Eye4value, present government will continue at least until Oct. 2015 (next election date if I remember correctly; sorry, if it's inaccurate). Also, country political landscape doesn't look good at the moment. I guess sorting out, if it meant Navidad, could take longer than 6-12 months.
Sandiegoman, 1 g/ton means, generally speaking, high grade for an open-pit mine. It is wrong to use one number only, e.g. grade to classify, as bad/good, every gold mine. It requires more numbers and features. For example, 1 g/ton open-pit mine extracting oxide ore is roughly equivalent, by efficiency (profitability) to 5 g/ton underground mine extracting low-sulphide ore. Frankly, I didn’t read IAG mining profile recently and can’t remember if its ores are good oxide. This information can be found on company web site.
It is a buying opportunity if gold goes up, and it was a selling opportunity couple days ago, especially if gold doesn’t go up. Market doesn’t like weak Q4 numbers, especially reported couple weeks after quarter ends. Speaking in general market terms, company has delivered earning warning a bit late, by general market practice. Also, 2014 capex projections seem to be higher than company told analysts during past conference calls.
In other words, one may see reasons for today’s drop, though practical interpretations can vary.
As of now every gold stock flies in vapor cloud, nothing below to support if gold goes down, and nothing above to stop if gold goes up. It is a very volatile environment; very close to gambling and as such it comes down to investment priorities. Some portfolios use small gambles; others ignore gambling, and finally some portfolios present one big gamble.
I will try to answer your questions step by step; they cover many issues pertained to sector analysis.
1. “Competent management” is something rarely assessed correctly by outsiders. Shortly speaking, we don’t have enough information. If management competency is an important issue for you and you believe that you can assess the distinction between competent and incompetent management then you could read conference call transcripts for various companies and decide yourself which CEO sounds competent, and still it will be your subjective opinion. Anyway, don’t trust message board opinions in this regard.
2. “Very profitable balance sheet” probably meant “very profitable income statement”. As of now you will not find a gold company fitting to the label. Some companies are still capable to stay afloat, e.g. GG, AUY… even ole IAG still makes few bucks. Pay attention to cash flow, btw, even if a gold company is still profitable (i.e. has positive net income), cash flow can be often negative.
3. Regarding “balance sheet”, EGO and AGI have stronger ones; though you could make wider research and maybe find something similar.
4. If gold price goes up then all gold stocks will run up. It is quite unpredictable to say which one will move faster, especially talking about short-term.
5. If gold price doesn’t go up, then all gold stocks are in bad situation, because current gold price is too low to sustain this business in long term. Certainly, every company is unique and "bad situation" means different for every particular stock.
By the way, curious point relevant to ole RNO and feasibility numbers. I have vague recollection (sorry, many years elapsed) that Lundin has never been able to bring Aguablanca numbers up to feasibility projections.
Most likely, some guys posting here visited that message board in past, in bull market times. Goldmania was there for sure; it is easy to remember his posts :)
I just checked share price for few messageboard darlings: New Guinea Gold, Ruby Creek (is tobinator still there?), Tamerlane… This list could be long; the end result is very similar.
Please note the stocks above were once strongly supported by many messages with many numbers. It brings up a point, relevant to GAAP-cost thread. When you analyze a non-producing company then, naturally, your analysis (no matter how thorough you do it) will bring less reliable results. It is one thing to use real performance numbers (from GAAP statements) and it is another story to use numbers from studies contemplating future production. It must be noted that relying on these studies is still better than relying on message board pump. However, final answer comes only when real production achieved; or not achieved (it is kind of answer too).
Rule of thumb, regarding studies (future projection), is that reality comes in darker way than projections. It comes this way (taking open fraud aside), because world and life are full of unpredictable problems and in mining these problems used to drop on investor heads in the most inappropriate time. I guess any mining investor could find lot of examples confirming this rule.
PS: RNO was the only thing ended well in that story. It is the most hilarious fact.
Best regards to RNO old timers, by the way.
I had opportunities to comment on these issues before and, obviously enough, these topics are discussed often, as they should be. Below you will find some basic ideas. They do not cover everything, but still they could be helpful by filtering out clearly incorrect assumptions.
1.Any cost number reported by gold companies (“cash”, “all-in”, etc.) is not GAAP-compliant. Shortly speaking GAAP doesn’t deal with these numbers.
2.GAAP deals with three generic types of financial statements: income, cash flow and balance sheet. Any number used within these statements is supposed to be GAAP-compliant.
