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CDNX

On the morning of March 19 we expressed concern the Venture was looking a little “toppish” and recommended raising cash levels in the event of a minor pullback, perhaps 5% on the Index.  For the first time in over a year the CDNX’s 50-day moving average (SMA) was starting to decline, a cautionary “red flag”.  The market did weaken slightly but not significantly.  This is okay – it never hurts to take some profits off the table and sit on some extra cash for a short period of time while the market sorts itself out and gives a clearer direction.  Not only are we focused on “home run” opportunities at BullMarketRun – and we have certainly provided them – but we’re also concerned about the preservation of the wealth we build.  So when the market gives us a “Proceed With Caution” sign, we pay attention.

The CDNX found support at 1548 this week and closed the week at 1560, just a 4-point decline from last Friday.  The resilience the Venture Exchange has shown over the past five trading sessions is rather remarkable considering the weakness in gold, month-end selling pressures (Friday was settlement day) and a declining 50-day SMA.  Seeing this resilience as the week progressed, we weren’t overly concerned with gold’s drop into the $1,080’s – the CDNX has consistently been an incredibly accurate leading indicator of the direction of the precious metals/overall commodities markets.  Any collapse in those markets would be preceded by an accelerated downward move and breakdown in the CDNX as we witnessed in the summer of 2008.

A stunning and very revealing statistic is that since early December, when gold hit an all-time high of $1,225 an ounce, the Venture Exchange has actually gained 6% (94 points) while the TSX Gold Index has dropped 21% and gold itself is down 11%.  This is a bullish divergence that confirms to us that gold and commodities are in another long-term uptrend with the possibility of a near-term crash very remote.  The CDNX is the most accurate leading indicator we’ve seen – don’t let certain analysts scare you that a crash even worse than 2008 is about to happen any day now.  The CDNX says NO.

If the CDNX continues to hold its ground next week above the 50-day SMA of 1535, then a bullish scenario is likely to start unfolding for April.  Overbought RSI levels on the CDNX have backed off, increasing the possibility of a move back up in the Index.  In fact, the RSI dropped to 50 this past week on the CDNX and that’s a level from which significant rallies have ensued over the past year.

Gold had an interesting week and escaped relatively unharmed from a major surge in the American dollar.  A pattern seems to be forming with gold making higher lows as the U.S. dollar makes higher highs.  This has to be encouraging for gold bulls.  And so too is the fact the U.S. dollar has hit 70 on the RSI – in most cases when this happens, gold starts to rally along with gold shares.  We saw that Friday with gold up $16 an ounce along with strong moves in the CDNX and the TSX Gold Index.

BullMarketRun Portfolio

Gold Bullion Development (GBB, TSX-V) went through some much needed consolidation this week to help unwind its overbought technical condition that emerged after last Friday’s run to 30 cents on nearly 7 million shares…GBB snapped a four-session losing steak Friday with a 2 cent gain to close the week down just a penny at 26.5 cents…there is little doubt in our mind that things are moving rapidly at the moment with this company…there has been HUGE demand for their recently announced private placement which late Friday was amended to $4 million from $3.22 million…word is, the PP is fully spoken for and will close very quickly…this, we believe, will be followed by the release of a preliminary resource block model for the LONG Bars zone at Granada, new assay results, and details on a very large Phase 3 drill program that should commence by the end of April/early May…the market will have a lot to speculate about in the days ahead…a breakout to a new all-time high for Gold Bullion appears almost certain when one examines the chart and grasps the fundamentals – Granada has all the makings of a world class bulk tonnage, open-pit deposit…one that is near-surface and surrounded by excellent infrastructure…rumor has it, Osisko (OSK, TSX) and others are keeping a close eye on developments with Gold Bullion which doesn’t surprise us one bit…

Seafield Resources (SFF, TSX-V)

Seafield had a fairly quiet week and closed unchanged at 26 cents…the key to making money in Seafield over the past six months or so has been to “play the swings”, buying into weakness and selling into strength…that would suggest now is the time to be accumulating Seafield…we expect this stock will eventually break out to new all-time highs in the upcoming second quarter when drilling commences at the company’s gold properties in the Quinchia district of Colombia…at 26 cents, Seafield is up 333% since we uncovered this gem last summer at a mere 6 cents…

