32 replies to this topic

[stockbucks_coffee]

PMilly, i don't have NEM i got drooy,gfi,hmy,kgc in case a strong dollar will mean a weak Rand which is good for the South Africa stocks. they been consolidating for 1 1/2 year so it could be their 'turn' this year. i got gss, bgo former high flying gold stocks of last year but i think the non-SA gold stocks will underperform SA gold stocks this year i got hl,cde,ssri,paas silver stocks have been the hotest but i'm afraid they may end up like the non-SA gold stocks soon, but playing them while it lasts.

[stockbucks_coffee]

ohh the s/t indicators are slightly up but i have to wait until mid day to get a better/truer reading of them.

[skott]

scaling into gold stock shorts nem at 42.70 right now Scott

[hiker]

you guys may want to read Ed Bugos recent two articles posted at Zacks.com...I espcially like the info. he provides on valuation and quantity of reserves...The recent article is 3/4 and comes up now...you will need to go to archives to find his article from the weekend or earlier....he switched his view on AEM some and gold in general between the two articles....

[PMILLY]

Thanks Stockbucks and skott. I agree about the S. African stocks outperforming others because of the Rand. I've followed DROOY for a while but not many others. Thinking about shorting NEM as well skott. I'm not convinced by this rally, and my indicators say we go down more before mounting a stronger rally. Pmilly

[skott]

Pmilly, you can thank me if I'm right. By tuesday, wednesday is my guess.If I am correct. scott

[stockbucks_coffee]

Hiker...can you provide a quick line or two summary of whether the Bugo's articles were bullish/bearish on what? TIA SC

[PMILLY]

skott, I was just thanking you for your input, regardless of whether you are correct. You can never blame someone else for your trades. It's ultimately our own decision. Whether you are right or wrong, it's still nice to know what your are thinking and if anyone else's indicators are corroborating with yours. Let's hope we're both right, although I may wait until later in the day to short, like in the past hour. I've noticed NEM has a tendency to dip late with carry over the next day. That seems to be the pattern lately. Pmilly

[hiker]

sc - one or two line summary? Here is the relevant section from recent article....he is just a guru...and timeframe always matters...his timeframes seem to be longer than swing trades, tho' am not certain - Some gold mining stocks to consider when the gold price and gold stocks start moving back up toward the multi-year high: If you like momentum and relative strength, the stocks within the precious metals sector that have been the strongest consistently over the past six to twelve months have been the silver stocks. Excluding these issues, over the past month stocks like Agnico-Eagle (NYSE: AEM ), Bema (AMEX: BGO ), Placer Dome (NYSE: PDG ), Anglogold (NYSE: AU ), and Eldorado (AMEX: EGO ) have performed least badly during the correction. Fueling Agnico’s recovery is the recovery in production that everyone expected, plus the results of its recent exploration efforts in helping to grow its gold reserves as reported last week. In Bema’s case, the market is anticipating an announcement from Placer Dome about an updated feasibility study (started in November 2003; due this month) and a financing arrangement to put into production the Cerro Casale deposit in Chile (Placer owns a 51% stake, AZS and BGO split the remaining 49%), which Placer Dome still carries on its books as a mineral resource even though the old feasibility shows the deposit to be profitable past $350 gold (Cerro Casale is a copper-gold porphyry – usually relatively low grades). The terms of the Joint Venture require Placer to arrange the first $1.3 billion (including a $200 million investment in the securities of the JV partners apparently). Placer said little more about it in its quarterly financial report last week, but the market in Bema has perked up. It’s a bit of a gamble to know what will actually happen. The company has hinted at waiting out potential tax changes in Chile. But at the same time, the market hasn’t attributed a full valuation to this deposit yet – perhaps because it’s been on the shelf since the late nineties. If Placer gives it a nod, the five million attributable ounces that Bema claims are reserves will probably be valued more as though they really were. The market also likes its Russian prospect, the Kupol deposit, for which Bugos hasn’t seen a resource calculation yet. But Bema is very bullish on it. They think it could produce up to 600,000 ounces annually, and have targeted next year for feasibility and 2007 for production startup. Bema owns 75% after offering the Russian government a 25% stake. Last year, Bema probably produced over 200,000 ounces of gold (results aren’t out yet), up from 117,000 the year before, and 73,000 in 2001. For 2004 the company could produce 300,000 ounces plus if its targets for two of its deposits (Petrex and Refugio) are met. Anyhow, since Bema hasn’t reported its fourth quarter results yet it’s hard to tell if the market is firming because the numbers are going to be good, or because it’s going to get some good news on either Cerro Casale or Kupol. Bugos likes the chart. Bema’s cashflow valuation is rich on a relative basis, but the company has shown above average growth in production over the past few years and is successfully demonstrating the potential for it to grow into a 1 million ounce producer sometime this decade. Bugos would argue that, at current gold prices, the market is currently valuing it as a 400,000 to 500,000 ounce producer; but that if there is good news surrounding their other projects, there is still room for the stock to lead the pack on the next run up in gold shares. If the object is to speculate on a full valuation for the company’s gold deposits, assuming they will all go into production on schedule, and ignoring any discount usually attributable to a non producing property as well as related to the political risk of owning assets in Russia, Bema could become a 1 million ounce producer by 2007. In this case, Bugos’ model suggests a valuation target for its shares that ranges from US$10 (at $500 gold) to US$25 (at $1000 gold) between now and the time they all make it to production. Discounting the Cerro Casale because Bugos hates speculating on what the majors are going to do, and keeping all the other assumptions constant, the range falls to between US$6 and US$15 as fair values (at 12 times potential cashflows ) for the stock. Otherwise, the company is going to have to ramp its production up to 400,000 ounces just to please the market’s current valuation of its shares. The risk is that something happens in Russia that scares markets out of anything with exposure there, or that something else unexpected happens to head off a production decision at Kupol, or Cerro Casale in Chile. Another risk is dilution. Bema’s shares outstanding have doubled over the past two years due to financings that seem to have been employed wisely enough to not cause grief for the market yet. But in a real gold stock correction, especially once the good news is out of the way, it can lead to underperformance. In summary, based on a current static picture of Bema’s fundamentals the stock is rich. But the premium owes to its potential to grow production forward. And relative to the full extent of this assumption, the premium is small. The stock is widely held, but the chart has been shaping up well (Bugos sees a possible declining wedge), and the market had put it in a leadership position last year. Bad news in the short run could send it back below $3/share, but on the other hand, if it completes the declining wedge this week, a legitimate breakout could take the stock north of $5 (US dollars). So this is one momentum deal that has legs.

[SilentOne]

Hi all, I think shorting gold stocks right now is a really bad idea. JMHO. One should be looking to accumulate, not short. Best play of the year will be metals and gold/silver from this month onward. cheers, john