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Volatility continues to rule the markets…Gold plummeted by more than $100 an ounce for the second trading session in a row overnight, dropping as low as $1,531 – just $6 above its rising 200-day moving average (SMA)…it has since reversed, however, and as of 8:30 am Pacific, the yellow metal is down $49 an ounce at $1,607…this dramatic volatility can be unsettling to many investors but understanding volatility and making it your friend is an important part of the formula for being a successful investor…Gold had become extremely overbought last month and the possibility of a near-term decline to the outer or inner trendline support areas, as shown below in John’s most recent 2.5-year weekly chart, was considered very high…this is exactly what has occurred, albeit over a quicker period than was anticipated…since its September 6 all-time high of $1922 on the Spot Market, Gold has tumbled nearly $400 or 20% – interestingly, this is exactly in line with Gold’s average 18% correction during recent years…there is absolutely no indication that we are witnessing a reversal in Gold’s long-term bull phase…James Steel, precious metals analyst at HSBC in New York, summed it up best…”There isn’t a single macro, geopolitical or any other event that has occurred in the last three days to give evidence of a reversal in the Gold rally”…Gold’s 200-day SMA has not been breached since January, 2009…at times of economic and stock market turmoil in recent years, it also has not been unusual for Gold to initially tumble in part because traders/investors have had to cash in their Gold in order to cover margin calls on other investments…from March 17, 2008, the day after the Bear Stearns’ collapse, to a low in mid-October, bullion fell more than 30%…in the next year it surged 50%…likewise, when the Dubai world default triggered a wave of selling across global financial markets in November, 2009, Gold was not immune…it dropped 12% in the subsequent 10 weeks, only to rally to another new high…below is John’s Gold chart after Friday’s trading…notice how the RSI has gone from extremely overbought to very close to important support (entering today)…John will update the Gold chart following today’s trading…

Silver took another hit overnight and touched another support area at $26…as of 8:30 am Pacific, Silver is off $1.51 at $29.42…Copper is down a dime at $3.20…Crude Oil is 61 cents weaker at 79.24 while the U.S. Dollar Index is flat at 78.19…the TSX Gold Index is holding up well, down 3 points at 393, while the CDNX continues to suffer…it’s off another 44 points at 1502…the Venture is extremely oversold, however, and we could see an intra-day reversal…

Detour Gold (DGC, TSX) is consolidating its holdings in the Detour Lake Gold camp…in another example of what we can expect a lot more of in the coming months, DGC and Trade Winds Ventures (TWD, TSX-V) have entered into a definitive agreement pursuant to which Detour Gold will acquire all of the issued and outstanding shares of Trade Winds, by way of a court approved plan of arrangement, for total consideration of $84-million…under the terms of the agreement, Trade Winds shareholders will receive 0.0142 of a Detour Gold share and $0.0001 in cash for each Trade Winds’ share held…based on Detour Gold’s closing share price last Friday, this represents total consideration of 45.5 cents per Trade Winds share and a premium of 57% to Trade Winds‘ closing price Friday…TWD is the most active stock on the CDNX so far today and is currently up 11.5 cents at 40.5 cents…if you believe Gold stocks are due for an immediate recovery, TWD has to be considered an attractive play at the moment…

Richmont Mines (RIC, TSX), which fell $1.07 Thursday and $1.04 Friday, dropped another 84 cents this morning, touching a low of $10.15…$103 million in market capitalization (24%) was knocked off Richmont in just four trading sessions which makes no sense at all but that’s the market…fortunes are born when there is blood in the streets…

Spanish Mountain Gold (SPA, TSX-V), a company with a very attractive low grade Gold deposit in central British Columbia, touched its 100-day moving average this morning (SMA) at 66 cents…last week, it was as high as 87 cents…there are many other examples of technically very oversold situations including two companies we follow closely, Visible Gold Mines (VGD, TSX-V) and Currie Rose Resources (CUI, TSX-V)…

Silver got hammered last week and it’s down again in overseas trading this evening.  As of 7:35 pm Pacific, Silver is off another $1.44 an ounce to $29.49 and has hit the 38.2% Fibonacci level.  There are some encouraging signs in this market as John points out in the chart below.

