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The Denver Gold Forum: Feedback From The Horror Edition
Last week, the annual Denver Gold Forum was organized, which typically is one of the highest-regarded mining conferences of the Western hemisphere. It’s also a high-end conference as investors only are allowed to attend it after filling in an application form. As this is quite a big difference with the PDAC show in Toronto in March where people would get in just to get a free pencil, the sounds coming out of the Denver Gold Show are usually very interesting, as it’s a ‘big boys’ conference.
The mid-tier producers understand the situation is bad
We spoke with several attendees of this conference, and the general consensus is that this was a ‘dull’ conference without any enthousiasm on the floor. Whereas most of the mining companies were pushing for growth just three years ago, the sentiment has completely changed. The main focus of the Denver Gold Forum this year was the emphasis on cost reduction and cleaning up the balance sheets which still are very messy from the blood bath during the past few years. According to an analyst we spoke to, not every company’s plans are credible or actionable and only a few (mid-tiers) stood out from the pack. It’s interesting to see that it’s mainly the mid-tier producers who are effectively trying to tackle the problem, whilst the more senior producers are still trying to survive based on their brand name rather than taking effective actions.
The royalty/streaming model is dead – a race to the bottom
Another complaint we picked up is the increased difficulty for royalty companies and precious metals streamers to generate deals which benefit their own shareholders. Five years ago, there were just a handful of streaming/royalty companies, but today there are more than 10 in North America alone. This means that the pie of available projects needs to be divided over much more market participants, and we have the impression there’s a race to the bottom going on. This could be highlighted by the recent deal whereby Franco Nevada and Sandstorm Gold teamed up to purchase a streaming deal on a gold project in Burkina Faso. According to the terms of the agreement, the payback period for the initial investment will be in excess of five years at the current gold price, where after the annual return will be lower than 10%. This means that the total IRR of this investment will be between 5 and 10%, unless this specific project will double the production rate, which isn’t very likely.
Whereas Silver Wheaton, Franco Nevada and other Royal Gold’s were able to close significantly accretive deals in the past, the returns for new streaming deals are relatively marginal, and we think the overcrowded royalty/streaming market will ultimately lead to mergers in the sector or it will eventually kill itself in its race to the bottom.
The consequences of a bad conference
It wasn’t just a boring conference, it had some serious consequences as well. A trader whose primary market place is the TSX Venture Exchange says that during (and after) the conference, his firm decided to pull bids out of the market. And that’s exactly the reason why we saw a gradual decline of the TSX Venture index (see next image) even though there were no volume spikes. The average daily volumes were relatively normal (that is, within 1.5 times the 3 month average), but because the bid-side was extremely thin, stocks started to slide right away with last Monday as apotheosis when the index showed a 3% drop with most mining companies falling 5% or more.
Source: Stockcharts
This has undermined the investor confidence further and we expect the market to remain quite shaky in the next few weeks. Unfortunately the tax loss selling season is also around the corner, and the combination of these factors could result in the mining sector going into a prolonged hibernation. The TSX-V is now at the lowest point since the beginning of this year, and the stronger US Dollar and weakening gold price aren’t really pointing in the direction of a sudden change.
However, as the TSX Venture Exchange has now dropped exactly 10% since the beginning of this month, we can now officially classify the recent trading as a ‘correction’. The only thing which gives us some hope and acts as a (dimmed) light at the end of the tunnel is the RSI, which currently stands at just 16, indicating the TSX V is in an ‘oversold’ territory. As the gold price is also just 3% above a double bottom, the fix might be in.
Source: Stockcharts
If the gold price doesn’t fall below the level of its double-bottom, a rebound of the gold price and an oversold TSX Venture Index might be combined to create a ‘perfect storm’. The next few weeks will be very important to see if those important levels will hold.
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Crazy me, I actually listened to about 15 forum presentations and they were hardly"boring." Most of these companies are cutting costs, making some progress, and there is more going on in exploration than meets the eye, but necessary to actually pay attention. For anybody who chooses to see for themselves versus being spoon feed by financial media here are my notes on a few.
http://winteractionables.com/?p=14794
http://winteractionables.com/?p=14619
As far as these royality companies they would be far better off just scarfing up the twenty or so advanced staged development companies and emerging miners for dimes on the dollar, versus the "financing" described above. Then they'd have a complete monopoly on future projects. Somebody arrange a billion dollars and we can roll the majority into private hands while so called "investors" rest sleep, leaving little left over. I am here to help.
capitulation bitchez.
