The Charts Of The Week: $4,000 Gold, Newmont, Vizsla, Onyx, and Emerita
As we enter a long weekend for many readers, I have selected half a dozen charts to review and glean insights from.
For many gold investors, Christmas arrived seven months early. Incrementum AG just published their annual “In Gold We Trust Report” that includes 443 pages filled with an abundance of gold-related charts, data, and unique insights. I look forward to interviewing In Gold We Trust Report author Ronnie Stoeferle over the next couple of weeks. However, for now I’ll share two of my favorite charts from this year’s report:
Incrementum has developed a proprietary gold price model that is based on two key parameters: the money supply (M2) and the so-called implicit gold coverage ratio. The cumulative distribution of results in the model forecasts a US$4,800 gold price by 2030, with a greater than 25% probability of a gold price above US$6,000 by the end of the decade.
The M2 money supply is currently growing at a ~7% annual rate, while the gold coverage ratio (proportion of the money supply that is covered by the gold reserves of a central bank) currently stands at 3.8%. The gold coverage ratio has been edging higher over the last few years and appears to be poised for a breakout move that could prove to be similar to the late-1970s:
The gold coverage ratio has a history of rising during periods of declining confidence in the monetary system, stagflation, and financial market crisis. As we enter the final years of the Fourth Turning with a disruptive and transformational US President, it makes sense that the gold coverage ratio could rise above 5% (and potentially above 10%) over the next few years.
After declining to a low of $3123/oz during early Thursday morning futures trading, gold managed to claw back to end the week right at the major support/resistance $3200 round number level:
Gold (Daily)
The good news for bulls is that gold finished the week with bottoming tails on the last two daily candlesticks. Meanwhile, after last week’s tumble the $3250 level has become the first level of new upside resistance.
After trending in bullish territory for most of the month of April, gold investor sentiment has returned to neutral territory.
Turning to gold mining stocks, shares of the world’s largest gold producer dropped ~10% early in the week but found support at a key level and rebounded a bit on Thursday and Friday:
NEM (Daily)
The ~$48 level is major support dating back many years in NEM. Therefore, it is not a surprise that bulls showed up to defend this level at a time when Newmont continues to generate record free cash flow amid enormous profit margins.
In a recent research note, Goldman Sachs emphasized that shareholders are receiving a free cash flow yield above 10% by owning Newmont:
"We estimate NEM will generate FCF of US$6.7bn in CY25 (including divestments), with a FCF yield of 10-13% near-term before improving to ~15-18% as projects complete."
Turning to silver, not only has silver begun to outperform gold (still very early days in this) but a big M&A deal announced early in the week (Pan American Silver acquiring MAG Silver) may be stirring animal spirits among silver mining investors.
VZLA (Weekly)
There aren’t many legitimate development-stage acquisition targets in the silver space. Moreover, there’s even fewer that have the sort of scale that meets the acquisition criteria of senior producers. Vizsla Silver (NYSE:VZLA, TSX:VZLA) is one of a handful globally.
Friday’s enormous trading volume definitely raises an eyebrow or two. In addition, VZLA rose 3.83% during a week in which silver fell nearly 2% - it is unusual to see a larger market cap junior developer buck the overall headwinds across the precious metals sector.
This is a sign that large institutional investors were not deterred by declining gold & silver prices. Instead, they demonstrated an urgency to accumulate millions of VZLA shares last week.
Thursday morning’s announcement by Vizsla that it has acquired the Santa Fe Project, including permitted on-site production infrastructure and an operating 350 tonne per day mill was clearly welcome by investors. After this week’s developments (PAAS acquisition of MAG + VZLA’s acquisition of Santa Fe Project) I believe that VZLA has now moved up to being the #1 development-stage silver/gold acquisition target globally
One of the stocks that was featured in last week’s presentation at Metals Investor Forum, Onyx Gold (TSX-V:ONYX, OTC:ONXGF), had another powerful yet volatile week:
ONYX.V (Daily)
Monday afternoon, I had the opportunity to speak with ONYX CEO Brock Colterjohn. Brock confirmed that he is on site near Timmins and the drill rig is following up on the hole MC24-163 discovery at the Argus North Target. Drilling will start on the same cross-section as discovery drillhole MC24-163, followed by fences of similarly spaced holes on cross-sections 50 meters to the east and west. Phase 2 follow-up will include larger step-outs along strike and to depth.
Next week, the company expects to close the recently upsized C$11 million financing, including the reveal of the 9.9% strategic investor.
Finally, Spain-focused VMS explorer/developer Emerita Resources (TSX-V:EMO, OTC:EMOTF) has hit a bit of a rough patch since trading all the way up to C$2.00 per share on Valentine’s Day February 14th:
EMO.V (Daily)
The recent downtrend stands in stark contrast to investor sentiment, which appears to be unanimously favorable towards Emerita. While Emerita does control a legitimate VMS Project (IBW Project) with potentially economic scale and grade, a substantial portion of the company’s current market cap hinges on the outcome of criminal/administrative proceedings in Seville, Spain.
