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RNO- This one took a beating yesterday partly due to a falloff in metal prices but mainly due to earnings that fell short of what many expected (some no doubt due to overinflated expectations from the yahoo message board). Excluding noncash derivative losses, the company would have earned 15c which is respectable for a $2.57 stock. Here are some notes I took while I listened to the conf call:
Production was down in Q3 at their AqualBlanca nickel mine because:
A. A lower grade of ore was mined. (Nickel grades were 25% below the year ago period.) The company expects that combined ore grades will improve from 11% in Q3 to 12-14% on a sustained basis.
B. Production was also slowed down becasue they tested creating seperate concentrates of nickel and copper. That testing has been discontinued. Throughput in October has increased to 140,000 tons vs. a 125,000 ton average in Q3.
Copper derivative losses occurred because futures prices for the metal are also factored in. While the spot price of Cu was unchanged from the end of Q2 to the end of Q3, futures prices were higher creating the loss. (For example, March 07 futures increased from 3.15 on June 30 to 3.40 on Sept 30). Gold derivative losses occurred because put and call option premiums are also related to volatility.
Sales were again lower than production in Q3 as they were in Q2. The company expects sales to exceed production in Q4.
Production at Aqua Blanca next year, while below previous estimates due to a reduction in ore grades, is still expected to be 20% higher than the current years production.
LMC-Interesting how different TDAmeritrade and Scottrade treat the transfer of EZM to LMC shares. TDameritrade shows me as selling my EZM shares and then buying LMC at the higher basis while Scottrade merely shows the cost basis for my LMC shares at what I paid for EZM. I much prefer the way Scottrade does it as no taxable gain will occur until I sell the shares while I have a whopping STCap gain bill created the way that TDAmeri handled it. It seems that Scottrades method is the proper one since I never sold my EZM although the merger proxy warned that a taxable event may be created for US investors by the merger.
LMC-It looks like the 75c eps does not include consolidated numbers from EZM. The merger did not close until after the end of the quarter but they should have included some consolidated proforma numbers for the merged company.
I also see that TDAmeritrade is showing my old EZM shares as sold and a new cost basis for my Lundin shares, rather than a swap for the new shares at the old EZM basis. . I had not wanted to take a gain on this until next year when it would also be longterm capital gains. Grrrrr.....
Nuts, Just as the intrinsic value of an oil company is the value of the oil still in the ground after expenses, the intrinsic value of a mining stock is the value of the minerals in the ground after extraction costs. I wish that miners provided a PV10 value as the oil companies do, it would make relative comparisons easier.
I picked up more LIM today and I have been buying since August. It's production increase next quarter will be significant but it is only in the beginning. As I recall, LIM expects nickel production to triple over the next 3-4 years.
Zinc producers.. Take a close look at breakwater's zinc resources vs their market cap and then compare it to Hudbay:
Breakwater has 3.9 billion pounds in zinc resources and a $646 mil market cap.
Hudbay has 3.1 billion pounds of zinc resources and a $2.1 billion market cap.
BWR has 4 times as much in zinc resources per dollar of market cap as HBM does. It is much higher leveraged to the future of zinc prices.
M M G G shouldn't even be discussed on this board. It is not a producing mine and likely hasn't gone up for a reason. Besides lots of money and time, a new mine would require a substantial new source of water to run it and they haven't been able to find one.
LRT-This one sold off with the canroys but it is a US oil trust. This one sold off sharply last year having a couple of offshore properties that were destroyed by Katrina. But they were in the process of shutting those down anyway when that happened. It's main field is the onshore Jay field in N Florida. Exxon is the operator and production was also curtailed there as they are replacing 3 water lines used to push the oil out of the ground. Thus far only one line has been replaced but they are already back to paying a dividend (3c per month or about 11% annualized). Barring a sharp drop in oil prices, the payout should only increase. The petroleum engineers give this one a PV10 value of $114 million which is about double its market cap.
Eventually, some of that canroy money should find its way into this one. I think it could double over the next year. (also a P4 pick of mine).
LMC (formerly EZM)...Still don't have the new shares in my brokerage accounts. Apparently the holdup is on Lundin to get the shares transferred. Has anyone heard how long it might take? A poster on Stockhouse said TDAmeritrade told him it could be a month. I sure hope not with earnings coming out next week.
BWLRF...Horrible report??? Not bad at all from what I can see. The Caribou mine sale was previously reported so I would assume that analysts had factored the one-time income from that into their estimates. Cash costs of zinc are up due mainly to lower production from Myra Falls..That problem will soon be solved according to today's PR.
