Rouyn-Noranda, Quebec
Markets are buoyant today as the FMOC begins two days of meetings…Gold has traded between $1,769 and $1,811 so far today…as of 11:50 am Eastern, the yellow metal is up $29 an ounce at $1,808…Silver is 51 cents higher at $40.16, Copper is flat $3.79, Crude Oil is $1.44 higher at $87.14 while the U.S. Dollar Index has declined one-third of a point to 77.04…this really isn’t surprising but Standard & Poor’s has cut Italy’s credit rating, underlining how the euro zone’s third-largest economy is being sucked deeper into the sovereign debt crisis…Italy’s Prime Minister, of course, came to the defence of his country with a strong rebuke of Standard & Poor’s…
“The assessments by Standard & Poor’s appear dictated more by newspaper articles than reality and appear to be tainted by political considerations,” Berlusconi said…truth is, Italy – like some of its euro zone partners – has become a financial basket case because of over-spending and economically illiterate politicians elected by a society that has demanded far too much of government…the head of a Brussels-based economic think-tank, Sony Kapoor, was quoted in this morning’s Financial Times as saying, “This is a downgrade of EU and Italian politicians”…the miserable failure of EU leaders to tackle the problems posed by Greece does little to inspire any confidence that the much larger and more urgent problems faced by Italy would be managed any better”…one of the many reasons Gold is so attractive right now is that political leaders across the board (Canada’s Harper is probably the exception and the most economically literate of a bad bunch), led by the President of the most powerful country in the world, simply do not understand the concept of wealth creation…later today, we’ll post a great speech by Peter Schiff, a respected American economist, author and commentator…he’s also President of Euro Pacific Capital…Schiff recently gave testimony to the U.S. House Subcommittee on Government Reform and Stimulus, and in that testimony he exposed examples of bad policies with disastrous, unintended consequences…he also laid out a sensible game plan for how the U.S. can pull out of its jobs and growth deficit…speaking of creating wealth, a company here in Rouyn-Noranda that really understands how to do that is Richmont Mines‘ (RIC, TSX) which has become an earnings machine…RIC is a growth stock with the company’s Gold production on track to triple by 2015 when Wasamac should kick into gear…2012 production will increase by about 40% with Francoeur coming on stream during the first quarter of next year…below, John updates the RIC chart with a new Fibonacci target level…RIC hit a new all-time high this morning of $13.29…technically, this is an extension of Wave 3 as John outlines below…how far this extension will carry RIC is impossible to say…however, at some point a Wave 4 move to the downside can be expected followed by a powerful Wave 5 move back up again…right now this is a stock on steroids…
To a large degree, the success of Richmont recently (the share price has almost doubled in a month) can be attributed to the company’s Wasamac Property which is finally starting to get the recognition and credit it deserves…what the street hasn’t yet picked up on is the fact that the Wasamac area has huge potential for additional deposits and the #1 area play – the junior leader – is clearly Visible Gold Mines (VGD, TSX-V) which has already demonstrated that Wasa Creek has strong discovery potential…VGD controls significant portions of land bordering Wasamac to the west, the east and the south – 6,000 hectares in total in a region already blessed with infrastructure and more of it coming through development of the Wasamac Mine…VGD is currently unchanged at 38 cents and appears to have found RSI support, so another leg up could be just around the corner…
The CDNX is 4 points higher at 1742 as of 11:50 am Eastern…Grayd Resource Corp. (GYD, TSX-V) is once again the volume leader after yesterday’s friendly takeover offer from Agnico-Eagle (AEM, TSX)…look for this kind of activity by big, medium and small producers to accelerate in the coming weeks and months as a period of consolidation grips the industry…cash-rich producers – even a current small producer like Richmont – are desperately trying to find ways to add ounces to their production profiles…another junior with an advanced property we like is Spanish Mountain Gold (SPA, TSX-V) which really appears to have its act together at the moment…SPA is up 4 pennies this morning to 86 cents…the company has a low-grade but high-tonnage deposit in the advanced stages in central British Columbia…investment guru Jim Slater, who BMR interviewed last year, is a major player in SPA and recently accumulated an additional 1.2 million shares in the company…this morning, SPA announced it has appointed Donald Coxe to the company’s board of directors…Coxe has four decades of institutional investment experience in North America and has maintained a highly visible presence in major business communities as an adviser to corporate boards and speaker for business conferences and industry events worldwide…he has been a strategic consultant to several major Gold mining companies over the last decade…
It’s important to keep a close eye on the action in Copper as we’ve stated many times at BMR…Copper is currently in a critical support area, as John shows in the chart below, and how it behaves in the days ahead could determine the future direction of the CDNX and the broader markets…
BMR
What do you think RIC is worth? Their market cap still seems low for a company that is producing and is going to be producing alot more compared to say even a Grayd that was bought out or going to be bought for 275 million? Maybe that is not a good comparison, but RIC still seems undervalued even at 13 bucks? What am I missing here anyway? thx
Comment by GREG H — September 20, 2011 @ 7:57 am
Yes, Greg, you’re right…..RIC earnings per share this year will approach $1. Look at the production growth ahead. Doesn’t take a rocket scientist to figure out this could become a $20 or $30 stock. Speaking of valuations, an institutional analyst just came out with a target price of up to $30 for Kinross. I picked up some more Kinross “D” warrants this morning at $3.30 (got some earlier at $3). Due your DD—check them out. They look attractive, especially if you think Gold is headed to $2,000 or more.