Visible Gold Mines (VGD, TSX-V)

Visible Gold Mines unfortunately took an abrupt and unexpected u-turn last week, falling 11.5 cents or 30% to 26.5 cents…the good news is, the stock is now technically quite oversold based on RSI(14) and Stochastics and there are positive things happening with this company on the ground in northwest Quebec…investors in our view likely read too much into selling of more than 300,000 shares by Pinetree Capital’s (PNP, TSX) Sheldon Inwentash, but that’s what started the nosedive which stopped the stock’s momentum and rattled some nerves…the overall market’s plunge then accelerated the selling along with a weakening of VGD’s technicals…as everyone knows, and was reminded last week, junior exploration stocks can be extremely volatile and aren’t for the faint of heart…but the rewards can be big…VGD is well positioned for success at two major projects…its Wasamac-area land package is in the heart of a promising new mining camp that is beginning to emerge west of Rouyn-Noranda…what’s highly significant for Visible Gold Mines is that much of the area around Wasamac has been under-explored and has obvious potential for additional deposits…VGD controls a large land position there and is also the most aggressive driller besides Richmont…in addition, VGD has some early results to prove it’s not drilling into cow pasture…VGD hit several zones of Gold mineralization on its very first hole at Wasa Creek (LBWC-11-3) as announced August 11…12 other holes (some with quite encouraging visuals) were completed in Phase 1 and assays are pending on all of those…what impresses us the most about LBWC-11-03 is that it was essentially a “blind hole” – this property has been virtually ignored in terms of any previous exploration and on the very first hole, VGD hits Gold…of particular curiosity is the 16.4-metre section that shows the same style of mineralization as the Wasamac deposit – close co-existence of Gold and pyrite disseminated in an altered shear zone…it’s still very early in the game for VGD at Wasa Creek but the right geological structures appear to exist and the company has made rapid progress with this project in just three months…as well, VGD geologists believe they may have discovered some sort of connection between the Wasa Shear and the Cadillac Fault at Wasa East with that property right in between those two Gold-bearing systems…given developments at Wasa Creek and Wasa East, along with the Joutel Project of course, news flow should be strong with VGD and some drama could quickly build…at the moment VGD has to be considered the most exciting play in the BMR “stable”…a 7,500-metre, Phase 1 drill program at Joutel has started…we love this property because three former Gold mines (one open-pit, two underground) and two former copper mines are within the immediate vicinity of where VGD will be drilling, just a few kilometres to the northwest and the southwest, respectively…it’s hard to imagine there aren’t more deposits in the area, ones that simply weren’t discovered in the 70′s, 80′s and 90′s…and we can’t think of a better geologist to find one or more new deposits there than Robert Sansfacon whose re-interpretation of Canadian Malartic helped Osisko (OSK, TSX) nail down a 10 million+ ounce monster…Sansfacon is challenging some previous geological assumptions concerning Joutel and he’s applying a new model, taking a structural approach rather than a stratigraphic one as Agnico-Eagle (AEM, TSX) did previously…two-thirds of the Phase 1 drilling will test the extension of a northwest-southeast mineralized structural pattern that based on geophysical surveys appears to strike directly southeast of Agnico-Eagle’s past-producing Telbel, Eagle and Eagle West mines for two kilometres and may extend farther to the former village of Joutel and beyond…the Joutel mines gave birth to Agnico-Eagle, and the major would love nothing more than to see this old mining camp come back to life…if anyone can make that happen, it’s Sansfacon who’s highly regarded in Quebec mining circles…Visible Gold Mines has over $4 million in working capital and is being driven by some exploration stories that appear to have serious “legs”…given this company’s aggressiveness and the quality of its geological team, we love the risk-reward ratio with this one and the odds of a potential major discovery…all the ingredients are there to make VGD the next potential big play in northwest Quebec…with a current market cap of $12.6 million, the risk-reward ratio is certainly attractive for long-term investors…

Cadillac Mining (CQX, TSX-V)