Based on last quarter, BWR is trading at an annualized PE of under 5, and now zinc prices are already 25% higher than they averaged last quarter...seems like a buy to me.
BWLRF...I'm happy with the results which basically matched the previous quarter after the profit from the property sale was taken out. They sold their zinc at an average price of $1.52 last quarter. Since it ended, zinc has already shot up to over $1.90 so looking forward results will only improve. A year from now this company should be earning 20c or more per quarter with higher prices and increased production.
Will be interesting to see what happens tomorrow...frankly I'll be surprised if it sells off.
What are the relative tax advantages of Canadian trusts vs US trusts?
Boating industry.. Thanks for your comments on situation in FL, 10 bagger. Reminded me that I have some FPB stock which I unloaded at a nice price with its recent runup.
Zinc shortage continues through next year:
Teck Cominco: Zinc Market In 315,000-Ton Deficit In 2007
13:15 EST Tuesday, October 31, 2006
LONDON -(Dow Jones)- Diversified Canadian mining company Teck Cominco Ltd. ( TCK) expects the 2007 zinc market to be in a 315,000-metric-ton deficit, resulting in a drawdown of inventories to such low levels that could curtail demand, the company said Tuesday.
The global zinc market will be in its fourth consecutive annual deficit during 2007 on the back of strong demand growth, Teck Cominco said during its third quarter results presentation.
"Zinc stock have fallen from 28 days of global consumption in 2005 to the historical low of 26 days in January, 2006. By the end of 2006 we expect stocks to have dropped to 11 days of global consumption, well below the historical low, " the company said.
The rapid fall in inventories and lack of supply could become so severe as to curtail consumption, it added.
For 2006, Teck Cominco estimated the supply shortfall at 460,000 tons.
Zinc traded on the London Metal Exchange has shot up to a record high of $4,300/ton Thursday on the basis of strong demand and continual stock decline, attracting speculative buying, analysts said. This is more than double since the start of the year.
-By Elisabeth Behrmann; Dow Jones Newswires; (4420) 7842 9412; elisabeth.behrmann@dowjones.com
BWLRF..In spite of its recent runup, BWLRF is still about 10% below its high last May. On the other hand, LME zinc inventories have declined 60% from their levels last May and the current price of zinc is about 15% higher than it was last May. I'm thinking fair value for Breakwater is about the same as what zinc is selling for...about $1.95....and I also believe we will see $2.50 zinc by early next year.
BWLRF-Sell before earnings? The company did somewhat disappoint last quarter due to production problems at their Myra Falls mine-no surprise that they dropped after earnings then. This time around they have already preannounced their production problems at Myra Falls and recently invited analysts to tour the mine and "see for themselves" the steps they are taking to alleviate the problems.
Also earnings are being announced a week earlier than last year. Usually when a company announces early, they have good news they want to share. Not to mention that BWR is about the purest play in zinc there is and adjusted for market cap they have more zinc reserves than HBM. By next year, with Langlois mine running and Myra Falls running full speed, they will nearly double zinc production. Despite recent strength, this is about the only base metal miner that has not hit new highs yet.
Place your bets....
Who cares to predict how high zinc prices will go? Inventories continue to drop on a daily basis, and in reality there already are virtually no inventories left in any of LME's 25 storage warehouses except New Orleans and a little in Singapore (see my post #56454). I'm beginning to believe that inventories are walking out of New Orleans as fast as they can get them cleaned up for shipping (damaged from Katrina storm.)
There is little new mine production coming until the second half of next year. I think we may see $3 zinc sometime within the next six months. BWLRF remains my favorite. They have lagged the others (although playing catch up now) due to production problems at their Myra Falls mine (they are adding ventilation shafts which should correct that problem). Langlois is opening up next year which will dramatically increase their production. In terms of active smallcap miners and zinc reserves vs mkt cap, Breakwater is probably the strongest play out there, IMO.
Maybe there are no metal inventories left to count...grin...
EZM vote...Some people received voting instructions and ballots by mail. Others received the info online. All could vote online at proxyvote.com but it is too late now as the deadline was yesterday unless one is attending the meeting this afternoon. The vote does require 66.67% approval and the general opinion is that EZM was shortchanged in their valuation. We should know the results within a few hours.
Zinc warehouse stocks broken down by location-Found this posted on another board. Notice how most of the warehouses are simply out of zinc. The only place that has any appreciable amount left is New Orleans, and I recall that much of that was unusable because of the flooding from Katrina last year. It appears to me that there are virtually no available supplies left.
