Avocet Mining Share Discussion Threads

[andy] 16/2/2006 14:51

Bestbuddy,

"anyone who really knew what was going to happen in the future would not be wasting the opportunity telling averyone else!"

why?

If it creates a self fullfilling prophecy, I can live with that!

[kojak78] 16/2/2006 12:44

The problem is that if gold is going to drop the gold shares will have done it before gold.

[bestbuddy] 16/2/2006 12:27

HT,
You dont say!
If i knew gold was definitely going to fall, of course i would not buy mining shares, that was not the point i was making, which was that AVM in my view is a good business that will benefit from a rising gold price but will not be wiped out by a falling one. As for other peoples predictions, anyone who really knew what was going to happen in the future would not be wasting the opportunity telling averyone else!

[kojak78] 16/2/2006 09:55

Sinclair advocated $480 gold in 2004 as far as I remember, nothing happened.

To be true I have come to realize that in gold stock investing the price of gold is pretty much useless. Just concentrate on the share price action and you will be alright.

[holdontight] 16/2/2006 09:48

Firstly....BB....if gold falls the last sector you wnat to be in is gold miners, hedged or unhedged.
Kojak, 529 was the last main resistance level on way to new highs. It is not unusual for a retrace at proint of break....but ask yourself why it is now holding up so well ABOVE this level....unchartered territory. Noone is right all the time, but Sinclair has been more accurate than anyone else I am aware of.
JJ..I never trade in instruments I do not understand/have experience of. An unhedged gold miner with increasing production and exploration potential suits me fine. With AVM, this is what I thought I would have by end of this year, but Catchpole has now eliminated this possibility with the new and increased hedge.

AVM is still a buy, and I hold a fair few. But they are unlikely to deliver the best returns over next few years....in fact I expect they will continue to underperform the XAU and HUI.

NAG, DYOR IMO etc

[jeddah jo] 16/2/2006 09:22

HOT if you seriously believe gold will be trading > $750 in 12 months there must be a whole host of better instruments to play in than gold miners. Sounds like a pure geared play in the physical gold market would reap the most rewards without you having to worry about the grubby business of actually getting the damned stuff out of the ground.

[kojak78] 16/2/2006 08:52

Breaching $529 + 3%..

Sorry, but I think that demonstrated just how wrong Sinclair is. 529 had no meaning at all.

We went from 465 to 540 or so, then back below 500, then to 575. 529 is just another figure, nothing more.

It's like the theory of closing gaps, totally useless, too. Yes, all gaps will get closed eventually. But you can take any arbitrary price where a stock once traded at and you'll see in 99% of all cases that price will be reached a second time.

[bestbuddy] 16/2/2006 08:44

And if gold continues to fall, whilst other mining shares plummet, AVM will have its profit for the next 3 years gauranteed. Then wont it seem like a smart move!
If gold rises AVM can still sell some of its production at full market value and again the hedge is only for three years.
I am an investor not a gambler - AVM is behaving like a responsible business ensuring that it limits risk and avoids disasters, probably an essential atribute for a mining business. If you want to speculate and gamble, maybe AVM is not for you.
However, if you can drop the price on your way out i would be very grateful as i have more funds waiting to come in.
Regards
BB

[holdontight] 16/2/2006 08:31

Again that depends on what your view is. I personally follow Sinclair quite closely, as he has been right far more often than he's been wrong. Breaching $529 + 3% was the main barrier to breach, meaning a whole new game has commenced, with greater spikes. Additionally, if you apply the same %'s to the rise from $250 to $575, then I think you argument will have a different conclusion anyway. My guess is AVM will be paying on their hedge by this time next year, meaning they have 2 years of production capped. Gold at $1000+ by end of next year will mean they are losing $300/oz on 100k for one year......I would then expect our glorious leader to do yet another deal which on surface looks better but in reality costs we shareholders more.

In a gold bull market the best place to be is with unhedged producers.

[kojak78] 16/2/2006 08:24

$450 as to rise to $1,000..

That is not the case, $450 is a 17% drop, a 17% rise means $630 and not $1000.

The hedge is like 360,000 at $550 with $700 needed to make book losses into real losses.

Hoewever, the hedge is onyl a distraction from the real issue with Avocet, Taror/Chore. Those 2 mio ozs in possible reserves will have a far greater impact than any puny 360,000 oz hedge. If you don't like the hedge just buy more physical gold or gold call options.

[jeddah jo] 16/2/2006 07:55

HOT, your view of the hedge appears to be entirely negative. This bull market clearly has a long way to go but the hedge is only for 3 years. In that time gold is just as likely to fall back to say $450 as to rise to $1,000.

Options are priced on the underlying commodity's volatility. If you look at the 5 year history of gold it has essentially risen from $260 to for the sake of argument $520. That is annual compounded growth rate of 14.9%. If you assume the next 3 years will see similar increase in prices, then that will take us to a GP of $788 or only $38 over the hedge price in 3 years time.

By far the most likely outcome in my opinion is that both the PUT and CALL options expire worthless, and the hedge is never implemented or if it is only marginally. However, it still does provide worthwhile insurance, and throughout this period of gold weakness the closer the GP is to the $450 strike price than the $750 strike price, arguably the MORE value the hedge has. In my opinion therefore it is already looking like a good bet.

