Gold stocks

[markrmau]

Could I have opinions on gold stocks?

I was in LHG but jumped out at 1.25 today because UBS reported that the production costs were slightly higher than expected, and because most other brokers have a sell on LHG.

Perhaps I was a bit hasty in pulling out though.

What about OXR, MNR?

It seems there is a crowd of us bullish on gold!

 

[Profitseeker]

Gold stocks have taken a bit of a battering recently. The purpose of this thread is to see what gold stocks people are holding, which gold stocks people think are going to go up or down and what the general consensus for gold stocks is. Also if anyone knows of any 1cent gold stocks that are about to make brillant drilling discoveries, please feel free to share.

 

[Profitseeker]

I hold:


NCM: Have recently bougt more in the share price dip. I believe the market over reacted and that longterm they have a fair way to go. I have read a lot of broker reports that generally value the stock at the $20-$22 mark and state that NCM is undervalued compared to it's American counter parts.
Current price 14.30. Short term target: $15 Long term target: $20


BDG: Have gold in the ground. Advanced their production date and plan to start producing gold in early 2006. Can only see this stock going up the closer we get to production.
Currently :$0.95 Long term target:$2.00

I like the look of:

CRS: I don't know too much about this stock ( would love to hear from anyone that follows it carefully). Seen it drop sharply recently although I belive it already produces gold and has been touted as a potential take over target.

I don't like the look of:

LHG: Only one mine and in area of regional uncertainty. Not much chance of them discovering more gold or expanding.



These views are all opinions and should only be viewed as such.

 

[skin]

RMS
Presently in a trading halt until Wednesday, High this year of 17.5 cents presently trading at 12 cents. Announcement of a spectacular gold find in Wattle Dam and are presently recalculating reserves and reinterpretating finds - expect to report finds soon - this may be the reason for the halt. Will be keeping an eye on this - I do not hold.

 

[krisbarry]

RMS
Presently in a trading halt until Wednesday, High this year of 17.5 cents presently trading at 12 cents. Announcement of a spectacular gold find in Wattle Dam and are presently recalculating reserves and reinterpretating finds - expect to report finds soon - this may be the reason for the halt. Will be keeping an eye on this - I do not hold.

Be careful, a trading halt and recalculation, could mean a downgrade of the "Spectacular gold find"

 

[Rafa]

OXR...

Not a pure gold play, mainly interested me after their merger/friendly takeover of Minotaur (whose stock i held)!

 

[mime]

Well I only have one gold stock (mml) and it's been suspended from trade. People think gold is low but I don't think so. Energy all the way.

 

[krisbarry]

Be careful, a trading halt and recalculation, could mean a downgrade of the "Spectacular gold find"

I take that back, looks like a good result, out of trading halt (visible gold)

 

[bvbfan]

Argh one of my favoured topics


two of the stocks mentioned i have problems with
CRS and LHG
LHG - location & hedging as well as being a one mine company
CRS - they have been running on low reserves for a long long time, they seem to find more when they need to but lately it seems that has not happened
Costs were also an issue I understand

ones that I like
OXR - okay not pure gold but I think the copper and gold will appreciate in the future
PNA - same as OXR but starting gold pour shortly, has already run a bit from low 20c area, so maybe a bit risky buying now

others I think have potential
AGC and DOM - I don't know the specifics but was rated a buy in the low to medium risk area by Hartleys
BDG and BGF - I prefer BDG but both look interesting, BDG more the long term option if they get to the 500,000oz a year production

there are some explorers which I'm watching, hold one at the moment but not a lot happening as its just getting into the warmer months when they can start drilling

Disclaimer:
I own OXR, have a few PNA left

 

[TjamesX]

Just one to chuck in the mix;

Equigold EQI

I haven't researched it really at all.... I heard it is a well positioned gold company.

TJ

 

[johnno261]

I am currently holding Pan Australian Resources - PNA. I would'nt consider it to be a big Gold player but more so a big Copper player. First gold to be poured in the next 6 weeks and the income from this should help develop their next stage in this project being their Big Copper deposit that's expected to come online 2007.
I do expect Pans price to retest it's high of 34.5 and poss. continue thru to high 30's early 40's.My humble opinion!!

Lafayette - LAF is my only other Gold stock which is also due to pour Gold shortly.

