Gold hit short-term resistance again yesterday near $1,670 and pulled back during the day to close at $1,652…as of 1:45 am Pacific, an early posting due to travel commitments, the yellow metal is up $2 an ounce at $1,654…Silver is ahead 2 cents to $30.08…Copper is down a penny at $3.71…Crude Oil is 16 cents higher at $100.87 while the U.S. Dollar Index has retreated one-third of a point to 80.75…
Fund managers have started 2012 with a âreawakened sense of optimism towards the global economy and a greater appetite for riskâ, according to a survey by Bank of America-Merrill Lynch and reported in yesterday’s Financial Times…the monthly survey recorded the biggest one-month improvement in its outlook for global growth since May, 2009, with only 3% of those surveyed saying the world economy would weaken in 2012 compared to 27% in December…this translated into lower levels of cash holdings, down to an average 4.4% of portfolios from 4.9% in December, as investors shifted slowly into riskier assets…
The Venture Exchange climbed as high as 1553 yesterday before closing down a point at 1538…overall, the Index is looking much healthier these days and any slight pullback (expect one) should be viewed as an opportunity…a reminder (we posted this chart Sunday) – a test of the neckline support, as shown below, w0uld be a normal technical development…
Silver is our theme this morning…as regular readers know, we’re very bullish on the long-term prospects for Silver (very compelling story) which is currently trading above a support band and threatening to break out from the top side of a wedge as John shows below…
We’ll be reviewing a number of Silver stocks in the coming weeks beginning with three this morning:Â A speculative but highly prospective exploration play (Rainbow Resources);Â 2) An advanced exploration play with a growing deposit (Wildcat Silver Corp.) and (3) an established producer (Great Panther Silver)…
Rainbow Resources (RBW, TSX-V)
Very occasionally, one comes across a particular situation in the market that has the perfect “feel” to it…you just know you’ve found a winner and it’s only a matter of time before that’s confirmed…yes, there is never a “sure thing” in the market but when examining upside potential and downside risk with a certain stock, there are times when the “no brainer” label is definitely applicable…that’s how we see it with Rainbow Resources (RBW, TSX-V) which is a newly-listed Venture company whose prospects changed dramatically a few months ago when it acquired privately-held Braveheart Resources, an Alberta-based exploration deal involving some very respected Calgary entrepreneurs including David Johnston and Bob Libin…
Rainbow is hitting the ground running with its Silver-Gold-lead-zinc land package in the West Kootenay region of southeast British Columbia because of several years of hard work by the Braveheart group, intimately familiar with all aspects of the prolific West Kootenay geological setting…they invested their own money and raised some privately and did some initial pre-drilling exploration work which yielded very encouraging results including high-grade, near-surface mineralization…then Braveheart met Rainbow and the rest, as they say, is history…
There is a lot that is still to come out with regard to the Rainbow story, as the company’s geological consultant is preparing a detailed report, but we know enough from what has been disclosed already (and from a property visit) to be able to tell that this one certainly appears to be a “no brainer” at current levels…I added to my personal position yesterday and John’s updated RBW chart shows a breakout after yesterday’s 17-cent close on the stock’s highest volume since January, 2011…
Note: John and Jon hold positions in RBW (Terry does not)…
If youâre bullish on Silver, which we are at BMR, you canât help but drool over this production statistic – 1,973,250 ounces from just 26,476 tonnes milled…thatâs an average grade of approximately 2,100 g/t Ag or 74.50 ounces per tonne – an eye-popping number which, BMR has learned from the B.C. Energy and Mines web site, constitutes the historical production (mostly from the early 1900’s) from Rainbow’s Ottawa Property, the top former producer in the Slocan Mining Camp…if that doesnât grab your attention, I donât know what will – and thatâs not even what Rainbow considers to be its #1 property (yes, this story gets even better)…
Rainbow is one of our favorite speculative opportunities, immediately and throughout 2012, and at 17 cents it sports a very modest market cap of $4.4 million…
Rainbowâs December 16 news release stated, âMoose Mountain Technical Services, Rainbow’s resource consultant, is currently preparing a comprehensive report on these properties (Ottawa, International, Tin City, President, Gold Viking and Rhea) based on exploration work carried out during this fourth quarter and in recent years by Braveheart Resources, plus valuable historical data going back to the early 1900s. The company expects the report, which will be completed in the near future, will underscore the potential of these properties and identify numerous high-priority drill targets.â
Given the above statement, we anticipate there will be a tsunami of news regarding Rainbowâs British Columbia land package in the coming weeks…so now is the best time for one to get positioned in RBW as weâre convinced it will quickly develop into a very strong Silver and Gold exploration play given the people involved…Ottawa is just one of six properties which makes up what Rainbow is now calling its âBig Strikeâ Project…I recently visited the Gold Viking Property as part of my extensive due diligence on this company…rest assured, the Rainbow team has assembled a first-rate property package (the 4,000+ hectare International Property, about 200 kilometres north of Nelson, has fascinating potential) and they are determined to build shareholder value and take this company to a whole new level…Rainbow is also actively looking at other possible Gold/Silver opportunities in favorable jurisdictions, so this is not going to be one-trick pony..
