Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
CUMBERLAND RESOURCES LTD. (CBD : TSX : C$4.55) - SPECULATIVE BUY -
12-MONTH TARGET PRICE: C$5.30
Graeme Currie
Comment: Removing Cumberland from our Top Picks list
In our report on this junior dated September 5, 2003, we noted that based on a number of results generated from Meadowbank in Q2/Q3 of 2003 that we felt there was the potential for an expansion in the base case model for this project from 4700 tpd to 5500 tpd. We defined a value for Meadowbank of $4.30 employing a 5% discounted NPV model. To this we added $1/share for this junior's exposure to Meliadine East and West where there are 1.2 million ounces net in situ. This derived a target of $5.30. We maintain that target and maintain our SPECULATIVE BUY rating for this junior. However, given the diminished beta spread from current price to target price we are unable maintain the shares as a Top Pick.
Okay, that US Government bond financing over now..., price of gold may well start to rebound in a few days (still may have to distribute some to retail investors and/or allow new buyers to hedge over next few days)... Never smart to bet against the US Fed by investing in gold during US bond financings...
_______________
"The bond market has traded in choppy fashion for much of the week amid a heavy influx of corporate and government debt.
The Treasury sold $16 billion in 5-year notes on Wednesday, which to the bond bulls' relief drew impressive foreign demand despite worries tied to the dollar's gyrations.
The government also sold $9 billion additional notes of the 10-year inflation-protected securities it sold in July on Thursday. The TIPs earned a yield of 2.229 percent. Demand improved from July. The bid-to-cover ratio showed that 2.25 bids were received for each security awarded, up from 2.18.
Analysts said that continued heavy supply, as the nation finances an even wider budget deficit in fiscal 2004, will continue to influence Treasury trade in coming months."
well, picked up some more Tesco at US$7.66, now have 1/2 of a position...
Yep, Tesco looks interesting, took a small initial position...
If that new casing/drilling technology works as advertised/hoped, this company will be taking off... One has to wonder why the COO resigned on Aug 18..., looks like they took a large one-time restructuring charge in June 03, so this probably explains it... looks like they hired a bunch of people to gear up for expansion and then had to lay them off...
NatGas: Robry graphs updated
both the monthly and weekly updated..., awaiting this weeks comments...
http://amarks.homestead.com/robrymodel.html
http://amarks.homestead.com/RobryNGModel.html
natgas: simmons latest...
http://www.simmonsco-intl.com/files/Kincardine.pdf
Gold, looking to buy around end of October...
http://www.icape.com/macro/oct-gold/gold.html
Can$ to US$ - parity again...
don't know if I can buy into parity, but .80 looks likely...
SA Rand & Currencies...
http://fx.sauder.ubc.ca/plot.html
looking at this 8 year chart, 6:1 looks viable...
long term charts...
Could you post what you learned after meeting PEX...?
Thanks!
Sold CEF @ $4.84 - 15.3% intraday premium...
My math shows trading at a 15.3% premium or $432 price of gold and $5.58 silver.
This discount will decrease to around 3%, IMO, with the advent of the new Gold ETF... Since NAV now equals $432 POG/$5.58 POS, should be able to get back in cheaper if and when Gold ETF knocks this premium down...
FWIW, will still prefer CEF over the new Gold ETF. Why? Because CEF has about 38% exposure to silver vs. none for the Gold ETF. That is one of the reasons I believe CEF will retain some of its premium...
FWIW from mineweb 9/29 article:
"The new [Gold ETF] funds won’t launch into a vacuum. The forty-year old Central Fund of Canada is literally the gold standard among bullion funds although professional traders say it faces a shorting risk when the new funds launch. This is because it sells at a premium to net asset value so traders may target that premium as they go long the WGC funds on the expectation that CEF will revert to par or even trade at a discount to NAV. However, CEF's premium is also due to its rock ribbed refusal to dilute shareholders. The NAV premium is currently just over 10%."