Kent Exploration (KEX, TSX-V)

As our article stated Thursday, keep sowing the money seeds with Kent…this stock has not busted loose yet like GBB, SFF, RVC or CMJ, but its turn will come…Kent has an excellent portfolio of properties and the right management and expertise to develop them in a way that will significantly build shareholder value and wealth…Kent announced Friday that it has completed 5 holes and 1,137 metres of drilling at its highly prospective Turnberry Prospect in western Australia (Gnaweeda joint venture with Teck)…Kent has also commenced an IP survey to help identify targets in advance of a drill program at Alexander River in New Zealand…the company’s AGM is coming up April 30 when shareholders will be voting on the proposed spin-off of the Gnaweeda project into Archean Star Resources…Kent shareholders will receive one share of Archean Star (which will trade on the TSX-V) for every four shares of Kent which closed Friday at 16.5 cents, down 1.5 cents on the week…

Greencastle Resources (VGN, TSX-V)

Greencastle continues to struggle and is the only stock in the BullMarketRun portfolio that has actually gone down in value from when we first highlighted it…Greencastle was off another penny this week to 13 cents, so the company now is trading at just its cash value which means there is little downside risk from here…the recent weakness in Greencastle was brought on by disappointing news regarding two wells the company and its partners recently drilled and cased near Cabri in southwestern Saskatchewan…that oil and gas play isn’t over, however (Greencastle has a large land package in that area), and Greencastle also holds other significant assets including royalties from the Primate oil field and gold properties in Nevada…great stock to accumulate at current levels for those with a longer-term outlook…

Richfield Ventures (RVC, TSX-V)

Richfield has pulled back from overbought levels as expected, closing Friday at $1.81 for a 34 cent loss on the week…Richfield could correct a bit more, but we expect this stock to have a strong April as drilling starts up again at its Blackwater Project in central British Columbia…like Gold Bullion, Richfield is developing a world class bulk tonnage, open-pit deposit…

Colombian Mines Corporation (CMJ, TSX-V)

Colombian Mines continues to look strong though it lost 8 cents this week to close at $1.31…the possibility of a declining 10-day SMA may put a little more downward pressure on the stock by the middle of next week, but any additional weakness should be regarded as a buying opportunity…CMJ has a terrific portfolio of gold properties in Colombia and currently has 2 drill rigs at Yarmualito…

At BullMarketRun, we’re blessed with some intelligent readers who often send us some excellent suggestions and their own views of where a particular stock is headed.

We often give our own technical analysis, but for another view this morning we have a chart and comments contributed by John from Peterborough, Ontario, who we know does have a knack for this kind of stuff.    He, too, has a very bullish outlook on GBB and illustrates below that the next up-move target for this stock is 42 cents.

Some comments on the chart (based on yesterday’s close) from John:

When the peak of 31 cents was reached on Monday, the RSI value was less than the RSI value of the previous high.  Immediately that divergence signalled a probable weakening in the stock price in the near future.  In this case, it happened almost immediately (on the daily chart there are two sloping green lines which indicate a negative or bearish divergence between the stock price and RSI(7), the relative strength indicator).

The horizontal blue line at 24 cents is a strong support level.

The stock price is above both the SMA50 and the SMA200 moving averages which are rising, creating a bullish scenario.  Another bullish indicator is the high ratio of up volume to down volume as indicated in the blue ellipse.

The horizontal blue lines to the left of the stock price are the Fibonacci levels which indicate the next up-move target is 42 cents.

RSI and Slow Stochastics have both been heading down which shows consolidation, which could continue for a while longer.  The outlook for GBB remains very bullish.

