2016 is starting off with a bang! Wall Street is learning quickly that steady years of market gains can evaporate in weeks and that unchecked complacency can be costly without proper insurance. Fear has returned to the markets which is shocking many confused investors. They are starting to finally ask some serious questions about what is coming next.
Gold investors have been prepared for what is next. The US National Debt just exceeded $19 Trillion in the past weeks while interest rates are pulling more into the negative territories despite FOMC fears of 4-rate hike increases in 2016. Now the question has quickly shifted to will there be any rate increases at all?
In fact the market is pricing higher probability in the coming FOMC meets, albeit not huge, there is more likely to be a rate cut rather than a rate increase! The global debt bubbles are inherently deflationary and unless global central banks are prepared to continue their printing escapades, then there is little hope that interest rates have much upside. Globally negative interest rates are becoming more widespread and trillions of circulating. Dollars, Euros, Yen, Swiss Francs, etc beg the question, where does one seek capital safety?
Gold and silver became huge benefactors of Wall Street’s fear as the Dow dropped thousands of points. Although fear is still limited, that will change very quickly if the Dow were to really plunge – closer to 10,000 than 15,000.
Wall Street has been a dedicated seller of precious metals for years. As you can see by the NYSE-GLD holdings, we nearly touched 20 million ounces weeks ago before nearly 3-million ounces of buying interest quickly emerged:
As Wall Street sold, the rest of the world has mostly been buyers of gold and at record levels. Now with Wall Street buyers returning, the competition for available physical supplies is squeezing prices higher. But the big fuel on the fire in the past weeks for gold prices has been a record hedge fund short position on gold.
Wall Street found their gold bear market theories tested and massive short covering shot gold up quickly with the gold price soaring briefly above $1,260. Asian buyers however have appeared to shy away from the big price spike as they are known to not chase after higher prices, but will gradually adjust to these higher prices over time.
What is next is likely continued volatility in the gold price that has not been seen in years. Speculators are back adding to the swings so be prepared for large moves to both sides. Technically gold looks to be attracted to the $1,300-$1,310 area as the next upside target while strong support is currently seen around $1,180-$1,190.
If equity markets continue to sell-off, which they may but after a period of consolidation, additional gold buying by Wall Street will keep the gold price moving higher. Having gold consolidate and hold the $1,100-$1,200+ area will provide a big boost for mining equities, even the small amount of interest last month has allowed for sharp gains from extremely depressed levels.
I have been receiving questions about is it too late and should one buy here. Long-term these prices are extremely depressed but short-term there is a good possibility of a consolidation. A pullback would be a welcome buying opportunity in the coming weeks.
Lots of positive news out of some of our favorite gold-silver stocks and my top holdings, many have seen their share prices shoot up 50%-100%-200% or more! Here are some recent updates on some key junior stocks which continue to outperform their peers:
Gold Standard Ventures (TSX-V:GSV, NYSE MKT:GSV) significantly boosted its coffers with strategic investments from two gold producers.
Goldcorp Inc. plunked down C$16.1 million for an equal number of shares at a dollar a piece, bringing its total holdings in the company to 9.9%. And OceanaGold Corp. agreed to spend $12.6 million at the same $1 share price to boost its share of the company to 19.9% as part of its existing equity participation right.
The financings come as the company continues to push out mineralization on the deposits at its Railroad-Pinion project in Nevada’s Carlin Trend.
At North Bullion hole RR13-13 returned 12.4 meters grading 3.53 g/t Au within a thicker zone of 74.4 meters averaging 1.68 g/t Au. A second more westerly hole, RR13-15, hit two higher-grade zones including 5.5 meters grading 2.57 g/t Au and 5 meters carrying 3.15 g/t Au, both within a thicker zone of 18.3 meters averaging 2.05 g/t Au.
At North Dark Star the company drilled a 97-meter intercept grading 1.61 g/t Au and 15.4 meters averaging 1.85 g/t Au in a core hole drilled to twin an RC hole. The hole, along with results from last year, confirm a new gold zone with grades and thickness much higher than the existing Dark Star resource, sitting 515 meters south of the main deposit.
