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Thomas Kelly

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  • Measuring 15 Junior Gold Miners by Cost of Resources [View article]
    Yes, the ANV mkt cap is supposed to be a billion. Typo. Still researching all of these but reader comments are correct that NAK, NG, and EGI also have huge copper reserves that make them much cheaper than this chart makes them seem. I'm still looking to see which others are in that situation. Haven't done one for the silver miners yet but I could try to put that out next week probably.
    Jan 28 02:32 PM | 5 Likes Like |Link to Comment
  • Gold Mining Stocks Undervalued - For Good Reason [View article]
    Interesting read although I don't entirely agree with the idea that you should avoid the sector entirely. There are a number of miners that are already producing, that are not significantly exposed to rising labor costs or resource nationalism, and that are trading at historically low levels. The key is to pick the right stock. The sector as a whole might have been thrown out, but the ones who bounce back will be in stronger position than ever as mine supply is sure to grow slowly with capex costs surging and financing hard to come by.
    Jun 20 11:53 PM | 3 Likes Like |Link to Comment
  • Eric Sprott's Gold Analysis Deconstructed: What The Gold Bulls Still Don't Get [View article]
    we ought to also talk about production costs which provide a natural economic floor. we are talking about $1000 avg cost per oz, probably more like $1200 to bring new projects online. that is sort of a hard stop for gold. so anything within about 15% of there is probably going to look good long term.
    May 3 02:17 AM | 2 Likes Like |Link to Comment
  • Measuring The Acquisition Prospects Of Junior Gold Miners [View article]
    Thanks...it was a fair bit of research to compile.
    Jul 1 11:03 PM | 1 Like Like |Link to Comment
  • Despite the resurgence of Keynesian economics and the popularity of Nobel Prize winner Paul Krugman, MarketWatch's Howard Gold sees some chinks in his armor. Gold makes the following counter-argument: Much of today’s unemployment is actually structural, the European crisis shows that countries’ long-term debt really does matter and Keynesian economics track record is more hyperbole than substantive reality.  [View news story]
    The notion that Keynes espoused the idea that debt does matter is utterly false. In fact Keynes was well aware that debt does matter and he advocated running a surplus during a time of economic growth for this reason. The idea that our policies right now are following the Keynesian model is intellectual dishonesty.
    Jun 17 08:24 AM | 1 Like Like |Link to Comment
  • Why a Takeout of Novagold Could Exceed $23/Share [View article]
    Yes, depending on how much the silver and Ambler manage to raise, any additional financing required would reduce the value of the buyout. It's tough to assign to how much lower because we don't yet know how they will finance it. Obviously an equity offering would be most dilutive for shareholders. But for an acquiring company with access to the capital markets, raising debt to cover development costs shouldn't be a significant problem and therefore the value of NG's assets would fetch a price consistent with debt financing in a takeover.

    As for splitting up the assets, I don't think it makes sense unless absolutely needed to raise capital for development costs. You would lose the diversification from a 60/40 gold/copper split and you also give away a significant established reserve in return for a lot of excess capital that must then be invested in identifying new projects with much longer times to production. To me there seems to be a lot more upside in keeping them together and selling in pieces.

