It is an unfortunate fact that we live in interesting times. That means that we have to go through the down part of the cycle before we get to ride the elevator to the giddy heights of what DEG is really worth. Right now it looks like gold is building a cup and handle formation. We have the cup already. The handle looks like it is being forged in the crucible of time. Should the handle become a reality then it is time to back the truck up and load into it as much gold as you can afford to buy.
As you can see from this chart there is some time to go for the handle to be built but should the pattern complete the gain for gold will be from the bottom of the cup to the rim - I make that somewhere near US$900 an ounce from the all time high to a new all time high. Action like that will lift all gold mining shares and some more so than others. DEG will be in the "more so than others" category because of the huge endowment that it owns and controls.
In the mean time the handle has to drop further in order to complete the pattern. Gold, and more so the shares of the gold miners, are a barometer for market liquidity. Liquidity is scarce at the moment. Liquidity is free cash that is looking for somewhere to invest. Liquidity is free cash to cover obligations as and when they fall due. With central banks being unable to pump the markets at the moment and at least one actively withdrawing liquidity (The People's Bank of China has just sucked money out of the system over the last week in what may be a strategic move to collapse Western markets) it is clear that the price of gold is going to fall further. That means that DEG will contract further before going up. Short of another major discovery being announced there is no positive news in the pipeline until the release of the maiden resource estimate in the indeterminate "mid year" when they have sufficient data. To do so without the data will only expose the board to unwanted legal action so you can bet your bippy that they are going to wait until they feel justified in releasing the estimate. Since the top 50 shareholders control 70% of the company they are not worried about short term fluctuations in the share price. The company will not be stolen from them on the cheap by an opportunist raider with the shares being so tightly held.
Short sellers may be looking at profiting from the natural rhythm of the markets but short selling has become a dangerous game. Especially if the shorts have sold too many shares. I would love to see the shorts go all in on selling down DEG because if they sell more than 20% of the shares on issue it will be open for Wall Street Bets to target it for a short squeeze of epic proportions. That is because none of us here are going to sell any shares to help the shorts get out of a hole that they dug for themselves. Time will tell what will happen here.
In the mean time, sit tight my friends and watch the show unfold.
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