Comment by Jon - BMR — September 20, 2011 @ 8:00 am
BER may adjust further down … below 19 cents…. beware! If you are now buying, you may still lose at 20.5 cents…. Hold on to it…. even though this stock is my favorite!
Comment by Theodore — September 20, 2011 @ 8:16 am
why is there insider selling on vgd
Comment by gil — September 20, 2011 @ 8:18 am
Gil, that selling is not from a director but from Sheldon Inwentash (of Pinetree). He’s classified as an “insider” because Pinetree holds 10% or more of VGD stock. There is one reason for buying a stock and many reasons for selling. In this case, I would be careful about putting too emphasis on these recent sales by Inwentash (250,000 or so). It’s even possible he may not even be aware of it – he holds investments in so many companies and from what I understand, a lot of his trading is handled by others. So his selling could even be a simple mistake – who knows. I remember last year, a similar situation occurred with Currie Rose – in that case Pinetree was selling stock around 20 cents and some investors got a little nervous. CUI then roared ahead to nearly 50 cents. My point is, don’t be alarmed. You may know more about VGD that Inwentash does. No directors or management have been selling VGD.
Comment by Jon - BMR — September 20, 2011 @ 8:37 am
Jon
what is the symbol for the kinross warrants?
thx
Comment by GREG H — September 20, 2011 @ 8:41 am
K.WT.D I picked it up in my TFSA. I think it’s one of those situations that’s hard to “trade”. I’m not offering investment advice but here’s my own thinking: I’ve taken a position in these warrants and I’m holding no matter what – I’m a firm believer in Gold ultimately going to $2,000 and beyond and these producers are going to flourish in that environment. If Kinross were to eventually go to $30, these warrants could triple or more in value. They don’t expire until Sept. 17, 2014. One warrant plus $21.30 U.S. gives you one share of Kinross. Of course the risk is these warrants could eventually become worthless but it’s hard to imagine Kinross not performing well. I like the odds.
Comment by Jon - BMR — September 20, 2011 @ 8:48 am
Jon
Could you please explain how these Kinross “D” warrants works (or direct me to where I can read about it)
Thanks in advance
Comment by Tommy — September 20, 2011 @ 8:56 am
BMR – Any idea why Kaminak Gold (KAM.V) is going down? You have mentioned Kaminak positively in the past….
Comment by Dave Mathew — September 20, 2011 @ 8:57 am
Hi Jon,
Can you please comment on yesterdays announcement with the amalgamation of assets between Goldquest and Takara. Your insight would be appreciated.
Comment by Paul — September 20, 2011 @ 9:00 am
I haven’t had a chance to look at it in detail, Paul, but on the surface it’s interesting. What I think is happening is that Bill Fisher wants a producer. He has some potential situations in the DR with GQC, and I believe they’re doing this merger with Takara as Takara has near-term production potential as well. That’s the thinking behind this. Fisher and Julio want to run a producer. In the current climate, this strategy could prove successful. Fisher has a strong track record. So I believe there’s good long-term potential here.
Comment by Jon - BMR — September 20, 2011 @ 9:06 am
I think it’s probably short-term technical-related trading, Dave. KAM’s Coffee Project is highly regarded by many geologists. They are getting great results. For the longest time I wondered why RIC was sitting at just $7 or $8. Patience is important. KAM’s an excellent play.
