West Coast Commentator

Exploring Gold Miner Stocks: Mid-Year 2009 Analysis

Some more thoughts on the miners you singled out:

Lihir - forget about the ocean - that thing is on a recent volcano. Steam galore in the pit - just look to the West of the main pit on Google Maps for one plume. Still a world-class deposit and probably snapped up soon.

South Africa - Much much worse than the power crisis (alleviated greatly by the economic collapse) is the new dictator Zuma. Zimbabwe (note the "Z"-milarity) is an example what will happen in South Africa in the next years. Any Rand the miners invest into their deep mines is wasted money. If I was forced to value their stocks, I would multiply their next 5 year's of profits by 50%, from 5-10 years by 25%, and after that by NADA (that's when they will be nationalized at the latest), in order to calculate the PEs. They are actually grossly overvalued! It's like betting against the bank.

Don't worry about Turkey - hey are bending backwards to join Egypt's corn bowl, eh Brussel's subsidies. As a German I refuse that idea. But for investing into EGO it's great news.

Exploring Gold Miner Stocks: Mid-Year 2009 Analysis

Yamana's sale of the San Francisco mine is not surprising, and a testimony to what happens when an investment banker (Marrone) thinks he knows better - for years this property was touted to be a 250,000 oz/year ultra-low cost jewel, only to disappoint once in production. At less than 100,000 oz/year and with production costs above $500/oz - good riddance. As a Yamana shareholder I hope they will do a better job overseeing less mines. But with Marrone you never know - he always overpays at the peak for some crap (Northern Orion). One very good reason their PE lags behind (makes me kringe - why didn't I invest in Kinross instead?).