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The threat of resource nationalism shifts to Barrick Gold (ABX -1.2%) and Goldcorp (GG -1.6%),...

The threat of resource nationalism shifts to Barrick Gold (ABX -1.2%) and Goldcorp (GG -1.6%), as the Dominican Republic’s congress says it wants a more favorable contract on the Pueblo Viejo mine, which reached commercial production two weeks ago. If the tax rate was raised to 35% and the net smelter royalty to 5%, NAV assumptions for each company could drop $0.40-$0.50/share.
Comments (5)
  • Old Trader
    , contributor
    Comments (5726) | Send Message
     
    This certainly explains to the action in GG yesterday and today.
    31 Jan 2013, 03:05 PM Reply Like
  • jbgoodell
    , contributor
    Comment (1) | Send Message
     
    Considering the dividend and the price of ABX that is close to the $30 support level (that seems strong), taking initial positions, also, selling puts ($20-$25 strike) may not be a bad strategy.
    31 Jan 2013, 04:22 PM Reply Like
  • Venerability
    , contributor
    Comments (3048) | Send Message
     
    Knowing the bias here, I'd love to know where they got those "NAV assumptions." Guidance on both companies has been going down steadily for months now. So I would bet the Core Analysts in Canada never included rosy assumptions in their stats in the first place. And most GG assumptions do not include El Morro at all, even though re-permitting could be coming very soon.

     

    Frankly, I'd like to see the producers in this sector just band together and start insisting on better valuations, not worse ones.

     

    There is clearly a push by the bullion banks - themselves the ones under pressure - to get producers to start hedging furiously again as in the late 90s heyday. This is in turn an effect of all the new ETFs around the world and the push towards Gold repatriation - of Gold which may have been lent out and derivatized to such an extent, it has literally disappeared.

     

    The producers can't allow themselves - nor their shareholders - to be the bottom of the food chain any longer.
    31 Jan 2013, 04:42 PM Reply Like
  • The Recusant
    , contributor
    Comments (2489) | Send Message
     
    Nothing new here that most have not suspected would be happening as things got worse on the global economic scene. The creeping disease of resource nationalism is just getting started and we can expect more of the same. First the poorer and less politically stable countries will utilize the technique and then it will progress until even larger and first-world countries are forced into such actions to bolster falling revenue. As Venerability hints above, this also supports the validity of gold as a strong asset. Which will eventually improve the valuations of PM producers, royalty companies, and the price of bullion. Unfortunately, many hold stock in companies who have only claims in countries that are less advanced and prone to nationalizing or taxing the PMs. IMO the Canada and the US (perhaps Turkey and China, also) will be the last hold outs on nationalizing or taxing PMs if it gets that far.
    31 Jan 2013, 05:11 PM Reply Like
  • Venerability
    , contributor
    Comments (3048) | Send Message
     
    Recusant,

     

    We all know know what's wrong, but we refuse - collectively, as a sector - managers, shareholders, and gurus alike - to do what is badly needed.

     

    And that is to play down appealing to the constituencies - the audiences - which are already there, i.e. Libertarians (in the guise of Austrians) and Classical Conservatives, and begin attempting to rope in the new audiences we need - i.e. Centrists and Progressives.

     

    We do that by embracing the Script I have been offering for over a decade now: Gold and Silver as weapons in the fight for a fairer, more equitable, and faster-growing world.

     

    This IS the Script most Gold Bulls - not Goldbugs, Gold Bulls - outside of the US and UK adhere to, whether they understand it fully or not.

     

    But it is still foreign to the US and UK markets and those who inhabit them.

     

    Now that the Other Side is fighting us so hard, we need to embrace the Gold is Growth, Gold is Progress, Gold is Fairness Script fully and from now on.

     

    (I know I have to start a blog series on this Script. Maybe even SA will have to print it!)
    1 Feb 2013, 12:39 PM Reply Like
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