Zinc Warehouse Stocks 18 Oct 2006
Close In Out +/- On Warrant Cancelled
Antwerp 0 0 0 0 0 0
Avonmouth 0 0 0 0 0 0
Baltimore 0 0 0 0 0 0
Barcelona 0 0 0 0 0 0
Bilbao 600 0 0 0 600 0
Bremen 0 0 0 0 0 0
Chicago 0 0 0 0 0 0
Detroit 0 0 0 0 0 0
Dubai 0 0 0 0 0 0
Genoa 1200 0 0 0 550 650
Gothenburg 0 0 0 0 0 0
Hamburg 0 0 0 0 0 0
Helsingborg 0 0 0 0 0 0
Hull 0 0 0 0 0 0
Johor 8475 0 0 0 8175 300
Leghorn 100 0 25 -25 0 100
Liverpool 225 0 0 0 0 225
Long Beach 0 0 0 0 0 0
Los Angeles 0 0 0 0 0 0
New Orleans 94775 0 1350 -1350 65025 29750
Rotterdam 50 0 0 0 0 50
Singapore 15475 0 250 -250 10750 4725
St Louis 0 0 0 0 0 0
Trieste 600 0 75 -75 0 600
Tyne & Wear 4175 0 25 -25 3600 575
Vlissingen 0 0 0 0 0 0
Total 125675 0 1725 -1725 88700 36975
LIM is within 5c of its 52 week high and could very well hit it today. Giddy-up horsie!!
Good for BofA. I had pulled funds out of my account a year ago because their $30 commish just couldn't compete. It does seem odd that they are offering zero commissions though. I recall the old saying...if it sounds too good to be true, then it probably is...Perhaps no interest will be paid on cash balances or maybe there is a commish on limit orders???
Doubloon, I hope you're right but I didn't see anything in the PR about outside TDYH stockholders getting more per share than the insiders do this time around???
Looks like somebody placed a market order to sell on this one. Last trade at 2.26, current quote is 2.71/3.08. Has anyone figured out what this restructuring plan means?
Zinc...Did anyone hear what happened to all those LME zinc inventories in New Orleans that were flooded by Katrina and deemed unusable until they were cleaned which was a time consuming process? I believe those were always counted as part of the inventory.
TCHC, Actually I would say that TCHC benefited hugely from the fact that no major hurricanes hit FL this year and now more experts say that none will either. Much of their price appreciation is due to good luck in that respect more than anything.
I suspect that FL insurance regulators are already receiving letters and emails from homeowners complaining that their current HO premiums are too high.
Guy..I wasn't trying to make a comment about the way you do the morning update of metal inventories. My comments were directed toward the lack of market reaction that there has been in zinc prices lately, despite a steady drop in inventories. Btw, does anyone know if current inventories are at a record low (I can see that it is easily a 5 year low).
LME Zinc stocks take another big drop...yawn.... At the current rate of decline, we will hit zero in 15 weeks (I left the weekends out). One of these days, the price of zinc (and zinc stocks) will take off again.
Zinc prices peaked last May at around $1.70. Since then LME inventories have continued on a steady decline to nearly half what they were in May and yet the price is holding around $1.50. Seems to me that we should either see an increase in inventories or a rise in prices soon.
Nat gas report-The EIA estimates that there is a working capacity of 3600 BCF of natural gas. If the increase in storage follows the average we would reach about 3500 BCF at the high level.
http://tonto.eia.doe.gov/dnav/ng/ng_pub_analysis_stor.asp
Totally OT!! Market is closed, crunch some numbers for fun...
Find out your age by sex
DON'T CHEAT BY SCROLLING DOWN FIRST!
It takes less than a minute .
Work this out as you read ...
Be sure you don't read the bottom until you've worked it out!
1. First of all, pick the number of times a week that you would like to have sex
(more than once but less than 10)
2. Multiply this number by 2 (just to be bold)
3. Add 5
4. Multiply it by 50 -- It is the end of the day so grab a calculator if you like.
5. If you have already had your birthday this year add 1756 ....
If you haven't, add 1755.
6. Now subtract the four digit year that you were born.
You should have a three digit number
The first digit of this was your original number
(i.e., how many times you want to have sex each week).
The next two numbers are
YOUR AGE! (Oh YES, it is!!!!!)
I wish that I had noticed stocklemon's report on ESCL last January. He wrote it about 4 months before the bottom fell out of it. Very insightful to what actually happened.
EZM to benefit from LUN mining project in Russia - deal has been finalized ....
