Brought to you by:
Advance Gold (AAX.V) - Sirios Resources (SOI.V)
Walker River Resources (WRR.V)
Great Bear Resources (GBR.V) had drilling news out today that the market used as an opportunity to sell and push it down. Actually, the market has been pushing it down pretty good of late. Some argue that is the condition of the market for junior stocks, many are under pressure.
I would counter that this is a premier gold discovery of high-grade to bonanza grade gold. The major gold miners are drooling for new discoveries, and the Hinge Zone on their Dixie Lake project in Red Lake is just what the majors ordered. With the quality of the project, it really should be doing much better, so why is the stock under pressure.
Recently, I have been watching some of the online interviews of the CEO of Great Bear and I think the answer can be found in them.
One thing that always concerns me in a new discovery is when I see a company in a hurry to get to a resource estimate. When I mentioned that to people about Great Bear, I was told they have no intention of doing a resource anytime soon. But, they have made a point in recent interviews that they are drilling on 15-metre centres.
They still say they aren't in a rush to do a resource estimate, but, the reality is they are drilling it off with drill hole spacing that is needed for a resource estimate. To me, it makes no difference what they say about the resource estimate, they are drilling it off for a resource estimate.
I don't like that in explorers with new discoveries, drilling it off takes a lot of time, is just a snap shot in time, the limits haven't been found, but, the market caps the project to the resource estimate. It doesn't matter that it can get bigger when that happens, it is sort of set in stone. Come in with a million ounces, and it will be called too small regardless of it being open for drilling to make it bigger.
In addition to capping the potential to get bigger, the market knows it takes time. These days, the last thing you want is to broadcast that you are taking the slow and steady, safe route to drill it off.
Which sends another message to the market, which is crucial to Red Lake projects. There is a healthy community of investors that love Red Lake projects. They all know Red Lake is about deep, high-grade, big gold mines. In Goldcorp's case, they needed to go down to 1000-2000 metres, to get the juiciest grades they mined.
Drilling it off on 15-metre centres means that by this time next year, they still won't be drilling down below 1000 metres. The pitch is that they expect to be taken over, and somebody else can drill the deep stuff. Problem with that is that potential buyers hear that as they don't need to be in a hurry. To shareholders it says they could be sold before the depth potential is even tested.
My worry is the market will get kind of bored of this slow and steady approach. This can create some healthy dips and rallies. For those that are way up on the stock, you should have sold enough to get back all your cash and then some.
Although I question the pace of drilling to depth, and the messaging that they are drilling it off and in no hurry to drill the depth potential. I still think this is the makings of a new Red Lake gold mine. I would look for dips to buy and rallies to sell into.
It looks like it wants to test the $2.00 level, which makes it pretty oversold. I think it being oversold, like gold, the timing looks good to be buying a trading position between the closing price and $2.00 level. Don't fall in love with it though, at least not until they focus all their attention on drilling the Hinge Zone, especially deep.
All the best,