Can You See the Pattern in Gold Prices?

Written by Gerardo Del Real
Posted December 5, 2016 at 9:05PM

A nine-year low in the unemployment rate has most analysts calling for a December rate hike. A hike I thought was more appropriate in September. The reasoning was simple; not raising in September made a December hike very probable and very predictable, allowing traders to front-run the Fed.

That part has been accurate as the 10-year Treasury note hit its highest level since last year, peaking at 2.45% on Thursday December 1st.

The major stock indices here in the U.S. continue to make record highs, while gold continues its downward trajectory.

Gold was essentially flat, closing down approximately 0.30% for the week, closing near $1,175 an ounce. A small loss but the fourth straight week of losses. This despite the dollar being down approximately 0.7%.

I’ll say it again, if it doesn’t break out it will break down. Expect lower prices. It may not happen in a straight line, there will likely be head-fakes, but I don’t expect a sustained run higher until we see gold drop near the $1,050 level.

kitco life gold 12.5.16(Can you see the pattern?)

Silver closed at $16.73 an ounce, up approximately 1.72% for the week.

Platinum and palladium closed at $932 and $745 an ounce, up 2.7% and 0.6% higher for the week.

Copper finally saw a brief pullback closing near the $2.62 level, down 1.5% for the week.

The Week in Juniors

Vendetta Mining Corp. (TSX-V: VTT)(OTC: VDTAF)

On November 30, 2016 Vendetta Mining announced some excellent drill results from the 2016 program at the Pegmont Lead-Zinc Project in Queensland, Australia.

Highlights from the release:

Zone 5 Highlights:

  • PVRD052A: 14.77 metres of 11.91% Pb+Zn (5.46% Pb, 6.45% Zn);
  • and 4.35 metres of 11.85% Pb+Zn (5.01% Pb, 6.84% Zn); and
  • and 5.05 metres of 10.32% Pb+Zn (4.52% Pb, 5.80% Zn)

Zone 2 - 3 Highlights:

  • PVRD035B: 14.73 metres of 12.41% Pb+Zn (9.02% Pb, 3.39% Zn);
  • and 10.32 metres of 11.94% Pb+Zn (9.64% Pb, 2.31% Zn); and
  • PVRD053: 7.49 metres of 11.51% Pb+Zn (8.10% Pb, 3.41% Zn)

Michael Williams, Vendetta’s President and CEO, commented

"The progress at the Pegmont project has been significant. We have successfully confirmed the shallow potential of the Burke Hinge Zone, discovered a high grade fold between Zones 2 & 3, we are able to successfully target mineralization in Zone 5 and in doing so have validated the geological model of zinc grade increasing to the west. We look forward to receipt of the metallurgical test work, updating the NI 43-101 resource which we intend to release early next year and the commencement of the 2017 program in Q1.”

The company expects to deliver an updated NI 43-101 resource estimate, including for the first time Zone 5 and the Burke Hinge Zone, early in 2017. Over 13,500 meters of drilling will be incorporated into the new estimate.

Pegmont is a stratiform, Broken Hill-type deposit that outcrops with an overall shallow dip to the southeast and is hosted in a magnetite-rich banded iron formation within high-grade metamorphic rocks. The project consists of three granted mining leases and two exploration permits that cover an area of approximately 3,468 ha.

Otis Gold Corp. (TSX-V: OOO)(OGLDF)

Otis Gold delivered some good numbers once again. On November 29, 2016 the company reported it had intersected:

  • 85.4 meters (m) grading 2.50 grams per tonne gold (g/t Au) in hole 16 OKR-338,
  • 69.1m grading 2.07 g/t Au in hole 16 OKR-348 and
  • 50.3m grading 2.04 g/t in hole 16 OKR-330 at its Kilgore Gold Project drill program, Clark County, Idaho.

Drilling is complete but there are still 12 holes being logged and assayed.

The most recent set of results continue to show that the Aspen Formation has the potential to host significant gold mineralization.

otis drilling map resize

Craig Lindsay, Otis President and CEO, states:

"We continue to be encouraged by the excellent results we are encountering in both the Lithic Tuff horizon, host to a majority of the existing mineralization at Kilgore, and the Aspen Formation, a rapidly-emerging gold host that is becoming better understood by Otis with each successive drill hole. It is very clear to us that the Aspen Formation sedimentary unit is a critically important feature of gold mineralization at Kilgore and for the potential expansion of the deposit. Lastly, we are pleased to have completed the expanded 40 hole drill program on budget and on time.”

