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Gold figures are especially impressive - since the beginning of 2017 the Chinese have withdrawn 1.5 thousand tons of gold from the SGE.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...  



Saturday, September 30, 2017

2017 Top Five Portfolio - Update

As of September 29, 2017 the Top Five Portfolio has returned 27.7% since inception (December 12, 2016):

Now me and my subscribers are entering the last phase of this real-time experiment (using George Soros' terminology) so it is a good time to tell you this:

"I am thinking about extending this service into 2018 but, probably, this time I would change the way I am communicating with you. Simply, instead of the updates delivered by email, the subscribers would get an instant access to the material published on a daily basis. It should be a much more effective way of communication. Details should be announced soon..."

Thursday, September 28, 2017

Hochschild Mining - Looks Interesting Now

Hochschild Mining is a mid-tier silver / gold producer operating in South America (Peru and Argentina). The company has been under my radar for years but most recently my interest in this miner has dissipated a little bit. Why? Because Hochschild was one of a few mining companies that hedged their production against lower precious metals prices. What is more, this policy had a negative impact on the company's results. However, in the 1H 2017 report I have found this statement (page 23):

"In 2016, the realized loss on gold and silver swaps and zero cost collar forward sales contracts in the period recognized within revenue was US$3,116,000 (loss on gold: US$3,501,000, gain on silver: US$385,000). There were no forward contracts in the 2017 period"

The most important is the last part of it (bolded) - it looks like Hochschild does not hedge its production any longer (if somebody claims the opposite - please, let me know; maybe I overlooked something... ).

One issue has gone but 1H 2017 results were very disappointing and since middle August 2017 the company shares have been in their strong downward trend: 



source: Stockcharts.com

What happened? The first problem is called "Arcata" - now this mine is one of the highest-cost producers for Hochschild:


In 1H 2017 the direct cash cost of production went up by 25.%, compared to 2016 and head grades went significantly down:


Well, the chart shows Arcata's mining sequences (red blocks) and now it looks like the mine has entered another sequence - this time the company is mining in the low-grade zone. Hence, poor results. 
Unfortunately, Hochschild does not disclose where it is going to mine silver / gold in the future. The company's comment is quite enigmatic:

"At Arcata, first half, production was 2.9 million silver equivalent ounces (H1 2016: 3.7 million ounces) with tonnage and silver grades adjusted following a revision of the mine plan to accommodate a reduced number of stopes and narrower veins. The focus at Arcata is to improve its cost position by increasing the quality of resources through the brownfield exploration programme as well as other efficiency and productivity measures in order to ensure the long term sustainability of the mine. The forecasts for Arcata’s output for the year have been revised to 5.5 million silver equivalent ounces in 2017"

And another piece:

"In H1 2017, as expected, Arcata’s all-in sustaining cost rose substantially versus H1 2016 to $17.6 per silver equivalent ounce (H1 2016: $13.0 per ounce) reflecting the reduced tonnage and grades resulting from the revised mine plan as well as the previously-announced increased investment in the mine’s brownfield exploration program"

Well, it looks like there is a problem: narrow veins (and probably higher dilution) and higher capital spending (brownfield exploration). In other words, despite the fact that Arcata has been a long-life operation (mining started in 1964), now it is facing troubles...


Another problem: the San Jose mine (shared with Mc Ewen Mining) located in Argentina. This mine, similarly to Arcata, substantially increased the direct cost of production (from $7.6 per ounce of silver equivalent in 1H 2016 to $9.1 per ounce in 1H 2017).
To be honest, it is not easy to explain this increase - head grades and the tonnage processed look alright (grades were even higher than in 1H 2016) so...
The company explains in this way:

"At San Jose, all-in sustaining costs increased to $14.4 per silver equivalent ounce (H1 2016: $11.7 per ounce) mainly due to the elimination of the Patagonian port rebate in the fourth quarter of 2016. In addition, lower than expected currency devaluation in Argentina only partially offset ongoing unit cost inflation. Overall 2017 all-in sustaining costs are now expected to be between $13.5 to $14.0 per silver equivalent ounce"

I am not able to comment on the Patagonian port rebate but as for inflation...yes, it can be a problem. Now the inflation rate in Argentina stands at 23.1% but in 1H 2017 the Peso was just 9.6% weaker against the US dollar, compared to 1H 2016. So inflation could be an explanation...