Cadillac fell in sympathy with VGD and the overall market last week, losing 4.5 pennies to close at a dime…with a market cap of just $2.7 million, CQX certainly offers strong upside potential simply given its current deal with VGD which allows CQX to retain a 40% interest in Wasa Creek, Wasa East and the entire Lucky Break/Cadillac Break Projects…what could really allow CQX to gain traction, however, is if it’s able to put its 100%-owned seven Wasa claims adjoining the northern portion of Richmont’s Wasamac Property into play, either by raising cash and exploring it themselves or finding a joint-venture partner…that’s what CQX has to do for the benefit of its shareholders…the company had a glorious opportunity to raise cash and build shareholder value earlier this year because of Wasamac and failed to do so…now they have another opportunity…second chances don’t come often in life but Cadillac management has been blessed with one in this instance, and hopefully they take advantage of it…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 explore Goldstrike in the right way…the best solution in our view is for Cadillac to cut a deal with another company for exploration of its Wasa claims and the natural partner for that appears to be VGD which has all the money and expertise necessary to unlock the value of those claims and create excitement in the market…Cadillac could let others do all the heavy lifting at and around Wasamac and then focus its energies on developing the Goldstrike Project…Victor Erickson and Andre Audet are smart mining people and have done an admirable job protecting the company’s tight share structure…this is not their own private company, however, and they owe it to their shareholders, for whom they serve, to build value and not let the company treasury run dry…CQX came out with news September 12 that it intends to conduct a Phase 1 drill program at Goldstrike (contingent on financing) starting in November…

Abcourt Mines (ABI, TSX-V)

Patience continues to be the name of the game here and will be for a while yet…Abcourt was down a penny-and-a-half last week to 9 cents and touched a new 52-week low of 8.5 cents…ABI faces very stiff overhead resistance with a declining 100-day moving average (SMA) at 11.5 cents and a declining 200-day SMA at 14.5 cents…if you’re bullish on long-term Silver and zinc prices, however, which we are, you have to love this play as the current market cap ($14 million) really doesn’t take into account the value of the company’s Abcourt-Barvue Silver-Zinc deposit near Val d’Or…ABI is ripe for an eventual takeover given the value of its assets and management’s obvious inability to unlock that value which is why we still view this company with considerable interest…we love the assets…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…the company released more results from Abcourt-Barvue August 2 including 2.1 metres grading 422.35 g/t Ag…drill results to date should significantly upgrade and increase all-category reserves and resources, most of which can be mined by open-pit…four years ago, GENIVAR produced a very positive feasibility report for the project which showed robust economics…more drilling is expected to take place at the property during the fourth quarter…more results were released July 5 from the company’s Elder-Tagami Gold Property near Rouyn-Noranda including 8.50 metres grading 3.71 g/t Au…that was from the Tagami area to the north which 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 in a better market…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 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)

All remains quiet on the Greencastle front…the stock was unchanged for the week at 14.5 cents (it fell as low as 13.5 cents) with a moderate jump in volume…the declining 100 and 200-day moving averages (SMA) at 18 and 21.5 cents, respectively, will provide stiff technical resistance until news or a dramatic change in the markets alter the dynamics…the company released its June 30th financials August 25 which show working capital of $7.3 million or 16 cents per share…our gut feeling is that something is cooking here…President and CEO Tony Roodenburg has been quiet for too long, but knowing the conservative Roodenburg he will likely wait until the markets reverse before he launches into anything in a major way…the fact Roodenburg is no longer at the helm of Seafield Resources (SFF, TSX-V) is a positive development in our view for Greencastle…he had been trying to ease his way out of Seafield since 2009 without much success until several months ago…he’s now 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 VGN forward and boost shareholder value and we’re confident Roodenburg will do it, sooner or later…Greencastle’s market cap of $6.6 million means the stock is now trading essentially at cash value…history shows that whenever VGN is trading at cash value, a great buying opportunity has opened up though investors must be patient…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, like now, and then sell into strength when something develops (sometimes a year or more later)…with strong working capital, three Gold properties (including land near the Blackwater Project and a couple of very good Nevada properties) and monthly (albeit very modest) cash flow from an oil royalty, it doesn’t take a rocket scientist to figure out that Greencastle does offer excellent value for long-term investors at current levels…the stock is flat since we added it back in to the BMR model portfolio last October…

Sidon International (SD, TSX-V)

We’re all entitled to have one dog in our portfolio and Sidon is that dog for us at the moment, though it did increase five-fold for us last year…there was finally some news from Sidon recently but not the news investors were hoping for as the company announced it will be late in filing its year-end (April 30th) financials…the same thing happened earlier this year with a related company, Kokanee Exploration (KOK, TSX), and the matter was resolved and Kokanee is back on track with some apparent new players…Sidon hasn’t been able to recover yet from its fall in March, one day after the CDNX correction or bear market began, on poor drill results from its Morogoro East Gold Property in Tanzania…the 6 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 apparently drilled some deeper holes but investors haven’t seen results yet…what the initial 6 holes have given Sidon, however, is a better understanding of the Morogoro geological structure which could 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 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 lack of good news is not encouraging…the climb back up won’t be easy and the company will almost certainly have to look at a consolidation of its capital or even a new group to come in and take things over…Sidon ran as high as 26.5 cents last winter but is now off 3 pennies since we introduced it to BMR readers in the spring of last year at a nickel…it closed off half a penny last week at 2 cents and hit a new low of just 1.5 cents…the company currently has 137 million shares outstanding for a market cap of $2.7 million…

