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“It’s not unheard of on the Cadillac Trend to have structures than run for kilometres.” – Frank Basa, BMR interview, July 20, 2010.

After last week’s Gold Bullion news release, which was very bullish in tone, and our 18-minute interview yesterday with GBB President and CEO Frank Basa, we are convinced that Gold Bullion is in the process of turning the “east-northeast” area of the LONG Bars Zone into a very significant discovery that has major ramifications for the potential of this project, 65 kilometres west of Osisko’s (OSK, TSX) massive Canadian Malartic Deposit.

“We keep on hitting mineralization even at depth,” Basa told us.  He was upbeat, relaxed, and I could also sense that he was trying to restrain himself from saying too much.  He’s clearly frustrated at the slowness of the assay labs but he has gone out of his way to reassure investors that the company is extremely encouraged with how its 20,000 metre Phase 2 program is proceeding.

We’ve analyzed last week’s news release and Basa’s comments yesterday.  Here’s our take (in point form) on what appears to be unfolding:

• Drilling in the east-northeast section is consistently hitting the same type of altered feldspar porphyry rock, with some quartz veining and in some cases visible gold, found in GR-10-17 which intersected 65.5 metres of 1.21 g/t Au;

• “Multiple altered zones” are being hit consistently in ALL directions surrounding GR-10-17 – north, south, east and west;

• Phase 2 holes are going twice as deep as Phase 1 holes and are intersecting mineralization at depth, meaning between 150 and 300 metres vertical;

• Following Phase 2, the east-northeast area will be approximately equal in its dimensions to the current Preliminary Block Model area to the west giving a combined length of at least 1.2 kilometres (1200 metres) and a width of several hundred metres;

• Drilling will continue at Granada through at least the remainder of this year with Basa hoping to complete an additional 30,000 metres by year-end as part of an even larger Phase 3 program.

We also know, based on last week’s GBB news release and a publicly available (Quebec Ministry of Mines) 1994 report on the Granada Eastern Extension that:

An east-west trending zone of shearing, alteration and quartz veining (with intrusions of syenitic feldspar porphyry) extends almost directly east of GR-10-17 (for 1800 metres) to LONG Bars Zone 2 which features a 1000 metre long shear zone.  Several northeasterly fault zones cross the shear zone and are considered prime targets for possible economic gold concentrations. Numerous vein zones, hosted by both Granada Formation conglomerate and feldspar porphyry, have been delineated historically in LONG Bars Zone 2 through trenching with considerable visible gold noted.  Sample assays in the 1930′s returned grades as high as 19 g/t Au while KWG got grab sample values as high as 13 g/t Au during some ground work in the summer of 1993.  At the eastern end of this area, an historic showing known as the Bert Vein returned grades in excess of 200 g/t Au – “the average assay of three bulk samples was 7.00 oz Au/T (page 11 of the report).”

If LONG Bars Zone 1 connects with LONG Bars Zone 2, and if LONG Bars Bars Zone 2 measures up through drilling, then the length of the Granada Gold Deposit mineralized area is potentially a massive 4,000 metres – twice the length of Canadian Malartic.  Those are a couple of big “ifs”, for sure, but it gives you a good picture of the incredible blue sky potential of Granada.  This could turn out to be bigger than any of us can really imagine.

In any event, given the fact 2.4 to 2.6 million ounces have already been identified within the Preliminary Block Model as a potential non-compliant resource, at the very least we see excellent potential for Gold Bullion doubling those ounces which makes the company’s current $55 million market cap incredible attractive.  With 30,000 more metres of drilling after Phase 2 by the end of this year, investors should have a pretty good idea if that 5 million ounce target can be achieved or even exceeded.

GBB’s weakness over the past 4 trading sessions can be explained very simply as “technical trading”.  The stock’s 20-day moving average has gone into decline for the first time since March, triggering some nervous nellies who don’t understand the fundamentals to dump their shares.  This is a normal technical event for a stock in the early stages of a massive move, and sometimes these are pros at work who are “painting the chart” in an effort to accumulate as much cheap stock as they can.  This is what I call the “Sweet Spot” entry point – the pullback that offers an incredible opportunity to load up on a fundamentally (and technically) very strong play.  Astute investors understand the money that can be made by buying into these special situations.