The rich West Kootenay region historically has produced more than 5 million ounces of Gold and more than 30 million ounces of Silver…the forest industry has suffered immensely in this part of British Columbia but mining and exploration are on the rebound thanks to higher Gold and Silver prices, and a government thatâs encouraging investment in the sector…many properties in the region have gone under-explored since the mining boom of the early 20th century…there is plenty of untapped potential and the chance of another major discovery has to be considered significant…Rainbow aims to be in the forefront…
The Best Place To Find A New Mine Is Near An Old Mine
Rainbowâs Ottawa Property also produced 793,852 pounds of lead, 28,162 pounds of zinc, 1,748 pounds of copper and minor amounts of Gold according to B.C. Energy and Mines…as the saying goes, the best place to find a new mine is near an old mine…from what we understand, the Ottawa Property has undergone very little drilling or none at all – the oldtimers went after the obvious super high-grade material near-surface and who knows what they may have overlooked…
Between just the Ottawa Property and the International, where high-grade Silver also exists, Rainbow has all the ingredients to become a thrilling drill play…
In summary, just some of the reasons we like Rainbow so much at the moment and why I have personally taken a strong position in the stock…as always, perform your own due diligence and never invest more than you can afford to lose with these speculative juniors…
1. The People Involved
Very solid and powerful group that includes well-known and successful Calgary businessman Bob Libin, a former broker with interests in mining, oil and gas, and the hospitality industry…heâs also very involved with the Calgary Flames and the Calgary Chamber of Commerce…there is a lot of depth on the Rainbow team with highly respected geologist Bruce Durham; David Johnston (director of the Chamber of Mines for eastern British Columbia) whoâs also well-known and respected in Calgary (he also headed up Braveheart); and Jim Decker of Grande Cache Coal fame who has more than 30 yearsâ experience in senior management, mine operations and engineering…this kind of a team plays to win…their track records prove it and they have the ability to raise all the capital they require;
2. The Land Package
Rainbow has assembled a land package in southeastern British Columbia which appears to have an abundance of high-grade, near-surface Silver-Gold drill targets…the company has six properties and results from a fourth quarter work program are pending…high-grade, near-surface mineralization is a winning combination if Rainbow can indeed verify impressive historical showings and expand on known mineralized systems…keep in mind that due to the work of Braveheart over the last several years, Rainbow is hitting the ground running with this property package;
3. The Capital Structure
Just 26 million shares outstanding at the moment for a market cap of $4.4 million…insiders hold nearly 25% of the outstanding stock…the company was listed only a year ago and hasnât had its first major ârunâ yet;
4. The Chart
Few companies on the Venture right now have a technical posture as favorable as Rainbowâs with rising moving averages and numerous other positive indicators as John outlined in the above chart…
WildCat Silver Corp. (WS, TSX)
We have featured Wildcat before at BMR and the company continues to deliver strong drill results from its Hermosa Property in Santa Cruz County, Arizona…WS will be issuing an updated resource estimate and preliminary economic assessment for the Hermosa Project early this year (current indicated resource is 36 million ounces of Silver while inferred resources total 85 million ounces)…WS is not only hitting solid Silver grades at Hermosa but manganese, zinc, lead and copper as well which will help immensely with the economics of the project…
Technically, the stock has been in consolidation since last spring…it closed yesterday at $1.53…take a look at John’s chart and watch for a possible breakout in the near future…as you can see, there is very strong support at $1.25 while the 500-day rising moving average (SMA) – not shown in the chart – is sitting just above the $1 level, so the downside risk really appears to be quite limited with WS…
Note: John, Jon and Terry do not hold positions in WS.
