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Allied Nevada Gold Files For Bankruptcy Protection
Just as in the case of oil currently, the problem with gold (and countless other commodities) trading where it does, is that as we have shown repeatedly on previous occasions, it is at or below the marginal production cost of various gold producers.
And with miners losing money on every incremental ounce (or barrell) they pull out of the ground, there is only so much capital they can burn before they have not choice but to file for bankruptcy. Which is precisely what happened to Allied Nevada Gold, the operator of the gaming state’s Hycroft mine, which earlier today filed for bankruptcy in Delaware.
The company blamed its deteriorating financial condition on the drop in gold and silver prices in recent years, an overleveraged capital structure, delays in a key expansion project, and currency swap exposure.
Yes, this is that Allied Nevada whose stock price traded as high as $45 when gold hit its all time high of over $1,900 hours before the SNB imposed its first, and now failed, currency floor which translated into a market cap of just about $4.5 billion.
It was trading at under a $1, and since the company is now bankrupt, the equity is most likely worthless as the creditors take over the equity.
The company, incorporated in Delaware in 2006, owns more than 50 Nevada properties acquired in a merger, as well as interests in what it calls some of state’s “most prolific gold-producing trends.”
As Bloomberg reports, Allied Nevada said it reached an agreement with a group of bondholders on a $78 million debtor-in-possession credit facility that will allow it to keep operating while its debts are restructured.
The miner has struggled with operational setbacks at Hycroft, most recently when a chalky substance slowed production and forced Allied Nevada to lower its annual gold and silver sales forecasts.
The Reno, Nevada-based company has also contended with plunging gold prices. The metal dropped 28 percent in 2013, the first annual decline in 13 years, and declined 1.4 percent last year.
With just $1.3 million of cash at the end of November, the company sold stock for $1 with warrants in December to raise $21.5 million. Debt crept up to $567.9 million by Nov. 30, including $48.0 million in cash borrowings under a loan. Completing a mill that it needs to recover more metals would cost almost $1.4 billion, according to a December regulatory filing.
In a normal world, in which supply and demand would be reflected in the price, a bankruptcy such as this one, which guarantees the mothballing of Allied's operations indefinitely and perhaps forever, the resulting decline in supply on the margin would mean an increase in prices. However, in a world in which physical supply and demand are irrelevant (and in the case of the biggest source of demand, outright misrepresented), the only thing that matters for pricing is how much paper gold will be created/destroyed via GLD and other ETFs, and/or how many Gold futures contracts the BIS trading desk in Basel will sell (not buy) in any given day.
In any event, while hardly having an impact on the gold price, this latest bankruptcy merely brings us one day closer to what we write in December of last year, namely that peak physical gold has arrived, and that going forward, producers will have no choice but to reduce their gold output.
One other thing: sooner or later, just like with oil and every other commodity, physical supply will catch up with physical demand, bypassing the great black box that is paper/synthetic/derivative trading of gold. And the more such miners go belly up, the faster this moment will finally arrive.
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They fought the fed and the fed won.
"And a currency swap exposure"
A Nevada miner mining in Nevada for a commodity priced in US dollars has a Currency Swap for what, pray tell?
now they will all be bought up by JPM or goldman sachs using interest free money from the fed. Once all the mine space is owned by the banks, they will have even more control over the price of gold than thy do now with their 100/1 paper contracts and naked shorts on the market. WHats worse than them controlling the price via futures markets? them owning the means of production
I gotta admit, the power of this ponzi is something else.
Miners shorted to hell. Bullion priced in Wall Street futures casino. A few trill of US dollars "goes missing".
The theft and denial is utterly amazing.
Whoever ends up with this will sell the production forward, at today's prices---all of it. This is how bullion banks deliver. This was the game played by ABX, a prime instrument in the 90s suppression of gold prices.
correct......andy hoffman was made aware of this plan four years ago as are most of the boyz inside the game
The smart ones won't be busted though -- if anyone's looking to buy low on miners look to outfits like AEM, with VERY low debt. They are busy scooping assets for equity. Dilutive, yes but long run extremely smart as they are getting the gold for a song.
The cure for low prices is...
low prices.
BTFD!
How can they not be making money when it only cost $5 to dig out of the ground?!?!
Currency swap positions has Goldman Sachs written all over it. Me thinks the fools got duped by Goldman for a big fall. What do you expect when you do business with the Jew Mafia. They form cliques to the detriment of Christian businesses and govts.
