The price of Gold has gone up exponentially in the last 6 or 7 years, from $300 to $1000 the change has been dramatic and a big welcome to Gold miners around the world. But for Canadian, Australian and other world miners, the change of price hasn't been as great as it may seem and its fall from $1000 is not really a fall at all. I'll focus on Canada for this post but the calculations can be applied for any other currency.
When the dollars are at par, the price of Gold is the price of Gold, simple enough.
So using ($1USD)/($CDN) x (price of gold).
In 2001 when Gold was $300 and the dollar at .65, Gold was actually at $461
in 2003 when Gold was $430 and the dollar at .75, Gold was actually at $573
in 2006 when Gold was $650 and the dollar .87, Gold was actually at $747
in 2007 when Gold was $800 and the dollar .98, Gold was actually at $816
in 2008 when Gold was $1000 and the dollar 1.05, Gold was actually at $952
Today, when Gold is at $815 and the dollar at 0.81, Gold is actually at $1006
$1000 Gold was nice for Canadian producers, but cheaper gas, a lower dollar and $815 Gold is even better. If Gold returns to $1000 dollars and the Canadian dollar continues to falter against its American counterpart, miners will continue to make healthy profits.
Thursday, November 27, 2008
Wednesday, November 26, 2008
Teck, giving lessons on what not to do
Fording, Jericho, Galore Creek, Nautilus. What do all these things have in common? They were all recent business ventures of Teck Cominco and they have all proven to be terrible decisions that are helping bring the company down.
The Fording deal is the most publicized, Teck payed $13.5 billion dollars to acquire Fording Canadian Coal Trust literally days before the credit crunch starting destroying the markets. They refused to revise the deal even when the markets and commodities were obviously heading towards lows, it's like a stubborn child sticking to his decision even when it was obvious that it's not a good one. Buying Fording might of seemed like a great idea last year when Teck was cash rich, coal was at all time highs and the future looked promising but going through with this in September was just foolish. Now Teck is stuck with a monstrous debt, a coal company that is worth a fraction of what it was when it paid a premium for it and Teck is now forced to sell off solid assets just to make ends meet. Their dividend payments were suspended and the share price of one of the pillars of Canadian mining has hit 20 year lows, imagine if Teck had not done this deal, they would be one of the best looking mining companies out there right now, cash rich and looking at growing their influence instead of selling it off.
Teck was also involved with Tehera Diamonds, giving them $30 million so they could continue mining operations at their Jericho mine. This was after Tehera had recorded losses on lower than expected grades of kimberlite. Not too long after, Tahera put the mine on care and maintenance and their stock is at around a penny now. $30 million flushed down the toilet.
Teck also acquired 50% interest with NovaGold for the Galore Creek project in British Colombia. The projects development costs were expected to be $2.2 billion dollars which quickly ballooned to over $5 billion before the project was scrapped and put on hold. NovaGold is a whole different story in itself, maybe I'll cover them tomorrow because they rival Teck with bad decisions lately.
Last but not least is Nautilus Minerals, Teck, among others, poured millions into a company planning on mining the sea floor. Giving hard cash for unproven technology, without even an idea as to when, what and how anything will be mined.
This is just a short list of some of Teck's financial decisions that they have done lately and has let up to a steep and major decline in their stock price and financial fact sheet. Until a major turnaround happens in the industry and in the company, they will suffer and will lose millions of dollars worth of assets, the only question now is what will remain of Teck once all the bleeding is over.
I guess we'll just have to wait and see.
The Fording deal is the most publicized, Teck payed $13.5 billion dollars to acquire Fording Canadian Coal Trust literally days before the credit crunch starting destroying the markets. They refused to revise the deal even when the markets and commodities were obviously heading towards lows, it's like a stubborn child sticking to his decision even when it was obvious that it's not a good one. Buying Fording might of seemed like a great idea last year when Teck was cash rich, coal was at all time highs and the future looked promising but going through with this in September was just foolish. Now Teck is stuck with a monstrous debt, a coal company that is worth a fraction of what it was when it paid a premium for it and Teck is now forced to sell off solid assets just to make ends meet. Their dividend payments were suspended and the share price of one of the pillars of Canadian mining has hit 20 year lows, imagine if Teck had not done this deal, they would be one of the best looking mining companies out there right now, cash rich and looking at growing their influence instead of selling it off.
