Market analyst Regina Meani discusses Meeka Gold (ASX:MEK).
From February this year the gold price has seen the bulls and bears running amuck. In February we identified the potential for bull traps and we believe that the recent drop to US $1787 on 16 May may well have been a bear trap. We find that following the spike through support to US$1787 and recent rally that the price is attempting to build the momentum to tackle its barriers located between $1875 and $1900 and then between $1920 and $1950. Once clear the price would gain the potential to head towards and into the $2000-2100 range. Support remains at $1833 and then more importantly between the $1787 low and $1750.
With this scenario in mind, we have selected Meeka Gold (ASX:MEK $0.07), formerly Latitude Consolidated limited, a Western Australian junior gold and rare earths miner with a high quality 100% owned portfolio. While the gold price continues to be volatile, Meeka Gold has the added benefit of controlling the Cascade Rare Earths Project (2,068km²) in a region that is rapidly emerging as a highly prospective clay rare earths province. Of further significance are the current results which contain high levels of permanent magnet metals being Neodymium-Praseodymium oxides. These metals are vital to the manufacture of high strength permanent magnets used in drivetrains of electric vehicles.
Every EV drivetrain requires up to 2kg of neodymium-praseodymium oxide and perhaps more significant is that a three-megawatt direct drive wind turbine uses 600kg. Neodymium-praseodymium is also used in air-conditioning units and is used to create strong metals for use in aircraft engines. Praseodymium is also a component of a special sort of glass, used to make visors to protect welders and glassmakers.
These metals are geopolitically critical and the company intends to accelerate their understanding of the project by commencing initial metallurgical work.
Meeka’s main focus is the Murchison Gold Project situated in the prolific Murchison Gold Fields with the project containing a large high-grade 1.1Moz Mineral Resource. The company released a Scoping Study in December 2021 which outlined a robust Project that produces over 420koz of gold.
In addition, Meeka owns the Circle Valley Project in the Albany-Fraser Mobile Belt. Gold mineralisation has been identified in four separate locations at Circle Valley and presents an exciting growth opportunity, which the company is aggressively pursuing.
If we take into account the share price history from Latitude, we find that a large expanded base has been developing since 2001. In 2022 we believe that the price is exhibiting the potential to approach and test the upper limits to the base with the added potential to break through and allow the price to forge significantly higher. Over the near term, the price needs to move above 9c to suggest a test of 12c and then 14c. Once clear the stock would gain the upside towards 30c and 40c and possibly much higher.
Support is located at 5.8-6.0c and more importantly around 4.0-4.5c. Until the base is completed, traders and investors should either wait for the completion or use tight stop losses.