$TSX Nearing and Inflection Point

Posted to email subscibers July 30th..

$TSX nearing an inflection point 

Most of you know that I am a chart watcher and if asked where I go first to find out about a stock... I will always tell you the chart.  There is a very interesting technical set-up for the $TSX index which is telling me that we are nearing some sort of inflection point over the next 3 to 4 months.  I have no idea what that catalyst is or even if we are going to breakdown or breakout.  What I can say is that when this break happens its going to be with force.  One way or the other.

If you were to just gauge retail sentiment.  You would think we are at the end of the world when it comes to stocks.  Financing has dried up.  There is no new money other than what was already precommitted to projects and the volumes have completely dried up to practically NIL.  On the other hand... I think contrarians work best when they are contra the herd, not contra an idea.  You cannot get any worse sentiment in this sector.

For commodities and materials in particular....  The last 18 months has not been fun except for the odd rocket, but nothing in this market can sustain a run.  What is even more odd is that in spite of such bearish sentiment North of 49... The US markets look the exact opposite and have gone through a nice correction in May should now continue the 'face ripper' they started in December when a lot of stocks put in their lows.

It's a confusing time for sure.  What might be your leading indicator could be gold.  If POG can break this last downtrend, it may signal that event this Canadian dog might be putting in its lows.  It will certainly help put in a floor ont he venture cosndiering the abnormally large amount of gold stocks on the index. At any rate.  I would not be fully invested in this market yet.  Not until we get our signal.  Speculate all you want and fish with your stink bids.  But buying this market gives you odds similar to betting a color on the Roulette wheel.  The only one making money is the house.

I am looking for anything sustained in August over 12,000 - 12,100 as buy signal.

A Wedge Within a Wedge...

Chart shows that $TSX price action on verge of breaking the recent trend in declines...



If you are looking for clues like myself... the next chart shows a slight acceleration in a declining trend. This usually happens before a precipitous crash or a series of capitulation events in the market.  What you might take if a break in the smaller trend occurs is that there is no accelerated decline. It was all needless panic.  It may foreshadow a larger break in trend.  But then again... it could be a head fake.  With that big giant head and shoulders pattern on the $TSX screaming disasaster is on the horizon... you just can't go long until the sell signal resolves itself.

Remember...  I say MAY foreshadow a trend in break. As always... looking to Europe in this never ending saga.

As the saying goes... "Buy in September and Remember"  Certainly the entry points haven't looked this good since 2009.

I say if you want a sexy bottom...  the best skin is at the beach in August.

Please wait for confirmation.  Not too much longer.




Happy Trading


Christopher Skidmore

EGZ Confirms Discovery of Worlds Largest Graphite Deposit

Energizer Resources Confirms Discovery of World’s Largest Graphite Deposit with 421.3 meters @ 6.12% C

 

Drilling Highlights:

• MOLO-12-01…  421.3 meters @ 6.12% C
• MOLO-12-01…    37.5 meters @ 6.11% C
• MOLO-12-01…  290.1 meters @ 6.08% C

Energizer released long anticipated assays to the drill intersections announced in early June and the results did not disappoint with the first hole of the resource delineation program at Molo intersecting 6.12% C over 421.3 meters.  The results confirm that Molo and the surrounding Green Giant graphite camp is the largest graphite discovery anywhere in the world.  This certainly makes Green Giant a potential cornerstone source of graphite production for the next century.  It is hard to imagine anyone making a discovery that has all of the qualities that Green Giant possesses.  Usually we talk about mine life in terms of 10 to 20 years, but on the Green Giant property, there is potentially enough graphite to mine for the next century.  This discovery is a game changer for the industry.  Green Giant will represent a reliable source of cheap graphite for the foreseeable future which assures both cost savings to auto manufacturers and more importantly security of supply, a major reason graphite is considered a ‘critical metal’.

The initial assays from drill holes and trenches confirm several important things about the Molo deposit…

• The deposit has a very consistent grade of 6% graphite over long intervals from surface indicating Molo will be a low cost open pit mine.
• Graphite rich mineralization has been confirmed to a 300 meter depth indicating substantial tonnage potential at the Molo graphite zone.
• Correlation between EM anomalies and graphite indicating several potential mine sites and potential unlimited resources and reserves capable of meeting a sustained long term demand curve

So how much graphite are we talking about?

25Mt @ 6% C between two trenches spaced 100m apart

More contained graphite than either Lac Knife or Bisset Creek

Energizer cut 358.5 meters grading 6.21% C in the trench we walked across while on site. 100 meters to the south EGZ intersected 325 meters @ 6.35% C.  If you are any good with numbers, you will quickly calculate that within these two trenches averaging a 340 meter wide zone is 25 million tonnes of graphite ore at 6%.

