BullMarketRun.com

4:00 am Pacific

Gold is under pressure early today on signs of an emerging U.S. budget deal in the Senate…the deal would apparently raise the debt ceiling until early February, reopen the government until January and include a mechanism to force lawmakers into longer-term budget discussions…however, resistance in the Republican-controlled House of Representatives could scuttle, or at least stall, anything that emerges from the Senate…many House Republicans have insisted that any deal include further spending limits…

As of 4:00 am Pacific, Gold is down $19 an ounce at $1,254…a close below important support at $1,270 would suggest a potential near-term test of chart support at $1,200 as John outlined over the weekend – intra-day, Gold could be quite volatile…Silver is off 67 cents at $20.60…Copper is down a penny at $3.26…Crude Oil is 50 cents lower at $101.90 while the U.S. Dollar Index is up one-third of a point at 80.66…this is shaping up to be a politically-driven, volatile week on the markets…Gold could suddenly explode to the upside, or in fact be pushed lower to test $1,200 or even the late June low…

The buzz continues regarding the mysterious $640 million Gold trade Friday morning that led to a 10-second trading halt and a $25 drop in the price of bullion in just 2 minutes…some traders are saying the 5,000 contract sale was a deliberate attempt to manipulate the market…who would have been behind that size of an order and why would they simply sell at market?…each contract controls 100 troy ounces…5,000 contracts were dumped on the market at 8:42 am Eastern (for maximum visibility)…1 theory is that it was a predatory high-frequency trading algorithm meant to force a boatload of stops under $1,280…

Rising Demand For Metals In Europe – Copper Demand Expected To Rise 2% in Q4

Europe is the world’s 2nd largest consumer of base metals after China, so a recent increase in demand in that region is highly encouraging…in fact, according to a Wall Street Journal report over the weekend, European metals producers and industry analysts are tentatively calling a bottom to the market amid signs that demand in the region is starting to pick up…rising demand for metals such as Aluminum and Copper – used in everything from smartphones to air-conditioning units – reflects improving economic conditions in the euro zone, relieves pressure on producers and could also lend some support to depressed base metal prices…European demand has plummeted in recent years as the financial crisis suppressed economic activity in the region…

European demand for Aluminum rose 1.3% to 2.1 million tons in the 3rd quarter of 2013, compared with the same period last year, and is projected to rise 1% in the 4th quarter to 1.9 million tons, according to metals and mining consultancy CRU Group…for Copper, demand rose 1% in the 3rd quarter to 922,000 tons…CRU forecasts it will rise nearly 2% in the 4th quarter to 935,000 tons…the growth, while tepid, compares with a 3.8% fall in European Aluminum consumption last year, according to CRU, and a 4% fall in demand for Copper…

China’s Energy, Base Metals Imports Rise Strongly In September, Q3 GDP Figures Due Friday

China’s imports of energy and base metals rose strongly in September, driven by a seasonal pickup in manufacturing and restocking ahead of the October Golden Week holiday, according to Barclays…meanwhile, thanks to loftier food prices, China’s consumer price index for September rose 3.1% compared with a year earlier, accelerating from August’s 2.6% year-on-year increase, according to National Statistics Bureau data released yesterday…the government has identified an “upper limit” for annual inflation of 3.5% and a “lower limit” for economic growth of 7.5% cent, and has said it will act if either of these limits is breached…data scheduled for release Friday are likely to show that China’s economy expanded by between 7.5% and 8% in the 3rd quarter, after modest stimulus measures helped avert fears of a slowdown over the summer…double-digit property price rises in major cities show that China’s housing market is back with a vengeance, underscoring the government’s dilemma of how to dampen the sector without abruptly choking off overall investment…