Gold Bullion Development (GBB, TSX-V)

It was a rough week for Gold Bullion, like most stocks, as it fell 4.5 cents to close at 29 cents…investors continue to wait for the much-anticipated initial 43-101 compliant resource estimate for the LONG Bars Zone at the same time as the stock faces stiff technical headwinds…the 100-day moving average, for example, which supported GBB from late 2009 through early this year, is now resistance which the stock has not yet been able to overcome…the rising 1,000-day SMA at 25 cents must now hold as support…GBB has a very valuable asset – Gold in the ground and close to surface at Granada…just how much of it remains to be seen but we’re optimistic as a resource estimate draws closer…one important point is very certain in this current equity and Gold environment – many producers, big, medium and small, are sitting on large piles of cash and are looking to add ounces to their production profiles…any junior with an advanced property like GBB possesses, and a 43-101 resource to back it up, could be the target of a potential takeover…merger and takeover activity and property acquisitions in this sector are likely going to increase substantially in the months ahead…GBB’s latest drill results, released September 14, continue to show wide intersections of low but mineable grade…half of the 28 holes had intercepts of 100 metres or more grading between 0.31 g/t Au and 0.50 g/t Au…the northern part of the Eastern Extension continues to show excellent potential and tonnage is adding up in that area…so, overall, we continue to like how the LONG Bars Zone is coming together but GBB has frustrated investors by not producing a 43-101 earlier as promised…companies are rewarded when they exceed the market’s expectations and are punished when they don’t fulfill them which is a major reason GBB has been struggling of late…the Castle spin-off is nice in a way but it also reminds investors that resources have been diverted from the company’s core project (Granada) over the last nine months to a property that may or may not prove to be a winner…GBB’s current market cap of $48 million puts a value of just $16 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 big volume…it’s all about volume at Granada which is why the drills have to keep turning and why we’ve been stating all year that more than just two rigs are needed in the LONG Bars Zone…this property continues to offer great potential but massive drilling is necessary…GBB is up 314% since we introduced it to BMR readers in late December, 2009…

Currie Rose Resources (CUI, TSX-V)

Currie Rose closed at important support (14 cents) Friday, losing 3 pennies from the previous week as the CDNX plunged 12%…based on RSI(14) and Stochastics, CUI has become technically very oversold and is due for a bounce at the very least…with assay results pending from Mabale Hills, the hope is that CUI could deliver some impressive numbers after reporting encouraging visuals…the company stated August 24 that 20 RC holes have been completed at Mabale Hills (16 at Sisu River, 4 at Dhahabu) while drilling has shifted to the Sekenke Project approximately 200 kilometres to the southeast…what we found especially encouraging about the news is the fact that disseminated sulphides were intersected in all 16 holes at Sisu River, unlike Phase 1 drilling there last winter…the initial stage of drilling at Sisu River gave the company some important geological clues and it’s quite possible that assay results will turn out much better this time around…each of the 4 holes at Dhahabu also intersected disseminated sulphides…drilling has yet to commence at Mwamazengo…geochemical analysis has outlined a continuous anomaly over a few hundred metres that runs parallel to the west of a previously reported discovery at Mwamazengo where 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…we’re most excited, however, 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 also 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…CUI announced a joint-venture deal January 25 with Australian-based Liontown Resources for Currie Rose’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…it was announced August 24 that Liontown has now started drilling at Jubilee…Trueclaim Exploration (TRM, TSX-V) has completed a Phase 2 drill program at the Scadding Propery…TRM 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…Trueclaim’s results were encouraging but considerably more work needs to be completed at Scadding to better determine its ultimate potential…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 $12.5 million, what hasn’t changed is the quality of this company’s project portfolio which remains as high as ever…Currie Rose‘s June 30th financials (six months) show the company has all the cash it needs (nearly $2 million as of June 30) to complete an initial major round of drilling (10,000 metres) in Tanzania this summer…

