Saturday, January 27, 2007

"Breakout!" Revisited (AGC.V)...

In November, I posted a long-term chart of Amarillo Gold (AGC.V), that depicted a cup and handle formation that stretched out for almost three years. The observation at the time was that Amarillo appeared ready to break out of this formation and confirm it. It subsequently did that and achieved the anticipated price target (TA does not always work, but sometimes it does). In that post, I also referred to some of the fundamentals that could help drive Amarillo, going forwards.

I began buying Amarillo Gold in January of 2004 when it was first recommended by Claude Cormier and added to my position on Friday. I believe that the consolidation occuring since the stock has moved to the new price level is close to completion. While the charts do not yet indicate that a turn is in progress, my sense is that there has been enough time to digest the previous move and the stock is ready for the fundamental news which is now anticipated (drill results from Lavras do Sul).

So, I think it's worthwhile to contemplate what might be in store for Amarillo. Their main deposit at Mara Rosa puts a fundamental floor under the stock. They have 700K+ ounces of gold with a high probability that the deposit will be expanded. Recent exploration of the Mara Rosa area lead to the staking of adjacent property and the identification of additional resources on the existing property.

The Lavras do Sul property was drilled previously by Rio Tinto and yielded mineralized cores of over 100M in length at 1 gram/tonne. Current drilling by Amarillo intends to confirm the historical drill results and start moving the property into 43-101 standards. Based on what I have heard from industry professionals, there is a high probability that Amarillo's current drilling will confirm previous results. Rio Tinto was seeking 5-10MM ounces of gold. It appears that Lavras do Sul may contain up to 3MM ounces. So, less than what Rio was seeking, but still respectable. When the drill program was announced, it was stated that initial results were expected in January.

The company has also made some personnel changes recently. Robert Landis was appointed as Chairman of the Board of Directors. Mr. Landis is a Boston-based investor that has served as a Director for several gold companies and is a consultant to GATA. His essays are available at The Golden Sextant.

I also noticed that the web page now identifies Sarah Vaughn-Jackson as the companys Communications Manager. If you Google around, you will find that Ms. Vaughn-Jackson provides similar services for Aquiline Resources and Laramide Resources. What Amarillo, Aquiline and Laramide all have in common is that they are creatures of the Iron Bark group. This group includes guys like Marc Henderson and Martin Walter who have spun out a number of companies in the mining exploration sector. The two I have mentioned are particularly successful examples. So this is another reason why I think Amarillo has a good chance of being a multi-bagger. There are people backing the company who have a track record of doing just that.

Here are some family photos:


wagee said...

So it was YOU who stepped on my tail on Friday! I think that if POG softens in the coming week so will AGC without news.....and I will finally get filled on my snake bid.....

About time you wrote up something one CKG no?

wagee said...

LOL! Just scrolled down and saw CKG!

TheSlowLane said...

Bro - I waited until later in the day on Friday to place my bid, but it got filled in a heartbeat and there was more on the ask at .80, so I'm not sure how much is still available but it seems that somebody is running an "all you can eat" special at that price. You are probably right about the short-term scenario, the weekly chart on AGC is not indicative of a move yet, but I think we will stay in a range fairly close to .80. Cheers!


slan said...

Forget about AGC. WGDF is where it is at. LOL.