A New Beginning for Genesis
After a brilliant first half of the year for the precious metals and related shares, the markets remain in a correction. Given that we just had a full moon last week, there is a fair chance we could have a countertrend rally before the correction continues into October. If I were any good at throwing darts, I would be looking for the bottom at the time of the full moon in October. When the bottom of this correction ends, it will be the safest and greatest time to invest in gold shares in recent memory.
Many writers comment on the significance or lack of significance of the COT reports released on Friday after the close. Simple math shows that most of them have it dead wrong and don’t get it. The mob of ignorant and uneducated investors in gold and silver who want to follow the lead of various gurus and other con men always get sheared. It’s because they refuse to ever engage their minds into gear. I wrote a good piece about the COTs and weak hands in early August and the correction began to kick into gear.
You do not need to subscribe to expensive financial advice services to understand the basics of investing. There are some wonderful and valuable guys out there who have subscription services but there are as many con men in the gold and silver arena as there are in any other area of endeavor. The first thing you need to do when trying to make investment decisions is to learn to think for yourself.
Commodities are a zero sum game. That means for every contract there is a buyer and there is a seller. That’s how we know there is no such thing as naked short selling because if there was, there would have to be naked long buying and no one ever uses that term. But since we know there is a buyer and a seller for each contract, we also know that there are weak hands and strong hands. That gives us a lot of information.
At bottoms the weak hands are selling and at tops the weak hands are buying. So if you can figure out what the weak hands are doing, you don’t need to know anything about fundamentals or technical analysis and you can still profit.
Recently we have seen a record high number of contracts for both silver and gold. So just who is determining what the market will do next, the weak hands or the strong hands? Since we already know through simple logic that the weak hands always want to buy at tops, we need to figure out who has been driving the market lately.
Gold topped in early July but the major gold mining indexes, the XAU and HUI didn’t top until a month later in early August and have tumbled since. Not by coincidence the open interest COTs for gold peaked in early July and in silver for early August. So as the price of gold and silver went up this year to record numbers, so did the speculator longs. Therefore, it was the speculator longs moving the markets as they bought contracts. Alas, in futures, you have to eventually sell what you bought or buy what you sold.
The manipulation/conspiracy cartel wants you to believe it’s the nasty bullion banks that move the market around like a kitten playing with a cotton ball. We keep hearing about how the bullion banks are suppressing gold even after one of the best rallies in years. But simple math shows us that as the commercials increase their shorts they are only doing it to cover the speculators longs that are really moving the market.
Likewise, simple math and logic show us that if the price of gold and silver is dropping and the open interest is also dropping it means someone is closing their contracts by selling their long positions. That is action on part of panicked speculator longs, not panicked commercial shorts as we are so often told. When the open interest in gold and silver contracts has gone down to a more reasonable historical position and the weak hands have one more time sold into a major low, the rally will resume.
One of the most interesting bits of folklore about mining holds that every deposit goes through seven owners before it becomes a mine. I’m not sure if it’s true or not or even how you could prove it but it sounds good to me. Certainly it is true a lot of projects see a lot of owners.
The Chevrier project now owned by Genesis Metals (GIS-V) seems to fit the bill. First drilled by Teck in 1950 it has gone through seven operators before Genesis Metals picked it up in March of 2016 by picking up the existing owner of the property.
Chevrier consists of a 95 square km project in Quebec province in Canada. There is an existing 43-101 resource done in 2010 on the Chevrier Main zone showing 4.6 million tonnes at 1.99 g/t that works out to 295,000 ounces more or less. On old Canadian government maps there is a historical resource quote at 650,000 ounces at an average of 5.4 g/t gold at the Main zone. For Chevrier South zone Met-Chem estimated that the deposit had a potential for between 8.5 and 9.0 million tonnes at 1.8 to 2.2 g/t gold. They stated that the zone didn’t come up to 43-101 standards due to a lack of density of information.
In order to bring the historical resource up to 43-101 Genesis has begun to re-log and re-assay the drill core and to re-sample the prior trenches. By the 4th quarter of 2016 Genesis will have recompiled all of the project data and completed their winter drill plan. Met-Chem believes another 20 holes in the South zone would bring the historic data into 43-101. Drilling in both zones is planned for Q-1 of 2017 with an updated 43-101 scheduled for Q-2 of 2017. In addition, there were 53 holes drilled in the Main zone that were never added to the resource.
Quebec is one of the most favorable mining jurisdictions in the world with many prospective deposits and existing mines. Genesis has purchased an interesting property that other mining companies have believed for 66 years to have mine potential. For the first time in 66 years, all of the existing data is being assembled. Given that exploration is a money hungry exercise, I think that Genesis has the management bandwidth and technical team that can turn this project from an interesting property into a potential mine.
Genesis Metals is an advertiser. I also participated in their latest private placement. Naturally I am biased. Please do review their latest presentation and do your own due diligence.