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Zinc stocks- I also am thinking it looks more and more bearish for them. Sold my remaining BN and BWR this morning. With BWR, that was a very disappointing earnings report. Much of it is due to production that was not included in sales but this has been going on now for at least 3 quarters. Plus I noted that production is lower at all mines from a year ago (excludes Langlois, which just started). Looks like continuing production problems as well. They always say wait till the next Q in the CC, but then the next quarter it is the same old story.
Yes, I was disappointed in BWR's earnings. Again they sold much less than they produced. I know the numbers certainly won't match every quarter but they should balance out over time. I broke down the production of metal in concentrate vs the metal sold for Q3 and here is the breakdown:
Metal Production Sales
Zinc (tons) 32111 16891
Copper 1,423 1,023
Lead 2,108 2,900
Silver (oz) 680,000 517,000
Gold 11,510 8,986
Sales fell significantly behind production in all metals except lead. Zinc sales were only 52% of production. I would assume that the company pushed lead sales to take advantage of higher prices. I thought that sales would exceed production in Q3 because sales generally lagged well behind production in Q2 as well. Here are the numbers for Q2:
Produced 30,599 tons of zinc vs 16,522 sold
Produced 2,484 tons of copper vs 1,024 sold
Produced 2,662 tons of lead vs 4,325 sold
Produced 11,717 oz of gold vs 10,413 sold
Produced 712,451 oz of silver vs 718,370 sold
Again they only sold 53% of the zinc they produced in Q2 and an even smaller % of Copper. Again they sold substantially more lead than they produced.
Q1 was even further out of whack for zinc. 27,534 tons of zinc in concentrate were produced but only 12,555 were sold.
I can see where production will certainly not match sales every quarter but it should balance out over time. Over the first nine months of this year 44,000 more tons of zinc have been produced than sold. At average prices sold in Q3, that is $140 million worth of zinc that hasn't been counted. The number gets even bigger when the other metals are counted. I can visualize mountains of BWR's zinc sitting somewhere. I hope somebody questions them on this in the CC (they only accept calls from analysts). Maybe they need to put more focus on collecting or change their accounting so it better reflects reality in terms of production. As it is, Q4 should be incredible if sales finally catch up.
NXG looking strong.
This gold and copper miner announced a proposed acquisition of an Australian gold miner yesterday. The acquisition of Perseverance Corp is for cash with NO dilution and is friendly:
http://biz.yahoo.com/bw/071028/20071028005060.html?.v=1&printer=1
I have been loading up on NXG today. It will turn NXG into a mid-tier gold producer and double their gold reserves. Estimated production is 434,000 oz of gold in 2008 at a cost of $184/oz after copper credits. Perseverance Corp brings two active gold mines, the vast majority of their mining areas have been unexplored.
NXG should cashflow about 150 million in 08 after taxes vs $780 mil mkt cap which is dirt cheap for a gold miner. Average PE of gold miners that are profitable is 23. No debt, no dilution, and the company will still have over $100 million in cash after the $250 mil acquisition is completed. Analysts in conf call sounded very positive about the deal and I expect that upgrades are coming. After the deal 84% of NXG's production will be gold, 16% copper so I expect the market to focus on NXG as a gold producer not a base metal company which commands substantially higher multiples.
All IMO, do your own DD.
It looks like Brooks the Crook is finally going to see the justice he deserves. Yahhhooo... May his cellmate be one of those good ole' mountain feller types from "Deliverance".
My guess is that the $1.29 trade on ZYNX may well not fill. Problem is that the market maker wants his cut so there may well be no trade. That is the problem with bb stocks vs nasdaq and exchange traded stocks.
BN warrants priced at 67c...
2007-10-25 11:05 ET - News Release
Mr. Michael Judson reports
BLUE NOTE MINING INC. PRICES OFFERING OF UNITS
Further to news in Stockwatch on Oct. 23, 2007, and Oct. 24, 2007, Blue Note Mining Inc. has priced its public offering of units. The company has agreed with a syndicate of agents led by Desjardins Securities Inc. and including Salman Partners Inc. for the issuance by the agents of 71.5 million units at a price of 56 cents per unit for gross proceeds of $40.04-million. The offering price was determined by negotiation between the company and the agents.