Great Panther Silver (GPR, TSX)
Great Panther has been one of our favorite Silver plays since late 2010…it has been volatile, like Silver itself, but overall GPR has performed well…the company expects to produce 1.72 to 1.90 million ounces of Silver at its Mexican mines this year, up from 1,495,000 in 2011…Gold, lead and zinc production are expected to increase as well though Silver accounts for about three-quarters of the company’s income…
Technically, Great Panther is trading just above its rising 500-day moving average (SMA) and was a great buy just below that level in December…again, the risk-reward ratio here is attractive…GPR closed at $2.29 yesterday…like WS, though, it may need a little more time to consolidate so patience is the key…
Note: John, Jon and Terry do not hold positions in GPR.
Thanks for the charts – much appreciated as always. With regard to RBW I seem to experience dĂŠjĂ vu – reminds me of the VGD story! Two questions: Doesn’t there need to be a green/white candle today before you can say it is breaking out? Aren’t there gaps around .11c and .13 cents to fill? Thanks đ
Comment by Andrew — January 18, 2012 @ 4:43 am
Cap-Ex Announces New Drill Results that Increase Size of the “Greenbush Zone”
Cap-Ex President and CEO, Mr. Francois Laurin comments, “These results are quite encouraging and the Company is looking forward to proceeding with its aggressive 2012 drilling program with an objective of identifying and communicating an initial mineral resource estimate.”
Only quite encouraging?
Comment by Andrew — January 18, 2012 @ 5:10 am
Hi Andrew.
Gaps are often filled but not always.
Whenever the SP closes above the top of an ascending triangle or a down trendline we can say it has broken out. The next day we look for confirmation of that breakout usually with a white candle but as long as the Close stays above the top of the triangle or trendline the SP has broken out. Sometimes the SP will reverse and test the breakout line for support.If it closes below that line then the breakout is nullified and we have Bull Fake. Hope this helps.
Comment by John - BMR — January 18, 2012 @ 5:54 am
Thanks John.
Comment by Andrew — January 18, 2012 @ 5:59 am
This report involves a coming metals shortage… good for CJC, CEV, at the very least…. worth a look and maybe BMR can find some promising companies that are in the biz of the ‘ium’s”
pwc.com/en_GX/gx/sustainability/research-insights/assets/impact-of-minerals-metals-scarcity-on-business.pdf
Comment by Jeremy — January 18, 2012 @ 8:59 am
http://traderdannorcini.blogspot.com/2012/01/gold-stocks-continue-being-plagued-by.html
Comment by Hugh — January 18, 2012 @ 10:42 am
VGD – Câline de bine!:)
Comment by Andrew — January 18, 2012 @ 1:05 pm
I have tried to be optimistic, but there’s something just not right out there & i
may be ready to cave. It has been a seesaw market, up/down the same amount, every second
day… I feel this writer may have it right.
——————————-
Tuesday, January 17, 2012
Gold stocks continue being plagued by the hedge fund ratio trade
The HUI continues to lose value against the price of gold bullion as evidenced by a continued deterioration in the ratio of the price of the HUI to the price of an ounce of gold.
We are reminded continually of two things that have led to this abysmal performance of the gold shares which are rapidly losing speculative interest in favor of the ETF.
The first is the risk of investing in companies that are subject to surprises which happened to Hecla and recently to Kinross. Hedge funds and other large investment groups or players seeing this say to themselves, “Why risk this sort of thing when we can get LEVERAGED EXPOSURE” to the gold price by buying the gold ETF on margin”.