    As for the acquiring company, thats tough to speculate on. Barrick could still do it but given the history it would not launch a hostile bid again. I don't think Teck has any interest. I think some of the big copper miners would have an interest. Someone like FCX as it would virtually double the size of their gold reserves, diversify the business better, and still add a big reserve to their core copper business. And the diversified miners have been showing increased interest in stepping outside their traditional products of iron and copper toward more esoteric things like potash, etc. They would certainly have the lowest cost of capital in acquiring so if they want to diversify the business and add precious metals exposure, they could. There aren't many projects the size of Donlin out there that would be meaningful for a big miner so it remains a possibility.
    Jan 23 04:17 PM | 1 Like Like |Link to Comment
  • Why a Takeout of Novagold Could Exceed $23/Share [View article]
    Yes we can both agree it is speculative. And I use the term speculative in a volatility sense and in a Hyman Minsky earnings are not covering the cost of doing business sense. And to be perfectly honest, I think we would all agree that the key variable for NG is going to be where the gold price is trading in a year. That's the real speculation because at $1000 gold, NG is probably priced right and at the very least wouldn't have much in the way of upside. At $2000 gold, obviously it is hugely undervalued. But my opinion on gold is constantly evolving and I think it is an instructive thought exercise to give a valuation to anchor NG relative to the gold price. Would like to put pen to paper on the bull and bear case for gold soon if I can find the time.
    Jan 22 01:11 AM | 1 Like Like |Link to Comment
  • Why a Takeout of Novagold Could Exceed $23/Share [View article]
    As far as the timing goes, I took my source from an interview with Novagold's CEO where he said production could be as early as 2015. You can quibble with that aspect of the argument but I don't see it changing the premise of the article that NG is substantially undervalued. Even making the assumption that neither mine starts production until 2018 and adding in 3 years and discounting out to 32 years, you still get a valuation around $19/share. And given that I haven't accounted for the additional boost in reserves that is very likely with the next feasibility, the question of whether production starts in 2015 or 2018 is sort of minor.

    Cash flow is not simply not a useful way of measuring development stage resource companies in their early stages as it is plain to see with all mining, oil and gas, etc that the bulk of the capex costs are front-loaded and then they start to print money like crazy on the back end.

    And NG's checkered past, funding issues, share dilution are all out there and plain to see for anyone doing the research. With regard to Barrick's previous bid, I intentionally used the figure of $1.6 billion as the takeover price rather than the $16/share that most people throw around in order to provide an honest look at Barrick's offer and not make it seem bigger than it was. Companies change with time. My goal isn't to evaluate NG in 2006, but rather, in 2011. And on the whole, I think, the analysis is pretty credible.
    Jan 21 08:58 PM | 1 Like Like |Link to Comment
  • Yamana's Post-Acquisition Bounce Shows The Way To Value In Gold Miners [View article]
    $1600/oz vs. $300 cash costs on 250koz per year. Granted they won't get to 250koz until sometime in 2015 at the earliest.
    Jun 21 05:47 PM | Likes Like |Link to Comment
  • Yamana's Post-Acquisition Bounce Shows The Way To Value In Gold Miners [View article]
    Of course there is fear of seizure...hence the low valuation. But Yamana operates in Argentina already and felt comfortable with the purchase. Perhaps they feel they have more leverage as they are larger and their investment dollars more important. Argentina's not my cup of tea either but at the right price the political risk is worth taking.
    Jun 21 05:46 PM | Likes Like |Link to Comment
  • Facebook's new high-growth market: kids? Facebook (FB) is apparently developing technology that would let the under-13 set use the site with parental supervision, a move that could explode Facebook's user base while outraging some privacy advocates. It's unclear when or if FB will roll out the service.  [View news story]
    I can see a Joe Camel lawsuit coming soon...
    Jun 4 07:46 PM | Likes Like |Link to Comment
  • 4 Questions For David Einhorn [View article]
    Pointless article.
    May 16 12:31 AM | Likes Like |Link to Comment
  • Gold Bull Market In Question With First Break Of 200-Day MA Since January 2009 [View article]
    Its not really enough to say M2 has not decreased. It has trended up over time for 20 years. What is much more important is that in the last 3 months the rate of increase in M2 has slowed dramatically. Second derivative is what really matters.

    http://bit.ly/rsTWKo
    Dec 16 02:20 PM | Likes Like |Link to Comment
  • Aurico/Northgate Tie-Up To Create Cash Flow King In 2012 [View article]
    indeed.
    Sep 6 08:29 PM | Likes Like |Link to Comment
  • Measuring 15 Junior Gold Miners by Cost of Resources [View article]
    Indeed it is. That was a mistake.
    Jan 29 11:47 PM | Likes Like |Link to Comment
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