 

[Mofra]

Johnno,

Howdy, just thought I'd add my two cents as a holder of both PNA and LAF - personally I beleive they are good for ST exposure to gold however as you said PNA is a big copper play (after the initial stages of the project) and I see LAF as diversified metals play (esp silver), also after the initial stages - the quoted cash costs of production for LAF alone are worth interest IMO.

Have also looked at EQI - EQIO may be a good way of gaining exposure for those looking for longer term pick - AGG's listing on the ASX could also be worth a pickup for anyone wanting to eliminate currency risk from a gold play.

Another VERY speccie one to look at is TTR - a feasibility study on the Phillips River project is due soon, they have a nickel mine (RAV8) due for closure at the end of this year and a gold JV that has just started producing, for which they are also earning management royalties. Copped a flogging after mid year announcements which stopped most people out of it so climbing back even on successful results could be tough.

Keep em coming folks, enjoying the thread.

 

[bvbfan]

AGG's listing on the ASX could also be worth a pickup for anyone wanting to eliminate currency risk from a gold play.

interested in why you think this?
They are predominantly dealing in Rand (for the gold sales) so why would AGG do any better here?

 

[johnno261]

interested in why you think this?
They are predominantly dealing in Rand (for the gold sales) so why would AGG do any better here?

Yeah in agreeance with you BVB. I too am confused re:AGG

 

[serp]

Yeah in agreeance with you BVB. I too am confused re:AGG

ditto.

 

[mime]

I've got a friend who thinks gold will go up because the US economy will sink. I disagree though and I think it will turn around because it has a right wing government in power. We can only wait and see.

 

[Profitseeker]

Greenspan disagrees too. After his bullish speech Gold fell and I expect Gold stocks to do the same today. I wish I'd taken some profit out of NCM on tuesday. ahh! You live and you learn.

 

[skin]

RMS - moved early today on announcement - took 20% profit - hopefully get back in later in month.

 

[Profitseeker]

NCM

Newcrest has learnt from WMC's errors

June 11, 2005
THE board of Newcrest knows that its US rivals Barrick and Newmont, along with South Africa's Anglo Gold, have underlying problems and that acquiring the unrecognised riches of the Australian miner could be their only way out.

But, following BHP Billiton's acquisition of WMC, Newcrest directors will be saying: "We will not let that happen to us."

But that won't be easy because Australian institutions put a value on Newcrest that is under half the value world institutions put on Newmont and Barrick.

However, if and when Barrick and Newmont move on Newcrest - something to be considered seriously - they will need to open the bidding around $30 a Newcrest share - double the current price. And even that might not be enough to gain the recommendation of directors, given the value of Newcrest to Barrick and Newmont and the fact that in their hands it would be valued using international criteria.

Of course, it is one thing for Newcrest directors to resolve to fight Australia's backward institutions, and another to actually maintain the rage in a bidding situation when each day the fund managers and analysts are attacking the target board in the press for not accepting the quick dollar.









The WMC affair showed how an unprepared board could be trapped by this pressure. Newcrest has now set up a detailed manual that sets out each step to take in the event of a low-priced raid.

WMC's enormous uranium and copper discoveries were transforming the value of the company as Xstrata made its bid, but companies do not get value for expansion plans announced during a takeover battle.

When Xstrata first lunged, WMC lost valuable time calling for tenders to appoint a defending institution. By the time the defence was under way, WMC had already suggested that it would be for sale at prices that were related to the present market value and so the hedge funds were moving in for the kill.

If BHP hadn't bid $7.85 the hedge funds would have flogged the stock, sending it into a downward spiral. To defend itself, WMC had to have a prearranged plan that set a much higher value benchmark, and simply not countenance a recommendation below that level.

Newcrest will not make that mistake. WMC appointed Grant Samuel to undertake an independent investigation. Grant Samuel, in valuing WMC, tried to forecast future long-term commodity prices on the basis of futuristic institutional guesses but it also published a clear chart to show the effect on WMC's value if there were higher or lower long-term prices.

It selected as a long-term copper price $US1.05 a pound (the current price is above $US1.40 a pound) and nickel at $US4 a pound, or about half the current price. The forecast long-term uranium price was $US22 a pound. Most now believe it will exceed $US30. Grant Samuel might be right about the future but by applying today's prices to the long-term formulas calculated by Grant Samuel, WMC is worth $16 a share, or twice the BHP bid.