Phase 1 drilling demonstrated that mineralization at Granada is widespread and near-surface, ideal for open-pit mining.  A 30,000 tonne bulk sample in 2007 graded 1.62 g/t Au which gives the best indication of what the mill grade will be.

Phase 2 drilling is expanding the LONG Bars Zone and hitting mineralization not only near surface but at depth.  GENIVAR is quickly developing the east-northeast extension and further drilling will determine if it connects with LONG Bars Zone 2, 1800 metres to the east.

Basa said yesterday he’s hoping the first set of assay results will come by the end of next week.

The Granada Gold Property has become a fascinating geological story and we’re convinced it has given us only a glimpse so far of its real potential.

10:40 am Pacific time:

We have said this many times before at BullMarketRun but it’s worth repeating – a fascinating geological story continues to unfold at Gold Bullion Development’s (GBB, TSX-V) Granada Gold Property in northwestern Quebec, 65 kilometres west of Osisko’s (OSK, TSX) massive Canadian Malartic Deposit.

Not only does mineralization appear widespread and near-surface at Granada as outlined in Phase 1 drilling (low grade though ideal for open-pit mining), but potential discoveries between 150 and 300 metres vertical depth appear likely in the current Phase 2 drilling given Gold Bullion’s news release a week ago.  BMR interviewed President and CEO Frank Basa this morning who also confirmed our speculation that the dimensions of the east-northeast discovery area that’s currently being drilled should match the dimensions of the existing Preliminary Block Model after Phase 2 drilling.  Much more drilling is also planned through the remainder of the year.  To listen to the full 18-minute interview with Basa, simply click on the link below (MP3 file):

BMR Interview With Basa

On another note, Gold has reversed nicely this morning and as of 10:40 am Pacific time is up $8 an ounce to $1,192 after touching $1,175 earlier today.  This certainly demonstrates the strong support Gold has  just above its rising 200-day moving average.

Due to extremely high levels of traffic, our web site is going through an immediate web server update which commences at noon Pacific time today.  The site will remain online during this process and our next posting will be shortly after this maintenance is completed within approximately 24 hours.  We thank you for your patience and we look forward to serving you even better in the days ahead.

Gold is finding support as BMR’s technical analyst outlined in last night’s article…Gold dipped as low as $1,175 this morning but buyers stepped in and have pushed it back up to the high of the day…as of 7:55 am Pacific time, Gold is ahead $7 an ounce to $1,191…Gold is at a 2-month low but has not been below its rising 200-day rising moving average (which currently is at $1,160) for over a year-and-a-half since early January, 2009…there is very strong technical support for Gold between $1,140 and $1,180…we expect continued chopiness for several weeks which should set Gold up for a major turnaround beginning mid to late August…it’s interesting to note the TSX Gold Index, which is up several points this morning, is already at quite oversold levels so the idea of a major 2008-style breakdown in Gold at this point just doesn’t seem to hold water…the CDNX is off 3 points to 1359…we do believe this market will soon break out of its 2-and-a-half month slump with chart patterns that are almost identical to those of 2004 when the market climbed 25% from late July through the remainder of the year…Gold Bullion Development (GBB, TSX-V) is off a penny this morning to 48.5 cents…there is very strong technical support for GBB in the upper 40’s…it’s rising 50-day moving average is 49 cents…with the company having outlined a potential non-compliant resource of 2.4 to 2.6 million ounces in its Preliminary Block Model, and hitting what appears to be all the right structures including visible gold in the east-northeast extension area of the LONG Bars Zone, we believe it’s just a matter of time before the market understands more fully the potential massive size of Granada…one of the key sentences in last week’s news release was that GENIVAR is hitting multiple zones of altered feldspar porphyry (favorable for gold mineralization) in all directions surrounding Phase 1 discovery hole GR-10-17…Sidon International (SD, TSX-V), which we added to the BMR Portfolio in March at a nickel, is unchanged at 10 cents…we expect some continued consolidation in Sidon before its overbought technical condition unwinds…Kent Exploration (KEX, TSX-V) released an update this morning on exploration activities at its Alexander River Gold Property in New Zealand…the company announced some encouraging results from an IP survey but is still waiting for a drill permit from the New Zealand Department of Conservation…Kent is up half a penny to 11.5 cents on low volume…

Gold’s 30-day moving average is now in decline, just the fourth time that has occurred in the past year-and-a-half.  That suggests some further minor weakness or chopiness is probable but the long-term uptrend remains intact as John explains in more detail below with an updated chart and analysis:

Gold has solid support levels between $1,140 and $1,180 which should be strong enough to enable it to make a reversal between the parameters.

