Hyperinflation

Precious Metal Miners: Post Earnings Season Analysis, Part 1

Yeh I have a few shares, but am more heavily weighted in ECU Silver and First Majestic with regards to my total allocation in the small cap silver miners. I have been doing research on Bear Creek and Mag Silver, and like what I see so far. I think MAG will get bought rather soon, hopefully at a much higher premium than the bid for mag last year.


On Nov 04 08:46 AM tripleblack wrote:

> I just looked into Great Panther (GPRLF.PK or GPR.TO). It is at .71
> per share. They are a strong silver play, but also have a good bit
> of gold and base metal action going on. Since the first quarter of
> 2009 they have been cash flow positive, which is a milestone for
> young mining companies. One thing I noted was the large number of
> options (7.3 million) set aside for the principal players, but that
> is not necessarily a bad thing since that will act as a strong incentive
> for them to get the stock price up.
>
> They have an excellent recent record of improving efficiency (particularly
> in the key concentration area) and cutting costs, and their position
> with their 2 existing Mexican mines and their drill program mapping
> future expansion is solid.
>
> They have just issued a $10m equity offering, which dilution is,
> I think, already factored into their stock price by the market. They
> are also looking to acquire another mine in the same region where
> they operate, which would explain the offering imo.
>
> finance.yahoo.com/news...
>
> www.reuters.com/articl...

Precious Metal Miners: Post Earnings Season Analysis, Part 1

True, GLD has outperformed some of the miners but this will likely be short lived in my opinion. I'm writing GLD calls and buying miners with them so if gold goes up, the miners should go up a multiple of the underlying asset and if it goes down then you just got shares for free ( from recieving the premium up front)


On Nov 04 08:32 AM rrobin wrote:

> What do you think about the performance of GLD vs. the miners at
> this point? It seems GLD might be outperforming miners if the market
> goes down as it has in the past few days. Miners could be subject
> to higher input costs due to inflation?

Ten Stocks for the Next Ten Years

While your "Long Track Record Idea" has merit, you have to look at all the multinational companies ( large money center banks such at Citi ) or General Electric, to name a few. The track record is not nearly as important a question as "Can this company maintain and/or grow their dividend and payout ratios".
I believe I did mention some great dividend stocks such as pengrowth and Phillip Morris Int'l. BHP still sports a 2.5% dividend yield despite the stock price appreciation. BHP, being on of the largest commodity producers ( gold, silver, uranium, base metals, etc ) gives you both great exposure to growth in emerging markets, whose product prices will rise faster than inflation. BHP will ( and has ) resumed its record as being a free cash flow machine. The amount of free cash flow BHP generates will necessarily lead to a higher payout ratio, as operating cash flow can easily cover their capital requirements to continue operations and fund future growth ( such as the potash industry, which they recently decided to enter).

As for some of the others, Silver Wheaton will have to begin paying out their excess profits in order to retain their tax exempt status. They have also discussed their desire to do so, both at the Q2 conference call and the conference call discussing their most recent royalty purchase of Barrick's Pascua-Luma. If you believe Oil is headed higher, Suncor is also a great long term play as they have an enormous reserve base, courtesy of the Petro-Canada acquisition. Suncor has the reserve base ( due to the oil sands), to become one of the largest oil players in the world. Suncor will likely increase their payout ratio dramatically over the course of the next decade.


On Oct 31 11:20 PM bobbybutte wrote:

> Instead of these stocks pick solid dividend stocks with LONG track
> records of large cap multinationals if you want to hedge against
> a falling dollar and inflation

Ten Stocks for the Next Ten Years

I agree with price to free cash flows measure as the best multiple around, except maybe pre-tax return on tangible capital. But this is an emerging industry, so I think as far as the miners go, P/FCF doesn't paint an accurate picture. But I think gold will continue to rise over the years $2000+ and Silver around 35 or 40, thus givin silver Wheaton's business model ( not subject to rising input costs as they purchase every ounce at $4, with a 1% inflation adjustment) and the enormous 5 year cagr , this metric fails to take these into account. As far a PM, this is a great metric to use.
my two cents-


On Oct 28 01:47 AM Peter Mycroft Psaras wrote:

