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The BMR Portfolio (Part 2 of 3)

Gold Bullion Development (GBB, TSX-V)

When put into proper perspective, the current share price weakness in Gold Bullion is nothing to be concerned about and in fact investors should be more bullish than ever at the moment on GBB given the “For Sale” sign that has been hanging over this stock the past 8 trading sessions.  There is a serious “disconnect”, in our view, between this decline and what’s actually happening on the ground in the LONG Bars Zone.

There have now been 3 major corrections with Gold Bullion since this stock came to life March 1.  The first correction, from late March into early April, took the stock down 27% from 31 cents to 22.5 cents.  The second correction was more severe, a 39% drop from a high of 71 cents in late June to a low of 43.5 cents in early July.  The third correction is the one we’re experiencing right now that appears to have either run its course or is very close to ending – a 28% decline from a high of 79 cents to last week’s 57 cent low.  Despite the current setback, the Chaikin Money Flow (CMF) indicator is still in positive territory – in fact it’s even increasing slightly right now – which shows there are plenty of smart buyers who are eagerly stepping in to take stock from weak hands.

Gold Bullion was off 6 more cents this past week, to 58 cents, but it’s strongly supported by rising 20, 50, 100 and 200-day moving averages with the SMA-50 sitting at 56.5 cents.    There are not only strong technical but sensible fundamental reasons for jumping in at current levels.

Gold Bullion has made it clear in news releases going back to July that we’ve yet to see assay results on a substantial amount of good looking core.  Results on only 18 Phase 2 holes have been received so far – a few of those holes were very good – but it appears the best batch of results has yet to come in from the Preliminary Block Model and from three distinct and promising areas within the Eastern Extension.  A new lab (ALS Chemex), known for its efficiency, was recently contracted by Gold Bullion so additional results may not be far off.  Gold Bullion has drilled over 90 holes to date in Phase 2.

What we see emerging at Granada is a very high tonnage deposit, or series of deposits, that could contain some incredible numbers.  Mineralization is all over the place – historical producing Pits #1, #2 West  and #2 East appear to be just the tip of the iceberg.  As a good example, outside the Preliminary Block Model, we believe it’s safe to make the assumption (based on GBB news releases since July) that Gold Bullion has hit good holes northwest of Phase 1 discovery hole #17, east and southeast of #17, and in the far south with hole #86.  This covers a distance of 450 metres north-south and at least 400 metres east-west (as far as hole #78).  This is extremely encouraging for the first major drill program that has ever been conducted outside the immediate area of the old Granada mine workings.  We know from historical reports that significant mineralization exists several kilometres east of the former mine, along a well defined zone of strong alteration, and if everything connects then Gold Bullion indeed has something huge on its hands (keep in mind a potential non-compliant 2.4 to 2.6 million ounces has already been outlined within the Preliminary Block Model).

Based on Willoughby’s 1994 report on Granada, and the description of hole #86, we do believe Gold Bullion has already made or will make a significant discovery of near-surface mineralization to the southeast and south of the Preliminary Block Model – additional confirmation of the blue sky potential of this property in one of the world’s most prolific gold producing regions.

Gold Bullion announced this past week it has added 5,000 metres to its Phase 2 drill program (now 25,000 total metres) as it continues to plan for an even larger Phase 3 program.  For GENIVAR to want to drill 5,000 more metres (“high priority” targets) without the benefit of more drill results speaks volumes about what is happening here.  GENIVAR is seeing all the right structure and enough visible gold to tell them that all they need to do is drill, drill, drill.

What we see developing here is massive – Gold Bullion needs to bring in more drill rigs and GENIVAR needs to call in the geological calvary as the workload is going to be immense in the coming months.

Astute investors who see what we see should be grateful for this recent pullback in Gold Bullion’s stock price – this is a classic example of how big money is often made by buying into weakness, especially when the primary uptrend remains intact as it does in this instance.  Those who took advantage of the two previous corrections in Gold Bullion will no doubt agree.  There was a 250% move from the low of the first correction and an 82% move from the low of the second correction.  The move from the low of this third correction holds tremendous upside potential as well.