JJ

[corrientes] 15/2/2006 21:44

Radioactive gold bars are no use to anyone.Such a scenario spells doom for everything and everyone,PM's and their holders included. No use being ultra rich in a desert with nothing to spend it on.You know, the economic version of MAD is working very well it seems.Eons ago, military wars would have been fought for less than the economic warfare we see today. As the doom and gloom merchants get their knickers in a twist,seeing every new situation as the end game, everyone else just gets on with it.

[holdontight] 15/2/2006 20:48

The problem is politically related not inflation related. WW3 IS the $!! The US has decided to defend it (the $), apparently at all cost. In the mean time, the ENTIRE Middle East, the Russians, China and many in Europe (esp the French) are fighting the Fed. Will be very interesting to see the outcome, but I expect the US to win. They certainly won't lose without nuking someone first, by proxy of course (ie Israel). Crazy stuff, but this is what gold bull-runs are made of!! Problem with AVM is they have limited the risk:reward with this bloody ridiculous derivative position........Catchpole needs replacing, imo, and NOW!

[jeddah jo] 15/2/2006 18:34

Weakness in gold is reflected by recent weakness in $. US interest rates are rising and could easily hit multi-year highs in a matter of weeks, yet the $ continues to weaken.

Looks like a pressage for inflation to me. All the arguments supporting gold are still in place and indeed strengthening. It is extremely unlikely the gold bull will end like this, the best is surely yet to come.

[zaky] 15/2/2006 18:22

hmm..im getting slightly worried by the drop of the last two days...

[kojak78] 15/2/2006 16:50

Put in a sell order over 102,000 but at a limit. Let's see what happens..

[kojak78] 15/2/2006 08:26

I'm based in Germany, unfortunately. If you got hobbies like shooting or reloading it get's really ridiculous over here. Bureaucracy and welfare state will ruin Europe in the end.

I think a falling US$ has no effects on share prices. The real worth of a company stays the same, it's just the price sticker that changes. So if the US$ falls US gold stocks will get just more expensive in US$ and stay the same in foreign currency terms.
However, there are two side effects of a falling currency. If a currency falls import prices will rise accordingly. Bit domestic prices will stay the same, at least for a time. Labour costs in South Africa (50% of total costs) are the reason why South African miners are dependent on the Rand exchange rate. US based miners have much lower labour costs, but they have domestic costs like electricity, too.
The second side effect is the purchase power of the investors of a stock. If you have a company that has a US$ denominated investor base those investors will have less purchase power with a lower US$. So the price could come slightly under pressure.

I think it's worth to focus on value, in the end we won't see dramatic currency exchange rate movements as all fiat currencies are doomed to fail over time. In Germany we had the Mark (Kaiserreich), Reichsmark (Weimar + 3rd Reich) and Deutschmark (since 1948/49). Reichsmark is worthless. The Deutschmark was exchanged 1.95583:1 to the Euro. But the original Mark from the Kaiserreich is still worth 4 Euro if you have old 20 Mark gold coins laying around. That translates into ca. 8 Deutschmak per old gold standard Mark.

[holdontight] 14/2/2006 23:08

There are some worrying rumours around about Dynasty.....namely the fact that all is not as good as currently being portrayed.

[richgit] 14/2/2006 23:05

Investors moaned about Avocet at 13p-20p-30p-40p-50p-60p-70p-80-90-£1.00

For a stock so moaned about it has done quite well-considering.

The one thing so many overlook is as- Management have proven-This Company is not for standing still.Love or loathe the part hedge,it creates a Bankers dream
and with such huge guaranteed cash flow the Management can pick off whatever deals they consider to be right.


If gold gets to $700oz I dont think I will be worrying too much how much we
wont be making at $1000oz because this Company wont still be valued at a mere
£135 Million.Plus by the time that happens I would reckon the Company will be
at or on the verge of adding even more Gold production and thus more to the unhedged positions.

..............................................
Our exploration portfolio has grown rapidly. With recent results at Bakan and
Pusian in Indonesia, and further surface work at a number of other projects, we
have a diversified pipeline of projects to bring into future production.
Meanwhile, a number of excellent acquisition opportunities have been brought to
our attention as a result of our reputation as a company that delivers on our
promises for both our shareholders and industry partners.
..................................................


Huge room for surprises on top of what is already being overlooked,and I think their stake in Dynasty is a typically astute deal.
I certainly believe this Management will create a £500 Million Cap Company so some good gains to be made over time in a stock that you can actually shift
large sums of Money.

[nooption] 14/2/2006 21:45

KOJAK78 Are you based in america? if in the uk what effect do you think further falls in the dollar would have on the profitability on your mfn investment.

[holdontight] 14/2/2006 17:41

Also invested in IFL, for the longer term (min 3 years plus).

[holdontight] 14/2/2006 17:39

The best return I have had from a "gold" share is BNC, where 27p turned into more than £2, with gold below $300/oz. AVM for me have moved from 40p to 140p, but it has taken them twice as long! The proven reserves are not good and they have a hedge. This is why they are being sold at a discount.....Penjom proven and the hedge. They are however undervalued, but always have been and will be until both of these are as the market wants.

Are they better value than Peter Hambro? Imo, yes they are, but the former have provided better shareholder returns so far.

For info, I bought some PLX today.......launched at 30p, fell to 5p, closed today at 10p. Worth a look, imo, dyor, nag etc

I will tell you the otyhers when I have bought them.

[corrientes] 14/2/2006 17:35

rabbi - I wondered that as well. Can you get rid of your own thread, because MA was routed and he knew it.