Avocet Mining Share Discussion Threads

[zengas] 09/6/2004 15:58

Biswell...remember that tv series back in the late 70s called the comedians,

Which one was you?

[biswell] 09/6/2004 15:37

CER OXS POG AVM and the rest will now start to drop.

You will note that AVM has only marked time as POG tried to get over $395 and back to $400.

It will now get out of step and lose it's footing.

Talking of steps
How are you fixed for a quick fan dango Ash?
B

[biswell] 09/6/2004 15:33

And behold POG has felt the heat and started it's summer melt
B

[biswell] 09/6/2004 15:31

Post 3982
'oil price inflation is good for gold as we discussed earlier'

Post 3918
'I doubt very much oil will weaken to $30 any time soon'

Post 3903
'As a result gold like oil will go up as the $ devalues'

Well I've got news for you folks the $ is about to get a lot stronger as a hole series of rate hikes starts within a matter of days
B

[biswell] 09/6/2004 15:24

Now it looks like a good time to get OUT of gold mining stocks

The chart shape tells the story to come(double top), 6000 now to come


B

[biswell] 09/6/2004 15:18

Well it's time to reap what you sow guys, so I suggest if you don't want to look a prat start editing quick

eg
Ashley and his HUI blunder

HUI has failed, and is now in fall mode, next stop 150


B

[64bit] 09/6/2004 13:37

hehee' biswell at it again... oil to goto 1p by christmas :))
u do realise that for every man/woman and child in the US oil is consumed at a rate of 3 gallons per day. the first private car in beijing appeared in 1984, today there are 1.2 million cars in beijing, and growing at 50% annually.
global oil production will reach it's peak about 8-15 years from now, and then... it's all downhill i'm afraid...
and saudia, hmm... u do realise russia was the largest net exporter in 2003.

hmm... i wonder why so many second tier oil exploration projects are now being funded. it has nothing to do with terrorism or $40 lsc, it's about supply, it's about demand... and when u add those fears to the price, u arrive at the current lsc price range...

so mr.biswell, does it not occur to u that instead of swimming against the tide u could take a more informed view... and perhaps invest in some of the areas that will benefit from all this... ie. steel and zinc..?

did u know that the biggest ever foreign funded capital project in russia is currently in trouble.. it's in trouble because they can't buy the steel they need... and they need the steel coated in zinc... hint hint.... ;)

i'm no gold expert but i know about oil... and what's historically been good for oil is good for gold.. and that's why i'm here, on the avm thread... i'm invested in avm because of what their p/e will be this year..

[richgit] 09/6/2004 10:33

Biswell,
Simply out of curiousity,what share are you bullish about?

[gammabod] 09/6/2004 09:49

Biswell

I'm getting deja vu.

Let me guess at the three possible outcomes.

1) POG goes down - you will crow on with an 'I told you so'.
2) POG trades sideways. - you will continue to tell us POG is going down.
3) POG goes up - you vanish until POG has a down day.

If there is anyone deluded on this board - it appears to be you my friend. Why is it that you don't stick around for the 'up' days in gold? (And there have been enough of them!)

And for what it's worth - I think you are wrong about Oil - we will see USD 60pb.

[biswell] 09/6/2004 09:34

Andy

You do me wrong young man.

POG will now fall,and so will oil.

I suggest you do some quick research into oil inventories and expected oil price movements, they will impact on POG.

Yesterday oil slipped $1.38/B and is another 27cents down at $37.01

That is $5 down in about 5 sessions since it peaked at $42

OPEC is/has opened the taps and US inventories will rise to a 1999 high once more by sept this year, having stood at a 28 year low in jan.

If you think this will no effect on POG you delude yourelf.

Ask Ashley, he is not as daft as he makes out he is.
Heheheheh (Muttley Style)
B

[chipperfrd] 09/6/2004 07:34

Very interesting article on another site regarding the recent listing of many US/UK smallcaps on the Berlin exchange.

AVM is listed under the id 900745 (1/3/04).

I have contacted the company. They are aware of the situation and are considering whether they need to take any action.

[andy] 08/6/2004 19:24

64bit,

he's just been quiet since the POG was rising, and now it's fallen a tad, he's back to try and put fear and doubt into holders.

Quite sad really.

