Gryphon Minerals (GRY.ASX) moves inextricably closer to financial closure on its gold project in Burkino Faso, Africa. The company is looking at 150,000oz per annum of gold production, and the timing could not have been better, which is why the following chart should give people guidance on buying for a technical break-out. This pattern is called a descending triangle, or a descending wedge. Which way will it break? Well, I'm confident it will be up, but let's do some maths: 1. Gold price consolidating around trend lows - upside here 2. Emerging gold producer deserving of a re-rating - after all, its $5/oz of exploration expenditure will turn into $500/oz of possible revenue - at least (depending on the gold price). All this will be mined over 15 years, so you need to apply appropriate present value calculations, so let's say conservatively $200 present value of gold for 4mil oz. That's a present value of $800mil for a $64mil company...and there is a lot of upside in resources, production schedules, resources, the positive exploration in Mauritania. 3. Low-cost gold production - surface mining, some high grade material, competitive low-cost labour in Africa. 4. Positive gold fundamentals - Very low interest rates, high asset prices (property, equities), QE-parties at the Fed, high debt levels, stagnant markets 5. Possible increase in gold output 6. Possible merger to give greater industry profile, i.e. Takeover by Kinross Mining would be an example, to create Pan-African miner.
From the following chart it is apparent that support is at 15.5c. My advice is - don't be greedy and be prepared to pay 16c, and if they go to 15c, then buy more. Now, is there any reason they could go lower, as I've indicated in the chart. Well, they I neglected to mention that they have cut costs to conserve cash. Its possible the recent poor trading conditions and inflation have undermined their cash balance, but they still have $52mil in cash, investments, a Mauritania gold project they could farm-out, and a large resource which will become 'bankable' in coming months. So I see no reason for dilution for the next 6 months. By this time, we will probably see some upside in gold prices, and some project developments. Based on this chart I'm expecting a break-out in mid-late September 2013. A nice rally in gold off base line lows will of course be a game-changer, as this company is precisely the type of target that those 'aggressive' mid-range fund managers like. There is already one on the books based in London.