Stronger Demand Needed To Counter Boost In Copper Supply

Stronger than expected economic growth in China, the euro zone and the U.S. over the next year, and therefore higher than anticipated demand for Copper, will be needed in order to offset the expected increase in Copper supply…according to data from Barclays and the International Copper Study Group in Lisbon, the global Copper surplus (currently around 90,000 tons) is expected to triple in 2014 as Codelco and Freeport-McMoRan, the world’s largest producers, are among those scheduled to add supply next year, and this could keep Copper prices under pressure…new mines or expansions to existing pits from Mongolia to Indonesia to Chile will boost output as producers respond to prices that more than tripled in the past decade…however, keep in mind that supply regularly gets disrupted by everything from strikes to landslides – so there could be surprises on the supply side, just as there could be on the demand side…

CRB Index Updated Chart

There are several encouraging signs in this long-term (20-year monthly) CRB Index chart…the Thomson-Reuters/Jeffries CRB Index comprises 19 commodities (with different weightings) including Crude Oil (23%), Gold (6%), Copper (6%), Natural Gas (6%), Silver (1%) and Nickel (1%)…if the CRB has indeed hit bottom, as John’s chart appears to be telling us, then it’s likely the Venture Exchange has found a bottom as well…historically, there has also been a strong correlation between China’s Shanghai Composite (SSEC) and the CRB…

The CRB’s RSI(14) support and the low position of the SS (Slow Stochastics) suggest that the next major move in the CRB Index is up, not down…in addition, the -DI trend indicator has been weakening gradually since the middle of last year – if it were trending higher, that would certainly be cause for concern…it’ll be important to keep a close eye on the CRB through the remainder of the year…

Today’s Markets

Asian markets were relatively quiet overnight…China’s Shanghai Composite fell 4 points to close at 2233 while Japan’s Nikkei average posted a slight gain (37 points) to finish at 21442…European shares are strongly higher as of 4:00 am Pacific while in New York, stock index futures in New York are pointing toward a positive open on Wall Street after 4 straight days of gains totaling 525 points or 3.6%…a relief rally or the start of a new bullish trend?…

Canadian markets of course were closed yesterday for Thanksgiving…the TSX finished Friday at 12892 while the Venture closed at 929, finding support at its 100-day moving average (SMA) which has flattened out…a support band stretches from 907 to Friday’s close…

Magor Corp. (MCC, TSX-V)

While we focus almost entirely on Gold, Silver and Copper and the junior exploration sector at BMR, occasionally our attention is drawn to a company in a completely different space that has exceptional management and a unique product or service that’s simple to understand with a model that can drive revenues and healthy profits…Macro Enterprises Inc. (MCR, TSX-V), a maintenance and service provider to the energy and resource industries, was one such company that we pointed out in May when it was trading around $3 a share…since then, MCR has doubled in price as its impressive revenue and earnings growth continues…

There’s a company in the tech area we like a lot, and that’s Magor Corp. (MCC, TSX-V) which started trading on the Venture in March after raising $6 million in an IPO…

First off, and most importantly, the people behind Magor are phenomenal…President and CEO Mike Pascoe is well known for his ability to build shareholder value in the telecommunications industry…he has led several very successful deals, recently and in the past, including of course Newbridge Networks which was bought out by Alcatel for $10 billion in 2000…Sir Terry Matthews is the Chairman of Magor and his record is impeccable – he founded Newbridge and co-founded Mitel…he’s also the founder and current Chairman of Wesley Clover, an investment vehicle and holding company that has interests in a broad range of next-generation technology companies, real estate, hotels and resorts…Wesley Clover also holds a sizable chunk (approximately 30%) of Magor…

Magor – Taking Video Conferencing To The Next Level

Magor could be well on its way to changing the landscape of video conferencing and collaboration…they are a serious potential “disrupter” in this industry as they’ve eliminated the expensive infrastructure currently used by many of their competitors…quite simply, traditional video conferencing cannot provide Magor’s level of interaction combined with its clear, high-definition video on the Internet...they’ve managed to create an environment for their users so that they feel they’re communicating and working as if they were sitting beside each other in the same room – even though they’re in different cities or countries…it’s an amazing system and we’ve seen it in action…