Of course there are positives - Pallancata, another Peruvian mine, was converted into an excellent operation (direct cost of production of $5.9 per ounce of silver eq.!) and the last mine, Inmaculada, keeps going smoothly.

However, 1H 2017 results were a negative surprise. For example:
  • cash flow operations (excluding working capital issues and taxes) went down from $152M in 1H 2016 to $111M in 1H 2017
  • free cash flow dropped from $89M to $29M

Hence, investors panicked and threw in the towel. As a result, now Hochschild shares are trading at quite depressed levels (EV / EBITDA of 6.1).

In my opinion, it is time to get interested in Hochschild once again...

Tuesday, September 26, 2017

IAU Still Adding Fresh Gold

I have not seen this before - iShares Gold Trust (IAU) is accumulating gold as if something big was to happen. For example, today this trust added the second highest amount of gold this year (74 thousand ounces). Note that today we saw big drops in gold / silver prices (0.75% and 1.54%, respectively) but...IAU investors do not care and are adding gold:


What is more, GLD has reached its strong support at around 123.0 (the yellow area on the chart below):


source: Stockcharts.com






Monday, September 18, 2017

An Interesting Chart For Speculators In Gold

The chart below should be of some interest to speculators in gold:


source: Stockcharts.com

Stockcharts have an interesting indicator - it discloses the trading volume attributed to certain price levels.

Let me take GLD as an example. The chart above shows that since July 2017 (when the current move in gold prices started) the highest trading volume was attributed to the price range of 121.7 - 122.7.

In other words, this level should be considered as strong support for GLD prices. It means also that any correction in GLD should end above this level.

Thursday, September 14, 2017

The Chinese Demand For Silver Is Very Strong

A few minutes ago the Shanghai Gold Exchange released its August report. The chart below is especially impressive:


source: Shanghai Gold Exchange

As the chart shows, the Chinese demand for silver was the highest this year. In August the Chinese investors withdrew as many as 270.3 tons of silver.

What is more, the demand was very strong despite rising prices of silver (in August the price of silver went up from 112.8 Yuan in the beginning of the month to 114.9 Yuan at the end).

Yes, I am really impressed...

Tuesday, September 12, 2017

Note For The Subscribers To The 2017 Top Five Portfolio

Today (8.30 a.m. New York Time) I sent the fourth update to the 2017 Top Five Portfolio. If anybody did not get it, please, let me know (via e-mail or in the "Comments" section).

Sunday, September 10, 2017

US Equities - Are They Still In A Bull Market?

European investors investing in US equities are not happy. Since March 2017 their holdings are losing value measured in Euro:


source: Stockcharts.com

While the S&P 500 (the lower panel of the chart) is still in its strong bull market, its equivalent measured in Euros is in its correction phase (the upper panel of the chart).

Note that a similar situation was an early indication of a bear market in the USA in 2007:


source: Stockcharts.com

Well, I am not saying that we are at the beginning of a bear market in the USA (it will never happen, by the way) now but caution is advised...

Friday, September 8, 2017

What Is Wrong With Silver?

This bull market in silver is totally different from normal. It looks like investors are using higher prices of silver to liquidate their long positions in silver held in SLV:


Note that in August and September (up to date), SLV reported an outflow of 14.7 million ounces of silver, in total. It is really a high amount.

As a result, the current silver holdings at SLV are very close to the amount of silver held at the beginning of the current stage of a bull market in precious metals (two circles marked in red):

So the question is: what is wrong with silver?

Tuesday, August 29, 2017

Is Gold Breaking Above $1,300 Per Ounce?

