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October 29, 2013

BMR Morning Market Musings…

Gold has traded between $1,340 and $1,358 so far today, hitting a 5-week overnight as the 2-day FOMC meeting begins later today…as of 8:40 am Pacific, Gold is down $6 an ounce at $1,347…Silver is up a nickel at $22.56…Copper has gained 2 pennies to $3.27…Crude Oil is 47 cents lower at $98.20 while the U.S. Dollar Index is up slightly at 79.39…

Macquarie Commodities Research reports that retail sales in China of Gold and Silver jewelry during September were 21.9 billion yuan, according to data released by the National Bureau of Statistics (NBS) last Friday…this was 18% higher year-on-year, but still shy of August’s record, reflecting a seasonally weak period…implied Shanghai Gold Exchange volume suggests sales of about 68 tons of Gold, 44% higher than a year ago…

In a dramatic shift, the CNBC October Fed Survey finds Wall Street expecting the Federal Reserve to maintain its $85 billion level of monthly asset purchases until April, 2014…that’s 5 months ahead of the average in the last survey…what’s more, the 40 respondents – economists, strategists and money managers – see the Fed buying about $650 billion of assets next year, up from $381 billion in the September survey…with Fed tapering apparently off the table for at least several months – perhaps longer – this should keep the greenback under pressure and provide a tailwind for Gold to move up…this past spring, it was the prospect of Fed tapering by September at the latest that drove Gold below critical support around $1,500…

October’s Unusual Gold Trades

The above chart is from Reuters’ Frank Tang…as Frank Holmes reported in his weekly Investor Alert at www.usfunds.com over the weekend, Mineweb contributor Lawrence Williams studied this month’s unusual Gold trades on the futures markets which started to occur with increased frequency…the chart above shows the number of contracts traded daily and the corresponding movement in the Gold price…what are visible are massive trading volumes every day of over 5,000 contracts, all around the same time…on October 1, as well as on October 10, there were huge trades of over 20,000 contracts…this amount represents well over 2 million ounces, or around $2.6 billion…as Holmes pointed out, “It’s safe to say nobody has that amount of physical Gold, apart from the big central banks, so these trades are being done by entities trading Gold they do NOT have in a manner designed primarily to trigger stop loss orders…however, someone with enormously deep pockets does have to be there in order to support these massive trades – the risks could be huge if the market turns against them…obviously the “big bad banks” haven’t learned anything in regards to the risk of failure due to this speculation.

U.S. Dollar Index Updated Chart

The U.S. Dollar Index broke below a long-term up trendline in September on this 2.5-year weekly chart – clearly a bearish development – and this also implied a near-term test of strong support at 79 which has occurred…RSI(14) is also now at previous support, so it’s reasonable to expect a bounce in the Dollar Index and that’s what we’re beginning to see today…it will meet stiff resistance, however, between 80 and 81…


Prosper Gold (PGX, TSX-V) Under Pressure After Sheslay Results

Nervous nellies started dumping Prosper Gold (PGX, TSX-V) at the open this morning following release of the 4th, 5th and 6th holes drilled by PGX at the Sheslay Property…no “glory hole”, which many were hoping for, but rest assured – these results confirm a robust system at the Sheslay, and the grades and intersections fully support the deposit model that Dr. Dirk Tempelman-Kluit will be speaking about next Tuesday in the Discovery Center of the Geological Survey of Canada in Vancouver…in total, nearly 30 holes have been drilled at the Star target (23 historically, 6 by Prosper), and each and every hole has delivered results that compare favorably in terms of grade and widths to other major deposits in the Stikine Arch…the Sheslay holes have also shown remarkably consistent Copper-Gold ratios…only a small portion (20%) of the Star target has been drilled, and of course there are several other Cu-Au porphyry targets at the Sheslay that have yet to be drill-tested…in addition, of course, Prosper has completed extensive airborne and IP surveys in addition to regional soil sampling throughout the land package and results of that should provide valuable insight as far as the “big picture” is concerned…nothing has changed with regard to the highly prospective nature of the Sheslay, and short-term traders who can’t look beyond the next 24 hours are simply delivering stock from weak hands into strong hands…

