Yesterday's election spree was a buying opportunity for gold investors. Not caring about huge price volatility they added 171.6 thousand ounces to GLD vaults.
Look at the chart below. It shows that lower prices of gold (the line marked in green) are considered as a buying opportunity. Since early July the price of gold went down around 7% but GLD holdings are, more or less, at the same level (the line marked in red):
As Erich Maria Remarque once said: All quiet on the Western front"
Some people say First Majestic is overvalued and over promoted. Maybe they are right (especially when over promotion is concerned) but the company shows steady progress. Let me show just one chart:
The chart shows production and profit margins calculated on a per quarter basis.
Note: profit margin is calculated as follows:
revenue less operating costs less smelting and refining expenses
Note that this year is exceptional for the company. Not only it increased its production but, due to higher silver prices and lower costs of production, it improved its margin.
Last but not least - today First Majestic shares are trading at an EV/EBITDA multiple of 14.2. It is not an elevated level...
Today Banro released its 3Q 2016 report. Below you will find the chart showing the performance of the oldest mine, called Twangiza:
As the chart shows, Twangiza is deteriorating. Despite higher gold prices received, the margins demonstrated by the mine are going down.
Why? Here is the answer:
Simply put, grades and recovery ratios are going down. As a result, margins are going down as well.
Somebody could say that over time every mine is deteriorating. Yes, but Twangiza is a relatively new operation. It is too early to deteriorate so much....
It looks like another buying opporunity for gold bugs:
Gold (the line marked in red or violet) goes steeply down but the ratio Silver / Gold (black and blue) goes steeply up.
Such a divergence is indicative of an incoming change in gold prices (to the upside).
And neither Donald nor Hillary have anything to do with it...
In addition to my article on Fairfax 3Q 2016 results (published on Seeking Alpha) here is a chart showing what Prem Watsa's investment policy is about:
I guess many gold bugs are wondering what is going on. From a micro ultra short - term perspective, gold is going up or trading sideways but GDX or GDXJ do not follow it.
For example, today GDX is losing around 2% (GDXJ is 2.2% down at the time of writing) but gold prices are generally unchanged (now they are 0.1% up). Here is the answer:
and here:
Simply put, a bunch of deep pockets is trying to scare the gold bugs. They do it in the most primitive way it can be done, which means that the fight is around the 50-day moving average (does anybody care about the 50-day moving average? I do not).
My advice is simple - let them play what they have to play. That is how this market works so...do nothing.
Today B2 Gold announced its 3Q 2016 results. Let me show two charts:
The chart shows cash flows from operations (excluding working capital issues), presented on a per quarter basis. Note that in the period between 2Q 2015 and 4Q 2015 the company was able to increase its cash flow (green arrow) amid lower prices of gold. Really excellent performance...
How did they do that? Well, look at this chart:
The answer is: cost cutting.
Since the beginning of 2015 B2 Gold's management has cut costs of production from around $1,200 per ounce to around $900 per ounce. Nice job, gentlemen...
And now, when gold prices are higher, is the time to make profits. And B2 Gold does it.
