Avocet Mining Share Discussion Threads

[wolstencroft] 05/8/2005 08:27

biswell has been particularrly wrong recently - on what I follow on oil, gold, avm, aen, cbm. He has been just about right on oxus. Worse than chance!

[dimsum2] 05/8/2005 02:35

excellent. I do love it when bis is on the rampage. the price invariably ticks up.

[brad1] 04/8/2005 17:50

about time to top up again, totally agree that this is way undervalued.

[wolstencroft] 04/8/2005 16:54

MMs must have read my earlier post!

[topsy turvy] 04/8/2005 15:50

Wow, what's happened all of a sudden! Up about 6% in half an hour.

[kojak78] 04/8/2005 15:31

"THE MERE OPPORTUNITY FOR THIS TO OCCUR IS EXTREMELY RARE. That was the pattern for the start of the late 1970's bull market and the 1993 bull market. The only other bull market, the one that started in July 1982, of-course also had a non-XXed Out 92-96 buy signal on the path, but that signal was not preceded by a quick 92-96 index buy and sell. The 1982 bull market didn't "need" a quick 92-96 buy and sell because it was not XXed Out."

If gold stocks stay here today and go down tomorrow not more than 1.7% the true bull will be generated, afaik the first one since 1970s/82/93.

[kojak78] 04/8/2005 13:55

Ridiculous p/e ratios, another example.

German Dax stock Henkel, 77 Euro, earnings according to yahoo 12.50 Euro or so. Makes a p/e of 6. Then why is the dividend yield (1.6%) so low?

I looked into the financial reports. 12.50 Euro is utter nonsense. Net earnings are 3.83 Euro. The difference is special effects..

10 year average 2.92 Euro net earnings. That is the 90s, remember:
1. earnings as a percentage of GDP are 50% higher than the 50 year average
2. effective corporate tax rates are very low compared to the 1950s
3. interest rates are very low!
4. GDP itself will probably decline when population declines.
5. hidden pension debts

1. means 1/3 less earnings
2. means 30% less earnings

We can't consider GDP declines as that is years ahead. We can't consider falling earnings during bear markets and we can't consider the hidden pension debts.

According to my estimates the inflation adjusted, long-term sustainable earnings of Henkel without depression/pension crisis/rising interest rates is 1.35 Euro, a p/e of 57 vs. the published 6!! Even at face value the p/e is still 26.

If I'd buy Henkel, I'd look for a p/e below 10, 7 is the most realistic. If we had a crash tomorrow I'd buy below 20 Euro, in a bear market lasting for years I'd buy below 10 Euro.
A pension crisis could very well still bankrupt the company. Interest rates are dangerous, too. 5% more interest rates means for Daimler Chrysler 9.5 bn more payments. Would that leave any earnings at all? Don't think so. So interest rates can bankrupt, too.

The obvious solution is inflation without higher interest rates. No pension crisis, no bankruptcies by higher interest rates. But lower earnings AND higher taxes. When the consumer is broke corporations will have to contribute more to the taxes, too.
So I think the 1/3 earnings reduction is very conservative, not even discounting a medium recession. And 30% less earnings because of higher taxes is realistic, too. Say earnings are ca. 115 and less 15% effective tax rates makes 100 net (henkel even paid only 9.6% last year). 70 net instead 100 net means 70 net vs. 115 pre-tax or a ca. 40% tax rate, very likely.

The "balance sheet" earnings (they spent lots of cash for restructuring) were even only 185 mio or a p/e of 54!! Very in line with my computation btw.

So either you make realistic assumptions as I did or you take the figures at face value, in either case the p/e is above 50 vs. the published 6.
---
Another calculation from another viewpoint:
Taking into account debt one could assume that Henkel pays 6% on the 3 bn debt, makes 180 mio. 185 mio net earnings at 10% tax rates is 205 mio before tax. Let's assume 400 mio Euro as pre-tax earnings (this time it's not a 10 year average). Lets assume the 3 bn in debt would be converted into equity. Gives you 13 bn market cap. Now earnings decline 1/3 to the mean and tax rates go up to 40%, new net earnings are 158 mio, no interest payments, no debt. 13000 mio / 158 mio = p/e 82
For a stock that has an official p/e of 6..
---
IMO current balance sheets are doctored and doesn't reflect the reality. p/e rates are not 20 to 30 in the US and 12 to 14 in Germany like you can read, they are between 50 and 100!! A stock market low with a p/e of 7 would give you a Dax between 500 and 1000.

[wolstencroft] 04/8/2005 09:07

Not a move this morning in AVM or OXS after last night in the US/Canada. MMs must be asleep. I placed an order for 15K this morning.

[kojak78] 03/8/2005 22:27

What a glorious day! The downtrend line was indeed broken, by 4%. What now? Pullback to 92 means no buy signal!

"1. The very bullish pattern requires a 92-96 index buy signal on the Path. That can happen if prices just stay where they are or if prices go up. The more common pattern would be a short spike down to a 16-20 buy coupled with a 35-39 index sell, followed by a small rise over the falling 92-96 back prices, followed instantly by a 35-39 index buy and a 16-20 index sell. Prices would continue to rise through that little sell signal for many months of rising prices. That signal pattern would be extremely bullish!"

If the gold stocks stay for two more days at current levels the 92-96 buy signal will be generated.

As far as I remember the path is open and that would mean a ski true bull, the last one was decades ago if I remember correctly. SKI has a very good track record..

