Tuesday, October 17, 2017

Gold Resources - Nice 3Q 2017 Production Figures

Yesterday Gold Resources (GORO) released 3Q 2017 production figures. These figures once again confirm the fact that GORO is a base metals producer and not, as many think, a precious metals producer:


The chart shows that in 3Q 2017 base metals' (copper, lead and zinc) contribution to the total production was 56%.

What is more, the high contribution of base metals should have a very positive impact on the company's results. To remind my readers, this year base metals go up much stronger than gold and silver so...GORO investors should be satisfied.

The chart below depicts the value of metals produced, assuming the average quarterly prices of gold, silver, lead, copper and zinc:




Note that in 3Q 2017 the value of production was the highest this year.

Thursday, October 12, 2017

Impressive Data On The Chinese Demand

Today the Shanghai Gold Exchange (the SGE) released the September data on the gold and silver demand. In my opinion, the Chinese demand for gold and silver is very strong. Here are the appropriate charts:

Gold:


...and silver:

Gold figures are especially impressive - since the beginning of 2017 the Chinese have withdrawn 1.5 thousand tons of gold from the SGE. It means that this year the demand for gold has been substantially higher than last year.

As for silver - despite lower demand than in August, the September data is still impressive (the second largest withdrawal this year up to date)...

Now, although the data disclosed by the SGE has no short-term impact on the prices of precious metals, in the medium and long-term the precious metals are strongly supported by the Chinese investors.

Wednesday, October 11, 2017

Corvus Gold - Update

Last year I published an article on Corvus Gold (it was dispatched in the form of a newsletter). I discussed the North Bullfrog Project and tried to assess the value of the company. Most recently Corvus shares have been rapidly going up so it is time to update my valuation figures. Assuming that nothing has changed, here is the updated calculation:

  • value of North Bullfrog: C$128.5M (as in the article)
  • Cash at the end of May 2017: C$1.3M
  • Debt: null
  • Shares outstanding: 99.78 milion (end of May 2017)

Equity value = $129.8M

Share value: C$1.30

Today Corvus shares were trading at the price of C$1.30 a share so...they hit my target price.

Monday, October 9, 2017

Alio Gold - A Quick Look At Its Market Performance

It looks like investors seem to share my positive opinion on Alio Gold (ALO). Since the announcement of 3Q 2017 production figures the company's shares are going up:


source: Stockcharts.com

What is more important, since the beginning of the current bull market in precious metals Alio has over performed the broad precious metals market represented by GDXJ (look at the upper panel of the chart and the green, up-sloping trend line).

According to the old rule:

If a company releases bad news and its stocks are going up, it may mean that all bad news are priced in.

Friday, October 6, 2017

Alio Gold: Expect Very Poor 3Q 2017 Results

Yesterday Alio Gold (ALO), one of my favorite mining companies, released 3Q 2017 production figures:


source: Alio Gold

Having this data, it is possible to make an estimate of the gross margin delivered by the company in 3Q 2017 (gross margin is defined as revenue less direct costs). My estimate cannot be accurate because I am not able to look into the company's internal figures but...let me try using the average figures.

So, over the last four quarters Alio was processing its ore at an average cost of $9.6 per ton of ore processed. Translating this figure into total material mined (ore + waste) and  assuming that the amount of ore processed is equal to the amount of ore mined*, it means that the company was mining its material at the average cost of $3.4 per ton of material (ore + waste) mined.

According to the table above, in 3Q 2017 Alio had to remove 5.2 million tons of waste. To do it the company incurred the cost of $17.8M ($3.4 x 5.2 million tons). Now, to mine the ore Alio had to spend $5.8M ($3.4 x 1.7 million tons) so the total cost of mining was $23.6M ($17.8M + $5.8M).

According to the company, the 3Q 2017 revenue was $25.2M so a gross margin should have been around $1.6M ($25.2M less $23.6M).
For comparison reasons, the chart below shows gross margins, starting from 1Q 2016:

source: Simple Digressions

Am I bothered about it? Not at all - the company was expecting a very hard quarter so I am not surprised...

* - I cannot be sure about it - generally, some part of ore or waste mined comes from previous quarters

Thursday, October 5, 2017

Warren Buffett? No, Thanks.

Is it the end of Warren Buffett's era? Look at the chart below:



source: Stockcharts.com

The chart shows the price action of Berkshire Hathaway shares against the S&P500 index since the beginning of the current bull market in stocks (March 2009). Note that the red arrow goes down, which means that investment in Berkshire has returned less than investment in the broad stock market...

It looks like investing in Warren Buffett's flagship company makes no sense. Mr. Buffett is beaten up by the broad stock market.

Sorry for being nasty...

Tuesday, October 3, 2017

Two Positive Signals For Gold Bulls

It looks like the precious metals market wants to tell us something important. Look at these two charts:


source: stooq.pl

The upper panel shows the relationship between GDX and gold. The lower panel shows gold prices.

Now, since September 27 GDX has been going up (the blue arrow) while gold has been going down (the red arrow). Interestingly, the shares of precious metals mining companies are stronger despite lower prices of gold.

Another ratio, silver to gold, is also sending positive signals with silver being stronger than gold.  While the signal sent by the second ratio (silver:gold) are relatively frequent, the signal sent by the first ratio (GDX:gold) is a rare event.

Note that both ratios are sending positive signals despite a stronger US dollar...