Magor’s first 6 months as a publicly traded company haven’t been easy, at least for investors – the stock has slipped from a high of 69 cents, shortly after it started trading, to a recent low of 23.5 cents…in its fiscal year ending April 30, Magor reported a net loss of $8.5 million but Q4 revenues grew substantially to $847,000 – nearly half of the total for the entire fiscal year ($1,964,000)…the loss was due to increased operating expenses in the areas of sales, marketing, and research and development as the company continued to prepare for the launch of its Aerus cloud-based services this fall…it takes money to roll these things out, and Magor has made wise use of shareholder funds so far…there are challenges and risks, of course, but MCC’s strategy has a great chance of paying off big-time…

Aerus – Magor’s Catalyst?

The next few quarters are going to be key for Magor with the launch of its Aerus platform this fall…Aerus enables people to engage collaboratively in high-quality visual conversations by simultaneously sharing, viewing, and editing relevant material on desktops, laptops, tablets, smartphones, whiteboards and other devices…Magor has been successful at securing requests for service trials with more than 20 carriers and solutions integrators around the globe, and the list continues to grow…how these “service trials” work out is obviously going to be key…

“Aerus is looking very strong as the traction with carriers and service providers at this stage is significantly exceeding our expectations,” stated Pascoe in a news release September 26…in order to accelerate the growth opportunity associated with Aerus, Magor completed a $1.5 million financing last week at 25 cents a share which also attracted some new institutional investors to the Magor story…after a 59-cent IPO, it’s disappointing that this financing had to occur at 25 cents…

Interestingly, Magor also appears to be making some inroads into China – the company announced Sept. 27, without going into details, that it has entered into a “joint venture agreement” with 3 Chinese parties – Harbin Venture Capital Management Co. Ltd., Harbin Aobo Venture Capital Management Co. Ltd., and Harbin Kaifu Investment Consulting Co. Ltd…

Effective software solutions often have high profit margins…if the Aerus launch is relatively flawless and Magor can gain the kind of market penetration and traction it expects with this technology, then MCC has huge upside potential from current levels over the next several quarters given Friday’s 28-cent close and total market cap of $14.5 million…MCC now has 51.7 million shares outstanding…if Aerus succeeds the way Pascoe and others believe it can, MCC could easily command a market cap 10 or 20 times where it is now…

Below is a 6-month chart from John that goes back to when MCC first started trading…there’s good reason to believe MCC bottomed at 23.5 cents…keep an eye on the Fib. levels in John’s chart in addition to the 50 and 100-day moving averages (SMA’s) – once they reverse to the upside, and those Fib. levels are cleared, MCC will have some serious technical momentum on its side…fundamentally, Aerus needs to be embraced by a demanding market but we like the odds…we’ll be watching closely for more news in the coming weeks…we find the risk-reward ratio with MCC to be very attractive at current levels with the opportunity for a “home run” between now and sometime in 2014…as always, perform your own due diligence…

What Does It Take To Make A Junior Exploration Company Successful?

Looking at the big picture, and how events could unfold over the next year, we’re convinced there are historic opportunities in the beaten-down junior resource sector at the moment – stocks that ultimately will increase 10-fold, 20-fold and more…when almost everyone is bullish, as was the case in late 2010 and early 2011, that’s the time to be fearful…the time to be bold is NOW when so many investors are too scared to jump in or have given up on the market completely…

The key, however, is to be selective as an astounding number of Venture companies are poorly run and have decimated their share structures over the last couple of years…during the 2003 to 2007 Venture bull market, followed by the powerful 2-year run after the Crash of 2008, a serious market problem also emerged that is now much more visible – an infestation of “lifestyle” companies…a Venture “lifestyle” company is a company that exists merely to perpetuate the comfortable lifestyles of those who are running it…they’re not serious about exploration or the business they’re engaged in…management will carry out enough promotion from time to time to keep the “printing press” running so they can complete an occasional financing in order to continue to collect their monthly salaries…they’re not interested, though, in really building a company – that would require too much work which, of course, would disrupt their comfortable lifestyles…this is clearly abuse of a publicly traded company but examples are plentiful (half the listings on the Venture?), and things are rigged in such a way that it’s almost impossible for shareholders to get rid of these individuals…we could write a book about how some of these Venture companies are run, but suffice to say it’s critical to take the time to perform your own due diligence and get to know – as best you can – the key people behind any company you’re looking at investing in…just a simple phone call could save you from making a serious mistake, or lead you in the direction of a home run opportunity…