Adventure Gold (AGE, TSX-V)

Adventure Gold got smacked last week, like just about every other stock on the CDNX…AGE closed Friday at 48.5 cents as it dropped 8.5 cents for the week and suffered some near-term technical damage as a result…this company remains one of our favorites, though, with several exciting projects on the go…our contention is that there’s a strong chance at least one of them will “hit”…President and CEO Marco Gagnon is a sharp operator who knows how to maximize every dollar the company spends…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 in the hands of joint venture partners Lake Shore Gold (LSG, TSX) and Agnico-Eagle Mines (AEM, TSX)…AGE started a 5,000 metre Phase 2 program in late May at its very promising Pascalis Property near Val d’Or…on May 31 the company reported more highly encouraging Phase 1 drill results from this former producer including 4.8 g/t Au over 33.1 metres in hole #20 (plus lower grade halos over significant widths)…the Phase 2 program was designed to further define the Gold system, leading to a resource calculation which is already being worked on…initial results from Phase 2 were released September 13 and were solid…they included 7.1 g/t Au over 4.3 metres, 4.5 g/t Au over 9.3 metres and 4.1 g/t Au over 5.8 metres (different holes)…Pascalis encompasses the past producing L.C. Beliveau Mine (Richmont’s Beaufor Mine is nearby)…we found a comment from Gagnon in AGE’s 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) could be very interested in this project as they are looking for an acquisition in the general area…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 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…we believe a lot of Gold was overlooked in that area…in addition, the geometry of the deposit is such that mining costs should be relatively low…considerable infrastructure is also in place…meanwhile, drill results are pending from Agnico-Eagle’s 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 2600 metres…with recent wedging it appears to be on track to potentially hit its intended target by the end of October…if a discovery is made, AGE will instantly explode higher…AGE has completed an 8-hole Phase 1 program at the Lapaska Property near Val D’Or…results released July 21 for the remaining 6 holes at Lapaska were very mediocre compared to the first 2 holes (MZO-TSX-V has an option to earn up to a 70% interest in the property) but Lapaska still holds good potential…AGE course also still has plans for the Granada Extension Property…AGE’s latest financials, released June 29, show the company with $3.3 million in working capital as of April 30, a $300,000 improvement in working capital over the quarter ending January 31…we first mentioned Adventure Gold to our readers in an article September 29 last year, 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 as the company is well positioned to survive any downturn in the markets…

GoldQuest Mining (GQX, TSX-V)

What an unexpected change of events for GoldQuest…long-term, the proposed merger with Takara Resources (TKK, TSX-V) could work out exceptionally well but investors, who often look at just the short-term,  weren’t immediately impressed…GQC fell as low as 11.5 cents last week (it closed Friday at 13 cents, a loss of 3 pennies for the week) after news Monday of the proposed merger with Takara…investors weren’t pleased with the ratio – GQC shareholders will receive 1.6287 shares in Takara for each share held in GoldQuest…talk of a potential rollback (perhaps 1-for-4) and a possible large financing prior to drilling didn’t go over very well with investors either…over the long run, GQC Chairman Bill Fisher is positioning for making the combined GQC-TKK entity a producer…that makes sense but, still, investors believe he could have negotiated a better ratio for GoldQuest given the company’s substantial assets in the Dominican Republic and Spain…

Seafield Resources (SFF, TSX-V)