John: The price of Gold (continuous contract) continued to wallow today in the midst of the summer doldrums, the seasonal period when both bullion and precious metal stocks battle weak markets and the spectre of reduced buying.  Gold opened at $1,193, climbed to $1,195 and then drifted to a low of $1,177 before climbing to $1,183 near the close.

Looking at the daily chart we see that for the past 9 trading days Gold has fluctuated within a horizontal trend channel (2 black horizontal lines) and today it broke to the downside and closed at the support band (former resistance) between $1,160 and $1,180 (green horizontal lines).  Another support (former resistance) line (green horizontal line) is shown at $1,140 – this is a strong support level going back to January of this year.

The sloping blue line is a trendline that should be watched carefully.  When a turnaround comes, the price of Gold will break this line to the upside indicating that a reversal has occurred.

Looking at the indicators:

The RSI(2) is quite low in the oversold region at 8% but can fall further before reaching an extreme level of <2.  The horizontal orange line represents the approximate level of previous lows at points indicated by vertical blue lines.  This shows we can expect further weakness – bearish.

The Slow Stochastics %K (black line) has crossed down over the %D (red line) and is in the oversold region – bearish.

The ADX trend strength indicator has the -DI (red line) above the +DI (green line) and pointing up.  The ADX trend strength indicator ADX (black line) is now also pointing up, indicating that the downtrend is getting stronger.  Watch for the -DI to climb higher and peak possibly around the 35-40 level – bearish.

Outlook: The immediate outlook is bearish.  There are very solid support levels between $1,140 and $1,180 which should be strong enough to enable Gold to make a reversal between the parameters.  The breaking of the blue trend line to the upside should give the first sign of a turnaround or at least a consolidation.  Longer-term outlook remains bullish.

Gold is soft this morning, breaking below technical support at $1,185 an ounce…as of 7:30 am Pacific time, Gold is down $12 an ounce to $1,181…a major level of support is around the 200-day moving average at $1,160…within a month or so Gold will be entering a period of seasonal strength…the CDNX is off 10 points to 1369…chart patterns in 2010 for the CDNX are very similar to those of 2004 when the market bottomed in July and rose 26% by the end of the year…some further choppiness in the CDNX can be expected through the end of the month including a possible test of the recent 1343 low…if the 2004 pattern repeats, however, the sell-off since early May has largely exhausted itself and the Index will hold at 1300 or better…Gold Bullion Development (GBB, TSX-V) is unchanged at 50 cents on relatively low volume this morning…Sidon International, which we’re also watching very closely, is down half a penny at 9.5 cents…Sidon got technically overbought, based on RSI and Stochastics, in last week’s 66% advance and is likely to consolidate for at least a short period to allow that overbought condition to cleanse itself…Fire River Gold (FAU, TSX-V), which we mentioned here a few weeks ago at 55 cents, is trading at 71 cents this morning, down a penny…Fire River is in the process of completing a financing…we see positive things in store for this company through the balance of the summer and fall as it drills and develops its Nixon Fork Gold Project in Alaska…

BMR Portfolio

Gold Bullion Development (GBB, TSX-V)

