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May 16, 2011

BMR Morning Market Musings…

Gold was mostly lower overnight but has turned positive this morning…as of 8:05 am Pacific, the yellow metal is up $8 an ounce at $1,503…physical demand for Gold reportedly remains strong…sales of Gold coins, for example, are on track for the best month in a year, according to CNBC, amid the worst commodities rout since 2008 – another sign that Gold’s longest bull market in nine decades is far from over…Silver touched nearly $34 an ounce this morning but is trying to rebound…it’s currently at $34.91, down 39 cents for the day…the slump in Silver prices has raised demand for Silver in India where companies are handing out Silver coins as part of employee bonus packages and jewelry stores are promoting Silver as an affordable alternative to Gold…crude oil is down $1.03 to $98.62 while the U.S. Dollar Index is off over half a point to 75.29…a gauge of manufacturing in New York State tumbled much more than expected in May to its lowest level in five months…the New York Fed’s “Empire State” general business conditions index fell to 11.88 from 21.70 in April…that’s the lowest level since December of last year and well below economists’ expectations of 19.85…the survey of manufacturing plants in the state is one of the earliest monthly guideposts to U.S. factory conditions…the legally set $14.3 trillion U.S. debt limit  is expected to be reached today (www.usdebtclock.org), preventing the U.S. from accessing bond markets again until the debt ceiling is raised…it’s believed the Fed can maneuver until August…Congressional wrangling continues with Republicans and Democrats far apart on any agreement to raise the debt ceiling with Republicans wanting to go much further on spending cuts than Democrats…ultimately, deep spending cuts will have to be implemented in the U.S. and not just at the federal level but at state and local levels as well…this will take the U.S. from a period of record stimulus spending to record cuts and unquestionably that could have an immediate negative impact on economic growth…investors focused on the fundamentals behind crude oil’s recent sell-off argue that the catalyst for the drop was less optimism about the strength of the U.S. economic recovery…margin hikes imposed on crude oil and gasoline served to aggravate the wave of selling…traders are also watching the euro zone where finance ministers are meeting today to discuss the region’s debt crisis amid new worries about developments in Greece…the CDNX is down 2 points as of 8:05 am Pacific to 2036…the fact the CDNX is significantly underperforming Gold and the broader stock markets in New York and Toronto is cause for serious concern…GoldQuest Mining (GQC, TSX-V) released results this morning from the final seven holes of a 24-hole program at its La Escandalosa Property in the Dominican Republic…the best intersection from Escandalosa Sur, where an initial 43-101 inferred resource of 400,000 ounces was outlined last fall, was 20 meters grading 1.32 g/t Au…results from this area overall (21 holes) were somewhat disappointing though more drilling is required and will take place later this year…however, the company drilled three holes at the Hondo Valle target 1.6 kilometres to the north (outside the resource area) and all three intersected significant mineralization including 29 metres grading 2.18 g/t Au in hole #65…that’s the thickest and highest grade mineralized section drilled to date at Hondo Valle…the theory is that mineralization trends north from Escandalosa Sur to Hondo Valle…GoldQuest is carrying out a 16-square kilometre IP survey and magnetic ground geophysical survey from 2 kilometres north of Hondo Valle to 2.2 kilometres south of Escandalosa Sur…this will be completed by the end of July and GQC will use the data to pinpoint key targets for an additional 3,000 metres of drilling…GoldQuest also has other promising projects in the DR it’s working on in addition to its lead-zinc-silver deposit in Spain…GQC is down 3 pennies at the moment to 20.5 cents on relatively light volume…we suggest investors perform due diligence on Brazilian Gold (BGC, TSX-V)…the BGC chart has held up extremely well during this period of CDNX weakness as the company continues to develop a number of promising Gold projects in northern Brazil…BGC is up slightly this morning to $1.43 after releasing results from the first two holes at its Rio Novo Property, 50 kilometres southwest of the company’s flagship Sao Jorge Gold deposit…Richmont Mines (RIC, TSX), which reported stellar first quarter results last Thursday, is up another 19 cents to $7.77…Richmont has been one of the top-performing Gold stocks on the TSX this year due in part to the growing size of its Wasamac deposit just west of Rouyn-Noranda…Cadillac Mining (CQX, TSX-V) has reversed course and won’t be drilling its strategically located “Wasa” claims anytime soon as revealed in a news release this morning…this company has missed a Golden opportunity over the last several months to raise money and generate investor excitement over Richmont’s success at Wasamac…the principal structure hosting Gold mineralization at Wasamac dips northerly onto Cadillac’s 100% owned seven claims…failure to take advantage of the Wasamac situation up to this point gives us little confidence Cadillac will be able to exploit the opportunity it has with its Goldstrike Project in Utah…CQX is currently down half a penny at 11.5 cents…

19 Comments

  1. Hi
    Have you looked into sgc-vc. It has held up very well during this difficult period. It has amazing projects going and will deliver its report in the next couple of weeks!!! Muti metals including silver and gold!! Sales from its last pp have dried up and I think it is going much higher. Might be of interest to bmr.