Each unit will consist of one common share in the capital of the company and one-half of one common share purchase warrant. Each warrant shall be exercisable for one common share for a period of 24 months following the closing of the offering at a price of 67 cents.
The agents will have an option, exercisable for a period of 30 days following the closing date of the offering, to purchase from the company that number of units representing up to 15 per cent of the offering.
BN- Very disappointed in the size of the secondary and how it was handled. BN needs a full-time CEO not a part time one. I sold 60% of my position yesterday but will probably hang on to the rest as I think it will eventually recover and move higher once they show results-even with all the dilution.
HSOA- While Laurus is a bottom feeder, it looks like HSOA inherited the problem with an acquisition. From what I can see they made the best of it in dealing with them.
http://www.thestreet.com/pf/markets/hedgefunds/10259627.html
BN- They must be burning through their cash. Their next 10Q is due in less than 3 weeks. I'd guess it will show they need the money although I wonder what happened to the $15 mil note they arranged last July with New Brunswick. Still, it is very hard to believe that they couldn't make due with a much smaller offering assuming they are only about 3 months away from showing profits and positive cash flow. Makes me wonder what is going on there...I lightened up considerably today.
The Company has entered into an agreement with a syndicate of agents led by Desjardins Securities Inc. and including Salman Partners Inc. (together, the "Underwriters") for the issuance of 71,500,000 Units at a price of $0.56 per Unit for aggregate gross proceeds of $40,040,000. [The Offering price was determined by negotiation between the Company and the Underwriters.]
Sold stock at 10% below market AND threw in free warrants while paying a 6% commish on the whole deal. No question as to who was the best negotiator here
BN- One surprise after another. Stock trading is now halted due to "pending news".
Wade..re, HSOA and Fradella. Yes the Yahoo poster is correct in what he says but that is certainly not all there is to the story. Fradella was CEO of American Eco from only 7/98-12/98 but he was involved with the company or its subsidiaries for several years prior to that. American Eco's ownership of USIS (HSOA's predecessor company) increased from 20% to 82% in November of '98 when a holder of a note they carried could not pay it when it became due. Shortly after, American Eco then placed Fradella as head of USIS, a majority owned subsidiary.
Also, American Eco reported a backlog of $275 million in Nov 98 while Fradella WAS president there. During the short time that Fradella was president of American Eco, the stock price dropped from $7 range to $2 range. Ouch. IMO, the whole gang in those days pulled a bunch of shenanigans and self serving deals. When I realized that Fradella came from that group, I sold my stock in HSOA...once burned, shame on them... twice burned, shame on me.
Monty, nice synopsis on CS although their reserve life is actually better than you noted with their PR that came out last week. They announced resources that are about 50% higher than before. Now up to an 11 year estimated mine life plus 6 more years if one includes inferred resources. CS is also on a blue light special this morning. CS and BN remain my fav miners.
HEMA- I suspect there is more to that story. As per last 10Q, HEMA had only drawn $2.5 million against a $4 mil credit line. It appears that they could have easily made the payment if they wanted to. CEO also resigned at the end of June. Looking at the goodwill they took on an acquisition that the past due notes were issued for, they may be playing hardball thinking they overpaid. Good luck KIK, I'll probably also watch this one from the sidelines.
BN: Best part of today's PR:
"Mine and mill operations are stabilizing and metallurgical performance is continuously improving. We expect to be meeting our planned production and metallurgical performance targets by year-end."
Their target is 105 mil lbs of zinc and 58 mil lbs of lead production annually. That removes much of the uncertainty about how production is progressing. Should start seeing some reports from analysts and this one should start moving up.
QUA- The lower recovery rate for the Q was expected and discussed in the last conf call. Company expects to work their way out of the difficult ore sometime in the current qrtr. They are on track to meet or exceed current year production quotas. Bottom line is no unexpected news and SP is nearly unchanged. (I have now sold out of this one and put some more funds into Capstone.)
thanks Bobwins...thats an intriguing analysis. I'll look into it further.
Ari, portfolio size.. I generally limit positions to 5% or less but on occasion I have gone as high as 10% but nowhere near that on an illiquid one. It is difficult to keep close tabs on more than about 20 stocks and it is also difficult to establish, much less dispose of, good sized positions in many of the type of stocks that are discussed on this board.
