll gains and keeping the economy on track to record its strongest year of job creation since 1999…non-farm payrolls rose a seasonally adjusted 321,000 last month, the strongest month of hiring since January 2012, the Labor Department reported…the unemployment rate, however, remained unchanged at 5.8%…hiring was broad across the economy, led by gains in the professional and business services sector…retail also saw 50,000 new hires heading into the holiday shopping season…in addition, revisions showed employers added a total of 44,000 more jobs in September and October than previously estimated…analysts polled by Reuters were expecting a jobs number of around 230,000 for November, so this morning’s figure caught markets by surprise…the dramatic move was well above the average of 224,000 a month over the past year…

Today’s Equity Markets

Asia

A very volatile session in China overnight as the Shanghai Composite swung both ways within a wide trading range of 165 points…at the end of the day, the index finished up 39 points or 1.4% at a new multi-year closing high of 2939…momentum is moving this market at the moment, and resistance at 3000 will likely be tested next week…

China’s ruling Politburo said it will maintain a “prudent” monetary stance and keep growth within a reasonable range in 2015, signaling it will hold off major changes at an economic policy meeting scheduled to begin next Tuesday…while China will see difficulties in 2015, economic growth is showing resilience and potential, giving the government plenty of room to maneuver, the official Xinhua News Agency reported today…China’s annual Central Economic Work Conference will set an economic growth target for 2015, expected to be around 7%…today’s language about a prudent monetary policy reiterated the government’s previous stance, suggesting there won’t be a major policy shift at that meeting…

Japan’s Nikkei average closed 33 points higher at 17920

Europe

European markets are up sharply in late trading overseas…Germany’s Bundesbank has cut in half its 2015 growth forecast for the euro zone’s largest economy…the central bank also trimmed its growth estimate for this year…however, the central bank’s president said there were signs that current weakness would soon be overcome…

North America

The Dow, which more often that not responds well on “jobs report” Fridays,  is up 53 points at 17953 as of 8:15 am Pacific

The TSX is 23 points higher after a large order from Goldman Sachs to sell a basket of Canadian stocks caused the index to tumble during the final hour of yesterday’s trading…the Venture, meanwhile, is off 4 points at 703 as of 8:15 am Pacific

Richmont Mines (RIC, TSX) Update

We’re bullish on Gold stocks entering year-end and we encourage our readers to perform their due diligence on as many quality producers and explorers as possible…

Canadian-based producers are benefiting from the weak Canadian dollar and much lower Oil prices than they budgeted for…keep in mind, Oil prices account for a significant portion of a producer’s cost structure, so these savings are going right to the bottom line…

If you can find a producer that’s out-performing both Gold and the TSX Gold Index, all the better…1 excellent example is Richmont Mines (RIC, TSX) which is on track for a stellar 2015 that could reward shareholders very handsomely…Richmont has a 1 million ounce high-grade resource to exploit beneath existing workings at its Island Gold Mine in northern Ontario, and the company has already recorded adjusted net earnings of 19 cents per share through the first 9 months of the current fiscal year…any company with Richmont’s revenue and earnings momentum should be on every investor’s radar screen…

Richmont has widely outpaced both Gold and the TSX Gold Index in 2014 as you can see on this 10-year monthly chart…Richmont soared from current levels to more than $12 per share during 2011 when it was one of the hottest stocks on the entire TSX…history could repeat itself in 2015

RIC is off 2 pennies at $3.78 as of 8:15 am Pacific

RIC5(1)

Probe Mines Ltd. (PRB, TSX-V) Update

Another Gold stock with excellent potential for 2015 is Probe Mines (PRB, TSX-V) which continues to advance its multi-million ounce Borden Lake Project in northern Ontario toward the completion of a Preliminary Economic Assessment…PRB has managed to hold critical support around $2 since the second quarter of this year, and the 50-day moving average (SMA) has recently reversed to the upside after being mostly in decline over the last 6 months…

PRB, unchanged at $2.57 as of 8:15 am Pacific, has significantly out-performed the price of Gold since early 2013

PRB1

The Venture’s “39-Week Cycle” 

Why the Venture has carved out a consistent pattern of 39-week cycles is a mystery that we can’t explain…however, just because it’s a mystery doesn’t mean it should be ignored or dismissed…in fact, looking at where the current cycle is at, our readers should draw great encouragement from what appears to be emerging which is an imminent new uptrend…

Below is a chart going back to 2001 that shows how this this pattern has played out…it’s particularly noteworthy now because the current 39-week period is rapidly drawing to a close (before year-end)…“peaks” and “troughs” typically occur at the end of each of these cycles…if history is any guide, the Venture is very close to moving out of this current trough…

CDNX9

Highbank Resources Ltd. (HBK, TSX-V) Update

The first half of December is usually the best time of the year to shop for bargains on the Venture, and one that we’re immediately eying is Highbank Resources (HBK, TSX-V) which is on the verge of putting its Swamp Point North aggregate project near Prince Rupert into production…