1.5Mt of graphite over a 100m strike

I just want to drive this number home one more time... 

1.5Mt of contained graphite within 100 meters…  More graphite than either Northern Graphite’s Bisset Creek or Focus Metals’ Lac Knife.  Why Energizer still trades at discount to its peers is a mystery to me.  If anyone should trade at a discount, it should be EGZ’s peers trading to EGZ.  No other deposit has the ability to ramp up like Molo.  EGZ stated in the news release that they believe that Green Giant could produce up to 100,000 tonnes of graphite concentrate a year without any major infrastructure upgrades to the area.  5 times Northern Graphite’s planned production.  A 100Mt deposit could produce 100,000 tonnes for 50 to 60 years or 500,000 tonnes for the next decade. If you project the results over the entire 850m by 300m zone the deposit grows to a whopping 200Mt when considered to a 300 meter depth.  It is pretty easy to see how EGZ is on the verge of defining one of the largest graphite resources anywhere in the world.  An initial resource estimate for Molo is due sometime in December.  Less than 5 months away and a production date will not be much after that in 2013 or early 2014 (dependent on DRA’s timelines.)

In my humble opinion… no graphite deposit can hold a candle to Molo


Lac Knife and Bisset Creek mineralization fits within a 200m strike at Molo

To take another perspective on things and grasp an idea of the magnitude of the discovery at Green Giant…the entire mineralization at Bisset Creek or Lac Knife could fit between two trenches at Molo.  You could stuff Bisset Creek into a 100 meter strike of Molo and then stack Lac Knife right next to it in another 100 meter wide zone.  All the graphite that FMS and NGC have you can stuff within a 200 meter zone at Molo which barely makes up a ¼ of the deposit.  It makes Bisset Creek and Lac Knife look pretty small when compared to the monstrosity developing at Molo.


200Mt @ 6% C is 12 to 13 million tonnes of graphite

More than 10 times the amount of contained graphite either NGC or FMS

Molo and its 200 million tonnes is just one anomaly within a camp that literally has 100’s of graphite occurrences and corresponding EM anomalies on the Green Giant property.  When it comes to graphite and a reliable 21^st century source…there is no other discovery potentially as significant to the entire industry as what EGZ is uncovering in Madagascar at Green Giant.

The numbers dwarf all other companies developing graphite deposits either with historical or NI 43-101 estimates in tonnage.  The grade is impressive for tonnage that is usually associated with disseminated zones like Bisset Creek or Lac Knife.  The combination of both grade and tonnage makes Molo a unique opportunity in graphite.  It is a ground floor discovery that a reputable mine builder in DRA is planning to turn into a cash cow in operation and major source of cheap graphite.  Mix in excellent purities and flake size that rivals Bisset Creek, you have your industry leader.

Below is a comparison of the 4 industry leaders who plan on producing graphite by 2014/2015.

Company	Deposit	Tonnes (M)	Grade (C)	In situ C	Market Cap
Energizer Resources EGZ-T	Green Giant, Madagascar	200Mt	6% C	12Mt	$47.8M
Focus Metals FMS-V	Lac Knife, Quebec	7.9Mt	15.5% C	1.2Mt	$58.8M
Northern Graphite NGC-V	Bisset Creek, Ontario	53.6Mt	1.87% C	1.0Mt	$55.2M
Flinders Resources FDR-V	Kringel, Sweden	6.9Mt	8.8% C	610,000t	$63.8M

While Graphite Prices Slide - Grade is King

Graphite prices have dropped over the last few months which would barely affect the bottom line of high grade operations like Green Giant or Lac Knife whose costs will be well under $1000 per tonne.  The same drop in large flake prices is an entirely different story for Bisset Creek whose costs will average a little under $2000/tonne.  A long term production decision at lower grading 2% projects is questionable without some sort of value added process like spherical graphite and is why Northern Graphite is working hard to perfect a value added spherical graphite process as well as spearheading graphene initiatives.

Deposits with higher grades are suddenly much more attractive considering graphite prices may have plateaued.  No one is sure where graphite prices will end up in the short term or the long run; but at current prices graphite mining is quite lucrative for many operations mining higher grades.  Grade always translates into low cost production.  The high grade mines will still be able to flourish with costs well under $1000 per tonne.  Gary Economo mentioned Lac Knife will produce graphite at less than $400 per tonne while a 6% to 7% mine could achieve $500 to $600 per tonne.  In an environment where costs are escalating for every miner, it doesn’t matter if you’re mining gold or graphite, low grade projects become quite unattractive. 


