Gold has traded between $1,184 and $1,205 so far today…as of 8:30 am Pacific, bullion is up $3 an ounce at $1,193…Silver has added 13 cents to $16.83…Copper is off slightly at $2.73…Crude Oil has retreated 77 cents to $59.53 while the U.S. Dollar Index has jumped more than half a point to 97.68 (see updated chart below)…
Federal Reserve Vice Chair Stanley Fisher, speaking today at the International Monetary Conference in Toronto, said that he views the world economy as still growing very slowly, and that “confidence in the financial system and the growth of the economy has been profoundly shaken.”
He added that it’s unclear if we’re in secular stagnation or a debt super-cycle, and warned against complacency bred from financial stability. “We should not make the mistake of believing that we have put an end to financial crises,” he said, later adding that “one reason we should worry about future crises is that successful reforms can breed complacency about risks.”
Oil Update
Energy firms pulled another 13 rigs from U.S. Oil fields last week, the biggest drop in 4 weeks, according to fresh data Friday…this confirmed that a near 6-month slump in activity has yet to run its course despite a rebound in Crude oil prices…it was the 25th straight weekly decline, bringing the total rig count down to 646, the lowest since August 2010…
Gold Long-Term Chart
This long-term monthly chart shows how Gold continues to remain at or above an uptrend line that goes back to the beginning of the bull market that started in 2001…this is particularly impressive considering the parabolic move in the greenback that started last summer and continued until mid-March…
Fib. support ($1,185) coincides with the current position of the uptrend line…RSI(14) has broken above its downtrend line and has been putting in a series of slightly higher highs and higher lows since the spring of 2013…
This 20-year chart, along with the 2.5-year weekly that we’ve been updating on a regular basis, appear to be the most reliable in terms of gauging Gold’s direction and possible breakout/breakdown points…
U.S. Dollar Index Update
While the greenback’s value is down modestly from its March peak, the Fed’s own models show the currency’s drag on the economy is likely to grow in coming months (more on that later this week)…this and other factors could prompt some Fed officials to lower their latest growth forecasts, to be released at the next Fed policy meeting June 16-17 – and to wait even longer to move on rates…
As expected, the Dollar Index has rallied back to its uptrend line (now resistance) where it broke down from in late April…price and RSI(14) have completed a “head and shoulders” while a double top pattern also formed in the Dollar Index in March-April…nothing’s impossible, but it would be very surprising – based on these patterns – if the greenback took off sharply to the upside again over the near to short-term and eclipsed the March-April highs…this is also something the Fed would likely not want to see…
Today’s Equity Markets
Asia
China’s Shanghai Composite was turbo-charged overnight, soaring more than 200 points or nearly 5% to close at 4829…for the year, Chinese stocks are now up almost 50%…
The country’s manufacturing sector presented a mixed picture in May, as an official gauge of factory activity recorded modest gains while a private index pointed to continuing sluggishness…analysts said that the conflicting results meant that Beijing probably would roll out more government support in the months ahead to spur momentum…
Europe
European markets were mixed today…
North America
The Dow is flat as of 8:30 am Pacific…
Some encouraging U.S. economic data this morning, which helped the greenback…manufacturing once again managed to remain in expansion territory in May, slightly beating expectations, according to the latest data from the Institute for Supply Management (ISM)…the ISM said its PMI showed a reading of 52.8% in May, up from an April reading of 51.5%…
U.S. construction spending surged in April to the highest level in nearly six-and-a-half years as outlays increased broadly, pointing to some pockets of strength in the economy…
Meanwhile, though consumer spending in April posted its weakest performance in 3 months, a solid gain in income growth could help boost spending in the future…the Commerce Department reported that consumer spending was flat in April after a revised 0.5% increase in March, which had been the biggest gain since last August…personal income rose a healthy 0.4% after being unchanged in March…
In Toronto, the TSX is off 18 points as of 8:30 am Pacific while the Venture is down 1 point to 691…
Venture Updated Long-Term Chart
This long-term monthly Venture chart provides encouragement that the Index is slowly but surely healing from a potential final low in December of last year…RSI(14) is emerging out of a similar pattern it went through during the Crash of 2008; the -DI indicator is moving down after touching previous extreme peak levels reached in 2013 and 2008; and the SS %K, after dropping even lower than its 2008 extreme, is now showing upside momentum and is very close to the point of a bullish %K/%D cross…
In other words, the worst clearly appears to be over and better days are ahead…what the Venture needs now is a catalyst, a reason to capture momentum by pushing through critical resistance just above 700…the catalyst could be a weakening greenback and higher commodity prices, and/or a major new discovery…
Integra Gold Corp. (ICG, TSX-V) Update
Integra Gold (ICG, TSX-V) continues to look very strong, fundamentally and technically, and what occurred last week is a confirmed breakout above the Fib. 30-cent resistance level…buy pressure as shown by the CMF remains strong…
