The meltdown means the price of gold is approaching the cost of production, which signals buying opportunities, said Douglas Groh, who helps manage $1.9 billion in gold and other precious metal investments at Tocqueville Asset Management LP.
“Valuations are probably the lowest they’ve been in 15 years for these mining companies,” Groh, whose holdings include Detour Gold Corp. and Goldcorp, said by telephone. “Clearly they are taking it on the chin and the market is anticipating the worst.”
The destructive force of a collapse in world coal prices has been underscored by the sale of a mine valued at A$860 million ($631 million) three years ago for just a dollar.
Brazilian miner Vale SA and Japan’s Sumitomo Corp. sold the Isaac Plains coking-coal mine in Australia to Stanmore Coal Ltd., the Brisbane-based company said Thursday in a statement. Sumitomo bought a half stake for A$430 million in 2012.
A slump in the price of coking coal, used to make steel, to a decade low is forcing mines to close across the world and bankrupting some producers. Alpha Natural Resources Inc., the biggest U.S. producer, plans to file for bankruptcy protection in Virginia as soon as Monday, said three people with direct knowledge of the matter. It was valued at $7.3 billion in 2008.
I would have bought that for $1.
The news will send reverberations all across metal storage centers.
Bad News: Stored Metal Nonexistent
July 28, 2015 6:55PM EST
Two documents were filed today (Declaration of Dan Bensimon and Joint Stipulation Regarding Contents of Vault). There is a lot of information in these documents.
Most importantly, they show an inventory of the IDS vault that I calculate as having a value of roughly $633,000, compared to the estimated $20M+ of metal that Bullion Direct stored for customers. The declaration states:
"[Bullion Direct] interpreted the provisions of the Terms of Service agreement such that when a customer placed an order, the precious metal was not actually purchased unless the customer agreed to take actual delivery of the product."
In other words, when someone bought $10,000 of metal and sent a check for $10,000, Bullion Direct would show the product in your porfolio. But they would not actually buy the metal. There is no sign that any hedging was done, either.
The documents show that Bullion Direct transferred funds to Nucleo (the company owned by Bullion Direct, which handles the software and patent) for startup costs, and "continued funding Nucleo’s operations until shortly before the Chapter 11 filing." At times, Nucleo reportedly had 30+ employees, and it sounds like Bullion Direct funded that start-up with money sent from customers for metal.
So unfortunately, it looks like Bullion Direct ended with about $.04 of metal for every $1.00 of metal people had "stored" there. The one piece of good news is that it appears that the intellectual property has some value; whether it comes anywhere near what is owed is unknown. The bankruptcy petition claimed $10M-$50M of assets, so unless there are major assets aside from the money, metal, and intellectual property, Bullion Direct believes the intellectual property has a value of at least $9M.
Many will be in for a surprise.
How many times have we've heard this?
According to court documents, there are as many as 6,000 creditors (although, I believe that number is low, and closer to 8,000), and they are owed “perhaps as great as $25M.” A Joint Stipulation between Bullion Direct and the depository shows inventory that I calculate as being worth roughly $635,000. That’s about $.03 of real metal for every $1.00 of metal supposedly being stored.
The bankruptcy petition gives a range of $10M-$50M for the value of the assets, which presumably means that the intellectual property (mainly the patent and software) is believed to be worth at least $9M.
As shocking as it is to find out that almost none of the metal supposedly stored for customers ever actually existed. At least there is hope that creditors might be made whole, if the intellectual property has the value that Bullion Direct thinks that it does.