A Shocking Trend: Buying Guns

This week, Ivan Lo goes over this week’s market activity, shows you a shocking chart, and gives you an update on Corvus Gold.

Dear Readers,

There is no way to predict short term events with 100% accuracy. The market will move up, and it will move down. Our job as investors is to determine the overall trend within a longer time period.

We’ve seen major ups and downs over the last four years and have witnessed numerous and extravagant intraday swings. Despite all, the market has continued in a relatively straight line up when you look at it from a distance. You should not be surprised anymore.

I have told my readers many times before that the overall trend of the market is up. This is not a product of growth fundamentals or regular market conditions, but rather the culmination of government influence and media control; an extremely loose monetary policy, insurmountable and climbing debt, market manipulation and media diversion.

The numerous examples of direct market influence via projected growth numbers or direct market buys have been crystal clear in the last few years.

Just like the recent U.S. Thanksgiving week, the markets found a way to stave off another decline this week. On Friday, the S&P 500 futures closed up on extremely heavy volume; bouncing off VWAP, before reality set in as news of the fiscal cliff issue came under pressure.

According to published reports citing Republican aides, Geithner presented to Boehner and separately to Sen. Minority Leader Mitch McConnell. The result of the presentation? McConnell told the National Review that he laughed out loud at Geithner’s presentation. Boehner, choosing the more politically friendly approach, said talks were at a “stalemate” as he said the White House proposal was “not serious.”

As I mentioned in “A Storm is Gathering,” the Fiscal Cliff issue will likely be resolved because it is set to reduce the 2013 US Government budget deficit in half. That means it will remove $607 Billion from the economy (GDP), resulting in a 4% drop; thus, pushing it back into recession.

I am not here to play politics, so I won’t go into whether or not the U.S should be allowed to go over the cliff. I am here to analyze the market.

The market will crash if we go over this cliff, but I don’t think the U.S., in all its power and glory, will allow that to happen; at least, not before doing everything it can to avoid it. In reality, the fiscal cliff debate is a political argument on how to spend money, not how to save it.

Expect more volatility next week, coupled with more illogical algo-induced market activity. However, I think the overall trend is up.

Play the Bubble

I am playing this bubble because I think there is more upside.

Obama has another four years, which means he will do whatever it takes to prop up the market during his term; he won’t take the heat for another market crash. Obama will leave the mess to the next president (likely Republican), as Bush had left for him. There will be a constant battle between government influence and natural market fundamentals. We know the latter will eventually prevail; the question is, “When?”

That means our current bubble will only get bigger. Play it while it lasts.

Buying Guns Update

I don’t endorse the use of guns, nor do I condone violence. My job is to shed light on world events that impact your portfolio.

A while back, I showed you a chart on two major gun manufacturers that have climbed dramatically over the last couple of years (see The Market Predicts Violence).

I showed you the chart because the stock market has generally been a strong indicator of future events.

Take a look at this 10-year internet search trend provided by Google Trends for the words “ammo” and “bulk ammo.”

Then look at “gold sale.”

google trends

The arrows show spikes immediately after the last two elections.

What’s the market and Internet search trend telling us now? I guess ammo alone isn’t enough; people want bulk.

And they want gold.

The Fear Factor: Corvus Gold Update

Fear gets the best of everyone.

Last Wednesday, gold fell nearly 2%. As a result, gold stocks fell sending Corvus Gold (TSX: KOR) (OTCQX: KORVF), a company recently added to our Equedia Select Portfolio, down 6%.

However, timing is everything.

Corvus shares fell as a result of fear-induced investors, panicked by a mere 2% fall in gold. But those who stayed the course and didn’t give in to fear, witnessed Corvus shares rebound by more than 18% to close at $1.66 on Friday; thus, beating out both the GDX and GDXJ dramatically.


Because Corvus announced this week it is onto the massive game-changer I told you about in my original report.