ICG is unchanged at 34 cents as of 8:30 am Pacific…
Fairmont Resources (FMR, TSX-V) Update
An important technical development in this 2+ year weekly chart for Fairmont Resources (FMR, TSX-V) – a breakout above a downsloping channel in place since late last year, as well as Fib. resistance at 14 cents…fundamentally, the company is well-positioned to begin unlocking the value of its high-grade industrial mineral properties in Quebec, led by the Buttercup which is fully permitted for production…
Increasing momentum is very evident here with RSI(14) pushing through resistance at 50%, in addition to the move above the downsloping channel…
Silver Short-Term Chart
Silver has recently been digesting recent gains after almost touching Fib. resistance just below $18 as expected…strong support at $16.60 and also at the top of the downtrend line (dotted blue) where Silver broke out from in May…
Silver Long-Term Chart
An explosive push higher – is this actually a scenario that could unfold in Silver over the next couple of years?…quite possibly, given the look of this 34-year monthly chart, though at the moment it’s hard to understand all the factors that could come into play to generate the kind of “Wave 5” move that appears to be in the works here…
It seems quite possible that the bottom of “Wave 4” came late last year when Silver briefly plunged to just above $14 an ounce…RSI(14) has managed to hold support which goes back to 2001…
Sell pressure continues to remain strong, however, as shown by the CMF – amazingly, at levels not seen in nearly 25 years since the low of $3.51…this intense sell pressure at the moment, which could continue for a while yet, should therefore be viewed in a larger context as a bullish contrarian indicator…
Note: Jon holds a share position in FMR.
Jon, very quiet on the GGI front. BMR hasn’t had much to say lately; albeit there hasn’t been much to talk about. I believe it is about to awake!
Comment by Dan — June 1, 2015 @ 9:42 am
Let’s hope we see a halt/news release with DBV this week. I’m hoping the delay in news is strategic on Farshad’s part. So much talk of H23 has lots of eyes watching…we need some momentum to bring us to the next level; with drilling around the corner we nee to start this off on the right foot.
Comment by Steve A. — June 1, 2015 @ 9:46 am
Hard Rock–Eric Coffin update
31 MAY 2015 A COMPELLING PEA FROM LION ONE Lion One Metals
(LIO-V, LOMLF-Qx, LLO-ASX; closed off 0.02 on 48k shares at $0.48 on V) gave attendees at yesterday’s Metals Investor Forum a bit of a bonus during their presentation, a first look at the PEA numbers for the Tuvatu project.
The highlight numbers from the study appear in the table below and they are indeed impressive. After tax, Tuvatu reports a US$86.5 million NPV and IRR of 52% from the production of 353,000 ounces over its 7.4 year project life which includes 1.3 years of development and construction, using a $1200/oz gold price and 5% discount rate. The payback period is a very impressive 1.5 years on an after tax basis.
Cash cost and all-in sustaining costs of $567 and $779 respectively are quite low, as is the estimated pre-production capex of US$48.6 million. The key to this PEA is grade. Lion One management developed a mine plan that focuses on the highest grade areas which results in an average diluted head grade of 11.3 g/t gold. Many of the best ore shoots are mined early and LIO expects to produce over 262k ounces in the first three full years of production.
The MIF presentation was handled by Stephen Mann, Lion One’s Managing Director. He spent a large portion of the presentation talking about exploration potential, both immediately surrounding the planned mining areas as well as the broader potential of the mining lease and surrounding exploration licence. That may seem odd in a presentation being used to announce PEA figures but it made a lot of sense. LIO is taking a classic old school approach to the development and mining of a high grade underground resource, following a well-trod path many successful mines before Tuvatu have utilized. The idea is to get Tuvatu into production as expeditiously and cost effectively as possible then use cash flows to continue development and exploration drilling to extend and expand the resource. Traders are used to seeing companies spend a lot of money to maximize the size of a resource then try to maximize the production scale. That makes sense in a bull market when it’s easy to line up money for capital intensive projects but that is not the market we are in.
A key attribute of projects that have recently succeeded in HRA Special Delivery #586 31 May, 2015 2 getting financed to development is capital efficiency and scalability. As LIO develops new ramps and levels it will put in drill stations that will be able to upgrade Inferred resources and test along strike and especially to depth more efficiently. There are a number of high grade intercepts on main veins up to 100 metres below the resource. Several of the main lodes have been intermittently traced with surface trenches for a kilometre or more in both strike directions away from the roughly 500 metre section that represents most of the Indicated and Inferred tonnage. If management can keep upgrading ounces and adding accessible high grade shoots we should see it in the mine plan as production proceeds.
Key goals will be to increase production in years 4 to 7 then adding years to the production life. Given how much untested target there is I think the odds they can accomplish this are good.