Gold Bullion was up half a penny on the week to 50 cents, trading in a range of 47.5 to 57 cents…the company issued an exploration update last Tuesday which was very bullish in its tone…drilling at Granada is intersecting multiple zones of altered feldspar porphyry (favorable for gold mineralization) in the Phase 1 east-northeast discovery area of the LONG Bars Zone…these structures, in fact, are being intersected in all directions (north, south, east and west) of Phase 1 discovery hole GR-10-17 which is extremely encouraging…about 4,000 metres of drilling (17 holes) has been completed in this promising area which is not part of the 2.4 to 2.6 million ounce estimate of potential resources (non-compliant) contained within the Preliminary Block Model…GENIVAR appears to be drilling twice as deep in the east-northeast area as they were in Phase 1 which is very interesting…given how efficient and effective GENIVAR has proven to be in drilling Granada, they certainly wouldn’t be wasting time and money with these deeper holes if these holes weren’t yielding good visual results…it’s possible the widespread lower grade mineralization at and near the surface is just the “tip of the iceberg” and something even more significant is at depth (for example, 300 vertical metres) which is still amenable to open-pit mining…Osisko’s Canadian Malartic goes down 320 metres…Gold Bullion also reported it has identified a second LONG Bars Zone 1800 metres east of GR-10-17…this area, which has undergone some extensive historical work including trenching and limited diamond drilling, features numerous north-dipping quartz vein or stringer zones and feldspar porphyry sills and dykes along a 1 kilometre shear zone…several northeasterly faults cross the shear zone and are considered prime targets for economic gold concentrations…some high grade showings were reported from historical work including up to 7 ounces per tonne (200+ g/t Au) from the Bert Vein, information BMR obtained from a publicly available 1994 report on the Granada Eastern Extension that was filed with the Quebec Ministry of Mines…LONG Bars Zone 2 has very similar geological characteristics to the original LONG Bars Zone Gold Bullion is currently drilling…a fascinating geological story continues to unfold at Granada…

Seafield Resources (SFF, TSX-V)

BMR interviewed Seafield President and CEO Tony Roodenburg this past week…Roodenburg presented a strong case for Seafield proving up a series of deposits at its Quinchia Project in Colombia that could total anywhere from 3 to 5 million ounces…the drill bit and fundamentals will be the main drivers behind Seafield over the coming months…drilling started 3 weeks ago at Miraflores where the company is confident it will increase the 43-101 inferred resource by at least 25% to 1 million ounces…drilling at Dos Quebradas likely won’t begin until about the end of August while no timeline for drilling has yet been established for Chuscal, another very promising target…the same individuals (Ian Park and Stewart Redwood) who assembled Medoro’s (MRS, TSX-V) land package, which contains the 9.5 million ounce Marmato Deposit, are running Seafield’s Colombian operations which cover 68 square kilometres in the highly prospective Quinchia District…Seafield closed Friday at 16.5 cents, giving it a market cap of only $15.5 million…Roodenburg feels the company has an excellent chance to define 2 million ounces at Quinchia at year-end which would significantly boost Seafield’s current market cap…

Sidon International Resources (SD, TSX-V)

Sidon enjoyed a breakthrough week as it finally received approval from the CDNX on its spring financing at 5 cents and letter of intent to acquire the Morogoro East Gold Property in Tanzania…BMR introduced Sidon to its readers and added the company to its portfolio in March when the stock was sitting at just a nickel…while Sidon may need a bit of time to digest its recent significant gains and unwind a somewhat overbought technical condition, we are very bullish on this situation for the remainder of the year as Morogoro appears to have Handeni-style potential…Canaco (CAN, TSX-V) has risen dramatically recently on stellar results from its Handeni Gold Project approximately 60 miles to the north of Morogoro East…Sidon traded huge volumes this past week and closed Friday at 10 cents, a 66% gain from its 6-cent close the week before…

Richfield Ventures (RVC, TSX-V)

Richfield has strengthened considerably recently and is up 50% since hitting a low of 90 cents June 28…the company is in the midst of a 25,000 metre drill program at its Blackwater Gold Project in central British Columbia which has world class potential…drilling started in April but the stock went into a sharp decline due to average early results combined with a very slow pace of drilling…a second rig is expected to be in action at Blackwater shortly which will help immensely…we continue to be very bullish on Richfield which is certainly starting to regain momentum…however, we caution it could be late summer or early fall (after more drill results) before the market gets really excited with this story…Richfield closed Friday at $1.35 (right at its 200-day moving average where there is resistance) for a 15-cent weekly gain…

North Arrow Minerals (NAR, TSX-V)

September can’t come quickly enough for North Arrow…the company announced Friday it will commence a 1,500 metre drill program at its Lac de Gras diamond property in the Northwest Territories by early September…the planning that has gone into this important upcoming drill program has been impressive indeed, and we’re very confident North Arrow has a strong probability of hitting some kimberlite pipes…the key of course will be whether they are economic…the ratio, however, of kimberlite pipes to economic pipes at Lac de Gras is the highest in the world…if there are two people on this earth who are capable of making a major new diamond discovery at Lac de Gras, they are Gren Thomas and Dr. Chris Jennings who have teamed up again with North Arrow after discovering the Diavik diamond deposit in the early 1990’s…Diavik trends right through the centre of North Arrow’s property…North Arrow also released encouraging drill results last week regarding its Beaverdam Lithium Project in North Carolina…it’ll be interesting to see the next steps North Arrow takes with regard to Beaverdam…North Arrow closed Friday at 17 cents, unchanged on the week…

