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Gold has traded between $1,131 and $1,143 so far today…as of 9:00 am Pacific, bullion is down $5 an ounce at $1,135…Silver is off a nickel at $14.57…Copper is up 3 pennies to $2.32…Crude Oil has retreated another $1.56 a barrel to $43.85 while the U.S. Dollar Index has added one-third of a point at 95.81…

Growth in China’s imports of precious metals is likely to be stronger than for most commodities over the next half decade, according to Barclays in a report published today…with the world’s largest population and as the country further develops its infrastructure, China is obviously one of the world’s largest consumers of commodities…the country’s shift toward “green energy” and a consumption-oriented economy should boost demand for certain commodities.  “Natural gas, corn, Silver, Gold and Palladium are also likely to see rapidly rising import growth,” the bank said…

Commerzbank’s technical team says Gold is well-positioned to again test the $1,160’s in the near future as long as it holds above last week’s low…

Oil Update

After enjoying its best 3-day gain (25%) since 1990 Thursday through Monday, Crude Oil is extending its pullback today from yesterday’s sharp losses which were due in part to data from industry group American Petroleum Institute that showed U.S. Crude stocks surged by 7.6 million barrels to 456.9 million in the week to August 28…analysts in a Reuters’ poll had expected just a 32,000 barrel gain…

Meanwhile, this morning, the U.S. Energy Information Administration reported that Crude inventories rose by 4.7 million barrels in the last week, the biggest 1-week rise since April, compared with analysts’ expectations for no change…

As John’s chart showed yesterday, Crude faces a strong band of resistance between $45 and $55…OPEC is finally some showing some concern about low prices, so we’ll see how that plays out in the coming weeks – so far, their strategy of trying to squeeze out North American shale producers hasn’t quite worked the way they had hoped…

Today’s Equity Markets

Asia

Asian markets were modestly lower overnight with China’s Shanghai Composite finishing 12 points lower at 3155…the Shanghai was off nearly 5% at one point before the government’s “rescue team” jumped in and brought the market back to nearly even by the end of the session…

Europe

European markets were up modestly today…

North America

The Dow is up 103 points as of 9:00 am Pacific after a horrible start to September yesterday…in Toronto, the TSX has lost 38 points while the Venture has added 3 points to 551 through the first 2-and-a-half hours of trading…

U.S. private sector job creation held steady last month, albeit slightly below expectations according to an ADP report released this morning…companies added 190,000 jobs to close out the summer, a number that was better than July’s downward-revised 177,000 but below the expected 201,000 new positions (ADP has shown private sector job growth of less than 200,000 in 5 out of the last 6 months)…the report tees the market up for Friday’s critical non-farm payrolls report from the Labor Department in advance of the upcoming FOMC meeting in mid-September…

U.S. worker productivity advanced this spring, reflecting a resurgence in economic activity following a slow start to 2015…the productivity of non-farm workers, measured as the output of goods and services per hour worked, increased at a 3.3% seasonally adjusted annual rate in Q2 according to the Labor Department…that was the strongest pace since the 4th quarter of 2013…from a year earlier, productivity was up 0.7%…however, this morning’s report showed weaker productivity gains in the manufacturing sector than previously thought…

TSX 6-Year Monthly Chart Update

One technical factor the TSX has going for it – along with U.S. markets – is a rising 1000-day moving average (SMA) which has provided support (on a closing basis) going back to late 2012 on the TSX as you can see on John’s 6-year monthly chart…

The fall below chart and Fib. support at 14150 on August 19 started the intense sell-off on the TSX that led to the very volatile Monday, Aug. 24, session when the index tumbled as low as 12705 before rebounding to close at 13053…

RSI(14) conditions are currently in very oversold territory at 18%, consistent with the late 2012 low in the TSX when it plunged 24% from its spring high…last week’s intra-day low of 12705 was a 19% correction from last summer’s all-time high of nearly 15700…

There’s a nearly 1650-point range on current Fib. support between 11502 and 13144…

Venture Short-Term Chart

The Venture’s main technical challenge at the moment is to overcome resistance at its EMA(20) – currently 561 – which it nearly touched at the close of last Friday’s trading…the Index finally emerged out of extended oversold conditions last week and also pushed above a downtrend line (not shown on this chart)…sell pressure became very intense near the end of July and appeared to peak at that time…

RSI(14) support on this 4-month daily chart should come at the 30% level, resistance throughout July and August…

Venture Long-Term Chart

Below is John’s latest long-term chart for the Venture…was 509 a final bottom?…impossible to tell, but what’s certain is that extreme values – never previously seen on this monthly chart – are clearly evident in several indictors including RSI(14) which has fallen slightly below its 2008 Crash reading…

Curiously, many investors are all too eager to chase a market – a particular stock or an index – when extreme “overbought” conditions are prevalent, but they’re reluctant to embrace extreme oversold conditions…that’s a dynamic of human psychology, how the emotions of excitement, greed and fear play heavily on investors’ decisions…

