Short-term selling pressure owed to rising optimism about the U.S. economy slowed a rally in gold prices that took the value of the precious yellow metal to a 7-1/2 year high in April. “Short-term” is the operative word, as gold is headlong in an uptrend that started late in 2015, a trend that is backstopped by the global economic climate of prolonged low and negative interest rates and inflationary risk that paints a relatively strong case for record gold prices in the mid-term. Banks and hedge funds alike are starting to make the forecast for gold to soon cross $2,000 per ounce.
Interest in gold plays can be seen everywhere from the NYSE to the small S&P/TSX Venture Composite, an index chock full of Canadian-listed microcap gold explorers that is heading for its tenth consecutive week of advancing. Dually-listed small and intermediate companies, such as New Gold (TSX: NGD)(NYSE American: NGD), IAMGold (TSX: IMG)(NYSE: IMG) and Gatling Exploration (TSX-V: GTR)(OTCQX: GATGF) are often amongst investor’s favorites due to the increased exposure in the U.S. and Canada.
Don’t Overthink…Go to Where the Gold Is
Gatling has quietly cozied up to leading miners in Canada’s famous Abitibi Greenstone Belt. The 450-kilometer-long by 150-kilometer-wide belt has produced – and continues to produce – some of the world’s epic gold discoveries as part of producing 180,000,000+ ounces of gold in the last decade or so.
Gatling’s 3,370-hectare Larder project is strategically located in the mining friendly Kirkland Lake-Larder Lake mining district between Kirkland Lake Gold’s (TSX: KL)(NYSE: KL) eponymous project (24 million ounces gold) and Kerr Mines’ (TSX: KER)(OTCQX: KERMF) Addison deposits (11 million ounces gold) and contiguous to Agnico Eagle’s (TSX: AEM)(NYSE: AEM) advanced exploration project hosting multiple deposits with over 3.5 million ounces of gold.
At Larder, historic exploration work has drilled and surveyed three different deposits – Bear, Cheminis and Fernland. The work, which only covers about 20% of the entire property resulted in an historic mineral resource estimate in 2011 showing 960,000 ounces at 5.0 g/t gold for the Bear and Cheminis deposits. More recent work by Gatling has further validated the high-grade nature of the project while expanding the scope of gold mineralization.
The estimate also didn’t include data from the $6.0 million in research conducted at the Bear deposit by Gold Fields (NYSE American: GV) in 2012-2013.
Bigger Than Anyone Imagined
In its due diligence of the project, Gatling leadership formed the opinion that previous explorers made an error in viewing the deposits as independent of each other. Rather, Gatling contended that they are all linked together as part of a single mineralized system stretching at least 4.5 kilometers.
The 2019 goal was to connect the Bear and Cheminis deposits. The company delivered on its promise, proving continuity of mineralization for the deposits spanning 3.0 kilometers, including a near-surface intersect of 11.2 g/t gold over 5.0m.
For 2020, Gatling plans to complete the trend with 35,000 meters of drilling and other exploration work tying Fernland to Bear and Cheminis for the full 4.5 kilometers of mineralization.
“We feel great about showing Bear and Cheminis were linked and remain confident in proving our assessment this year that all three deposits are actually one contiguous gold-rich system,” said Nathan Tribble, P.Geo, V.P. of Exploration at Gatling, in a phone call with Baystreet.ca. “What’s really exciting is the data we’ve collected shows the highest-grade gold yet, further expanding into previously unexplored areas and, importantly, that Bear Deposit has a near-surface component to it.”
The latest two drill holes extended the North zone at Bear approximately 250 meters towards surface and 100 meters to the west. One hole intersected 85.1 g/t Au over 3.0 meters, while the other hit 8.4 g/t Au over 1.5 meters.
According to Tribble, the common school of thought amongst explorers was that Bear only had gold deep in the ground, which the Gatling team didn’t think was true. While more drilling needs to be completed, a single hole cut during ice drilling this winter was successful in testing the up plunge portion of the Bear deposit.
“This is a very significant discovery that should be eye-opening both investors and other explorers in the area as to what we could be sitting on at Larder,” he said. “Once again, we just have to prove our hypothesis, which I am optimistic we will be able to do, although no one in mining knows anything for certain until the bit meets the rock.”
The company has yet to disappoint on its goals. 2020 could be a year of more milestones for this little C$14 million market cap company, including proving the 4.5-kilometer strike and more mineralization at Larder as exploration pushes west towards the Omega gold mine.
Tribble says about 90% of the 2020 budget is earmarked for connecting Bear, Cheminis and Fernland, with the remainder going to Kir Vit (where 80% of 2019 targets hit gold) and finding another sweet spot to drill.
MACD Positive Divergence
Technical traders won’t overlook a bullish indication called a positive divergence of the MACD (Moving Average Convergence/Divergence) and the PPS (price per share). Simply positive divergence occurs when the PPS is making a lower low, while at the same time the MACD is making a higher low.
Savvy techies won’t use the divergence all by itself, which can be more unreliable, but rather combine it with signs of static support and indications of an uptrend to lend credence to a new direction for a stock.
In the case of GTR, shares seemed to have bottomed in April at 23.5 cents to make a new higher low at 26.5 cents and then 27.5 cents and higher highs at 31 cents and 32 cents. With a new support level building at 28 cents, technical traders will be looking for the next higher high to be made to accelerate the stock’s reversal.
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