Gold is stronger again this morning as it tries to get above the $1,100 level again…it’s currently up $6 an ounce to $1,097 (as of 8:15 am Pacific time)…the Venture Exchange has shown tremendous resilience this week while battling weaker gold prices, a declining 50-day moving average, and normal month-end selling pressures…this has potential bullish implications…the CDNX is ahead 8 points this morning to 1,558…the technical picture for the CDNX should really start to come into focus by the end of next week…we are still cautious at the moment as we wait to see how things play out, but the bulls have reason for optimism…Gold Bullion Development (GBB, TSX-V) has reversed a four-day slide and is charging higher once again…March has been a great month for GBB but we suspect the fireworks have only started with this stock with a preliminary resource block model and more assays on the way, not to mention a huge round of new drilling at Granada…all Gold Bullion has to do is drill, drill, drill…GBB is up 2 cents this morning to 26.5 cents as accumulation picks up again…Kent Exploration (KEX, TSX-V) has come out with an update on its Austalian and New Zealand exploration projects this morning…Kent has completed five holes totaling 1,137 metres at its Gnaweeda Turnberry Prospect, and an IP survey has commenced at Alexander River in New Zealand in advance of a drill program there…Kent is down half a penny to 16.5 cents…Seafield Resources (SFF, TSX-V) has backed off a little bit after a strong day yesterday…Seafield is at 26 cents, down 1.5 cents…

Gold Bullion Development (GBB, TSX-V) has been trading this week almost exactly as we expected it to and has retreated into the “sweet zone” – Thursday’s 24.5 cent close puts it firmly in a very strong area of support from which the next big run, taking it to fresh highs, is likely to begin.  This is “textbook” trading, so we hope those who have been following this exciting story have been accumulating positions the past few days.   Gold Bullion has been in “consolidation mode” this week with overbought RSI levels correcting back to where they were just prior to the March 2 blast-off.

Osisko’s (OSK, TSX) $372 million all-stock friendly takeover offer for Brett Resources (BBR, TSX-V) underscores in many ways how potentially valuable Gold Bullion’s Granada Gold Property is. Gold Bullion has a current market cap of just $20 million and, at the very least, has every chance in our view to soon define a deposit that equals or exceeds Brett’s Hammond Reef.  Granada is also surrounded by excellent infrastructure in the heart of the “Golden Highway”, 40 miles west of Osisko’s Canadian Malartic Deposit (Gold Bullion, by the way, now controls 4,900 hectares at Granada, nearly identical in size to Osisko’s package at Malartic).

As stated in its March 10 news release, Gold Bullion will soon be releasing a preliminary resource block model on the LONG Bars Zone which includes historical drilling in addition to GBB’s 25-hole program in December and January that resulted in a significant discovery in the northeastern part of the property.   Mineralization is at shallow depths (typically near surface to 200 metres) and is open in all directions at Granada.  We’ve walked the LONG Bars Zone, we’ve seen it for our own eyes. And the next few months are going to be fun as Gold Bullion drills hole after hole – north, south, east and west.  We can’t wait to see what their preliminary 43-101 is going to look like by year-end.  The company was drilling for structure in December and January and came up with some fantastic holes.  What happens when they actually start drilling for grade?

Brett’s Hammond Reef has an inferred resource of 259.4 million tonnes grading 0.8 g/t Au at a cut-off grade of 0.30 (6.7 million ounces).   The deposit remains open along strike and at depth.  Over 97% of the resource is within 300 metres of surface.  The inferred resource estimate was based on 85 historical holes (18,000 metres) and 138 holes drilled by Brett (39,000 metres).

GENIVAR, Gold Bullion’s geological consultant, is producing a preliminary resource block model for Granada based on 29,000 metres of total drilling (26,000 historical, nearly 3,000 by Gold Bullion), underground workings, and three test open-pit bulk samples.  Gold Bullion’s large 30,000 tonne bulk sample in 2007 graded 1.62 g/t Au and even showed some minor silver, nickel and copper credits.   The company has already demonstrated there are no metallurgical issues at Granada, recoveries are very high and strip ratios are low.  The economics of a large open-pit mining operation at this property could potentially be quite robust.

An interesting experience during our recent Granada site visit was walking on the 400,000 tonne waste pile, adjacent to the old #1 pit.  In the past, people used to sneak into this area and hunt for gold.  The fact that Gold Bullion sampled its waste pile and got a stunning average grade of 1.75 g/t speaks volumes about the potential of this property.  Underneath this waste pile, though, could be another significant zone of mineralization as geologists believe a fault runs right through here (holes 1, 2 and 3 were drilled at the very western tip of the waste pile and returned significant results).  Drilling through this waste rock should not be a problem.

Below is a view from on top of the waste pile with Granada Mine Manager Karol Mikulash on the left and GENIVAR’s Nathan Jourdain on the right:

A view of part of the Granada waste pile...like walking on the moon. What's underneath the waste pile has geologists curious.