Energizer’s Molo… A World Class Source of Graphite

Energizer Resources Green Giant is an emerging world class graphite discovery whose metrics are shaping up to make Molo and Green Giant second to none.  EGZ is the best of the bunch when it comes to graphite.  The company should be valued (at a minimum) on par to the current industry leaders FDR, NGC and FMS.

Once production is achieved at Molo… the numbers will speak for themselves.

EGZ is early in the discovery cycle but is already the clear winner and will emerge as the leader when it comes to mining graphite.  Green Giant a “no brainer’.

1. Simple Processing - some of the simplest processing in the industry
2. High Purity - product demonstrates a high purity which means premium pricing
3. High Grade - outstanding grade means Molo will be a low cost producer
4. Tonnage – being one of the largest graphite deposits in the world ensures both scalability and a long mine.

Number #5

Molo is shaping up to become the biggest graphite deposit anywhere in the world.  Green giant could potentially make up the largest concentration of graphite deposits found anywhere on Earth.  The capacity to go from 100,000 to 500,000 to 1Mtpa is unmatched by what any other concentration of graphite deposits has to offer anywhere on Earth.

So far the results have been ‘Out of this world’ for this world class mineral discovery.


http://www.marketwire.com/press-release/energizer-resources-intersects-434-metres-of-graphite-mineralization-in-drill-core-tsx-egz-1664741.htm



Christopher Skidmore


Beat the Market Stock Picks

Posted to my newsletter July 25th

Special Alert: Gold about to Break Out 

I started writing this article yesterday at close because my intention was to get it out yesterday but that didn’t happen because a nap turned into a 10 hour sleep.   At any rate…  I might be going out on a limb but I do believe that both the gold and gold stocks could be on the verge of a major breakout and today POG has slammed the $1600 wall indicating it has some real momentum for a rally.  Gold maybe not ready for a major breakout to $2000, but there is at least a good 6 to 8 week counter trend rally.  There are several factors that lead me to believe that gold may be close to being done consolidating and have put in a bottom.

Seasonal strength – We are now entering the sweet spot for when gold is seasonally strong.  Psychologically gold is cheap compared to last year and there was an absence of buying from traditional physical sources last year because of steep price increases.  This year I expect that traditional physical demand for gold will pick up from last year from places like India and China.

Support at $1530 could not be broken – As much as shorters tried, there is very strong support that could not be broken.  I for one would no longer be short the yellow metal as there seems to be more people willing to buy below $1570 than there are sellers.  That is another bullish sign.  Especially considering how well POG has been holding $1570 over the last few weeks.

Technical wedge setup -  POG is going to move… one way or the other with this setup.   This is a major technical setup we are approaching over the next week or so and considering the level of support  at current prices, it will take a major bad news event to move gold lower.   This one factor that “All Roads Lead to Monetization”  even deflation certainly in my mind keeps a floor in the price of gold.  That floor seems to be $1530.  If POG breaks this trend to the upside…  there is at least a $100 move to a stronger trendline.  This trendline analysis is setting up to almost the same type of break that the American markets made in December after the selloff when they came back with a thunderous roar.  Keep your eyes peeled very closely because there is a lot of cash on the sidelines waiting to pounce in this market.  There are many lovers of gold that are looking for any excuse to get back into the market.



The FED is finally going to discuss the merits of a bond buying program.  Hello?  QE3 is finally on the table.  Just rumors of the FED discussing QE3 will help re-inflate asset prices.   I heard commentary that said there was nothing new to this rumor.  These guys obviously didn’t read the article below because the major difference is that the FED has not discussed bond buying on a serious level since QE2.  It was the bond buying that help inflate asset prices and the materials market specifically which will certainly happen again.  There has also been talk which I have mentioned months ago that the most likely form will be at bonds that are linked to the US mortgage market.  I am not a debt guy but it makes sense that this time relief is aimed at the American consumer.  I relief in mortgage rates and stimulus in this area could help re-inflate housing prices which is the biggest hit to the American consumer.  If you can get house prices to where Americans have some real equity in their homes, it will not only help consumption in the US but also potentially   One thing I am surprised is that I thought the FED would be more reactionary and wait until the economy and markets were more indanger while this move seems to be more proactive if the QE3 initiative arrives in late 2012 or early 2013.

http://www.bloomberg.com/news/2012-07-23/raskin-says-fed-to-debate-benefit-of-new-bond-buying-plan.html


The rest of the world is ready for stimulus.  China is talking stimulus.  Even Europe is talking some type of stimulus although it never gets very far because no one can get along over there.  Everyone realizes that if you want to deleverage without starving your citizens, you need to monetize at the same time you put in FAT CUTTING austerity measures.   I have heard the words stimulus come out of Merkel’s mouth in the last 2 months… so you know she knows that they have to do it at some time.  And we all know that Merkel runs the show over there.