Higher prices of gold and silver should attract investors but it is not always the case. Look at this chart:


Interestingly, this month, despite a 3.6% increase in silver prices, as many as 8.6 million ounces of silver were withdrawn from SLV vaults (and the 2017 cumulative flow is still negative - look at the lower panel of the chart).

However, JPM Morgan warehouse still reports silver inflows and since the beginning of 2017 as many as 33.7 million ounces of silver were added to the bank's vaults. It is a huge amount of silver. For example, Fresnillo plc, the largest world's primary silver producer delivers around 55 million ounces of silver in annual production.

On the other hand, in August two gold trusts, GLD and IAU, added big amounts of gold to their vaults (look at the row indicated by the red arrow on the chart below):

So, generally, August should be a good month for gold bugs. Particularly, this day (August 29) seems to be very interesting for precious metals investors - it looks like gold is breaking above its very strong resistance.

However, in my opinion, to get let reliable confirmation of this move we should wait for a few days...

Tuesday, August 22, 2017

IAU Or GLD? That Is A Question

I closely track gold flows reported by two big gold holders: IAU and GLD.

However, there is a big difference between these two investment vehicles. Look at the charts below:






Green bars depict monthly flows of gold and red lines depict cumulative gold flows.

It is easy to spot that this year investors participating in IAU were accumulating gold (the up sloping red line) while those using GLD were doing the opposite (and as of August 21 GLD reported a year-to-date outflow of gold).

Now the question is: which gold vehicle gives more reliable signals - IAU of GLD?

Monday, August 21, 2017

Who Trades Atico Mining?

I very often wonder who invests in stocks. Let me take an example of Atico Mining, a small copper producer, operating the El Roble mine in Peru.

On August 15 the company released the following info:

VANCOUVER, BRITISH COLUMBIA--(Marketwired - Aug. 15, 2017) - Atico Mining Corporation (the "Company" or "Atico") (TSX VENTURE:ATY) reports a temporary work stoppage at the El Roble mine pending final inspection of the clean water discharge system. The Company will work with provincial authorities to confirm the integrity and safety of the system as quickly as possible, beginning tomorrow August 16, 2017.
Here is the reaction of the market:
 
source: stockcharts.com
Notice that in middle June 2017 Atico shares started an impressive move up - between June 16 and August 14 these shares gained 53.4%.
However, on August 15, since the beginning of the trading day, somebody was desperately selling Atico shares, which resulted in a final drop of 6.7% (blue arrow). It looks like somebody knew about the company's problems.
Then, the next day, when the info was known to everybody, the shares tumbled 13.3% at their selling climax (red arrow).
Summarizing - in just four after this "disastrous" news a decent company lost 14.6% in value.  
Today the company released this info:
VANCOUVER, BRITISH COLUMBIA--(Marketwired - Aug. 21, 2017) - Atico Mining Corporation (the "Company" or "Atico") (TSX VENTURE:ATY)(OTC PINK:ATCMF) is pleased to report that further to the news release announced August 15, 2017, the final inspection by provincial authorities concluded successfully and the operations at El Roble mine have resumed as of August 18, 2017.
So now everything is back to normal. However, a question remains open: who is trading stocks? Who thinks that a minor technical issue, a usual thing in the mining industry, can derail a decent company in just two days?

UPDATE:
Today Atico shares are up 10.5%. My question is still intact - who trades these shares?
 

Saturday, August 19, 2017

Message For The Subscribers To The 2017 Top Five Portfolio

The third update has been dispatched. If anyone did not receive the update - please, let me know (via email or in the "Comment" section)

Friday, August 18, 2017

Gold Is Doing Well But...

Gold is doing well but the latest surge is not supported by another precious metal, silver. Look at this chart:
source: stooq.pl

The today's top (the upper red arrow) is not accompanied by a similar top in the silver / gold ratio (the lower red arrow). It looks like a classic negative divergence indicating a short-term top in gold prices...

