Mining Minerals & Metals Share Discussion Threads

[1waving] 04/3/2008 13:49

Jim Sinclair, couldn't resist putting this one up:--

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Down to business:

1. Gold has never made it thorough a round number without a battle. You may recall every 100 points since $248 gold battled at each $100 mark.
2. To assume we are going through $1000 with ease can only occur if my $1650 magnet is so low it is silly.
3. I don't assume that.
4. The real number is not $1000 nor $1050 but rather $1024 with a maximum over run of $26. You may recall I suggested the run to $1000 was going to be as straight up as markets can perform.
5. I would expect a break above and then some rotation around $1000 until the third day above $1000. Following that it is off to $1650.
6.I will give you more minor angels as we move past $1024.
7. The ratios long the majors and short the juniors sold as an OTC derivative by the same geeks that have brought you the end of the financial world as we knew it, also produced the gold share ratio spread.
8. This spread is starting to contract now as the majors decelerated their climb and the juniors in the main have decelerated or ended their decline.
9. The US dollar has been for a long time and is now totally hopeless.
10. The price objective on the downside of the dollar is .5200. It will get there.
11. Gold is going to $1650. Remember this. It will get there.
12. No commodity share is going down when the underlying asset of the company is going to establish at least an appreciation of 665% from the low. The geeks only look at the momentum of a spread once again forgetting a thing called a market. When the recent OTC derivatives skewing a market explodes, as it will, the juniors will fire out of their silo like an ICBM, doing nuclear damage once again to those criminals and their overloaded laptops.

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' the juniors will fire out of their silo like an ICBM '

Like that one.

[1waving] 02/3/2008 20:49

From Davy's report June '07 ( House broker )

--------------------------------

Quite apart from the specific Komana West target location, there is a
body of evidence that the deposit sits on a north south mineralised trend
defined by the Komana shear zone which itself extends over a length of
20 kilometres.

---------------------------------

Following on from this, in the current drill season new strikes have now been found at Soloba, 3.5kms to the south of Komana West, and Kama, 9kms to the South. This 20 kilometre hosted shear zone is bearing fruit, very probably with more to come.

Edit: Glencar said they had 3 targets to drill south of Komana West so 1 to come.
Also airborne survey currently underway may indicate further targets.

[stenick] 02/3/2008 13:08

All this speculation/articles about gold look promising,thanks for all the info posted,most appreciated...

[serpicouk] 01/3/2008 11:12

1waving - Completely agree about China's foreign currency reserves.

[1waving] 29/2/2008 21:20

serp, not totally convinced about the hedge fund shorting but am more than convinced the FSA does not even have the resource or will to to investigate thoroughly the activities of over 7000? hedge funds.

On a different note, read an article earlier in the week that it is being suggested in China that part or more of their foreign currency reserves are put into gold. Their foreign currency reserves dwarf even their sovereign funds. Will try to find that article again over the weekend.

[serpicouk] 29/2/2008 20:47

Not sure I subscribe to the hedge fund conspiracy. With yet another high profile hedge fund being liquidated ( I would imagine they're in survival mode rather than subtle manipulation of junior gold stocks.

FSA have investigated naked shorts and found no supporting evidence - although I know how highly the FSA are regarded by AIM investors. =)

Suspect the sector is just temporarily out of favour in the current risk averse climate. Personally, I don't blame the big boys for shunning them in preference of gold producers. Makes sense with the current gold run. But as the majors/mid tiers have already been chased up the next real returns will no doubt come from explorers. As always - we go in cycles.

No gunmen on the grassy knoll for me.

[haydock] 29/2/2008 17:24

Try Herencia web site, profile, does it fit?{Good prospect I bought into this week, APF hold a full hand.}

Anyway ive been ferreting around again & i have found you a brilliantly agued article.The best I have seen yet on the small gold situation.
Borrowed from SRB.
divinausa1 - 27 Feb'08 - 10:07 - 1198 of 1200


Get Ready - Here Come the Gold Stocks!
By David Galland
Casey Research


You'd have to be a monk living in isolated penury to miss the fact that gold is on a tear. Specifically, it has risen from $277.75 on January 4, 2002 to $950 last week, a gain of 242% in just over 6 years. Over the same period, the trembling S&P 500 is up an anemic 22%.

