OK-OK MY HOT LIST.-penny stocks..accumulate-slowly
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Synopsis: Lithic Resources Ltd (LTH-V: $0.35) is a prime example of an overlooked exploration junior that is on the verge of achieving a much higher profile as speculators come looking for juniors with competent management and projects that already have a resource in place that is open to expansion through new exploration and whose economics appear to shine at current metal prices. Nearly 2 million shares have come out in the $0.20-$0.30 during the first quarter of 2006, but the selling is drying up in response to the recent announcement of a $400,000 private placement at $0.25 which has generated so much interest management is considering increasing the amount. I wish to confirm that Lithic remains a top priority buy in the $0.20-$0.29 range and to alert bottom-fishers that the timing for a significant speculation cycle is imminent. If you want exposure to a zinc play in Utah with molybdenum, silver and even copper possibilities that already has more than $1.2 billion worth of zinc in the ground, currently carrying an implied project value of only $9 million, then Lithic Resources Ltd is an excellent way to put some zinc exposure into your bottom-fish portfolio. The upside limit during the next five weeks will likely be the $0.50-$0.60 level as the market either digests 2.9 million warrants exercisable at $0.50 until late April and early May or waits for them to expire. The proceeds from the current financing will be used to conduct geophysical surveys on the Crypto project in Utah and the earlier stage Stoke Mountain VMS project in southern Quebec prior to summer-fall drilling for which Lithic plans to raise another $2-3 million. Stoke Mountain is an old VMS teaser play in the same belt of rocks that host the Buchans and Duck Pond deposits as well as Messina's recent Boomerang discovery. Lithic's approach involves targeting an untested stratigraphic horizon in the hope of finding a large cousin of the many small copper-zinc-silver deposits in the region. Stoke Mountain is a sleeper in the sense that very little exploration was done during the 20th century because Domtar Paper had held the mineral rights. At Crypto Lithic plans to extend the known carbonate replacement zinc zones, apply modern geophysical methods to identify new possible zones, investigate the molybdenum mineralization previously encountered at depth, further explore the potential for distal high grade silver-lead veins, and follow up a past intersection of high grade copper-zinc-molybdenum mineralization. Crypto's geology appears to be driven by a deep porphyry system whose geometry is not yet well understood, which leaves this play open to significant surprises. The story at Stoke Mountain is the potential for a new discovery, while the story at Crypto is to expand the known mineralization and upgrade the existing resource in anticipation of a Structural Bull scenario where zinc establishes a long term average above $1 per lb. The wild card for Lithic is that the management behind its major shareholder, the Resource Capital Fund, takes advantage of higher prices generated by market interest in Crypto to drag an even larger project into the fold. As Lithic currently stands it offers something for just about every type of speculator, including the Bay Street boys who last October pelted the president with eggs and tomatoes when he came looking for money. But that was before zinc exploded from the sink
The 1,164 hectare Crypto project is located in Utah about 150 km southwest of Salt Lake City and about 50 km southeast of Dumont Nickel's Gold Hill project. Utah is a mining friendly state which hosts the world class Bingham Canyon Mine. The Bingham Canyon porphyry system has a resource of about 3.1 billion tonnes grading 0.73% copper, 0.043% molybdenite and 0.013 opt gold. In addition Bingham hosts carbonate replacement and skarn mineralization containing high grade zinc, lead, silver and gold ore. Bingham Canyon's carbonate replacement mineralization, of which 13.5 million tonnes grading 8.8% lead, 3.4% zinc and 4.9 opt silver has been mined, is relevant because Crypto has a similar geological setting, although the inferred porphyry system would be buried deeper. The Crypto project includes the historic Fish Springs Mining District which underwent small scale mining of high grade silver-lead ore from structurally controlled carbonate replacement zones during the late 19th century until the 1970's. The Utah Mine produced 13,000 tons grading 128 opt silver and 44% lead. Lithic believes there remains potential for additional high grade silver mineralization at depth in the eastern part of the property