Friday, August 11, 2017

Gold Bulls - Watch Out

After an impressive rally, gold prices are very close to generate a sell signal. Look at the chart below:


The lower panel of the chart shows the relationship between gold and US 10-year treasury notes (10 year) prices. It looks like whenever the ratio Gold / 10 year is getting very close to the upper, resistance line, gold is bouncing down.

Tuesday, August 8, 2017

The Drop In Jaguar Mining Share Prices Explained

Now we know who is responsible for the last huge drop in Jaguar share prices - it is Resolute Funds Limited. Here is an excerpt from an appropriate info:


"During the month of July, Resolute in aggregate disposed of 35,000,000 common shares of Jaguar Mining on behalf of the Fund. The dispositions included 4,637,000 shares with a four-month holding period sold to an accredited investor in accordance with applicable securities regulations and which had been acquired by the Fund in a private placement that closed on June 15, 2017. As a result of these dispositions, together with other shares acquired or disposed of previously, the Fund held 2,000,000 common shares of Jaguar Mining at the end of July, 2017, representing approximately 0.62% of all outstanding shares of that class"

I think it is the good news. A shareholder, that I cannot name a smart investor (who disposes the shares in such a nasty way?), is out of the company (nearly). Very fine. Farewell Resolute. And, please, do not touch this company again.

What is more, while selecting mining picks I will be closely checking whether this fund is among company's shareholders. If it is, caution is advised...

Poor Wesdome Gold...(another mining company where Resolute is a big shareholder).

Are Copper Prices Ahead Of A Correction?

It looks like a short-term divergence between copper prices and the copper dollar index is in the making. Look at these two charts:


source: Simple Digressions

To remind my readers, the copper dollar index is built in the same way as the Goldollar index:

"It is calculated by multiplying the price of copper by the U.S. dollar Index and its purpose is to cancel the effects of currency fluctuations on the price of copper. By comparing it with the spot copper dolar index an analyst can determine if there is inherent strength/weakness in the price of copper"

Now, as a rule, copper prices and the copper dollar index go in tandem. However, if there is any divergence between these two instruments, caution is advised.

The two blue arrows on the chart above show this pattern. A few days ago copper prices broke above their resistance at $2.78 per pound but the copper dollar index is still below a similar resistance level. If I am correct, copper may start its correction soon.
  

Monday, August 7, 2017

Richmont Mines - There Is Only One Problem

A few days ago Richmont Mines (RIC) released its 2Q 2017 report. As I expected, the results were excellent. The flagship property, the Island Gold mine, delivered outstanding results. Simply put, there is nothing to comment.

However, the company has one problem, which is called the Beaufor mine. Particularly, costs of production at which the gold is produced at this mine. Look at this chart:



and this one:

source: Simple Digressions

As the charts show, in 2016 Beaufor became a cash flow negative mine. The all-in sustaining cash cost of production (AISC) of C$1,854 per ounce of gold was much above the average gold price received in 2016 (C$1,640 per ounce).

This year the company expects to cut AISC to C$1,565 per ounce of gold but:
  • in 1Q 2017 this cost was standing at C$1,580 per ounce (with gold price received of C$1,624 per ounce - slightly above 1Q 2017 AISC, which was good)
  • in 2Q 2017 the AISC was C$1,791 (once again above the gold price received of C$1,688 per ounce of gold, which was bad)
As a result, in 1H 2017 the average AISC was C$1,682 per ounce of gold while the average gold price received was C$1,659. Simply put, the Beaufor mine was once again cash flow negative (each ounce of gold sold was burning C$23).

It looks like this mine is a big problem to the company's management - the guys are surely scratching their heads on discussions what to do with this mine...anyway, the 2017 Beaufor cost guidance is endangered, in my opinion.

Further, I think that the management should focus on cutting mining costs at Beaufor. Since 2015 these costs, measured on a-per-ton-of-ore-processed basis, have been in their strong upward trend:

source: Simple Digressions

Now, in 2Q 2017 each ton of ore processed at Beaufor was grading 5.21 grams of gold. With recovery rate of 97.7% and price of gold received of C$1,688 per ounce, each ton of ore processed was worth C$276. So the Beaufor mine was very close to its break-even point (as the chart indicates, the cash cost was standing at C$263 per ton of ore).