oil & natgas - RJ
http://beacon1.rjf.com/researchpdf/iEne100603b_0655.pdf
F&D Costs - $/Mcfe
Conclusion
F&D costs have been on the rise, and this certainly lowers the rates of return on drilling additional wells. That being said, natural gas prices have increased enough to more than offset the higher costs. In the current gas price environment of $5.00/Mcf and with F&D costs in the $1.50/Mcf range, this would equate to approximately 55% IRR. Under an even more conservative $4.00/Mcf long-term gas price and relatively high F&D costs of $1.75/Mcfe, drilling an additional well should generate ~20% IRRs. Bottom line: we believe the current E&P operating environment offers healthy returns for new drilling activity despite rising F&D costs. When combined with our view that E&P stocks are not adequately reflecting the value of existing assets, we view the E&P sector as particularly attractive. We continue to favor companies that are capable of adding value by growing production on a debt-adjusted, per-share basis, and we are steering investors to companies that we believe have multi-year inventories of high rates of return projects. The companies include Apache, Brigham, Chesapeake, Comstock, Denbury, EOG, Evergreen, Forest Oil, Quicksilver, Magnum Hunter, Pioneer, Remington, Tom Brown, Ultra Petroleum, Western Gas and XTO. On
the oilservice side, we believe that the high rates of return generated by E&P companies will lead to further increases in U.S. land drilling activity. Accordingly we continue to favor Patterson-UTI, Maverick Tube, Nabors, Grey Wolf, Key Energy, National-Oilwell and Unit Corporation.
NatGas Seasonality...
Sold Nov calls on my remaining CHK long position...
SA Rand...
MINEWEB: As I said, we’ve got the rand trading at around R6.80 to the dollar. It’s amazingly strong. We’ve had most traders and economists scratching their heads, just trying to figure out what it’s all about. To put it all in perspective – it means the rand has gained more than 50% since it hit its all-time low of R13.81 to the dollar just back in December 2001. Someone who might be able to offer an interesting international perspective on why a currency is behaving in the way it is, and just what it might do next, is Kai Herbert. He’s the head of an emerging market currency desk at a major New York international bank. Kai, you’ve asked us not to name the bank, but could you just tell us how it ranks in terms of the value of rand traded in New York?
KAI HERBERT: Probably I would say we have the second- or third-largest US corporate investor base. So I would rank it second in the US.
MINEWEB: OK. And you also trade the full suite of international currencies. Just in your book, how does the rand stack up against other emerging markets like the Brazilian real or the Polish zloti?
KAI HERBERT: The rand probably enjoys, I would say, a good 45 to 50% of my daily interest and global risk appetite that we do have. I would say a pretty chunk of emerging markets’ risk is in South Africa, from a trading perspective and also from a customer perspective. So we have a pretty good interest in it.
MINEWEB: What makes it that appealing?
KAI HERBERT: Number one, of course, the customer base is always banks’ leading indicator, and a fair amount of trade-related business, and investor driven to very, very big expenses, investor driven. And then obviously, from a trading perspective, the volatility of the currency proves to be very rewarding and often also a little bit difficult, and at times cost quite a bit of money. But I think its volatility and illiquidity of the currency that makes it quite attractive.
MINEWEB: The liquidity issue first of all – is that something that in your opinion should be addressed, and how would you address it?
KAI HERBERT: Well, liquidity can’t really be addressed much, because it is really depending on market events, market conditions, and it varies from day to day. I mean, on certain days you will have far more liquidity than on others. Comparing the rand, for example, to other currencies, which is a very, very difficult task, you will find much higher liquidity in certainly Eastern European emerging market currencies than South Africa, simply because the trade partnership etc, is far greater than in South Africa. Liquidity is not just simply provided by one bank. I mean, it’s a composite part of banks. So to address it we say, OK, we are going to step up liquidity. Those are difficult tasks, because then, really, the central bank should be the leader in supplying liquidity.
MINEWEB: Kai, you also said a lot of the trade you do is investor-driven. Could we take that to mean that there is hardcore investor appetite in investing in South Africa?
KAI HERBERT: Absolutely. A fair chunk is equity driven, a good amount is bond-driven, and then obviously you have your plain vanilla currency funds that just look for high yields. And South Africa still enjoys one of the high-yielding, or most high-yielding, compared to the others, at 10%.
MINEWEB: And just looking at those yields, there’s a lot of theories floating around about why the rand has done as well as it has. On top of the list of explanations out here is that carry trade is the chief cause. Before we go into that, could you just explain to us exactly what carry trade is?
