Avocet Mining Share Discussion Threads

[spooky] 18/1/2006 10:39

I have a question about this mornings announcement.I understand the put and the call and i understand the effect on next years earnings of the removal of the hedge.What i do not understand is how they have reduced the outstanding size of the historical hedge to the 22,000 ounces they expect to pay off by July.Any thoughts ?

[utsushi] 18/1/2006 10:12

Why should gold go up, it's a useless commodity, if the dollar falls, countrys will diversify reserves in other currencies, more supply will come on stream, and the gold price will soon fall, and so will gold mining companies share price..please tell me where i am wrong?

[pecker1] 18/1/2006 10:09

HOT,

Not sure about your question - I think we could have had 500k oz unhedged!

But agree about an acquisition. With the share price over 140p, it must be very tempting to use their paper to buy in to one of the projects they have been offered. with any luck the hedging issue will be forgotten as other action will soon take centre stage.

[pecker1] 18/1/2006 09:51

HOT,

That " oh no..." was my first reaction too. FWIW, it still is. At this second stage of the gold bull, gold is likely to increase at a quicker pace than it has done in the last four years, so gold at say $900 oz in 2008/9 is by no means out of the question. 120k oz hedged at $700 with gold at $900av leaves us $24million less profit.

I had hoped that AVM would have learned their lesson on hedging and were soon to join the ranks of the unhedged producers like Goldcorp. A tremendous cachet to attract investors in a gold bull who want full exposure to the gold price. How much better would it have been to approach US investors as an intermediate producer with a no hedging story?

Now it's been thrown away. For what? Well, more cautious institutional investors may like this in the short-term as it reduces the risk of holding AVM. So the stock will look more attractive to them and they can justify holding. Good for the share price in the next year or so. But if gold starts challenging $900, it will look increasingly less attractive to investors wanting full exposure.

[saucepan] 18/1/2006 09:41

OK, stand corrected; thanks :-)

[saucepan] 18/1/2006 09:40

First line of fourth paragraph: "The options affect 57% of Avocet's current annual gold production of approximately 210,000 ounces".

Yes, my assumption is that is an historical statement; i.e. correct up to today. I was talking about estimated production going forward, possibly for this year.

I am happy to be corrected; number crunching is not my forte.

But, at this stage, I still think my interpretation of the statement quoted is a logical one.

[kojak78] 18/1/2006 09:37

No, they mean all production above 10000 is 43%. 10000 is 57% of production. Total 210000.

[holdontight] 18/1/2006 09:35

Up she goes again......

[phillis] 18/1/2006 09:35

Saucepan -read the first line of the fourth paragraph

[holdontight] 18/1/2006 09:35

Saucepan,,,,,,you have the %'s wrong way round? Should be 57%, which means circa 210-220 OF CURRENT PRODUCTION LEVELS. However, the statement also mentions potential to increase this prod SIGNIFIANTLY and my take is they are planning to buy more production.

[saucepan] 18/1/2006 09:29

Phillis, reference your post 1790:

Is the following not another way of working things(?):

"All production above 10,000 ounces per month, which is currently 43% of estimated annual production"

10,000 oz per month, times 12 months = 120,000 oz.

We are told this figure = 43% of estimated annual production.

100%, therefore, = 279,069 oz.

One difficulty with this, is the lack of explicitness with regard to the specific period being referred to. I am assuming the current year forward.

But, it looks good to me nevertheless; particularly as AVM is always cautious.

[holdontight] 18/1/2006 09:27

275000 shares traded in first hour.....we are headed much higher....my 150p by end of Jan will be achieved by end of this week, maybe end of today. I think we have more news on the way......exploration update and perhaps an acquisition!! Just my view and gut feeling.

[holdontight] 18/1/2006 09:14

"this transaction underpins the company's ability to fund expansion opportunities".....like this bit!!

[saucepan] 18/1/2006 08:56

ADVFN intraday charts not working. AVM has been up as much as 6% today; currently +4%

[holdontight] 18/1/2006 08:53

Abdsolutely, Kojak. My first reaction was oh no not another bloody hedge. But I think they have been prudent. Someone says market likes it but AVM showing no movement on my screen????

[kojak78] 18/1/2006 08:47

Oh my dear, they hedged 360,000 oz at 700.

I think we could see 650 this year and 900 in 2007. But we could get some kind of halftime correction / bear market in the gold price á la 1974-1976. Such a "correction" would be totally different from current corrections as I can very well see the gold price drop $400 down to 500 again!

If such a correction should occur that would mean we would have perhaps 6-9 months or even less of gold prices above 700 until 2009. I don't expect the gold price to touch 450 in that time-frame. After then it will be time for the 4-digit targets in the gold price.

While I don't like the renewed hedging at all, it gives us more financial flexibility in the near term and more security for developing current projects. That's what Avocet is all about, undervaluation of the current projects.

So even if the gold market should turn now Avocet should do very well and in the worst case the hedging could limit AVM performance by perhaps 10 or 20%.

[phillis] 18/1/2006 08:39

No meaningful increases in output yet taking place.

Annualised production to Sep 05 208.5k oz
Current run rate 210k oz

[leesonlookalike] 18/1/2006 08:34

gold avg for this year been revised to usd550 which of course means that the analysts are expecting it to hit usd600 plus, to make the usd550 average.

this stock is flying.. nice chart...

what r peeps expectations for this stock ? gbp2 plus... ?

chers 4 anyones advice in advance...

[johnma] 18/1/2006 08:32

Excellent Statement this is looking to 175p in the short term.

GGG is the next AVM

[tonyfleming] 18/1/2006 08:30

That has made it clearer - thanks. Anyway, the market seems to like it!

[holdontight] 18/1/2006 08:27

So if gold falls below 450, 10000 ozs / mnth produced by AVM will not be sold for under 450. If gold rises above 700, 10000 ozs / mnth produced by AVM will not be sold for any more than 700.

So risk is reduced, but so is upside, for 3 years. Is this in shareholders interests? The answer is yes......I think I would have considered the same action if it were my company. Good news on the hedge reduction as well. What we now need to see is production at 300000, so the above "sensible" move becomes a lower % of overall production, allowing greater participation in a plus 700 price of gold market. I think the inst's will applaud the move as their money is now much safer, but still retains a racy upside potential.

[tonyfleming] 18/1/2006 08:27

How could this go wrong?? I don't fully understand the implications of it.