> I have analyzed your list to show how those companies are doing on
> Main Street. My key ratios for analysis are price to free cash flow
> (seekingalpha.com/symbo...) and Free Cash Flow Return on
> Invested Capital (seekingalpha.com/symbo...).
>
> When investing I look for PFCF below 15 times and FROIC above 20%+.
> When you are lucky enough to find a combination of the two you find
> a perfect balance of growth + value and you get capital appreciation
> through capital preservation.
>
> For those who don't know;
>
> PFCF =Market Price/ (Cash flow per share-Capital Spending per share)
>
>
> FROIC = FCF per share/ (long term debt per share + shareholders equity
> per share)
>
> FROIC basically tells you how much return in free cash flow a company
> generate for every dollar of Total Capital they employ.
>
> I consider FROIC the primary determining factor in identifying growth
> companies as you can compare every company (except financials) on
> an equal basis. The question I ask every company I analyze is = how
> much return (in percent) in FCF are you going to give me for every
> dollar of total capital you invest?
>
> As you will see I have analyzed your list from a FROIC point of view
> below (all using 2010 estimates);
>
> Silver Wheaton (seekingalpha.com/symbo...)
>
> FCF PS = $0.65
> TCAP PS = $4.12
> FROIC = 15.77%
> PRICE TO FCF = 19.88
>
> Suncor Energy (seekingalpha.com/symbo...)
>
> FCF PS = $-1.95
> TCAP PS = $17.46
> FROIC = -11.16%
> PRICE TO FCF = -17.90
>
>
>
> Phillip Morris Int'l (seekingalpha.com/symbo...)
>
> FCF PS = $3.65
> TCAP PS = $15.13
> FROIC = 24.12%
> PRICE TO FCF = 13.14
>
> Potash (seekingalpha.com/symbo...)
>
> FCF PS = $2.85
> TCAP PS = $42.81
> FROIC = 6.65%
> PRICE TO FCF = 34.10
>
> Coeur d'Alene Mines (seekingalpha.com/symbo...)
>
> FCF PS = $0.40
> TCAP PS = $32.94
> FROIC = 1.2%
> PRICE TO FCF = 54.98
>
> Jaguar Mining (seekingalpha.com/symbo...)
>
> FCF PS = $-0.15
> TCAP PS = $5.10
> FROIC = -2.9%
> PRICE TO FCF = -58.47
>
> Yamana (seekingalpha.com/symbo...)
>
> FCF PS = $0.46
> TCAP PS = $9.81
> FROIC = 4.69%
> PRICE TO FCF = 24.54
>
> Pengrowth (seekingalpha.com/symbo...)
>
> FCF PS = $1.25
> TCAP PS = $13.02
> FROIC = 9.60%
> PRICE TO FCF = 7.99
>
> BHP Billiton (seekingalpha.com/symbo...)
>
> FCF PS = $1.45
> TCAP PS = $20.92
> FROIC = 6.93%
> PRICE TO FCF = 48.63
>
> FROIC gives me a real return on Main Street and if I can get a 20%+
> return on Main Street and at the same time buy a stock that is selling
> for less than 15 times its FCF then there is a very high probability
> that it should be very successful investment.
>
> By choosing 20%+ as my minimum FROIC I have built a portfolio of
> 29 holdings for my clients that has a combined portfolio FROIC of
> 32% and sells as a group for 12.35 PFCF.
>
> As for PFCF I came up with the 15 or less number as being Ideal after
> performing a 58 year backtest. To view the backtest just click the
> link below.
>
> mycroftresearch.com/up...
>
>
>
> Disclosure = No Position in any of the stocks on this list
>
> The Fine Print: As Registered Investment Advisors, we see it as our
> responsibility to advise the following: We do not know your personal
> financial situation, so the information contained in this communiqué
> represents the opinions of Peter "Mycroft" Psaras, and should not
> be construed as personalized investment advice.
>
> It should not be assumed that investing in any securities we are
> investing in will always be profitable. We take our research seriously,
> we do our best to get it right, and we “eat our own cooking,” but
> we could be wrong, hence our full disclosure as to whether we own
> or are buying the investments we write about.

