CDNX
The Venture Exchange snapped a four-week losing streak with a 44-point weekly gain to 1,499 (the 50-day moving average). The intra-day low of 1,429 Friday, Feb. 5, was the bottom, we believe, of a 19 trading session correction which shaved 200 points or 12.2% off the CDNX 52-week high of 1,629 set January 11. This correction was very similar in both duration and magnitude as the one we saw last June and July. In both instances the market held above its rising 100-day moving average.
The doomsayers have got it wrong. There have been many calls during this period of market weakness for a repeat of 2008 and a catastrophic market collapse right across the board from stocks to commodities. That obviously hasn’t happened yet, and it won’t – at least not anytime soon. As we have stated here repeatedly, the rather extreme bullish divergence between the CDNX, gold and the TSX Gold Index clearly shows that commodities are headed higher, not lower, and any weakness in stocks is a major buying opportunity.
The CDNX is actually higher now (by just over 2%) than it was at its December peak while gold is off 10% and the TSX Gold Index is off nearly 20% – that’s the bullish divergence we’ve been referring to, and it’s the opposite of what we witnessed in the summer of 2008 prior to the collapse in commodity and stock prices. The CDNX, which has consistently proven to be our most accurate and reliable indicator of future overall market activity, remains firmly in a parabolic uptrend with a target zone of 1,950 to 2,300. Huge profits are going to be made in this market over the coming weeks and months.
Gold and silver both appear poised for a major new advance to the upside, an event being telegraphed by the action we’ve seen in the CDNX. Two important factors of note with gold – commercial traders substantially reduced their net short positions (to the lowest levels we’ve seen since last August) after gold fell to $1,040 February 5. And from a technical perspective, a bullish falling wedge pattern has formed in gold which strongly suggests the precious metal is ready to stage a major breakout (a move past $1,120 will confirm this). This is when money is made in the markets.
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Gold Bullion Development Corporation (GBB, TSX-V)
Gold Bullion was halted last Monday morning and then released news that it had intersected 74 metres of 0.88 g/t Au in hole #15 at its Granada Gold Property…the significance of this was lost on some market players who a) didn’t read the part that stated this was a 600-metre step-out and b) don’t understand that the grades Gold Bullion is encountering are very mineable and also very similar to Osisko’s grades at the massive Canadian Malartic deposit 40 miles to the east…folks, we are convinced that Gold Bullion is sitting on a multi-million ounce, open-pit, bulk tonnage gold deposit (or series of deposits) at Granada, and continued assay results and drilling are going to prove this out in our view…as last Monday’s news stated, mineralization at Granada remains open in all directions and is now measured at 600 metres in length, 150 metres in width and up to 70 metres in thickness…theoretically, this implies a deposit of 700,000 ounces, a 150% increase over what A.C.A. Howe estimated for Granada in 1994…the size of this property has increased substantially since then, and investors also need to be reminded that Gold Bullion has already conducted a large bulk sample at Granada which graded 1.62 g/t…the grade from Granada’s waste pile assayed 1.75 g/t…the new estimate for Osisko’s open-pit reserve at Malartic is now 8.97 million ounces at an average fully diluted grade of 1.13 g/t…Gold Bullion’s stock price of 10 cents (for a market cap of only $8 million) is an absolute “steal” given how Granada appears to be shaping up…the prolific “Cadillac Trend” has produced numerous multi-million ounce gold deposits and many millionaire investors in the process…we’re not invested in Gold Bullion to make a few pennies per share…this has real potential to make investors several dollars per share if this property delivers the way we believe it could…
Seafield Resources (SFF, TSX-V)
All’s quiet on the Seafield front with no news on its proposed Colombian property acquisitions since mid-November…the stock closed last Friday at 21 cents, down half a penny on the week…this is one of those situations investors just have to be patient with…our advice on Seafield remains the same – accumulate on any weakness…
Kent Exploration (KEX, TSX-V)
Kent continues to be one of our favorites and closed last Friday at 15 cents, unchanged on the week…this stock is stuck at the moment between its 100-day and 200-day moving averages (14 to 17 cents), but we believe it won’t be long before it breaks out again to the upside…drilling begins at Kent’s Gnaweeda Gold Property in Australia in a few weeks, and possibly at its Alexander River Property in New Zealand around the same time…
Greencastle Resources (VGN, TSX-V)
Greencastle fell for the second straight week, closing last Friday at 15 cents, and is a better buy than ever…the first of two wells Greencastle and its private partners drilled in the Cabri area of southewestern Saskatchewan is currently being tested…it’ll take a few more weeks to determine if flow rates are economic…Greencastle has a highly prospective land package at Cabri with the potential, we believe, to deliver numerous producing small wells totaling 1,000 or more bpd…at just 15 cents Greencastle is trading barely above its cash value, and the company also has valuable gold assets along the Battle Mountain Trend in Nevada…
Richfield Ventures (RVC, TSX-V)
Richfield jumped 13 cents on the week to $1.11 after announcing plans to start a 25,000 metre drill program at its Blackwater Gold Property in the B.C. Interior in April…about 40% of that drilling will be for additional exploration while the balance will be for resource definition to produce a 43-101…Blackwater has all the makings of a major bulk tonnage deposit…this is one those stocks you just tuck away for six months or a year and wait for a takeover…
Colombian Mines Corporation (CMJ, TSX-V)
Colombian jumped 6 cents on the week to 97 cents…drilling is now underway (or will be underway very shortly) at its Yarumalito Gold Property, one of several outstanding prospects this company has acquired through the lengthy direct acquisition process with the Colombian mining authorities…the stock’s technical strength has improved significantly over the past week, suggesting higher prices are imminent…