Teck was also involved with Tehera Diamonds, giving them $30 million so they could continue mining operations at their Jericho mine. This was after Tehera had recorded losses on lower than expected grades of kimberlite. Not too long after, Tahera put the mine on care and maintenance and their stock is at around a penny now. $30 million flushed down the toilet.
Teck also acquired 50% interest with NovaGold for the Galore Creek project in British Colombia. The projects development costs were expected to be $2.2 billion dollars which quickly ballooned to over $5 billion before the project was scrapped and put on hold. NovaGold is a whole different story in itself, maybe I'll cover them tomorrow because they rival Teck with bad decisions lately.
Last but not least is Nautilus Minerals, Teck, among others, poured millions into a company planning on mining the sea floor. Giving hard cash for unproven technology, without even an idea as to when, what and how anything will be mined.
This is just a short list of some of Teck's financial decisions that they have done lately and has let up to a steep and major decline in their stock price and financial fact sheet. Until a major turnaround happens in the industry and in the company, they will suffer and will lose millions of dollars worth of assets, the only question now is what will remain of Teck once all the bleeding is over.
I guess we'll just have to wait and see.
Monday, November 24, 2008
Poor Teck...things couldn't of gone worse for them. The timing of the Fording deal was terrible, the choice to buy Fording was terrible and now they're spinning their wheels trying to get out of debt. Investors are abandoning them faster than we can refresh our portfolio web pages.
The COO resigned this morning, Kinross and others will pick away at it and Teck will become a shadow of what it used to be. One of the mining powerhouses of Canada will never be the same after this market crash.
The COO resigned this morning, Kinross and others will pick away at it and Teck will become a shadow of what it used to be. One of the mining powerhouses of Canada will never be the same after this market crash.
Friday, November 21, 2008
The decline of Junior mining
Junior mining, the companies we love to gamble our hard earned money on and speculate which ones will find the next big mine. Realistically, 90% of the time finding a mine isn't what we're gambling on, we're playing the ups and downs, the pumps and dumps and putting our trust with the management of the company.
Junior mining companies aren't trustworthy, plain and simple. They are greedy, corrupt and shifty organizations that flip from one area to another and fleece the investor time and time again. The ones who actually do find mines or good properties are forced to become legit (or more so) and usually bring in a new board of directors or a new president to revamp its image. It can no longer contract all it's work to its buddies at ridiculously inflated prices or option ground from old friends they used to work with in the "rough times". When times are good, juniors will act like they are spending the investors money wisely, but they are passing it to their friends and families and doing everything they can to line their own pockets. They will do legitimate work, there is no doubt about that, but they will exaggerate in press releases and do everything they can to keep a story alive. Every ethical boundary is flirted with if not blatantly crossed, junior mining is an industry where snakes thrive, the good honest people are lost in the sea of deceitful money grubbers.
Yes, I'm a little bitter, but I also understand that they provide a great service to the mining industry, they get to do the dirty work for the majors and sometimes, they actually find a great deposit and become a mid-tier or major themselves. This economic crash, for all the bad that it has brought to the mining industry, is at least doing some good. It is going to trim the bloated junior mining industry into a slimmer, more competitive industry. The bad properties will be abandoned and the good management teams will survive. Good, honest people will lose their jobs, which is unfortunate, but at least we can hope to see a departure of the bad guys because frankly, mining doesn't need them, they brought us Bre-X, they brought us countless scams, they give a black eye to the mining industry every day. You know who they are, I know who they are, I shake hands with some of them regularly. We don't need them.
I urge everyone who invests in the TSX-V to read the book "Fleecing the Lamb" by David Cruise. It will make you a much better investor, I guarantee it.
Junior mining companies aren't trustworthy, plain and simple. They are greedy, corrupt and shifty organizations that flip from one area to another and fleece the investor time and time again. The ones who actually do find mines or good properties are forced to become legit (or more so) and usually bring in a new board of directors or a new president to revamp its image. It can no longer contract all it's work to its buddies at ridiculously inflated prices or option ground from old friends they used to work with in the "rough times". When times are good, juniors will act like they are spending the investors money wisely, but they are passing it to their friends and families and doing everything they can to line their own pockets. They will do legitimate work, there is no doubt about that, but they will exaggerate in press releases and do everything they can to keep a story alive. Every ethical boundary is flirted with if not blatantly crossed, junior mining is an industry where snakes thrive, the good honest people are lost in the sea of deceitful money grubbers.