The main focus at Crypto, however, is a series of carbonate replacement and magnetite bearing skarn zones containing coarse grained sphalerite (zinc). This mineralization occurs at the contact where a possibly Tertiary aged quartz monzonite intrusive has cut a sequence of Ordovician to Silurian carbonates. The zinc zones were discovered in 1961 by Utah International while drilling iron (magnetite) targets and explored until 1985. During the nineties Cyprus Minerals optioned the property and tested the known zones at depth. In total 68 holes have been drilled for 88,400 ft. Cyprus calculated a non-43-101 compliant "geological in situ reserve" in 1993 which Roscoe Postle independently reviewed and deemed to be up to prevailing industry standards. Cyprus estimated a resource of 2.8 million tonnes of oxide zinc grading 7% to a depth of 250 metres, and 5.4 million tonnes of 8.68% sulphide zinc between 300-500 metres. The zinc oxide mineralization is not relevant because it represents metallurgical recovery problems, but the deeper sulphide resource has economic potential through underground mining methods. The sulphide resource contains 1,033,058,880 lbs of zinc worth US $1.3 billion at a $1.24 per lb zinc price, with a rock value of $237 per tonne. When Lithic acquired the Crypto project the rock value of the zinc sulphides was only half that amount, and when zinc was wallowing at $0.35 per lb the rock value was only $67 per tonne, far too low to sustain an underground mining operation. At a $237 rock value the Crypto deposit may very well be feasible, but what nobody is yet willing to grant as feasible is a long term average zinc price of $1.24. That is why the market is only assigning an implied value of $9 million to the Crypto project rather the $100-200 million the project might be worth if high zinc prices were here to stay. Lithic management feels that it needs to boost the overall resource by at least 50% to achieve a scale that would justify development of an underground mine premised on $0.80-$0.90 long term zinc prices. And because even that assumption requires one to throw out the history of the past 30 years, it is no surprise that Lithic management sometimes comes across as Crypto's biggest skeptics
But Lithic's Chris Staargaard and Russ Cranswick are both geologists, and what gets them excited is the possibility that Crypto's geological potential has barely been scratched. The intrusive associated with the carbonate replacement mineralization appears to be a cupola extending from a deeper intrusive body. Drilling at depth of the zinc mineralization has encountered molybdenite mineralization. The presence of molybdenite at depth and the structurally controlled lead-silver mineralization east of the zinc zones is consistent with the metal zonation found in porphyry system. Additional intriguing possibilities are raised by a 3 metre intersection 600 metres east of the main zone which graded 3.5% copper, 7.65% zinc, 0.1% molybdenum and 21.8 g/t silver. Copper is not part of the known zinc carbonate replacement zones, which leads Lithic management to suspect that a large porphyry is present at depth which has generated a number of carbonate replacement deposits with varying metal content. The idealized cartoon model below is a possible interpretation of the above Crypto geological cartoon. The exploration strategy will be to apply a variety of geophysical techniques in an effort to "see" targets not seen before, and to drill a number of deep holes designed to illuminate the geological context of the targets. The goal for Crypto is thus twofold: expand the known zones and find entirely new zones by developing a better understanding of the Crypto system's geometry. It is tough to raise money in bear markets for such a strategy, but in a bull market based on rising commodity prices this double pronged approach appeals to dreamers and number-crunchers alike.
The Stoke Mountain project was also optioned in June 2005 from a pair of geologists who had worked on this project during the nineties. Lithic can earn 100% by paying $155,000, issuing 450,000 shares and spending $975,000 over four years. The vendors retain a 2% NSR, of which can be bought out for $500,000. The property is located in southern Quebec about a 2 hour drive southeast of Montreal. It occurs within the Dunnage tectonic zone, "a belt of old oceanic crust that includes a collage of Cambrian to Mid-Ordovician island-arc terranes" which have potential for volcanogenic massive sulphide deposits (VMS). World class deposits include the mined out Buchans deposit in Newfoundland and the Brunswick 12 deposit in New Brunswick. Smaller examples in Newfoundland include Aur's Duck Pond deposit and the new boomerang discovery of Messina Minerals.
