Timing Physical Gold Purchases in 2013, Hedge Fund SAC Capital Positions for Movement, and Review of New Gold Producer Metanor Resources Inc.

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Despite recent pull-backs in the spot price of Gold, ownership of precious metals is still on the rise globally as a secure store of value and hedge against inevitable results of rampant currency debasement. Below we provide analysis of historical annual lows in Gold prices; data favors now in timing a Gold purchase, this article also features insight on ‘smart-money’/hedge funds having positioned themselves for volatility in Gold for 2013 and also features a review of junior Gold mining company Metanor Resources Inc. which appears poised for share price appreciation as it now anticipates operating cash flow positive at its 100% owned Bachelor Gold mine and mill in Quebec.

Analysis of historical annual lows of Gold; data favors now in timing a Gold purchase in 2013. The underlying long-term fundamentals for being long Gold remain strong.

New York, NY: Recent pull-backs in spot Gold appear merely the result of profit-taking/preservation, technical analysis reaction, and deliberate price smashing. Important to note is that the underlying long-term fundamentals for being long Gold remain strong. A review of the historical annual lows of Gold since 2001 reveal timing favors investors in the first two months of the year:

Year – Annual Low – Annual High for the year
2001 – April 02 – September 17
2002 – January 04 – December 27
2003 – April 07 – December 31
2004 – May 10 – December 02
2005 – February 08 – December 12
2006 – January 05 – May 12
2007 – January 10 – November 08
2008 – October 24 – March 17
2009 – January 15 – December 02
2010 – February 05 – November 09
2011 – January 29 – September 05
2012 – May 30 – October 04
2013 to date – This Week – T.B.D.

The low price for Gold occurred between January and May in every year but one, and in January or February the low occurred seven out of 12 years.

Several ‘smart-money’ players have positioned themselves for a spike in Gold for 2013, recently released Q4 2012 hedge fund details affirm several are positioning for a move higher in mining shares sometime in the next two years or less; e.g. SAC Capital Partners LP, a $20 billion dollar group of hedge funds founded by Stephen A. Cohen, positioned itself in over $240 million dollars worth of gold, silver, and mining share investments. SAC employed large sophisticated straddle positions to profit from volatility (designed to make money either way by being simultaneously short and long) along with directional strategies including over $36 million dollars worth of call options on various gold and silver mining companies (designed for potential moves higher). SAC also increased its holdings in gold and silver mining shares from roughly $54.9 million, to $122.2 million, a total increase of over $65 million; companies included many of the major producers such as AngloGold, Barrick, Goldcorp, and included junior producers, such as Timmins Gold Corp. and Fortuna Silver Mines Inc.

Investors looking for exposure to Gold via shares of miners would do well to consider new Gold producer Metanor Resources Inc. With Metanor now entering steady-state gold production and cash flow positive status, this should result in improved market awareness and appreciation for the Company as it executes on its plan; the reality of the infrastructure and resource value, cash flow growth, and clear ability to add ounces should translate to share price appreciation. Metanor's infrastructure is valued (estimated replacement value) at ~CDN$200 million. The intrinsic value of Metanor’s known resources (~1.6 million oz gold in all categories on all its properties) and infrastructure are several times the company’s current market capitalization.

Metanor has had several news releases of significance over the several weeks indicating it is steadily increasing Gold production at its newly refurbished 1200TPD capacity Bachelor Mine & Mill, in Quebec. This week Metanor announced had poured a record Gold bar of 868 ounces, representing only one weeks production and a sizeable rise in the rate of production over what it had accomplished in January 2013. In January Metanor produced 2,236 oz of Gold, compared to 1,718 oz in December demonstrating a 30% month-on-month improvement, we believe February results too will show a similar increase.

The consecutive rises in Gold production is part of an ongoing ramp-up toward Metanor's targeted 5000 oz Gold per month (60,000 oz per annum) run rate which is expected to be accomplished this 2013 utilizing 2/3 capacity of its 1200 TPD mill.

We anticipate shares of Metanor Resources to rise as the reality of the accomplishments underway are appreciated by the market. In the last month Metanor was identified in an analyst report with upside market valuation by investment dealer Secutor Capital Management. The analyst initiated coverage with significant upside re-rating based on several factors. A full PDF copy of the analyst’s report is available at the following URL http://sectornewswire.com/SCMCanalystMTOJan29-2013.pdf online.

Metanor is leveraged to the price of gold, able to sell 80% of its Bachelor Mine sourced gold at spot prices with the balance sold to Sandstorm as per gold participation agreement. Fully permitted, fully capitalized, and sufficiently staffed with professional mining personnel able to handle the ramp-up, Metanor presents investors with an exceptional opportunity as the first new gold miner in Quebec's Plan Nord. Operational highlights of this new low cost gold producer include;

  • Low geopolitical risk.
  • Low hydro-electric costs, not affected by oil prices.
  • Grades upwards of 26 g/t gold with an average grade of 7.38 g/t gold (fully diluted using long hole).
  • Targeting 60,000 oz per year production at 800TPD, >96% recoveries.
  • Estimated cash cost of ~US$464/oz gold (2011 pre-feasibility by Stantec).

-Identified zones should lead to resource growth and extension of mine life closer to 10+ years; Industrial Alliance analyst calculated (non 43-101) 700,000 oz achievable based on deep hole intercepts and extrapolation of data.

Metanor’s' other project of significance, the 100% owned Barry gold deposit, is a 10M+ ounce target; the independent international professional geological firm SGS Geostat has identified Metanor’s Barry deposit as comparable in potential to rival other multi-million ounce deposits such as Osisko's Malartic gold deposit & Detour Gold's Detour deposit. The Barry gold project is located ~65 km from the Bachelor mill. The Barry property resource estimate now sits at 309,500 oz Gold of Indicated Resources (7,701,000 t at 1.25 g/t Au) and 471,950 oz gold of Inferred Resources (10,411,000 t at 1.41 g/t Au) and is wide open for large resource growth expansion. The current 1km strike at Barry is potentially 13km; there are in excess of 150 anomalies outside the pit area.

With two projects of significance that together, many believe will take Metanor Resources to near mid-tier producer status (between 150,000 oz - 200,000 oz Gold per annum) within a few years. The time to pay attention is now while Metanor is trading at a fraction of its infrastructure value (close to book value) and closing in on its gold production target. Metanor has $17 million in long-term debt ($7M from the government and $10M on a convertible debenture with a buyback provision) at very manageable terms. The progressively larger initial free cash flow anticipated will go towards investments in expansion and growth. With anticipated strong cash flow growth, large organic resource growth potential, and sitting geographically as the only mill located within 200 km in a gold rich district, Metanor with ~237.7 million shares outstanding (~268.9 million fully diluted; we note most warrants are deep out-of-the-money and will expire unexercised, Metanor has employed excellent dilution control over the last year) provides an ideal vehicle for investors seeking exposure to precious metals.

A comprehensive overview of Metanor may be found at http://miningmarketwatch.net/mto.htm online.

This release may contain forward-looking statements regarding future events that involve risk and uncertainties. Readers are cautioned that these forward-looking statements are only predictions and may differ materially from actual events or results. Articles, excerpts, commentary and reviews herein are for information purposes and are not solicitations to buy or sell any of the securities mentioned. This is a journalistic article and the author is not a registered securities advisor, and opinions expressed should not be considered as investment advice to buy or sell securities. Readers are referred to the terms of use, disclaimer and disclosure sections located at the above referenced URL.

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Mike Thompson
Madison Avenue Research Group
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