KAI HERBERT: The interest rate of a country like South Africa is currently 10%. And, in the US, it’s close to zero. So what you would do is you would borrow as cheap as possible to lend out as high as possible. So that is a carry trade. You will be short US dollars, you will be paying next to nothing for the US dollars and you will be investing those in the South African rand. Hence that’s the difference between what you are paying in interest and you are receiving interest, your profits. However, having said that, your risk is the currency itself.
MINEWEB: So basically you would be taking advantage of the higher interest rates, and that in turn is creating demand for the rand, which is making the rand stronger?
KAI HERBERT: Correct.
MINEWEB: How much of the rand strength at this stage, in your opinion, is due to that carry trade?
KAI HERBERT: Probably between 60 and 70% is because of the carry trade. At current levels, I would probably say a little bit less, probably around about 60:40. At higher levels, it was much more. A factor I think, as soon as we broke through the seven level, the weighting increased on a weak dollar.
MINEWEB: So basically more due to the weak dollar than to the rand – it started shifting a bit?
KAI HERBERT: Yes
MINEWEB: And interest rates this year have been quite aggressively cut by about 3.5%. How many more percentage points lower before you see some sort of reversal in this carry trade and we see the rand start weakening again?
KAI HERBERT: To give a number nowadays is very difficult. I think one has to bear in mind the current market conditions and also the situation. I would think a good another 150 basis points would not cause an alarming reversal. However, it would certainly slow the appreciation down, and that is obviously what ourselves and analysts are speculating – that another 100 basis points cut would definitely slow down the appreciation, and possibly lean it on to the upper side if you had to compare this currency to other high-yielding factors, where you gain equal interest rates and run less country risk, because don’t forget, South Africa’s location is always, I would say, weighing against the currency versus Poland.
MINEWEB: If and when we do see large interest-rate cuts, for example 3%, do you see a nice gentle reversal in the rand, or are we going to absolutely see it fall out of bed?
KAI HERBERT: That again depends on other factors as well, as the dollar weakness overall. I think if we manage to get through the R6.60, R6.80 level, we could certainly see its further strength and, on the reversal side, it certainly is not going to fall out of bed provided all conditions remain the same. It very, very much depends on current conditions, political situations and, as I mentioned before, South Africa’s location. There’s always that risk from a US perspective, from a US investor. If we have any political turmoil in neighbouring countries, any uncertainties, we certainly can see a reversal, and something like that could push it over the edge, or even internal politics.
MINEWEB: A very interesting perspective from Kai Herbert, head of the emerging markets currencies desk at the second largest trader of the rand in New York. Anything interesting in there for you, Paul? It seems, from the points that I took up, that there’s a lot of bullish investor sentiment in South Africa that is positive?
PAUL THERON: Yes, and also I found it quite telling that he said that number of 60 to 70% of the current strength in the rand could be ascribed to the carry trade. Recently, a Merrill Lynch report came out and that consistently said that they felt the rand would go stronger. They said they couldn’t find any evidence of the carry trade, which put them on their own in this particular debate. I think it is quite telling and I think what’s also nice about hearing it from somebody over there is that these are people who are not subject to any kind of political concerns regarding being seen to be playing in the currency.
MINEWEB: That is what they are doing.
PAUL THERON: Yes, they don’t care whether it’s the Polish zloti or the South African rand or the Brazilian real – it’s wherever they think they can get a return, whether they can see the market, they can call the trades and be involved. So I would say it underscores and re-emphasises some of the points you were making – that on the whole one might see the rand weakening from here, but that there are reasons why it’s been strong.
continuing to lay low and in cash...
Still 55% of portfolio in gold stocks, 10% in natgas stocks, and 35% in cash/Pimco Commodity fund PCRDX...
We got the US Treasury Auctions coming up this week:
"The government will sell $16 billion in 5-year notes Wednesday and on Thursday will offer $9 billion more of the 10-year inflation-protected notes previously sold in July in addition to its weekly offerings of shorter-term bills."
Suggest you be careful adding gold stocks here, US does not take a liking to POG during these auctions...