Some Gold Companies to Discuss

For 2012 the second half we are going to wipe the slate clean and we are primarily looking at gold stocks.  That is it.  Of course graphite is still a great opportunity especially considering where some companies share prices have fallen to and now is the time to buy.  Even if the markets do fall off a cliff this fall, I think it will only be for a very brief moment and that the markets will bottom in within the next 9 to 12 months.  Bear markets do not last forever and with all the stimulus planned over the next 18 months should eventually light a fire under the materials sectors.  With all the monetization about to happen… the biggest beneficiary is of course gold.   Since everything is dirt cheap.  You always gotta go with the best.  When the cream of the crop is as cheap as it is there is no reason to seek leverage in lower tier companies.  So I have listed my top five high grade gold stocks.  When looking at quality I look at several factors to determine but obviously you gotta stay close to home.  As Argentina has taught me this year, even perceived political risk can ruin a portfolio.  So to start the second half of 2012 off here are my top 5 high grade gold stocks.  Note…  4 of the 5 companies deposits are in Canada.  Goldcorp’s Red Lake might not be the crowning jewel it used to be and there is plenty of near term production potential from these companies to more than replace GoldCorp’s Red Lake… and no, Rubicon is not on this list.

One other thing to discuss that I do not think I have laid out well.   These five here are development plays and are suitable long term holds.  When I list exploration plays.  They are 100 times more speculative and you must treat them as such.  They are lottery tickets and can go up as fast as they can go down, but are very good trading vehicles if you can stomach the volatility.  Most of those discoveries will nto play out in the long run but can represent potential 100 fold gains if they do and you get in early.

Always approach discovery plays like CSQ-V as they are.  A potential discovery.

Pretvim Resources PVG-TO $14.69 / $1.4B Market Cap

PVG continues to be the top dog of all dogs anywhere in the world.  If this is not in your portfolio you are nuts.  Today they intersected on of the highest grades intersections I have ever heard of…

41,582 g/t au over 0.5 meters… that is one big nugget.

I have run through the numbers on this one several times.  The resource will continue to grow in leaps and bounds and this mine will replace Goldcorp’s Red Lake Mines as the top dog in Canada.  Definitively.

Continental Gold Mines CNL-T $6.90 / $760M market cap

Continental Gold Mines is my only international play and it is in America friendly Columbia which has seen a rebirth in gold exploration and discovery.  Continental Gold Mines is the cream of the crop that South America has to offer.   I attended CNL’s presentation on Buritica at PDAC and have to tell that of the mining presentations, this one I left being the most impressed.   The company has ten drills at Buritica drilling over 100,000 meters this year and have significantly expanded the deposit which stands at 630,000 ounces measured and indicated at 17.8 g/t au and 2.5M ounces inferred at 11.4 g/t au inferred.  The deposit contains 11M ounces of silver and over 100M pounds of zinc.  CNL has not released a PEA on the project, but I expect it to be a low cost producer.

The company has hit some impressive intersections outside of the resource model 3 meters @ 162.7 g/t au and 41 g/t ag.  In early June the company announced another impressive stepout hole demonstrating that huge potential for the resource model to grow to well over 10M ounces of gold with 4.5 meter intersection at 20.3 g/t au and 102 g/t ag that extended the total depth of the system to 1,300 meters, 650 meters below the deepest point of the current resource model.  The hole was also a 500 meter step-out  in the Yaragua system.  The Buritica Project is the best that South America has to offer as far as high grade goes.  Some might take CSI-T Serra Pelada.  Not me.  I am a CNL fan and this list only has room for one international play.

Barkerville Gold Mines BGM-V $0.82 / $88M market cap

The more I look at what happen the last month the more smell a dirty rat with what went on.  Frank has been in the gold business for 20 years and is not a dumb guy despite his appearance.  Either that guy is completely incompetent including the rest of the staff at BGM or they knew that the BCSC was going to make them retract.  One thing that leads me to this suspicion is the fact that a ton of warrants were exercised over the last month.  This smells so dirty I really don’t wanna touch because of the OBVIOUS behind the scenes shennigans for the financiers flushing paper out in the high $1.50’s.
Nevertheless, when I look at a company, I evaluate the property less management because I have seen it time again… crappy people getting lucky.  It is how this resource industry works.  You have the hard workers that do their DD and work everything and you have others that just want to promote a company and flush out paper and make a buck.  It’s the only industry that I know where both groups can succeed.  Not to say that Frank hasn’t worked his ass off to get to where he is, but seriously I don’t know anyone who is that stupid to not see what happened last month for what it is.

