Sell in May and Go Away
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
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,
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
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EVR-V $.23 (May 3, 2010)
EVRRF-OTCBB 77.2 million shares