In other words, with lower and lower grades and higher costs of mining and processing the only thing the company can do is to cut costs. If it is impossible...the only solution is to put the mine on care and maintenance and wait for much higher prices of gold....
 

Friday, August 4, 2017

USD, US Equities And Copper - Are They At Their Pivotal Points?

I am back at my desk. Today I would like to show a few charts with little or no comment.

USD



The chart shows the US dollar sentiment index build on the data delivered by the COT report (Commitments of Traders report), as of August 1, 2017. As the chart shows, there is excessive pessimism among big speculators trading in US dollar index futures.

I guess everybody noticed that today the US dollar went up strongly. Those interested in my sentiment indices - please, go to my Seeking Alpha Marketplace service here.

VIX

The US stock market is unstoppable but...big speculators betting on higher prices of US equities are overly optimistic. The chart below shows a net position held by these traders in VIX futures. A huge net short position held by big speculators means that nearly each speculator bets on higher prices of US equities (lower VIX means higher stock prices).


What is more, the amount of those taking part in the game is the highest in history. Look at the total open interest in VIX futures:


Copper

Most recently copper prices broke above their strong resistance. This breakout was followed by masses participating in this movement. As a result, money managers (another class of big speculators) betting on higher prices of copper became overly optimistic about the red metal:



Similarly to VIX, the amount of players taking part in the game "Let us buy copper" is the highest in history:

Wednesday, July 19, 2017

Gold Resource Corp Is Not A Primary Precious Metals Producer Anymore

Today Gold Resource Corp (NYSE: GORO) released its 2Q 2017 production results. The company produced the following amounts of metals:

  • Gold: 5,696 ounces
  • Silver: 397,670 ounces
  • Copper: 294 tonnes
  • Lead: 1,207 tonnes
  • Zinc: 4,176 tonnes
Now, assuming the following, average metal prices recorded in 2Q 2017:

  • Gold: $1,258 per ounce
  • Silver: $17.21 per ounce
  • Copper: $5,662 per tonne
  • Lead: $2,161 per tonne
  • Zinc: $2,596 per tonne

the metals produced in 2Q 2017 were worth:


source: Simple Digressions

Or, look at another chart:

source: Simple Digressions

As the chart shows, the value of base metals produced in 2Q 2017 was higher than the value of precious metals.

So, GORO is not a primary precious metals producer anymore, which means that from now on the company's peers are base metals producers.

Wednesday, July 12, 2017

Silver - The Demand In Action

Although for the last two days gold and silver regained some ground but, generally, precious metals investors feel a lot of pain this year. For example, on July 10 the silver was trading at this year's lowest level  so far.


However, it looks like lower prices of silver attracted a bunch of investors who started aggressive accumulation of this metal. The chart of SLV looks very promising:


source: Simple Digressions

As the chart shows, July is an exception. Generally, Western investors buy silver when its prices are going up. And vice versa. However, in July SLV added as many as 9.4 million ounces of silver at lower prices than those reported in June (a loss of 4.2% - look at the blue row  where monthly changes in silver prices are plotted).

I think it is a very positive development for silver bulls.

Interestingly, a new pattern is developing - in May the Chinese withdrew the highest amount of silver from the Shanghai Gold Exchange (which should be read as "in May there was the highest demand for silver bullion in China):


source: Simple Digressions

Note that in May SLV reported a highest inflow of silver into its vaults.

Tuesday, July 4, 2017

Centamin plc - A Dividend Company?

Precious metals mining companies are not income companies. In other words, the investors hunting for dividend-generating picks should forget about the precious metals sector.

However, there are exceptions. For example, last year Centamin plc (CELTF), a mining company operating in Egypt (the Sukari mine), paid a very generous dividend of 15.5 US cents per share. Keeping in mind that Centamin shares are trading at US$1.96 a share, the dividend yield stands at 7.9%.

