TikTok versus Tick Tock - gold touched $2,000 this week. They are talking about banning TikTok in the US, but have you been listening to the subtle sound of Tick Tock in the background each morning as you get out of bed? For those not "watching" or "listening" closely, gold pushed $2,000 briefly this week. Is this the start of an upward trend being driven by Global factors? Will instability in the banking system and higher interest rates drive the price of gold higher?
Another great cleanup week for Tocvan Resources, i.e. I define cleanup as the movement of stock from short-term and impatient investors, to people who are building longer-term positions. Obviously, the cleanup and upward price movement of a stock only occurs when there are more buyers than sellers. Tocvan closed at $0.69 yesterday on 42,000 shares, completing yet another upward price movement with over 250,000 shares trading for the week. The price of Tocvan moved upward from the mid $0.40's since the beginning of March, but more importantly, the price breached the $0.70 barrier on Thursday and was only knocked back by small share trades within seconds of the close..These small knockback trades are also suggestive of small impatient players exiting who waited all day to sell.
Much like the supply and demand for gold has increased Worldwide, the upward price movement of Tocvan is also to some degree a reflection of supply and demand. Tocvan has less than 39 M shares outstanding, well financed, and a strong shareholder base as evidenced by generally low weekly volumes. I tend to watch the trading volume of a stock over the last few months as an indication of trends (an old man's equivalent of charting). Of the 1.4 M shares trading in the last 30 days, Anonymous accounted for over 850,000 shares of selling. Since the spread has been tight (small day to day trading price range), there has been no room for flipping, thus suggesting the selling from Anonymous is a key shareholder methodically exiting a large position. As my dad said, "once this shareholder is gone and there is considerably less stock for sale, the price will accelerate upwards to a New Price Equilibrium" This new equilibrium will be followed by consolidation as profit takers exit and are replaced by new shareholders looking for long-term value.
This "New Price Equilibrium" is partly a result of supply and demand, but more significantly due to the progress and underlying assets of Tocvan. Over 23,000 m of drilling at Pilar has identified a robust at surface gold/silver mineralization system extending significantly at depth, a geology formation that is attractive for a low cost open pit mine (important to note that there are numerous open pit mines operating successfully in the Sonora area who are looking for more feedstock). A critical step in proving the feasibility of Pilar is the ongong 1,000 ton bulk heap leach sample being conducted by a local company located only 25 km away. The ability to collect material from trenches at the surface is a significant economic benefit to Tocvan as larger samples can be collected more quickly and cheaply. Make no doubt about it, this 1,000 ton bulk sample will be key to making a production decision in my opinion.
Brodie Sutherland, chief executive officer, said.... "This will set the stage for moving Pilar towards development, showcasing the expected head grade and recovery blended across our key oxide zones. Having a local certified laboratory to assist in the metallurgical analysis and to quality check the results is just another added benefit of operating in a top mining jurisdiction. Gold characterization studies will guide us on improving recovery and understanding the mineralized system at Pilar".
Concurrently with the bulk sample, a precious metal diagnostic leach study will be completed by LTM (Laboratorio Technologico de Metalurgia is an International Organization for Standardization-certified lab based in Hermosillo with internationally trained and certified technical experts in metallurgical analysis). Five 10-kilogram samples will be collected from the surface and drill core for the precious metal diagnostic leach study. The scope of work will include: Head grade analysis and precious metal characterization (results for each category to be provided: free gold; exposed but attached; associated with carbonates; sulphide associated; and encapsulated in siliceous minerals). This is another critical piece of the puzzle in optimizing the production puzzle of Pilar in the future.
There is no doubt that proceeding to a 1,000 ton bulk sample and conducting diagnostic leach studies at this stage of development, is an indication that Pilar is more advanced than we think, further infill drilling will test this hypothesis and ultimately attract more investors if positive.
Tocvan also seems to be at an advanced stage in understanding the geological system at Pilar, as evidenced by the detailed application and issuing of a two year permit allowing for nine trench areas and 83 drill pads at Pilar. The permit will provide access for planned infill and step-out drilling along the 1.2-kilometre trend that remains largely untested at Pilar (potential for increasing resource and defining existing resource). Ultimately allowing for a maiden NI 43-101 resource calculation later this year or early next. I think Tocvan and shareholders already know the value of Pilar, but the infill drilling will allow for refinement of the tonnage, define open pit footprint, and economics going forward to production.
Shareholders must not forget the BLUE SKY potential of El Picacho, 100% owned by Tocvan. They have conducted extensive geological due diligence and a small first time drill program last year with excellent results. The number and depth of historical working on the property is impressive, with significant gold and silver assays throughout. I suspect the drills will be turning shortly. Penny for Penny, I believe El Picacho is a large and more robust system than Pilar, which will reward patient shareholders. Just think about what could happen, bringing Pilar to production will provide free cash flow without extensive share dilution, or even possibly spinning off El Picacho into a separate company to provide more upside value to shareholders. As my dad said, "BLUE SKY potential drives the imagination of investors".
What about the ticking of the clock I mentioned earlier, not to be confused with the media platform called TikTok?
In an article by CNBC, demand soared to an 11-year high in 2022 on the back of “colossal central bank purchases, aided by vigorous retail investor buying,” according to the World Gold Council with annual gold demand jumping 18% to 4,741 tons (excluding over-the-counter or OTC trading) across the year, the largest annual figure since 2011, fueled by record fourth-quarter demand of 1,337 tons.
Data says that total annual gold supply inched 2% higher in 2022 to 4,755 tons, with mine production notching a four-year high of 3,612 tons. In times of Global disruptions such as war, rising inflation, and rising interest rates, people use gold as a hedge against inflation whether this is true hedge or not. Where does all the gold go since it is not used or eaten like other commodities such as oil or wheat?
As Peter Hug, director of global trading at Kitco, said, "Gold ends up in a drawer someplace. The gold in jewelry is effectively taken off the market for years at a time".
One doesn't have to look far to see that another large driver to the removal of gold from the supply change is bulk buying through central banks.“This marked a banner year for central bank buying: 2022 was not only the thirteenth consecutive year of net purchases, but also the second highest level of annual demand on record back to 1950, boosted by +400t demand in both Q3 and Q4,” the WGC said.