Thursday, 30 September 2010

Rather a selling opportunity?

Novagold reached a new two year high yesterday trading up to $9.20 intraday. Is it a buy or a sell?

All considerations

  1. + NG quotes at $8.94 at close yesterday Sep 29, an impressive gain over last few weeks, but it stays well below half the November 2007 price level. So there might still be room for further gains?
  2. + Back in November 07 we had a gold price of about $800/oz, while we’re over 60% higher now: sure if NG catches up the territory lost on the rise of bullion, we’re in for some nice gains.
  3. + After the capital raises (private placements at $5.5 in early spring) investors continued bidding up the price. Apparently they were ready to pay an extra just to be on the same boat as Soros and Paulson. This definitely raises confidence.
  4. + NG needs counting on its rich resources, not on operational results. The resource base is interesting for partnerships and new investors all the same. Eventually one of the partners may launch a take-over bid.
  1. - Not a single project resulted in a operating mine. Even ‘Rock creek’ where most investments were completed, has been put ‘on care and maintenance’. Geologists are not competent mining engineers nor production managers apparently.
  2. - Reviewing the feasibility study (implying higher costs) at Galore creek triggered the suspending of the project and directly resulted in the NG price shashed in half by the end of 2007.
  3. - Debt financing the start up of Rock Creek proved detrimental in November 2008 as NG ran out of cash amidst technical problems to get the mine started. The share price dropped below $0.50. Refinancing and raising new capital with new shares sold at $1.20 and warrants at $1.50 dramatically diluted existing shareholders, as the number of shares rose by 80%. By now, the number of shares more than doubled.
  4. - In order for Donlin creek to become a working mine, up to 4 billion $ are needed: for NG to maintain its 50% interest in the project, it needs finding 2 billion. The capital raised earlier this year was $175 M: we’re not yet there. Two billion is close to the market cap at the moment.
 Conclusions are all yours.

About the origin of the silver dollar

The Maria Theresa Thaler is probably one of the most famous and well known coins of the world. See also following links:
Maria Theresia thaler, 1780 Restrike

Monday, 20 September 2010

Lucky Junior Mining picks

With some sense of irony one could state: “Junior mining is a mine field.”

Over the last few months, I have been posting just twice on a junior mining company worth taking a closer look at:
(Both postings are in Dutch, though some Google Translation activity suggests they might have drawn wider attention.)

Wednesday, 8 September 2010

Gold mining valuation metrics and its limitations

When comparing gold mining companies, operational key elements, such as cash cost per ounce produced are a key metric. "Cash cost per ounce produced" is a non-GAAP performance measure which provides an indication of the mining and processing efficiency. There is an industry definition called the “Gold Institute Gold Cost Standard” of what is included and how it needs to be calculated. See page 4 of following reference: Gold Mine Cost Report – Q3 2010.

That publication gives a sound idea of how different cash cost can possibly be among operating gold mines. It also points out the continuous rise in cash costs. This has recently been discussed by Scott Wright a senior mining analyst working at Zeal. See: Gold mining margins.

Saturday, 4 September 2010

Tubize: een turbo op UCB

De cijfers

Tubize houdt 65 370 000 aandelen UCB aan, goed voor 35.62% van de beurskapitalisatie. Het aantal Tubize aandelen is 44 608 831, zodat één aandeel Tubize 1.4654 aandelen UCB vertegenwoordigt. Dat is dan meteen de hefboom: geen zware 'turbo' genre ABN-Amro en evenmin een stop-loss.

Om die zware positie in UCB te handhaven, heeft Tubize ook 378.2 miljoen EUR schuldfinanciering. Dat komt neer op een uitstaande schuld van 8.4773 EUR per aandeel Tubize. De intrinsieke waarde van Tubize in functie van de koers van UCB is dan snel berekend als: IW = 1.4654 x UCB – 8.4773