A bunch of bullshit in my opinion.

What made it worse is the BCSC makes them re-state but refuses to cancel the trades.  So all the VSE scum gets to keep their money from washing out their warrants and the BCSC plays the role of basher and tanks the stock where the VSE scum can load up again.  Beautiful.

Those harsh comments aside, I have moved Barkerville to third place on my gold development play list.  The 10.6M ounce resources will get re-stated and the ounces will drop and the grade will drop.  Where the grade drops to is anyone’s guess.  I don’t have Barkerville’s results in a spreadsheet so I could only give you a best guess as to where the resource goes.  I think it will come in around 8M ounces and a 4 g/t gold grade which will still be very good for the Cow Mountain deposit.

My brother recently moved to Wells from the island so I took the time recently to make a trip up to Barkerville to visit him and take a boo at the operations in Barkerville.  One thing that I noticed from my last trip to Barkerville when I was 16 was that where there was only one placer operation, along the creek to Bowron I now counted at least (4) 5 or 6 man placer operations on the river, two of them were active while I was there.  On the other creek heading east there was at least one guy I followed from Wells that had his own little one man operation in the bush.   There is plenty of gold in Barkerville and it makes little sense to me why the area hasn’t generated more interest.  Oh ya.  Frank.

These are my top dogs.  In my opinion Barkerville could be a real winner because of the market cap and the fact a 4g/t or 5g/t open pit is going to be mighty profitable vs. the other two that have higher grades but will both be underground gold mines.  But if you know me... the best opporuntities are the ones where you step out on a ledge where others refuse to go.



Numbers 4 and 5

Sabina Gold and Silver Corp SBB-T $2.00 / $346M market cap

In my opinion Barkerville has the stuff to knock Sabina out of third place eventually.  Sabina is much better financed but there project does not compare to Barkerville.  If only you could switch management.  Barkerville will also have much more favorable operating conditions than in the Nunavut where Sabina is located and Barkerville has much better exploration upside as demonstrated (but not to be relied upon) in the news release last month.   I am not going to spend much more time on SBB for now , but it is on the list and is extremely over sold from 18  month highs of over $8 a share.  It is a solid recognizable name and potential for takeover with its cash much more than a name like North Country Gold whose open pit at 3 Bluffs won’t grow too much more than it is.  NCG is still a very good value play at the current price but did not make the top five.  No.

Eagle Hill Gold Corp EAG-V $0.165 / $26M  market cap

I am going to go out on a limb and say that EAG is one of the most mis-priced gold stocks on the market and should not be trading under $0.30 let alone $0.165. EAG sp never seems to gain traction but it is an exploration program that has really gained some traction in the last 18 months.   They recently released a resource statement that more than doubles the global resource at Windfall Lake and the results from their drilling program continue to have success.  EAG has millions in infrastructure at Windfall that would cost double its market cap to put in now and 1.36 ounces at just under 10 g/t.

Many of those ounces near surface

I am confident that Windfall Lake will be a strong open pit and underground mine for years to come and is now easily a 100,000 ounce per year production potential.  Many of the recent intersections are near surface and would make a pretty lucrative pit operation with the near surface results below.

• 41.8m @ 4.6 g/t au
• 47.2m @ 11.8 g/t au
• 55m @ 5.7 g/t au
• 25m @22.85 g/t au

Stick with this one and you will eventually be rewarded.   Will they get 10M ounces at Windfall Lake?  I am not sure yet of that but even a 3M to 5M ounces resource will be a very attractive mine and this system is one that looks like it will go to depth.  So far Windfall Lake has been demonstrated to a 770 meter depth.    EAG is my one wild card pick that could eventually blow the socks off everything else if they can have 500,000 to 1M ounce starter pit.

For this last high leverage spot there were several candidates but the recent success by EAG made me take this bit of a surprise.
Other candidates for this Canadian high leverage early high grade developer pick were Maudore MAO-V, North Country NCG-V, Mega Precious Metals MGP-V.

Stick with the top 3… it’s the easiest money you ever made.  The entry point for all these guys is now.

Christopher Skidmore

Happy Trading