A number of small 1-3 million tonne copper-zinc-lead-gold-silver deposits have been exploited on the Quebec portion during the past hundred years. Examples include Cupra-d'Estrie at 2.43 million tons of 3.28% zinc, 2.74% copper, and 38 g/t silver, Solbec at 2.06 million tonnes of 4.57% zinc, 1.57% copper, 48.6 g/t silver, and Suffield at 1.39 million tonnes of 7% zinc, 0.9% copper, 0.5% lead, 91.2 g/t silver and 2.7 g/t gold. The town of Sherbrooke to the southwest of the Stoke Mountain property used to be a mining town but no longer so. The Stoke Mountain property is interesting because it has received little exploration compared to surrounding land because Domtar Paper held mineral rights until a forced divestiture in the eighties. The theory is that VMS deposits occur in clusters, usually with at least one larger deposit which in this area has not yet been found. Lac Minerals took a first crack at the property in search of Bousquet style gold deposits, and then Phelps Dodge took on the project during the nineties, shifting the focus to VMS targets. Phelps Dodge focused its drilling on IP anomalies deep within the volcanic sequence and obtained a few sniffs, and just as its geologists were figuring out that their focus should have been the volcanic-sediment contact higher up in the stratigraphic sequence, Phelps Dodge pulled the plug on the project. For at least one of the vendors Stokes Mountain represents unfinished business. Lithic's goal is to conduct detailed mapping and geochemical sampling to better sort out the stratigraphy and follow up with drilling.
Conclusion: Lithic has suffered from neglect by its major shareholder during the past couple years because the Resource Capital Fund group does not normally control the companies it bankrolls. Lithic was thus an anomaly with which it was unsure how to deal. The job has now fallen to RCF's Russ Cranswick to help Chris Staargaard breathe new life into the junior. Other directors include RCF's Ryan Bennett and Frank Wheatley who tend to be busy with other projects. Both Staargaard and Cranswick are relatively young in mining industry terms, and although they do not have significant equity stakes in Lithic, the junior is emerging as a proving ground for them. Prior to the recent private placement the company had almost no money left and a bunch of disgruntled shareholders wondering why they had ever invested in Lithic. All that is about to change, provided Cranswick and Staargaard pick up the ball and run with it. The IPV chart below reveals that at a $9 million IPV for the 100% owned Crypto project Lithic is among the cheapest of the juniors who own zinc deposits. With only 18,032,819 shares issued and 24,490,486 fully diluted, of which nearly 9 million are owned by Resource Capital Fund II, Cumberland and Eurozinc, the structure of Lithic offers lots of upside if Crypto captures the public's imagination, and Stoke Mountain delivers a new discovery.
Skyline Gold gets TSX-V acceptance of Bronson report
2006-06-21 16:23 ET - News Release
Mr. Jeff Smulders reports
SKYLINE ANNOUNCES THE ACCEPTANCE AND DETAILS OF ITS TECHNICAL REPORT
Skyline Gold Corp. has received the acceptance of the TSX Venture Exchange of the technical report referred to in Stockwatch news June 6, 2006.
The technical report includes comment on access, infrastructure, exploration, drilling, metallurgy and resource estimates and a recommended exploration program on the company's Bronson Slope property in northwestern British Columbia. The report is being filed on SEDAR and will be posted on the company's website, currently under development.
The report concludes that the resource estimate of Giroux (1996b) is reliable and relevant. Although this historical resource estimate does not meet current Canadian Institute of Mining and Metallurgy (CIMM) resource standards and classifications, it was an accurate and fair resource estimate, at the time, and should be referred to as a historical resource. This historical resource will be used by Skyline in future reporting and referred to as such.
BRONSON SLOPE
GIROUX OCTOBER, 1996, HISTORICAL RESOURCE WITH CONTAINED METAL CONTENT
(Cut-off based on NSR of $6 (U.S.) per ton)
Category Tons Au g/t Ag g/t Cu% Au (Oz) Ag (Oz) Cu (Lb)
Measured 2,280,000 0.574 2.59 0.210 42,076 189,856 10,555,625
Indicated 65,000,000 0.527 2.46 0.195 1,101,323 5,140,901 279,433,050
---------- ----- ---------- --------- --------- -----------
Total 67,280,000 0.528 2.46 0.196 1,143,399 5,330,757 289,988,675
Inferred 24,300,000 0.454 2.23 0.199 354,693 1,742,216 106,607,842
Based on the following 1996 metal prices and currency:
$1.00 (U.S.) equals $1.33 (Canadian)
Au at $385 (U.S.) per ounce
Ag at $5.25 (U.S.) per ounce
Cu at $1.10 (U.S.) per pound
A. Burgoyne, author of the technical report, recommends that Bronson Slope be advanced through further exploration and drilling. Mr. Burgoyne recommends a two-stage program. The first stage would include survey control, the tie-in to pre-existing grids and the geological database, and completion of 4,215 metres of core drilling. The drilling will focus on the Red Bluff, a part of Bronson Slope, at 50-metre and 100-metre centres. The cost of this program is estimated to be $1.75-million.
