John Miller

Growth at reasonable price, contrarian, macro, gold & precious metals
John Miller
Growth at reasonable price, contrarian, macro, gold & precious metals
Contributor since: 2011
Good catch/point that AU's "low" price makes its debt to cap look bad. But it is a stretch to say the balance sheets are similar. Go to Morningstar and look at the maturities and yield's on Newmont's debt. Also, it is generous to say AU is rapidly reducing costs when they have been so high. And keep in mind those AISC cost figures don't include the $50+ per ounce financing costs. AU might be a typical value trap. If prices go down they can't service their close maturity debts. If prices go up, they were better off holding CC&V. On the plus side their DRC mine is humming. But Randgold deserves more of the credit there in my opinion. Let's see if these earnings materialize finally for AU.
Thanks for the comment.
The way you are looking at it is an over-simplification. As of Dec. 2014 Waihi only has 360K oz of probable reserves (0 proven), though there are resources to explore. The main Martha pit is closing next year. Underground at Trio is done. Interestingly, the new operation (Correnso) involves blasting under residential housing (don't worry, they will post a schedule) and some of the ore body must be left in place because it is too close to the surface. The life of the mine and total gold remaining is "poor". Though grades are good, there are higher costs relative to pit mining.
Redo your calculation based on total remaining ounces and how much will be cleared on each ounce after costs to better judge the relative values.
As way of a joke, what you propose is akin to comparing a 2000 Honda Civic to a 2010 Honda Accord on a dollar per wheel basis. The Civic seems great at $250 a wheel compared to the $2500 per wheel the Accord costs you, right?
My understanding capex at Merian is projected to be closer to 1 billion (100% basis). Second, could there be a second need for cash (hint, hint) that led to the equity dilution? Third, the author is looking at fundamentals for the longer term and not making a buy now technical call. Check out Merian article:
Today's application data confirms thesis.
Your comment above makes me think you and Schiff may have more common ground than I initially expected. Lower, longer - no substantial hikes - no substantial reduction in balance sheet.
Thanks for all the comments. I think there is a lot we agree on actually. I don't like to get into semantics arguments or take ideas to illogical extremes.
The real rate matters to the Chinese, and others, who have too make a decision between gold or U.S. debt.
Thank you for the article. Only disagreement is I believe the Euro bonds' or Japanese bonds' bubble will burst before the Treasury bubble (and not simultaneous) and we will see those funds flow into the US treasuries driving prices higher and yeilds lower.
See comment below.
Check out this about gold supply:
Not sure if you read the debate from the link I provided at the beginning of the article? Or if you have read his recent book. The following is from the debate:
"But do you think that gold is currently a good investment given what you're saying about the potential for turmoil?"
I spent a lot more energy trying to get the macro economic argument at the beginning right from his view than worrying about the integrity of this title. In any case, before you pass final ethical judgement upon me, please consider: I provided the links to source material for any quotes, the volume/proportion of direct quotes is very high, and if the spirit of his words were captured.
The strongest correlation for gold prices since the crisis is US gov. bond prices, ie inverse to their yield. This is logical because subdued real rates of interest are positive for gold. In other words, physical assets perform well in a zero rate environ. coupled with modest inflation.
Merian is great add for Newmont. Only draw backs are the 4 million resources was estimated using $1300 gold price and higher political risks than average of the portfolio. Been working on a piece about Merian this week.
When you have any trouble getting back year gold Eagles and Maples near spot please let me know.
Thanks for the post and the heads-up on grades.
When you say the ECB's credibility is on the line what do you mean? They are credible in their talk to buy sovereign bonds with little sterilization? Or do you mean the opposite, that if they choose to monetize the PIGS debt that ruins their credibility?
Means prices are way down recently, also plays off the "blood in the streets" discussion in the article. Did you really not know or just.....?
I did carefully read your article and others you have posted recently and think you have good points but.....
You said:
"U.S. inflation worries or not, if the ECB acts in a manner similar to the BOJ, the dollar is supported further. It is precisely dollar support that has driven the price of all commodities lower lately, and it is behind the determined drive lower in gold."
I am saying that longer term this is not set in stone. Look at the DXY to Gold chart.
I will add again that receding inflation concerns in the US would be positive for gold because it would limit US rate hikes. I think you think inflation would be good for gold prices but don't want to speak for you.
I am not trolling you, just trying to discuss, please do not respond to me to read the article, I am honestly trying to understand your points.
One assumption you may have wrong (sorry if you are not saying this) is the assumption that a weaker Euro and dollar strength will be bad for gold in the mid-term. Take a look at the DXY to Gold price chart in this article:
I'll add that if inflation fears wane the Fed will use this as an excuse not to raise rates. I think you are assuming if inflation fears continue that it would help gold. I think it is the opposite.
I think the basic idea is to add liquidity. Keep in mind they would basically be crediting bank accounts Euros. Also to drive up asset prices to create the wealth effect and generally raise prices in the whole system which could have a trickle around effect. Explanation is not an endorsement.
The perma-bulls never capitulate and my guess is the Chinese jewelry buyers were back in force at $1200 in October. We will see if Fed still really still plans 2015 rate hikes at Dec meeting. Can they allow dollar strength to go into first quarter? If they don't take accommodative stance what happens to the SPY. In any case Japan and ECB expanding balance sheets. Down side seems limited here.
The seasonality of the revenue in the first chart is very cool. Great growth but as you point out, sales does not cure all ills as earnings are stagnant. How is the debt situation, P/E and share count?
Fortunately latest cluster is a little more distant from Kayes region. New cluster is in Bamako.
I think he was making a humorous statement/point and my answer was somewhat tongue-in-cheek. But of course, if you keep the yellow rocks in your wall or under the floor you can limit your counter-party risks.
Your interest comes in the form of zero counterparty risk.
I like the new anniversary, silver Australian Kookaburra in the 1oz size. Not super large premium over spot and past year's versions have seen premium expansion which helps offset any spot price declines. Beautiful, government backed, changing design each year, and somewhat limited quantity.
Good point. Thank you.
Yeah and the joke was going to be so funny until autocorrect doomed it.
I can "interrupt" your remark as tongue in cheek. I won't have to wait long to be proven wrong. Like I said, in December we will know if the 2015 yearend fed funds target has come down or gone up.
I've got one for you: chart GLD versus SPY over the past ten years. Yeah, it is just one data point but even you must admit it is interesting. Are you trading or investing?
P.S. We are seeking alpha here. Alpha is high when you are standing alone.
Europe spills over to US. Fed pushes back rate hikes. All major central banks then have accommodative stance plus run deficits creating currency. U.S. banks use excess reserves to buy Treasuries - I.E Operation Twist 2 - Gold, last safe haven, rises quickly. But low, sell high.