Yes, I'm a little bitter, but I also understand that they provide a great service to the mining industry, they get to do the dirty work for the majors and sometimes, they actually find a great deposit and become a mid-tier or major themselves. This economic crash, for all the bad that it has brought to the mining industry, is at least doing some good. It is going to trim the bloated junior mining industry into a slimmer, more competitive industry. The bad properties will be abandoned and the good management teams will survive. Good, honest people will lose their jobs, which is unfortunate, but at least we can hope to see a departure of the bad guys because frankly, mining doesn't need them, they brought us Bre-X, they brought us countless scams, they give a black eye to the mining industry every day. You know who they are, I know who they are, I shake hands with some of them regularly. We don't need them.
I urge everyone who invests in the TSX-V to read the book "Fleecing the Lamb" by David Cruise. It will make you a much better investor, I guarantee it.
Saturday, November 15, 2008
ino
I'll be displaying ads from ino from now on, it's a cool site with lots of good features, inotv is pretty cool and the vids there are pretty informative, the trend analysis thing is also a good feature. Check them out if you want.
Friday, November 14, 2008
Markets need to do their job
Uncertainty can be the killer of markets and mining, the impact it has on an industry can be absolutely devastating. It can (and does) destroy companies, close mines, cancel exploration projects and turn an incredible asset into a crippling liability.
When people think of uncertainty and risks in mining people inevitably think of the obvious social, political and environmental factors. A mining company wishing to operate next to or in a park or nature reserve will never have its deposit evaluated to its full potential, the risk of the government, environmental groups or aboriginals interfering and either restricting or denying mining or exploration rights scares and turns away investment dollars. The same goes for a project in a country like Venezuela, recent examples are Crystallex and Gold Reserve who are the victims of a over controlling government that can't be trusted. Ivanhoe and Aurelian had the same problems, sitting on a great deposit but the stock could not respond because the government provided too much uncertainty. New laws, new regulations...change. It just doesn't sit well with investors.
The recent credit issues surrounding the world and crash in commodity prices, mostly due to people expecting less demand for metals has broken down mining and beaten it to a pulp. The demand for metals has helped in shrinking the industry but the uncertainty of markets and mining operations has obliterated it. Mining is already exceptionally vulnerable to risks and uncertainty for the reasons I mentioned above, recent bailouts, stimulus packages and whatever else "help" federal governments have been trying to implement has done nothing to improve the situation.
The confusing nature of all the recent legislation passed has just caused people who were already unsure as to what was going on to get out and abandon the markets in droves. We need to take a step back, evaluate what we have done and respond accordingly, knee jerk reactions to "save" the free market system have ignored the fact that the free market is supposed to correct itself. The only true job of the market system that we are so desperately trying to save by force is to identify a value and price for something. Its job is to wade through the political factors a company faces, calculate its costs, revenue, assets, potential and to come up with a price. One, which is controlled by investors. By throwing a new quick fix every two days we're hurting the shell shocked investor from participating in the free market system and we're increasing to the levels of uncertainty.
Mining already has to deal with too much uncertainty and risks, if we have to implement changes and packages to help instituations from collapsing we have to be able to present them clearly and transparently to the investor. Until then, continue to expect wild volatility in commodities and stocks.
When people think of uncertainty and risks in mining people inevitably think of the obvious social, political and environmental factors. A mining company wishing to operate next to or in a park or nature reserve will never have its deposit evaluated to its full potential, the risk of the government, environmental groups or aboriginals interfering and either restricting or denying mining or exploration rights scares and turns away investment dollars. The same goes for a project in a country like Venezuela, recent examples are Crystallex and Gold Reserve who are the victims of a over controlling government that can't be trusted. Ivanhoe and Aurelian had the same problems, sitting on a great deposit but the stock could not respond because the government provided too much uncertainty. New laws, new regulations...change. It just doesn't sit well with investors.
The recent credit issues surrounding the world and crash in commodity prices, mostly due to people expecting less demand for metals has broken down mining and beaten it to a pulp. The demand for metals has helped in shrinking the industry but the uncertainty of markets and mining operations has obliterated it. Mining is already exceptionally vulnerable to risks and uncertainty for the reasons I mentioned above, recent bailouts, stimulus packages and whatever else "help" federal governments have been trying to implement has done nothing to improve the situation.