A second stage of core drilling is recommended, subject to stage one being positive, on the Red Bluff zone and High Wall gold zone, as well as the Bronson East and Bronson West targets. The program will total 10,656 metres of HQ-diameter core drilling, at an estimated cost of $3.7-million. Drilling will commence immediately as finances become available under the management of Cam DeLong, BSc, MSc, project manager.
June 19, 2006
Over the past years that I have been privileged to participate in this fledgling generational bull market in gold, I have written a goodly number of essays detailing the Commitments of Traders reports and analyzing how that relates to the price action experienced in the gold futures pit at the Comex.
Having been at this game for a long time now, I can usually get a pretty good feel for who is doing what during the course of the week by comparing the price action in the pit against the previous week’s COT report and looking at the long term trend of a market. In what I consider to be “normal” markets, a rising market in an established bull trend will usually see the bulk of the speculators, both large and small, on the long side with the bulk of the commercials taking the opposite or short side. That only makes sense as commercials/producers are using the speculator buying to implement scale-up selling programs to lock in profits. They sell a little here and a little there and continue to do so as prices rise, assuring themselves of a profit and minimizing risk which the speculators are more than willing to assume in exchange for an opportunity to make a profit. The higher the market rises, the happier these true or bona-fide hedgers are as that means higher selling prices for their goods.
Over the past years in this gold market we have witnessed some anomalous patterns in the open interest activity that I have detailed in great extent in various essays I have published out on the web. Unlike “normal” markets, the pattern for gold has been for the commercials to meet determined speculator buying in gold with fierce resistance all the way up in a manner that is normally not consistent with price maximizing selling. Upward progress is met, not with commercials standing aside and allowing the funds to drive the market north and then selling lightly into that buying only enough to cover their immediate hedging needs, but rather with fierce and determined selling that fights and contends against all upward progress. I have therefore come to expect this pattern as the norm in the gold market.
Imagine my surprise then to learn from today’s release of the COT report that the commercial category went even one step further than I had come to expect from them. Their normal pattern has been to sell with steady determination but only into rising prices as they attempt to cap the price rise and resist the upward progress of the metal. Once the fund buying has abated or stalled, they then launch a counterattack of heavy offers which overpower the bidders in the market. This has the intended effect of causing a quick retreat by the locals who front run their offers and proceed to knock the market down into the sell-stops below which are then automatically touched off turning speculators into sellers. The process then feeds on itself producing an avalanche of selling which trips all the short term technical oscillators and has the black boxes lighting up the computerized platforms with even more speculator sell orders which soon turns into a veritable blood letting.
The cartel of commercials then use this forced speculator selling to buy back or cover the short positions they had built up over the course of the price rise congratulating themselves for having fleeced the momentum based trading funds who chased the market higher. We have seen this pattern repeat itself going all the way back to 2001.
What is quite extraordinary about today’s report was that it detailed something which I have not seen during the course of this entire bull market since 2001, namely, increasing short sales by the commercial category in the midst of a falling market – not just a falling market, but a precipitously falling market at that. This is a startling new development.
What is even more remarkable is that the big trading funds, instead of dumping their longs into the lap of the waiting commercial cartel, actually appear to have been buying on the way down! This also is a FIRST! In other words, we have seen in one week a COMPLETE REVERSAL of the norm of the last 5 years in the gold market. As a matter of fact what I had been expecting to see was a REDUCTION in the net short position of the commercial category and a reduction in the net long position of the trading funds. I assumed that the gold cartel would dupe the trading funds into establishing a huge number of new short positions even as that same category sharply cut the number of long positions. I also assumed that the same thing would happen among the small spec category.
What actually happened was the exact opposite except for the small specs who ditched more shorts than they did longs! The big trading funds INCREASED their net long position as the market fell – something they have not done throughout the history of this past bull market. Instead of piling on a ton of new shorts, the trading funds added only a bit more than 700 new shorts and almost 4,000 new longs into the price weakness. Could it be that this category is finally wising up and actually learning to beat the cartel at its own game? We will have to see but the fact that this has occurred at all is nothing short of astonishing.
