InterestingI had a modest position in GWY and was scared away back in March after the Tsuanami... I sold many positions back then and went to cash at that time. I was watching this deal like a hawk as back in March the price was melting, even after GWY had indicated that there was visible gold in all the Cal holes... The day they announced GWY 115 I took a solid position and so did some of my associates. I have since been buying even more as this rally looks like a breakout.
IMHO there was some big time money that moved in when GWY115 and the other juicy holes were announced and I am convinced that there will be just too many big boys wanting in for this deal to hang around near these levels ... Even the most brillaint and seasoned MM's cant keep er down once the jockeying for paper goes on...I think that this will be higher even without news, and that this deal is going to be quickly re-evaluated.
Obviously there are probaly some entities that have aquired meaningful positions, and even if a guy like Batista wanted to take a run, I doubt that he would go over the 10% threshold at this point - you always want to keep your card close to your chest.and once you take 10% you have to declare it and you have to report all trades.. Even if someone were to grab over 10%, the poison pill provisions dont kick in till 20% unfriendly ownership takes place, and once a bidding war starts, poison pills dont have any affect. A very important factor here is that neither Batista or a senior have taken down a big chunk - so there are no warts on any bidding process that might take place.
And these recent buyers, since the big news on the CA drill results - they have been so lucky in that they have been able to mop up so much cheap paper - when you look at the volume after the 18 mil share day, its been huge - this thing has hit a triple top and if she breaks, there should be little resistance till she gets close to $2.00. And I wont be selling a share once that happens.
The most frustrating this about these markets has been the complete lack of correlation between the share price of the junior golds and the spot price of bullion - a major disconnect formed at the end of 2010, as the TSX venture index has toppled from 2400 to 1800, a drop of about 25% across the board yet at the same time the price of bullion has risen from $1400.00 to $1800.00, a rise of oer 25%.. This in turn has created qutie the value gap - the junior golds are freakin cheap...
Just for giggles, I am gonna post a copy of an email I sent in frustration to a fellow investor... It breaks down just how cheap the juniors are - they are trading at valuations similat to what we found in late 2008 after the meltdown, and some of us were lucky enough to have made fortunes on the golds back then... I think that deals like GWY will be the easy 5-10 baggers once the main markets come back to the junior golds...Everyone is afraid of the juniors right now - which
tells me that now is the time to buy these bargains.
Email elow..
Re the golds – unbelievable that the TSX venture is in a free fall while the price of gold keeps on hitting new highs. To give people an idea of how cheap the gold juniors are, I use a ratio, call it Daves ratio, as follows: Daves Ratio = (TSX Venture Index/Price of Gold)
In AUG 2007 the price of gold was about $675/oz and the TSX Venture index was at about 4300, giving us a Dave ratio of about 6.4. Interestingly at that time, nobody complained that the junior golds were expensive. After the summer of 2007, when the first signs of the credit crisis started to emerge, the venture began a brutal and steady decline that was rather unnoticed by the general markets. By the time Aug 2008 rolled along, the TSX Venture index had slipped to about 2100 and the price of gold was at about $820.00, giving us a Dave ratio of about 2.6.
Then the bottom really fell out and the TSX venture was decimated. In Nov 2008, the price of gold was around $775 and the TSX venture index had fallen to about 650, leaving us a Daves ratio of about 0.84. It was below zero for the first time ever! There were bargains galore at this time and many gold juniors with proven resources were trading at ridiculous evaluations of about $10.00 per proven ounce. (Back in the day, the norm was about $100 per proven ounce, and this was when gold was only at about $500 per ounce.) At this time, I was able to identify juicy deals such as Keegan resources (T.KGN) which was trading at 0.60, Evolving Gold (V.EVG) which was trading at 0.14 (they had about 0.20 cash on hand at the time)!! and Colossus minerals (T.CSI) which was trading at 0.60 per share.
Now – let’s fast forward to today’s situation.
Between early 2009 and late 2010, there was a bull market in the gold juniors and the TSX venture had risen from 650 to about 2280 and the spot price of gold had risen to about 1400, giving us a Dave ratio of about 1.6. Yet at this time, many pundits were claiming that the junior golds and the golds were expensive as they felt that gold had climbed about as far as possible. Funny that they claimed that the gold stocks were expensive, yet back in 2007 when the dave ratio was 6.4 – nobody was claiming that the junior golds were expensive. Actually, in reality, these junior stocks, using a Dave ratio, were about 4 times cheaper than they were back in 2007. My take on the situation was that as there was very strong demand for gold juniors in 2010, there were a record number of financings conducted and that created a large amount of paper sloshing around, much of it in unsophisticated hands. It is no secret that in late 2010, many of the fund managers wanted out of the junior golds, and this was evident in early 2011 as the price of gold kept rising, yet the price of the gold juniors was falling off. Whenever I noticed a good news release by a gold junior, there was huge volume but no uptick in price., The funds were obviously liquidating, and the good news created a liquidity event for these funds and this news and the ensuing interest allowed them to liquidate their positions, resulting in no share price increase, but just a lot of volume.
Well, my take is that all these funds have it all wrong, they were wrong that the price of gold had topped, and they were wrong that these stocks were overvalued (Daves ratio was only 1.6!!!)
Let’s have a quick gander at todays metrics. The current price of gold is about $1750 and the current value of the TSX venture is about 1711 – giving us a Daves ratio of about .98 – this is below 1 and it is approaching the ridiculous panic evaluations of late 2008 – a time when there were dozens of 10 baggers to be had as long as you were careful to choose quality companies.
One could argue that these deals were a little cheaper back in late 2008, but the main difference now is that most of these companies are now well cashed up.
That is the end of my email.... My point is that the juniors are cheap. I am finding deals trading at less than $20 per insitu ton, quality deals that are actually trading below the value of their cash and marketable securities. And deals like GWY - very inexpensive!!
Good luck to all Longs.. Se ya all at $5.00, even if it takes 18 months...