So when the bastards of the BiS sell off their ETFs, who in the fuck is buying them?
The electronic USD 1/0s have fallen off the disk drive and are probably hidden in the dust bunnies at the bottom of the computer case.
Only in Harry Reid's home state. What are the odds?
The price controls derived from ownership really only work in one direction -- up. Owning production of something with a finite supply and real costs to extract doesn't let you push prices down much. Sure, you can sell all that you can produce at $10/oz, but that won't last long and you're still supply limited. At best it lets you hold current pricing.
If such a buyout happens I'd say it would be a huge indicator that prices are about to turn up.
I think this is the deflation before the inflation that we have all been looking for.
It will take a while, but I think it's on...I'd bring out the deer in the headlights and Donkey Kong.
The real deflation has yet to hit. We won't see it until the market crashes.
Expect to see the 10-Year at 1.0%
I hear you, but I wonder if instead of a waterfall event if we are just going to watch the air go gradually out of the tires. Lots of mini crashes, but folks do not rush for the exits all at once. Yet nothing clearly marks a moment to jump back in, so we can't kick start it because everyone hangs on to what they can, hoping not to lose what they have.
Not sure that made sense.
I have an image of people like me clinging to what I have, afraid to move, hoping not to lose more. Aside from buying stuff for the long haul that I know I will use, and making repairs, I am not buying squat! And that attitude will bring about the slow deflation, I think. We will learn what is essential and what is not.
I read you talking about 5 gallon buckets & mylar bags the other day [which are all excellent]... For those who can't get the 5 gal buckets for free, they're still pretty cheap [about 2 bucks & change at HD]...
Anyway, beyond that, for anyone who has a little space to warehouse things that will be of great use [and that are relatively cheap]...
- 3/4" PVC tubing 10' lengths
- every coupling you can get your hands on for those [T's, 90, 45, extenders, ball valves, caps, threaded, unthreaded]
- PVC cement
- 6' leader hoses [& various length hoses]
- sumps & pumps [.5 to 1.5 HP oughta do]
- lumber [esp 2x4's, 2x6's, 2x8's]
- deck screws
- bags of Perlite/Vermiculite
- stackable plastic shoe boxes [usually only cost a buck & a half each]
All essential items for square ft. gardening 'start ups'
Hat Tip for bringing up Square Foot Gardening- get it at the library or used book store, he's sold 2 million copies.
All New Square Foot Gardening, Second Edition: The Revolutionary Way to Grow More In Less Space Paperback – February 15, 2013 by Mel BartholomewISBN-13: 978-1591865483
Or - 1.0%
Thank you
Greenskeeper callllmmm down, let them buy it up, what do you think they are gonna do lower the prices? Monopolies dont work that way, once they have control they will jack up the prices. Not to mention that inflation is going to be your best friend in couple of years :)
Cheere the fuck up.
Well, knukles, you see it's like this.... they, uh.... you have to, uh..... hmmmm. It's complicated, OK? It's just complicated.
scratching head, eyes rolling about un-synchronized, drooling
It was a USDCAD swap, they got hurt on the CAD$ depreciating as much as it did the past 6mo.
Very common thing for firms to have so i'd put your tinfoil hat back in the closet.
Mary a blip in the GDX and juniors space.
This is not a liquidation.
If we're at peak oil why is storage at an all time high?
I have ANV in my IRA, should I BTFD or FO
I also have ANV in my IRA. I think ANV's assets are worth more than their debt. I'm wondering how that will translate to stock price after the chapter 11 reorg....
Only for the moment. Someday those guys will be back in there kissing the ground...
Tip: Never use weapons supplied by your enemy in a war with them. (In this case, USD currency swap nonsense and debt.)
When it comes to finance, most miners are morons - they are largely engineers who care about operations. So it seems like this company tried to bring some financial "talent" aboard and got the wrong kind. One guy with weak oversight can do it.
Caring about operations, like how it is supposed to be, yet that is not enough. Really, incredibly, sad.
We will all pay for this way of thinking and living that has become the norm for the insiders. Putting greed above survival will kill some of these assholes in terms of folks wanting a pound of flesh in revenge, in terms of not being able to rev up production because the means of production were canabalized, and in terms of environmental damage.
Mother earth will have the final say, every time.
Edit: I am speaking more broadly than just gold, such as oil, water, food production etc.
Sad indeed.