Let me try to put it another way. The COT report covers the activity of the traders from the Tuesday of the week past to the Tuesday of the current week. In other words, if we want to learn who was doing what from Tuesday to Tuesday we can get a very good picture from looking at that report. Unfortunately the report does not tell us who was doing what on Wednesday, Thursday and Friday of the current week. That will show up in the following week. Still, we can get enough information to correctly identify the transition of players for a week’s interval of time.
Having established this we can now go back to the gold chart and look at the price action of the market from Tuesday of last week, 6-6-2006 to the Tuesday of the current week, 6-13-2006.
On Monday of last week, the price of August Comex Gold closed the session at 648.70. This will be our starting point for the analysis that follows since the COT report will show us who did what from the following day until Tuesday of this week as compared against the price action of gold.
The next day, Tuesday, 6-6-2006, gold dropped down to 634.70. Wednesday it went down to 632.60. Thursday it took another huge hit and closed down at 613.80. Friday it closed down at 612.80. The following Monday, at the start of this week, it continued its downward progress and closed at 611.30. Tuesday, the final day of this week which is covered by the COT report, it was walloped for a gargantuan hit of $55 closing all the way down at 566.80. It was further mauled overnight beginning in the afternoon Access session on into Tuesday evening when it began to gets it footing in the late afternoon Asian action and early morning European trading session. To sum up – gold went straight down from Tuesday of last week thru Tuesday of this week to a tune of a loss of $81.90, and if you include the Tuesday overnight action, a whopping loss of $102.30 in one week!
To further amplify on what I have described previously - Whereas the normal pattern of the last five years in gold as I have described above would have expected us to see the commercial cartel covering or reducing their shorts and booking profits, the exact opposite occurred – the commercial shorts, aka known as the gold cartel, SOLD THE ENTIRE WAY DOWN – instead of REDUCING the number of their shorts and booking profits they actually PUT ON MORE OF THEM! The COT report reveals that they added a total of 5,282 BRAND NEW SHORTS as the price of gold collapsed. They have NEVER done this before during any time in this bull market in gold since it began way back in 2001.
What does this mean? – quite simple – it means that there was a concerted effort on the part of this group of short sellers to FORCE THE GOLD PRICE DOWN. They had absolutely no interest in booking profits on existing shorts as the price tumbled some $100. This is a stunning development as it clearly indicates a concerted attempt to derail what was becoming a runaway bull market in the gold price that was threatening to garner far too much public attention. Remember - gold’s perennial function is to serve as the financial “canary in the coal mine” which alerts the workers to hidden, toxic dangers. Quite simply, gold’s stunning rally to $730 in the matter of a few months time was sending shock waves through the corridors of the monetary elites who were “looking into the abyss” if gold continued its meteoric rise. Something had to be done and quickly or this thing was going to get out of hand.
Along that line, this past week I had sent some comments up to my good friend Bill Murphy over at GATA’s fine site, www.lemetropolecafe.com detailing both in written and in visual chart form what appeared to me to be a deliberate assault that was being launched against the gold market beginning in the thin and illiquid conditions of the aftermarket Access trading session as soon as it opened for the resumption of trading in the afternoons. Bill included those in his daily Midas reports. Also, my trading buddy and good pal Jim Sinclair (www.jsmineset.com) had posted the same comments along with the price charts detailing the attack as shown on the 30 minute interval chart. As a trader who trades exclusively in the CBOT’s full-sized electronic gold contract every single day, I am quite attuned to the normal order flow into that “pit”. What caught my eye immediately beginning last week and continuing with the assault on gold early this week, was the huge size of sell offers that came flooding into those pits late last week and earlier this week during the normally comparatively quiet afternoon session. Offers of 500+ to sell were relentlessly pounding the CBOT electronic gold contract. One enormous sell order of 943 hit the pit much to my stunned amazement. I found myself talking out loud to myself saying, “What in the world is going on here? Did I miss something happening in the world? Did someone Central Banker or Fed governor say something? Who in the heck is selling like this?”
To give you some perspective – I rarely see buy or sell orders in the early afternoon session exceeding 100 contracts going either way. Clearly some entity was attempting to mercilessly pound the price down into lower levels looking to run stops in the thin conditions and set off a cascade of further selling which would then be expected to carry over into the TOCOM session that evening driving the price even lower as Japanese selling took over.
