The upward momentum has increased even further. The volumes over the last few days have been extremely high. Nearly 29 million shares have been traded in the last two days, and some consider this part of a short squeeze. There were 35 million shares (22% of the float) short on September 30, and the price on that date was $8.81. So the stock has moved nearly 40% over the last couple of weeks. The announcement about investment in Zebra Biologics has increased the excitement, and even Dr. Frost has continued to acquire shares consistently, though in small quantities. As mentioned in an article on SA, people are skeptical about whether the announcement of Zebra Biologics actually played a significant role in the move. The undisclosed investment appears to be speculative as Zebra is into development of next generation antibodies. It may take years before this technology can be commercialized to contribute meaningfully to OPKO's top or bottom line. So ultimately, this move can be traced to the power of Dr. Frost. Frost now controls more than 152 million shares of OPKO Health out of the outstanding 403.6 million shares (37.7%). His investment in Biozone Pharmaceuticals (BZNE), which owns the high potential drug delivery technology QuSomes, and the agreement between OPKO and Biozone, has made a lot of news. The acquisition of PROLOR Biotech, and several other investments over the last couple of years have helped the stock post remarkable gains. Again, many of these investments may take time to help improve the financial position of the company. The valuations are surely exceptionally high. The price to sales is nearly 50, and the price to book is also extremely high. For those who want to invest on valuations, it is not so convincing. However, if the squeeze gets tighter, then it is possible for the stock to go even higher.
The correction in gold has run deeper than expected, but now it is very close to the strong support of $1200. The possibility of rebound is high, and the better valued stocks can be considered for long term investment. The best part about Iamgold is the dividend yield. Presuming that gold rebounds, these levels may appear extremely attractive in hindsight. Investors are already at 6% yield when they buy the stock. The high probability of rebound adds to possibility of capital appreciation. Iamgold is now trading at less than half its book value, and despite the adverse price scenario, has been able to achieve a net profit margin of 6% on a ttm basis. The operating margins are nearly 25%. The debt of $639 million is also not too bad if one considers the cash of $368 million. The trailing P/E is 17 and the forward P/E is around 15. The price to sales is around 1. The problem is the cost of production. At $1134 per ounce, the all-in-sustaining costs are high compared to many peers. For IAG, the costs increased 10% on a yoy basis in Q3. There are even some development stage companies with lower expected cost of production like Pershing Gold (PGLC). IAG is on track to achieve the targeted cost savings, and the impact may be more prominent in the forthcoming quarters. The company had announced a $100 million cost-reduction program at the beginning of the year. The target was for reduction in operating costs by $54 million, exploration expenditures by $40 million and corporate general and administrative costs by $6 million. The company has achieved 77% of planned reductions by the end of Q3 with savings of $38 million in Operations, $35 million in Exploration and $4 million in Corporate. So the company seems to be taking the right steps, and appears to be a good bet at current levels. However, gold needs to hold and rebound.
Senesco will make two presentations on SNS01T for blood-borne cancer care at the 55th American Society of Hematology (ASH) Annual Meeting and Exposition to be held from December 7-10. It will provide an update on the current results of the Phase 1b/2a trial. It will also make an oral presentation of new results with SNS01-T in non-clinical studies. The abstracts to be presented include “Phase 1b/2a Open-Label, Multiple-Dose, Dose-Escalation Study To Evaluate The Safety and Tolerability Of Intravenous Infusion Of SNS01-T In Patients With Relapsed Or Refractory Multiple Myeloma, Mantle Cell Lymphoma, Or Diffuse Large B Cell Lymphoma" and "SNS01-T Exhibits Significant Anti-Tumoral Activity In Models Of Multiple Myeloma and Non-Hodgkins B Cell Lymphoma and Induces Cell Death In Malignant But Not Normal B Cells". In case the results come in better than expected on the safety & efficacy fronts, then the stock could start a sustainable upward movement. The results in the pre-clinical trials were extremely encouraging, and the cohort 1 & 2 results were also good. However, the dose in cohort 3 and 4 are much higher, and hence it will be interesting to note the tolerance by the patients and the associated side effects. The efficacy is likely to be better at higher doses, but tolerance / side effects will hold more importance than before. Analysts have pointed out that the stock is undervalued compared to other development stage companies. The fact that insiders have put in money in the company at a much higher price than the current market price of the stock indicates their confidence. Chairman Harlan Waksal's investment at $26 is significant as he has the relevant experience in the biotech sector to understand the potential of SNS01T. He is surely confident of the prospects.