Mining will be carried out with shrinkage stoping that should mean less dilution. It’s an exacting way to mine but there are a lot of miners in the area with experience with this mining method from their time working at Vatukoula. There is also room to increase production with better gold recoveries. Recent testing has reported recoveries in the 90-95% range. The PEA uses early recovery averages of 86.3%. Adding 4-5% to the recoveries would make a big difference in returns.
Management is talking to finance groups. The successful track record of management will help here, as will the fact that management owns a third of the stock. There are a number of other large shareholders who seem to be willing to wait to see Tuvatu get built. I’ve been impressed at how well LIO has held its price. Much of the float seems well owned and there is no cheap stock. Add management’s ability to promote and I think LIO will continue to trade higher.
The potential for a short timeline to production and high IRR should attract a relatively high value per ounce. Lion One is a buy at these levels based on this strong economic study and potential for near term development.
Regards for Now: Eric Coffin HRA – This document may be quoted, in context, provided proper credit is given.
Comment by Carl — June 1, 2015 @ 9:56 am
Looks like we are getting a little interest in WRR today. Maybe some news coming soon. Hopefully this week.
Comment by Ed — June 1, 2015 @ 10:10 am
Let’s hope DBV also makes some noise this week. Lots of eyes on Farshad to deliver with H23 and the commencement of the summer drill program. I hope the delay in results has been for strategic reasons…I fear that if DBV doesn’t move the share price to new (high) levels, some much needed momentum will be lost moving forward.
Comment by Steve A. — June 1, 2015 @ 12:22 pm
Yes, 1st June today and I was expecting to have heard that the drill had started turning at the Grizzly in April. DBV hole 23 result must surely be out this week and I expect GGI will also have a NR soon.
GBB commentary soon from BMR?
Comment by Tom UK — June 1, 2015 @ 12:25 pm
Yes, hoping for some commentary from BMR soon. Jon, what’s up with the email from BMR asking to click on a link to verify the email address every time I make a post?
Comment by Dan — June 1, 2015 @ 12:29 pm
Tom , has anyone heard if DBV has started drilling at the Hat ? The silence is deafening!
Comment by Les — June 1, 2015 @ 12:33 pm
FMR did some decent volume at $0.19 today – John’s charts ring true. Is the anticipation of news the reason for the jump, or just a recovery from recent lows? Do you think volume will be sustained – that would be bullish for the share price!
Comment by Rob Mills — June 1, 2015 @ 1:23 pm
Hadded to my GGI today, Jon i wonder why suddenly they have moved their drill from roradero to La patilla, wouln’t it be wiser to start drilling at reales, not clear.
Comment by Martin — June 1, 2015 @ 3:50 pm
I sold VID today. I would hold off on buying it now. I am not giving up on it and it is still a watch. I just think you can buy it lower down the road.
Comment by dave — June 1, 2015 @ 6:27 pm
I think Farshad is on the site and probably the drilling is started, my opinion only !
Comment by Guy Delisle — June 1, 2015 @ 6:51 pm
Martin, GGI announced on April 9th that they would drill high grade zones at La Patilla. They have the LOI in place for toll milling of the ”mineralised rock” so maybe their priority is to use their own cheap drill to identify plenty of supply for the mill and generate cash.
This suggests that the $1.25mil they raised before Christmas is all available for the Grizzly. The lack of news from GGI is frustrating, but it appears their strategy is to use funds wisely in order to avoid dilution. IMO this will reward shareholders in the long run. I may accumulate more at these low prices.
Martin – where did you read that the drill had moved to La Patilla?
Les – I’m not in the know regarding DBV drilling, Guy may possibly be in the loop regarding info from insiders. If so, I’m sure the result will come from h23 this week.
Comment by Tom UK — June 2, 2015 @ 12:45 am
It is just a assumption, when ever it is shallow drilling they use their own equipment. And they haven’t sayd that they would contract anyone.
Comment by Martin — June 2, 2015 @ 3:33 am
Thanks Martin, they were non-specific when they made the announcement:
VANCOUVER, April 9, 2015 /CNW/ – Garibaldi Resources Corp. (TSX.V: GGI) (the “Company” or “Garibaldi”) is pleased to report that a diamond drill rig has been mobilized to begin a follow-up program at a high-grade gold zone discovered last year at the La Patilla Property in Sinaloa, Mexico.
Comment by Tom UK — June 2, 2015 @ 4:23 am
Guy, do you think they would have announced the results of H23 first before they started drilling? Makes me worried that H23 wasn’t what they were hoping for and are now trying to get their ducks in a row prior to their next release. I hope I’m just being paranoid!
Comment by Steve A. — June 2, 2015 @ 6:23 am
I think he announced drilling is resume first and after hole 23 ! But remember at each news from Farshad since 2 years he always left hope !!!
Comment by guy delisle — June 2, 2015 @ 7:05 am
Steve, I was thinking the same thing. And the PP prior to release? Could’ve done financing at higher price? Starting to getting nervous
Comment by Sam — June 2, 2015 @ 9:30 am