Separating The Best From The Rest

The companies that WILL be successful going forward (short-term and longer-term) are the ones with the working capital, the expertise (management and geological), the share structure, the properties (legitimate discovery opportunities) and the drive/desire/ to build shareholder value…by our estimate, only about 10% of Venture companies at the moment possess those 5 critical pillars of strength…within that group, as one zooms in even more, is where you will find those juniors with 10-bagger or better potential…if you identify and invest in even 4 of those companies, chances are that 1 or 2 will succeed and hit it big…with that kind of leverage, all it takes – just like in baseball – is a .300 batting average to make a fortune…you can be wrong 70% or more of the time and still bag huge overall returns…

No matter how challenging the market environment might be, a company that makes a legitimate and significant discovery will be rewarded (we’ve seen this demonstrated countless times over many years including last spring when Colorado Resources – CXO, TSX-V – became a 10-bagger in a month)…in fact, when markets are soft, a company that reports a whopper of a drill hole has little competition and can instantly become “the only game in town”…two things have hurt Colorado which climbed as high as $1.74 in May and closed Friday at 26.5 cents – it’s a company run by geologists, and it hasn’t been able to repeat the success of its 1st hole (momentum problem)…investors are impatient and fickle…management must deliver consistently…

Which brings us to Prosper Gold (PGX, TSX-V), Garibaldi Resources (GGI, TSX-V) and the Sheslay Valley, an area about 60 miles west of Iskut in northwest B.C. that has large scale and exceedingly strong potential – not simply because of the right geology, but due to the skill of the individuals examining those rocks and the business/market leaders at the helm of these 2 companies…there are other players in the Sheslay Valley, too, including a major that could end up swallowing both Prosper Gold and Garibaldi in the event this area produces the kind of discovery that some people believe is actually quite likely…

Prosper Gold Corp. (PGX, TSX-V)

Prosper Gold (PGX, TSX-V) is an incredibly synergistic group that importantly has exceptional business and market savvy at the top in Pete Bernier and one of the best geologists in the country in Dr. Dirk Tempelman-Kluit…together, they took Richfield Ventures from pennies in 2009 to a $500 million buy-out by New Gold Inc. (NGD, TSX) in 2011 thanks to the discovery at Blackwater…these 2 individuals complement each other extremely well as Tempelman-Kluit described in our recent interview (click on the forward arrow to listen to this 1-minute excerpt – requires Adobe Flash Player version 9 or above):

[audio:https://bullmarketrun.com/wp-content/uploads/2013/10/Dirk-PGX-Clip-4.mp3|titles=Dirk PGX Clip 4]

Prosper Gold could be just 1 drill hole away from a rocket-launching boost…on September 30, PGX reported the first 3 holes of a Phase 1 program at the Sheslay…each hole produced long intersections of Copper and Gold mineralization, with grades comparable to the reserve grades at Red Chris…these results confirmed the historical numbers reported by Firesteel Resources (FTR, TSX-V) which drilled about 2 dozen holes between 2004 and 2007 (only 2 were drilled to lengths of more than 300 metres)…what’s different about these next 3 holes at the Sheslay is that they were drilled to depths never previously tested on this property…

As stated in PGX’s Sept. 30 news release, “Pending drill holes have confirmed Copper-bearing porphyry-style mineralization to a depth of 598 metres from surface. This is the deepest confirmed mineralization to date.”