Gold Bullion has been a fascinating story to cover and we have every reason to believe it’s going to get even more interesting in the days, weeks and months ahead.  We’re still working on a comprehensive report on Gold Bullion from our recent visit.

Gold has stabilized after a sharp drop yesterday and is up $4.00 an ounce to $1,091 as of 8:50 am Pacific time…the CDNX this week has been holding up well and is not behaving in a way that would suggest commodities and the precious metals sector are about to crash as some analysts are suggesting…the reversal in the CDNX’s 50-day moving average last week was a cautionary “red flag” for us…we remain cautious as our goal is not only “home run” hits in the junior resource sector but preservation of the wealth we build…the action we’ve seen in the Venture this week, however, is encouraging so far…the CDNX is currently up 6 points on the day to 1557…it would be extremely positive if this market could hold at or above its 50-day moving average (1540) over the course of the next week or so…Kent Exploration (KEX, TSX-V) has rebounded this morning from oversold conditions and is currently up 2.5 cents to 18.5 cents…Kent has tremendous upside potential and patient investors should be rewarded handsomely with this stock…Gold Bullion Development (GBB, TSX-V) continues to consolidate around 25 cents which is very positive from a technical point of view as the recent overbought condition continues to unwind…Merrill Lynch picked up 200,000 Seafield (SFF, TSX-V) shares this morning, driving it up to 26.5 cents…Colombian Mines (CMJ, TSX-V) is up 6 cents to $1.35, Richfield Ventures (RVC, TSX-V) is unchanged at $2.00 and struggling Greencastle Resources (VGN, TSX-V) is also unchanged at 13.5 cents…we expect to add a new stock to our portfolio to kick off the month of April…we are just completing our due diligence and we believe we may have another huge winner on our hands…

The current weakness in Kent Exploration (KEX, TSX-V) is puzzling  as it certainly does not jive with the company’s underlying fundamentals or  excellent prospects.  But that’s the market which for some reason has yet to fall in love with this stock.  For those investors with just a little patience and a  reasonable time horizon, we are certain that Kent will reward you handsomely in due course.  We reap what we sow.  There is incredible value here and now is the time to sow the money seeds with Kent to reap the rewards later on.

Kent closed today at just 16 cents (it dropped as low as 15.5 this morning) for a market cap of only $6 million.  The weakness, we believe, is related to technical factors as well as some investors who have been selling stock to exercise warrants or selling their cheap stock once the warrants have been exercised.

Let’s quickly review Kent’s underlying strengths which clearly show why this stock offers such great value at current levels:

1. Gnaweeda Gold Project – Western Australia

Kent (the operator) continues to drill at Gnaweeda,  a joint venture with Teck which covers a 28 kilometre strike length of highly prospective rocks in the Archean-age Gnaweeda Greenstone Belt.    Turnberry is the most advanced property in this land package and 7 of 9 holes drilled by Teck in a limited program in 2007 intersected significant gold mineralization (including VG) at depths ranging from 17 to 280 metres.  The possibility of Kent getting some favorable results at Turnberry are very real. The current Phase 1 program at Gnaweeda includes five holes at Turnberry and three at another prospect, Bunarra.

“Dr. Gerry Ray, who did our 43-101, is really excited about Gnaweeda,”  Kent President/CEO Graeme O’Neill told us in a recent interview.  “He looks at a lot of projects and he thinks this one is one of the cream of the crop…Kirkland Lake-style.  He says you find one deposit, they’re like bells on a string.  There’s always more.  Typically you get two or three within a 10-15 kilometre strike.”

The style of both the mineralization and alteration at Gnaweeda suggests this project could host in-situ gold similar to the large Archean deposits mined in the neighboring Meekatharra-Wydgee Greenstone Belt.  The current drill program may come up with some interesting results and will also give Kent and Teck a much better understanding of the geological and structural controls at Gnaweeda – valuable information for the planning of a second round of drilling.