For those who need a refresher, go to http://equedia.com/reportarchive/corvusgoldreport

To summarize, Corvus Gold is led by an extremely capable and proven management team headed by CEO Jeff Pontius, who has led the discoveries of more than 40 million ounces of gold (5 deposits of over 1 million ounces of gold totaling over 40 million ounces – 3 of the deposits became mines and the other 2, Livengood and North Bullfrog, are in the development stages.)

Corvus’ main asset is its 100% owned North Bullfrog project in Nevada, which is on the fast-track to gold production by late 2014. It already has a resource of 1.6 million ounces of gold and an initial PEA that shows a payback period of 1.2 years at current gold prices.

The near-term production story, low market cap, strong capital structure (no warrants), and incredible management credentials are more than enough to make institutions take notice. But that’s not all…

Earlier this year, Corvus made a new high grade discovery at their Yellow Jacket Target at North Bullfrog. As a result, Corvus has already signed numerous confidentially agreements with majors in the area.

That’s because every gold major operates in Nevada; Barrick, Kinross, Newmont…you name it. Nevada is an amazingly mine-friendly jurisdiction with favourable geology. That is why it is the world leader in terms of gold production per unit area; it is also why high grade discoveries here draw incredible attention.

Yellow Jacket High Grade Discovery

Yellow Jacket at Corvus’ North Bullfrog project is over 2km long and is a high-grade gold-silver vein system located less than 400m away from the Phase II, proposed Sierra Blanca pit (see original report for more info.)

Back in May 2012, Corvus announced that Hole NB-12-138 intersected:

  • 72.4 m grading 1.74 g/t Au and 98.7 g/t Ag, including 4.3 m grading 20.0 g/t Au and 1,519 g/t Ag beginning at 40 m vertical depth, with some very high grade intervals:

hole NB-12-138

This result defines a thick, near-surface mineralized zone around the previously discovered high-grade vein, potentially expanding the Sierra Blanca open pit.

Meanwhile, Hole NB-12-139 encountered extensive explosive hydrothermal zones, indicating the target boiling zone lies below the high-grade quartz vein intersected in hole NB-12-138. This suggests more elevation-controlled high-grade mineralization at depth of the Yellow Jacket zone.

Without going into too much geo-talk, it means that Corvus has not only found one high grade feeder structure, but they have apparently figured out how to find more. This style of high-grade mineralization has produced exceptional deposits throughout Nevada and if Corvus can further define the potential of their deposit, it could be massive game changer.

Corvus proved this week there’s more…

Corvus Gold Continues to Hit High-Grade Gold-Silver Vein System in Yellow Jacket Step-out Drilling

On Wednesday, Corvus announced results from the first hole of a four-hole program which was designed to further identify and delineate the bonanza grade feeder system I just mentioned above.

The most recent results, Hole NB-12-183, intersected:

  • 49 metres @ 1.9 g/t gold and 43 g/t silver including 1.7m @ 13.1 g/t gold and 549 g/t silver

Significant New Intercepts* from Phase II 2012 Yellow Jacket Drilling

While the grades are not as high as the original hole, it is very important to note that the high-grade mineralization is not only there, but it’s still open at depth and along strike. That means this could be a massive high grade discovery.

Of course, we won’t know how big it is until more drilling is done. However, even if this high grade zone is contained only in a small area, it would still add major benefit to the bulk-tonnage project currently being studied at North Bullfrog. If, on the other hand, the high grade zones get big, it’s going to be a massive game-changer.

As Jeff summarized:

“The recent intercepts confirming and extending the spectacular mineralization found in hole NB-12-138 along with the substantial quartz vein thicknesses in the following three holes are giving shape to a significant new discovery that could dramatically change both the North Bullfrog project and the overall Corvus story.”

I couldn’t have said it better myself.

As I just mentioned, Corvus has not only found one high grade feeder structure, but they have apparently figured out how to find more. News releases never give a clear enough picture for the market to understand. So let me explain.

The Big Picture

Jeff has the uncanny ability to find gold. That is why he has led the discoveries of over 40 million ounces of gold.

The high grade discovery at Yellow Jacket at the Northbullfrog project is no exception; it was a complete blind discovery based off of ingenuity and hard work.