There is no such risk inherent in the ETF. No one worries about nationalization of the ETF or environmental lawsuits or some bureaucratic agency shutting it down to clean up debris in a mine.
Secondly -this then leads us to the ratio spread trade. Buy the actual metal either through the ETF or the physical stuff (or even the Comex) and take a corresponding short position in some of the mining companies to further minimize the risk of investing in gold.
This shows up in the rotten performance of the gold shares in general as they continue to decline against the price of bullion . Note that the line goes nearly straight down since the beginning of 2011 with a brief exception of a lousy two months last year.
If one wanted to devise a mechanism to deliberately depress the price of the mining shares they could not have come up with a better mechanism to do so than the gold ETF. The lesson in this is that investors must be extremely selective in choosing gold mining companies to invest in and not just blindly throw money into the sector and thereby hope to be successful. As long as the Gold ETF is in existence, the hedge funds are going to use it as the long leg of these spread trades and actively seek out the weaker gold mining companies to short. At this point I am not sure what it is going to take to reverse this trade as traders will stick with a strategy as long as it works and not a day longer. Long suffering gold mining share owners should continue to press management to take the steps necessary to make it more difficult to short their shares successfully. Failing that they can always pray for a takeover or acquisition!
Comment by Bert — January 18, 2012 @ 1:07 pm
CEV – the results were inline with previous drill results. However, we’ve now had a triple top and looks like a triple bottom is in the cards – which isn’t good is it? The %Fe is the same as other explorers in the Labrador trough (Zone Resources etc) and the new release seems to have been taken as an opportunity to sell. Hopefully a bounce up tomorrow.
Comment by Andrew — January 18, 2012 @ 1:09 pm
Andrew, did you mean VGD = POS? đ
Comment by Bruce — January 18, 2012 @ 8:20 pm
Hang in there Bert, sooner or later the hedgies will have to cover and the miners will be like a coiled spring.
Comment by Hugh — January 19, 2012 @ 4:04 am
Hello Bruce – No, it’s a mild term expressing disbelief, surprise etc. (has religious roots so is mild to avoid being sacrilegious) but yours is probably more appropriate! đ I hear it a lot in Edmundston, NB. Today, if there’s no news I’m sure there will be (if there’s anyone there) a lot of expletives directed at M. Dallaire such as “va chier”. đ
Comment by Andrew — January 19, 2012 @ 4:25 am
Anyone have any positive thoughts on CEV besides F&M – I’m guessing the chart does not look good technically?
Comment by Andrew — January 19, 2012 @ 4:28 am
Hugh – Thanks !
Andrew – I am still positive on CEV, but i find it difficult
to watch the games they, the so called big boys play. They
have everything, that we don’t have & that don’t seem to
satisfy them, as they continue to try to pry from us, the
little we have… There are more drill results pending, but
i have to be truthful, when conversing with my cyber friends,
we are in the middle of winter down here, so we sell now, hoping
to get back in cheaper by spring, or we hang in there, with a
guarantee of not missing the boat. Anyway, we have been going
nowhere fast, but will things change is the big question. I do
know how to change things to the positive, for my stocks that
is & that is to sell out & you can be sure, they will then move
up. R !
Comment by Bert — January 19, 2012 @ 5:42 am
Thanks Bert! I don’t like those CEV Fib support levels though, so I’ll be positive and say it’s going to test 1.20 by the end of January and VGD will have a stellar update to deliver at their AGM today and the SP will triple so I can sell and load up on RBW which has a crock of gold at the end! đ
Comment by Andrew — January 19, 2012 @ 6:48 am
Andrew
VGD, are they holding their AGM in a phone booth ? Regarding RBW, would you
settle for a crock of silver ? Smiling without the smiley. R !
Comment by Bert — January 19, 2012 @ 8:58 am
Probably no working phone booths in Rouyn-Noranda (doors are frozen shut and concealed by plowed snow), so maybe a Tim Hortons so they can put Hockey on the agenda as “other business” and keep warm spending my money on donuts! đ Yes a crock of silver would be great and once I’ve emptied it I’ll wedge the empty crock on a certain CEO’s head! đ
Comment by Andrew — January 19, 2012 @ 9:13 am