The stock has been in the news recently. A couple of Articles on seekingalpha have expressed positive opinion about the future prospects of the company. Chairman Harlan Waksal's faith in the company is one of the reasons for analyst confidence. He had purchased the company's stock at $26/share in 2012, and has personally secured a $3 million credit line for the company. This investment indicates that he is confident about the future prospects of the company's development stage drug candidate SNS01T. He has a successful track record, and his opinion needs to be given due consideration. Waksal is the co-founder of Imclone, which he had sold to Eli Lilly (LLY) for $6.8 billion. Another director, Christopher Forbes, had also acquired the company's stocks at the same price. Insider purchases signal their optimism about the future. Results in preclinical trials, and cohort 1 & 2 (multiple-myeloma patients) were encouraging. Cohort 2 results were declared in June, and cohort 3 results are expected in a few weeks. The cohort 3 results may lead to a positive reaction if the results are good. The market may begin to value the stock at much higher levels. SNS01T has use in other indications like inflammation and ischemia. Senesco owns numerous patents related to its drug candidate, with applications in agriculture (increasing crop yield), programming of cell death etc. However, the drug candidate has two to three years to go before it receives FDA approval. The trials will require funding from time to time to take the research forward. There is intense competition in the field, though the size of the market also provides a huge opportunity. Like many development stage biotech companies, the risks of investment are relatively high, but the reward is also likely to be commensurate. As mentioned in one SA article, Cohort 3 results could be the near term catalyst.
The last few days have seen the stock rebound with slightly higher volumes. It had corrected after making its 52 week high in early September. It has appreciated 464% in 2013, and 393% on a 52 week basis. The merger with TransEnterix has boosted the sentiments, and the support of Dr. Frost is also one major factor responsible for increased investor interest. The company had raised $30.2 million just before the merger, with TransEnterix contributing 65% or $19.7 million, and Dr. Frost and other investors putting in the balance 35% or $10.5 million. The money has increased the prospects of the combined company. Both SafeStitch and TransEnterix will benefit from stronger finances and also from the expected synergies. Resources are critical for companies at this stage, and backing of Dr. Frost can help them get more capital from time to time. He has the resources and experience to help the company explore partnerships with other investors. Frost is on TransEnterix's board, and is also heading huge companies like Teva (TEVA) & OPKO Health (OPK). He explores synergies between his companies. Recently, MusclePharm, where he has a stake, invested in his company Biozone Pharmaceuticals (BZNE). Biozone owns the high potential proprietary drug delivery technology QuSomes, and MusclePharm can benefit from the technology to increase efficacy of its supplements. For TransEnterix, the merger can speed up the development of flexible minimally invasive surgical technologies, and SafeStitch can develop its robotic system SurgiBot and other products. It is important to remember that the benefits of the merger will take time to translate into numbers. The stock has already moved up quite a bit to factor a lot of the future positives. The sharp move has increased the possibility of corrections. So one can tag along, but with a clear stop loss in mind.
Gold has remained weak and is unable to make decisive positive moves. Till that happens, the nervousness will continue. It is possible that the sluggishness will continue for a long time. Pershing hired an engineering consultant to update several key permits for the mine. CEO Alfers stated that the expertise of the consultants will help Pershing optimize the design of the expanded mine and secure the required permit modifications. Most importantly, Alfers stated that Pershing is well situated to become Nevada's next new gold producer because the company already has a fully constructed and permitted gold recovery facility for its gold resources. The company is poised for fast-track resumption of gold production with only modest capital expenditures to re-start the entire operation. The reaction of the stock to this news was muted, but one cannot ignore the fact that the company has obtained the necessary funding for getting close to production, and is declaring that it is going to start production soon. The insiders are putting in money regularly, and Barry Honig has acquired more than 1.1 million shares in last two months alone. Out of this, 425,000 shares were purchased during last week. Its cost of production is expected to be extremely low, so even the current price scenario is not too bad for the company. Many analysts have calculated the expected cash flow in case the company is able to produce 50K ounces as per plan. However, the company has not come out with a time frame for start of production. That is very much required so that one knows the anticipated schedule. That announcement will be a positive trigger for the stock. In any case, gold has to do better than what it has done so far otherwise the mood will remain circumspect. It needs to move beyond $1350 to indicate that the correction is getting over.