In a gold bull market, an investor would expect the profits on gold stocks to be a multiple of those to be had from bullion. That leverage comes from simple arithmetic: once a gold producer covers its production costs, then each 1% rise in the price of gold can translate into a 5%, 10% or even richer improvement in the bottom line. For a company such as Barrick, with 125 million ounces in proven and probable reserves, even a $1 per ounce increase in the price of gold can mean big money.

And so we see that between January 2002 and last week, the gold stocks were in fact up 612%. So far, so good.

Yet, the gold stocks have stalled in recent months; between August 1, 2007 and February 21, 2008 gold bullion rose 42%, but gold stocks were up just 37%.

What's going on? Is it that, in their concern over the broader equity markets, people have forgotten that gold stocks are associated with gold? Or is something else at work here?

The answer is "something else."

The Mothball Years
While there are a number of plausible reasons for gold stocks lagging of late, we have come to the conclusion that the true explanation reaches much farther into the past. It's that the managements of the gold producers have only recently escaped the state of fear they operated under during gold's 20-year bear market.

Consider: as recently as the year 2002, gold was still trading near $280. Against that number was a cash cost of around $250 per ounce for a typical company. That cost figure is about as low as the number could go, and it was the response of an industry beaten down and huddling in a trench.

Caution lingers after the reason for it has gone. As gold began its upward move in 2002, it did so against the backdrop of an industry still in mothballs and still run by managers whose primary skills were cost cutting and frugality. This is important on a number of fronts.

1)Having been trained in the acid bath of razor-thin margins, management was intensely skeptical about gold's rally. They suspected it might be just another bear market trap, ready to punish unwary optimists who parted with cash to ramp up production.

2)In the hunkered-down years, miners focused on the higher-grade, easy-to-mine material that gave them the best shot at turning a profit, however small that might be. And being in survival mode, they were extremely cautious about buying new equipment or maintaining a large workforce. Employee rosters were reduced to the bare minimum.

3)Because staying in business was such an urgent goal, they were willing, even eager, to sell future production at a set price -- a perfectly rational strategy in a bear market, because it at least assured they would receive a price that covered the known costs.

With all these factors taken together, it's easy to understand why the industry was slow to respond when gold started rising. In fact, it was only in February 2003, with gold trending over $350, that Barrick Gold Corp., the world's largest gold miner, began the expensive process of unwinding its hedges. And it wasn't until November of that year that the company announced it would stop forward selling altogether and would eliminate its entire hedge book.

Once the turning point came - when management finally realized the bull market was for real -- the industry began to scramble to catch up. Which, in a choo-choo industry like mining, means hiring and training lots of people, buying or refurbishing the equipment needed to reestablish production on second-tier deposits, upgrading facilities, building expensive new mills, etc., etc. And, of course, dealing with the challenge and expense of unwinding hundreds of millions of dollars worth of forward hedge contracts.

The rebuilding of the gold mining industry, in short, really only began in earnest over the past few years.

The Ugly Duckling Years
As would be expected, the costs associated with rebuilding the industry sent big hits to the bottom line, resulting in the kind of ugly financial metrics that repel institutional investors.

The metrics were not at all helped by the shift away from high-grade ore, because the lower the grade, the more the material you have to dig, hoist, haul and process, meaning increased production costs. In addition, the industry rebuild occurred against a backdrop of generally rising inflation and a falling dollar, which helped push the cash cost of production up by more than double from the mothball years, keeping the miners unattractive as investments.

By contrast, the base metals companies, which had hit bottom earlier, near the end of 1998, had already emerged from the mothball stage, thanks to increasing demand from China and elsewhere. They were, as a result, well on the road to recovery when the big price increases for base metals kicked off in 2004. So, while the gold miners have been widely shunned as ugly ducklings in recent times, the base metals sector has been enjoying salad days, reflected in multi-billion mergers and acquisitions and, of course, sharply higher share prices.

The Golden Years
Here at Casey Research, we are of the firm opinion that, now that the biggest costs related to restarting their industry are behind them, the big gold companies are poised to take off. The proof should come in rapidly improving margins which, lo and behold, we have begun to see in the quarterly reports now being released.