2.  Archean Star Spin-Off

Kent shareholders will soon receive a “dividend” in the form of shares in a new CDNX traded company to be called Archean Star Resources.  Shareholder approval on the spin-off is expected at Kent’s AGM April 30 (a minimum $1 million financing is currently in the works with Archean Star at a proposed 25 cents) and we expect the company will begin trading on the Venture Exchange soon thereafter.  For every four shares of Kent you own, you’ll receive one share of Archean Star.  An investor with 20,000 shares of Kent (currently valued at $3,200 based on today’s closing price) will receive 5,000 shares of Archean Star.  Even with Archean Star at just 20 cents (there will be approximately 13 million shares outstanding assuming a $1 million financing at 25 cents), that’s a nice $1,000 “dividend”.

The Archean Star spin-off, in our view, will unlock the value of Gnaweeda for Kent shareholders and could also become a vehicle for additional projects.  Kent will still be left with two flagship properties including one that will deliver cash flow:

3. Alexander River Project

Drilling should commence in the near future at Kent’s Alexander River Project in New Zealand.

The market has yet to fully appreciate the significance of this particular property which quite possibly could eventually rival OceanaGold’s (OGC, TSX) very successful Globe Progress Mine located just 20 kilometres to the north.  Ironically, Oceana gave up Alexander as a result of the 2008 market meltdown when it had to cut costs and go into survival mode.

The Alexander Prospect, which includes the old Alexander Mine that produced about 40,000 ounces of gold prior to closing in 1943, was estimated by Macraes Mining (the precursor to OceanaGold) to contain an inferred (non-compliant) resource of 643,000 ounces of gold.  Macraes reported that an auriferous halo of sulphide hosted mineralization exists around the early mined reefs (similar, by the way, to Globe Progress) and that there is an inferred resource of approximately four million tons grading more than five grams per ton.

A significant portion of the Alexander Prospect has yet to be systematically explored, however, and that has O’Neill thinking this property may have one million-plus ounce potential.  “From what we’re seeing here, this could go on for 2.5 kilometres (double the Macraes’ figure),” O’Neill told us.  “While we were reviewing some of the historic data, Nancy (Nancy Reardon, Kent geologist) noted that there was a pan concentrate taken about three quarters of a kilometer away that ran 30 grams.  That’s a pretty significant pan concentrate, and it’s in another watershed…there appears to be least two parallel structures.  The whole gold belt stretches something like 40 or 50 kilometres north to south and over 100 small mines have been in operation.”

“The New Zealand government is good to deal with, very professional people,” explained O’Neill.  “After many years of unfriendly governments, they changed their whole mindset.  They’ve made a big commitment.  It’s a supportive environment, similar to Saskatchewan.  What I like to do, I like to go into an area and have someone say, ‘How can I help you’, and that is what I got there.  I was very impressed.”

Kent completed some trench sampling at Alexander River late last year and in January reported impressive results including 24.6 g/t Au over 3.2 metres, 6.4 metres grading 6.87 g/t Au, 8 metres of 10.56 g/t Au, and 12.8 metres grading 4.5 g/t Au.  Significantly, these numbers confirmed historical numbers from Alexander River – even better in some cases.

4. Flagstaff Barite Property

As far as we know, Kent is the only publicly traded company with a production-ready high-grade barite deposit (CE Minerals defined an historic deposit at Flagstaff in the early 1980’s which they estimated at 1.3 million tons of 4.2 specific gravity barite).  Mine permits and a barite sales agreement are in place, though Kent still has to post a $140,000 reclamation bond.  Infrastructure is excellent at Flagstaff, located in northeastern Washington State, and the actual mining operation would be fairly simple (blasting, excavating, upgrading) and low-cost.

Kent recently completed a long-term sales agreement with Matovitch Mining Industries for 20,000 tons of barite annually at $40 per ton, but what we found interesting in our conversation with O’Neill was that he stated, “Matovitch has indicated if we can produce 40 or 50 thousand tons a year, they would take it all.”

Annual production of 50,000 tons of high-grade barite would generate approximately $2,000,000 in cash flow for Kent.  “Including a fairly substantial fudge factor we’re looking at costs of about $20 a ton,” stated O’Neill.

Kent will be able to get back on the ground at Flagstaff in a couple of months.

5. Management

Our final but most important point regarding Kent concerns its management and the quality team that O’Neill has assembled, from geologists through to investor relations.  A company is only as good as its people, and Kent’s people are GOOD.  O’Neill is a sharp businessman with strong ethics and a determination to succeed.  He has recruited an extremely capable team, obviously something that Teck also noticed when it agreed to do a joint venture with Kent. Teck is very selective and doesn’t just jump into bed with any junior that knocks on its door.  They saw credibility, talent, and a capable partner that could move a large project like Gnaweeda forward.

