If gold can’t break out, it will break down
Gold finished up approximately 1% for the month and at a slight 0.3% increase for the quarter. Gold once again failed to break out, closing the month in the $1,320 range. Gold is still up nearly 25% for the year but most of those gains came early in the year.
The trader in me says if it can’t break out, it will break down… briefly. The markets will tell… soon.
We’ve discussed the lack of conviction from the Fed. Couple in the upcoming election here in the U.S., the instability of European banks, and a possible rate hike in December and the fourth quarter is shaping up to be an interesting one to say the least.
Silver had a positive but volatile month, closing with a gain of approximately 4.2%.
Copper ended the month trading in the $2.20/lb. range, up 0.5% higher for the quarter while platinum added a modest 1.5% gain in the third quarter.
The breakout performance came from palladium, which closed near $725 an ounce and added a spectacular 21% for the third quarter.
WTI oil futures have added more than 7% over the past few days after a preliminary agreement by OPEC to cut production. OPEC’s next meeting is on November 30. Expect a lot of back and forth between now and then. Again, volatility.
The Week In Juniors
Gainey Capital Corp. (TSXV: GNC; OTCQX: GNYPF)
On September 29, 2016 Gainey Capital announced assay results from the first hole of the company’s ongoing Phase 1 drill program at the near surface, La Nueva Victoria Mineralized Zone of the El Colomo property in Sierra Madre Golden Belt, Mexico.
The mineralized interval commences at 5.15 meters from surface for 70.85 meters of 0.65 g/t Au and 35.31 g/t Ag (1.14 g/t Au Eq).
The hole starts near surface, has solid gold and silver values, and the project is in a good jurisdiction with good infrastructure.
In addition, Gainey Capital has a large land package with multiple targets. I expect results in the next week or so from the second and third holes.
Rafael Gallardo, Senior Geologist of Minera Cascabel S.A. de C.V., who is leading the drill program, commented;
”The results that we have received for the first drill hole are very encouraging and I look forward to the results from the other two holes designed to target this zone. The near-surface Au-Ag mineralization we have encountered is typical of epithermal low-sulphidation type deposits found in the area.”
David Coburn, CEO of Gainey, commented;
”The maiden drill results on La Nueva Victoria confirm our model for sub-surface mineralization following up on our initial detailed sampling program. Further drilling along trend and at depth has the potential to see this zone expand significantly and, in addition to future drilling at La Higuerita and El Arrayan, have the potential to support the discovery of an under-explored gold-silver mineralized system.”
The company has a very small market cap and a large land package. Keep an eye on this early-stage drill program.
Kirkland Gold (TSX: KLG)(OTC: KGILF)
On September 29, 2016 Kirkland Gold and Newmarket Gold entered into a definitive agreement to buy an Australian-focused gold producer Newmarket Gold in a share-exchange deal valued at about C$939 million (US$716 million), creating a mid-tier gold company.
As the Outsider Club‘s Jason Simpkins pointed out just a couple days ago, this isn’t the only big news coming from Australian gold miners in recent days.
The combined company will have a market capitalization of approximately C$2.4 billion and produce over 500k oz of gold annually.
Existing Kirkland Lake Gold and Newmarket shareholders will own approximately 57% and 43% of the combined company, respectively, on a fully-diluted in-the-money basis.
Here are the highlights from the release:
- Creation of a new low-cost, mid-tier gold producer: Pro forma company will produce over 500 koz of gold in 2016 with cash costs of less than US$650/oz and all-in sustaining cash costs below US$1,015/oz.
- Diversified production base: Combined company will operate seven mines and five mills in highly prospective gold camps with low geopolitical risk – Canada and Australia are two of the top mining jurisdictions in the world. Key in-country management structure, led by Darren Hall, will be kept in place to ensure seamless integration of the Australian operations.
- Production profile anchored by three high-grade, low-cost operations: Production profile anchored by the Macassa, Fosterville and Taylor mines. Combined production in 2016 from these three assets alone will be over 330koz, with cash costs of under US$600/oz and AISC below US$800/oz.
- Driving growth across two world class mining jurisdictions: This combination brings together a full complement of skill sets to position the combined company to take advantage of future profitable growth supported by the enhanced corporate financial strength. In addition, the combined company will have the ability to cross pollinate best practices to drive cost savings across the portfolio.
- Expanded discovery and exploration potential: District-scale property positions in established gold camps in Canada and Australia with strong development and exploration pipeline to fuel future organic growth.
- Strong balance sheet and healthy cash flow generation: Cash balance of over C$275 million and significant expected free cash flow generation in 2016 will provide industry leading financial strength and flexibility.
Otis Gold (TSX-V; OOO)(OTC: OGLDF)
On September 26, 2016 Otis Gold announced assay results from the first six holes of its ongoing drill program at the Kilgore Gold Project in Idaho.
Noteworthy intercepts from the first six holes include:
- 56.4 m of 0.85 g/t Au in hole 16 OKR-316 (bottomed in Aspen Formation)
- 61.0 m of 1.03 g/t Au in hole 16 OKR–317 (largely in Aspen Formation)
- 120.4 m of 1.55 g/t Au in hole 16 OKR-318 (hosted in Tertiary sill and Aspen Formation)
- 55.5 m of 0.82 g/t Au in hole 16 OKR-321 (hosted in lithic tuff and Tertiary sill)
Craig Lindsay, Otis President and CEO commented:
“We are very pleased with this first set of 6 holes from our ongoing 36 hole program. They support our geologic model and belief that potential exists to expand the Kilgore Deposit at depth in the Aspen sedimentary unit underlying the main deposit, which currently is primarily hosted in volcanics. Additional drilling will continue to refine this potential at depth, as well as explore potential in the Crab Claw to the north of the existing deposit.”
Otis closed a C$2.298 million financing in early August and has seen its share price go from a 52-week low of C$0.07 to where shares trade now at C$0.30.
The company may be on its way to proving up over one million ounces if it can add ounces in the Crab Claw, north of the existing NI 43-101-compliant resource of 520,000 ounces of drill-indicated gold (27.3 million tonnes @ 0.59 gpt Au, 0.24 gpt Au cutoff) and 300,000 ounces of inferred gold (20.2 million tons @ 0.46 gpt Au, 0.25 gpt Au cutoff).
GoldQuest Mining Corp. (TSX-V: GQC)(OTC: GDQMF)
Lastly, on September 27, 2016 GoldQuest announced the results of an independent Pre-Feasibility Study (“PFS”), including maiden Mineral Reserves for its 100%-owned Romero gold-copper project in the Dominican Republic.
Highlights from the release:
- Maiden Probable Mineral Reserves of 7.03 million tonnes containing: 840,000 ounces of gold, 980,000 ounces of silver, 136 million pounds of copper.
- A 2,800 tonnes per day operation totalling life of mine gold equivalent production of approximately 1.117 Moz Au Eq
- Annual gold equivalent production averaging 109,000 ounces per year
- Post tax Net Present Value @ (5%) of $203 million (pre tax $317 million)
- All-in Sustaining Cost of $595/oz Au Eq
- Post tax Internal Rate of Return of 28% (pre-tax 38.6%)
- Initial Capex of $158.6 (Life of Mine $250.9 including sustaining and closure)
All figures are in U.S. dollars unless otherwise stated, with a DOP/USD exchange rate of 46:1 and metal price assumptions of $1,300/oz gold (Au), $20/oz silver (Ag), and $2.50/lb copper (Cu).
Very solid looking numbers from a company with very good exploration upside.
To your wealth,
Gerardo Del Real