    Comment by andrea — May 16, 2011 @ 7:23 am

  2. the fact the CDNX is significantly underperforming Gold and the broader stock markets in New York and Toronto is cause for serious concern… can we elaborate on this issue ?..the cause of it and what is to expect from now on ?

    Comment by Dude — May 16, 2011 @ 7:50 am

  3. I think the results are good for GQC, this confirms what you guys have been saying that the interest is in the North, I suppose while this is not a sensational news release it is an important step towards achieving their 43-101 expansion goals, speculative mining can be boring while you wait for companies to plough through the tedium of exploration. I think this is going to be a great story going forward and GCQ seem to have honest management with good comunication skills.

    Comment by Hugh — May 16, 2011 @ 8:02 am

  4. So are you guys just giving up on CQX NOW? It was supposed to be one of your best plays for 2011? Very disappointing.

    Comment by GREG H — May 16, 2011 @ 8:23 am

  5. At this point i dont think CQX has any choice but to wait and see for the “wasa” claims because the share price is way to low and any financing would dilute the shareholders too much. The only play now is to see what results visible gold gets from the claims they got from cadillac and to see what more results come from richmont. Also to investigate further the goldstrike claims and maybe start a small production there. This all in an effort to increase share price and do a financing at a more favorable level. I personally think this price is a great entry point.

    Comment by Ed — May 16, 2011 @ 8:32 am

  6. GREG H.. Welcome to the ventur. I hope you are learning that there are no Jesus magic on investing in Risky stocks. Oh…maybe you can do Like King David or King Salomon by raising a army and invade your Neighbours to steel all there gold. That’s how those so call famous people became rich.

    Comment by Andre — May 16, 2011 @ 11:26 am

  7. Zoolander and Tony Roodenburg, I thought he is focused in greencastle now? Get this guy back for an interview???

    marketwire.com/press-release/zoolander-acquires-south-african-mineral-exploration-company-1512586.htm

    Comment by Hugh — May 16, 2011 @ 12:00 pm

  8. Also news out on Abcourt – cant believe this stock is trading so cheaply??

    stockhouse.com/tools/?page=%2FFinancialTools%2Fsn%5Fnewsreleases%2Easp%3Fsymbol%3DV%2EABI%26newsid%3D8171352

    Comment by Hugh — May 16, 2011 @ 12:16 pm

  9. Hi BMR
    I agree totaly with GREH H about CQX and ask the same question as he do. I think it would be greate if you could clear out some questions and maybe contact President and CEO Victor Erickson for a new interview with him.
    You wrote so many positive things about CQX before but when I read you now I get a feeling that this case is closed.

    This is some of what you wrote before:

    So what are the fundamentals driving Cadillac Mining?

    •Reading between the lines of the company’s most recent news release, Cadillac could be close to “pulling the trigger” on a potentially major precious metals project (or projects) in the Great Basin. Company officials have been carefully researching opportunities there for over two years, so we suspect something significant is brewing that could really be game-changing;

    •Cadillac’s 100% owned “Wasa” Property adjoins Richmont Mines‘ (RIC, TSX) Wasamac Property along the Cadillac Trend in northwestern Quebec (15 kilometres west of Gold Bullion’s Granada Gold Property). Ongoing drilling by Richmont is making new discoveries and defining a significant Gold deposit with the principal structure hosting that mineralization dipping northerly toward the seven claims (164 hectares) held by Cadillac. This information is publicly available but many investors have missed it – Cadillac holds strategic and valuable land right beside a former mine that likely is going back into production as an underground operation;

    •More results from Wasamac and a new resource estimate are coming in January. Richmont started drilling Wasamac last May and has steadily stepped up its drilling efforts with a sense of urgency, adding a a third rig in September. The original plan was to drill 10,000 metres. Due to good results this was expanded in late summer to 15,000 metres and has been increased again to 20,000 metres;

    •The only hole ever drilled by Cadillac at its “Wasa” Property was very encouraging as it intercepted a zone that is interpreted to be a feeder system typical of those seen under VMS systems in the Noranda camp. The discovery of an alteration pipe on these claims, and Richmont’s drilling success to date, underscore the value of this important asset for Cadillac;

    •Cadillac is a large landholder west of GBB’s Granada and has just partnered with Visible Gold (VGD, TSX-V) which will be aggressively exploring the Cadillac claims which total over 7,000 hectares (excluding “Wasa” which is 100% controlled by Cadillac);

    •Cadillac has a silver property (“Silver Streak”) of considerable merit near Houston, British Columbia, with mineralization displaying some similarities to the massive Equity Silver deposit less than 30 kilometres to the east. Historical trenching returned 1.99% Cu and 338 g/t Ag over 33 metres. Cadillac drilled four holes in 2007 with one hole returning 28.2 g/t Ag over 28.4 metres (16.4 to 44.8 metres). Unfortunately this hole was abandoned at 44.8 metres “in better mineralization due to bad ground conditions in a fault.” With numbers like that, there’s no question Silver Streak has significant potential and the company realizes that. They completed a high-resolution ground magnetic survey in March and a follow-up drill program is clearly warranted;

    •Cadillac has a terrific share structure – just 25 million shares outstanding, NO warrants and only 2.5 million options. There is no warrant selling pressure with this stock, as we see in many other plays, and according to our research only 10,000 shares have been sold by insiders this year (vs. buying of 718,000 shares). That’s despite the substantial recent gains. Management holds at least 20% of the stock and it appears they’re holding on very tightly;

    •Cadillac has experienced management with outstanding mining industry backgrounds.