[biswell] 08/6/2004 17:24

Or you could say that watching AVM share price performance was like



watching paint dry
B

[64bit] 08/6/2004 17:22

hey' mr.biswell, back from corfu then..
hehee' i'm happy you're back, maybe u will make me laugh again ;)

just a thought, maybe if you drop your 'tmt and paper goes up forever' stuff you could join us somewhere more exotic next year..
i won't tell u what you've missed, $42 lsc, $390 pog... ;))
i'm now interested in steel too, so now waiting for your 'steel 1p by christmas' provarications too... ;))

[biswell] 08/6/2004 17:00

Gold and AVM are a bit like this little fellow


Clinging on by their nails but gravity wins out in the end
B

[b b muppet] 08/6/2004 16:43

Budenveiser,

Very good set of rules, and it does tend to prove the point I try to make consistantly, most people unlike AVM are not sitting on Gold Mines they are sitting on worthless bits of paper and the destruction of dreams.

Will go into these with regard to AVM specifically later but this will prove useful for reference purposes for posting.




Twelve Guidelines for Buying Gold Mining Stocks
Kenneth J. Gerbino
Kenneth J. Gerbino & Company
Investment Management
June 8, 2004

The twelve guidelines should help you to better understand some investment basics regarding the mining industry, especially if you do not have a background in geology or mining engineering. I have kept this as non-technical as possible so no one falls asleep. Keep in mind, these are basic guidelines and far from complete.

If the company does not have an independent professional resource calculation for gold or silver or other minerals, know that someone is either speculating or guessing at the most critical data point regarding mining industry valuations. Be careful not to confuse "resources" with "reserves." Measured and Indicated resources are reliable as a resource. "Inferred resources" are very speculative mineral inventories, so be careful when "inferred" is used. A resource still has a long way to go to become an economic deposit, as opposed to "reserves" which are deemed to be proven economic and mineable ounces calculated by very strict engineering and government rules. Canada's National Instrument 43-101 is one such guideline regarding resources and reserves.
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I would suggest your portfolio be 60% invested in companies already producing gold or silver profitably. The other 40% divide into companies close to production with impressive projects or very far along in defining large and significant mineral resources. Producers should include majors and mid-tiers (your monetary insurance, since they undoubtedly have the goods in the ground). Look for mid-tiers with good growth profiles. Junior producers with new projects are also ok.

Companies with lots of money in the bank or access to sponsorship from top investment banks in Toronto, London and Vancouver is vital in this capital intensive business and always a good thing to look for. Diversify: have at least 15 good companies. Depending on your risk tolerance you could allocate a small portion to grass roots exploration stocks but know this is the very high-risk end of the business.

The industry has changed in the last five years. Exploration and development budgets from 1998 to 2002 declined dramatically. Therefore going forward, in my opinion, any substantial project that is near feasibility (an extensive outside engineering report based usually on tens of millions of dollars of geological, metallurgical, and engineering work) could be a buy-out candidate for major and mid-tier companies that need to catch up on reserve replacement and growth..
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"Good management" is an overused word. My definition of good management is 20 year mining professionals who have had successful executive positions with large or successful mining companies or projects in the past. If you see names like Barrick, Newmont, Placer, Anglo, Goldfields, etc. on the resume you are most likely dealing with some quality professionals. People who ran mid-tier companies or successfully helped bring medium to large projects to production also qualify. There are always exceptions, but you better know who you are dealing with. Direct mail pieces touting some gold stock and claiming top management should be carefully checked out..
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Size is very important. The larger the deposit or potential resource the better. Small mines are not worth your trouble as there are few institutions that will finance them and fewer companies that will ever acquire them. With gold mines try and look for 2-3 million ounce and above possibilities. Mining giant Goldfields, only targets projects with 2 million reserve ounces. With silver, 100 million ounces should be your minimum. But the above still has to be qualified. If the resource is too deep under the surface, of very low grade (richness), or has one of many other negative reasons it may not ever be economic to mine.

Tonnage is important. Big tonnage operations create economies of scale that can make some low metal values economic to mine. Three hundred million tonnes (a tonne is 2204.62 pounds, not to be confused with a ton which is 2000 pounds) for an open pit gold mine is big. Ten million tonnes open pit is small. For an underground operation, tonnage can vary dramatically and grade and mining widths become more important (we will discuss this below), but one million tonnes would be small. For a base metal open pit deposit, one billion tonnes would be huge, while 20 million tonnes would be small. So remember in this business - Big is Beautiful..
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Grade (richness) is crucial. How much bang for the buck are you getting per tonne of rock. If the grades are high enough the above tonnage discussion becomes less relevant. With a near surface potential open pit gold deposit, 2 grams per tonne (a gram is .03215 of an ounce) would be excellent. 1 gram would be fair as long as you don't have to remove too much waste rock to get at the ore.

