Comments: After flirting with a breakout from the upper channel for several days, looks like Gold Stocks are finally succumbing to some profit taking. I don't expect that continue for too long however, because I don't expect Gold to fall below $640 on a closing basis. I think the break of the upper channel will in fact occur, sooner or later, but not until the gold stocks have had a bit of a breather. Buying back in at around 350 HUI might be a decent bet.
Comments: I received today from VGZ the belated Notice of Special Meeting which was held on November 16 regarding the spin off transaction involving the creation of Allied Nevada Gold Corp as a spin-off company from VGZ. I can kind of understand after leafing through the Notice why shareholders weren't crazy about VGZ, selling it down, as the spin off approached, despite higher gold prices.
The Notice, which describes the proposed spin-off in considerable detail, including its tax consequences for shareholders, option holders and warrant holders, is well over 200 pages of fine print! Complexity is rarely a big crowd pleaser with investors. Incidentally, Minco Mining & Metals Corp. rallied sharply in early September after they announced the abortion of their proposed spin-off of subsidiary Minco Silver. Obviously spin-offs in the precious metal sector haven't been a big hit. One good thing of the VGZ spin-off, however, will be the creation of a new entity which is eventually intended to trade on the American Stock Exchange. This is good because, with the rate of consolidation in the sector leading to an increased narrowing of the number of tradeable names out there, sometimes I feel like I'm running low on trading options.
Comments: Failure to meet deadlines in a timely manner as well as continuing share dilution have been major complaints of shareholders of NSU, a gold and base metal miner operating in Eritrea and Mali. I wonder whether the increased tensions in neighboring Ethiopia in connection with the situation in Somali may have also exerted downward pressure on the price. However, this company is now trading at support and may be a speculative buy, though one should keep in mind that NSU tanked while the gold price rallied, which is generally not the most encouraging sign.
NSU recently completed their feasibility study for their contemplated mine in Eritrea, which normally leads to greater leverage to the metal price. NSU's Bish Property in Eritrea is somewhat unusual, as far as the mineralization is concerned. The feasibility study for the mine indicates that during its projected 10 years of mine life, the mine will be producing primarily gold from the ore layers most near to the surface, followed by primarily copper and some gold in years 3 to 5, followed finally by zinc, copper and gold in years 6 to 10, making it a Gold and Base Metals mine, at different stages of production.
Altogether, the metals that are expected to be produced over the life of the mine will be as follows:
- 1.06 million oz gold
- 747 million lb copper
- 1,092 million lb zinc
- 10 million oz silver
NSU is trading up on heavy volume today as I type this so it may indeed have a decent chance of bouncing from the support.
Comments: A breakdown from a bearish wedge should see GSS going to $3.10 or possibly lower. Still, I am generally more positive on GSS as their prospects next year, barring any more unforeseen catastrophes, are fairly encouraging, especially if the energy shortage situation improves in Ghana, which I understand it should.
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