Just last week, Goldcorp announced that fourth-quarter profit had nearly quadrupled over the same quarter the year before. And then Kinross announced that it, too, had posted a record quarter, with profits up almost three-fold over Q406. Meanwhile, Barrick reported that net profit for 2007 was 28% ahead of 2006. In addition, Barrick is feeling sufficiently flush (and optimistic) that it's buying out Rio Tinto's 40% interest in the Cortez Hills joint venture for $1.695 billion... cash.

And the exception to this picture of profit eggs finally hatching is only superficially an exception. Newmont announced a loss of $1.8 billion in 2007. But most of it came from a one-time house cleaning -- $531 million to unwind 18.5 million ounces of forward gold sales and a $1.6 billion non-cash charge to terminate operations related to merchant banking. Look past those elements, which are an overdue recognition of money that went down the drain years ago, and you find that Newmont's mining business is actually in a healthy position. Looked at from another angle, Newmont took these charges now because they could afford to do so and because they felt that the damage to their share price would be softened by the strong performance of their current operations. Now that they've cleaned up the books, they too are dressed up to join the profit party.

How to Profit
It won't be long before others also note the pending improvements to the bottom lines of the big gold companies. The investment herd, we are convinced, is coming and, we expect, coming soon.

How to profit?

First and foremost, you want to be moving into the established producing companies post haste. The gangway on this ship is getting ready to be pulled up.

Secondly, you should seriously consider moving some funds into the higher-quality junior exploration stocks. History has proven that, absent an exciting discovery story, the big gold stocks must get in gear before investor sentiment can reach the critical mass needed to ignite the juniors.

History also shows that as profitable as the big gold companies are in a bull market, returns on the juniors can blow those away. Exponentially. This upside, of course, comes with a greater degree of risk.

But paradoxically, this risk has been largely mitigated by the majors' slow take-off. That's because, anticipating that the gold stocks would follow the metal higher - and history shows no example of them not doing so - investors have already poured record amounts of money into exploration programs. As a result, we now know which companies have the goods -- significant discoveries that juniors have spent tens of millions to define and prove up with the clear intent of selling to the majors.

The missing element, of course, has been that, until recently, the majors didn't have enough free cash to make those acquisitions. That is about to change.

While you don't know me and so will have to take my word for it, I am not the type of person to fall in love with any investment. And any time I feel such an urge coming on, I check all my assumptions twice and then check them again. That said, I will also say that I have never been more bullish than I am now on the gold mining sector as a whole, with an added nod to the well-run exploration companies.


--------------------------------------------------------------------------------

David Galland is the managing director of Casey Research, publishers of Doug Casey's monthly International Speculator advisory. For over 27 years Doug Casey and the Casey Research team have provided self-directed investors with unbiased research on investments with the potential to provide double- and triple-digit returns by tapping into evolving economic and investment trends ahead of the crowd.

[1waving] 29/2/2008 17:15

Just done a search on Jim's site for Herenicia and nothing is found so probably no.

Jim is chairman of a company called Tan Range which I understand is a gold royalty company if that helps.

[1waving] 29/2/2008 17:12

Not at all sure on the South America miner but am doubtful.

The technical bit is quite simple, the hedge funds sell a small quantity of shares at a critical time to drive the price down artificially, to extend their gains on their existing bet the shares will go down. In short it is market manipulation.

The illegal short that Jim mentions does get technical but in simple terms is selling shares that don't exist. Highly illegal but hard to catch.

[haydock] 29/2/2008 17:04

I have just checked, the name is that of a director of Herenicia.
Is it the same guy?

[haydock] 29/2/2008 17:00

Regards lwaving.

Actually it's all a bit too technical for a simple cut & paste, runner.I am not sure I ever understand this shorting.
Mind you neither do the banks & the companies that can loose £70m, but of course have bolted the stable door after it's gone!!!

I had one question though, is Jim Sinclair the one involved in South America with a small cap miner?

[1waving] 29/2/2008 16:45

Jim Sinclair emphasising a point: ---

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Dear Arlen,

I have read this as you requested. It is what I HAVE ALREADY told you!

