A company caught our attention a few months ago that we have been following closely and performing due diligence on ever since – Visible Gold Mines Inc. (VGD, TSX-V), an aggressive Gold explorer based in Rouyn-Noranda. Northwestern Quebec is Visible Gold Mines’ niche – its entire focus is on that area and the company has made it clear it intends to become an exploration leader in this prolific mining region. It’s now backing those words with action.
Visible Gold Mines is one of the few Venture Exchange companies we’ve come across that not only possesses top-notch geological expertise but two other key ingredients that are necessary in order to maximize shareholder value and create wealth – business savvy and marketing prowess. This is truly a special situation which is why we’ve added Visible Gold Mines to the BMR model portfolio at 40 cents.
Visible Gold Mines is armed with nearly $9 million in cash and one of the finest geologists in the country in Robert Sansfacon who played a critical role in the discovery of Osisko’s (OSK, TSX) Canadian Malartic Deposit. The President and CEO is Martin Dallaire, a very successful businessman from Rouyn-Noranda who knows the mining industry inside-out. I had the pleasure of first meeting Dallaire a couple of months ago (it helps immensely that he’s fluent in English as my French still needs a lot of work). He’s sharp, determined, organized and focused. As soon as you walk into the Visible Gold Mines’ office, you get the immediate sense that something is different compared to most other CDNX situations – Dallaire means business, he’s strategically building a company and has surrounded himself with quality people to achieve his goals. This is no stock promotion – it’s the real thing.
Agnico-Eagle Mines (AEM, TSX) likes what it sees in Visible Gold as well. Yesterday, VGD announced a very significant deal with Agnico-Eagle to add to its already impressive land package. Visible Gold has entered into an option agreement with AEM to acquire a 50% interest in the Joutel Property comprising one mining lease and 477 claims approximately 150 kilometers north of Rouyn-Noranda. Joutel’s Eagle and Telbel mines produced over 1 million ounces of Gold at a grade of 6 g/t Au and some Silver between 1973 and 1993 (Agnico Mines merged with Eagle Mines Ltd. in 1972, allowing for the development of Eagle Mines’ Joutel mining complex). Joutel gave birth to Agnico-Eagle which eventually closed the mine prematurely in order to concentrate its efforts on the massive LaRonde Mine.
We believe there are two reasons Agnico-Eagle decided to option Joutel to Visible Gold Mines – Dallaire and Sansfacon, as simple as that. Chances are, there is considerable remaining Gold at Joutel and significant extensions to the deposits are quite possible as often that’s the case with these situations. If anyone can unlock the value of this project, it’s Sansfacon. He’s a veteran geologist who honed his skills for many years with Lac Minerals. He knows how to find Gold and nail down a deposit. He’s highly respected in the industry. He likely sees a new approach to Joutel.
Visible Gold Mines is already drilling its Silidor Property and will soon be launching a drill program on the ground it optioned in December from Cadillac Mining (CQX, TSX-V). Joutel adds a whole new dynamic to an already exciting exploration story. With the large and talented team Dallaire has assembled, we believe it’s only a matter of time before this company makes a discovery and positions itself as a strongly recognized force in the Quebec exploration and mining space. Visible Gold has only 47.2 million shares outstanding and closed yesterday at 42 cents for a market cap of $19.8 million. The company has a very healthy balance sheet (approximately 20 cents per share in cash and no debt) and the stock’s chart is looking very favorable as John explains below:
John: Yesterday, Visible Gold Mines (VGD,TSX-V) opened at 39 cents, its low, climbed to a high of 42.5 cents and then closed at 42 cents. It gained 3 pennies (7.69%) on much higher CDNX volume of 534,000 shares. Yesterday’s volume was 61% of this week’s total volume (4 days) and that is very significant.
Looking at the 6-month daily chart we see that between the beginning of November, 2010, and January of this year, VGD traded within a horizontal trend channel. It reached a high of 70 cents after a run-up from 13 cents in July, 2010 (not shown here). After topping out, the stock declined to a low of 33 cents at which point it began to consolidate within a symmetrical triangle bounded by a downsloping blue line and an upsloping green line.
There have been 2 light bullish volume days prior to yesterday but yesterday’s volume took the share price from the close supporting daily SMA(200) moving average to the top blue resistance line of the triangle – a very strong and bullish move. If the volume continues to remain strong and increases over the next few days, we could see a powerful break to the upside. The trading is about 75% of the distance to the apex of the triangle which is the area where the most powerful breakouts occur. If it does not break out within the next 2 or 3 days and the trading moves further toward the apex, any breakout would probably not be as strong. The volume is the key.
The declining 50-day SMA has flattened out and could very soon reverse to the upside which is another very positive sign.
Looking at the indicators:
The RSI has formed a flat “W” formation at 47% and is now at 54% and pointing up – very bullish. The Slow Stochastics (SS) has the %K (black line) at 56%, pointing up and above the %D (red line) at 45%, also pointing up – very bullish.
The Chaikin Money Flow (CMF) indicator shows that a strong surge of buying power occurred yesterday, a very bullish sign.
Outlook: The outlook after trading yesterday is very bullish. The chart patterns and all the indicators are very positive for a breakout but only if the volume remains high and increases.
Note: As always, perform your own due diligence and please read our disclaimer. Jon holds a position in Visible Gold Mines, John does not.