Peter Schiff was very wrong.
yes, i've taken a severe beating, but why the hell would anyone holding sell at these prices...?
opportunity cost. the money needs to go somewhere better. b.) to avoid selling at even lower prices.
I don't buy this BS. Miners were making money in 2005 and now with gold 3 times higher ( inflation adjusted ) they are "barely" profitable. thats for the herd to believe gold will skyrocket when in reality it is probably in the first stages of a loooong bear trend.
I hope so.... gives me more time to accumulate and at lower prices....
History has already written the story of "printing money" and "value of metals"......
There is not one single instance printing money having a different outcome....
Never, never, reason at; or about the market. the price chart is all the information you get. don't make up stories. all decisions must be made on the price chart and actual, serious, independent study of a particular market.
Good point. Could be that gold miners have had TBTJ Bankers advise the on swaps & bonds for investing capital.
Stocks & bonds can be hammered on Wall Street of course. Last year on got hammer saying that profitability was down. I didn't recover, so...
Publicly held companies, gold companies, maybe owned by TPTB.
We burn a shit load of diesel producing minerals for market. Diesel cost is 3 times higher than 10 years ago. You cant mine gold with paper , it takes lots of steel and energy, none of that is cheap. As a miner I can tell you no one is making a ton of money , enthusiasm is low as well as new investment. If gold goes under $1000 ,marginal producers will be dropping like flies.
I have to admit that I am enjoying buying low cost silver.
MON
indeed. what was oil in 2005, like, $50 a barrel . Ease of extraction has also tightened, so oil is twice as expensive and it takes more oil per oz
im glad i read this. i was close to converting my super into gold and silver miner shares
You don't want any stocks; and certainly not any mining stocks. invest in something a lot simpler and more direct.
Perfect time for a naked short about 400 tons, 3 strikes on the chart the computers will see it and flush. All stop losses will kick in to finish the job.
Tick tock...
If everyone agrees to never convert their virtual Gold to physical then there will never be a shortage of Gold!
But there is always one ahole who wants physical. That is the problem.
Keep buying virtual Gold and Silver. I even have some for sale at discounted prices from a Prince in Nigeria.
Don’t forget, with lowered production, there will be less supply when panic follows… that is, when prices start to hyper-inflate… that is, again, when the Fed raises interest rates.
And, then, when you learn of factors that will influence gold’s price that no one else will tell you about, it should make your head spin; namely, Mortgage Backed Securities; US Treasuries held by foreign institutions; “cash equivalents” that show up on domestic, and foreign, corporate balance sheets, where it used to be “cash”; and, ‘How does insurance on bank deposits affect gold’s price?'; among a few others. All of them are ultimately backed by gold, and no one seems to realize it. Furthermore, what happened to the gold that shows up on the US Treasury's balance sheet as "gold receiveables"?
Questions... questions... and when men learn their answers, we will have to live thru an unprecedented financial storm. This report should be studied, as if your life depeded on it.
Mining has little to do with prices in a shortage. Remember the Hunt Bros... they had it all figuted out exactly how much was needed to corner the silver market. Even as mining exploded as silver shot up past $20, $30, $40 from $6, it was all the grandmas and little people, cashing in their silverware, jewelry, pre-65s that put out their lights, hundreds of millions of ounces out of the woodwork. Not the mines.
But hey, for once the little people won.
The (great) importance of mining has to do with global mining supply making up what amounts to (literally and figuratively) the yearly physical flow. Without the lion's share of that production- the estimated yearly production figure is around 2500 tons- becoming available to the market, the flow will dry up like a certain west Texas river bed in summer. I'm inclined to think that I am understating matters when I say that such a condition, in the absence of several thousand tons being made available to the market from other sources-and why, pray tell, would it at this juncture-will amount to a very big deal for the international monetary and financial system.
The Hunt bros. Were done in by the exchange changing the rules on the fly.
Ah, yes, "fond" memories of Jim Sinclair ("gold won't go below $1600") and the King World News pumping dweebs.
i'm staying.
Despite mines being holes in the ground with a few lying schmendricks standing next to them, mines still represent a product of physical output, cost and time. Those 'real things' have no place in a fiancialized sphere, and they are not welcome. Unfortunately - or fortunately, depending on which way one chooses to look at the overall economic dynamic, 'real things' and the physical output, cost and time that accompany them, are going to make a comeback in a big way. It likely won't be during a time of a 'partying' equity market, but it will nonetheless arrive.
Everything you say is true; but. you have to pick the right one. and the right price; and the right time to sell. wouldn't it be easier to just hold on to some physical metal ?