When people realize what has been done to them the mood will be very dark. What seems now to be a multitude if problems will coalesce into one. These are the things Revolution are made from.
We smelted some folks.
He who smelt it, dealt it.
(I've reverted to my inner 5th grader)
God I love puerile humor
I've got 2 school-age boys. I'm learning it ALL OVER AGAIN through them. It's EXACTLY the same stuff, but they think they inveted it. Amazing.
As a good father, you absolutely MUST encourage such behavior.
I did and we still have great times as a family roaring with laughter ... and the kids are all graduated, off working.
Can't take ones self too seriously. Enjoy the kids while you can. Family first.
Got band aids?
https://www.youtube.com/watch?v=xvbkxlPf2ig
Dammit, NoDebt. You stole my Thunder. Curses, foiled again.
There has been a lot of interesting developments in the precious metals industry over the last years, most likely brought on by low prices and low demand.
The only miner I'd buy into is Parker Schnabel....why not Tony Beets you ask? Well, you would never see a nickel out of that crazy Dutch bastard!
Funny that... I was just thinking that Todd Hoffman oughta buy those big trucks. Tony'll buy 'em all up, have the only ones in the Yukon and then when Parker's and Todd's shit breaks charge 'em 55% of the take. All the while lighting kerosene fires around his dredge mining the heart of the stream bed deposits, $75/yard, cursing and swearing all day.
Gawd.... I'll betcha he's one bad drunk when he gets loaded. And Mrs Beets looks like she's hit him more than once, herself. (Ba bam! Frying pan up side the head) No wonder the daughter looks like she's ready for some counseling. Imagine him as your father in law. Oy!
"They fought the fed and the fed won."
Yup, exactly as I predicted a year ago, when I first started harping on the fact that "TPTB will depress or keep chanel-bound PM prices as long as they see fit and China lets them".
I also predicted that, at ~$1200/oz or less, we'd see CONSOLIDATION in the AU mining industry, i.e. "Big Fish eat little fish". Same as it ever was.
And... More Gold recycling.
p.s. All this is not Rocket or Star Trek Science... just common sense for those who choose to think things through (i.e. do due diligence in System and Value-Chain Analysis), rather than shoot from the hip or regurgitate Beliefs from their peer leaders.
This just puts more pressure on the price of gold to increase. Keep closing those mines! See those pictures up there, where they will convert the mining equipment into launchpads for the gold price?
And since silver, platinum, copper and other metals are by-products of gold mining...those should rise also.
"currency swap exposure"?
No sympathy from me, in that case.
If they were profitable, they could have afforded the hit. It all boils down to gold mining is unprofitable until the US run out of other people's gold to dump. It wasn't profitable at 1900. It isn;t profitable now. Miners make money selling shares, taking on debt, and trading paper, not by mining. Their stock prices never went anywhere in the last 10 years because they don't make money and their balance sheets are onions of fraudulent accounting.
Getting on top of the learning curve sure has been painful. Physical purchases have held or increased value, all the mining investments have sucked my money down the drain. Buy and hold physical, trade (at most) these mining schemes.
Looking at some of the reasons they give for declaring makes me think that they were trying to play the market, which of course ask's the question of who they were getting advice from?
Welcome to free and fair markets in the land of the free. Would the Nobel Prize Winner cheat you? Would the most admired man in this world in the 2014 Gallup poll drone women and children and wedding parties?
Speaking of "just observing"... I've noticed for several years now that there are plenty of Pump & Dump gold shills here on ZH, since they have a perfect target audience (primed with an unusually high attraction for PM), whose Confirmation Bias can be manipulated.
Have also noticed that contrarians (who predicted gold to drop to $1200-1300 when it was $1700) got junked severely. And, as I've said time and again: "People don't want the Truth. People mostly want the truth that's consistent with their worldview. If you attack it, they will certainly not thank you and probably attack you"
Moral: When in doubt, remember that "The Fed stay solvent longer YOU can". Hedge accordingly.
I am sure some banker convinced Obama dumping what gold we still had left was a good idea.
Thar be shitweasels about.......
I wondred who was selling thoese earth movers on Ebay. Now I know.
There goes those jobs in Nevada...especially in the North. Recovery! Bullish!
of course this would explain why unprecedented PHYSICAL demand for both of the only 2 forms of REAL money have been declining dramatically over the last few years.....
Where is THE best place to buy gold and silver?
