CEO.CA Weekly Wrap
A look at some of the week’s best chats and charts on CEO.CA, a community and platform for Canada’s venture stock markets.
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A volatile week in the precious metals sector came to a peaceful conclusion with gold mining shares ending Friday’s session essentially unchanged. Earlier in the week we saw many gold miners including the world’s largest gold producer Barrick Gold (TSX:ABX, NYSE: GOLD) make 52-week highs:
ABX.TO (Daily - as of Tuesday March 26, 2019 close)
While things looked great for gold bulls at Tuesday's close, the bulls were in for a big shake on Thursday as gold fell $21 from nearly $1320 per ounce to the mid-$1290s, before ending the week just shy of the $1300 level:
Gold (Daily)
While most junior mining investors probably felt their accounts were a bit lighter by Friday’s close, there was plenty of opportunity in Venture listed stocks throughout the week. The TSX-Venture Composite even found support at its rising 50-day moving average and put in place what appears to be another higher low:
TSX-Venture Composite (Daily)
Since December the TSX-V has followed a healthy trend of taking two steps forward and one step back; minor support near 620 with a much bigger area of support down near 605-608. Money flow continues to be strong and characteristic of a nascent bull market.
Checking in with a chart I mentioned a few weeks ago, the gold/S&P 500 ratio chart, is now at a critical area of support as it forms what could be interpreted as the right shoulder of a head & shoulders bottom pattern:
Gold/S&P 500 (Weekly)
After a rip-roaring 4th quarter of 2018 the gold/SPX ratio retraced about 1/2 of its gains during the 1st quarter of 2019. If this H&S bottom pattern is to play out in a bullish fashion for the gold/SPX ratio we should begin to see a move higher in the couple of weeks (which will mean higher gold prices, lower stock prices, OR both).
There were several things which stood out to me about last week's market action in Canadian listed junior miners, including a huge move in a tiny West African gold explorer, Compass Gold (TSX-V:CVB), which took off like a rocket after reporting drill results from its Sikasso Property in Southern Mali:
CVB.V (Daily)
After the NR was released Thursday morning CVB shares gapped higher to $.16 and proceeded to experience heavy accumulation throughout Thursday’s trading session, before reaching an intraday high of $.71 per share. There aren’t many sectors where one can buy a stock in the morning and sell it in the afternoon for a more than 300% gain!!
CEO.ca Pro Level 2 Market Depth helped to capture the buying frenzy in CVB beginning Thursday morning:
However, big gains don't come without big risk.
The share price volatility in the junior mining sector is like no other, and CVB proceeded to “correct” nearly 50% from Thursday’s high to Friday’s close. It will be interesting to see if previous resistance near $.30 now offers support for CVB shares. Moreover, it will be even more important to determine whether additional drilling over the coming weeks is able to build upon and confirm the discovery in hole OUDD001, which included the following intersections over 3 discrete mineralized zones drilled beneath an artisinal gold working:
The junior mining sector offers the potential for tremendous gains but also for tremendous losses. Simply stated big gains don't come without taking big risk. While CVB shares were soaring, shares of Miramont Resources (TSX-V:MONT) were tumbling after a disappointing NR which reported “intermittent and discontinuous” mineralization in six holes from its Cerro Hermosa Project in Southern Peru:
MONT.CA (30-minute)
Without delving too deeply into the Miramont story I think it is a great lesson in expectations; the higher the expectations, the bigger the potential fall. Resource exploration is a risky business and there is a good reason why most exploration companies have $10 million market caps - they aren’t a sure thing! In fact, far from it. The vast majority of exploration companies won’t find an economic resource and will end up chewing through millions of dollars of shareholder capital before calling it quits and/or changing the company name and assembling a new set of assets with a completely different story based upon the next new hot commodity/sector.
However, this doesn’t mean that a savvy investor can’t do very well in junior mining. Miramont shares went from $.13 in November to $.63 just a couple of weeks ago, that’s a nearly 400% gain in four months!! Not bad if you ask me. While Miramont made a roundtrip last week there was ample opportunity to lock in gains over the last couple of months.
Bob Moriarty of 321gold calls junior mining stocks “lottery tickets”, you’ve either got a lottery ticket that still has a chance to hit big or you’ve got an expired lottery ticket. The trick is to not get stuck with too many expired lottery tickets, and cash in on a few while they still have a chance to hit big.
Turning to the Golden Triangle we’ve seen some interesting action in GT explorers such as GT Gold (TSX-V:GTT) and Skeena Resources (TSX-V:SKE) in the last couple of weeks; GTT has risen ~30% in March while Skeena is up a remarkable 60%! These are impressive gains particularly because other Golden Triangle explorers were mostly flat or even down during March, and these companies aren’t drilling or putting out any news flow of significance at this time of the year.