BHP chief executive Chip Goodyear believes there could be a correction in mineral prices but we are headed for a 30-40 year bull run. So even if there had been a setback BHP would have acquired WMC at a low price.

Indeed, when addressing BHP executives Goodyear was almost emotional about the opportunities ahead for the company and the landmark growth signal that WMC confirmed for BHP.

The BHP board went to Beijing, where clearly it is going to further button the company into long-term Chinese growth. Any repercussions that might have occurred as a result of iron ore pricing were stifled because the Chinese knew that their future power requirements would require massive amounts of uranium and BHP had in its pocket 38 per cent of the world's resource.

As WMC was falling to BHP, Newcrest shares plunged because the company could not meet analysts' 2004-05 earnings projections. There couldn't have been a more stupid market reaction because when a company is commissioning plant to increase production substantially there are always difficulties.

In this case, a piece of equipment that the company did not expect it would need until underground mining started should have been installed six months earlier to treat the above-ground production from Telfer.

The shares recovered when the analysts thought that the short-term profit shortfall might cause a bid to be made. Unfortunately it is not easy to look after shareholders when many of a country's analysts are not up to world standard.

Newcrest is set to earn about $200 million in 2005-06. In 2006-07 CSFB expects earnings of $308 million but, if current metal prices continue, profit would be around $350 million. It would have been even higher but for a decision to lock in prices during this high-borrowing start-up stage. Depending on prices, Newcrest is set to earn about $330 million in 2006-07, or $1 a share.

American gold companies are priced on a PE ratio of around 25, which would make Newcrest worth $25. But Newcrest 2006-07 profit level is still depressed by the start-up stage and the hedging contracts taken out to protect itself.

You gain a better idea of the mispricing of Newcrest when you look at output, reserves and costs. In calender 2007, when Telfer is completed, Newcrest's output should be about 2 million ounces a year.

Barrick's present production is 5.5 million ounces and Newmont's is about 7 million ounces. And so, in rough terms, on a gross output basis Newcrest is headed towards being 36 per cent the size of Barrick and about 28 per cent of Newmont.

But when you look at costs to extract that gold there is no comparison. The costs of both Barrick and Newmont are rising. Newmont's costs are between $US240 and $US250 an ounce and Barrick's between $US220 and $US230 an ounce. Newcrest's costs in 2005 are under $US95 -- less than half their rivals.

This differential reflects Newcrest's high throughput mines and the high copper content in Newcrest ores.

On the question of reserves, Newmont and Barrick have around 90 million ounces but with a totally different cost parameter to Newcrest's.

Newcrest's ore reserves are 28 million ounces but it has resources of an extra 35 million ounces and it is now planning to spend the money to convert 12 million ounces of those resources to reserves to lift the total to 40 million ounces.

Newmont is capitalised at $US16 billion ($20.8 billion) and Barrick at $US12 billion, Newcrest is capitalised at only $US3.7 billion. It's clearly worth more than half of Barrick and more than 45 per cent of Newmont.

Of course, valuing Newcrest also depends on copper prices. According to Goldman Sachs JB Were, the current gold price values Newcrest at $US68 per resource gold ounce but if the copper is deducted then the value of Newcrest is $US36 per resource ounce.

Barrick and Newmont are priced at between $US98 and $US97 per resource ounce. That's why you need to at least double the long-term Newcrest price to get into the American league.

Of course, it's important to remember that Newcrest has not completed Telfer and hasn't proven those reserves, so clearly an adjustment needs to be made on value. But to Barrick or Newmont, Newcrest is worth well over $30 a share because it would solve both their costs and reserves problems and transform their profits.

We should not forget Anglo and Africa. Half the African gold mines are losing money. The reason Barrick, Newmont or Anglo haven't bid is that they feared construction and start-up problems at Telfer and know the Newcrest board will do everything in its power to stop them from gaining it at anything like current values. And it is also possible that if Anglo, Newmont or Barrick bid one of the others will counter.

 

[Profitseeker]

Found the above article interesting for a few reasons. Yes the main one is because I hold. The other things of interest to me were:

Does this mean that most other gold stocks in Australia are undervalued. If so they could provide a lot of promise given that there is a lot of talk of consildation in the sector. (Also in above article)

I also found the critique of the australian financila institutions pretty interesting. Maybe I should quit my day job!!!