Most people don't want metal. They want leverage and they want dollars. As they wise up these folks will move into the security of cash, not physical metal. They don't see the value of gold they just want to increase their stack...of paper.
Indeed. Most people in "The West" don't want physical because they are, whether they know it or not, speculators and investors, not savers. That will change in due course as Westerners learn the hard way about the prudence of saving and what asset in particular one must have in one's posession to be saver.
"want" = emotion. I have nothing to say to people with emotions about investments. they're beyond help. Leverage, or margin, once regarded as the secret of the wealthy, is readily available on physical metal. there's no excuse for mining stocks; no rationale. these are people who think "market" means stock market. This becomes a cemented world view; if it's not a stock, it doesn't exist. "Gold doesn't pay dividends" , etc, etc. I once had a middle aged white man tell me he wished he could get in on the beginning of a major new bull market. I told him he was in on the beginning of one. Silver was selling for $4.35/oz.; he told me to go away; he didn't mean crazy things like the futures market, or bullion. Only stocks were real to him. I still see him from time to time; he's sader but no wiser; I never mention investing to him. You can lead the horse to water, but you can't make it drink.
Go lookup Exter's pyramid Vegas. They go to cash first because they are idiots but eventually they realize the error and find gold which is the base of all prices. Cash is the 2nd to last step before gold...
I remember when people talked about Enron that way. No need for physical, when there is virtual.
If miners won't shut in uneconomic production of their own accord, and preserve their only assets until such time as the market attaches a reasonable value to them, then the market will shut them down. Best game in town is to short-sell the miners on every bear flag, and buy physical metal on the capitulations.
Exactly!
It's not like a crop of tomatoes, that will go bad if not harvested in a certain time frame.
If you like your Gold in the ground, have you investigated citigold in Au. trades on the ASX. they've got the stuff in the ground and they're an operating company who smelts and ships bars every month. The Whats'it royal family fund of someplace, I forget, Bahrain ? don't know; bought 20% several years ago; since then the stock price has gone down a lot; they're not complaining. if you do have a long view, it's worth examinging this company in detail; they have a very info. rich web site. I think the designator is CTO-ASX. Citi-Gold should get you to the web site on Google.
In my Self Directed Pension Account (that I cannot cash in, or hold assets of real value) I have invested in profitable silver miners.
Starcore International Mines, Silvercrest Mines, Orosur Mining Inc.
As well as Northern Dynasty Minerals
I also like Rogers Sugar, but cashed out a few weeks ago.
Ok. I always mention Citi gold at the end of the discussion in the case of people who just have to have a stock. No disrespect intended.
Sell the silver..., buy the sugar!
You say a mine is a hole in the ground with a liar at the top, then you pimp Citigold?
Citigold is a fraud, just like 90% of the rest of listed 'mining' companies.
I just mention it as a last resort; at least it does have gold in the ground and it's operating.
I don't understand why it's a fraud; but then I'm not an expert on mining stocks.
A mine is a hole in the ground with a liar standing next to it, and a Jewish Attorney standing next to him; with a Banker in the background. I never advised anybody to own any mining stocks whatsoever; at any time. One chinese millionaire here in Oahu is very well disposed to me because I talked him out of his mining stocks 9 years ago. It's good to have friends like that. Some day, I might need a favor.
One chinese millionaire here in Oahu is very well disposed to me....
Oh I know that guy. His name is Ho Le Fuk.
Better call Saul....
It sounded better the first time...
sorry for the duplicate; I'm a computer idiot.
A mine is a hole in the ground with a liar standing next to it, and a Jewish Attorney standing next to him; with a Banker in the background. I never advised anybody to own any mining stocks whatsoever; at any time. One chinese millionaire here in Oahu is very well disposed to me because I talked him out of his mining stocks 9 years ago. It's good to have friends like that. Some day, I might need a favor.
harsh as your words are, its the correct course of action!
Just-Get-Rid-of-Them. 100%. Gone. go on to something else.
The solution is peer to peer currencies.
Like cash, or silver coins?
Tesla is a mining company sporting a huge market cap.
Same goes with Boeing, LMT and Amazon.
Entire countries might start getting "shut down" here.
We should probably just Nationalize ALL the PM Mining Companies located in the US.
We can't have them deciding not to remain open, can we?
Once you start manipulating, when do you stop?
Hint hint, I'm not the only one who's shorting them. No need to nationalize something that's turning such a tidy profit for at least some of the the .1%.
The Great Pumpkin is comming. It will be here...,
and then you'll be sorry. You'll see...