As for natgas stocks, well I do believe they are undervalued with many selling for less than 15x earnings and 3.5x cash flow..., certainly a much better value than most S&P and QQQ stocks... Nonetheless, continue to believe Robry is right... We will likely have a 80ish build this week and next week appears to be even higher (not as many cooling deg days). We are looking at natgas storage above 3.1TCF by end of this injection season, IMO... With supply exceeding demand by so much each week, hard to fathom what is driving those natgas future prices, but they are definitely trending up...
So just sitting on cash for now..., since the risk vs. reward for both gold and natgas stocks does not appear opportune...
My current thinking and research is now on SA Gold stocks. The Rand/US$ exchange rate is making new 3 year highs recently... Watching that weekly chart to time when to buy HMY, GFI, and more GBN...
The crowded intermediate gold space
good article...
http://www.mips1.net/mggold.nsf/Current/4225685F0043D1B285256DB70072C7FB?OpenDocument
NatGas Storage...
Robry now projecting +77 build...
2 noteworthy items:
1) This is anamoly week, so there can be a very wide swing between estimated and actual this week. Anamoly week caused because some gas storage only reports monthly (generally the first report of the new month, i.e. this week's report). EIA estimates the monthly each week and will likely adjust to actual this week, so could be a wide variance from expected storage, one way or the other...
2) 6% of all storage sites are now at full capacity (vs. 20% used in Robry's model, thus Robry +77 build should be understated). Overall natgas storage will tend to be slightly undercounted as well because one cannot inject into a storage facility already at full capacity (i.e. 6% of storage)...
"The daily component of the gas-flow model is starting to have a great deal of difficulty because it is now disproportionally reflecting full storage sites which have shut down for the fall and causing it to undercount injections (20% of its sample size is full, vs 6% on the full model). This also will affect the daily baseline scores (which are calculated in part from the daily component of the gas-flow model), making them a little less bearish than the full-model would imply. This will continue through switchover (the point of first withdrawal), and the model runs should be given much less attention than the full-model (which hasn't the problem), though it too could have problems with no-notice flows as we approach switchover."
he updated that chart again... I do believe the $357-$360 area will offer very good support, a few fib retracement levels in that area as well... If POG is around $360 in Oct 29 timeframe, then everything would seem right per my best guess that this would be an intermediate term low... But things seldom ever go as I guess...
Heck don't ask me..., just said it was an interesting chart!!
FWIW, from my analysis and what others have shared with me, believe that 10/29 may well be the turning point...
BUT, I reserve the right to revise and extend my remarks...
PEX chose a very poor time to announce a financing that was not already a bought deal... Possible that they will either have to withdraw this PP or amend the terms to lower prices...? As stated, like the company but seems best to watch for now...
here's a chart posted on bearforum, worth a look, don't necessarily agree, but do believe POG goes down from here..., by how much is the question...
http://stockcharts.com/def/servlet/SC.web?c=$gold,uu[w,a]daclyyay[dd][pb50!b200][vc60][ili21,18!la10....
this also from bearforum/Noland...
Sakakibara seems to be one of the few Japanese who knows what he is talking about. I respect his analysis of events. From Noland:
-------------------------------------------------
October 1 – Market News International (Matthew Saltmarsh): “The changing balance of G-3 fundamentals means that the yen is likely to continue appreciating, probably testing the key Y100 level against the dollar at some point, according to Eisuke Sakakibara, a former senior Japanese official… ‘I am afraid that something quite destabilising may be coming in the next months’, he said in an interview on the sidelines of a conference of Asia-Europe region building here. Sakakibara noted that the effectiveness of Japan’s currency interventions has ‘declined dramatically,’ and as a result, ‘the yen will shoot up towards Y100 and the euro will continue to increase -- and that will really tilt the balance in the international financial arena.’ ‘Intervention alone cannot hold the (yen’s) rate. Intervention with the wind works, but leaning against the wind doesn’t work, and now the Japanese interventions are leaning against the wind.’ Over the last six months, the Bank of Japan's dollar buying has been able to stem the yen’s rise up to a point, but that has been ‘because of market uncertainties.’ ‘The perception of the recovery in Japan was not strong. But within the last two months or so there has been a sudden admission that Japan is recovering.’”
