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Ben Kramer-Miller

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  • Why Osisko Shareholders Should Sell Now [View article]
    R Greg Osmond,
    I stand by my analysis. AEM and AUY overpaid for Osisko. I haven't done the updated math, but before they spun off the 5% NSR royalty to "Spinco" these two companies effectively paid $3.9 billion for $120 million in annual cash-flow. It gets worse when you consider that now 8% of the gold goes to a royalty company.
    The deal makes sense if you assume that the majors that were interested in OSK were interested because they expected much higher gold prices. While I'm in this camp I'm not going to overpay for a company's DCF unless I have a very good reason to do so.
    The simple fact is that there aren't any large projects with low production costs in low risk jurisdictions. The couple of exceptions such as Canadian Malartic are going to appeal to the large mining companies. A $20 billion company isn't going to waste its time on a 50,000 ounce producer because it is undervalued at $1,300/ounce gold.
    Goldcorp, Yamana, and Agnico have limited options. As an individual investor I have more options. I can go out and buy stock in a company like Orvana Minerals or SilverCrest Mines and move the needle on my portfolio. Major gold producers cannot. So they have to view things a bit differently--maximize leverage without sacrificing current cash-flow or exposing shareholders to unnecessary political risk.
    So from this perspective the bidding war in Osisko makes sense. But that doesn't mean I was wrong in saying that OSK and Canadian Malartic were overvalued, and just because other major gold miners saw the long term opportunity that I outline above doesn't make my analysis wrong--remember that in the article I say that Osisko is more valuable to a large acquirer than it is as an independent company.
    With that being said I don't work for GG, AUY, or AEM. And just because the stock rose doesn't make my analysis incorrect--lots of gold mining stocks rose.

    -Ben
    Apr 19 02:29 PM | Likes Like |Link to Comment
  • Luna Gold: Intriguing, But Not Worth The Risk [View article]
    Brua,
    Aura is really a copper miner. As far as the "list" if I'm not mistaken you're referring to the list of my previous articles after my article finishes. Seeking Alpha just lists the last few articles I published. The Aura recommendation is just older, not outdated. I still like the company although I'm a bit worried about copper prices.
    Apr 14 12:26 PM | Likes Like |Link to Comment
  • Luna Gold: Intriguing, But Not Worth The Risk [View article]
    So I think management has done an excellent job. As I point out they have grown resources and production and they have generated profits for shareholders. At the same time CEO John Blake is resigning. While one person doesn't make the management team I think managerial acumen may be a small risk going forward. I want to see a couple of statements such as a presentation or a quarrterly MD&A from the new CEO before I give my full endorsement.

    Regarding an actual entry point there are a lot of moving parts at this point in time. If the stock fell tomorrow so that it traded below my conservative 12% discount rate valuation of Aurizona minus its obligations, I would buy--that level is $100M - $17M = $83M. But the only way that will happen in the near term is if gold falls or if there is some major disaster.

    But clearly there is a lot of leverage to the gold price in both directions. Also we have a new resource estimate coming out and a mine expansion plan coming out later this year, so unless the stock crashes on no news in the very near term I think we would need to revisit the issue of a good entry point.

    Note that all of these uncertainties and moving parts regarding valuation is a reason in itself to stay away with the current mkt cap exceeding the mine's DCF. If you're going to buy a stock with a lot of unknowns you need to be compensated for doing so.

    Hope this helps!
    -Ben
    Apr 10 05:38 PM | Likes Like |Link to Comment
  • Virginia Mines: Goldcorp's Disappointing Eleonore Report Makes This Company A 'Sell' [View article]
    Thanks!
    Just one clarification. My first Virginia piece was bearish. My approach looked at the bullish scenarios (600k oz/year for 15 years) and still came to a bearish, albeit a less bearish conclusion.
    Apr 9 01:47 PM | Likes Like |Link to Comment
  • Virginia Mines: Goldcorp's Disappointing Eleonore Report Makes This Company A 'Sell' [View article]
    The company has to be optimistic, but as investors we have to consider a more pessimistic scenario.
    Apr 3 12:36 PM | Likes Like |Link to Comment
  • Virginia Mines: Goldcorp's Disappointing Eleonore Report Makes This Company A 'Sell' [View article]
    I appreciate it. You've been dead on about GG. I don't know about shorting it but I'll probably sell the next spike. Kinross is looking better and better now with the Tasiast expansion plan and the "Russia discount."
    Apr 2 10:30 PM | Likes Like |Link to Comment
  • Virginia Mines: Goldcorp's Disappointing Eleonore Report Makes This Company A 'Sell' [View article]
    Adrian,
    Keep in mind that I do the calculation twice. The first is Goldcorp's own mine plan. The second gives them the benefit of the doubt on the inferred resources and adds 2 million ounces of total production. Even in this situation when you use a 0% discount rate and a much higher gold price the shares are pricing in a lot of exploration upside.
    If Goldcorp is going to continue to claim 600,000+ ounces of production then they need to square that with the report they just released.
    Another thing that troubles me about this whole Eleonore situation is the fact that it was released on a Friday night with no followup. Compare this to Kinross' handling of the Tasiast announcement. There was a pre-announcement, then the release, and then a follow-up conference call. Why is GG being so disseminating?