The hedge funds have been short the juniors and long the majors, resulting in overpricing the major and violently under-pricing the juniors.

The shorts continue their campaign by selling usually near the close on relatively light volume to attempt to make many issues look bad.

All you need to do is look at your junior in question on a 9 or 18-minute chart and check the volume of each bar. The operation at hand will scream out at you when compared to the total volume on the day.

Low volume selling within minutes of the exchange closing followed by even more miniscule selling on the electronic after hours are a dead give away someone is working hard to paint a picture by NOT SELLING TO SELL VOLUME, ONLY TO MOVE PRICE.

They will get burned. You can count on that.

Any issue doing well on the ground should not be bothered at all by both legal and illegal shorts. The undervaluation with gold running towards $1650 will burn them.

I have been spot on regarding gold and will be spot on regarding this issue. I am open to wagers.

A company that has in-ground assets rising in value should love the short that gets increasingly short as that will ultimately benefit the situation. The short is pushing their luck at this point.

Regards,
Jim

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No doubt I'll see this elsewhere shortly Haydock.

[bongo bwana] 28/2/2008 20:23

De men is JORC n

[1waving] 27/2/2008 10:06

A pick up in volume will give a very strong signal.

Extract from Penny Sleuth article, tipping the juniors in general.:--


But as you know, institutional investors are wary of anything not in the S&P 500. So, they dive into physical gold and major producers. Our junior minors remain the only undervalued avenue for investment at that point.

This sets up the third phase, which is just about to start...

Compared to the last huge precious metals rally, this one is more of a slow and steady increase. This gives us a clearer picture of this all-important third phase, which goes something like this...

People outside of the institutions and Wall Street begin to realize what they've missed during the first two stages of the precious metals rally. They want in. Just as they did during the end of the dot-com boom in 1999 and 2000, everyone throws their money at the hottest thing, which, in this case, is precious metals.

So instead of continuing to invest in the already overbought mega-producers, this new crowd begins to buy up the undervalued junior miners. This is our chance.

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[bongo bwana] 27/2/2008 09:40

Guys the trades in GEX have picked up.

Yesterday we had a number of 100K trades and again today.

Have not seen this for a while.

[serpicouk] 26/2/2008 23:28

Yep...that might be one positive outcome.

My concerns would be that with less money available they may tighten their JV criteria. Weeding out the marginal project, dropping commitments earlier if they don't return positive drill results and generally only supporting the prime projects...but of course, that wouldn't be a problem for GEX. :)

Probably won't have much impact on GEX really. GFs still have a business to run and their business plan will be longer than 5 years. In fact, there will probably be operational cost savings from down sizing and cap ex savings from reduced expansion in SA mines...may be some of that will be funneled into grass roots exploration...

[1waving] 26/2/2008 22:21

I would think that would galvanise theit efforts elsewhere.
They do have quite a concentration of assets in S.A.
Reduced gold supply from s.a. until 2012 in a rising demand environment, sustained bullishness in gold.
Maybe their power crisis will not be as bad as projected.

[serpicouk] 26/2/2008 22:11

Not been keeping an eye on Goldields...didn't quite realise how bad the power restriction would be for them. Hope the significant down sizing of their SA operations doesn't have an adverse effects for GEX.



Electricity crisis puts 6,900 Gold Fields jobs at risk and further effect on production.

Gold Fields Limited gold production for the current quarter is forecast to decline by between 20% and 25%...It is further confirmed that, as a consequence of the 10% power reduction imposed by Eskom, sustainable production at Gold Fields' South African operations is likely to decline by between 15 and 20 percent from the June quarter (Q4 F08) onwards...[Eskom restriction until at least 2012]

[1waving] 25/2/2008 21:27

From GF 2007 exploration report.
---------------
During F2007, Gold Fields spent US$47 million on near mine exploration and US$41 million on greenfields exploration – a total exploration spend of US$88 million. The year also marked a significant evolution in the approach to exploration against the background of two considerations:

A global shortage of quality gold projects; and

Immense liquidity from the equity markets presently funding juniors thereby reducing the scope of conventional earn-in deals.