The merger has improved the sentiments for SafeStitch dramatically, but it is important to keep in mind that the stock has already run up quite a bit. The merger may have great prospects, but translation of that into real dollars may take some time. The stock has already delivered exponential returns to the investors over the last few months. It has doubled in one month, and it has appreciated by nearly 500% on a ytd basis. Recent movement in the stock is linked to the announcement of the merger with TransEnterix. Billionaire investor Dr. Phillip Frost, who has a significant stake in SafeStitch, will be on the board of the combined entity. SafeStitch raised more than $30 million in a private placement, with TransEnterix investors contributing 65% and SafeStitch investors (including Dr. Frost) putting in 35%. With the funding, TransEnterix will be able to build upon its ability to bring flexible minimally invasive surgical technologies to market and develop its robotic system SurgiBot(TM). As mentioned in an article on SA, the merger will give Safestitch the necessary resources to continue developing devices and to begin marketing them. The most reassuring part of the deal is the active interest of Dr. Frost, who is known as an astute investor in the pharma / medical devices sector. He actively explores synergies between the companies where he has stake. For example, his company OPKO Health (OPK) is working with Biozone (BZNE), another of his companies, to use Biozone's proprietary drug delivery technology (QuSomes) which can help reduce cost of manufacture of formulations. So the potential is surely there, but after such a huge rise in the stock price over the last few months, it is good to be a bit cautious.
The stock has declined by 14% from the recent high made in the last week of August. Despite the correction, it is still up 33% over the last 3 months. This performance is much better than many of its peers. It has shown some resilience during the recent correction in prices of precious metals, and may be expected to out-perform in case there is a sustained rebound. An article on SA recently predicted an 11% increase in revenues for Q3'13, and a decline in net margins. The decline could result in lower dividends. The author states that the company's decision to expand its gold operations will put continuous pressure on the margins. Silver's profit margin will decline to around 80% and gold's margin will decline to around 70%. Increase in the percent of gold's revenues out of total revenues (from 29% in Q1'13 and 32% in Q3'13) is expected to lower the overall margins. Even the last earnings were not good as the revenues had declined by 17% and the net earnings had fallen by 50%. Importantly, the operating cash flows declined by 28%, and the cash operating margin declined significantly. The debt on books has increased over the last few quarters. However, the high profit margins of the streaming companies and the lower risk makes them a preferred bet compared to the miners. The correction in precious metal prices was due because they had run up sharply in a very short period of time. The outlook of the sector is better than what it was in June. There have been more investments in smaller companies. Pershing Gold (PGLC) has obtained $20 million funding with its director Barry Honig making significant investments. This indicates the faith of the top managers in the prospects of the sector. Silver Wheaton is a good bet for the long term, but the valuations may get a bit stretched if the stock price rises significantly from here.
The correction was due, and precious metals have obliged. A bit too much maybe, but they seem to be finding support around crucial levels. It is too early to be sure, but it is possible that they may rebound a bit to consolidate. If the supports do not hold, then the stocks may even test recent lows. Coeur has lost all the gains made in August, and has corrected by nearly 25% from the highs made at the end of August. The volatility has been high. Gold has corrected by around 7% from the highs, and silver has done much worse. That has dampened the sentiments a bit. Most stocks of mining companies have declined and are near recent lows. The taper – no-taper news has only added to the volatility. However, analysts are relatively more positive despite the correction. Even for Coeur, Scotiabank & Zacks have upgraded the stock. Scotia bank increased the target price from $5 to $6, and Zacks has a price target of $13.50. Analysts at Raymond James, which initiated coverage on Coeur recently, have put an outperform rating for the stock with a price target of $18. The average target price is just below $20. Even smaller companies like Pershing Gold (PGLC) have been able to obtain funding at market price with its Director Barry Honig making significant investments. This indicates that apart from the analysts, even the managements are a bit optimistic about the fact that the June lows may hold even if the correction runs deeper. The good part is that all companies, including Coeur, have become more conscious about the cost, and the rationalization efforts are already showing results. Further, Coeur recently announced a 91.5% and 96.4% increase in estimates for mineral reserves for silver and gold at its Nevada-based Rochester mine. If silver rebounds from current levels, then the medium to long term outlook for Coeur may improve.