GTT.V (Daily)
SKE.V (Daily)
While rumors and a newsletter writer recommendation help to explain some of the strength in these two ‘top tier’ GT gold explorers, it seems to me that there is more to the story as to what is happening here.
We have seen an M&A trend begin among the major gold producers (Barrick/Randgold, Newmont/Goldcorp) and one of my themes for 2019 is that this M&A wave will reach the mid-tiers and juniors, creating a veritable tidal wave of acquisitions and combinations across the precious metals mining sector. We probably don’t need 60+ exploration companies in the Golden Triangle and some M&A could go a long way towards creating shareholder value. Perhaps GTT and SKE are about to join in on the M&A party?
Notice how the offers get “cleaned up” in GTT as the week progresses in the following video of CEO Pro Level 2 Market Depth:
In the following video of trading in Skeena last week we can see buyers in control from the market open on Monday morning through to the Friday close as Skeena gained 22.22% for the week, adding C$8 million in market cap in the process:
In the Weekly Wrap three weeks ago I pointed out the strength in Golden Triangle explorers and proposed that we would see a different scenario this year (as opposed to the typical April-June/July pre-exploration results runup followed by a sell the news dump in September/October) - perhaps a different scenario is already unfolding.
It is interesting to see that strength continue in the last few weeks even though the summer exploration season is still a couple months away. The Newcrest acquisition of 70% of the Red Chris Mine from Imperial Metals probably helps to explain some of the Golden Triangle Strength as the market begins to guess who will be the next acquisition target. I also believe that some people are expecting the exploration season to begin earlier this year (early June?) and are thus getting into the seasonal runup ahead of drilling a bit earlier.
@dirkdiggler posted an excellent ‘tour’ of Golden Triangle explorecos Friday afternoon, including a valuable map which helps to understand the lay of the land in this prolific mining region of British Columbia:
Dirk made special mention of Aben Resources (TSX-V:ABN) with the following comment:
“The company, fully permitted for drill pad construction at Forrest Kerr, has $6-mill in the till and the resolve to hit the Boundary zones hard this year. Adding to the excitement, they’ll be kicking off their 2019 field season at Justin, their highly prospective Yukon project, in only a few weeks time”
Turning attention away from the Golden Triangle to other explorers with BC projects, another stock that has begun to lift off in recent weeks is tiny Orestone Mining (TSX-V:ORS):
ORS.V (Daily)
Last Wednesday ORS announced a C$1.1 million private placement which will more than double the fully diluted share count from ~17 million shares to ~37 million shares (if all outstanding options & warrants are exercised the company will receive another ~C$2 million in cash). Normally a stock will get weighed down by the announcement of a private placement, especially when the PP includes full warrants with an exercise price below where the stock is currently trading. This doesn’t appear to be the case with ORS as the stock rose 33.3% on record volume on Friday.
Chart virtuoso @Ty pointed out the upside potential in ORS with a chart comment on Friday afternoon:
ORS.V (Weekly - Log Scale)
Ty's chart helps to illustrate that even after the recent rise ORS has the potential to double or triple from Friday’s close, however, it will be important for ORS shareholders to be mindful of when those PP shares/warrants come free trading in early August (4 months + 1 day from the date the placement closes).
Orestone’s Captain Project covers 72 square kilometers and hosts a large gold/copper porphyry system with multiple targets located 41 kilometers north of Fort St. James, British Columbia and approximately 30 kilometers south of the Mt. Milligan copper-gold Mine owned by Centerra Gold. Once ORS completes the aforementioned private placement financing the company plans to announce additional exploration plans.
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Disclosure: Author is long ABN.V and SKE.V at time of publishing and Aben Resources (ABN.V) is an Energy & Gold sponsor company.
DISCLAIMER: The work included in this article is based on current events, technical charts, company news releases, and the author’s opinions. It may contain errors, and you shouldn’t make any investment decision based solely on what you read here. This publication contains forward-looking statements, including but not limited to comments regarding predictions and projections. Forward-looking statements address future events and conditions and therefore involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements. The views expressed in this publication and on the EnergyandGold website do not necessarily reflect the views of Energy and Gold Publishing LTD, publisher of EnergyandGold.com. This publication is provided for informational and entertainment purposes only and is not a recommendation to buy or sell any security. Always thoroughly do your own due diligence and talk to a licensed investment adviser prior to making any investment decisions. Junior resource companies can easily lose 100% of their value so read company profiles on www.SEDAR.com for important risk disclosures. It’s your money and your responsibility.
