Tax Loss Silly Season
Slowly but surely the stars have come into alignment for the battered metals sector. The bear market in silver started at the end of April of 2011. Gold topped in September of the same year. The bear has been more brutal and lasted longer than any since 1970. But bear markets breed bull markets and the upcoming market is going to be interesting to say the least. When gold and silver bottomed in 2001 the financial horizon was still reasonably stable. Today the banking system and financial systems of most countries are on the edge of an abyss waiting to fall into the bottomless pit.
We are at the end of tax loss silly season. For the past couple of weeks shares have been dumped on the sales table just because they are down for the year. Many shares are going to recover in the next two months simply because they sold off during tax loss silly season.
The Commitments of Traders numbers are more favorable for gold than they have been for 14 years, going all the way back to 2001. Silver is not quite as positive but still positive. We are perfectly positioned for a bull phase even if you believe gold and silver are in some kind of permanent bear market.
I’m going to list three companies that I think are perfectly positioned for a major advance no matter what the over all market does. One is selling for about $.36 on the cash dollar and that didn’t happen in 2001 or 2008 at the very depths. All have excellent and forward-thinking management.
Gold Standard Ventures (GSV-V) has one of the largest untested pieces left in the Carlin Trend. While they have spent the last five years looking for another Carlin elephant, slowly they have been adding ounces in a near surface oxide district that will be a mine. I have always disagreed with management lumping the entire district together. By doing so, it appears they are a one-trick elephant. Actually they picked up an area they call Dark Star with a 43-101 resource for half a buck ($.50) an ounce. And added a lot of ounces since with intercepts of 149.4 meters of 1.38 g/t and 157 meters of 1.51 g/t. Dark Star is adjacent to what they call the Pinion project and will end up being part of Pinion. It is distinctly different than the North Bullion deposit. The Railroad district owned by GSV could be several different types of mines.
Don’t bother trying to figure out if that is economic, Newmont has done it for you. They are mining the Emigrant Springs gold mine just northeast of the Pinion/Dark Star project. Emigrant has a resource of 62 million tonnes at a grade of .62 g/t. Dark Star and Pinion has potentially a bigger mine with a better grade. Newmont is already a next-door neighbor and I can guarantee with a high degree of certainty that Newmont executives are looking over the fence at what Gold Standard has already found.
In the past 15 years we have covered hundreds of companies. I’ve been lied to so many times that I now take the promises of mining executives with the same degree of credibility as I do tea leaves. Jon Awde is one of the very few who is not an utter liar. He does what he says he will do and does it when he says he will do it. I think and always have thought that the district is going to be even bigger than his expert geos believe. Pinion/Dark Star is going to be a mine. It doesn’t matter if Newmont buys it or JVs it or GSV goes into production. It will be a mine and a very profitable one if the gold mining business exists five years from now.
GSV has already begun to recover. It was $.69 when I wrote about them a month ago just after they announced their latest drill results. They are up 30% in the last month. I expect them to continue to be among the leaders in the next bull phase if we have hit a bottom or not.
Another company that I have covered since literally the day they went public is Red Eagle. (RD-V) They went public at the very top of the market in the middle of 2011. I got a call from the CEO of Red Eagle, Ian Slater; on the day they closed their financing. He wanted me to visit their Santa Rosa project in Colombia and needed to know how soon I could be there. My response was “immediately” since I was sitting on the deck of Bob Allen’s Bullet Group offices in Medellin at the time of the call.
The Santa Rosa district has been mined since the 16th Century. There are hundreds of mines, portals, test pits and areas of artisanal mining on the project. While the gold industry slide down the slippery slope of a brutal bear market, Ian and Bob Bell, the President of the company quietly moved the company forward toward production. I wrote about them in July of 2011 and again in August of this year.
The mine will open in the 2nd half of 2016 with cash costs of under $700 and an IRR of 53%. And in their own way, they are liars as well so I am perfectly comfortable with them. The Santa Rosa district is going to be a lot bigger than they are suggesting. There is a lot of gold there. They will build the mine and mill first and then expand like crazy. With a market cap of about $45 million, they have a lot of potential and will be one of the leaders in the new bull phase.
I haven’t written about Minco Silver (MSV-T) for years. Things have been quiet on the China silver story. They have $1 a share in cash. The shares are $.365 today. So if they close the company you have about a 200% return the day they close.
They also have a big silver deposit in China with 63 million ounces of silver in a 43-101 resource. You have to pay for the $1 in cash per share but the silver is free. Silver may go up someday.
Gold Standard and Red Eagle are advertisers and naturally I am biased. Minco Silver is not an advertiser but I’m still biased. I believe all three stocks will be a lot higher by March. You are getting an excellent story with each, with brilliant management in what appears to be a rising market to me. Do your own due diligence.
Gold Standard Ventures
Red Eagle Mining
Minco Silver Corp