The visuals must have been good or Prosper never would have drilled that deep in the first place…they’re too smart to take that kind of a risk at this stage…assay results for holes S027, S028 and S029 could come anytime during this last half of October…

Tonnage possibilities at the Sheslay are enormous if Prosper is able to tie together the 4 Cu-Au porphyry bearing targets – Star, North Star, East Star and Copper Creek – clustered within a 12 sq. km area…in addition, there’s also Pyrrhotite Creek, nearly 5 km southwest of the Star target and immediately east of the important Kaketsa pluton (two-thirds of which rests on Garibaldi’s massive Grizzly Property as GGI holds the largest land position of any junior in the area)…Prosper Gold describes Pyrrhotite Creek as a “second distinct multiple target area” with a 2,000-metre long copper-in-soil anomaly with associated elevated molybdenum values.”

A picture tells a thousand words – a little further below is a BMR-produced map, from Google Earth, which we’re posting again for reference purposes…the Star target is where Prosper drilled 6 holes…core photos from drilling at the Star show strong evidence of a robust hydrothermal system with multi-directional veins and multi-generations of veins…

Garibaldi, meanwhile, is sampling in the northwest corner of the Grizzly where historical technical reports describe alteration and mineralization as very similar, if not identical, to that seen at Pyrrhotite Creek…preliminary results from GGI’s recent airborne survey have confirmed multiple targets over a distance of 15 km from Grizzly West to Grizzly Central…GGI has identified 2 parallel faults that appear to be related to Cu-Au occurrences on both the Grizzly and the Sheslay…

Hopefully our readers are getting a feel for the SCALE of this – and the map below is not the entire Sheslay area…Teck Resources Ltd. (TCK, TSX) has staked a huge position – 612 sq. km – right up to the southern border of the Grizzly, while Doubleview Resources (DBV, TSX-V) is getting ready to once again drill the Hat Property contiguous to the eastern border of the Sheslay…

Quite simply, what you’re looking at below, in our view, is going to be British Columbia’s hottest exploration area that will generate an immense amount of news and investor attention over the next 12 months and beyond…

The Importance Of Share Structure

Poor share structure can severely limit the upside potential of any discovery play…Prosper Gold has just 25 million shares outstanding, and more than 6 million of those shares are in the hands of Bernier and Tempelman-Kluit…in the event of a “glory hole” in the immediate future, investors will be scrambling as most of those 25 million shares can’t even be traded right now due to the 4-month hold on the financing, completed at the end of August, and the CPC 36-month staged release escrow…

As for Garibaldi, it’s one of the few Venture companies that has NOT had to do a financing in more than 4 years…and with nearly $4 million in working capital, it’s not in a position where it has to do a financing anytime soon…that’s a huge advantage given that so many companies’ share prices are being held down because of an over-supply of paper in the market due to cheap private placements (flow-through and non-flow-through) over the past couple of years…in a lot of cases, investors are selling PP stock immediately after it becomes free-trading – even at at loss – and are content to just ride their warrants…that problem doesn’t exist with GGI…

We’ll have more with Garibaldi President and CEO Steve Regoci later in the week – check out some audio excerpts from our interview with him that were posted Friday…Regoci, a former broker, heads up a stable, solid team of seasoned business and geological leaders who have the ability and the desire to take this company a long way over the next 12 months and beyond…not only is GGI the dominant landholder among juniors in the increasingly important Sheslay Valley exploration camp, but the company is extremely well-positioned for more success in Mexico with 3 significant projects (1 of which has been generating cash flow since February and includes a graphite discovery) and a recently acquired strategic Gold property that has the potential to quickly develop into a small-scale low-cost producer…GGI has shown that near-surface coal seams in Mexico can efficiently be exploited for profit to the company…if they have a Gold property with enough near-surface mineralization at favorable grades for efficient small-scale exploitation, who knows – they may be able to go another 4 years without having to do a financing…

Updated Silver Charts

Long-Term Chart

Short-Term Silver Chart

Note: John and Jon both hold share positions in GGI.  Jon also holds share positions in PGX and MCC.