Skeena Resources (SKE, TSX-V) Goes After Dolly Varden Silver (DV, TSX-V)

An interesting situation has developed on the Venture in recent days, and it all started after Dolly Varden Silver (DV, TSX) released a NI-43-101 resource estimate last Thursday covering the 4 known deposits on its 100%-owned Dolly Varden Project in northwest British Columbia…this is certainly a prospective property (94 sq. km) that warrants a lot more work…the deposits are hosted in Lower Jurassic Hazelton Group stratigraphy, the same stratigraphy that hosts the past producing Eskay Creek precious-metal-rich VMS (volcanogenic massive sulphide), and the high-grade Gold Brucejack deposits, located on trend and approximately 130 km and 110 km, respectively, to the northwest of Dolly Varden…this rock package and structural trend extends northward from the historic deposits throughout the Dolly Varden Property…

As a company, Dolly Varden has certainly experienced some internal upheavel over the past year…below are a couple of paragraphs from a news release from DV last year, as the “principal”, so to speak, had to separate the 2 of these guys and tell them to “chill out”…

“At the request of the board of directors, John Burns and George Heard have stepped back from their duties at Dolly Varden Silver Corp., taking leaves of absence as chairman and chief executive officer/president, respectively. The board has constituted a special committee of the independent directors to investigate disputes between Mr. Burns and Mr. Heard, as well as other management matters that have recently come to the attention of the board (our emphasis).  The investigation is expected to be completed in the next few weeks.”

In late January, Dolly Varden appointed Rosie Moore as interim CEO and President – she came from Hecla Mining Company which is DV‘s largest shareholder…

Interestingly, in its March corporate presentation available on the company website, DV listed Skeena Chairman Ron Netolitzky (a co-founder of Eskay Creek who was recently inducted into the Canadian Mining Hall of Fame), as an “advisor”, though his name does not appear on the “advisor” page of DBV’s website today…

This brings us to Skeena’s move against Dolly Varden 2 days ago, immediately after DV’s Friday release of its resource estimate (the combined indicated mineral resource estimate totals 31.8 million ounces of Silver, contained within 3.07 million tonnes of material with an average grade of 321.6 g/t Ag…the inferred mineral resource estimate totals an additional 10.8 million ounces of Silver at a grade of 373.3 g/t)…

Skeena announced the following on Monday:

“On Aug. 27, 2015, Skeena Resources Ltd. delivered to Dolly Varden Silver Corp. a binding proposal to acquire 100% of the common shares of Dolly Varden for consideration consisting of common shares of Skeena having an aggregate value of approximately $4.2-million. Under the proposal, each Dolly Varden share would be exchanged for 2.763 Skeena shares, which values each Dolly Varden share at approximately 22.1 cents, representing a premium of 30% to the closing price of the Dolly Varden shares on the TSX Venture Exchange on Aug. 27, 2015, and 50.9% to the 10-day volume-weighted average price of both companies’ shares.

Skeena believes that the proposal is in the best interest of both Dolly Varden and Skeena shareholders. More specifically, the proposal provides an opportunity for Dolly Varden to merge with a well-capitalized company that has the ability to finance exploration programs on Dolly Varden’s Silver properties. Skeena has a dedicated technical team with a proven record of successful mineral discoveries in British Columbia. A business combination of Skeena and Dolly Varden will allow Dolly Varden shareholders to gain exposure to Skeena’s Spectrum high-grade Gold project in northwest British Columbia.”

Dolly Varden quickly rebuffed the offer with this announcement yesterday:

“The Skeena proposal was timed to deprive Dolly Varden’s shareholders of full value. The timing of the Skeena offer was highly opportunistic, given that it was made less than 9 hours after the company publicly disclosed its resource estimate. The company’s board viewed the Skeena offer as an attempt to exploit the lower market price of Dolly Varden’s shares before the market could fully consider and reflect the resource estimate issued earlier that same day. The board believes this timing was an effort to opportunistically transfer the upside value in the Dolly Varden property to Skeena’s shareholders at the expense of Dolly Varden’s shareholders.

“A superior alternative is expected to emerge (our emphasis).  Over the past month, the special committee of the company’s board (comprising Tom Wharton, Allen Ambrose, Don Birak and Allan Marter), together with Dolly Varden’s management team, and financial and legal advisers, has been aggressively working to advance a range of strategic alternatives to enhance shareholder value, which are, in the opinion of the board of directors, after having received independent financial and legal advice, and on the recommendation of an independent special committee, superior to the Skeena proposal.”

