Canadian Miners Performance Update

With the yellow metal well above $1250, miners have rallied from their correction bottom reached mid December 2016.  On April 12, the HUI index is up 33% from this mid December bottom, yet from its bear market bottom that adds up to a more impressive 115%.  However, from its August rally top the HUI still is down 25%.  Following tables shed light on how the individual explorer, developer and mining stocks performed during these hectic days.

No mercy for gold explorers

A gold explorer ETF

Early October 2011, I pointed to the poor performance of junior gold stocks and of explorers in particular. With GLDX, the Global X Gold Explorer ETF, we have a suitable benchmark for that market segment. How has the situation evolved ever since? Let's first have a look at the GLDX graph since October 2011:

Global X gold explorer ETF (GLDX) the last 9 months

Doesn't look very nice, but then again: miners have been in a terrible slump, largely underperforming gold bullion over more than a year now. Are you off worse with explorers, as was the case in October?
We did witness a recovery of GLDX early 2012 and after the mid May disastreous swoon, a swift recovery followed. Yamana Gold bidding for Extorre added some spice to the rally. (GLDX has Extorre among its holdings; but on the flip side Yamana will acquire Extorre on the cheap as compared to what it quoted like a year ago).

The MVGDXJ Junior gold mining index

Close to a year ago, I first pointed to this junior mining index used as a benchmark for Van Eck’s GDXJ junior mining ETF. See : A junior gold mining index. Back then, the index was managed by the German firm “4asset-management”. Recently Van Eck took over the index calculation. Its composition and time series are now revealed on Van Eck’s website… for those to whom an access is granted. Whereas initially the access policy seemed rather liberal, now it has become restricted to ‘finance professionals’ (which doesn’t include me as a blogger.) The present posting is therefore the final one on this topic.

Crazy Horse Resources

Note June 6, 2017: this company was renamed Rockwealth Resources and there has been a 10:1 share rollback. Coverage is discontinued.

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

Pro's:

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.

 Con's:

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.

Genco Resources: de storm doorstaan

Het is voor een exploratiebedrijf (vandaar ook nog de naam Genco Resources) niet evident om zich om te turnen tot een mijnbouwonderneming. Dat mocht Genco de laatste paar jaar ondervinden.