There is no shortage of demand for Highbank’s aggregate – even before anticipated LNG business kicks in – and production is expected to gradually ramp up throughout 2015…keep in mind, the port of Prince Rupert is undergoing a massive infrastructure expansion already valued in excess of $40-billion…Highbank holds strategic advantages over any potential competitors, so we see a long-term value-creation situation here that one rarely finds in a Venture company…

Technically, HBK has landed at the top end of an exceptionally strong support band – the “sweet spot”, as we call it – as defined by Fib. support levels which you can see on John’s 2+ year weekly chart…recent weakness can be attributed to some selling to exercise warrants which expired at the end of November

Highbank has been a strong Venture out-performer in 2014 and its 200-day moving average (SMA), currently at 22 cents, continues to rise…

HBK is up half a penny at 20.5 cents as of 8:15 am Pacific after dipping as low as 18 cents intra-day yesterday…as always, perform your own due diligence…

HBK2(1)

Note:  Jon holds a share position in RIC.

15 Comments

  1. HBK halted !

    Comment by Guy Delisle — December 5, 2014 @ 8:27 am

  2. Jon

    what do you guys think of Argonaut Gold?
    thanks

    Comment by Greg — December 5, 2014 @ 8:29 am

  3. Has been a disappointing year for AR, Greg…would like to see an improvement in their #s…a higher Gold price would give AR a lift but ultimately they need to deliver better results…better opportunities out there IMHO…

    Comment by Jon - BMR — December 5, 2014 @ 9:58 am

  4. Don’t understand GGI. They are closer now that at anytime in it’s history of a potential major hit and no volume. What gives? Unless investors are not willing to sell?

    Comment by Dan — December 5, 2014 @ 11:39 am

  5. Any idea when Richmont will have more drill results from Island Deep gold deposit?

    Comment by Mike — December 5, 2014 @ 1:52 pm

  6. Thanks Jon

    Comment by Greg — December 5, 2014 @ 4:18 pm

  7. Jon Any thoughts on the Halt of HighbanK?

    Comment by Greg — December 5, 2014 @ 4:23 pm

  8. NOT SURE I UNDERSTAND THE GRAPH OF THE 39TH WEEK? FROM 2011 TO ENDING 2014, IT LOOKS STRAIGHT DOWN FROM 2200 TO 700- NOW???

    Comment by STEVEN1 — December 5, 2014 @ 5:38 pm

  9. Steven, perhaps John could explain this better, but each vertical line represents a 39-week period. You’ll notice turning points roughly at the beginning and end of each 39-week cycle, just as we’re seeing a trough right now near the end of the current 39-week period.

    Comment by Jon - BMR — December 5, 2014 @ 8:18 pm

  10. No idea, Greg, I can only assume it’s good news. I know they’re very close to starting production, so it could be related to that, possibly.

    Comment by Jon - BMR — December 5, 2014 @ 8:19 pm

  11. Mike, I suspect they have more results coming out very soon, and they ought to be good. Island Deep is still open for expansion. The Island Mine is going to benefit a lot from lower Oil prices, and even though Gold is down in U.S. Dollars over last year, in Canadian dollars Richmont is actually fetching a higher price. 4th quarter #s should be great. Wouldn’t be surprised if RIC hits the $5 Fib. level by January sometime which is a 50% move from here.

    Comment by Jon - BMR — December 5, 2014 @ 8:21 pm

  12. Dan, it’s early December and a reflection of the overall markets. The tempo should change shortly.

    Comment by Jon - BMR — December 5, 2014 @ 8:28 pm

  13. Just looked at the market cap of RIC its only 159 million…

    Comment by Greg — December 5, 2014 @ 9:33 pm

  14. Do the math, Greg – RIC could be looking at adjusted net earnings per share of 30 cents in fiscal 2014. That’s why there’s now a $3 floor on the share price, so the downside is very limited. With earnings like that, and continued earnings momentum expected in 2015, you can see why $5 a share in short order makes a lot of sense (at just 15 x potential trailing earnings, $4.50). Ultimately, once they’re in full production with the high-grade Island Deep resource, this stock has a chance to be back at all-time highs. RIC’s bottom line is going to benefit a lot from the low Canadian dollar and weak Oil prices. Cost-wise, the Island Mine is particularly sensitive to Oil prices. I don’t see other producers out there I like better than this one why is why we said RIC was a keeper at $2.50. It’s also a keeper at $3.50. This is a classic case when the fundamentals and technicals come into perfect alignment. Both will drive this higher, even if Gold stays near current levels. Huge upside if Gold suddenly takes off.

    Comment by Jon - BMR — December 6, 2014 @ 8:50 am

  15. Yep Jon I agree that why I was surprised to see their market cap was at only 159 million… hope it pulls back a little this week

    Comment by Greg — December 7, 2014 @ 4:56 pm

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