We’ll review these results more extensively tomorrow…hole #4 (S027) intersected 334 metres from near-surface (7 to 341 metres depth) grading 0.35% Cu and 0.11 g/t Au, and also included a 72-metre intersection of 0.27% Cu and 0.10 g/t Au from 504 to 576 metres – confirming the existence of mineralization at deeper levels at the Sheslay…this will have to be investigated more…we were hoping to see some significant higher-grade sections below 400 metres…hole #5 returned 144 metres grading 0.45% Cu and 0.26 g/t Au, while hole #6 intersected 0.34% Cu and 0.21 g/t Au over 252 metres…again, very respectable results – the kind that help produce significant deposits, and that any geologist would be very happy with…unfortunately, even very good results are often not good enough in the current market environment to drive momentum in a stock…the market, understandably, wants a company to exceed expectations…

PGX is down 23 cents at 38 cents as of 8:40 am Pacific…there’s every reason to believe PGX will rebound as the week progresses and investors have a chance to think through these results a little more…

GoldQuest Releases Resource Estimate For Romero & Romero South

GoldQuest Mining (GQC, TSX-V) released a NI-43-101 resource estimate this morning for its Romero and Romero South deposits in the Dominican Republic (Romero South is formerly Escandalosa, 950 metres south of Romero)…total combined indicated resources are 2.4 million ounces AuEq (19.4 million tonnes grading 2.63 g/t Au, 3.7 g/t Ag, 0.63% Cu and 0.29% Zn)…total inferred resources are 790,000 ounces AuEq at 1.64 g/t Au, 3.8 g/t Ag, 0.36% Cu and 0.42% Zn

“High grade, long drill hole intersections from the Romero Project have translated into a high quality resource statement within 17 months of the Romero discovery,” commented Julio Espaillat, Goldquest’s CEO. “At a $150 net smelter return cut-off Romero includes a coherent high-grade indicated core of 6.23 million tonnes grading 6.9 g/t Gold equivalent, containing 1,386,000 ounces of Gold equivalent, which also encourages us to consider commencing early economic studies to advance the project towards a mining decision.”

The core of the Romero deposit in the indicated resource appears to have favorable geometry for large tonnage underground mining…Micon International Ltd. selected a NSR cut-off of $60 as an estimate of what might be a reasonable marginal cost of extraction at Romero…

Gold Standard Ventures Corp. (GSV, TSX-V) Update

Gold Standard Ventures (GSV, TSX-V) is making progress with its Railroad Project in Nevada with the stock doubling over a 1-month period from its September 12 low of 51 cents to its October 10 intra-day high of $1.04…the stock then retreated to 77 cents, just above strong support, and has since rebounded to 92 cents, yesterday’s close…

GSV faces a stiff resistance band between 96 cents and $1.20…higher volume and increasing buy pressure will be required to push through this area…higher Gold prices and a good run by the Venture of course would also help…

Madalena Energy Inc. (MVN, TSX-V) Update

Madalena Energy (MVN, TSX-V) is very active with a large land base of over 150 net sections (100,000+ net acres) in the Paddle River area of west-central Alberta with increasing production and reserves on 3 horizontal plays…the company also has very attractive assets in Argentina where it’s focused on the multi-billion barrel potential of 3 large blocks within the “sweet spot” of Argentina’s prolific Neuquen basin…

Technically, MVN has been looking very strong over the past couple of months which is why we’ve been featuring it quite often…yesterday, it broke above a cup-with-handle breakout target as shown in John’s 2.5-year weekly chart…the next Fib. level is 68 cents…

Contact Exploration Inc. (CEX, TSX-V) Update

Another energy play that makes sense to us at the moment is Contact Exploration (CEX, TSX-V) which got a boost recently after successfully completing and testing its 4th Montney well in Alberta which has expanded the scope of magnitude of the company’s Eask Kakwa Project…

CEX is now at the top end of a horizontal channel, and the question is whether or not it can break above that channel in the near future…we believe it’s in a good position to attempt a breakout (note John’s Fib. level)…CEX closed at 27 cents yesterday…

Note: John and Jon both hold share positions in PGX.

12 Comments

  1. Starcore proving how leveraged it is to higher gold prices when contrasting their 2012 vs. 2013 financial results. Knee jerk selloff on their results but if you believe in higher gold prices this is a spring loaded cannon with a P/E ratio of about 4 based on last years financials at terrible gold prices. At least with most of the miners we seemed to have reached an equilibrium with extreme pessimism vs. value buyers looking to load up on leverage that believe gold prices will go back higher.