also from Noland:
But these days capital flows are kind of independent too, and one could almost argue, not that our capital inflow is financing our current account deficit, one could almost argue that our current account deficit is financing our capital inflows. So long as that is happening, and as long as we are regarded as the dynamic economy and the best place in the world to invest, our large current account deficit is not going to cause us any problem. The problem will come when people change their mind about all that and they’ve decided, maybe suddenly, that the world has too many excess dollars and they’d like to sell a lot of them all at once in the foreign exchange market. If they did that all at once, we would experience an exchange rate crisis. We’d do no telling what to react to it. I don’t know exactly what would happen, but it wouldn’t be good. But we’ve had the potential for that to happen for several years now and it hasn’t. Most of the countries that own a lot of the dollar balances don’t have any real incentive to trigger a crisis like that. They would perhaps be hurt as much as anybody else by such a crisis. What is it they say: “If you owe the bank a little money, you’ve got a problem. If you owe it a lot of money, the bank’s got a problem.” We might be in that situation.”
don't forget to post this article...
http://www.financialsense.com/stormwatch/oldupdates/2003/1003.html
If it moves to $365, I will likely be a buyer of physical gold...
Believe HSL may have it right...
"I now feel it's best to have gold bars & gold coins as a core holding U don't trade. But trade every one of your gold shares (where U have built-in leverage). This helps your bottom-line (profit), lets U sell-on-strength instead of (all or partly) sitting-still on-strength. Doing this also helps the gold price by taking physical gold out of the mkt."
http://www.321gold.com/editorials/schultz/schultz100203_i_know.html
However, my trading style is to take LT CapGains on the gold stocks... Thus, I trade them generally only when I have LT capgains... I do take a ST scalp from time to time on others, but always keep a good core of advanced stage juniors that I believe will generate LT capgains (i.e. GBN, AGI, CBD, CKG, PAAS warrants).
pulled my order yesterday..., after listening to and reviewing some analysis foreboding a continued drop in POG/HUI until about Oct 29... Here is some of it:
"Gold is now in a Sell Signal, and has been for a couple of days. Not important to me for my core position which is all I have at the moment. I have no intention of trading the core position at all cause I dont think Im good enough to do it for all the buy and sells and never blow it. The core position gets sold when Dow/Gold = 5-6 - and I think it will be worth at least 20x what it is now...maybe more than 20x.
But this wave down that we're in is the 1st of 2 waves. Even though its starting off pretty brutally it actually shouldnt be that bad. The date this one bottoms looks pretty clear and its 10/29. Its a very distinct and obvious target. Most people dont believe you can figure the dates out way in advance and be right...but often you can.
But after this wave down then we get a bounce. The bounce might even be a 100% retrace for a double top."
out at $1.43 for a decent day trading profit...
just trying to give GBN stock price a bit of support..., will look to add and trade again if they whack it again next week...
FWIW, T/A from a friend/partner of mine indicates low for the POG around 10/29/03...
added to GBN @ US$1.35
FWIW, Robry style is more intermediate term rather than short term... We are getting a short term bounce right now, as investors appear to be factoring in a colder winter than normal while Robry assumes normal weather...
Also, please note his comments apply to natgas stocks only and not to oil stocks (e.g. oil stocks have over 80% oil to 20% natgas production).
You can see Robry's record here..., all monthly models are as of the first of the month...
Robry was buying as of April 1, May, 1, and June 1 (his model was predicting negative natgas storage)... We had crossover about July 1 and he sold his E&P stocks in that time frame. He has been out of the market since then waiting for lower prices would be my understanding since July 1... He has never posted his individual trades, just whether the natgas sector is a buy or not...
http://www.amarks.homestead.com/robrymodel.html
Frank:
Robry comments on natgas apply to ALL natgas stocks... Yes he posts exclusively on that thread and I chart his work at my website...
NatGas-Robry Graphs & Comment updated...
http://amarks.homestead.com/RobryNGModel.html
Robry on a rant tonight..., natgas bulls better not read this part...
http://finance.messages.yahoo.com/bbs?.mm=FN&action=m&board=7081371&tid=cwei&sid=708....