O’Neill has done an excellent job of keeping share dilution to a minimum with Kent.  The company currently has 37 million shares outstanding (45 million fully diluted).  They’re fairly low on cash (we estimate they have about $200,000 in working capital at the moment with more money coming in from the exercise of warrants) but they manage their cash well and will not dilute the stock with a large financing at current prices.

Building a company is never easy and sometimes the rewards don’t come as quickly as you would like.  Kent’s stock price is exactly where it was about six months ago when we first uncovered this little gem.  Our faith in Kent has not been shaken; to the contrary, it has only been reinforced by O’Neill’s low-key but strategic, deliberate and systematic approach.  Over the past year-and-a-half in particular he has made bold moves and has steadily assembled the building blocks that will provide the foundation for not one but two outstanding junior resource companies.  Now is very much the time to be a Kent shareholder.  This is a company that BullMarketRun is convinced is destined to succeed in a huge way.

A surging U.S. dollar has put pressure on gold prices this morning…gold is near its low of the day, down $11 an ounce to $1,091 (as of 8:30 am Pacific time)…we’re keeping a close watch on the CDNX which is holding up reasonably well so far in the face of weak markets this morning…the CDNX is down 6 points to 1555…the next several days are going to be critical from a technical standpoint for the Venture…as we mentioned, the Venture’s declining 50-day moving average has raised a cautionary red flag for us…we’ll see how things play out in the coming days as the CDNX is put to a serious technical test with gold under pressure and month-end just around the corner…a bullish scenario would be if the Venture can hold at or above its current 50-day moving average (1540)…a breach of that support would likely take the Index down to secondary support at 1500, just above its 100-day moving average…we are cautious at the moment and less eager to speculate…Gold Bullion Development (GBB, TSX-V) remains a special situation in the current environment, however…GBB has very strong support in the mid-20’s and bounced back quickly this morning after touching 23.5 cents in early trading…it’s currently at 25.5 cents, down half a penny…the stock’s recent overbought condition is unwinding, so the trading action we’re seeing is very healthy and necessary from a technical standpoint and lays the groundwork for an assault on potential all-time highs with GBB in the near future…Richfield Ventures (RVC, TSX-V), another very attractive bulk tonnage situation, is beginning to pull back now after recently running to a new 52-week high of $2.25…depending on the markets, we may see Richfield retreat to between $1.50 and $1.80 which are the 50 and 20-day moving averages, respectively…

Our cautious stance on the markets continues…the CDNX is inching up a little this morning, currently ahead 1 point at 1,556 while gold is bouncing around and is now up $2 an ounce at $1,104 (as of 8:45 am Pacific time)…the Venture’s declining 50-day moving average is a cause for concern at the moment as we outlined over the weekend..the next few days will be an excellent test of just how resilient this market is…the first major area of support on the CDNX is 1,540, the 50-day moving average…below that, there is excellent support between 1,485-1,500…we hope traders increased cash positions last Friday when we first warned of some potential turbulence ahead…the action in Gold Bullion Development (GBB, TSX-V) is very positive from a technical point of view as the stock is consolidating nicely in the mid to upper 20’s…this will lay the groundwork for a potential major new move to the upside in the near future…even with a choppy or slightly negative market, a company with a significant gold discovery on its hands is going to fare very well…we suspect a considerable number of GBB warrants have been exercised recently which has helped to keep a “lid”, so to speak, on the stock price…Gold Bullion is up 286% since we first highlighted this stock three months ago…smart money, we believe, continues to accumulate GBB…elsewhere with the BullMarketRun portfolio, we are keeping a close eye on Richfield Ventures (RVC, TSX-V) which has been a tremendous performer of late…we expect Richfield to ease off slightly and consolidate for a brief period to digest its recent gains before potentially making a run at the $3 level when drilling resumes at Blackwater…Richfield is currently off three cents to $2…the best strategy with Colombian Mines (CMJ, TSX-V) has been to accumulate on any weakness…CMJ continues to drill its Yarmualito Property in Colombia and has a terrific package of exploration projects in that country…