We remain very pleased with how things are proceeding with Seafield, especially considering the current markets…President and CEO Carlos Lopez continues to put the building blocks together with this company…we’re impressed with his actions over the last few months as he has strengthened Seafield in several ways…he has also put his money where his mouth is, buying significant amounts of stock in the open market…Seafield fell a penny last week to close at 20 cents…on Friday it touched strong support at 19.5 cents, the 1,000-day rising moving average (SMA)…on Wednesday the company released positive results for the initial scoping level metallurgical testwork on its Miraflores Property which showed gravity recoveries as high as 94.3%…the stock has been less volatile recently after bouncing up and down for a period of time between the low 20′s and the low-to-mid-30′s…the company’s June 30th financials were released August 26, showing SFF with $18 million in cash…Seafield announced August 31 that it has opened its new office in Medellin…this followed the news August 11 that Giovanny Ortiz, the former exploration manager of the Angostura Project, has been appointed General Manager of the company’s operations in Colombia…heavy selling came into the SFF market July 25 when the company announced drill results from Dos Quebradas which were disappointing, though we caution it’s still early in the game for that property…Seafield is currently drilling a promising area at Dos Quebradas approximately 250 metres wide (east to west) and more than 300 metres long (north to south)…the zone is open at depth and is interpreted to plunge to the north…more drill results from Dos Quebradas are expected in the next four weeks…meanwhile, Seafield has added a second drill rig at Miraflores in order to expedite a Phase 2 program there which is designed to better define the shape of the orebody, increase the resource confidence and extend mineralization…a total of 10 holes or 6,200 metres is expected to be completed by November (the rock is hard at Miraflores, so the drilling is slow which is why a second rig has been added)…the company announced July 5 that it has hired SRK Consulting for a preliminary economic assessment or scoping level study on Miraflores for completion by the first quarter of next year…SRK will evaluate the potential positive economics of developing an open-pit and underground operation at the property…it will also provide recommendations to advance the project to prefeasibility…Seafield released an updated 43-101 resource estimate for Miraflores May 26…the 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)…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 in a very strong cash position…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 233%% since we made it the first company in the BMR model portfolio two years ago…its current market cap is $33.5 million, approximately twice the company’s cash value…

TSX Venture Exchange and Gold

It was an ugly week for the markets and the CDNX led the decline, dropping a staggering 12% to 1546.  The only good news is, the CDNX has hit extremely oversold levels and based on John’s chart Thursday we’re expecting a reversal to the upside beginning as early as Monday.  All asset classes were hit hard last week (Copper fell below key support) though the U.S. Dollar Index continued to climb.  The Dow was off 6.4%, the Nasdaq declined 5.3% and the TSX dropped 6.5%.

In retrospect, the unusual decline in the CDNX last March actually likely signaled the start of a bear market.  That’s becoming more clear now given the trading patterns in the CDNX over the last six months.  Major bull market corrections in this Index typically last anywhere from one to several months.  We are now into the seventh month.  Last week’s action showed that August was no accident or a final “capitulation”.  And while extreme oversold levels should allow for a move back up this coming week, the final quarter of the year could be rough with the 300 and 500-day moving averages unlikely to be able to continue to rise.  The current action in Copper is confirming a worse than expected global economic slowdown if not in fact a recession.  Protection of capital, as always, is critical.  And remember – fortunes are born when there is blood in the streets.  A final capitulation in the markets has likely not yet occurred but could during the fourth quarter.

Gold

There was an interesting, albeit ridiculous, article concerning Gold in Saturday’s Globe and Mail (“Gold Is For The Fool – If You Are Looking For Safety”).  It was written by David Berman and from the sounds of it, he may have been buying Gold at $1,900 an ounce recently and is now whining that it’s not acting like a “true safe haven”.  Berman showed that he has no understanding of the Gold market or even technical analysis for that matter,  but he nonetheless has been given the platform to mislead people in Canada’s so-called national newspaper.

It was obvious last month from a technical perspective that Gold had become extremely overbought and that the next major push to the upside, through $2,000 an ounce, could not occur until after a substantial correction and consolidation.  John provided some logical downside targets which included approximately $1,600.  Yesterday, of course, Gold scared many as it fell $100 an ounce at one point before closing down $79 at $1,657.  Despite a nearly (and much-needed) $300 drop since the September 6 all-time high of $1,922 on the Spot Market, Gold remains the ultimate currency and the best safe haven there is for long-term investors.

Gold’s overbought condition has been unwinding significantly as this consolidation phase continues, a phase that potentially could carry on for several more weeks.  So patience is the key.  Gold likely hasn’t bottomed out just yet but you’ll notice in John’s chart below (2.5-year weekly chart) how the RSI has dropped very close to support.

Silver got hammered last week and closed Friday at $30.93 (John is working on a new Silver chart which we’ll be posting later today or tomorrow morning at the latest).  Copper plunged through an important support band between $3.60 and $3.78 and closed at $3.30.  Crude Oil fell to $79.85 while the U.S. Dollar Index finished at 78.31.

The “Big Picture” View Of Gold

As Frank Holmes so effectively illustrates at www.usfunds.com, Gold is being driven by both the Fear Trade and the Love Trade.  The transfer of wealth from west to east, and the accumulation of wealth particularly in China and India, is having a huge impact on Gold.

