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I am a former engineer in topography (ESGT Paris CN&M) and specialized in metrology or very precise measurement (two Phd). I was interested in quantum metrology for a while... Live mostly between California (Santa Monica), Provence-Cote d'azur (Where my children and grand children live) and... More
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  • Agnico Eagle Mines: Announces Sale Of Probe Mines Shares And Warrants To GoldCorp Inc Today.

    (NYSE:AEM)

    This article is an update of my preceding article on Agnico Eagle on December 9, 2014.

    It is regarding the sale of Probe Mines Ltd., to Goldcorp Inc. (NYSE:GG) that I talked about in a preceding article yesterday.

    Agnico Eagle Mines, announces today that it agreed to sell its shares of Probe Mines Ltd., to Goldcorp Inc.

    AEM is selling its 10.4% of the total outstanding shares and warrants of Probe Mines:

    1. 7,320,200 common shares of Probe Mines Ltd. (PRB.V) for cash consideration of C$5.90
    2. 2,347,951 common share purchase warrants of Probe Mines (PRB.V) for cash consideration of C$2.90
    3. 3,277,049 common share purchase warrants of Probe Mines (Similar to the ones indicated in 2), will be kept by Agnico Eagle. Assuming the exercise of these warrants by AEM, these shares represent 3.5% of the total outstanding of Probe Mines.

    AEM will receive a total of C$43.4 million or about $35.8 million.

    Probe Mines owns the Borden Gold project in Ontario, Canada. Borden Gold is situated at 160 km West of Porcupine mine owned by Goldcorp Inc.

    Commentary:

    Agnico Eagle Mines, is making a very good profit with this transaction to Goldcorp Inc.

    AEM bought the shares on May 23, 2013:

    TORONTO, May 23, 2013 /PRNewswire/ - Agnico Eagle Mines Limited (TSX and NYSE: AEM) ("Agnico") today announced that it has entered into an agreement with Cormark Securities Inc. ("Cormark") and Probe Mines Limited ("Probe") pursuant to which Agnico has agreed to purchase 7,500,000 units of Probe (the "Units") from Cormark at a price of $1.50 per Unit for total consideration of $11,250,000. Each Unit is comprised of one common share of Probe (each, a "Common Share") and three-quarters of one common share purchase warrant of Probe (each whole common share purchase warrant, a "Warrant"). Each Warrant entitles the holder to acquire one Common Share at a price of $2.10 for a period of two years from the closing date. Closing of the transaction is expected to occur on or about May 28, 2013.

    (Image taken from Reuters/Mike Cassese.)

    Congratulations to the AEM management and CEO Sean Boyd (on the right in the picture above showing the "The Inukshuk," which weighs 50 kgs; contains 1,303 ounces of gold and 311.75 ounces of silver.)

    Mr. Sean Boyd who saw a "Inukshuk in the rough" potential in this Borden Gold project.

    It is not everyday that an investment of this magnitude gets a return of 386% (AEM still owns 3.2 million share warrant.)

    Tags: GG, AEM
    Jan 21 6:06 PM | Link | Comment!
  • Barrick Gold Corp: Time To Buy And Turn Long On The Gold Miners.

    Barrick Gold Corp. (NYSE:ABX)

    Photo: Barrick Q3 2014 Presentation.

    Quick Presentation:

    Barrick Gold Corp., produces and sells gold and copper. The company is also involved in exploration and mine development activities.

    The company holds interests in several producing gold mines, which are located in North America, South America, and Australia Pacific; producing copper mines situated in Chile and Zambia; and a mine under construction is in Saudi Arabia.

    Link: Company Website.

    Link: Company last conference call transcript on October 31, 2014.

    Kelvin Dushnisky, Co-President, said at the conference call:

    Of course, we must also have the financial flexibility to execute on our plans. We have $2.7 billion of cash and an additional $4 billion is available on a fully undrawn credit facility. So liquidity is not a concern.

    Best Assets location: (From ABX presentation.)

    Barrick Gold Financial snapshot:

     20122013

    2014

    Forecast

    Q3 2014

    Q2 2014

    Q1 2014

    Shares Outstanding billion

    1.161.161.165*1.1651.1651.165
    Revenue in $ Billion14.54712.51010 - 112.5982.4322.632

    Gold production

    M Oz

    7.4217.1666.251.6491,4851,588
    Copper production in M lbs46853945013167104
    All-in sustaining cash cost gold AISC $945915880-920852865833
    Realized gold price $ per Oz1,6691,4111,2001,2851,2891,285
    Realized copper price $ per lbs3.573.243.103.093.173.03
    Net earnings per share in $(0.66)(2.51)N/A0.11(0.23)0.08
    Adjusted net earning per share in $3.820.37N/A0.190.140.20
    Operating cash flow $ million5,4394,240N/A852488585
    Total debt in $B11.59913.0813.112.885--
    Yearly Dividend per share $0.800.200.200.050.050.05
    Impairments4.411.545420.0180.5140.01
    Cash and Cash equivalent in $ B-2.4042.6-2.72.7052.52.7

    * Shares outstanding as of October 21, 2014 are 1,164,669,608 (stock options are 5,805,251 shares.)

    Recent major event:

    Barrick gold completes 50-50 Joint venture agreement with Ma'aden for Jabal Sayid. News released on December 3, 2014. The startup is anticipated in 2015.

    Jabal Sayid is expected to begin shipping, low-cost concentrate in early 2016.