And at the Pinion deposit all but one of the 15 RC holes the company drilled hit significant intercepts above the 0.14 g/t Au cut-off, including five intercepts grading above one gram per tonne.
GoldMoney Inc (TSX-V: XAU), owner of the BitGold platform, also announced a significant round of financing. The company initially announced its intention to raise C$15 million but soon more than doubled that to C$31.9 million, plus an underwriter allotment that could bring the final total to C$36.6 million. The company expects to close the financing around Feb. 24.
The financing comes as the company announced it had added 91,000 net sign-ups in January and made C$41.7 million worth of transactions in the month, up $10 million from a month earlier. Total gold stored in vaults has increased from C$20.8 million to C$25.3 million.
The company also announced several advancements to the system including BitGold for business with more control and features; a partnership with wholesale gold trader Dillon Gage Inc. to increase physical bullion integration; and personal verified account features for more security and streamlined use.
Canarc Resource Corp (TSX:CCM, OTCBB:CRCUF) continues to advance its recently-acquired El Compas gold-silver project in Zacatecas, Mexico with the addition of a preliminary economic analysis, resource estimate, and a processing plant lease.
The PEA on the fully permitted project shows an all-in sustaining cash cost of $614 per AuEq oz., an after-tax net present value of $32.9 million and IRR of 84.3% using a 5% discount rate, and $7.6 million in pre-production capital expenses.
The mine plan calls for a 7-year operation producing roughly 18,000 AuEq oz a year. The material would be trucked to the government owned La Plata processing plant on which Carnac secured a long-term lease option in January.
The company also released a resource estimate on the El Compas deposit, outlining 552,000 indicated tonnes grading 6.55 g/t gold and 66.2 g/t silver for 116,000 oz. gold and 1.2 million oz. silver. Inferred resources add another 421,000 tonnes grading 4.18 g/t gold and 59.9 g/t silver.
Brazil Resources (TSX-V:BRI; OTCQX:BRIZF) chairman Amir Adnani set out his priorities for the year in a letter to shareholders, outlining plans to find more depressed assets to snap up on the cheap, as well as make inexpensive advancements on the company’s current holdings.
Brazil’s strategy has been to acquire gold properties in the depressed market, like the Whistler gold-copper project in Alaska it snapped up last year.
With the project already hosting the equivalent of 5.9 million indicated gold ounces the company did not outline work plans on the project for this year.
Brazil does however plan to carry out a winter geophysical program on its Rea uranium project in the western portion of the Athabasca Basin to refine future drill targets. It also continues to push forward permitting and environmental approvals on its four main gold projects in Brazil, requiring little capital outflow.
New Jersey Mining Company (OTC-QB: NJMC) bought a 50 per cent interest in the Butte Highlands Joint Venture from Timberline Resources Corp, giving it partial control of the Butte Highlands gold project in Montana.
New Jersey’s interest in the project is carried to production by joint venture partner Montana State Gold Company, with New Jersey repaying its share from future mine production.
Previous operators have already spent $30 million on the project, but it had been beset by permitting delays, despite being on private lands. The road use and hard rock operating permits are however now secure, paving the way for full mine development.
Under the deal for the Butte Highlands project New Jersey has to make a $50,000 down payment, followed by a $175,000 payment and the transfer of 3 million shares.
Gold Resource Corp (NYSE-MKT: GORO) hit more high-grade results at its Arista mine in Mexico’s Oaxaca state, pushing known mineralization further north.
The latest results from the Switchback system include a hole that hit 6.3 meters averaging 5.87 g/t gold, 139 g/t silver, 0.58% copper, 5% lead, and 8.14% zinc. A second hole returned 3.2 meters averaging 3.30 g/t gold, 245 g/t silver, 0.36% copper, 4.7% lead, and 13.94% zinc.
The results further expand the Switchback system, a new extension of the main Arista mine with established mineralization over a 450-meter strike and more than 450-meter depth.