    Comment by Justin — October 29, 2013 @ 7:52 am

  2. Hi BMR,
    Any News from CMB and GMZ soon?
    Any hints of what will happend?

    Comment by Bosse — October 29, 2013 @ 8:46 am

  3. RBW insider purchased 86,000 shares on the open market.
    Jon, do you know what they know? Thanks

    Comment by Alexandre — October 29, 2013 @ 9:23 am

  4. Nervous nellies? I believe it’s gamblers realizing that pgx is not what it was being pumped as. I’d have alot more respect for this site if they would admit that they were wrong once in while. Market wants nice higher grades, pgx is very low grade. The market is speaking and it is smarter then typical retail.

    Comment by OldMan — October 29, 2013 @ 9:27 am

  5. What!!!

    Can’t believe that there are NO comments!!! I’ve been lurking for several months, listening to the +ve. Where are u now? Let’s be honest w/ ourselves.

    Comment by bear — October 29, 2013 @ 10:09 am

  6. We had better days, I have decided to go long on GGI, so i will keep my share 🙂

    Comment by Martin — October 29, 2013 @ 10:13 am

  7. PGX.V – I’m not the most knowledgeable person when it comes to mining data but isn’t this supposed to be mainly a gold play? And although the widths are good, aren’t grades of .11, .10, .26 & .21 g/t Au pretty crappy? Even the copper is not great – my understanding is that .30% is considered a decent copper grade and all we have here is .35%, .27%, .45%, & .34% Cu. They may be hitting minerals on every drill and at depth but the grades don’t appear to be outstanding against all the hype (doesn’t look economical to me). As the saying goes, “where’s the beef”?

    Comment by Steve — October 29, 2013 @ 10:17 am

  8. Four months of relentless pumping, all for not.

    Comment by Pete — October 29, 2013 @ 1:13 pm

  9. My sympathy goes out to those, who own PGX & in particular to Jon, who
    put everything into PGX & GGI, but more co-operation was required from
    the drills, in order to impress an already ugly market & ultimately
    that’s what counts. Not that he won’t be proven correct at the end,
    but today was not his, no matter how it is spun (is that a good word).
    I mentioned in an earlier post, that over the winter, would be a good
    time to take a look at PGX & it now appears i may have been correct. I
    don’t know everything about GGI, but i do know enough, that i wouldn’t
    hesitate in selling PGX & buying GGI, which seem to have much more going
    for them at present, in particular, they have a cash flow, they have Mexico
    & don’t forget the Grizzly, which they will not allow to hibernate this
    winter. R !

    Comment by Bert — October 29, 2013 @ 1:15 pm

  10. Glad you’re still here,Bert!As far as these results go,it doesn’t surprise me,but I’ll bet they surprised Pete Bernier.The results were supposedly going to come yesterday,but I’ll bet when he saw them,he had to try and spin it as best he could,so it took an extra day.
    These are,for all intents and purposes,typical results from porphyry deposits around the world.The average copper and gold content in these deposits around the world is .40% copper and .2 grams of gold/ton.
    They are in the starting stages of proving up a deposit,and they have hit on all holes.Next summer will be the big one.Even better results would not have been met with a huge runup.It was just way too quiet all the way around.To the market,this is just another dime-a-dozen play with nothing outstanding to draw the interest of the investment community.How cheap will this get now once tax-loss season rolls around?
    Looking at the IP maps,it appears the big dog in this area may just be DBV.Rumours swirl that the property Bernier REALLY wanted was the HAT that DBV is now drilling.The geo says that the IP readings on Hat are much higher than those Bernier was drilling,and match those at Red Chris when they hit 1% copper.
    DBV has the floor to themselves now.Imo,both PGX and GGI are dead plays and will be picked up much cheaper in the coming weeks..Nobody cares about Mexico,no matter how much it gets mentioned here.
    DBV has the chance to prove the smallest dog has the biggest teeth.Could get really interesting around here.

    Comment by Jim Niles — October 29, 2013 @ 2:43 pm

  11. I predicted that pgx would tank if results were not a barn burner sad to say I was right.In this market results have to be outstanding for stocks to respond in a positive manner.

    Comment by gil — October 29, 2013 @ 5:08 pm

  12. With all due respect Gill, any astute investor would have the forethought to know that if the results weren’t stellar it would have a negative effect on PGx share price.

    Comment by Paul — October 30, 2013 @ 9:55 am

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