The follow up drill results are confirming that Yellow Jacket is the potential feeder zone for gold mineralization throughout the project. And based off of their model, Corvus has identified three more high grade targets to explore the high-grade mineralization potential.

The current discovery at Yellow Jacket has essentially no surface expression as far as gold goes. It does, however, have certain geophysical characteristics such as a conductive clay zone overtop, which I walked over while I was there.

north bullfrog

As we move down further, we begin to see the more typical alteration associated with the low grade systems; it’s more resistive and it has a different geophysical property. As we get even deeper into the structures, around 500m down, we can see the offset in the basement rocks. Associated with that offset, you can see some conductive zones which management believes relate to sulphides that form around the veins.This signature appears to be consistent with the other targets that Corvus has found.

Of course, until they are drilled, we don’t know how much gold has been forced up by the fluids. But we do know that Corvus is in a large gold system that probably has in the neighbourhood of at least 2 million ounces of gold (management has already proven a 43-101 gold resource of 1.6 million ounces.) This gold came up from somewhere. That means the probability of hitting more of these high grade feeder-type systems is very high.

The Next Three Holes

Management has three more holes to announce over the next several weeks and into early next year as part of the follow up drill program at Yellow Jacket.

From a visibility standpoint, the holes are clearly in the quartz vein system and seeing some nice stringer zone mineralization around it. The quartz shows that the hydrothermal zone was very active with a lot of fluids having moved throughout. There is a great chance that the next three holes should turn up some strong gold bearing results with an increasing amount of silver mineralization as well. The gold to silver ratio jumps dramatically at Yellow Jacket compared to the rest of the project and could positively impact the economics at the project.

In plain English, Corvus is now on top of a very significant vein discovery; the size of which we don’t know yet because there is still a lot of open, unexplored terrain to drill on just the Yellow Jacket target.

Putting it Together

The current mineralization at Corvus’ North Bullfrog Property is showing strong similarities to the historic Bullfrog Mine.

The Bullfrog Mine is a mine that produced 2.6Mozs gold (1.9Mozs open pit @ 2.6 g/t Au & 0.7Mozs underground @ 9.7 g/t Au) and was mined by Barrick Gold and predecessors in the early 1990’s. It’s just south of Corvus’ North Bullfrog Property and was one of the highest grade mines in Nevada.

Given the continued success at North Bullfrog and the Yellow Jacket high grade zone, Corvus is now onto more than just a near term production story with strong economic numbers; it may be onto to the next high grade story in Nevada. And that is something very special.

Don’t Blink

There’s a lot of players watching Corvus.

Corvus is currently doing more development drilling on Jolly Jane at North Bullfrog to move the resource into the measured and indicated category, so it can be used in the resource calculation for the feasibility study to be released early next year.

But they also have three more holes coming out from Yellow Jacket, three more high grade targets to follow, additional metallurgical results, an updated PEA, and a feasibility on the way in Q1. That means anything can happen.

The market may be volatile but great projects stand out. We witnessed this first hand last week with Corvus. Don’t let fear get the best of you; instead, be ready to take advantage of other’s fears.

As I said before, be strong and stay the course.

Until next week,

Ivan Lo

Equedia Weekly

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Disclosure: I am long gold and silver through ETF’s and bullion, as well as long both major and junior gold and silver companies. We’re also biased towards Corvus Gold Inc. because they are an advertiser, we participated in their most recent financing on October 15, 2012, we own stock, and we own options. You can do the math. Our reputation is built upon the companies we feature. That is why we invest in every company we feature in our Equedia Reports, including Corvus Gold Inc. It’s your money to invest and we don’t share in your profits or your losses, so please take responsibility for doing your own due diligence. Remember, past performance is not indicative of future performance. Just because many of the companies in our previous Equedia Reports have done well, doesn’t mean they all will. Furthermore, Corvus Gold Inc. and its management have no control over our editorial content and any opinions expressed are those of our own. We’re not obligated to write a report on any of our advertisers and we’re not obligated to talk about them just because they advertise with us.

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