With underground mines, everything changes: depth, the continuity and mining widths of the ore and the vertical or horizontal plane of the ore all comes into play as well as many other factors. Generally, to be on the safe side, if you can find gold grades of 10 grams (about a third of an oz.) or more per tonne across mineralized sections averaging 3-4 meters or more in width, then you are looking at good potential. Lower grades across wider widths also work (i.e. 6-7 grams across 10 meters) Keep in mind these are rough guidelines and subject to many other factors, like depth, vein continuity, overall tonnage and much more. But the sweet spot in this industry is high grades across wide zones of mineralization..
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Expansion possibilities for a company's production and resources/reserves are important. For non-producers, resource expansion is crucial, because as these companies drill and confirm more resources they will increase their intrinsic value. This helps them handle the big hurdles of either financing the mine or mines, selling-out, or bringing in a joint venture partner at reasonable terms. Mining companies with plenty of production and new mines coming on stream in the years ahead are usually a good group to own. Growth is Good..
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Cost per ounce of production is very important. Companies with high costs are more risky since a low metal price market will make them unprofitable, but they will have considerable positive leverage if metal prices go up. A gold mine with $325 costs per ounce, doesn't make much at $375 gold, but if gold goes to $425, the mining profit doubles. High cost producers are a double edge sword.

I like low cost producers. They are safer, have lots of cash flow to buy new properties and mines, will have more funds for exploration and development and could eventually pay strong dividends if gold stays in a new high price range over the years (i.e. $450-500). Also large mining companies are not going to buy-out high cost producers. They are risky and migraine headaches for management.

Mining costs are mostly a function of grades, mining widths and tonnage. If you can talk to a mining engineer and get a handle on the cost per oz. or tonne of the operation, you are acquiring crucial data for your analysis. Companies operating at high costs (within $100 of the gold price) or that have projects that look like they will be high cost producers should be avoided. High costs equal high anxiety..
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Value per ounce: How much you are paying for the gold in the ground is an important stat. The lower the better. The following guidelines relate to a $350-400 gold price. If gold were to go higher these numbers would increase. For advanced exploration companies, try and stay in a valuation range around $15 per ounce of resource in the ground. As an example, a company with 15 million shares outstanding selling for $5 per share has a $75 million market cap. With a 5 million ounce resource, the market cap. per ounce is $15. As companies move up the food chain and expand and define the resource and test metallurgy and do engineering studies, the market cap. per ounce should go up to $30-50 per ounce. Depending on the quality of the deposit these valuations can change.

Producing companies if bought out, can go for $100 to $150 per ounce of "reserves" in the ground. That is an important guideline. You do not want to buy a stock where you are already paying $100 per ounce for just a "resource" (which means the "reserve" will actually be lower). With the company just in the advanced exploration stage, there won't be enough upside unless the deposit gets a lot larger. Advanced developmental (meaning feasibility to actual construction) companies can be bought out for $40-75 per ounce of resource or much more depending on many factors that are beyond the scope of this writing.

Usually the value of the ounces and the stock price go up as more and more confidence is gained in the project. Initial resource definition usually allows for a value of $5-10 per ounce. At the bankable feasibility stage those same ounces could be valued at $40-75 per ounce.

If you see a mining company with a well defined resource and the gold ounces are valued at only $5 per ounce or so, just know there is probably a reason and it is probably bad. Most likely those ounces will never see daylight due to any number of reasons: environmental, logistics and infrastructure problems, political risk, low grades, high capital costs, narrow mining widths, high strip ratios (how much waste rock has to be removed to get to the ore in an open pit operation) and a host of other reasons. There is a right price for the ounces, don't overpay..
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In a favorable gold mining environment, which I believe we will have for the next 10 years, it doesn't pay to take undue risks. Try and find good merchandise and be careful of the small grass roots exploration companies. Surface sampling is the key to the difficult exploration business. Positive soil and loose rock samples on a prospective property may have come from many miles away twenty million years ago. This means an ore body that is hopefully under the ground is not there. Only one inch of geological movement in a subsurface rock structure every 100 years equals in 20 million years, 3.2 miles. In geology you are dealing with billions of years. Mountains you see were once ocean floors, etc. Large and extensive outcrops (surface rock formations) that have mineral showings can be a good indicator as well as widespread crude and small local native mining activity. But it is no easy task finding these minerals in large enough deposits to be economic to mine. Surface showings are actually very important indicators for economic mineral discoveries but unfortunately they are still high-risk speculations..
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A key stat is cash flow per share if the company is already a producer. Large gold mining companies can sell for 15-20 times cash flow in a good gold market. Mid-tier and smaller producers can sell for 25-35 times current cash flow because of expected cash flow increases, from new mines coming on stream. In this case the market is anticipating the future. Beware high cost producers selling at high multiples of cash flow, as they will get hit very hard if gold has a set back.