    Is this not a fact anymore?

    Kind Regards
    Bosse

    Comment by Bosse — May 16, 2011 @ 2:27 pm

  10. Hi John,

    Would appreciate a chart update on the CDNX as to what you see as the possible lows are. Your posts on March 19th where the red flags as to what has transpired to this point.

    Thanks

    Comment by Charles — May 16, 2011 @ 4:04 pm

  11. John: Please give a technical support levels as all levels above 2000 have broken down. Now what to expect? This is not 2008?

    Comment by STEVEN — May 16, 2011 @ 4:25 pm

  12. Bosse, Cadillac has many factors in its favor which we have mentioned in detail as you have pointed out. I love the share structure, the Wasa Property, the land package in Utah, and the fact Erickson and Audet both have strong mining backgrounds. They’re good people, they work hard, and they don’t waste money. Patience is required here. There is still enormous potential with Cadillac. Unfortunately, Vic and Andre – while I like and respect them both – simply don’t have a “feel” for the market which has become very apparent over the last five months. They were presented with a great opportunity with Richmont’s success at Wasamac (and BMR’s coverage) and they simply just didn’t understand or comprehend the extent of that opportunity or how to take full advantage of it. They had a chance to raise several million dollars because of Wasamac in this market during the first quarter of this year, yet the sense of urgency just wasn’t there nor the understanding of how to pull that all together and really bring some excitement into this play. They were given advice from some astute market people but chose to do things their own way. In this business, one must be able to “seize the moment”. This play isn’t dead – but I’m terribly disappointed and frustrated that Cadillac has failed to capitalize up to this point on Wasamac. The company has let down all of its shareholders. Hence my comment this morning which may have seemed a little harsh but there’s real truth to it – how can we expect the current management to fully exploit the Utah opportunity (Goldstrike) and generate shareholder value when they have dropped the ball over the last number of months with regard to Wasamac? That’s a very legitimate question. Wasamac was (and still is) Cadillac’s meal ticket. They could have leveraged that opportunity to raise a bundle of cash which also would have advanced their very strong Utah project.

    Comment by Jon - BMR — May 16, 2011 @ 6:18 pm

  13. Hi Steven, I’ll let John answer your question in more detail……..though we’ve already pointed out there is strong support around 2000 and at the November low of 1900, and good support levels below that as well. Back in March, we warned about the possibility of a correction down to 1900 or even lower. Keep in mind the average major correction on the CDNX is around 25%. And we haven’t even hit that yet. Unlike 2008, the CDNX has rising 200 and 300-day moving averages which will not be threatened anytime soon. Personally, I think 1650 is a distinct possibility. That would be a hefty correction but a healthy one given the run-up we’ve had. What disturbs me the most right now is the divergence we’re seeing between the CDNX and other markets – this tells me there’s a major sell-off coming on the Dow and the TSX, which will drag the Venture down further. The Venture may then lead all markets higher again. We’re in for a lot of volatility.

    Comment by Jon - BMR — May 16, 2011 @ 6:32 pm

  14. Hi Greg, not giving up on CQX – just voicing some frustration. See my more detailed comment regarding this.

    Comment by Jon - BMR — May 16, 2011 @ 6:34 pm

  15. The CDNX has been a remarkable leading indicator. In otherwords, it’ll often make a significant turn or move ahead of the broader markets….2008 was a classic example. So was July 2010 when we were able to correctly predict a huge run-up in Gold and the broader markets based on the action of the CDNX which moved ahead of everything. This characteristic of the CDNX goes right back to its days as the old Vancouver Stock Exchange. As we pointed out Sunday in Part 1 of our Week In Review, the CDNX over the last five weeks had lost a whopping 15%. The Dow and the Nasdaq each gained 1.7%, the resource-heavy TSX fell 5.8%, Gold climbed $20 or 1.4%, Silver lost 14% while copper has also had a rough time, dropping about 10%. This kind of under-performance by the CDNX means there is trouble ahead elsewhere in the markets, which will drag the CDNX down further.

    Comment by Jon - BMR — May 16, 2011 @ 6:43 pm

  16. Thanks, Andrea, will check it out.

    Comment by BMR — May 16, 2011 @ 6:44 pm

  17. All these CDNX stocks have been falling because QE2 has been coming to an end. QE3 comes in and it will be risk on again, until then expect sideways or down.

    Comment by herb — May 16, 2011 @ 11:30 pm

  18. Updated presentation from CQX
    The big problem for CQX is the cash position. It needs to be solved, some way or another…
    cadillacmining.com/Public_php/projects.php

    Comment by BM — May 17, 2011 @ 1:17 am

  19. doesVGD have a chance for a comeback????

    Comment by BRIAN — July 27, 2012 @ 7:22 am

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