3.Cost numbers used by gold companies can be deduced from GAAP numbers, but this calculation is not always transparent. Sometimes, companies supply lengthy descriptions how they got “cost” numbers. Sometimes they supply very short notes for the same purpose.
4.Why do companies use non-compliant numbers? Speaking officially, they want to give investors another perspective, different from GAAP. In unofficial way, it depends on personal perception. Some people are poetic: they believe that companies try to make it better for humanity. Other guys are cynical: they see perpetrators picking their pockets. Verify your personal credentials.
5.In all cases, treat cost numbers using reasonable doubt. If you analyze gold-producing company performance then you should, firstly, analyze GAAP statements. It is not too difficult to calculate cost based on these documents. Compare result with “cost” numbers supplied by the company. Check #4 for self-evaluation purposes.
6.If you analyze non-producing companies then check NPV numbers, supplied in economic studies (PEA, feasibility, etc.). It is possible, with some approximation, to calculate future cost based on NPV projections. Compare result with “cost” numbers supplied by the company. Check #4 for self-evaluation purposes.
As of now most market observers comment on copper situation in mixed way. They mostly admit both tightness in finished metal market (indicated by steady decline in LME inventory) and surplus of copper concentrate (as mining output grows up faster than demand). Also recently, Chinese smelters were able to negotiate better terms: higher smelting fees making effectively payments for concentrates lower; it confirms indirectly prevailing market views.
In other words, finished metal price goes up, while concentrate price (after smelting fees) goes down. In result, smelters enjoy expanding profit margins at the moment while miners still experience post-recessionary squeeze. This situation highlights advantage of SCCO comparing to pure miners. This company is an integrated copper producers having own smelting operations; its profit linked directly to finished product price (refined copper). Local squeeze on concentrate level doesn’t affect profits here.
Most likely, SCCO doesn’t go to oil business. Parent company (Grupo Mexico) considers it. SCCO will stay in copper business.
Recent weakness was caused by negative comments on copper price from few market analysts. LME copper inventory numbers tell different story, positive to copper price, and so far copper price trends up, for about two months already. Probably, it needs to break 3.50 to move share price to 30s.
First of all, this “debt annulment” is taken out of context. It was mentioned, initially, in this thread (in my message) that Fed can annul debt that it keeps on its balance sheet, i.e. debt that was created and still exist artificially; actually, it was money printing. Annulment of this “debt” would just bring reality to light: government didn’t borrow this money; it just printed it. By the way, this idea holds even if formal annulment doesn’t come to light. In other words, good part of U.S. debt is a phantom, because it is “owned” by Fed reserve that is part of government, no matter how it is described in formal terms.
Regarding GDP-debt paradigm, it could work as it is written in your message, only if U.S. would exist in isolated situation, i.e. without any economic interaction with other countries. In reality, U.S. economy gets huge boost because this country has privilege to pay all expenses just by printing more dollars without risking devaluation. In other words, good part of Chinese GDP travels out of that country to American shores, because Chinese (and many others) are willing to exchange their goods (real GDP) for our paper thus making them equal in economic terms. Shortly speaking, it creates situation when money printing increases our GDP, i.e. we steal other people GDPs. Moreover, our “victims” wish to see stronger dollar; they often want it more than U.S. government and, definitely, they support dollar more than U.S. government does.
In other words, U.S. operates in sweet spot. It can print huge amount of paper and other countries both eat this paper and support its allure. This situation (mostly, having political roots) makes U.S. economy stronger; it is expanding, not contracting, when government prints; again it is exclusively because U.S. can exchange paper for real goods.
First of all, I would like to use this message to express my gratitude to those supporting (in humorous and friendly way) my alias existence on this board without any participation (messages) from my side.
Now, I would like to explain following bear market paradigm: you can invest in risky stocks only if you invest in less riskier stocks too. It is debatable whether investment in gold is appropriate in this environment. Small bets can work; any bet can work in stock market under certain conditions. However, betting against market consistently, in big way and using extreme vehicles usually destroys investment portfolios.
I kindly suggest to every gold investor to read today’s GG report. It looks monumentally strong, especially comparing with fragile existence of too many gold companies. Shortly speaking, if someone cannot afford to invest in GG (or few other similarly stronger producers) then this person should not invest in gold at all, no matter how strong is his/her emotional attachment to the yellow metal. Naturally, I am talking about new investments.
In other words, if someone decides to bet on losing sectors then, at least, buy stronger stocks in them. It can protect from excessive losses, just in case losing sector shows teeth and bites your pocket.