The confusing nature of all the recent legislation passed has just caused people who were already unsure as to what was going on to get out and abandon the markets in droves. We need to take a step back, evaluate what we have done and respond accordingly, knee jerk reactions to "save" the free market system have ignored the fact that the free market is supposed to correct itself. The only true job of the market system that we are so desperately trying to save by force is to identify a value and price for something. Its job is to wade through the political factors a company faces, calculate its costs, revenue, assets, potential and to come up with a price. One, which is controlled by investors. By throwing a new quick fix every two days we're hurting the shell shocked investor from participating in the free market system and we're increasing to the levels of uncertainty.
Mining already has to deal with too much uncertainty and risks, if we have to implement changes and packages to help instituations from collapsing we have to be able to present them clearly and transparently to the investor. Until then, continue to expect wild volatility in commodities and stocks.
Monday, November 10, 2008
Ecuador mining law to be presented
The piece of legislation thousands of investors, Ecuadorians and mining industry personnel have been waiting for to be released is about to come out. Since Kinross picked up 17 million ounces (or more) for 1.2 billion dollars, outrage ensued and Patrick Anderson is now on the board of directors of Noront (what were they thinking?). Now since the mining investment sector collapsed I've heard a few people say this wasn't a bad deal...thinking short term I can agree but long term, which is what people who had invested in ARU were thinking...this was far, far from a good deal. The only solace the ARU shareholders have is that at least they didn't get robbed like Crystallex and Gold Reserve.
Everyone expects the mining mandate to be pro-mining, even though the president has some extreme factions inside his government he was quoted as saying:
"If there are deep changes to the law, I will veto it and put it up for a popular referendum," Correa said during his weekly media address on Saturday. "The government's political decision is to develop the mining sector."
At least there's some positive news coming out of the mining sector. We'll see what the details of the bill say when it's released but after reading a few drafts, I think it's safe to say this won't have anything major in it that will make people's head spin.
Everyone expects the mining mandate to be pro-mining, even though the president has some extreme factions inside his government he was quoted as saying:
"If there are deep changes to the law, I will veto it and put it up for a popular referendum," Correa said during his weekly media address on Saturday. "The government's political decision is to develop the mining sector."
At least there's some positive news coming out of the mining sector. We'll see what the details of the bill say when it's released but after reading a few drafts, I think it's safe to say this won't have anything major in it that will make people's head spin.
Sunday, November 9, 2008
Liberty forced to close
Liberty mines (LBE) announced on Friday that they will be putting their Timmins area nickel mines on care and maintenance. This is a tough place for them to be, another one of those new producers who got a couple mines started right in the thick of record nickel prices. Still dealing with development and start up debt, they needed financing to keep them going, once they realized that wasn't going to happen they were forced to do what many others have done lately and that's go on care and maintenance.
I don't expect this one to be doing anything spectacular for a while, even when nickel prices recover they will be dealing with their debt for a long time, they're not a very attractive company at the moment.
Best of luck to all the workers who got laid off. There's still a shortage of skilled men in the industry.
I don't expect this one to be doing anything spectacular for a while, even when nickel prices recover they will be dealing with their debt for a long time, they're not a very attractive company at the moment.
Best of luck to all the workers who got laid off. There's still a shortage of skilled men in the industry.
Copper outlook
Consider this, the world uses up one Escondida per year. That's the world's largest copper deposit, swallowed up by humans every single year. Do we find an Escondida every year? Not even close.
We all know commodity prices don't reflect their true supply and demand but they reflect what speculators think. With the markets contracting, copper is sitting well under $2 and a lot of copper mines are feeling the tight pinch and at risk of closing if these prices remain where they are. This, as we all know it is a cycle, copper will rebound and I think sooner rather than later, we simply use up too much copper and are not finding enough of it. The demand will shrink in the next little while but like the other metals, it will recover, maybe $4/lb was too much but $1.68/lb is definitely too low. Copper is a safer bet than most other base metals, we just don't chew through as much nickel, lead and zinc as we do copper, China and India are the especially strong buyers of the stuff and I don't care what "reduced growth" they keep talking about they are still predicting 8-9% growth for China over the next few years. It's not 12% but it's still a hell of a lot. Unless we find a few Escondidas we're going to be setting ourselves up for some more copper theives running around construction sites robbing people in a few years.
