Point well taken angietheapple. I agree in that regard. However, I think they can safely shut down all production at the Africian mines for at least 2 years so it would make sense. It will take a lot of miners to finally slow or halt production at unfeasable mines to make a difference. I think right now there are around 3,200+ tonnes per year of gold produced which is at or near record worldwide output. If production just went to levels in the 90's where it was in the 2,000 tonne per year range (if memory serves me correctly) things would work out very well. Either way, IAG has Niobium which the market seems to give no credit for!
That is good to know and hopefully other CEO's will finally pull the plug on over priced non economically viable projects. Niobium is the Key to IAG in the short to medium term IMO
Good post leebagain. I think for Gold to start going up significantly there needs to be cooperation from the large miners to cut production. I.E. companies like IAG have no business mining in Africa where the cost above production has been and is and will be in the near and medium term future! Until there is less gold being produced the price of gold will have pressure on it. These central banks are in overdrive shorting paper products!
dambatchew, that does make sense when you say that some of the preferreds may have been shorted as a hedge. It would only make sense if the margin interest rate were less than the preferred dividend of course.
patsbaz makes a good point in that perhaps after the conversion Prem Wasta will finally have shareholder interests aligned with his.
IR finally got back to me on the Fairfax Financial Note. They must have been busy so I will give them the benefit of the doubt and apologize for my comments on them earlier! They showed me the copies of the SEC filing pages and highlighted the answers. The Preferred on the 6% note will convert on December 21st 2014 at a conversion price of $9.2115 per share or 18,423,000 shares. NOT at current market which I worried would be 40 million shares so that is some good news as far as I am concerned.
The confusing part was in their presentations and even in the 10k and 8k filings that leads one to believe the conversion would be at current market prices at the time. It read, "On the fifth anniversary of the date of issuance of the 6.0% Convertible Preferred Stock, all outstanding shares will be converted automatically into shares of the company's common stock at the then-prevailing conversion price if all dividends are current as of such date."
I agree IR sucks. I have sent them several emails and left voice mail messages for clarification on the Fairfax Financial preferred convertibles. Their silence leads me to believe they will mandatory convert at 'market' on December 21st of this year. That 200 million will dilute existing shareholders by about 40 million shares as it stands. Perhaps that is why they have that 200 million figure to 'buy' Prem Wasta of Fairfax Financial out. He seems to be the only one making money on SD after all these years other than board members and Ward family members!
I'll take it at this point! TPG has had going on 18 months and stock is trading near 2 year lows. If they cannot find a buyer for $7.50 they should start winding down operations and sell off piece by piece and the stock would be trading a lot higher than it is now.
From a Reuters article this past Monday:
Oil prices needed to meet expenditure
OPEC Country 2012 2013
"Algeria 121 119
Angola 81 94
Ecuador 112 122
Iran 123 136
Iraq 100 116
Kuwait 61 59
Libya 94 111
Nigeria 118 124
Qatar 59 58
Saudi Arabia 87 92
UAE 82 90
Venezuela 102 117
Marginal cost of producing one new barrel of oil
Regions Dollars per barrel ($/bbl)
Brazil Ethanol 63-69
Central and South America 29-35
Deepwater Offshore 54-60
EU Biodiesel 106-113
EU Ethanol 98-105
Middle East Onshore 10-17
North Sea 46-53
Oil Sands 89-96
Former Soviet Union Onshore 18-25
Russia Onshore 15-21
US Ethanol 80-87
US Shale Oil 70-77
WAF Offshore 38-44
(Reporting by Rowena Caine in London; Editing by Christopher
Johnson and Michael Urquhart)"
They should cut Capex to @billion and use the rest to pay off debt if there is anything left over from a cash flow standpoint. The company is not being rewarded for drilling beyond its current cash means so it wouldn't hurt to stay within cash flow for Capex and use the cash on the balance sheet to pay down debt and some share repurchases IMO.
The fed wants a stronger dollar it appears so its only a matter of time the rest of the market follows the oil and gold stocks lower. The funny thing is the stronger dollar is doing nothing to lower food prices!
On the bright side Brent is $98 a barrel and under $100 hurts a lot of countries that produce oil (i.e. Russia). Perhaps this is the Fed's intention but not thinking of the collateral damage to domestic producers! Maybe they will slow production thus helping stabilize price going forward?
SD's repurchase 'program' seems to be more words than action. The market doesn't believe it or take it seriously since the stock never rallied much with the news. Its all about Fairfax Financial and Prem Wasta and his mandatory conversion of his preferreds December 21st this year. That is what the 200 million will probably be used for and not open market purchases IMO
I hope TPG is not just sitting idle as it appears. There has been no 'unlocked' shareholder value as of yet since they took over. Selling the GOM appears to have done nothing to impress investors. Only selling the SWD assets or another very cold winter will bring SD back into the 7's during the next 6 months.
Some entity could take SD private, sell off non-performing assets, SWD and form a trust with the rest. A liquidation of SD would be worth far more than what it is trading at now. I hope it happens so they at least lose their board jobs and try to earn a living like a normal person!
Excellent article thanks for letting us know. The person writing it seems to know a lot about IAG and gold and the industry.
Anything over $1,300 is a bonus for most miners since most expect gold to hover around that level. I think production numbers will start to come down in 2015 since a lot of projects have been put on hold by many miners and they are drilling out their current commitments. Either way, with 4.5 Trillion dollars on the Fed balance sheet when there was only 1 Trillion or so back in 2008 the price of gold should be much higher.
Lower oil costs may help too so a stronger dollar isn't all negative for miners since I believe fuel costs are at least 25% or more of production costs.
It is mind boggling how the spread has grown with cushing around 20 million barrels down from near 40 million barrels not long ago! Why would refiners want to import oil when they get it $9 per barrel cheaper which leads one to believe the glut at the ports will work its way through via less imports and eventually lead to closer spreads again. That is a major factor in why many domestic O&G companies are not doing well.
We need a petition to oust TPG from the board to 'unlock value' for shareholders! SD needs to pay down debt and maybe even reduce Capex by a couple hundred million a year to do so if they can't sell the SWD extra capacity for nearly a billion within the next 6 months or so.
Thanks leebagain. Yes, the dollar is in an uptrend which could hurt gold. However, there should be a floor on gold in the mid 1200's as that is when the countries from the east (India and China) usually start ramping up their buying it seems. IAG is in the best operating position it has been in a couple years so its only a matter of time before the 'market' recognizes it!
$5 will be a great place to be so IAG is fully margin able with most brokerages and can get on more institutional radars. Some new institutions got in IAG last quarter as well. One took a 7 million+ share position and a couple others took new large positions as well. Check the nasdaq site and under institutional holdings to see the full list.
Never count on the Chinese to buy anything unless its in BK and they can get it on the cheap. That has been my experience in buyouts and hoping for them. Niobium should be spun off as a separate company to raise money to expand Niobec and some cash to pay down some debt. That is their best chance of getting a multiple of 8-10x IMO. IF gold cooperates and stays above $1,300 and hits $1,350 $5 could be in the cards I agree.