So the question becomes, who would do such a thing and why?
Then it all began to make perfect sense if one understands what both Jim Sinclair and Bill Murphy and the GATA gang had been saying about this recent price decline in gold, namely, that is was an orchestrated and deliberate attack by the Central Bankers of the West to break the back of the gold market and defuse the warning message that gold was sounding abroad. In our opinion, it started with the Bank of England either mobilizing its own gold supplies or gold from the IMF. This gold was then used to temporarily flood the market with extra supply with which to overwhelm the soaring investment demand thereby knocking the price of gold, and other commodities sharply downward to give the intended effect that fears of inflation due to commodity price rises had been effectively contained. In order to affect the most carnage on gold, this surreptitiously mobilized supply of extra gold had to be accompanied by a concerted and well-coordinated effort on the part of the Western Central Bankers and some of their allies of tough anti-inflation talk giving the impression that the CB’s were going to be especially vigilant to nip any inflation genie in the bud.
Think about this a bit and see if we can put two and two together. If you knew in advance that the BOE was about to make a move to derail the surging copper market and bail out its friends at the LME which was on the verge of witnessing a default among some of its members who had stupidly sold short into a roaring bull market in copper, and you knew that they would also do this by launching an all out assault on the base metals and especially on the gold price using mobilized Central Bank vault gold, what do you think you could conclude? Answer – the price of gold was going to fall sharply as it would be temporarily overwhelmed by the extra supply hitting the market. If you knew this would you not sell with complete reckless abandon? Would you not attempt to chase the market down as far as you could pushing into one set of sell stops after another? Would you not do this in the hopes of wrecking as much carnage on the market as possible and then eventually clean up by buying all those shorts back after you had broken the back of nearly every would-be gold bull on the planet? I know I sure would have! You would be a complete nitwit not to recognize such a gift horse being dropped into your lap!
Well, that is exactly what I believe occurred. The BOE in conjunction with their cohorts at the Fed, would have tipped off its agents, or better yet, would have plotted with its agents Goldman Sachs, et al, that is was about to mobilize its gold or the IMF’s gold and dump it onto the market. In the meantime Goldman Sachs and friends were unleashed to smash the paper markets in gold at both the Comex and the CBOT, and run as many speculators out of it as possible while seeking to inflict the most technical damage possible on the price charts. The intended effect was to be to so completely dishearten and discourage the public and the investment funds from buying gold that it would suffer an ignominious death and fall off the radar screens of investors. That would effectively get it out of the headlines and remove the pesky metal’s telltale warning signs about the true state of the global economy. No more gold stories equals happy Central Bankers.
There is no doubt that the plan worked to near perfection – I have never seen so much near total despair and disillusionment among the friends of gold as I witnessed this past Tuesday and early Wednesday. Out of everywhere, as if on cue, analysts confidently pronounced that the bull market in gold and in commodities was over, finis, kaput!
However, a funny thing happened on the way to the forum. Someone showed up to meet the brazen sellers and began to buy in huge lots. Gold quickly ricocheted off the $545-$550 level running all the way back to near $590 in two days. Today, Friday, 6-16-2006, when the same group of sellers once again attempted to break the back of the gold market which had come roaring back in overnight trade in both Asia and in Europe, and began their coordinated selling assault during the New York trading session (what else is new), out of nowhere buying came out of everywhere forcing them to beat a hasty retreat. Gold, which at one point had been knocked down $20 off its overnight highs, came back with a vengeance stuffing the shorts and forcing them back out as it closed the session in remarkable fashion for a Friday afternoon.
The strong close augurs well for next week although gold did suffer some pretty heavy technical damage this week as a result of the attack. It will take our friend some time to repair the damage suffered but it demonstrated true grit this week by coming back from such a fierce beating in so noble a fashion to end the week. One has to understand that as a result of the work of GATA and especially the conference in the Klondike that the big physical market buyers know full well what is going on in the gold market and were laying in wait for Goldman and company. And why should they not? If one understands the war involving gold and knows that there exists a group of entities who are intent on smashing the price of gold and will utilize all the resources at their disposal, why not wait for them to pull one of their stunts, step aside for a while, let them knock the price back down and then buy all that you can fit into your boats at a greatly reduced price level. After all, if you are determined to own gold and increase your holdings of it as the Russians, Chinese and Arab interests are, why not let the fools make it available to you at a nice big discount and then load the boat complements of your short-sighted but “generous” benefactors?