The article on SA a few days ago covered several aspects of the future potential of Biozone. Most of them, like limited downside potential due to revenues from the contract manufacturing business, and the huge potential of the QuSomes drug delivery technology, have already been mentioned in most articles about the company. The author also mentions that the potential of QuSomes technology is confirmed by the fact that a company like MusclePharm (MSLP) invested in Biozone months after investment by OPKO Health (OPK). Dr. Frost and other investors, must have seen great potential in the technology based on results from the research so far. The author mentions that 'there must be something very innovative about the QuSomes technology and Biozone's ability to manufacture it for multiple different products.' In case OPKO begins to manufacture even one of its products based on the technology, that would confirm its commercial viability, and have positive effects on the contract manufacturing business. Further, the contract manufacturing business revenues are likely to receive a boost in 2014 even if MusclePharm contracts a portion of its production to Biozone. Analysts are in favor of following the smart money, and Dr. Frost's track record indicates that he has huge faith in the prospects of Biozone. This is reflected by the huge stake taken by him directly and through the companies where he is at the helm. Companies like Opko and MusclePharm are already doing well, and Biozone can follow if it begins to realize its potential. The next few quarters will be interesting to see how the events unfold. There are obvious risks when one invests in a company like Biozone and volatility may be high. However, backing of investors like Dr. Frost provides assurance of financial support which is ever so critical for companies at this stage of the business cycle.
Correction in gold has had a significant negative impact on stocks from the sector. Goldcorp has just made its 52 week low, which is close to the lows made in June. The chances of a rebound are good because gold had shown some strength last time it hit $1200. In case $1200 holds, these stocks can be good for the long term. Even if gold can consolidate in $1200-$1450 range in the medium term, companies like Goldcorp can report better numbers going forward. Goldcorp has taken the impairment hit, and is making conscious efforts to lower the cost. However, there has been yoy increase in all-in sustaining costs in Q3'13. The all-in costs in Q3 came in at $992 /oz. compared to $801 /Oz. for Q3'12. This compares well will many peers, though there are even development stage companies with lower expected cost of production like Pershing Gold (PGLC). Goldcorp reported much lower sales in Q3, but remains on course to meet its production and cost guidance. The valuations are good as the stock is trading at 0.87 times its book value. Analysts are positive on the stock. One article on SA recently compared Goldcorp with Barrick Gold (ABX), and expressed strong preference for Goldcorp. The author mentioned that Goldcorp has implemented a successful and disciplined growth and capital allocation strategy. It has significantly lower debt and operates in low risk jurisdictions. The company is strongly focused on gold and the exposure to silver is low. The focus on cost reduction is also at the top of management's mind. Most of its mines saw lower costs compared to the previous quarter, and these efforts will improve the margins over the next few quarters. In the current volatile scenario, lower cost companies will be preferred, and Goldcorp may be a good bet for the long term. But gold has to hold, else all bets are off.