    When fully operational, the mine is expected to produce 100 million pounds of copper in concentrate per year in its first full five years, with the potential to increase to 130 million pounds per year.

    The Jabal Sayid prospect recorded an impairment charge of $514 million and ABX sold 50% of the mine for $210 million.

    Value creation potential in Nevada:

    ABX is advancing several projects in Nevada through the pre-feasibility stage, PFS, in 2015 (Gold Rush, Cortez hills, Turquoise Ridge and Spring Valley.)

    Commentary:

    Barrick Gold is a very solid top-tier gold and copper miner with a good growth prospect, despite an evident depressed gold price environment since 2012, and few weaknesses that must be addressed.

    Commentary on few particular and important topics:

    1- Pascua-Lama gold mine project in Chile and Argentina border, back in the game?

    The company has already invested over $5 billion in this project, and is expecting to invest another few $ billion, if it decides to move the project to commercialization?

    On October 31, 2013, the company announced its intention to stop the mine development indefinitely, due to many negative factors (Political opposition, drop in the gold price, labor unrest, permitting issues.)

    However, recently Barrick Gold seems again interested to move the project forward, and improve its feasibility by appointing a new project director, Sergio Fuentes, on November 13, 2014. Its main mission is to help the company to decide or not, to move forward and restart the large Pascua-Lama project.

    A decision to restart the huge Pascua-Lama project, which straddles the Chilean and Argentine border, would depend on the resolution of permissioning and legal matters in Chile and improved project economics, the Toronto-based company said.

    CEO confirmed the situation at the last conference call:

    ... The Pascua-Lama project is currently on care and maintenance. Restarting construction will depend on several things. First, we need to see improved project economics. We continue to look at measures that would improve returns, including better planning and capital deployment, as well as improved cost control. We will not make a go-forward decision before we have a reliable estimate on the cost and a robust execution plan to complete the project, and it must meet a minimum ROI threshold.

    This project is a concern, in my opinion, because of the size of the investment involved and the difficult geopolitical and legal situation of the future mine.

    2 - In the last conference call, the company intended to reduce the net debt to $7 billion.

    James Gowans, Co-President, said on the conference call:

    In terms of targeting net debt, I think $7 billion is what we have identified as a number that we would be comfortable with and that's our target in terms of bringing down our current level.

    Although, it is not certain how the company will be able to reach this important goal, it is something that I see as a positive in term of a long-term investment.

    3 - The company is focusing on several projects in Nevada, which have the potential to increase production at a low cost.

    Many projects in Nevada are in the pipeline and some are ready to be completed by 2015.

    The Turquoise Ridge addition of a second shaft; Spring valley project and advanced pre-feasibility project as well as Goldrush scheduled to be ready in Q2 2015.

    This is encouraging and will impact revenues in 2016.

    4 - Mixed signals from the copper segment. The company has increased guidance for 2014 and 2015, however, problems remain.

    The government of Zambia announced recently that it intended to change its royalty policy and increase to 20% the royalty on open pit operations instead of the 6% which ABX is paying now; and increase to 8% for underground operations. This change is due to take effect on January 1st, 2015.

    This new potential burden will be extremely challenging for the company and may force ABX to close both mines.

    Recently, on October 29, 2014, the President of Zambia, Michael Sata, passed away, and this proposal of tripling the royalty is now on hold.

    On the positive side, the Jabal Sayid mine, in Saudi Arabia, is scheduled to produce low-cost concentrate in 2016.

    Basic gold trading strategy:

    My thinking is that the gold miners like ABX, for example, have suffered already quite a lot, and demonstrate a very damaging negative trend since 2012 which signaled the collapse of a long bull market for gold. The PPS has lost a whopping 74% of its value since January 2012.

    ABX chart since 01/2012:

    ABX Chart

    ABX data by YCharts

    Comparison between ABX and the gold/Copper spot-price since 01/2012:

    Gold Price in US Dollars Chart

    Gold Price in US Dollars data by YCharts

    It is very easy to see why ABX is probably factoring in, now, most of the negative effects of this bearish cycle. Furthermore, the price of gold had reached a price support at around $1,200/Oz, in my opinion, and seems trading in a tight range now, between the low $1,100's to the low $1,300's, for about a year.

    CITI analysts are predicting $1,220/Oz in 2015 with Nomura Security raising its target to $1,450/Oz and others predicting a collapse under $1,000/Oz. It is not a bullish trend yet, however, it signals that the terrible slide of gold price may be over, and we enter a phase of healing.

    Citi said gold will still deal with low crude oil prices and global growth concerns, which weigh on the inflation outlook for both the short-term and longer-term, along with U.S. dollar strength. However, the bank says, these factors are priced into the market more now and this is the consensus view, rather than being a surprise.

    I am basing my gold trading strategy on this simple hypothesis, and I believe that the gold miners will start to trend up in 2015, if gold can show some resilience at around $1,250/Oz?

    ABX is an excellent candidate with a strong financial growth prospect and seems to restore successfully the balance sheet to a position of strength and focuses on reducing net debt.

    The bulk of the production focus is in the Americas (Cortez, Pueblo Viejo, Gold strike, Laguna Norte, Veladero,) with a low attractive AISC at around $760/Oz which is attractive. The company is paying 1.7% in yearly dividend.

    Tags: ABX, long-ideas
    Dec 07 11:30 AM | Link | Comment!
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