Sell in May and Go Away

Bob Moriarty
Archives
May 4, 2010

Wall Street has some pet sayings they use now and again to impress the rubes. Sell in May and go away is one such buzz phrase. There is some truth to it. Often, especially in market crash years, the market tops in May or so and drops until October or so.

I think the general market is set up for The Perfect Storm. I think a crash started in Mid-April and lots of people called it, including Martin Armstrong from his prison cell, way in advance. I think bonds are topping and when interest rates go up on Sovereign Debt, the game is over. I am not good at picking prices but the overall market crash this year could easily make 2008 look like a kid's party.

There is $600 trillion dollars outstanding in derivatives. I have been shouting at the top of my voice for years about the dangers of derivatives. They are all fraud. It's not possible to have a market that large supported by rational investments. It's a giant casino run by crooks and the suckers are playing with Monopoly money. The game of musical chairs is over and there are no chairs.

I think the general market will crash. It may well take senior gold and silver stocks with it. Depending on the quality of the juniors, they may represent a safe haven. The massive ETF market will be toast when derivatives fall over the cliff. That may well include both silver and gold ETFs.

In 2008 when so many juniors crashed hard, they were held by Hedge Funds that had to raise money and were selling every share of every company that they could. Those shares were all sold in late 2008 and those hedge funds have not come back into the market. In any case this is a time when each investor will have to do some thinking for himself. Obviously the safest refuge will be in physical gold and silver.

I just got back from a trip to a company "Swinging for the Fences." The company is Everton Resources (EVR-V) and their primary projects are in the Dominican Republic.

I became aware of some of their ground about four years ago when I visited a Mexican gold project for Linear Gold. The head of the project briefed me on their backup project located in the Dominican Republic next to the 29.6 million ounce gold project owned by Barrick called Pueblo Viejo.

The guy running Linear was a whole lot more impressed with himself than I was. The stock was about $7 a share then and is $1.80 now so the market feels the same way. I wrote an article about the Mexican project and Linear's management got their knickers in a twist because the article revolved around the project, not them. I killed the article and ate the cost of the trip. I actually thought a lot more of their DR project than their Mexican project anyway.

In any case, Everton Resources did a deal with Linear. They have an option to earn up to 65% of the Ampliacion project located just to the west and north of Pueblo Viejo. I think the project has giant home run potential.

In all, Everton has JVs on 382 square KM of ground in the DR. We had a full briefing by the manager of GlobeStar Mining. They have a fully operational 30,000-ounce per year mine and mill. The ground in the JV with Everton lies to the east and south of Pueblo Viejo.

Why is proximity to Pueblo Viejo so important, you may be asking? Well, it has a resource of 29.6 million ounces of gold. Barrick and their 40% [corrected, thanks Andreas] partner Goldcorp have a $3 billion dollar construction program going on. When Pueblo Viejo goes into production, it will be producing 1.2 million ounces of gold a year. One of the 1 million ounce pits lies about 300 meters from Everton's ground. And that ground was barely tested when Linear owned it outright.

Giant gold projects occur in clumps. You never have a single deposit. Everton is holding the most prospective ground for a 10 million ounce deposit that I have seen in years and they are drilling in late May. Right now the company has an $18 million dollar market cap. They have three million in the bank and are fully funded for this year's program. I'd like to see them drill a lot more and a lot faster.

Everton also holds some brilliant ground in Canada. I always get uncomfortable when a junior has too much good ground on its plate. You have to start wondering where they are headed. What is their focus? Do they have a focus?

We discussed that with Everton management last week and it's their intention to JV the Canadian properties out or set up a shell and spin them out to their existing shareholders. To give you an idea of the value of the DR projects, one of the Canadian projects located near Kenora in Ontario has a 385,000 ounce 43-101 resource in gold. Another has a 313,000 43-101 gold resource and had $35 million dollars invested by a prior mining company in a decline. Their Canadian mining projects would support a far higher market cap than what they have. But their projects in the DR are far better.

I really like the company, the management and their depth in the DR. They are doing what I though Linear should have been doing years ago. Their potential for a giant hit is high. When I saw what they had, I bought some shares.

Putting a value on the company is going to be very hard for the ordinary investor. They have a number of deals and each JV has different terms. I'd like to see them get as much of the projects as possible and one partner has indicated they would be quite happy with a no risk NSR rather than have to keep coughing up more money to participate.

We own shares, we are biased. As always do your own due diligence but if management can aggressively advance the project and keep the number of shares outstanding under control, they have giant potential.

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Everton Resources
EVR-V $.23 (May 3, 2010)
EVRRF-OTCBB 77.2 million shares
Everton website

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Bob Moriarty
President: 321gold
Archives

321gold Ltd