Kent Exploration (KEX, TSX-V)

With an improved balance sheet thanks to a major financing (the final tranche of which is still pending), Kent has posted the reclamation bond that was necessary in order to commence production at its Flagstaff Barite Property in northeastern Washington State…final approval from the Bureau of Land Managment should come in the near future…Kent has gone through some rough times the past couple of months, triggered by Australian politics and a very foolish proposed “super tax” on producing mining companies which has since been watered down by the new Australian Prime Minister…Gnaweeda, one of Kent’s three flagship properties, is located in Western Australia…with some money now its bank account, potential cash flow that could be generated from the barite property, and a drill program expected to start in the near future at its Alexander River Gold Property in New Zealand, our outlook for Kent over the next few months has improved considerably…the stock finished the week at 11 cents, down 1.5 cents from the previous week…

Colombian Mines Corporation (CMJ, TSX-V)

CMJ’s 100-day SMA is in decline but the stock has found support at its rising 300-day SMA which is just above 60 cents…CMJ closed Friday at 68 cents, down 4 pennies on the week…the company released new drill results from its Yarumalito Gold-Copper Property last Monday…the best intercept was 141 metres grading 0.77 g/t Au…CMJ is considering expanding its drill program at Yarumalito based on encouraging results to date…given the fact CMJ has a very large land package in Colombia, and is a well-run company with extensive experience in that country, we remain bullish on the medium to long-term prospects for CMJ…

Greencastle Resources (VGN, TSX-V)

No less than 35% of the buying in Greencastle since June 17 has come from President and CEO Tony Roodenburg who continues to add to his personal holdings at favorable prices…on a book value basis, Greencastle has never been cheaper in its dozen or so years on the market…the stock closed the week at 12.5 cents, up half a penny, and continues to trade at cash value…history has shown that Greencastle is always a terrific buy when it’s trading at cash value and no one knows that better than Roodenburg…sooner or later an event will trigger renewed interest in the stock and a significant move to the upside…investors should only jump into Greencastle, in our view, if they have a 6 to 12-month time horizon…

CDNX and Gold

The CDNX was a relatively strong performer this week, fairing better than all the major markets as well as Gold which fell $18 for the week.  The CDNX gained 7 points last week to 1379.  Its five-session winning streak was snapped Friday when it lost 7 points as the Dow and TSX suffered triple digit losses.

As our technical analyst pointed out in an article Friday, the 2010 CDNX chart looks very similar to CDNX patterns in 2004.  We see a significantly greater likelihood of a repeat of 2004 vs. a repeat of 2008 which many newsletter writers and analysts are warning about.  Supported by rising 200 and 300-day moving averages, the CDNX is in a much healthier technical position than it was in the summer of 2008.  One cannot rule out the possibility of a final plunge or shakeout here in July or early August that could take the CDNX down to about 1,300, but it’s equally possible the 1343 low earlier this month will hold.  After the market bottomed in July, 2004, it rose 26% by the end of the year.  The sell-off since the beginnning of May this year appears to have largely exhausted itself and has to be interpreted, we believe, as merely a normal correction within an ongoing bull market.  If we were about to witness a crash in the overall markets, similar to 2008, the speculative CDNX would be accelerating much more to the downside and collapsing technically ahead of the major markets which has not occurred.

Only time will tell if we are correct but the CDNX has proven to be a very reliable and consistent leading indicator.  We could see some choppy trading for a few more weeks before a significant move to the upside begins to take hold by mid-August or so.  By that time Gold will be entering a period of seasonal strength.  Gold is showing some technical weakness at the moment with declining 14 and 30-day moving averages.  It has closely followed its 60-day moving average, though, which continues to rise.  Gold has not touched its rising 200-day moving average since January, 2009.  Right now Gold is just $33 above its 200-day SMA which is $1,160.  Further choppiness in Gold should also be expected over the near term but this market should firm up again later in the summer as it traditionally does.