The latest result came a week after the company hit high-grade intercepts on the main Arista deposit. Results included a 5.6 meter hit on the Viridiana vein averaging 14.2 g/t gold, 43 g/t silver and a spattering of base metals, while a hole on the Marena vein hit 3.3 meters grading 12.05 g/t gold, 150 g/t silver, 0.74% copper, 7.62% lead and 24.4% zinc.
For the year ahead the company is planning to complete a second drift to the Switchback zone after finishing the first 450-meter link last quarter. The company also plans to continue drilling to expand the Arista Mine’s mineralization at both the main Arista deposit and Switchback.
Goldsource Mines (TSX-V:GXS) has transitioned to the commissioning phase after completing construction at its Eagle Mountain gold mine in Guyana. The project timeline hit a snag after some machinery was damaged in shipping, but the company reports it is now testing out the equipment and ramping up to production.
The company says it expects to complete the 1,000 tpd phase I of the mine for under $5 million, shaving off about $1 million from the expected cost. The mine plan estimated that Goldsource could produce gold for cash operating costs of around $550 per oz. gold. The company started construction of the mine less than a year ago and has taken the fast lane to production.
GoldSource also announced Nicholas Campbell was coming on as the chief financial officer, succeeding Barney Magnusson. Campbell worked for 10 years as a mining research analyst before moving to a more hands-on role in the industry including as financial advisor to Silvercrest Mines and head of planning and business development for Torenco Energy.
Fortuna Silver Mines (NYSE: FSM) (TSX: FVI) exceeded its production guidance in 2015, producing 6.6 million oz. silver and 39,700 oz. gold, or 9 million silver equivalent ounces. Zinc production came in at 36 million lbs. and lead production at 24 million lbs.
The results were 2% above guidance for silver and 13% for gold. Silver production was slightly higher than 2014 levels, while gold production increased 12%, zinc production was up 31%, and lead was up 48%.
Lead and zinc production got a big boost after the company focused on base metals,
its Caylloma mine in Peru, while silver production at the mine dropped. Production at the company’s San Jose mine in southern Mexico saw precious metal production come in roughly 15% above guidance thanks in part to grades of 234 g/t Ag and 1.83 g/t Au that were about 9% more than expected.
For 2016 Fortuna plans to process 875,000 tonnes of ore averaging 230 g/t Ag and 1.65 g/t Au at its San Jose mine. At Caylloma it plans to process 503,000 tonnes averaging 89 g/t Ag, 4.08% Pb, and 4.37% Zn.
The company says it will finish the expansion project at San Jose by July that will increase throughput from 2,000 tpd to 3,000 tpd and at Caylloma it plans to increase mill throughput from 1,300 tpd to 1,430 tpd.
Fortuna also plans 22,000 meters of diamond drilling on brownfield targets around San Jose and development of a 1,500-meter underground exploration drift for better access to the northern extension of the Trinidad North vein system.
SilverCrest Metals (TSX-V:SIL) (OTCMKTS:SVCMF) appointed Michael Rapsch as vice president of corporate communications. He previously worked in investor relations at SilverCrest Mines.
SilverCrest Metals was formed out of exploration projects left from First Majestic Silver’s acquisition of SilverCrest Mines in 2015.
The company is currently cashed up with several million dollars with an exploration portfolio in Mexico. Current drilling programs are focusing on their Sonoran projects near their former mine that is now part of First Majestic.
With most the SilverCrest Mines team involved, investors are looking for continued success from the seasoned crew. The best part for investors is that the current market cap is trading for less than their cash position and with exploration drilling underway, SilverCrest Metals offers an opportunity to invest into exploration with limited risks.
- Peter Spina, President of GoldSeek.com
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Peter Spina's experience with the precious metal markets started back in the mid-1990s, which led to the creation of GoldSeek.com back in 1995. Today GoldSeek.com ranks in the top three most popular global gold websites and its sister site, SilverSeek.com ranks as the most visited silver website in the world. Back at the start of the new secular precious metals bull market, Peter established the technically-focused subscription newsletter, which at the start of 2005 was merged into the more comprehensive Gold Forecaster (goldforecaster.com) service. In addition to the newsletter and websites, Peter frequently appears in the media including MarketWatch, Reuters, and Investors Business Daily.
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