    Now I'm not saying that Virginia Mines is a bad company. They have been extremely successful and they have created a lot of value for shareholders. But the amount of optimism that we have to price in in order to square the company's valuation with the amount of cash-flow that is going to be generated by the Eleonore royalty is simply unrealistic. There are other opportunities out there in the royalty space and in low cost gold producers with pristine balance sheets, and I want to put my money in these stocks.

    -Ben
    Apr 2 09:57 PM | Likes Like |Link to Comment
  • Virginia Mines: Goldcorp's Disappointing Eleonore Report Makes This Company A 'Sell' [View article]
    NanooGeek,
    It's not a 2.2% royalty. It is a 2.2% royalty on the first 3 million ounces, then 2.45% on the next million, 2.7% on the next million, and so on peaking at 3.5%
    Apr 1 05:05 PM | Likes Like |Link to Comment
  • Kinross Gold: Deep Value And Successful Restructuring Make This A Top Major Gold Miner To Own [View article]
    Maybe there was insider information regarding the outcome from teh feasibility study for the Tasiast mine
    Mar 27 04:45 PM | Likes Like |Link to Comment
  • Rubicon Minerals: Weakness After The Secondary Offering Leads To A Buying Opportunity [View article]
    This is a fair question. You have to realize that the articles I write are a part of a research process. I went into writing the article without a positive or negative opinion of the stock. In writing the article I convinced myself that RBY was a good buy and so I put it on a watch list. I don't immediately rush out and buy a stock once I decide that it is a good idea to do so. I know that market noise can give me a better entry point. Maybe a comment will point out a crucial flaw and lead me to rethink my thesis.
    Mar 27 12:19 AM | 1 Like Like |Link to Comment
  • Rubicon Minerals: Weakness After The Secondary Offering Leads To A Buying Opportunity [View article]
    Thanks for the questions, Daniel.
    Regarding the second question your guess is as good as mine. I haven't found any glaring inconsistencies or omissions in the PEA. While there is always the risk of a mine taking more time to go into production there is no reason for this to be the case. Tahoe Resources had no trouble bringing Escobal to commercial production despite community opposition to the mine, and this is a much larger project than Phoenix.
    Regarding the first question my thinking here is that while there is always the risk of another secondary for companies bringing their first mines into production, Rubicon's risk seems to be relatively low given the large--20%--contingency, and given that it has USD payments coming from RGLD but expenses in the weak Canadian dollar. If the price of gold remains low or falls from here we could see the company require some cash some time in 2015.

    Hope this helps!
    -Ben
    Mar 24 09:07 PM | Likes Like |Link to Comment
  • Kinross Gold: Deep Value And Successful Restructuring Make This A Top Major Gold Miner To Own [View article]
    Those funds are find but just remember that you will lose out on the upside should prices spike. Since you probably want to own gold and silver in part for tail risk of economic chaos/hyperinflation these funds fail to function as good gold and silver holdings. But there is no harm in holding a part of your portfolio in these funds.
    Mar 17 06:39 PM | Likes Like |Link to Comment
  • Caledonia Mining Is Too Cheap To Ignore [View article]
    Akaralph,
    I actually did take a small position yesterday and plan on buying more on a pullback.
    Mar 15 05:12 PM | Likes Like |Link to Comment
  • New Gold: Low Costs And High Growth? It's More Complicated Than That [View article]
    The company is the one doing the misleading given that it reports the value of its development projects pre-tax and using a 5% discount rate. The company also neglects to incorproate its interest expenses into its AISC figures. All companies do the latter but with New Gold this comes to a whopping $125/ounce. If anyone is doing the mis-leading it is New Gold.
    Mar 13 10:52 PM | 2 Likes Like |Link to Comment
  • Kinross Gold: Deep Value And Successful Restructuring Make This A Top Major Gold Miner To Own [View article]
    Hi Azinsd,
    As a fundamental investor I think gold should be trading significantly higher. But technically I think we need to see more negativity. I think we saw a lot of people enter the market at $1,000 who aren't as committed as, say, people like James Turk and Eric Sprott who have owned gold since $300. A dip below $1,000 will get a lot of people thinking prices are going lower who now believe prices are going higher. Furthermore there is no strong support at $1,180, but there is at $1,000. I think an intra-week spike below $1,000 to, say, $950 or so is a real possibility that will get a lot of people bearish and set the market up for an epic rally.
    We already saw something similar in silver. Silver made a double bottom at $26 even though the support was at $18 - $21 or so. The $26 level was breached and we hit the support levels from 2008 and 2010 and are setting up for a strong rally.
    But keep in mind that I'm no technical analyst and I could be wrong. I own some gold miners and I own the Central Fund of Canada. I also own some gold coins. I'm not selling any of these.
    Hope this helps.
    -Ben
    Mar 12 11:11 PM | 1 Like Like |Link to Comment
COMMENTS STATS
513 Comments
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