In conclusion, we will need to see the price action this next week and the COT next Friday along with the daily open interest reports to see if the gold cartel is forced to cover those brand new shorts, many of which are underwater at this point and whether the funds will now trade this gold market a bit more intelligently. We want to see if gold can hold the recent lows on any possible subsequent revisiting of those lows. If so, and if especially the volume dries up in comparison to that of the day when the lows were made, then the bottom is definitely in and gold will start its next leg up from this region after a period of base building. We know that down at those levels there are huge buyers waiting in the physical market who want to obtain gold at what they consider to be a “value” area. That is the key. Those guys want all the cheap gold they can get and will pounce on it at a price they are happy with. If the CB’s want to dump more gold on the market, those big buyers will be more than happy to relieve them of it all. Heaven help the new shorts in this market if that gang of physical market buyers decides this is as cheap as gold is going to get again.
June 16,2006
Dan Norcini
read at www.kitco.com
To start off, Lithic management replenished its treasury with a modest private placement of 3,728,000 units at $0.25 in April 2006 that brought on board new shareholders seeking a stake in a zinc play. The company has used a small portion of the proceeds to conduct geophysical surveys on the Crypto project, but has yet to receive the results thanks to the extraordinary activity of the exploration service sector. Lithic's Chris Staargaard continues to claim that a $2 million plus drill program awaits Crypto in 2007
There has, however, been an additional development which is the primary reason for this Tracker and my confirmation that Lithic Resources Ltd continues to be a top priority bottom-fish buy in the $0.20-$0.29 range where it is currently trading. Until recently Lithic's principal shareholder, the Resource Capital Fund II LP, managed by the Denver based Resource Capital group, has viewed Lithic as an inconsequential mistake that ended up in its portfolio. The Resource Capital group is a venture capital outfit which specializes in financing advanced metal projects. One of its major investments has been EuroZinc Mining Corp (EZM-T: $3.90), whose acquisition of the Neves Corvo copper-zinc project in Portugal was largely financed by the Resource Capital group. On August 21 EuroZinc agreed to merge with Lundin Mining Corp (LUN-T: $41
the events of the past couple months have spurred a fresh interest in Lithic by the Resource Capital group, which is being cashed out of its major plays of the past few years. Whereas at the start of 2006 the Resource Capital group was willing to view Lithic as just a shell whose shareholders could be readily brutalized through a roll-back based RTO of some over-priced Australian asset, today RCF is viewing Lithic as a foundation of something much bigger. The Crypto zinc project, and even the longshot Stokes Mountain VMS play in southern Quebec, are now seen as stepping stones rather than disposable placeholders. This shift in RCF's perception of Lithic within the grand scheme of things is what I wish to communicate to bottom-fishers. The departure of EuroZinc into the Lundin fold creates a huge goodwill bank for RCF, and a funding vacuum for the RCF III LP.
With only 27.3 million Lithic shares fully diluted at $0.28, the implied project value of 100% owned Crypto is only about $8 million, a fraction of the Crypto zinc deposit's $2 billion in situ value which has the potential to grow substantially with the help of modern geophysical surveys applied for the first time in decades. My view is that Crypto could turn into a dream target worth $500 million, translating into $10-$20 price targets for Lithic if mother nature co-operates and the Cyclical Bears receive a major drubbing. But even with a more modest $100 million dream target, Lithic's Crypto project represents fair speculative value at the current stock price
If you look carefully at the Lithic chart you will see that the stock is just starting to rise off a bottom built during the past couple months. In early May Lithic had punched through $0.50 just as the central banks initiated a liquidity squeeze that squelched the flow of hedge fund money into the resource sector. Lithic then retreated to bottom-fish levels because there was no project news in the short term pipeline, RCF's priorities remained elsewhere, and the bookies were favoring the bears in the Showdown between the Structural Bulls and Cyclical Bears. The situation is very different now, and Lithic is primed to become a huge winner for bottom-fishers. RCF has apparently taken the view that the current economic setting is too unusual to leave the fate of Lithic entirely in the hands of the exploration process. Success may not just "happen" to Lithic, it will be made to happen. And that is the sort of bottom-fish I adore.
*JK owns shares of Lithic....www.kaiserbottomfish.com