OT- digital phone service: Ari, I have been using Vonage for about 3 months now and am very happy with it. Cost is only $28/mo with taxes and that is for unlimited usage throughout USA and Canada. The sound quality and reliability are great using my internet broadband cable line. I tried another service first but the sound was awful and I cancelled. When one first sets it up, get a new phone number to check it out before committing to transferring one's land line phone # to the digital service. Btw, I also have no problem sending and recieving faxes over Vonage which was a concern I had when trying it out.
ATPG- I see the latest PV10 or estimated net present value of the estimated future earnings of their total developed and undeveloped reserves discounted at 10%/year is about $1 billion after tax. I also see there is roughly a 50-50 split between oil and ng. With a current market cap of $1.65 billion it seems that I am paying about $8 for every $5 worth of future profits here. Doesn't seem like such a great deal to me or maybe I am missing something here. Has there been a huge discovery since the last 10K report was prepared?
XPO- Thanks guys for pointing this one out as I also picked up a bunch in the low 1.20s, but I'm hanging onto my shares. Technically it is bumping against a downtrend line but it seems to me that it wants to break through it. I think the company may finally break out of its old trading range mainly due to improving fundamentals as they continue to put out improved numbers:
Last quarter revs were up 24% from the year ago Q and 20% above the previous Q.
Before tax earnings were up 42% from a year ago.
Seven consecutive quarters of growing revs and operating income.
Good balance sheet with low debt.
Insider buys earlier this year.
Company is confident of continued strong organic growth for the future. "We're confident in our business model and believe that by remaining conservative and goal-focused in our approach we will be able to continue delivering strong results in revenue growth and profitability."
R59- BRLC now hitting 4.75 up 78c. SOYO, another HDTV company has basically doubled over the last month. Hopefully it is time for BRLC to catch up.
BWR, I expect them to report a very strong quarter as their Langlois mine has been producing since November of last year but none of the ore from it has shown up in their P&Ls to date. Langlois was not put into commercial status until the day after the last reported quarter ended so all sales to date from Langlois will be included in the current quarter results.
HBM- Article out today indicates that HBM is likely responsible for soil contamination including arsenic from a site they have been mining since 1930. HBM was down 80c today....
The province is warning children in Flin Flon to keep their hands away from their mouths if they're playing outdoors, fearing they could ingest harmful metals including arsenic, lead, mercury and copper.
A Manitoba Conservation study reveals the level of harmful metals found in some of Flin Flon's soil exceeds the recommended guidelines and could pose a risk to human health.
Out of the 93 Flin Flon sites that were tested for arsenic, a known carcinogen, 58 soil samples exceeded levels that were deemed safe for public health -- including 16 playgrounds and one schoolyard.
The report said the pollutants are either known or suspected emissions from HudBay Minerals Inc., a mining and smelting corporation that's one of the province's top polluters....
Article link:
http://www.winnipegfreepress.com/local/story/4049935p-4656971c.html
re canadian dividends: Apparently, Canada is witholding 15% on dividends paid from all Canadian companies to US residents, not just trusts. I am seeing the 15% withheld from the dividends that I recieve from ARG (argof). I understand there is a form for US residents to get it back up to a certain amount from the IRS but I don't recall either the max amount or the form #.
CS...At the Sept 07 presentation on their website, CS projects $50 mil in free cash flow in 2008. Using 89 mil diluted shares, that works out to about 55c/ share. Since earnings are usually less than cashflow, how did you come up with $1 eps for 2008, cl001?
>Today, finally, 1 CAD = 1 USD. It has been a long time! Investing in Canada will also give you currency appreciation!<
Wow. That is amazing considering that just two weeks ago, 1CAD=.95USD That is 5% depreciation in just two weeks. I guess that is the cost of juicing the economy with low interest rates. I'm afraid we will begin to see inflation rear its ugly head.
http://futures.tradingcharts.com/marketquotes/CD.html
BRLC- I'm happy to see that someone already familiar with the company and its operations took the role of CFO. That will help a smooth transition as they are entering their busiest season. The CEO also gave a presentation this morning to analysts and investors. Provided more color on the credit crunch in Taiwan which appears to be easing. Company cannot keep up with heavy demand from retailers. Some retailers are now offering to pay on shipment or even before shipment to get more product. BRLC expects growth to continue at 100% or more. It looks to me like the stock has bottomed and should move higher.
http://phx.corporate-ir.net/phoenix.zhtml?c=146224&p=irol-EventDetails&EventId=1644597&W...