Online, coin shops, coin shows,....Todd Hoffman?
china
OK, trying to be serious here. I have purchased one gold coin in my life and it was a 79' Krugerrand for $1701.00 at the absolute peak price in fucking history.
I didnt realize BTFATH, was a joke : /
http://novabrowningrutherford.com/5-ways-to-spot-a-sucker/
Russia
I am running on empty. I have no innuendos or snappy comebacks.
Knuckles, heeeeeelp!
Local dealer, or APMEX....
develope a relationship with the local dealr so that if he's cool he'll let u slide on taxes for purchases under $1500...
that helps when ur nibbling 20 oz's here and there on phony paper raids like all of this year...
Show up with cash.
PullMyFingerBullion.com
Bernanke's private stash
Stick with physical. It can go down but it won't go bankrupt. - All the miners are toast.
Gold is pretty worthless stuff, can't even use it to run your car or heat your home.
I heat my home with facebook
Yep. Its only real use... besides making you look like a douche using your gold laptop or wearing a gold watch... is backing a currency. Pretty useless... and inert.
It is only money.
Such an event will become more common in an era where marginal cost of an extraction business is often more than marginal revenue. We should get used to it.
Allied Nevada: a very large, modest grade silver mine with gold credits. In bankruptcy protection because silver production was heavily encumbered with debt and could not overcome its challenges, because silver prices fell below the marginal cost of production.
Gold by-product in operations was not the key revenue driver.
Large gold miners heavily exposed to copper production and heavily encumbered with debt may see the same fate, because of the decline in copper prices.
You must be able to differentiate between these types of silver or copper mines with gold as a byproduct of operations and gold mining companies that rely solely on gold mining operations as a primary driver of revenue.
Hycroft has a measured Ag resource of 350 million ozs.
Boy, did I get fucked on this one.
Here's what the 1889 book, The Great Red Dragon, had to say about precious metals.
The Money Power is Devouring our Gold and Silver MinesAs a rule, persons having gold or silver mines to develop always go to the Money Kings or their agents for the capital to develop them. And the Money Kings never put any money into a mine without having a majority of the stock given them, so as to secure to them its absolute control. They must have the lion's share in any enterprise before they will invest in it. They usually put in one of the original stockholders as their agent and manager; and generally the mine is so managed as to freeze out the other stockholders.
A shaft is sunk down upon the "lead;" if it proves to be rich, only the poorer levels nearer the surface are worked, till the outside stockholders become discouraged and sell out their stock cheap: then the mine is worked efficiently. But if, on the other hand, the mine proves to be a pocket, like the Emma Mine in Utah, it is puffed in the papers until outsiders have bought the stock; then the true state of things is revealed. Having full control of the mine, they are able, with their agent, to manipulate it as they please; and finally they thus get control of all valuable mines.
Geez, nothing new here. The banksters use the old playbook while everyone else doesn't even know the playbook exists.
Next owner will be based in Shanghi, getting rid of a few more dollars from stock.
.... "Money Kings", Bitchez.
But look at their presentation and they said that their production costs were below 1,000 WTF??? http://www.alliednevada.com/wp-content/uploads/DGG-2014.pdf
So what was their actual production (weight) or is that a dumb question? not
Come on! Does Kunckles have to do ALL the 'heavy lifting' around here ? !
Give the guy some help!
kabal using this trick to bankrupt them and then take the assets,,,,
I guess they actually did not mine paper gold... Too bad for them... More will follow before the paper PM ponzi collapses. But collapse it will, and when it happens it will be a collapse for the history books.
Let's subsidise it and continue fucking up our planet.
Btw who else predicts a bottom around 800?
Mission accomplished... Oil, Metals Mining, Coal, Natural Gas and Farming, the five dead horseman of Quantative "Market" destruction.
The data on gold miners average cost is slightly outdated
with the fall in oil production costs for many miners have fallen a bit, as well as all the non-USD miners getting a bit of extra reprieve from the strong USD lowering their local currency production costs.
Of course, all that said, it just means more miners can still take further falls in gold prices without going to the brink yet.
According to their Balance Sheet listed on EX-99.3 of their recent 8-K, the company had shareholder's equity of more than $707m, positive cash flow and current assets nine times the current liabilities. Yet the company filed for Chapter 11 with the bondholders trying to gain ownership from the current shareholders for $76 million.
This is broad daylight robbery carried out by the bondholders with the co-operation of the management. Is it any wonder that the current Allied Nevada shareholders are furious and outrage.