Sure, if one can call investing 1 Billion dollars over a four to five year period for a minority interest (49%) with the Russians on a new Russian mine. That project was shopped around and Lundin was the high bidder. Now Lundin wants EZM's huge cash flow to help pay for it. And then there is Lundin's interest in starting up a huge mine in Iran. I prefer to invest my money in stable areas.
A while back I worked up a comparision of EZM's and LUN's meaured and indicated reserves that all still in the ground and what they would be worth if all were sold at current prices. EZM with two mines has $13 billion worth of reserves. Lundin with 3 mines has $4.5 billion worth of reserves (one mine is closing next year and another within 5 years. EZM has 74% of the reserves for the combined company yet the merger only gives EZM stockholders 56% of the company.
I will be voting NO on the merger. All stockholders should vote since any shares that are not voted are counted as yes votes. Good news is that a 66 2/3% yes vote is required for the lousy merger deal to pass and insiders control less than 1% of the shares.
BWR, C1001, your numbers look right to me. Needless to say, I am disappointed to see an estimated production drop of 25% vs the first half but since they have invited analysts to come and tour Myra Falls they must have something worth showing to them. Even with current lowered production they are only selling at a PE of 2.5
Next year should be a great year with Langlois coming online. As you indicated, zinc production could be at double current levels a year from now. Company is doing much exploratory drilling and I expect they will also announce a big jump in reserves in Q4. If I wasn't already loaded up, I would be buying here.
BWR..Now we finally know why the SP has taken such a big hit. Obviously the analysts knew about it before the public did with the pre-planned get together tomorrow. I am disappointed with management for their preferential disclosure and I will be venting on them tomorrow (not that it makes much difference but sometimes it helps to vent anyway)
Zinc inventories on LME. Could be that the huge reported drop in Fridays inventories of 6150 lbs was a mistake. At least one site (metalprices.com ) reported the drop at 1650 lbs. If so, today's rise in reported inventories would be a correction to friday's mistake (3375 reported increase was really a 1725 drop). LME will run out of zinc in 90 days at current drawdown rate.
I picked up some more cheap BWLRF at 95c.....
The zinc market may be anticipating supplies coming from the Red Dog mine owned by Teck Cominco. That mine is the largest producer of zinc concentrate in the world. Because its remote location well north of the arctic circle, they can only ship out its concentrate during the summer months. Although, it seems that product should have been hitting the market before now.
http://www.teckcominco.com/operations/reddog/
BWLRF has been on a blue light special for the last week. The light just keeps spinning faster and getting brighter. I also have lost track of how many days in a row zinc inventories have fallen. It's either the buy of the year or there is some bad news out there.
Energy, The Big Picture..
Here's a good article by an analyst who would not sell oil stocks here and predicts oil prices could turn around sooner rather than later...
LINCOLN PARK, N.J. (InsidersPlus) -- Today's news trumpets plunging oil prices, and how that trend will continue. Here's why the sentiment du jour is wrong.
First, what we're seeing now is mostly seasonal weakness. We're between peak driving season and the heating season. Oil inventories are always high in September. Yes, they are the highest since 1998, but that's only 3.5% higher than usual. It comes to 7 million barrels; less than a day's average usage for us.
In March, when we were on the other side of the seasonal dip, we had a 15 day excess and the exact same headlines about 1998. In one week oil plunged 15% from $67 to $57. Within four months, it was $78. Why no panic? The U.S. uses 3 million more barrels of oil than it did in 1998; a 16% increase.
Other factors
At about 21%, the recent drop in oil prices is steeper than March's. One reason is that traders bid up prices in anticipation of hurricanes which never showed. That component won't support prices until spring. The political "fear premium" has also receded. The hurricanes may give us a pass this year, but political problems won't. Terrorists and rogue nations know high oil prices hurt America and help our enemies. They will dial up the rhetoric and dirty deeds before long, if only to keep prices high. In addition, OPEC will curtail supply if prices get too weak.
Longer term, there's still the supply and demand equation. The John S. Herold Co. has for decades been the best source of information on the energy sector. In March, Herold said we need to find about 30 billion barrels of oil per year to replace reserves at current demand, but we're only finding about 10 billion. Furthermore, worldwide demand has been growing about 1.5% annually. With Asia and South America in their economic infancy and Africa not yet born, a few Americans buying smaller cars is not going to put a significant dent in growth.
