Barry Allen, BNN.ca

Why gold stocks are struggling:

http://www.bnn.ca/News/2012/3/29/Why-gold-stocks-are-struggling.aspx

I would say that gold stocks are struggling because the gold price only need be steadily around $1800/oz.+ for the lights to come on.

Secondly, gold mines do not make responsible investments in the least. They massively diluted their shareholders (through share dilution and ore dilution, sometimes destroying the best mining prospects) anxious to develop at too low a gold price, mostly due to the fact that people are still skeptical that gold prices could reach this price. I have to agree with Barry Allen on that point.

Thirdly, my own special sauce is that delta hedging has become an essential part of the markets and that commercial trading parries the money coming into gold mining stocks against options in the treasury markets. The assumed risk on these gold stocks is not misplaced, and the treasury markets are maintained by central bank purchasing of bonds.

That means that in the almost complete absence of buyers, the sellers are in control and have control over the share price, but not the fundamentals. The company will continue to produce, but the share price will continue to suffer, because the share price is considered over trailing earnings. To be considered for forward earnings, you need to provide a dividend yield, and thus the share price will likely assume a fair value posture.

My expectation for Q4 is that with the addtional production coming on, then you'll see something like 14k oz. production at an average realized price of $1670/oz. This will likely put the company into an operational surplus. Q1 gold prices should advance, completely changing the complexion. Snow White banker dilutionists heroin profiteers such as Sprott could still ruin the outcome through private placements and brutally costly gold-based lending.

The open question remains whether GBN.V will have to dilute further. GBN.V reports that they have an operational deficit of ~$8m, at the end of Q3. Production will likely cover this amount handily, and share prices are far too low to consider financing. They would have to add something like 40m. shares. This will hang over the stock for a considerable time, since Q4 will not be reported until the end of August, and Netolitzky has been buying shares, a sure sign he will massively dilute. (I think we're all waiting on the gold price right now.)

If IAMgold had offered $1.70 per share for GBN.V, then they would have a turnkey mature development prospect in production, rather than a pure speculative moosepasture in S&P-downgraded Ontario, where gold miners stand to be taxed to death. As it turns out, they can buy GBN.V for much, much cheaper @30¢ per share in Potash/Uranium-rich Saskatchewan.

Weekly P&F Chart

If you want to generate a P&F chart for GBN.V you have to use Percentage, rather than Traditional. Bearish price target 18¢. I would expect the low in August irrespective of the gold price.

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GBN.V P&F Weekly Chart Based On Percentage