The Two Sides of the Inflationary Coin

Cash reserves not in the dictionary? They are two separate words, I wouldn't imagine they would be. Then again the FED may have taken it out, much like how the definition of inflation used to be : "An unnecessary rise in the supply of money and credit" to the current day definition "rise in prices"


On Oct 26 06:24 PM bob dempsey wrote:

> cash reserves is not in the dictionary try again

GDX: A Catalyst for Junior, Emerging Miners

It;s GDXJ, SA edited it out

Invest in Precious Metal Miners During the Coming Earnings Season

Precious metals miners have had a very easy time accessing financing over the entire course of this recession. Revolving credit facilities have been no trouble to find and equity offerings have been oversubscribed many times. I know Agnico (AEM) and Silver Wheaton (SLW) along with several others have found debt facilities to access if need be, so although credit is hard to come by, there is enough smart money out there that knows where to allocate it efficiently. But on the other hand, it had been much harder for exploration and small juniors to do so, so I do agree with that point to some degree.


On Oct 01 12:25 PM Original Scruffy wrote:

> I am a gold bug / bull, however I find the author's article a bit
> optimistic. One must be very carreful when looking at miners. I especially
> find the following to be misleading:
> "Augmenting this fact, are the very low cash costs (and all in costs
> for that matter), which will undoubtedly help to set record net profits,
> cash flows and operating margins."
> It is my experience that cash is very hard to come by in today's
> "money-for-banks-only" environment.
> Small business and and miners are being starved of cash availability.
> There is a lot of share dilution and opressive financial conditions
> placed on miners trying to take advantage of the rise in precious
> metal prices.
> If you are going to invest in this sector, you best take a very good
> look at cash flow, and general business fundamentals before you select
> a stock.

Invest in Precious Metal Miners During the Coming Earnings Season

Number Holding Ticker Shares Market Value % of net assets
1 Barrick Gold Corp ABX 19,065,165 $688,252,456.50 14.11%
2 Goldcorp Inc GG 14,513,361 $553,249,321.32 11.34%
3 Newmont Mining Corp NEM 9,650,732 $406,488,831.84 8.33%
4 Kinross Gold Corp KGC 13,685,738 $279,599,627.34 5.73%
5 AngloGold Ashanti Ltd AU 7,128,743 $276,595,228.40 5.67%
6 Agnico-Eagle Mines Ltd AEM 3,818,342 $243,877,503.54 5.00%
7 Cia de Minas Buenaventura SA BVN 7,246,139 $243,107,963.45 4.98%
8 Gold Fields Ltd GFI 16,593,440 $220,360,883.20 4.52%
9 Yamana Gold Inc AUY 21,521,930 $216,295,396.50 4.44%
10 Lihir Gold Ltd LIHR 8,728,419 $214,806,391.59 4.40%
11 Randgold Resources Ltd GOLD US 3,262,986 $212,811,946.92 4.36%
12 IAMGOLD Corp IAG 15,017,187 $198,977,727.75 4.08%
13 Harmony Gold Mining Co Ltd HMY 17,417,238 $178,178,344.74 3.65%
14 Eldorado Gold Corp EGO 16,321,885 $173,011,981.00 3.55%
15 Silver Wheaton Corp SLW 13,668,712 $164,981,353.84 3.38%
16 PAN American Silver Corp PAAS 3,566,126 $76,814,354.04 1.57%
17 Royal Gold Inc RGLD 1,666,561 $72,145,425.69 1.48%
18 Silver Standard Resources Inc SSRI 2,931,661 $57,313,972.55 1.18%
19 New Gold Inc NGD 15,819,544 $57,108,553.84 1.17%
20 Coeur d'Alene Mines Corp. CDE US 3,082,719 $57,184,437.45 1.17%
21 Gammon Gold Inc GRS 5,085,641 $42,515,958.76 0.87%
22 Seabridge Gold Inc SA 1,533,614 $40,518,081.88 0.83%
23 Hecla Mining Co HL 9,668,836 $39,255,474.16 0.80%
24 Golden Star Resources Ltd GSS 9,668,263 $31,325,172.12 0.64%
25 Northgate Minerals Corp NXG 10,464,865 $27,104,000.35 0.56%
26 Aurizon Mines Ltd AZK 6,493,419 $27,402,228.18 0.56%
27 Minefinders Corp MFN 2,420,895 $22,054,353.45 0.45%
28 Great Basin Gold Ltd GBG 13,634,803 $19,361,420.26 0.40%
29 Cash 17,286,056 $17,286,069.72 0.35%
30 Nevsun Resources Ltd NSU 5,244,976 $10,227,703.20 0.21%
31 Tanzanian Royalty Exploration Corp TRE 3,670,645 $10,094,273.75 0.21%
32 Vista Gold Corp VGZ CN 1,736,589 $3,907,325.25 0.08%
This is about 67% Large Mid-Tier/Senior , 27% Emerging/Mid-Tier Producers and the rest Juniors


On Oct 02 11:05 AM T.Stamps wrote:

> Good article. Does GDX cover large, medium and small
> companies? A full spectrum.