Fear over new supply, like oil sands and recent large Gulf of Mexico discoveries, is also misplaced. Tar oil is only profitable above $50. Perhaps technology will reduce that, but costs are rising rapidly across the sector, and it will be many years before tar oil can replace more than a small fraction of needed reserves. The new Gulf discoveries, which shouldn't hit the market until 2009, are five miles down. You don't extract that at $40 a barrel. So, there are price floors in place for both new sources.
Smart money
The near-term energy futures market is populated by speculators. The five-year market is the providence of those in the business, or directly affected by it. They are not infallible, but Herold points out that the forward market has been a much better judge of prices than the more volatile spot market. The five-year futures call for oil in the low $70s and natural gas at $8.30. Storage cost is factored in, but, as you can see, those in the know aren't expecting a long-term crash. At projected prices, the industry will remain very profitable.
Still, I can't deny that a recession could temporarily push prices into the 50s, or even the high 40s under extreme circumstances. But recessions seldom last longer than two quarters, and most companies in the oil patch should remain profitable throughout any dip. If you're smart enough to know when to get out and back in again without missing the boat, more power to you. I'm staying the course with my energy holdings. When everyone around you is short-term trading, the best way to make profits is to go long.
My favorite sector stocks right now are Devon Energy and Dawson, the land-based seismic survey company. Herold believes that domestic land-based drilling will increase, given the increasingly nationalist bent of foreign countries with significant reserves. Never buy Dawson with a market order. It has an extremely small float. The bid-ask spread could be large.
Jack Adamo has been analyzing insider transactions for 13 years, and writing about them professionally since 1996. He's the editor of the Jack Adamo's Insiders Plus and Option Income Advisor investment letters. Jack Adamo and his subscribers hold Devon and Dawson. (jackadamo.com)
Content found in The Guru's Corner is subject to the terms and conditions found in the Disclaimer and does not represent a recommendation of investment advice. Investors should seek the advice of a qualified investment professional prior to making any investment decisions. (disclaimer)
Gilead, They say there are two things we can count on...death and taxes. Taxes are certainly discussed in politics, but they are a constant that transcends politics and will never go away. Today is also a tax due date for many of us so it is very pertinent, IMO.
A long list and a reminder:
Federal Income Tax
Federal Unemployment Tax
Workers Compensation Tax
Social Security Tax
Medicare Tax
State Income Tax
State Unemployment Tax
School Tax
Sales Taxes (State and Local)
Real Estate Tax
Property Tax
Building Permit Tax
Well Permit Tax
Septic Permit Tax
Utility Taxes
Severence Tax
Corporate Income Tax
Accounts Receivable Tax
Privilege Tax
Inventory Tax
Food License Tax
Fuel permit tax
Inheritance Tax
Interest Expense
Capital Gains Tax
IRS Penalties
IRS Interest Charges
Liquor Tax
Luxury Taxes
Marriage License Tax
Service Charge Taxes
Telephone Federal Excise Tax
Telephone Federal Universal Service Fee Tax
Telephone Federal, State and Local Surcharge Tax
Telephone Minimum Usage Surcharge Tax
Telephone Recurring and Non-Recurring Charges Tax
Telephone State and Local Tax
Telephone Usage Charge Tax
Vehicle Sales Tax
Vehicle License Registration Tax
Recreational Vehicle Tax
Trailer Registration Tax
Road Toll Booth Taxes
Toll Bridge Taxes
Toll Tunnel Taxes
Watercraft registration Tax
Gasoline Tax
Road Usage Taxes (Truckers)
Dog License Tax
Fishing License Tax
Hunting License Tax
Cigarette Tax
Airline Travel Tax
B&O tax
Property excise Tax
And the list goes on and on and on..
Now consider that 100 years ago, none of these taxes existed and we had no national debt! Talk about a growth industry, too bad it is all built on our backs.
Which leads me to the point of this story. Today is Sept 15 which is also the day that 3rd quarter estimated federal taxes for 2006 are due. The government wants its cut of all those short and long term capital gains profits that we have worked so hard for (and they are due now even before the quarter is over). If you don't pay now there may well be additional interest and penalties due as well.
I take a 3 day weekend and come back to the worse day I can remember. One would think the terrorists had struck again looking at the energy and metals sector. I see why OG is dropping with an overhang of supply mainly due to mild weather and no hurricanes, but it seems to me that the same drop in oil prices is good for this nation's and the world economy. More money after buying gas left to buy goods and staples and thus more demand for metals. Today was a day that fear ruled. I'll be looking to snag some good deals in the morning after the dust along with margin calls for some clears. Mostly looking at base metal stocks.