SA Rand & Gold - 3 Year
SA Rand - 3 Year
Gold Ounce in SA Rand - 3 Year
Gold Ounce in US$ - 3 Year
Yep, that is correct and where I got it:
"I found it on the website. Fully diluted 38.71 million as of June 20th."
FWIW, am likely going to wait and hope PEX gets knocked down under the PP price before purchasing... Given any significant correction in POG, then I would not be surprised to see prices under C$.13
There should be plenty of time to purchase this company, given it needs to raise C$5M over the next few years, can hopefully catch a nice down price spike when someone bails... Like the company and its prospects, but these Vancouver traded stocks often get whacked.... or so I hope...
GBN Analysis
BillG and I used tag team calling techniques today to corroborate our information on the GBN Burnstone drilling results. As a result, we likely have better information than if only one of us had called. Always useful to have 2 opinions and compare them, and we largely agree...
My opinion:
1) The old Area 2 now includes the new Area 2 and Area 3 and likely some part of Area 4. All of this new Area 2/3/4 likely will contain at least 8M ounces of gold using a 325 cutoff. (The inferred reserve is 11M so 8M should be somewhat conservative.) Comparing the old slide presentation of the old Area 2 to the new map of Areas 2/3/4 it is clear to me that the old Area 2 includes the new Areas 2 and 3...
2) Area 1 likely contains about 5M ounces using a 325 cutoff.
3) Ivanhoe likely contains over 1M ounces, of which 50% belong to GBN outright plus the royalty.
Thus, my total expected gold ounce reserve (both measured and indicated plus inferred) equals 13.5M ounces... I hope and plan to be surprised on the upside (not the downside)... We still do not know the estimated cash cost for the new Area 2/3/4, but likely it will be in the same $170-$180 range as Area 1.
Thanks to BillG for his post...
Updated share structure 9/30:
http://www.alamosgold.com/s/ShareStructure.asp?ReportID=61356&_Title=Share-Capital-Information-a....
Issued and Outstanding Share Capital: 45,894,664
Warrants Outstanding: 9,230,771
Options Outstanding: 2,647,381
___________________
Fully Diluted Share Capital: 57,772,816
Working Capital: 10,230,000
On Exercise of Outstanding Warrants: 12,103,000
On Exercise of Outstanding Stock Options: 2,624,000
___________________
Working Capital - Fully Diluted: 24,957,000
Using my math, we still have 2M warrants that need to be exercised within the next 10 days...
old warrants outstanding= 9,830,156
new warrants outstanding= 9,230,771
difference = 599,385
October 11, 2003 warrants @ C$.90 = 2.56M
Jackc any comments here? Guess PruBear and others waiting until the very end to exercise? Also, do you anticipate any selling into the market on these warrants or do you believe we may get exercise and hold instead?? Thanks in advance for any comments!!
oh yeah, and by the way, AGI up to C$2.00
AGI breaks C$2.00
82K cross at the end by McFarlane:
15:43 2.000 82,000 +0.190 McFarlane McFarlane
still expecting announcment in near term that AGI will begin trading on the AMEX, other than that, no news to account for the rise? (other than its cheap relative to peers IMO)??
such articles relate to the long term..., in the short term I still expect natgas to fall to below $4.10, then industrial demand kicks in, and then crossover, and then Robry model shows natgas storage in negative numbers as it extrapolates to unreasonable conclusion (hint, you cannot have negative natgas storage!!) just like it was in Mar & Apr 03...
important to note:
"It is an extrapolation of the supply/demand balance of the past 10 weeks, extended out with seasonal factors & degree-day-norms, to its either reasonable or unreasonable conclusion."
Right now model predicting more in NatGas storage than there is storage capacity!!.... i.e. an unreasonable conclusion... Thus, natgas prices predicted to fall (unless we have a very cold winter or industrial demand chemical and fertilizer plants picks up).
Currently oil prices ($29+) are very supportive to natgas prices over $4.50 (precludes fuel switching from natgas to oil), but supply continues to exceed demand (and will continue unless very cold winter or industrial demand picks up)...
Great, SWG may become the next MOY arbitrage play...
read explanation here...
http://www.amarks.homestead.com/robrymodel.html
waiting for a crossover...