Avocet Mining Share Discussion Threads

[kojak78] 13/4/2006 11:26

Don't think so, HUi is down 3% from the high and AVM already 13%. 150 was the starting point of the rally to 208, a gain of 58 pence. 172 would mean a 62% correction. I guess it depends on the general gold stock market movement.

Nothing wrong with a nice and healthy correction.

[holdontightuk] 13/4/2006 11:03

K...I think your 150p mark might be accurate, looking at the chart. Would be healthier if this happened quickly, imo, with a definite bounce back to 175/180 ish when 150p hit.

Good buying point, I agree.

[kojak78] 13/4/2006 10:34

Gold price down slightly, if the HUI opens higher today we will get e replay of the December spike action and gold stocks will make 10 to 20% in a couple of days. Lower silver prices mean that many people who shorted silver stocks (many of them declined in the face of higher silver prices) will buy back their shorts and silver stocks should stabilize or go higher.

[kojak78] 13/4/2006 10:10

Folks must be crazy, they had days to sell above 200. Well, the chance has passed und now one must do the reasonable thing under changed circumstances and hold. Technicals are near oversold levels now, Williams %R is oversold, Slow Stochastics near oversold and RSI near neutral (50). A drop to 180 would bring the technical indicators into target territory and then we could get a final quick drop of say 5%, so it looks like the 170p region will be the bottom from where we will go higher 50 or 100% for the remainder of the year.

Do nothing, buy more at the 170 range and below.

[beckaroo] 12/4/2006 16:15

Thanks Kojak...

[trader horne] 12/4/2006 16:00

Yikyak, agree with your call, no worries!

[kojak78] 12/4/2006 15:13

This one will end in tears. The FED is sucking the money out of the pockets of ordinary citizens by increasing rates and is printing like mad to finance the U.S. goverment agencies. Less for individuals, more for the collective. IMO that's communism and it will end in tears. The American public is already spending less, proven by the shrinking trade deficit.

[kojak78] 12/4/2006 14:46

"Does puts at 450 mean that they dont have to sell gold at 450 unless they want to" exactly

"and calls at 700 mean they have to sell at 700 if the bank tells them to"
correct too.

AVM has bought puts at 450 strike price. That means if gold goes below 450 they can sell still at 450 using the put.
AVM has sold calls at 700. If gold goes above 700 buyers might use the call and AVM will have to sell at 700 even if gold is at say 850.

They have used the amount of money received from selling the calls to finance the buying of the puts.

See


"The Company has purchased European put options (the ability to deliver at a certain price, exercisable at specific periods) for 10,000 ounces per month at US$450/oz over a 36 month period from April 2006 to March 2009. The Company has also sold European call options (the ability for a third party to purchase from the Company at a certain price, exercisable at specific periods) for 10,000 ounces per month at US$700/oz over the same period from April 2006 to March 2009."

360000 ozs total so very minor amount, AVM will have 3 to 4 mio ozs in reserves 2 years down the road. Every month gold isn't above 700 starting from April the hedge will automatically reduce by 10000 ozs.

[beckaroo] 12/4/2006 14:00

I know I'm probably stupid but can someone explain this hedge please. Does puts at 450 mean that they dont have to sell gold at 450 unless they want to (so if price goes under 450) and calls at 700 mean they have to sell at 700 if the bank tells them to, or does it mean that now the price is at 600ish they always have to sell some of their production at 450 and then some more if the price goes above 700.

[kojak78] 12/4/2006 13:22

Not excatly gone, they replaced the rest of the old hedge with a new one consisting of puts at 450 and calls at 700, a minor position only though and we're not at 700 yet.

Someone here mentioned britishbulls, they have an excellent track record at trading AVM:


They turned £100 into £700.
If one had invested into AVM with a buy and hold mentality £100 would have turned into £317 now.

Here comes the clue: I don't think many traders are better than the britishbulls method with candlesticks etc. They use many sell-ifs and buy-ifs that need confirmation. Confirmation means a black or white candle one day after. Then there's the AVM bid/ask spread, currently at 1% to 2%. One day late can make the difference of several percentage points, I guess on average 2 to 3% against the trader. That means every trade has a 4% cost on average without transaction fees. Let's assume we trade very well and have only 2% loss, slightly larger than the spread. Britishbulls have listed 50 trades, that means 98%^50 = 36.4% = £255 (=36.4% of £700) instead of the £317 if one had followed the buy and hold method!

[dixi] 12/4/2006 13:01

"zhockey - 12 Apr'06 - 12:03 - 2412 of 2413


Only thing that puts me off is the high prod costs coupled with the $300 hedge, anyone know when/if this expires?"

Just to point out what Kojak is inferring - this hedge is closed and gone. Also certain production costs are expected to fall as production ramps.

This is all well documented in various AVM RNS's - so do I detect a bit of BB mischief with regards to the price of AVM?

[kojak78] 12/4/2006 12:36

Ok, I admit it, I put in 17000 to sell at 197.50 at the open, order didn't get filled. This was the last chance to sell before a possible correction. I'm mentally prepared for 160 and even 150, in the past I was very conservative and have the bulk of my margin remaining (a small part of margin is used on MFL). If we reach the price targets I'll buy a few thousand shares more at least, if I sell MFL perhaps even more. My view on the 17000 was not trading but selling them for good with the unlikely possibility of buying back lower. I wouldn't sell any single share which I intend to hold for the longer term.

On the positive side RSI, Williams %R and Slow Stochastics are in much more reasonable levels noew and will probably reach oversold levels again way before we're anything near 160. We have a gap now at higher levels and we now gaps always get filled (so please no upturn from here before going lower..)

