Last week was a gratifying week for a number of reasons but it was also a frustrating one for many of us Ontario-ians that worship the summers out on Georgian Bay. Canadian boating season usually runs from the last week of April to the first or second week of October, so twenty or so weeks out of fifty-two is pretty skimpy especially when I talk to my friends who have dockage in the Caribbean or southern U.S.
We learned late last week that we would finally be allowed to use the marina for this upcoming May Two-Four long weekend (derived from the Seventies term "two-four," describing a case of beer containing twenty-four bottles purchased from the Brewers' Retail, and a "must-have" when rocketing up the 400 highway to someone's cottage in a '68 GTO with Thrush mufflers and chrome scoop on the hood).
Well, at the last hour, the marina sent us all an email informing us that they would not be opening until next weekend, which means all those spring chores that get shelved in favor of "two-four chicanery" are now back on the front burner. In full protest and resembling a form of perverse self-flagellation, I decided to walk six kilometers and cut the front and back lawn in 30-degree heat just to make a statement, and let it be known that it was one of the silliest antics a sexagenarian can pull off—but highly effective if you are hellbent to say goodnight to your spouse an hour before your usual bedtime.
The blogosphere and Twitterverse were rife with cryptocurrency (and specifically Bitcoin) grave-dancing last week, as the cheerleaders all went collectively silent. The myriad of podcast professors who missed one of the most outstanding trades of the last two decades were giving it the old "See? I told you so!" nauseum that drives me to drink and assorted stimulants and hallucinogens.
I rarely make any public comments on crypto, because while I was one that also missed the trade, I have always doffed my fedora at those who had the courage to take that trade. When asked, I only gave a perfunctory technical assessment once last year, after it rose to $40,000 in a near-vertical ascent, remarking that like Japan's Nikkei in the 1980s or the NASDAQ in the 1990s, markets that move from "gradual" to "parabolic" are markets that are ready to get smoked.
A few days later, BTC traded down to $28,000, but (and this is important) the reason I refuse to gloat over supposedly prescient calls is that it then turned on the proverbial dime and headed straight to $65,000. There are phrases from my past forty-five years carving up markets that come to mind, such as "Hero to Zero" and "Penthouse to the Outhouse," but all I will say is that the number one enemy of the investment class is a word called "hubris." The market has an uncanny way of turning victory laps into train wrecks. Never forget that.
As for the crypto space (and Bitcoin in general), it must hold that big uptrend line dating back to March 2020 and since the RSI (relative strength index) and MACD (moving average convergence/divergence) are approaching oversold status, the rout might be coming to an end.
Of course, if that happens, the gold and silver bugs will put away their cymbals and drums and streamers, taking down all of their finger-wagging podcasts and go collectively silent, only to be found hiding under their desks sucking their thumbs in fetal positions.
Just as predictably, the crypto-junkies will be back on their soapboxes, chastising the Boomers for their unfounded allegiances to assets that have survived for 5,000 years. As Jean Baptiste-Alphonse Karr once said: "Plus ca change, plus c'est la meme chose," or "The more things change, the more they remain the same." How very true.
The great news for the week was the announcement that my biggest holding, Getchell Gold Corp. (GTCH:CSE; GGLDF:OTCQB) (CA$0.57 / US$0.4834), announced that they closed a CA$2.7 million financing, following it up with the news that an additional CA$646,730 was collected from warrant exercises. Working capital is now a healthy ~CA$4.7 million, giving Getchell management the comfort of being able to get very aggressive in their continuing (and very exciting) drill program at Fondaway Canyon, but also in their maiden drill program at the Star Point copper-gold-silver prospect, also located in Nevada.
Getchell is number one on my list for a number of reasons (valuation per ounce the biggest), but those analysts out there covering the gold and silver producers are astonished that the same disconnect that is happening with Getchell is commonplace right across the board. Companies trading at three times cash flow and six times earnings, or, as in the case of Getchell, US$50 per ounce of in-ground gold (with the Nevada benchmark at US$100/ounce)—and that figure is assuming full dilution, which adds even more cash to the working capital position.
The technical picture for the company looks bright after succumbing to the same corrective malady that has afflicted the entire senior and junior mining space since last August. Breaking that downtrend line in early May and getting the bullish MACD crossover shortly thereafter has set the pick for a move to all-time highs that I think coincides with the drill turning in a few days.
As far as valuation is concerned, it is important to remember that GTCH's $50 per ounce is based upon the 2017 resource estimate, which is now considered obsolete. The reason it has to be thrown into the waste bin is that the prior operator calculated 1,069,000 ounces with a $1,200 gold price, and modeled it with a 3.43 g/t Au cutoff grade (which was fine back then, but is not "fine" today, with gold approaching $1,900/ounce).
Also, falling into the order of obsolescence, is that no credit is being given for the 2020 drill program, where the results were, to the credit of President Mike Sieb and Vice President Exploration Scott Frostad and their interpretive acumen, simply spectacular, and included the discovery of a new zone, relatively shallow, that will without a doubt add a great many more ounces as well.