BRLC- My alaska cruise was great last week. Although it was the end of the season, the weather was great, in fact the ship’s crew said the sunny and warm weather was the best of the entire season. The sights were incredible and yes there were a lot of grayhairs on board but the advantage is that it made me feel younger being around them.
While the cruise was great, a big storm hit BRLC last week. One could even say a hurricane hit them as the price has now plunged over 40% from a week ago. They say bad news hits in threes but BRLC managed to beat that giving investors 4 pieces of bad news to chew on. Obviously many investors spit it out.
1. Earnings were delayed at the last minute with no explanation.
2. When earnings came out 2 days late, they fell a penny short of analysts concensus estimates for Q4. At 11c they were however well within the analysts forecast range of 8-16c.
3. Company lowered their sales forecasts for Q1 (ending sept 30) to $170 mil -$180 mil) from analysts avg of $256 mil.
4. Company announced that the CFO was resigning as of the end of this month to join an un-named startup company.
What to do now? First some background. BRLC is mainly a supplier of highdef LCD flat screen TVs under the “Olevia” brand name in North America and also in China. It has been a hyper growth stock at a value stock price. Sales have grown from only $30 Mil in 2004 to $697 M last year. Here is a track of sales revs and earnings for the last 8 quarters. Note that business is seasonal with the high point in the Dec quarter as many HDTVs are purchased by consumers for the football and Christmas seasons:
Period Revs EPS
June-07 $205M 11c
Mar 07 $163M 8c
Dec 06 $242M 21c
Sept 06 $87 M 8c
June 06 $60M (11c) (loss)
Mar 06 $46M (26c)
Dec 06 $60M (4c)
Sept 06 $27M (5c)
Unfortunately, investors have not shared the growth in their stockholdings. The price has ranged from $2 to nearly $12 over the last 2 years and currently sits at $3.60/ share.
The company blames the lower sales projections for the coming quarter on the credit crunch that has also hit China. They also lowered estimates for the current calendar year to $1-1.1 Billion. Since we already know sales for the first two quarters and then adding $175 M for expected Sept qrtr sales, that leaves estimated Dec qrtr sales at $1,000M-$175M-$205M-$163M= $457 Mil. The CEO stated in the conf-call that those sales estimates are conservative and assume that credit conditions remain tight. Assuming 15% gross margins and a 37% tax rate with 93 Mil O.S., that should translate to about 30c eps in the Dec qrtr. I also expect earnings of 6c eps in the coming quarter using their new guidance.
To deal with the credit crunch, the company is planning to focus more on N America sales since credit terms here are much shorter than China’s 120 day customary terms. The flat screen HDTV market is projected to grow at 53% over the coming year in N America. BRLC expects that their NAmerica sales will triple that. They state that they cannot keep up with the demand at the current time.
The CFO leaving is also a concern. This is the first year that BRLC had to comply with SarOx and the auditors noted concerns over internal financial controls in some areas. Personally, I think that the CFO is burned out as handling this much growth along with S/O requirements had to be very stressful to him.
Bottom line is we have a rapidly growing and profitable company that has made more than its share of mis-steps that has badly shaken investor confidence and given the shorts many field days and there are many of them with 40% of the float now shorted. On the other hand, BRLC’s current market cap is only 1/3 of expected sales for this calendar year and the PE ratio should be only 6.5 so further downside should be limited especially with their strongest quarter starting soon. I won’t argue with the market but I will look at adding more when the current slide ends. BTW, the CEO purchased 5000 shares last Friday on the open market at $4.07. While not a large purchase the last time he bought shares was 15000 shares at $2.10 in May 06. This was within 10c of the low and at the start of a run that peaked at $11.70. I hope history repeats here.
R59, re BRLC...I'm on an Alaskan cruise and I won't be able to really research anything till after I get back. Needless to say I'm disappointed but I plan to hold here. I think the price will recover but I'll have to lower my target. Notice how tight money is affecting BRLC sales. How many others are affected as well?