EMO Chart Setup
Much of EMO’s November 2024-February 2025 rally can be attributed to the anticipation of the commencement of a criminal trial in Spain. This is a trial that investors and EMO shareholders have been waiting for since 2021.
Since mid-March, EMO shares have been consolidating within a symmetrical triangle. However, the symmetrical triangle can also be interpreted as part of the ‘right shoulder’ of a multi-month head & shoulders top pattern.
Patterns within patterns.
The amount of potential energy that has been built up within these patterns is nothing short of enormous. A decisive breakout above the $1.31 resistance level could project to as high as the February high at $2.00. Meanwhile, a breakdown below $1.00 would carry with it a minimum downside objective of $.55 (November 2024 low).
75%+ upside OR 50%+ downside depending upon which way the cookie crumbles.
Court Proceedings In Spain
The most interesting aspect of the chart setup is that an important criminal trial is unfolding in Seville, Spain that could ultimately decide whether Emerita or another party (Minorbis S.L.) will be awarded the redevelopment tender for the Aznalcóllar Mine (large VMS deposit in the Iberian Pyrite Belt). As of mid-May 2025, Emerita Resources is actively engaged in a significant legal battle concerning the Aznalcóllar Mine in Spain. The company has long contested the 2015 awarding of the mine's redevelopment tender to a consortium involving Minorbis S.L. and Grupo México, alleging that the process was marred by corruption and irregularities.
On March 3, 2025, the Provincial Court of Seville commenced a criminal trial addressing these allegations. Sixteen defendants, including members of the tender evaluation panel and individuals associated with Minorbis S.L., face charges such as influence peddling, fraud, embezzlement, and bribery. The trial is scheduled to span up to 40 sessions, concluding by July 15, 2025.
A quote from CEO David Gower in Emerita’s March 3rd news release:
“The process to this point has been a 10-year odyssey, and according to external Spanish legal counsel, this marks the final stage of the criminal trial as it pertains to the awarding of the Aznalcóllar tender. With respect to the title to the Aznalcóllar property, Emerita’s external Spanish legal counsel has advised the Company that under Spanish law if there is commission of a crime in awarding a public tender, that bid must be disqualified and the tender must be awarded to the next qualified bidder. Emerita is the only qualified bidder in this particular tender. Further, the Provincial Court, in reviewing the case during the previous appeal process, has indicated that the other bid did not meet the requirements laid out in the tender process and should have been disqualified on that basis alone. Emerita’s goal has always been to develop the Aznalcóllar property as a modern, long life mining operation that will operate at the highest standards of environmental stewardship, employee and community safety.”
Emerita asserts that under Spanish law, if a crime is committed in the awarding of a public tender, the offending bid must be disqualified, and the tender should be awarded to the next qualified bidder. Emerita maintains that it is the sole qualified bidder in this case. The outcome of this trial could therefore have significant implications for the company's future operations in the region.
The Aznalcóllar Mine, particularly the Los Frailes deposit, is a significant asset within the Iberian Pyrite Belt. Historical estimates suggest the deposit contains approximately 71 million tonnes grading 3.86% zinc, 2.18% lead, 0.34% copper, and 60 ppm silver.
The final verdicts from both the criminal and administrative proceedings are anticipated in mid-2025.
Conclusion
The Aznalcóllar Mine is a truly special VMS deposit with rare scale (total resources of 100+ million tonnes) and grade (Los Frailes Underground hosts average grades of 6.65% zinc 3.87% lead 0.29% copper 84 g/t silver) in a brownfield setting. If Emerita is ultimately awarded the redevelopment tender for Aznalcóllar, I can envision EMO shares trading to a significant multiple of today’s ~$1.20 share price. Even $5/share could be possible, and such a valuation would be in line with top global VMS developer/producer peers such as Foran Mining and Adriatic Metals.
Despite the abundance of optimism among many investors, I am skeptical that Emerita will receive the redevelopment tender. I am not an attorney licensed to practice law in Spain, therefore my opinion on this matter isn’t worth much. However, I can read a chart and sometimes I can even decipher the writing on the wall.
If Emerita is not awarded the redevelopment tender, EMO shares could get cut in half as a result. I have no position in EMO at this time, nor do I have plans to open a position (either long or short) anytime soon.
Disclosure: Author owns NEM VZLA shares at the time of publishing this article and may choose to buy or sell at any time without notice.
DISCLAIMER: The work included in this article is based on current events, technical charts, company news releases, corporate presentations and the author’s opinions. It may contain errors, and you shouldn’t make any investment decision based solely on what you read here. This publication contains forward-looking statements, including but not limited to comments regarding predictions and projections. Forward-looking statements address future events and conditions and therefore involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements. This article is provided for informational and entertainment purposes only and is not a recommendation to buy or sell any security. Always thoroughly do your own due diligence and talk to a licensed investment adviser prior to making any investment decisions. Junior resource companies can easily lose 100% of their value so read company profiles on www.SEDARplus.ca for important risk disclosures. It’s your money and your responsibility.