The stock has corrected sharply over the last 7-8 weeks. It is nearly 20% below the 52 week high made in the middle of last month. The news that Lakewood Capital had initiated a short position in the company's shares led to some pressure. Lakewood earlier had a long position in the stock. The level of shorts were at extremely high levels on October 31 and hence the stock is vulnerable to volatile movements. In case of positive news, the squeeze can be very strong. The insider and institutional holding is extremely high, and investors like Soros Fund Management have a long position in the stock. However, despite the correction, it has done great in 2013 with more than 100% appreciation. Last couple of weeks have seen some recovery, but the volumes patterns are not so supportive. Dr. Frost has made some purchases recently which has supported the positive sentiments. Dr. Frost has been active with his other companies as well, and recently Biozone Pharmaceuticals (BZNE) was merged with Cocrystal Discovery where Opko and Teva (TEVA) have a stake. The strong performance of Opko is also mainly due to the support of Dr. Frost. The numerous acquisitions have also helped build positive sentiments about the prospects of the company. Many of Opko's investments may take time to yield tangible results, and hence improvement in the fundamentals may take a few years. The valuations are primarily based on promise, and the price to sales is still exceptionally high. An article on SA was positive on the future prospects of the company based on its candidates and catalysts in the near future. The analyst considered the recent fall as a buying opportunity, especially in view of purchases by Dr. Frost from the market. Dr. Frost's continued support is surely a factor, especially if one considers the possibility of a squeeze.
The stock has done great for investors over the past one year with around 90% appreciation. Even over the longer term, it has appreciated by 380% over the last 5 years. A recent article on seekingalpha analyzes the future potential of OPKO. The author recommends to buy the stock based on its innovation pipeline, backing of Dr. Phillip Frost, and an unusually large short interest which may lead to a surge in demand for the stock. As per the author, OPKO has maintained an aggressive acquisition strategy and the management team has brought together a very large suite of products under development. The company recently completed an all-stock acquisition of PROLOR Biotech. However, the stock valuations are extremely high as they are mostly based on future positives. Though the revenues have grown exponentially over the years, the bottom-line has been negative for several years now. The accumulated deficit is more than $426 million. The debt is relatively high at $209 million, and the cash is around $169 million. On the positive side, there are hopes from OPKO's 4KScore diagnostic test which could generate significant annual revenues (estimated at $1.8 billion) in due course. This figure surely dwarfs the negatives on the company's balance sheet now. The presence of Dr. Frost is one of the major reasons for optimism about the company. He is looking for synergies between OPKO and Biozone (BZNE), another of his companies with good potential. OPKO itself has invested in Biozone, and has an agreement with it. Biozone's proprietary drug delivery technology (QuSomes) can help in reducing cost of manufacture of formulations. So there could be some catalysts for OPKO in the short term, but it is important to remember that the stock has already run up a lot recently, and there could be periods of profit booking, especially if there is some negative news flow.
The stock seems to be gaining momentum again after a few months of uncharacteristic volatility. Despite being a bit subdued during the last few months, the stock has appreciated by 38% over last one year. The company has been in the news for its deal with Inovio (INO), a smaller company in biotech space. An article on Motley fool mentioned Roche as a good stock for conservative growth for those looking to invest in this sector. The first half of 2013 was reasonably good with 5% increase in revenues and 12% increase in core EPS. The HER2 franchise showed 11% growth, and now accounts for 14% of the company's sales. Working with experimental companies like Inovio (INO) can help Roche prepare for the patent expirations which are starting next year. Hercepting ($6.3 billion in sales in fiscal 2012) is likely to face generic competition next year, but is expected to make up for the loss partly due to the new subcutaneous formulation recently approved in the EU. The Inovio deal is expected to be good for the company in the long term as it gives it exposure to the prostate cancer market. In addition, Inovio's Hepatitis B vaccine is also believed to have a lot of potential. It also gives it access to the electroporation technology for drug delivery. The technology is believed to have a lot of potential, though it has to go through a lot of trials etc. Another technology QuSomes from Biozone (BZNE), which is for liposomal delivery of drugs, is also believed to have a lot of potential for increasing the efficiency and efficacy of delivery of drugs. OPKO Health (OPK) is testing the Qusomes technology for various drugs based on a license agreement with Biozone. Ultimately, once these techniques go past the trial stage, they are likely to reduce the cost of production and the therapy. Roche is perhaps attempting to access these advantages by looking at the smaller players.
