NEW YORK – Mining equities are days or hours away from a rousing reversal. A stealth rally already is here.
Chartists tell me gauges that measure Canada-traded junior miners could rise sharply in coming days.
Al Marden,a long time associate and chart logger in Nevada, sent me this report about the decline of major and minor mining stocks since April 1 or so. Chartists say the looming rebound in oversold mining equities (NYSE: GDX, Stock Forum) will look a lot like the sharp rebound that occurred this past January in the group. (Stock chart of GDX courtesy of StockCharts.com)
I am on record saying the revival of interest in mining equities will begin this week. (See notes at bottom for my travel dates.)
Evidence includes a quarterly shuffle, or rebalancing, of the junior gold and silver miners’ exchange-traded fund in the USA (NYSE: GDXJ, Stock Forum).
The Market Vectors portfolios, both the big GDX and the junior GDXJ, are handled by manager Van Eck. The junior one holds about $2.2 billion in securities. Professional and individual investors use such investment trusts to replicate ownership of a swath of mining companies.
More than a dozen junior miners or prospectors almost surely will be added to the list at the close of this week. Four are to be removed. The additions and deletions are based on the accumulation or loss of market capitalization during the quarter. In one case at least, a merchant bank that has sought to brand itself as a gold producer (in West Africa) is now part of the Market Vectors fund: Endeavour Mining (TSX: T.EDV, Stock Forum) in Vancouver, Canada.
The official listing of holdings had no indication of changes (as of Tuesday morning ET). Still, three mining executives tell me the shuffle will occur later this week.
“We will be removed from the GDXJ effective June 17,” Tracey Thom says about Allied NevadaGold (TSX: T.ANV, Stock Forum). “Basically, we've been … increasing (in) value and our market cap exceeds the limits for the index/fund. We are researching the indices to see if there are any we may be eligible for but have not been considered yet.”
Ms. Thom is Vice President of Investor Relations for Allied Nevada, which mines gold and silver in Nevada and has as a major shareholder and director the geologist Carl Pescio, whom I have met several times in Elko, Nevada, and in Canada. Mr. Pescio is also a large shareholder in Gold Standard Ventures (TSX: V.GV, Stock Forum) and its Railroad Project near Elko.
The GDXJ fund’s rebalance explains strength and thick trading activity in several of the equities added to the fund. It also explains a (Monday) decline in four of those removed, including Allied Nevada and European Gold Fields (TSX: T.EGU, Stock Forum). Early today (Tuesday), those two and two others said to be added to the ETF rebounded smartly.
Here are the tickers said to have been added: FVI, BCM, MAG, OK, GPR, ECU, AUMN, AVR, TXG, GRY, TRR, AR, ATC, SUE, BDR, RMS, PGD, ORE, PZG, EDV, BRD, FM, P.
Tickers said to have been removed: ANV, DGC, ASR, EGU. There are silver prospectors and miners in both lists.
A Golden Valley
A stealth rally of mining equities is already in the works. Drill assays and other data and events are influencing share valuations for the first time in more than two months. There are 30 or 40 examples that have crossed my desk, albeit some in shallow trading – thus the description stealth.
Seminal companies or joint venture partners in significant mineral jurisdictions will be among the first to benefit. One of those, Glenn Mullan’s Golden Valley Mines (TSX: V.GZZ, Stock Forum), operates at Val D’Or in Quebec in partnership with successful Osisko Mining (TSX: T.OSK, Stock Forum). Golden Valley just reported robust gold grades on its Malartic CHL project. Its shares rose five percent Tuesday in a sign of possible affirmation of the 60-meter intercept of 1.5-grams gold.
CEO Mullan says he is setting up Golden Valley as a project generator with gold, uranium and other mineral projects in Canada and Sierra Leone. The CHL project is just east of Osisko’s well engineered Canadian Malartic Gold Project. Other properties Golden Valley looks to list as public entities in Canada are located in Saskatchewan, Quebec and Sierra Leone, West Africa.
Stock movers on fresh drill data in my neck of the woods include EurOmax Resources (TSX: V.EOX, Stock Forum). Mark Gustafson’s EurOmax says it has more than 85 meters of two-plus-grams-per-tonne gold at its Trun project in Bulgaria. The geologist-consultant for the company is Quinton Hennigh, whom I have been profiling and with whom I have traveled.
EurOmax is prospecting for minerals deposits in the Balkans.
The small company is a client of Torrey Hills Capital, which pays me as a consultant for my networking ideas and investor outreach strategies. I don’t own the shares.
Finally, shares of Canaco Resources (TSX: V.CAN, Stock Forum) are coming to life one full week after the Tanzania prospector unveiled what appear to be spectacular grades at Magambazi: 55-plus meters and 30 meters of better than three grams gold. Andy Smith’s Canaco Resources is a well-financed $700 million company whose shares are about 40 percent off their March-April high points.
The Canaco shares also are reflecting investor interest in its Tanzania copper and gold property. I will be seeing that property and Magambazi in Tanzania at the weekend and into next week. Canaco is “spinning” its entire interest in the 70 percent-owned Tanzania property to shareholders of record June 28.
Not everyone is jumping up and down like I am. David Banister, a New England stock chartist with a better-than-average forecasting record, says Tuesday that Canada-traded prospectors and miners “are quite bearish, though near a 5-wave low and will bounce soon ... the juniors are in some trouble.”
ACTIONABLES: Also in stealth mode is Kiska Metals (TSX: V.KSK, Stock Forum),which is active in Alaska. Kiska’s Whistler copper and gold project just started its summer drilling up there. Like nearly every emerging or wanna-be metals producer in the world, Kiska has seen few of its news events get investor attention this entire spring season – until this week.
Notes: I own three of the ‘tickers’ cited in the rebalance of the GDXJ: FVI, GP and AUMN. My current sked includes a trip later this week to see Canaco’s holdings in Ethiopia and Tanzania. In addition, I am planning to see Golden Valley’s activity at Val D’Or in late June or early July. … Those in Germany (or in East Africa) who would like to meet and hear me chat about my Top 3 Prospects, please connect with me before Thursday. I will have several hours of down time between flights at Frankfurt on Friday morning and again the following Wednesday morning and would love to meet.
Thom Steps Out: I am adding professional outreach for a select number of natural resources companies to my log. I will continue to write free articles such as this one for Stockhouseand its nearly one million users. Here is the press release about my new outreach gambit: Thom & Torrey Hills Capital. (Please do not purchase shares of client companies based solely on my writing, my speaking or my on-site research.)
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