PS1: please, be aware that I have few shares of GG at the moment. You can consider EGO or IAG or PAAS (no position in these stocks); i.e. no bias at all; and in any case don’t invest too much in them. Good luck with your RBY and any other investments.
PS2: by the way, GG report contains few things about Red Lake. It might be helpful to you to read them anyway.
I have never heard about any Canadian filing (I am a U.S. taxpayer). Dividends paid by Canadian companies are subjected to 15% automatic withholding (done on payment point), if you hold shares in taxable account (IRA account is not subjected to this withholding).
This withheld amount is refunded to you (as a tax credit) when you file U.S. taxes. I can’t say for sure whether it requires additional form to your U.S. tax return; anyway it is a very simple procedure, as my accountant told me.
Eye4value, regarding near-term price prediction for this or better say all PM stocks, future is hazy as usual and one man’s perception of a bottoming pattern can be another man’s feeling of a topping trade.
In my opinion, PM stocks got temporary respite because of two coinciding events in general market: holiday week during last days of December and profit-taking during first days of January. As of now PM sector trades inverse to general equities and this is very stable trend. Also, PAAS share price is supported by buyback program and so it outperforms peers at the moment.
In terms of fundamentals, it is all the same, imho. On sector level, gold and silver price is too low. On global level, world economy grows, by whatever reason, and financial disturbances are inevitably getting smaller. Certainly, they will not disappear and, moreover, the will come back in stronger way in due time. However, this “due time” can be still far away. General market is on upward slope and fighting market tape is a useless and costly business. Last two years provided too many examples of this kind.
PAAS still has strong balance sheet and so it is a legitimate contender to last longer than sector stay in low zone. It makes this stock valuable for investment purposes, depending on individual investment priorities.
Great management would hedge all production at $2000+/Oz two years ago. In this case it would be rightfully crowned as “the best”. Frankly, I am not aware of any company that did it.
First of all, gold wasn’t up last year, not even close to it. It moved down in big way taking gold stocks in the same direction; i.e. it was usually: gold down and miners down. By the way, it is natural to see equity prices declining more than commodity price in bear market.
Gold price is still in low (bottom, hopefully) zone and so gold stocks will continue perform in unstable manner. In other words, I disagree that “no apparent reason” exists for poor performance on some (actually, many) days. The rationale (reason) is that fundamentals are weak (because of low gold price) and institutional support doesn’t exist (on surface, at least). It makes stocks vulnerable; they can be moved up or down, mostly down so far.
Basically, investment in PM stocks is a gamble at the moment and gambling bets are supposed to be traded in uneven ways.
It is not a short covering, if you mean institutional shorting. Big players covered before this. Most likely, it is a bear market rally, and big players try to make money on both ends. They will try to sell before the rally ends. It makes the game the most exciting.
Eye4value, what is the link between possible partial annulment of debt (only that held by fed reserve) and dollar crashing? Please note that “crashing” means that people abandon dollar for another currency. Which one is a legitimate contender? I don’t see any.
Dollar is still the strongest currency, even if this distinction earned by attrition; others are worse than the dollar.
Regarding Fed policies of buying U.S. bonds, it means essentially that debt has been replaced by money printing; something anticipated long time ago. These policies work because there are no viable alternatives to dollar. That’s the real situation.
Market flashes bullish sign here: copper is about to enter new bull market. LME numbers continue declining and they have come close to the threshold guarding bull territory. After the border is pierced, number of positive articles published by mainstream market sources will just increase in numbers amplified by upgrades from leading investment houses. That’s how bull market works.
This company is a low cost producer with very big mineral reserves available for sizable increases in production in coming years. What else is needed for a buy decision at the moment? Doubts could be used in mid 30s; either take profits there or continue riding.
Slvrbull75, you are a sore loser, unable to stand truth and looking for every excuse to hide from reality (big losses on your PM investments). It must be especially bitter for you to see both economy and market roaring up leaving you behind.
Getting lucky is the best thing that could happen on stock market. However, it is not only about luck. Projecting “big boys” moves includes also some analysis, i.e. big players take positions based on very comprehensive analysis usually done by very qualified people. Getting along with “big boys” means essentially that a small player was able to get the same results by doing own analysis; it happens sometimes.
Also, small player is supposed to be nimble; it is some advantage versus big boys. In other (somewhat known) words, it is better to be lucky than good, but being good increases chances to get lucky.