The Kilgore Gold Project contains a current (dated September 12, 2012) NI 43-101 Indicated Resource of 520,000 ounces (oz) Au in 27.4 million tonnes at a grade of 0.59 g/t Au and an Inferred Resource of 300,000 oz Au in 20.2 million tonnes at a grade of 0.46 g/t Au.

The deposit is part of an extensive low-sulfidation quartz-adularia epithermal hydrothermal system hosted in Tertiary volcanic rocks and basement Aspen Formation calcareous siltstone, shale, and sandstone of Late Cretaceous age.

Gold mineralization is of the traditional disseminated, bulk-tonnage type similar to that comprising the classic volcanic-hosted gold deposits at Round Mountain, Nevada and McDonald Meadows, Montana. The deposit features very attractive metallurgy with excellent gold recovery averaging greater than 80% at 1.5" crush size based on column leach test results.

The positive drill results followed a $500,000 private placement which was announced on November 25, 2016. The financing was done without a warrant.

I’ve looked at Otis in the past and like the project and people involved. However, I’m not a big fan of the share structure. Although, to be fair to management, this financing is one of several it’s been able to execute without a warrant.

Mawson Resources (TSX-V: MAW)(OTC: MWSNF)

On December 2, 2016 Mawson Resources announced it had closed its previously announced financing of C$6 million.

Mr Michael Hudson, CEO, commented;

“We are pleased to close the Private Placement, and wish to thank the Sentient Group and existing funds for their continued support. We also welcome our new shareholders. With drill permits recently received, we now can rigorously and systematically drill test the Rompas-Rajapalot gold discovery for the first time. Post financing, Mawson will hold more than C$9 million cash which will enable the Company to execute a 10,000 to 13,000 metre drill program. Drill rigs are set to start turning over the coming weeks.”

Following closing of the private placement, the Sentient Group holds approximately 37.45% of the issued and outstanding common shares of Mawson on a partially diluted basis.

With permits in hand and C$9 million in the bank, Mawson is worth watching as it has a large, district-scale land package that has delivered near-surface high-grade gold intercepts in the past.

The team at Mawson believes the targets they will be testing may be the most prospective yet. The truth machine starts turning in a few weeks. Looking forward to results from the program.

Mariana Resources (TSX-V; MARL)(OTC: MRLDF)

Another drill program worth keeping an eye on is drilling at the 100%-owned Ergama copper-gold project.

On November 29, 2016 Mariana announced it has commenced the drilling of an initial seven-hole diamond drill program at its 100% owned Ergama copper-gold project in Balikesir Province, western Turkey.

Chief Executive Officer Glen Parsons commented:

"Whilst the high grade gold and copper Hot Maden project advances to development, Mariana continues to work its diversified portfolio of advanced and early stage exploration projects.  Ergama is a 100% owned, prospective, copper-gold porphyry target in a region that hosts a number of key discoveries, development projects and mines and Turkey's largest gold mine Kisladag operated by Eldorado Gold.

"Mariana's objective is to confirm mineralisation and geological model being a mineralised copper gold porphyry system as well as high grade gold and silver epithermal mineralisation and, if successful, will lead to the next stage of drilling at Ergama.

"I look forward to updating the market on Hot Maden soon and further news from Ergama in the New Year.”

Everyone knows the spectacular results that Hot Maden has delivered. I’ll be watching the drill program at Ergama closely.

The Ergama Project license covers an area of 2,168 Ha (21.6 km2), and is located in western Turkey between the well mineralized Biga Peninsula and Eldorado Gold's Kisladag gold mine (currently Turkey's largest gold mine with gold production of 280,000 oz in 2015).

Geological mapping at Ergama has identified extensive zones of both porphyry- and epithermal-style hydrothermal alteration assemblages — dominated by low temperature chalcedonic silica on hilltops and advanced argillic alteration assemblages ("lithocap") elsewhere — within Oligocene- to Miocene-age volcanic rocks.

Ground geophysics completed in 2012 confirmed the presence of two strong, near-surface IP chargeability anomalies, with the largest measuring 1km x 1km and interpreted to represent sulphides associated with a "blind" porphyry copper-gold deposit.

To your wealth,

gerardo-sig

Gerardo Del Real
Editor, Resource Stock Digest Premium and Junior Mining Trader.

For the past decade, Gerardo Del Real has worked behind-the-scenes providing research, due diligence and advice to large institutional players, fund managers, newsletter writers and some of the most active high net worth investors in the resource space. Now, he is bringing his extensive experience to the public through Outsider Club, Resource Stock Digest Premium, and Junior Mining Trader. For more about Gerardo, check out his editor page.

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