Companies expecting cash flow from future projects are usually valued using a net present value criteria. In this method the entire future cash flow of a mine is laid out and a value is placed on this cash stream, taking into consideration the time value of money. How much is the $500 million dollars that the mine will make in the years 2008 thru 2018 worth today in the present. The future cash flows have to be discounted in order to arrive at some sort of present value for the projects. Many times a 5-10% discount rate is used. I believe a lower discount rate is also ok, since gold is an anti-discounting currency (i.e. gold's price should go up with inflation and interest rates therefore negating the discount rate - because it will keep its future purchasing value).

Earnings per share is a tricky stat for the miners because of so many non-cash charges and accounting complexities. In the long run it all comes out in the wash, but during the years of the life of a producing mine, cash flow is the king. Look hard at cash flow per share or expected cash flow from projects..
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Comparables are very important. Why would you buy a stock where for every $1 you invest you get $5 of gold in the ground when another company with very similar fundamentals and resources gives you $40 of gold in the ground for every $1 you invest. There actually may be a good reason, but the point is you should know what that reason is. Comparisons are an important ingredient to avoid overpriced companies and missing some real bargains. We constantly do comparables at Kenneth J. Gerbino & Co. and I suggest you do also. One should compare the basics: grades, tonnage, costs per ounce, costs per tonne, smelter charges (for base metal deposits), reserve or resource value per dollar invested, market cap per reserve/resource ounce, discounted cash flows and the net present values of the mining assets. Comparables allow you to better shop the market..
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Be careful of the term Gross Metal Value. This is all the precious metal ounces or base metal pounds in the ground multiplied by the current price of the metals. It is misleading unless you have a lot more information and knowledge. Just know that with any mineral deposit a company will never recoup anything near the gross metal value of what is in the ground. The ore will have a mine waste factor (5-15%), recovery losses in the mill or from the leach pads (5-20%), and smelter, refinery, transportation and penalty costs for base metals (20-35%). Throw in royalties, state and local taxes and other expenses and you will see that gross metal value is less important to your analysis than all the other ingredients that would determine a quality mining investment. It doesn't mean the term is useless but it can be dangerous to use on its own.
Well, there you have some basic guidelines that I hope will help you through all the press releases and some of the direct mail hoopla about all the billion dollar mountains out there. Remember the more homework you do the better off you will be.

For other articles on gold and the economy please visit our website.


Kenneth J. Gerbino
May 2004

Kenneth J. Gerbino & Company
Investment Management
9595 Wilshire Boulevard, Suite 303
Beverly Hills, California 90212
Telephone [phone]
Fax [phone]
E-Mail: [e-mail]
Website: www.kengerbino.com

________________
321gold Inc

[budevenwiser] 08/6/2004 09:05

12 basic guidelines to valueing a gold company

[jeddah jo] 07/6/2004 20:23

Ouch! Didn't expect to get rumbled on such a respectable board as this. What a worldly bunch we must be. Just a case of whether its great minds think alike or fools rarely differ.

Only 2.15am now. I've been a good boy today, honest 'injuns :)

JJ

[64bit] 07/6/2004 17:13

hey' richgit, me think jeddah jo was up suspiciously late last night...
i've got a place in phuket and i know what goes on at 4 in the morning ;)

[mieke] 07/6/2004 15:52

Looks like we are very much locked in a holding pattern - presumably this will last most of June? Suits me, slow accumulation, things may start to move last week of June/first week of July as long as POG holds up - which it looks like its doing..........off to Spain for a few days so keep the ship in order chaps

[richgit] 07/6/2004 14:59

Bp,
Lets hope so,and for all holders.
If I wasn`t married with two young sons Id probably be contacting Jeddah Jo
now,and to hell with everything.

[ohojim] 07/6/2004 13:36

B B Muppet - 3 Jun'04 - 09:53 - 4120 of 4130

....I have made a conscious decision to post less and wait for news.......


All IMHO, NAG, DYOR etc, etc

BBM