I had the fortune (or misfortune) to have two large real estate notes payoff in April 2004. I have been in and out of HMY and GFI since 2001 for 3 profitable round trips. I happened to start buying at the spring crunch of the gold stocks and got in HMY, GFI< GG< KGC<IAG< NXG at what I deemed to be at good prices. The market moved somewhat lower over the summer and then spiked as GFI make a takeover bid for IAG. However, HMY cut its deal with Norilsk as to its 20% stock share and both GFI and HMY got hammered after fall 2004. Well I held as I believe SA gold stocks are undervlaued due to the Africa risk ( a real risk with BEE). I did not anticipate the merger going so bad. That said, HMY will perform a turnaround after its merger debacle. Norilsk pulled its stock vote pledge and I understand ( per Russian media) that the shares are now held in Polyus, which means they are looking to go on a Euro or American stock exchnge in 2006. HMY sold half its GFI shares to cover its cash needs and has stated it will hold the other half till a higher price hits. I read both sals work and the gator. Lets share info and not get miffed. Sometime we are right and sometime we are wrong. The SA golds will stand on their own as Mbeiki and the ANC dont want foreign owenrship of the gold companies. Both HMY and GFI have good reserve, although HMY reserve appeared to have been overstated-a a fact that came out in the merger fight. By the way, Im selling the GG, KGC, IAG at almost doubles hopefully in October/November 2005 as the usual fall jump takes place. Ill sit on the HMY and GFI till 2006 to stretch out cap gains taxes.
The POG in the Indian market, which is the largest physical market, runs with the farming season and weddign season. In Indian culture and religion, it is propitious to wait to marry until the fall and gold is an integral part of the wedding, even for the most common peasant. The farmers also know how well(or badly) their crop will be and they will convert the paper rupee to hard gold in the fall. This physical demand traditionally drives up gold price as it is real demand, not funny moeny derivatives traded back and forth on the Comex and NYSE. This real physical demand is what drives the traditional upsurge in the fall/autumn for gold stocks, although in my opinion Indian demand stands on its own-but I dont argue with Mr. market if someone takes my shares and leaves me the profit.
Crafate, thanks for that timely and informative post. Your work displays the best example I've seen in a long time of the huge value these discussions can provide. Investors sharing information will always be more trustworthy than your friendly broker, because there is no conflict of interest involved.
I've owned both HMY and GFI for a good many years, too, and was hammered in the takeover battle. While the stocks have been down, though, I've recovered a good bit of the paper loss by selling call options on my holdings.