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One of our top picks going into 2011 is GoldQuest Mining (GQC, TSX-V), a company that has been active in the mining-friendly Dominican Republic for a decade and has assembled a truly impressive portfolio of advanced and early stage Gold properties with silver and base metal potential as well.  We’ll be reporting more on GoldQuest again in the very near future but we encourage investors to look into this company closely because we see a real opportunity at its current price of 26 cents, giving it a market capitalization of only $24 million.  GQC has far more going for it now than it did back in 2007 when the share price shot up to $1.80 for a market cap of $100 million.  Technically, John very much likes what he sees with GoldQuest at the moment and has provided us with an updated chart analysis immediately below our quick review of GQC’s fundamentals.

Just over a week ago, on the day the CDNX fell by as much as 80 points to 1902, GoldQuest came out with news regarding its La Escandalosa Project (formerly called Las Tres Palmas) in the DR, 120 kilometres east of Pueblo Viejo – one of the world’s largest Gold deposits with proven and probable reserves in excess of 22 million ounces.

Based on just 25 drill holes (3,291 metres), GQC has already outlined an inferred resource of 406,000 ounces of Gold at Escandalosa Sur (nearly 5 million tonnes grading 2.59 g/t Au at a 0.30 cut-off).  Mineralization is stratiform and flat-lying.  The deposit, which also includes copper (0.16%),  zinc (0.21%) and silver (2.34 g/t),  is 600 metres along strike and 500 metres wide.  The geometry makes it suitable for open-pit mining, and the really exciting thing is the potential for outlining a much larger deposit.  Alteration and Gold mineralization have been traced for about 2,200 metres from Hondo Valle (north of Escandalosa Sur) to La Hilguera (south of Escandalosa Sur).

A three-year permit extension has been received for the La Escandalosa concession and all requisite environmental approvals are now in place for drilling to proceed.  A comprehensive drill program is expected to begin shortly aimed at upgrading the existing resource and testing potential extensions to the north and south.  The source of the mineralizing fluids remains unknown at La Escandalosa, leaving open the possibility of the discovery of mineralization in structural feeder zones or perhaps in a porphyry copper-Gold type system.

GoldQuest has many other targets of considerable merit throughout its large DR land package including Las Animas which has a 43-101 inferred resource of 129,000 ounces of Gold, 2.5 million ounces of silver, 106 million pounds of copper and 130 million pounds of zinc.

In Spain, Goldquest holds the Toral Zinc-Lead-Silver Deposit which has an historical (non-43-101 compliant) resource of 5.4 million tonnes grading 9% zinc, 6% lead and 45 g/t Ag.  A 43-101 on Toral is currently being prepared.  GoldQuest has also acquired a second polymetallic project in the area (Lago, just a 20-minute drive from Toral), and more details are expected upon approval from the Spanish government of a mineral rights application for the property.

We are in a bull market of historic proportions and the timing for GoldQuest couldn’t be better, so fasten your seatbelt.  This company has a lot going for it with major blue sky potential for 2011 as the drills turn and results pour in from the Dominican Republic.

GQC Updated Chart Analysis

John:  Today, Goldquest Mining(GQC, TSX-V) opened at 25 cents, its low, and then closed at its high of 26 cents for a gain of 1 penny on CDNX volume of 334,000 shares.

Looking at the 3-month daily chart we see that between September 1 and October 9 the stock climbed steadily from 11 cents up to a high of 32 cents and then retraced down to 20 cents.   Then, on October 28, a bullish reversal occurred and the share price climbed back to 31 cents from where it retraced again to 25 cents.   The period from October 12 to today has been a consolidation. The average daily volume during this time has been declining, thus validating the consolidation.

The volume today was 2 times that of Tuesday and the highest in the last 6 sessions. Today’s candle was bullish.  The support at 25 cents coincides with the 38.2% Fibonacci retracement level which makes this support extremely strong.

A blue downsloping trendline is drawn on the last retracement. A breakout above this blue line will signal the start of another move to the upside. The Fibonacci target at 40 cents shown on a previous chart is still valid.

Looking at the indicators:

The RSI is at 47% and pointing up. It has just bounced off support (orange horizontal line) – bullish.

The Slow Stochastics indicator has the %K (black line) pointing down but starting to turn up toward the downsloping %D (red line).  It could cross up above the %D in the near future. This must be watched carefully.

There are 3 vertical green lines drawn on the chart, each depicting a %K crossover of the %D. When this occurs there is a reversal in the stock price. Thus, if the %K crosses up over the %D in the near future, we can expect an attempted breakout of the share price above the downsloping blue line – very bullish.

The ADX trend indicator has the +DI (green line) rather low and flat at 24 and above the -DI (red line) at 19. The ADX (black line) trend strength indicator is gently sloping down at 26. This indicates the bullish trend is very slowly weakening which is to be expected during a consolidation. Note the vertical blue line which shows where the +DI crosses above the -DI and changes the trend from bearish to bullish. This occurred during the first week of September and the trend has remained bullish since then. This is a very bullish orientation.

Outlook: Both the chart and the indicators show how close we probably are for another move up in the share price. Two things to watch for are the breakout above the blue trendline and the crossover of the Slow Stochastics. GQC is looking very strong and its 20, 50, 100 and 200-day moving averages are all in bullish alignment.