Bobwins, Are you saying that you are fully invested and have little or no cash in this market?
HSOA- I think a big issue is that Fireline has now jumped headfirst into the New York real estate market much of which is in condo construction yet as I recall, they have little or no experience there. Also while the NY market remains relatively strong, it may well follow other areas down. Those new projects won't be completed for well over a year which is plenty of time for that market to dive as well yet they are counting on it to be a very large percentage of HSOA's future business. It looks to me like HSOA may well be setting themselves up to either fly or die based on what happens to the NY RE market going forward.
I hear you guys. A good M&A announcement could light a fire under all metal stocks as it has done before. Just don't let it be a "merger of equals" like what Lundin pulled when it bought out EZM on the cheap.
Even the CEO of HBM recently commented that they are looking at making an acquisition:
TORONTO, Aug 15 (Reuters) - HudBay Minerals Inc.'s (HBM.TO: Quote, Profile, Research) second-quarter profit fell 55 percent on a non-cash expense, but the mid-tier miner's chief executive suggested on Wednesday the company could take advantage of easing mining stocks by making a bid for another player.
Time to go shopping, HBM, BWR, EQN others are strong buyout candidates:
( DJ ) 09/05 04:35PM =DJ It's Shopping Season In The Global Base-Metals Sector
By Brian Truscott
Of DOW JONES NEWSWIRES
VANCOUVER (Dow Jones)--Base-metal-company valuations have retreated but cash
in hand has not, which means just one thing: it's shopping season.
"This is the perfect time for acquisitions, what with the amount of
unallocated capital sitting on balance sheets at the moment," said one sector
analyst.
What's more, market liquidity and volumes are way down.
"If a company came in and offered an all-cash deal at a 30% premium,
shareholders would probably say 'Thank you' and take it," he said.
And it's not as if there's just one or two names on the potential
mergers-and-acquisitions block; it's the whole sector - zinc, nickel, copper,
uranium, you name it.
An ad hoc list of senior names - Rio Tinto Plc (RTP), BHP Billiton Ltd.
(BHP), CVRD (RIO), Xstrata Plc (XTA.LN), Teck Cominco Ltd. (TCK) and the like
- quickly add up to more than $30 billion in available cash and marketable
securities. Add in a long list of mid-tier players that have been generating
scads of free cash flow from high metal prices and you get an astronomical sum
of money that has to be employed in some fashion.
Taking a step back and looking at the various base-metal sectors, here's a
list of names that are likely going to be taken out in fairly short order,
Hudbay Minerals Inc. (HBM.T) is the company the market reckons will be taken
out first, primarily for its zinc - a metal that will become a precious
commodity starting in 2010. Likely predators? Nrystar, the coming spin-off
from Belgium's Umicore and Australia's Zinifex. Or it could be the oft-rumored
suitor Lundin Mining Corp. (LMC), which might choose to go after Inmet Mining
Corp. (IMN.T) instead.
Another in the sector expected to go is Breakwater Resources Ltd. (BWR.T),
which is relatively small but seen as a strong producer which generates scads
of free cash flow. This might actually become a HudBay target in a stopgap
effort to protect its independence and a way to spend some of its excess cash.
Another favorite target: Equinox Minerals Ltd. (EQN.T), a dual-listed copper
company operating in stable Zambia, with operations scheduled for the middle
of 2008. "Equinox is the cheapest by far in the market right now for what you
can get with your dollar," said one analyst.
In the nickel sector, Brazil's Mirabela Nickel Ltd. (MNB.T) is sitting on a
cash pile and has no debt and there are widespread rumours in the market that
both FNX Mining Co. (FNX.T) and Lundin are buying the company's stock.
At the same time, it's thought diversified FNX Mining is a company ripe for
the taking - a long list of suitors could be taking a slide rule over this
one.
Anvil Mining, Katanga Seen As Targets Among Copper Cos.
And while Aur Resources has already been taken in the copper sector, Anvil
Mining Ltd. (AVM.T), a leading producer of copper in the Democratic Republic
of Congo, should also be on the block.