Now, investors get accustomed to good things very quickly. I am sure that some of them hope that this year Centamin is going to pay a high dividend once again. However, I doubt it. Look at the table below:



source: Simple Digressions

The table shows the way the company calculates its dividend. Firstly, cash flow, defined as revenue less all-in sustaining cash cost of production, is calculated.

Then the EMRA profit share (briefly, it is that part of the company's profit that is attributed to the government of Egypt) and exploration expenses (related to other Centamin's properties) are deducted, resulting in the so-called free cash flow. 

Now, the point is that this year Centamin wants to pay off not less than 30% of free cash flow in the form of a dividend (last year it was around 70%) so, as the table shows, the dividend yield should stand at a mere 2.0%.

At least that is what the company stated in its 2016 Annual Report:


source: Centamin plc

If, due to some reasons, Centamin's management decides to pay a higher dividend, that is fine. For example, if the payout ratio is 70% (as last year) the yield should stand at 4.6%, which is a very nice figure. 

However, the question is: will they change their dividend policy? 

Monday, July 3, 2017

Are We Close To The Bottom In Gold?

Look at these two charts:

source: stooq.com

It happens all the time - there is another divergence (red arrows) between gold prices (the upper panel of the chart) and the silver / gold ratio (the lower panel of the chart).

Generally, when gold prices are diving and the silver / gold ratio is going up, the precious metals market is close to its local bottom.


Sunday, July 2, 2017

Volume By Price Indicator - Quite A Helpful Tool To Trade Stocks

My readers know that I am not a fan of Technical Analysis in its classic form. However, sometimes I have a look at a few interesting indicators that are not in common use.

Let me take the so-called  "Volume By Price" indicator. According to Stockcharts, this indicator is defined as:

"Volume-by-Price is an indicator that shows the amount of volume for a particular price range, which is based on closing prices. The Volume-by-Price bars are horizontal and shown on the left side of the chart to correspond with these price ranges. Chartists can view these bars as a single color or with two colors to separate up volume and down volume. By combining volume and closing prices, this indicator can be used to identify high-volume price ranges to mark support or resistance"

In my opinion, the Volume by price indicator is sometimes very helpful to find major resistance / support levels. Look at these two charts:


source: www.stockcharts.com

The chart shows the price action of B2 Gold, one of the best gold miners (although most recently in some kind of trouble). Notice that its shares are fighting against a strong resistance at around C$3.9 a share. Interestingly, this resistance level has been disclosed by a long, horizontal bar on the left. In other words, this bar means that vast amounts of shares changed hands at C$3.8 a share.  

Now, another example. This time it is Kirkland Lake Gold, similarly to B2 Gold one of the world's best gold miners:


source: www.stockcharts.com

Here we can easily spot what happens when the shares break their strong resistance level (depicted by a long, horizontal bar on the left). Notice that after some struggle Kirkland shares ultimately broke above their strong resistance at C$10.0 - C$10.5 a share. Since that event the company's shares are appreciating at high speed (the red arrow).

Tuesday, June 27, 2017

Paladin Energy - The Road to Zero

Paladin Energy is (or was?) one of the world's largest uranium producers. Now the company is generally non-existent - most recently Paladin shares have been withdrawn from exchanges.

Below I present a few charts showing the Paladin's road to zero.

Uranium prices:


source: stockcharts.com

Uranium prices topped in 2007, ahead of a big financial crisis. Then, in 2011, the Fukushima disaster set the downward trend in uranium prices. For many years...

Poor prices = poor investment and impairment charges

When uranium prices  go down, a uranium producer generates lower cash flow from operations:


source: Simple Digressions


Poor prices have a negative impact on the value of assets. Hence, impairment charges:

source: Simple Digressions

Then, when there is no cash, a company has to borrow money to keep operations going:


Negative cash flow from operations + debt service + impairment charges are a poisonous mixture. As a result, a company's equity goes to zero...or even lower:




source: Simple Digressions

End of story

Oh, is it? Not really - now Paladin tries to restructure its debt and...sell its best asset (the Langer Heinrich mine)