((2500-200)*.395 - 7)*.65 = US$585 mio net, that's what dreams are made of.

[kojak78] 03/8/2005 19:23

Not just that, they will make up for the last 6 months and then will go up even higher. Beginning in 2006 we will see Gold 520 and that will bring Avocet's trailing p/e to 3. IMO 2006 will be the year we break the 200p barrier!

[chipperfrd] 03/8/2005 18:59

Lets hope so!

I see gold is $5 up tonight.
NEM is +4.9%, Randgold +8.1%, SSRI +6.5%

A bit of enthusiasm spreading into the lse mining stocks would be highly appreciated and long awaited.

[kojak78] 03/8/2005 18:51

The XAU looks as if it has broken above the downtrend line. If we close at current levels (96) and stay here for two more days Jeff Kern's SKI system will generate a buy signal, as far as I now it should be a very rare true bull signal.

Higher highs here we come!!

[kojak78] 03/8/2005 16:59

mid February:
AVM = 97p
XAU = 87

August:
AVM = 67p (curr. loss for US$ investors, the XAU is priced in US$)
XAU = 94.5

If Avocet had performed with the XAU it would be at 110p, if it had doubled the gain as it had in recent years the share price would be 123p

So we have lost at least 37% vs. the XAU.

We're trading like XAU 60 and POG sub 300.

[kojak78] 03/8/2005 14:27

@wolstencroft

And the silly thing is that those non producers have performed better than any junior producer!! Anyone with 100000 to 300000 oz in production has done far worse than the big miners and the small non producers. Then there are the never producers, I think Vista Gold will probably never produce a single oz again.. (although they were nice back in the days when they quadrupled in 2 days).

What concerns me most is not the selling. It's the *who* is selling. I hope no company insiders, affiliates or Elliot Associates. Could be a fund unloading in need of cash or a hedge fund where something has gone wrong.

I guess in 3 months it will be over, Avocet will push up reserves to figures that will even blow us away or will pay a very high dividend. So no need for high share prices.

[corrientes] 03/8/2005 14:02

The mirror

[chambeaj] 03/8/2005 13:51

Who are you talking to?

[biswell] 03/8/2005 13:49

Many gold shares are not rising as they should with the POG rise today

Time to get worried methinks

B

[wolstencroft] 03/8/2005 13:45

kojak: You have made some excellent posts here recently. Many thanks.

Its summer and the market is thin but why the MMs want to make AVM down I don't know: I feel that there must be some real selling out there. Again I dont know why - the crucial problem facing miners at the moment are costs and availability of everything from energy to tyres. AVM are producing so most infrastructure is in place. I have sold down a lot of the non-producing juniors on the basis that they will probably takes ages to get to production even if they have a reserve. Price shocks for new projects are becoming more and more common. ALl the more reason to hold AVM and I still they are just about managing cost control.

(BTW: Notwithstanding over-hyped nature of Peter Hambro they are one of the few miners to control costs.)

[chipperfrd] 03/8/2005 11:33

Thanks kojak, appreciate your views (post 735).

Not quite sure why you use a 90p share price for OXS in post 737 as it has not been up there since late 2003 - currently 40.25p!

However, I will mull over your comparative figures.

Cheers.

[kojak78] 03/8/2005 09:57

btw, a 90p Oxus share price equates to a 580p Avocet share price if measuring Oxus first half 2005 calender year cash flow vs. Avocet second half 2006 financial year cash flow.

[doobydave] 03/8/2005 09:57

Thanks for the comparison with GAM, kojak. (Edit: and OXS)

At times like this I wonder whether Avocet wouldn't do well to pick up a secondary Canadian listing, despite its operational locus. The trouble is, AIM is full of ghastly spiv outfits and tends to get ignored as the result, but value might still be bettter appreciated that side of the water. There is simply no rational basis for AVM's absurd discount.
DD

[kojak78] 03/8/2005 09:53

Oxus = US$65/reserve oz, without Jeeroy US$126/reserve oz.

production should be
Amantaytau oxides 50% of 190000 at 106
Amantaytau sulphides 50% of 190000 at 120
Jerooy 67% of 180000 at 133

So in theory 300000 at US$124/oz
= price to cash flow 2.26 (Avocet would have 1.53 with Taror and Chore).
without Jerooy price to cash flow would be 3.5

So big difference! Without Jerooy Oxus is far more expensive than Avocet (but not compared to other gold miners).

Even with Jerooy one has to look at the actual performance. At least the oxides should be up and running. But the latest financial report says:
- 89000 oz for the 6 months/180000 annually (of which Oxus only has 50%), mine started in February, so full production is already here
- cash costs US$159, could come into line with ca. US$130, not 106 (148000/180000 * 159)
- hedge book 120000 oz
- no sulphide feasibility!!

Oxus is valued as if all possible projects would go into production with absolut certainty while Avocet's share price doesn't even reflect the remote possibility of Taror/Chore going into production.

So you compare either Oxus Amantaytau oxides vs. Avocet Penjom/North Lanut/Jilau or all Oxus mines vs. Avocet +Taror/Chore.

Oxus price to cash flow for a worst case scenario (all staying as it is) would be 9.

Before selling any Oxus share I would dig deeper, although I don't think Oxus management is on par with Avocet's I think they have very interesting, very low cost projects with very interesting exploration potential!

[chipperfrd] 03/8/2005 09:35

kojak, thank you for replying.

Are you involved in other metals besides gold.

Sorry if I am being nosey!