Which brings us to Katanga Mining Ltd. (KAT.T), which has just wriggled out
of a hostile takeover bid by Camec, or the Central African Mining &
Exploration Co. (CFM.LN). "This one has been a big political game and Camec
lost out," one analyst said.
Nevertheless, Katanga has had its data room open during the bid and lots of
the major players in the area went through it, meaning one of them could take
a run at grabbing the DRC-based copper and cobalt producer.
And just down the road from Katanga is Nikanor Plc (NKR.LN), which had
previously been rumored for some kind of tie-up with Katanga, simply because
Katanga has infrastructure and Nikanor has a good deposit.
Over in Peru, Chariot Resources Ltd. (CHD.T) is a sitting duck for Lundin
Mining, which inherited a 19% stake in Chariot when it took out Rio Narcea.
On the uranium front, it's no secret that Cameco Corp. (CCJ) is sitting in a
Canadian market where the regulator looks at virtually everything it does.
This inevitably pushes back projects, especially regarding the rehabilitation
of its flooded Cigar Lake mine, where the opening date keeps being delayed. At
least one analyst thinks 2013 is now a realistic target for operations, while
another questioned whether the mine will ever open.
That means Cameco needs inventory. At the same time, BHP Billiton and Rio
Tinto have both spoken about ramping up their uranium divisions.
Which companies are in the middle? Paladin Resources Ltd. (PDN.T), Denison
Mines Corp. (DNN) and Uranium One Inc. (UUU). All three are targets for
companies sitting on huge cash piles.
And we haven't even touched upon what Anglo American Plc (AAL.LN), a
diversified senior that's fast developing its asset base outside of South
Africa, might do, apart from, say, jettisoning some of its assets in northern
Asia. It wouldn't take a run at Teck Cominco, would it?
"The only other option for some of the seniors here is to use their cash to
become more diversified, by focusing on downstream operations - a
higher-margin business area," one analyst said. "That means they wouldn't have
to be a price-taker anymore and so therefore (could) become a diversified
producer, which is something along the lines of what Alcoa (Inc. (AA)) did."
And the timeline for the M&A shenanigan?
"Any time now; it's going to be fun," the analyst said.
-Brian Truscott, Dow Jones Newswires; 604-669-1595;
brian.truscott@dowjones.com
Today is also a holiday in Canada and it is Labour Day.
I think the last time I saw a post about the 10 beer drinkers was around April 15th. I enjoyed it now as well as then. Regardless of ones politics, the successful certainly pay their way in taxes here. While the unemployed and underemployed have the time to complain about how bad things are, the successful are probably too busy working to answer.
Summer Bank Holiday in England. No updates on LME inventories or pricing at Kitco. It looks like many are sleeping in today.
TAM out with feasibility study on it's Pine Point project. Looks great to me but the stock has sold off today on the news..."Buy on the rumor, sell on the news"
http://biz.yahoo.com/ccn/070824/200708240409470001.html?.v=1
HIMX @ 4.35. I haven't seen this one discussed here before. Manufacturer of chips and display drivers for LCD displays. Growth of high def TVs is booming and the company recently reported that sales in the last Q were up 30% and profits were up 37%. They have no debt and 76c in cash/share. They recently announced a 20c dividend to be paid in October and have also been buying back stock. HIMX has a trailing PE of 11 and a forward PE of 8 based on analyst estimates of earnings which have been increasing.
A cloud over this one is that 4 law firms have filed for class action law suits in the last week claiming that in their IPO last year, they did not make clear that the manufacturers they supply to had high inventories. Makes no sense to me as the company made it clear that their business is cyclical and at any rate sales are much higher now than when they did the IPO. The SP is down about 10% in the last week which is probably due in large parts to those suits. This puts it at near a 52 week low. Football and christmas season is coming and they should show strong results for the rest of the year and also into 2009 as the changeover to all digital TV becomes mandatory in Feb of that year. Many will be buying new TVs for this. All IMO, of course.
ADA is projecting avg $46 mil in pre tax cash flow. Adjusting for current prices of zinc ($1.40) and lead ($1.45), that will be reduced by $2 million. $44 million/161 dil shares= 27c cash flow/share. At current SP, ADA is selling for 3.6 times estimated cash flow, which is good even for a startup. As Cl indicates, ADA also has other assets as well which makes this an attractive play, IMO.