Clear Channel has moved about 3% over one month, and there have been some high volume days recently to support the upward movement. The earnings could not do much for the stock despite the fact that the company posted a net profit after two quarters of losses. The crash in June had dented the sentiments, but stock is still up by 45% on a 52 week basis. Fundamentally, the revenue on ttm basis is $2.95 billion, and the gross profit is $1.34 billion. The company is carrying a net loss of around $200 million on a ttm basis, but that is mainly because of the $248 million impairment hit in the fourth quarter of 2012 on account of extinguishment of debt. The debt on books and declining cash position is a bit of a worry. So the fundamentals are not that robust, and one good quarter cannot be expected to change the sentiments. It needs a few more quarters of good growth in top and bottom-line so that investors see some consistency in the performance. Going by the ttm figures, the topline is not expected to show too much growth, though the bottom-line may show some improvement. Growth is not easy due to the competition in the industry which keeps the margins under pressure. The outdoor advertising giants like Lamar (LAMR) and CBS (CBS) provide direct competition. The industry also faces competition from other segments like online advertising. Social media is increasingly being used by advertisers to spread awareness about their products & services. Celebrity influence is being used to encourage people to use the product / services. IZEA (IZEA), a company active in the social media sponsorship space, recently reported results of a survey which point to increasing popularity of native advertising. Meanwhile, insidermonkey reported the hedge fund activity related to Clear Channel which indicated some bullishness in the stance of the smart money. That is a bit encouraging.
The announcement of the purchase of device unit of Nokia by Microsoft (MSFT) has changed the fortunes of the company. The stock has surely moved swiftly to factor the cash offered by Microsoft, and there are analysts who are upbeat about the long term prospects of the company after the deal. In addition to the cash, which will be a major portion of the market cap of the company, the sale of the loss-making unit will have other positive effects. An article on seekingalpha mentions that the sale of the unit will improve the financials significantly and strengthen the balance sheet. In any case nothing great was expected from the unit with competition in all segments of the handsets markets increasing substantially. The smartphone market, with players like Apple (AAPL) and Samsung (SSNLF.PK), is increasingly getting crowded with smaller, local players around the world. Even used devices are increasingly being preferred, and the resale value of Apple products is a source of competitive advantage which companies like Nokia do not possess. Usell (USEL), a company which provides a platform for buying / selling used phones, reported great growth in revenues recently. In addition, the patents portfolio of Nokia is expected to bring in revenues, and even Microsoft will pay them a substantial sum annually for the next 10 years. Other business segments like the Nokia Siemens Networks may also do well going forward. Overall, it will be a more cash rich company with the main overhang being out of the way. The perspective may take time to change, but the markets may begin to factor the long term benefits of the deal. However, the recent appreciation in the price has factored most of the short term positives. Future success will depend on how it performs in the remaining business segments. It will be interesting to see the operating results after the deal is closed.
The stock has been a bit volatile recently and has corrected from the highs. Short-term volatility can be expected for such stocks, and long term prospects depend on the ability of Biozone to deliver on both the fronts, contract manufacturing and QuSomes drug delivery technology. There is another comprehensive review of Biozone on SA which recommends to buy the stock for long term. Dr. Frost owns a significant stake in the company directly and through his companies like Opko Health (OPK). MusclePharm (MSLP) has also invested $2M in Biozone to gain access to QuSomes technology. The $2 million received from MusclePharm is a significant amount considering the cash available with Biozone on June 30.Consequent upon liquidation of Equachem (Biozone's raw material selling business), the net loss has declined by 80%. The R&D spending has increased mainly to further develop the QuSomes. The company may get some pro-rata dividend from liquidation BetaZone Laboratories, a company that engages in the development, sale and licensing of pharmaceuticals and cosmetics in Latin America. Biozone owns 45% in that. Depending upon the exact amount (to be reflected in the earnings), the company's cash position could be strengthened due to the dividend. The possible uses of Qusomes outside the cosmetics market could provide it with huge benefits. The agreement with MusclePharm is also game changing both for the contract manufacturing and the Qusomes technology. MusclePharm is evaluating QuSomes technology and believes QuSomes could improve the absorption and delivery speed of its products It may utilize Biozone's manufacturing facilities for its products. QuSomes can help in reducing cost of manufacture and increase effectiveness at lower dosage. In either case, the pharmaceuticals manufacturers will be excited to embrace the technology once it goes through the usual process of approval etc. The article also mentions some risk factors so needs to read in totality.