Comment by Jon - BMR — September 20, 2011 @ 9:09 am
I think GQC-TKK merger is good for the long term (as a producer). I didn’t like the short term aspect because the merger makes the combined company less desirable takeover target due to the fragmented locations. Also, I didn’t like the number of shares offered to GQC.
As for GBB, 85:1 dividend was aweful. For a 30 cents stock, that’s worthless.
Comment by Bruce — September 20, 2011 @ 10:09 am
BER goes below 20 cents … currently at 19 cents as I predicted … do not rush to buy as it may hit 17 cents mark…. the large lot has not been dumped…
Comment by Theodore — September 20, 2011 @ 10:19 am
Bruce, the spin out is a side show IMO, its all about the 43-101. Its the difference between a .30 stocks and a 2$ stock
Comment by Hugh — September 20, 2011 @ 12:00 pm
Hey Hugh. The spin out is the side show alright. It is just not what it was “expected” to be. Eventually, GBB will report at least 4+M oz (just Long Bar zone 1, not including Aukeko) and be worth more than $2. But that’s down the road. Short term, as I have posted, I’m putting 47 cents floor price based on 3M oz and how other juniors are valued currently. If it goes above 47 cents short term, I’ll take that as a gravy.
Comment by Bruce — September 20, 2011 @ 1:10 pm
what are your impression on SFF is it still on your list,thank you.
Comment by claudette — September 20, 2011 @ 2:53 pm
Hi Claudette, I like SFF more than ever right now given the change in management in May. Lopez has done a great job re-organizing this company on the ground in Colombia and ramping up exploration. He has also been aggressive in the market, accumulating some stock. Technically, SFF has always been a great buy over the last couple of years anytime it has traded close to its 1,000-day moving average. The company is in an excellent cash position (about $18 million at the end of June) and their Quinchia land package is solid. SFF has a good chance to take Miraflores to 2+ million ounces, plus other properties hold deposit potential as well. Lopez is being aggressive, so it wouldn’t surprise me if they’re also working on a deal for another property in Colombia (I’m currently holding SFF warrants).
Comment by Jon - BMR — September 20, 2011 @ 3:00 pm
NES is also worth looking at…
119 m @ 3.76 g/t au, reported today.
230 m @ 7.5 g/t au was the discovery hole with follow ups of 214 m @ 3.00 g/t au, 275 @ 1.43 g/t au and 119 m @ 4.71 g/t au.
NES is worth less than half TRR and has double their grades.
NES also held by 25% Lundin Family with another 5% shareholder
Comment by Taylor — September 20, 2011 @ 10:06 pm
Have to agree with Taylor about NES. Spectacular results and are adding two more rigs shortly. Should be a 5+ ml oz open pit deposit with some super high grade mixed in. Easy double by year end.
Comment by Patrick — September 21, 2011 @ 1:02 am
John, any thoughts on the GBB split?
I am, sort of, pleased with the split so they can focus on de LONG bars zone. I am not so pleased with the drop to 0.30 for the GBB stock itself. Not sure if the 1:85 ratio will hold up my investment.
I am holding on to GBB but I am unsure how to proceed now. Should I keep the Silver stock, or sell it?
Comment by Digga — September 21, 2011 @ 1:08 am
Hi Digga, no, not really. And I can’t tell you whether you should keep something or not. Castle has been a distraction for GBB since the beginning of the year. It has taken money, time and resources that otherwise could have been deployed at the company’s core asset, Granada.
Comment by Jon - BMR — September 21, 2011 @ 4:14 am
Someone doesnt like the GQC deal – dumping fast – ugly!!
Comment by Hugh — September 21, 2011 @ 6:28 am
I will comment more on the GQC situation this morning, Hugh….I think from a long-term perspective, this could certainly work out well…however, I don’t believe the ratio is fair for GQC shareholders…it’s a bizarre turn of events for this company and definitely a complete u-turn from the game plan for GQC that Bill Fisher laid out to us in an interview back in February…
Comment by Jon - BMR — September 21, 2011 @ 6:44 am
I just dumped too, my cash can make a faster return elsewhere. Miners are about to take off in the next few months and I think its not worth keeping cash with management that dont respect shareholders
Comment by Hugh — September 21, 2011 @ 6:54 am