Invest in Precious Metal Miners During the Coming Earnings Season

I agree EGO is a great company, it just comes down to opportunity cost at this point. I have yet to do enough research on the Sino aquisition or Sino is general to evaluate the aquisition. I know that this will propel them past the 1m oz production mark and perhaps much further, and I do like it as a great way to play China. The One concern I have ( due to the fact I have not read the feasibility studies on Sino's mines ) is that although China is currently the largest producer ( not to be confused with having the largest reserve base ) is the fact that most mines have tended to have much shorter lives as deposits are smaller than average. That being said, I can't give any sort of qualified opinion until I look much further into this.


On Oct 01 08:32 PM Joe Bruin wrote:

> Disclosure: I own EGO.
>
> El Dorado Gold is a great company. Do your research on this company.
> You won't be disappointed. The Chinese mines will increase production
> costs but those costs are in line with industry standards. It gives
> them a nice foot print into China which is loaded with gold. China
> is the #1 gold producer and it is very fragmented. I think EGO could
> be a dominant player in China as they have experience in operating
> a mine in China.
>
> Listen to the Denver Gold Summit presentation that EGO gave. You
> will learn some valuable items. Listen very carefully as the CEO
> talks about the sister volcano next to their Turkey mine. I think
> this mine has the potential to be another huge, low cost producer.
> It's amazing that no one talks about it.

Invest in Precious Metal Miners During the Coming Earnings Season

I like Barrick much much better now that they decided to remove their abundance of gold hedges. I don't think the end of month quarterly results will be anything special precisely due to the fact that they had these hedges on basically the entire quarter. But you also have to take into account growth for Barrick which will be harder and harder to come by as even such world class mines such as Pascua-Luma will likely not add to production growth but rather act to replace production that is going or will soon be going offline.


On Oct 01 10:11 AM HBWOW wrote:

> No mention of ABX ?
> Your thoughts on this large miner, please.

Invest in Precious Metal Miners During the Coming Earnings Season

El-Dorado is certainly a good company, especially after acquiring Sino. Their growth will come somewhat at a cost i.e high cap-ex for a few years = lower free cash flow, but definitely moving up the food chain. It's also a great way to play China. I didn't intentionally skip EGO, but I could've made comments on more than a dozen others and I don't think anyone would want to read something that long.



On Oct 01 10:03 AM Randel wrote:

> Have you looked at Eldorado Gold? EGO Small , low cost producer.
> Of all the gold miners ,it is number one in profits and number two
> in five year projected growth rate. I bought it yesterday. I'd appreciate
> your input.

Stock Market Overbought: What This Means for Silver and Gold

Where do you get deflation from? during the boom the fed used "core cpi" so that the substantial rise in food and energy would be excluded thus clouding inflation expectations for the time being. But now that we are in a crisis the FED is including food and energy which shows a drop in price year over year, how convenient... Have you bothered to look at the rise in insurance premiums, healthcare, education... what have you seen going down exactly? Falling housing prices is not deflation by the way because they were just overprices. No one said we were in a inflationary spiral when prices of housing, oil, equities were going through the roof. Gold will go to 8,000 sooner than 800

Finding the Right Junior Miners for Maximum Upside Potential

Mag Silver - MVG (not sure what the US ticker is) - Paulson has been accumulating this, so that is worth noting. I think buyout target. I like Jaguar Mining (JAG) , Aurizon Mines (AZK) , and First Majestic Silver (not sure if it has US listing). As mentioned above Rubicon is a good play. There is also MineFinders, Northgate, Centerra , Centamin.
Hope that helped -

Finding the Right Junior Miners for Maximum Upside Potential

Very True, massive consolidation is not to far off. Even for more risk-averse investors should look at Silver Standard Resources. Although this doesn't provide quite the leverage of the aformentioned equities, the upside is enormous. The Enterprise Value is a mere 1.25 Billion for a company sporting 2 Billion ounces in resources. Although only 200m of these are proven reserves, they have been adding to this at an accelerating rate. In other words, I think SSRI , SSO.TO has both massive production growth and reserve growth which will serve as huge catalysts, pushing this stock much higher.