The latest press release of the company mentions that it has taken a significant step towards putting its Relief Canyon Mine in Pershing County, Nevada back into production. An engineering consulting firm (Knight Piésold) has been selected to perform the geotechnical engineering work required to update several key permits for the mine. Subject to completion of these steps, the company may be on course to resuming production from facility. According to CEO Stephen Alfers, the expertise of the consultants will help the company optimize the design of the expanded mine and secure the required permit modifications. The company's 2013 drilling campaign is still in progress, and continues in an area mainly north of the North Pit. The drilling effort has the objective of expanding and upgrading the existing measured, indicated and inferred resources from the mines. The results of the drilling have been encouraging, and has also discovered several high-grade intercepts. The news is important because the company has categorically mentioned that it is likely to become Nevada's next new gold producer. It is poised for fast-track resumption of gold production with only modest capital expenditures to re-start the entire operation. The leach pads can accommodate 21 million tons of ore with lots of room for expansion. The gold recovery plant has the capacity to process up to 8 million tons per year. However, the PR did not mention the time frame for resumption of production. More details on that will help get a clearer picture. Meanwhile, Gold has corrected significantly and seems to be finding support around crucial levels. As soon as the sentiments improve, one is likely to see more stock specific action in the sector. The cost of production for Pershing is expected to be significantly lower than the industry average, so it may be able to achieve decent margins even if the price remains around current levels.
The court ruling was positive in the sense that the venue will not be changed, and the claims of direct infringement have not been dismissed. This is good because it will avoid further delays in the case due to transfer etc. Further, since the claims have not been dismissed, the first hurdle has been definitely crossed. The Aruze and Penn lawsuits will not be split, but the court granted the motion to sever the action against WMS, Caesars and MGM. This is not that bad anyway. However, the court granted defendants' motion to dismiss contributory and induced infringement claims, and the court granted defendants' motion to pause proceedings against MGM, Caesars and Penn. This is because the court viewed these as retailers who did not necessarily have detailed knowledge about slot machines they operated. So first the manufacturers need to be found guilty of infringing patents, and then the users will be tried. As mentioned by Greg Miller on seekingalpha, the ruling is very much positive for MGT. So, as of now, the Markman hearing will be held in June next year. However, he has put in his money in MGT mainly for the prospects related to the fantasy daily sports business. This is because of the growth potential of that segment. He mentions prospects of exponential growth (2000%) over the next 7 years. The daily segment will only increase in popularity over time. If MGT is able to leverage this growth story, that will be the real game changer for the company. The awards / settlement related to the lawsuits will be bonus events, so to say. The size of the awards can surely make them bigger than a bonus. The company needs to provide more information about the progress of the Fantasy sports business from time to time. That will help the investors remain aware of possibilities.
IAG has recovered a bit from the recent lows. It is up around 15%, though the volumes have been a bit down in the last couple of sessions. Gold has corrected from the recent high and seems to be finding its feet around crucial levels. The correction was expected, though it has run a bit deeper than one would have liked. A sustained rebound will improve the sentiments. All stocks have corrected significantly, and the underlying nervousness surfaces as soon as there is some weakness in gold prices. The sentimental impact of the correction over the last two years cannot be expected to go away in a jiffy. However, an analyst on SA has mentioned that the sector is doing better now because it has learned from its mistakes. The costs are down, and the expansion plans are much more conservative. Consequently, the author sees that we could be witnessing an inflection point after two years of declines. There are analyst upgrades, including that for IAG. HSBC has an overweight rating on IAG, with a PT of $6.20. many are seeing deep value in the sector for the long term. Pershing Gold (PGLC), a development stage company in Nevada, recently announced that it is on track to start production from its mines. These are signs that the managements are a bit more confident than they were a few months ago. For IAG, the dividend yield is a big plus point, especially if one considers the scope for additional returns due to capital appreciation. The valuations remain attractive as the company is trading at around half its book value. Unlike many peers, it still is in profit on a ttm basis. The SA article recommends a long IAG for long term investment. The leverage is also reasonable if one considers the cash position.