The fundamental case for Gold remains incredibly strong – currency instability and an overall lack of confidence in fiat currencies, governments and world leaders 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.

What’s also driving Gold is the weakness of the United States, brought on in no small part by one of the most ineffectual Presidents the nation has ever been saddled with.  America has lost its way and the recent S&P downgrade is both a real and a symbolic reflection of that.  Since the summer of 2009, the U.S. economy has produced a net total of just two million jobs while federal spending has gone through the roof.  Throughout its incredible history, the United States has demonstrated an amazing resiliency and the ability to bounce back from major economic, social and political troubles.  It will do so again but this will take time and a real Commander-in-Chief in the White House by November, 2012.  By then Gold will have climbed another 50% or more.

Gold is under pressure again today and losses accelerated once it dropped below the August spike low of just above $1,700…as of 11:45 am Eastern, the yellow metal is down $64 an ounce at $1,672…while some near-term chart damage has been done, Gold’s longer-term technical health is not affected…in fact, as we mentioned yesterday, even a drop to the $1,600 area wouldn’t put a dent into the long-term bullish picture – in fact, that would just set the stage for an eventual dramatic push through the $2,000 level…Silver is getting whacked again today, too, as it’s off $3.39 an ounce to $32.45…Copper’s weakness (it has suffered its worst weekly decline since 2008) definitely signals trouble ahead for the global economy…it hit a low of $3.23 this morning and is currently down a dime at $3.35…Crude Oil is 15 cents lower at $80.36 while the U.S. Dollar Index is flat at 78.30…

It’s important to keep an eye on the CRB (RJ) Index which, like the CDNX, has been in a general decline over the past six months…below is a CRB 2.5-year weekly chart from John that shows the Index is currently in a support band that may or may not hold…as of 11:45 am Eastern, it’s down 2 points at 305…

The CDNX is off another 36 points to 1562…the Index is clearly in oversold territory and the “Stochastics Hinge” that John identified on the chart last night is an indication that this latest move to the downside is very close to reversing and a bounce can be expected…however, it does not appear that a “capitulation” has occurred yet and that’s just one reason for the strong possibility of more downside action during the final quarter of the year…it’s hard to imagine at this point that the Index’s 300-day and 500-day moving averages, currently still rising, won’t go into decline in the coming months which will put additional pressure on this market…there will be plenty of trading opportunities and interest will continue in the strongest exploration plays, but this could be a very difficult market to navigate going forward…small, medium and large producers who are sitting on impressive amounts of cash are already targeting acquisition opportunities, so the best plays will be those companies that are possible takeover candidates or have properties that producers would be interested in acquiring…

Yukon stocks, which played a huge role in the CDNX bull market, have really suffered recently with ATAC Resources (ATC, TSX-V) entering today’s trading having declined for 10 consecutive sessions…technically, it has become severely oversold which is why it has bounced to the upside this morning…ATC is currently up 13 cents to $4.33…ATC holds great potential, in our view, as it continues to explore for Carlin-type deposits in the Yukon but overall market weakness could still take it lower…Kaminak Gold (KAM, TSX-V) is in the same position with its Coffee Project…

We’re wrapped up our visit to northwest Quebec but we have more stories to share over the next week…it takes some time to put things together…most investors right now are so focused on the current volatility and the world’s financial problems, they aren’t paying attention to some of the great exploration stories and opportunities that are unfolding in northwest Quebec and elsewhere for that matter – Wasamac being one of them, though Richmont Mines (RIC, TSX) has been performing very well…more deposits are likely in that area where no company is better positioned for exploration success than Visible Gold Mines (VGD, TSX-V)…the plunge in the CDNX has taken VGD down to a strong zone of technical support at 29 cents as John pointed out on his most recent VGD chart…

The CDNX took a beating today, dropping 106 points or 6% to 1598.  This is a typical situation when many investors panic and let their emotions dictate their trading.  And often that means doing the opposite of what they really should be doing.

Technical analysis is so valuable because it helps take “emotion” out of the decision-making process when it comes to buying or selling a stock.  Take a look at John’s CDNX chart below and you’ll see that a reversal is likely Friday or Monday based on the “Stochastics hinge” that has formed.

As of 11:30 am Eastern, the CDNX is off 92 points at 1612.  John’s 2.5-year chart below shows two pivotal support zones.  Note the current oversold RSI condition which offers hope the first support band may hold.