This has necessitated an increase in the generative effort within the exploration group to develop new opportunities in under-explored areas, and a change in the nature of business and deal-making relationships regarding exploration.
-----------------------

Note: A global shortage of quality gold projects.
Liquidity reducing the scope of conventional earn-in deals.
Change in the nature of business and deal making relationships regarding
exploration.

Gold Fields reserves went down last year.

When the results of the airborne survey are received, I would think that GF will be looking for rapid progress at Sankarani.

[1waving] 25/2/2008 18:57

Interesting post on a presentation of what to look for, from another bb

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Discovery Investing - Looking for Ten Baggers.

Here are some of the points

1. Are the assets potentially world class? Cure for TB, Major new Gold Mine etc
2. Do they own it or control it? 100% good, 51% etc
3. Management and Board of Directors - How Good? Track record? Are they concerned for Shareholder? Personal Stake?
6. What's the catalyst? If it has a chance for discovery.
7. Buy when CHEAP (normally no one likes them at the time)
9. Buy enough Stock to make a difference.
10. Not a trading strategy - Go To Sleep stratgy when you have your position - Let it mature and not sell. Have patience, courage and be willing to lose.

------------------------------

Make your own assessment, are all the right boxes ticked. If you're not sure, get researching !!!!

[amt] 24/2/2008 22:03

SerpicoUK - Thanks for the info.

[1waving] 24/2/2008 18:32

Yes, good exposure for GEX, however, with the article being dated the 22nd Feb, it seems odd that most of the text relates to the GEX release in Dec and nothing from the GEX release of the 30th Jan.

Very much a historical report, maybe a page filler for mining weekly.

Serp, a note on your comment the resource at present is small at 520,000oz. That really is a historic resource as it only includes drilling up to Jun 07. They could upgrade that JORC resource with every set of drill results but that would obviously not be cost effective so they are going for an increase with a full seasons drilling to the end of June 08 to be included in what I would expect to be a strong JORC increase.

Looking to what may be current within the 1000m or so of the resource zone I would think we are quite close to 1m oz. The additional 200,000oz that SRK said may be achieved through infill drilling looks good with the recent drill results 'Many of these holes intersected mineralization at higher grade and thickness than had been seen in some of the earlier holes in the same area.'

There are also the extensions at depth to be taken into account in those results 'extensively mineralized zone running from 119 metres to 246 metres depth.' The thickness of ore grade mineralisation at depth is perhaps more variable, 6m at 27.6 gm/t from 162-168m, 38m at 38.9gm/t from 94-132m in the bonanza zone certainly will add resource ounces.

So adding the 520,000 and 200,000 and adding an amount for the extensions at depth would bring us close to the 1m oz mark for a more likely figure for the current resource within the 1,000m resource zone

There is now almost a further 1km of extensions to the North and South of the resource zone at Komana West, the Komana East non JORC estimate of 280,000oz and recent strikes at Soloba and Kama will add very significantly to the JORC over time with some of it being added in this drilling season.


The outstanding results from 22 drill holes should be due very shortly.

[serpicouk] 24/2/2008 17:18

A nice bit of exposure for GEX:

Irish luck exploring African gold
By: Gerrit Bezuidenhout
Published: 22 Feb 08 - 0:00

[serpicouk] 24/2/2008 14:49

I hope we can keep the BB a fair assessment of both potential and risk. Those wishing to elaborate on past failures, which should be assessed in terms of future risks, shouldn't be quickly dismissed. Assuming they post with the appropriate etiquette.

Amt - "The ridiculously low share price vs value of the reserves seems almost too good to be true."

I'm not sure I see this in the same way. I see the share price as very good value with regard to the range and potential of the concessions GEX hold, the GF JV, the current drill season plan and the fact that they are fully funded (very important in the current climate).

The resource at present is small at 520,000 oz of which only 121,000 oz are indicated. The value of this is not significant (yet) and therefore I don't feel the share price is ridiculously low in this respect - although may underpin it somewhat.

With the current sentiment towards junior gold explorers (much talked about on here of late) potential(/any?) success is not being priced in (good for people buying, frustrating for people holding). In fact, I hold several companies which have estimated resources in the Billions but with market caps in the 10's of Millions.

Serp.