It’ll be interesting to see how this one plays out…Netolitzky is certainly astute and opportunistic – those are qualities that have made him so successful in the industry…he obviously sees value in the Dolly Varden Property – especially if he can snap it up for $4.2 million in shares…

DV is up 2.5 cents at 22.5 cents as of 9:00 am Pacific while SKE is off half a penny at 7.5 cents…

Lingo Media Corp. (LM, TSX-V) Update

Last Thursday morning, we immediately pointed out a financial turnaround in Lingo Media (LM, TSX-V) following the release of its Q2 financials…LM closed up 6.5 cents that day at 34.5 cents, and then surged as high as 60 cents the next morning before retracing to close the week at 41 cents…another example of volatility, and how astute traders can profit from it…

Earlier this year, LM’s chart gave a strong sign of pending improved fortunes for the company when the stock broke out above a multi-year downtrend line…those are typically very reliable signals…

Lingo, which brands itself as a leader in changing the way the world learns English, has promising prospects based on last week’s news, and the improved financial performance should help underpin the share price…John’s chart shows what we see as a very solid support band between the 23.6% and 38.2% Fib. levels (high 20’s to high 30’s)…the rising 20 and 50-day moving averages (SMA’s) are currently at 30 and 27 cents, respectively, and have provided excellent support throughout this year…

LM is off half a penny at 37 cents as of 9:00 am Pacific…

Mission Ready Services Inc. (MRS, TSX-V)

Speaking of financial turnarounds, there could be one brewing at Mission Ready Services (MRS, TSX-V) which on Monday reported net income of $400,000 for Q2 vs. a $350,000 loss in the previous quarter…

We love what this company stands for, and the times we live in demonstrate there’s a growing need for this company’s products: “Mission Ready is committed to saving lives and enhancing the performance of military personnel, first responders and those who protect us by working to ensure they are equipped with the best possible personal protective equipment.”

Mission Ready is focused on profitable growth as it executes its strategy of expanding services to the U.S. Department of Defence, U.S. law enforcement agencies, and other protective agencies within the U.S. and other countries…the company has several wearable protective products, developed by its research and development division, that are being readied for market and has entered into discussions with several potential customers to commercialize these products this year (ballistic combat shirt, tactical police shirt, no-contact modular riot shield cover)…the company is also expanding its decontamination, cleaning and repair services, both in the U.S. military and to municipal firefighters and emergency-first responders…

• Record revenue in Q2 of over $2.7-million, a 147% increase over Q2 2014;
• Net income of $400,000 in Q2 2015 compared with a $500,000 loss in same period last year;
• Revenues of $4.8-million year to date

As per its June 30 financials, the company had working capital of $800,000 and minimal debt (less than $200,000)…

Technically, Mission Ready hit an all-time low of 6.5 cents recently after reaching a yearly high of 27.5 cents in late March…declining 50 and 200-day moving averages (SMA) beginning in December last year put steady downward pressure on the stock price, but extreme oversold conditions emerged last month which suggest a recovery is now underway…at 8.5 cents, the current market cap is $4.8 million (57 million shares outstanding)…if the bottom line shows continued improvement, MRS could be ready for a strong finish to the year…as always, perform your own due diligence…

Kiska Metals Corp. (KSK, TSX-V) Update

“Bottom fishers” should keep a close eye on Kiska Metals (KSK, TSX-V) which we mentioned in some detail last week…tt’s during times like now, when junior exploration and mining companies are so much out of favor, that the greatest opportunities emerge for future 10-baggers, 20-baggers and even 50-baggers…

Patient investors in our view have a chance to cash in handsomely, at some point down the road, near-term or longer-term, on Kiska which is trading at only 2 cents, just above its all-time low of 1.5 cents…Kiska could survive even a greater storm than the one the junior resource sector has been through over the last 4+ years given their working capital position, their model, and their prudence…they’ve had repeat business relationships with Barrick, Newmont, AngloGold, Xstrata, Teck and most recently First Quantum…

Check last Thursday’s Morning Musings for additional information regarding Kiska…

What immediately has our attention with regard to Kiska is its Kliyul Project in north central B.C. that Teck began drilling in July…geologists at Teck are very intrigued with the 65 sq. km project which rests less than 70 km southeast of the past producing Kemess mine in the prolific Quesnel Trough…historical drilling was relatively shallow and returned very significant Cu-Au drill intercepts…this is an exceptionally promising, potentially large system as defined by alteration footprint and geophysics…importantly, it’s also adjacent to an all-weather road and a 230kV power line…

Teck can earn a 51% interest in the project by incurring cumulative aggregate expenditures of $5.5-million on or before January 31, 2018, and up to a 65% interest by incurring additional expenditures of $6.5-million ($12-million total) on or before Jan. 31, 2021…

Technically, we love this long-term chart…KSK broke out above a multi-year downtrend line in early 2014, and retraced back to that downtrend line just recently…every indicator here is looking positive for an eventual important upside move – exact timing is just uncertain…

Note:  Jon holds a share position in KSK.