Goff Corp: Short Covering On The Way?

Temporarily, the gold bull market has grinded to a complete halt. Over the past 2 trading days, gold and gold stocks have been pummeled. Even gold’s luster as a safe-haven investment fell apart as the yellow metal fell 9.2% on Monday with global macroeconomic concerns sending the S&P 500 down 2.3%.

The seemingly-strong thesis for gold is being put to the test with a vengeance. Here is a sample of the carnage over the past 6 months seen in gold and silver, the two most-widely traded precious metals: the Gold Miners ETF (GDX) is down 44%; the Gold ETF (GLD) is down 22%; the Silver Miners ETF (SIL) is down 42%; and the Silver ETF (SLV) is down 30%. Some analysts are calling this a bear market for gold while some market watchers have gone so far into wondering if the era for gold is over. Before we make that conclusion and quickly move our money into other assets, it’s best to put things in perspective.

There is no question that the appeal of the yellow metal is lower than anytime over the past 5 years with the global macroeconomic conditions slowly improving and inflation not nearly as high as some projected. Still, this doesn’t necessarily mean that gold has lost all of its luster.

Europe is in a state of flux that could be seen with the recent situation in Cyprus. The US Fed continues to print money. And even though we have seen selling in the marketplace, there are still buyers out there as the option market clearly demonstrates. At-the-money calls expiring in one month for the Gold ETF, cost $5.45 per share, more than at-the-money puts, which are worth $4.95. In other words, investors see a bigger risk for an upward move in prices for GLD in one month, rather than a downward move. The same bullish skew can be also seen in options expiring in five days and 68 days, according to Bloomberg data.

This brings us to one gold stock that I find very interesting, Goff Corporation (GOFF.OB), the U.S.-based public company whose wholly owned subsidiary, Golden Glory Resources, is engaged in gold exploration with a view to developing highly prospective gold projects. The company is assessing multiple projects for their potential as gold and silver prospects. Colombia is currently one of the leading gold mining areas in the world producing over 55,509 kilograms of gold (2011), primarily from the region where Goff's subsidiary Golden Glory Resources holds leases.

The company has released a string of positive announcements recently but despite all of the positive news, shorts keep hammering the stock and as of Monday’s close, 32% of daily volume traded for Goff’s shares were short which could be setting the company up for a large number of shorts covering their positions soon. That should boost the shares closer to fair value of something in the neighborhood of $4 a share.
The stock surprisingly rose on Monday, even with the selling commodity stocks all over the map saw. Some of that may have been related to the company’s press release put out on Monday talking about the potential of its Colombian projects. The company said that Golden Glory Resources reported that its recent acquisition of gold concessions in Colombia now position the company among the country's list of top gold exploration mining companies with several potential multi-million ounce gold targets.

There was one other nugget of information provided in the release that may have also provided a bullish tone to Monday’s trading day. Talking about its Marmato Mountain gold leases, Goff said that it has which has a measured, indicated and inferred resource of 14.2 million ounces gold and over 89,000 ounces silver. At today's gold prices, that makes it a $22 billion plus discovery. That value most definitely doesn’t include the costs of mining the gold, but still a significant discovery for a company with a market cap of under $100 million.

Monday’s news followed up Friday press release in which the company said that its going to begin drilling on its Gavia Gold Project in Caldas, Colombia. The company announced plans to pursue a 20-hole diamond drill exploration program on its Gavia Gold Project in the Marmato region, Caldas District, Colombia. The leases are reported to offer multimillion ounce, large tonnage, bulk mineable targets with potential up to three grams of gold per ton average. Golden Glory Resources will be targeting near surface gold/silver targets using technical information developed by the company's geo-technical team.
Previous drilling has been carried out on the Gavia Property, and revealed gold grades averaging about gram per ton. Historical data indicates the Gavia Property has gold potential of over 20 million ounces contained based on mapping, soil samples and existing tunnels.

The stock has been covered by a number of analysts on the web including three different reports on Seeking Alpha the last of which being published last Tuesday. To quickly conclude, Goff Corp is uniquely positioned with a strong assets to survive in thrive in this recent commodity downturn. The shorts should provide a healthy boost to the timing of the shares achieving their fair value on the open market.