The hedge: Yes, AVM is hedged. Puts bought at strike 450 and calls sold at strike 700. But only a very minor amount. Don't forget that AVM holds 29% of Dynasty and 36% earn-in agreement on Hatu. As AVM isn't going to buy Dynasty (so it seems) Dynasty will be bought by Anglo in the medium to longer term. That means Dynasty shares should climb higher and this will offset the hedge position of AVM. And 36% of Hatu with 64% Anglo majority owner will look very nice.

Look, I hold AVM for more than 1 year and I'm tax free if I sell. If I buy more shares at a correction low I'm able to sell my old shares at higher prices and can still make use of my tax credits without trading my current position and risking losing shares for good.

[zhockey] 12/4/2006 12:03

Only thing that puts me off is the high prod costs coupled with the $300 hedge, anyone know when/if this expires?

[yikyak] 12/4/2006 10:22

Mattyboy, couldn't agree more.

Should be interesting to see if this was the correct call or not, I'll have to tip the executioner a gold guinea to make a single clean cut if not!!

.....................................

yikyak - 7 Apr'06 - 13:19 - 2387 of 2410 edit

I know a few on this board are expecting a pullback of sorts but my gut'o'meter says different, i'll stick my neck on the block and say we keep on going and not drop below £1.94 ever again which, obviously, is a pretty bold call.

I can almost hear the axes being sharpened.

.....................................

[mattybuoy] 11/4/2006 20:00

AVM is still way under-valued. As to a lesser extent are the other AIM gold producers e.g. OXS, UGY. Even CER looks vaguely reasonable. The only one that isn't under-valued is POG.

kojak I'm not sure how relevant the HUI is to AVM. The London AIM market is in a completely different galaxy to North America. The "rules" are not the same at all and there are few "gold bugs" to speak of. Consider why POG is the only stock valued reasonably? Answer = it is run by a City insider from a legendary family. None of the other London stocks are, that's why they have to do it the hard way ...

No disrespect to POG there BTW, Mr Hambro and his team have done very well. Just trying to cast light on why valuations are the way they are.

[kojak78] 11/4/2006 10:56

Hm, gold above 600 and perhaps declining to slightly below 600, the HUI with intraday reversal and I guess perhaps not so good performance today. Could it be that AVM is strong on its own legs? Perhaps increased buying on the excellent drilling news from Bakan. At least we made a moderately bullish continuation candlestick pattern.

If the need arised I'll pull the trigger on another gold stock, not this one!

[hosede] 11/4/2006 09:17

Kojak
you don't have to buy physical gold - there are ETFs, spreadbets and covered warrants that can be bought and sold at the click of a mouse. I favour slightly geared warrants myself but you can take as big or small a risk as you want

[bionicdog] 11/4/2006 07:57

One thing is for sure and that is that gold above $600 won't do AVM any harm.

[chipperfrd] 10/4/2006 14:35

I guess it is all down to personal perception and opinion.
I am happy to hold quite a few AVM and several other gold stocks but I am also heavily invested in other areas too. Overall I am pretty happy with a good degree of diversification across resource stocks and tend to remain so.
Chip

[kojak78] 10/4/2006 14:13

Oil stocks aren't cheap, they have low p/e ratios. Buy cyclical stocks when p/e ratios are high or when they make losses and sell when p/es are low. Typical cyclical companies are Phelps Dodge or GM or DCX. Oil stocks belong to them and perhaps gold stocks.

Gold/oil ratio suggests $1050 gold price. Let#s assume Newmont is breaking even right now with 20 bn market cap + 3 bn market cap for the royalty business. $460 extra per oz are $322 after tax. Times 7 mio ozs = 2.25 bn net earnings = p/e 9. Gold stocks are not more expensive than oil stocks, gold is manipulated to the downside that's all. Of course that means that gold stocks have anticipated a lot of the coming gold price gains. They still have exploration + leverage.

AVM is way cheaper than the average gold stock, still several hundred percent until we reach Newmont valuation levels.

[chipperfrd] 10/4/2006 13:09

True, I am aware of the ratio but I am more concerned about the high valuations of major gold stocks compared to oil stocks which, in the main, are still cheap in comparison.
I also think that historically, the investment world has always believed that oil would remain a cheap form of energy with limitless supplies. Hence the ratio with gold. However, I do not hold that view at all - ergo I believe prices must rise.
I am also a strong believer in gold rising during times such as these but in the final analysis it is not as vital to human existence as oil & energy. The same argument holds true to an even greater extent with water - another investment opportunity if ever there was one!
Chip

[yikyak] 10/4/2006 12:59

Necessinflation - "Everything that is 'necessary' to life is increasing in price: Shelter, energy, food, utilities, medical."

[kojak78] 10/4/2006 12:57

Gold/oil ratio is 8.9, average over the last decades is 15 to 16 and the highs were above 30. So gold has several hundred percentage points potential even against oil.

[chipperfrd] 10/4/2006 12:42

Gold market is still very small. Alternatives are zinc, copper, oil, gas, etc. All very profitable over recent months.
Longterm I see oil as the place to be. I will keep a fair chunk in gold/silver but the really big, liquid market is oil/gas.
Chip

[kojak78] 10/4/2006 12:22

Yes and if you sell your stocks, transfer the money to your local bank, cash out the money, go to the coin dealer.. two weeks have gone and you're money is worth xx% less.
IMO most people will decide to flip their stocks into gold stocks instead of buying physical.

Hyperinflation here we come.