The key will be the revised resource calculation, to be completed after the 2021 results are compiled . With two seasons of drill results and a lowered cutoff grade to add to the equation, Fondaway is going to evolve into—at a minimum—a Tier Two asset (2–5 million ounces) and with the blessings of the two Goddesses of Junior Mining—Mother Nature and Lady Luck—it just might evolve into a Tier One asset (5 million ounces plus).
One last remark before I shutter the pompoms and megaphone—new highs in 2021–2022 in gold prices will, in my opinion, result in merger and acquisition (M&A) transactions for the state of Nevada in the US$150–200 per ounce range. Result? Do the math. Getchell is a low-risk, high probability opportunity with multi-bagger potential in the right jurisdiction.
Shifting gears to the other metals, while gold appears to be primed for a test of the 2011 high around US$1,908, one troubling aspect of last week's action was the poor performance of silver, with no better evidence than the sharp advance in the GSR (gold-silver ratio) to 68.28 from under 65 while closing back above the 100-dma (daily moving average). As I have continually screamed from the highest yardarm for decades, no healthy precious metals advance can occur with silver lagging, and lagged it most surely did, dropping 1.45% on Friday, with gold essentially unchanged.
Also, unsettling was the poor late-week action in the HUI and while it actually was unchanged on the week, I would have preferred to see it best the 325 level, which was the January peak for the miners.
One week ago, I posted the chart of copper showing the overbought readings in RSI and the bearish MACD crossover. Since we had earlier exited the big Freeport-McMoRan Inc. (FCX:NYSE) stock and call positions with decent profits, I have FCX once again in the crosshairs as I fully expect to see RSI approaching 30 and the stock price under USD $38 again before too long.
I have the distinct impression that a great many traders (late longs) are now trapped in the "electrification trade," and that means there is going to be a bloodletting soon that flushes the kiddies out of their positions. I will be buying back positions, because if there is one trade that leaps off the page at me, it is the copper-electrification-junior developer positions as I look out to 2022 and beyond. "Copper to $15!" were the cheers twelve days ago at USD $4.88/lb. but now that the cheers have turned to tears, I have both barrels loaded with shot and I am hunting down my jettisoned copper positions patiently, and with second half of 2021 as the moon-rocket phase.
The GGM Advisory 2021 portfolio is once again back in gear, with the best performer being Western Uranium & Vanadium Corp. (WUC:CSE; WSTRF:OTCQX), up142.20%.
You will have noticed that in today's missive, I purposely avoided getting into any discussion of these people that make decisions for us these days, be they politicians, central bankers or public health "officials." If I ever run for office, I am going to have a battery of "experts" available every time I make a decision, so in the event that I make a completely bonehead move, like locking down a country or threatening to have the police pull people over for violating an unconstitutional "stay at home" order, I can simply haul out the "advisory group" and blame them for giving me "bad advice."
Then, during the next election campaign I can brag about how I fired the old advisory group and replaced them all with a new advisory group, while telling the voters how concerned I am for public welfare, until I am re-elected to office, after which it becomes an exercise in "wash, rinse, repeat" (lead-filled ashtray heading toward TV screen).
Originally published Friday, May 21, 2021.
Originally trained during the inflationary 1970s, Michael Ballanger is a graduate of Saint Louis University where he earned a Bachelor of Science in finance and a Bachelor of Art in marketing before completing post-graduate work at the Wharton School of Finance. With more than 30 years of experience as a junior mining and exploration specialist, as well as a solid background in corporate finance, Ballanger's adherence to the concept of "Hard Assets" allows him to focus the practice on selecting opportunities in the global resource sector with emphasis on the precious metals exploration and development sector. Ballanger takes great pleasure in visiting mineral properties around the globe in the never-ending hunt for early-stage opportunities.[NLINSERT]
1) Michael J. Ballanger: I, or members of my immediate household or family, own securities of the following companies mentioned in this article: Western Uranium & Vanadium and Getchell Gold . My company has a financial relationship with the following companies referred to in this article: Western Uranium and Vanadium and Getchell Gold. I determined which companies would be included in this article based on my research and understanding of the sector. Additional disclosures are below.
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5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Getchell Gold and Western Uranium and Vanadium, companies mentioned in this article.
Michael Ballanger Disclaimer: This letter makes no guarantee or warranty on the accuracy or completeness of the data provided. Nothing contained herein is intended or shall be deemed to be investment advice, implied or otherwise. This letter represents my views and replicates trades that I am making but nothing more than that. Always consult your registered advisor to assist you with your investments. I accept no liability for any loss arising from the use of the data contained on this letter. Options and junior mining stocks contain a high level of risk that may result in the loss of part or all invested capital and therefore are suitable for experienced and professional investors and traders only. One should be familiar with the risks involved in junior mining and options trading and we recommend consulting a financial adviser if you feel you do not understand the risks involved.