I haven’t discussed it here before, but NDM.TO – Northern Dynasty Minerals, is an interesting story.  It has been a favorite recommendation of many newsletter writers (including Casey, Stansberry, and TD Securities, ), and I have no hesitation in reporting that it has been a greater winner for me over the last year.

As you can see from the six month chart, it’s had a beautiful run, from 75 cents in mid October to the $4.50 level a week ago.

And then, as you can see in the box, in the space of a day Northern Dynasty went from an intra-day high of $4.50 to an intra-day low of $2.50.

What happened?

The short sellers moved in.

Specifically, Kerrisdale Capital issued a report saying Cu at Zero.  Their basic premise is simple: Northern Dynasty’s main asset, the Pebble deposit in Alaska, is worthless.  They state that many large players in the industry have owned this deposit in the past, and have invested massive amounts of money, over $500 million, only to abandon it (and sell it cheaply to Northern Dynasty).  They further state that to develop the asset, including building an 86 mile long road, and dams and other infrastructure, would render the project uneconomic.

Interesting.  The market was worried, and a big sell-off ensued.

So who is correct?  Management, and the newsletter writers, who say this is a great investment, or Kerrisdale Capital?

Let’s start with Kerrisdale Capital.  They are a hedge fund in New York that specializes in short sales.  The founder and chief investment officer of Kerrisdale, Sahm Adrangi, was arrested in August, 2016 on charges of drunk driving and cocaine possession, apparently after he crashed his BMW at 3:00 am.

So, at least we know the owner is credible…..

Kerrisdale’s modus operadi is simple: pick a target, short the stock, write a report to crash the price, cover your shorts, win big.  They’ve done it before.

Back in September, 2016, one short month after that little cocaine possession incident, Kerrisdale targeted First Majestic Silver Corp.  The stock was around $17 when they shorted it, and it’s around $13 now, so I guess they were right to short it, but that has more to do with the market than their actions.

So what about Northern Dynasty?

On Friday, Northern Dynasty responded by saying “BS”.  Specifically, they said that Short Seller’s Report Based on Misstatements, Inaccuracies and “Anonymous Sources”, which is the fancy way of saying “BS”.  You can read their response in full, but the gist of it is this:

Kerrisdale has no mining analysts on staff, they have not visited the site in Alaska, and they have not talked to either company management or apparently any outside experts.  They are making it up.

In addition, while it is true that there would be costs to develop Pebble, the deposit is massive, and with new mining techniques it can be done less expensively than with old technology.

As with all mining companies there are no guarantees, but this could be a massive winner.

I already have a sizeable position, so I probably won’t do any new buying. However, I plan to hold for a while and see who wins the battle: shorts vs. longs.

I’m betting on the longs (not the short cocaine guy).

Those are my thoughts, thanks for reading, see you next week.

 

Gold: Time to Go All In

by JDH on February 11, 2017

Let’s look at the charts, shall we?

As the 10 year chart of gold shows, the down trend that began with the peak in 2011 is still in place.  We are not yet in a new bull market, but it would appear we are getting close.

The uptrend and downtrend lines will collide in the next few months, and I’m guessing the break out will be to the upside.

Want more proof?

Take a look at NUGT – Direxion Daily Gold Miners Bull 3x Shares NYSE + BATS, a 3 times leveraged basket of gold miners, over the last eight months.

The down channel that started in August 2016 is clearly over.  The Fibonacci retracement levels show that plotting from the high in November to the bottom in December, NUGT has now retraced 62% of the decline.  That’s good news.

Or perhaps it’s just a bunch of mumbo-jumbo, since you can draw whatever lines you want.

I prefer to be the optimist, and that’s why this week I was selling on strength at the beginning of the week, and then buying on weakness on Thursday and Friday.  I am no where near being fully invested, but I am adding to my positions, and I’m optimistic for the action over the next few months.

Remember 2016: gold did great in the first six months of the year, and then collapsed in the later half of the year.  Will that pattern be repeated?  I have no idea, but the first quarter is a seasonally strong time for gold, so I plan to “make hay while the sun shines”, but also keep this on a short leash, and take profits as they present themselves.

Alterra Power

On an unrelated topic, Alterra Power announced very impressive drill results this week.  Alterra is a renewable energy company operating in Iceland, British Columbia, and Texas, and the geothermal well they drilled in Iceland was off-the-charts impressive.  The stock popped up on the news, but AXY.TO – Alterra Power Corp. is well off it’s highs, and is at an excellent buy point.  This will not be a 10 bagger in a week, but it’s a great, long term, core, lower risk holding, and provides great diversification away from gold.  I like it.

That’s the update.  Thanks for reading.  More next week.

Gold had a good week, so let’s talk Trump

February 4, 2017

From a low of $1,180 on Monday morning, gold had a good week, touching $1,225 on Thursday, and holding most of those gains on Friday.  Good.  So let’s talk Trump. As reader’s of this blog are aware, I am Canadian.  I don’t particularly care who the US President is, or what he does, because I […]

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Gold Has Trouble Getting Through Resistance Level

January 28, 2017

Charts are great.  You can draw whatever lines on them you want.  My lines may be totally different from your lines, but we all think whatever lines we drew make sense.  Case in point: Here’s a one year chart of gold.  The horizontal orange line roughly demarcates the support back in March and June of […]

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NEWS FLASH: World Didn’t End

January 21, 2017

I’m different than most.  I fully expected Trump to win.  In my post on October 29, 2016 titled Why a Trump Victory and an Old Italian Bank May Cause a Market Crash, I said: Trump will win on November 8.  In a landslide.  On November 9, the world will wake up to President Trump. I […]

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An Uneventful Week

January 14, 2017

This was an uneventful week, for the most part, and I am writing this on a lousy internet connection, so I will keep this brief: no change from last week. Gold had a decent week, but I didn’t buy or sell; I held. Here’s why: My goal this year is to maximize returns while minimizing […]

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A Great Start to 2017 for Gold and NUGT

January 7, 2017

Wow.  That was quite a start to 2017.  As I said last week, I think the bottom for gold is in, perhaps for many years (although I have been wrong many times before).  On the last trading day of of 2016 gold traded as low as $1,150.30, and on January 5 it traded as high […]

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Gold: The Bottom is in

December 31, 2016

Happy New Year.  As we start 2017, I hereby announce that gold bottomed on December 15, 2016.  Intra-day it traded down to $1,124.30, and closed at $1,129.80.  That’s the line in the sand, and I don’t expect to see that level, perhaps ever again. Of course it is highly likely that I am completely wrong. […]

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Merry Christmas Eve

December 24, 2016

It’s Christmas Eve, so presumably your thoughts are on family and fun, not the markets, so I will be brief. From around the $1,050 level at the start of 2016 to $1,133 today, gold went way up, then back down, and is closing the year not far from where it started. What can we learn […]

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Gold: Done?

December 17, 2016

From February through November, 2016, gold held above a major support level of $1,200. Then gold broke down, and on Friday gold closed at $1,137.50, and you don’t need to be a math genius to realize that $1,137.50 is a lot lower than $1,200.  That support level is long gone. What’s worse, that’s the same […]

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