I was talking to the exploration manager of one of the world's largest copper miners the other week and this was the point he kept repeating, the suppression of copper prices simply cannot last very long. Juniors are still scary material to touch but a major or mid-tier producer might become pretty attractive right now.
Of course, do your own due diligence, it's still a rough place out in the mining investment sector but there's money to be made.
We all know commodity prices don't reflect their true supply and demand but they reflect what speculators think. With the markets contracting, copper is sitting well under $2 and a lot of copper mines are feeling the tight pinch and at risk of closing if these prices remain where they are. This, as we all know it is a cycle, copper will rebound and I think sooner rather than later, we simply use up too much copper and are not finding enough of it. The demand will shrink in the next little while but like the other metals, it will recover, maybe $4/lb was too much but $1.68/lb is definitely too low. Copper is a safer bet than most other base metals, we just don't chew through as much nickel, lead and zinc as we do copper, China and India are the especially strong buyers of the stuff and I don't care what "reduced growth" they keep talking about they are still predicting 8-9% growth for China over the next few years. It's not 12% but it's still a hell of a lot. Unless we find a few Escondidas we're going to be setting ourselves up for some more copper theives running around construction sites robbing people in a few years.
I was talking to the exploration manager of one of the world's largest copper miners the other week and this was the point he kept repeating, the suppression of copper prices simply cannot last very long. Juniors are still scary material to touch but a major or mid-tier producer might become pretty attractive right now.
Of course, do your own due diligence, it's still a rough place out in the mining investment sector but there's money to be made.
Thursday, November 6, 2008
Rusoro steps into the picture
...I don't know what to say about all of this, all I can do is reiterate what I said earlier. Invest in Canada. You just can't trust the rest of the world....ugh.
Venezuela, who yesterday claimed they were stealing the Las Cristinas property are now saying the Gold Reserve's (GRZ) Brisas project will also be taken and their favorite Russian buddies will step in and mine them instead.
What a slap in the face, I love mining and I hate to wish for a mine to pull a Jericho or Southwestern but.....
Karma can be a terrible thing and Venezuela and Rusoro deserve a lot of bad karma
Venezuela, who yesterday claimed they were stealing the Las Cristinas property are now saying the Gold Reserve's (GRZ) Brisas project will also be taken and their favorite Russian buddies will step in and mine them instead.
What a slap in the face, I love mining and I hate to wish for a mine to pull a Jericho or Southwestern but.....
Karma can be a terrible thing and Venezuela and Rusoro deserve a lot of bad karma
Wednesday, November 5, 2008
AWOL
I haven't posted in the last while, I moved into a new place and started a new job, it was a busy time. Now that I'm settled (sort of) I'll try to keep on top of things.
Las Cristinas to be stolen
So Venezuela finally stepped in and took Las Cristinas...what a shame. Can and should we expect any different though? Honestly, this is a disgrace and all that, but who didn't see something to this effect coming a mile away? Investors poured millions and millions into this project and in turn developed one of the largest gold deposits in South America while Chavez stood back and waited and waited. Once it was clear Crystallex had done all the necessary work and they couldn't keep on making excuses for not letting them start mining, (Remember all the BS about the national forest and the mine would never open, the environment comes first crap?) they sweep in and steal 17 million ounces.
And I don't care how you put it or what "deal" Crystallex takes, this deposit is STOLEN. You thought Kinross stole Fruite Del Norte? HA! The worst part is this will stay in courts for years and years and people will continue to keep hoping KRY can maybe possibly win it back. They won't.
It's over.
When you invest in areas such as Venezuela, be prepared to lose all your money in an instant. In fact, I wouldn't rule out the chance that not only will you lose your money, but someone will break into your house and steal your TV...yeah, it's that risky.
Invest in Canada, you can't trust the rest of the world, plain and simple.
And I don't care how you put it or what "deal" Crystallex takes, this deposit is STOLEN. You thought Kinross stole Fruite Del Norte? HA! The worst part is this will stay in courts for years and years and people will continue to keep hoping KRY can maybe possibly win it back. They won't.
It's over.
When you invest in areas such as Venezuela, be prepared to lose all your money in an instant. In fact, I wouldn't rule out the chance that not only will you lose your money, but someone will break into your house and steal your TV...yeah, it's that risky.
Invest in Canada, you can't trust the rest of the world, plain and simple.
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