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A comprehensive look at gold throughout this year

May 13, 2016

With gold and the US dollar moving up today Cory and Doc take a close look at what the future holds for gold. They address the fact that pundits have been looking for a pull back but it has not come yet. Is $1,150 off the table?

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Discussion
39 Comments
    B
    May 13, 2016 13:16 AM

    OpIcarus: Anonymous hackers shut down Bank of England, call for ‘online revolution’

    Hacktivist collective Anonymous has launched cyber-attacks on major financial institutions across the world, including the Bank of England, in order to “start an online revolution.”

    Hackers affiliated with Anonymous also claimed to have shut down several international banks over the past four days, including the National Reserve Bank of Tonga, the Federal Reserve Bank of Boston and the central banks of Sweden, Myanmar and Laos.S1ege, who is thought to be a member of the Ghost Squad branch of Anonymous, said

    the focus of future cyber-attacks will be “NASDAQ, NYSE and Paypal.”

    According to IBTimes, none of the institutions subject to attack have disclosed the extent of damage.

    While some banks were taken down for only a few minutes, others were left offline for hours.

    More risk than just the mine management and price etc.

    Rickards is sure right, a big advantage to gold is it is not digital.

      May 13, 2016 13:20 AM

      Anchovies are not digital either.

        Tad
        May 13, 2016 13:49 PM

        Lets start an anchovy index.

      May 13, 2016 13:33 AM

      Don’t worry – the new Doom game is out today so the hackers probably will spend the next few months playing that.

    B
    May 13, 2016 13:19 AM

    Doc
    Do you figure your summer doldrums is still the time to buy PM shares?
    or is that kaput now?

      May 13, 2016 13:49 AM

      B; I plan to be buying all summer even if gold and silver trend sideways—of course, it’ll be on a selective basis depending on charting. I hope to be just about “all in” by the end of the year.

    May 13, 2016 13:27 AM

    Hey gang,
    can anyone tell me why Primero Mining Corp P:TSX is getting so much love from the TD analysts? Has yet to pop over there 200….but that could be like Scorpio, but with a much larger scale….Matt/Dan/Doc/Excelcior?

      May 13, 2016 13:33 AM

      I wonder if TD thinks PPP will win their dispute with the Mexican tax men?

      May 13, 2016 13:53 AM

      Confused, it could be because it appears they’re ramping up production in the 2nd quarter and some of their production issues appear to be behind them. This isn’t investment advice but I’ve been purchasing some shares down here and will probably increase that before their next quarter report—I purchase whenever they have a week where the lows approach the lower BB. PPP is one of those rare companies that have not shared in the big upside of a lot of these companies but once they put the tax issue behind them, they may then make a run. I love this kind of a risk/reward play where most wait—-.

        May 13, 2016 13:56 AM

        Doc,
        They also have a pretty deep bench when it comes to the board and management

        May 13, 2016 13:57 AM

        Thanks!

      May 13, 2016 13:25 PM

      Primero will have more share price leverage to rising gold price because its percentage of profitability will increase more than other more ecomonic mines already more profitable that may just see a little further bump on $100 addition to Gold.

      Primero has not really had as big of an uptrend as many other miners due to their economics, but higher metals prices will put them back in the ball game.

      Here is some recent analysis of their financials for some insight into why it hasn’t fare as well as some of it’s peers, and the tax issue has been a noose around their neck limiting gains. It looks like they may be ready to turn the corner and charge higher if Gold does in fact get up into the mid to high $1300s. If gold pulls downwards though…..?

      ________________________________________________________________________

      Primero Mining Corp. :PPP-US: Earnings Analysis: Q1, 2016 By the Numbers
      POSTED BY CAPITALCUBE ON MAY 9, 2016 IN EARNINGS ANALYSIS, YAHOO FINANCE |

      Primero Mining Corp. reports financial results for the quarter ended March 31, 2016.

      Highlights

      Summary numbers: Revenues of USD 50.54 million, Net Earnings of USD -13.17 million.

      Gross margins narrowed from 15.23% to -12.67% compared to the same period last year, operating (EBITDA) margins now 8.70% from 30.57%.

      Change in operating cash flow of -156.36% compared to same period last year is about the same as change in earnings, likely no significant movement in accruals or reserves.

      Narrowing of operating margins contributed to decline in earnings.

      The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

      2015-03-31 2015-06-30 2015-09-30 2015-12-31 2016-03-31
      Relevant Numbers (Quarterly)
      Revenues (mil) 73.31 67.37 79.22 71.4 50.54
      Revenue Growth (%YOY) 51.88 -15.44 4.92 0.33 -31.05
      Earnings (mil) 3.58 -6.74 -5.4 -98.35 -13.17
      Earnings Growth (%YOY) 139.44 -1279.02 94.9 10.56 -467.52
      Net Margin (%) 4.89 -10.01 -6.82 -137.74 -26.06
      EPS 0.02 -0.04 -0.03 -0.6 -0.08
      Return on Equity (%) 1.91 -3.59 -2.89 -56.43 -8.19
      Return on Assets (%) 1.41 -2.64 -2.13 -40.64 -5.8

        May 13, 2016 13:34 PM

        Here is another gem of a Turn-around story that is still flying under the radar of most Gold investors = Jaguar Mining.

        They have been through 5 years of hell, hit rock bottom, restructured, came out of credit protection with 3 producing mines at 2 big mining complexes, and a 4th mine at a 3rd mining complex on care and maintenance awaiting higher metals to restart. They have made great strides in reducing their costs and getting more and more lean and finally got things under the costs of spot gold the last few quarters.

        This is why I’m looking to buy the Gold or polymetallic producers, that are the “best of the worst” as Matthew and I have discussed on here before. Perseus Mining is another one that has higher cash costs, but has been lowering them like crazy, just acquired Amarna, and will be starting their next mine into production later this year or in early 2017.

        Anyhoo…….here is some recent info on Jaguar Mining showing their improvements in cost and efficiency, and when the marketplace realizes this and they start benefiting from rising metals prices, then watch out as this stock could kick it in gear.
        _________________________________________________________________________

        Jaguar Reports First Quarter Financial Results, Company Positioning for Strong Production and Growth; Increased Operating Cash Flow, Cash Operating Costs of $742 and AISC of $1,061 in Q1 2016

        Toronto, Canada, May 10, 2016 – Jaguar Mining Inc. (“Jaguar” or the “Company”) (TSX-V: JAG) today announced operational and financial results for the first quarter ended March 31, 2016. The Company’s Financial Statements and Management Discussion & Analysis are available on SEDAR and on the Company’s website at http://www.jaguarmining.com. All figures are in US dollars unless otherwise expressed.

        —-> Q1 2016 Highlights

        – Consolidated gold production of 21,197 ounces based on a 15% increase in average head grade to 3.78 g/t and 90.2% recovery compared to 21,336 ounces, average head grade of 3.28 g/t, and 89.4% recovery in Q1 2015.

        – Turmalina gold production increased 34% to 15,772 ounces with higher milled tonnes and a 19% increase in average grade to 4.29 g/t, compared to Q1 2015.

        – To position for sustainable production and growth, the Company increased investment in mine development in Q1 2016; primary development increased 65% to 1,161 metres and secondary ore development for stoping preparation across all mine sites increased 242% to 1,046 metres compared to Q1 2015 primary and secondary development of 705 metres and 306 metres respectively.

        – 11% decrease in consolidated cash operating costs (“COC”) to $742 per ounce of gold sold, compared to $831 per ounce of gold sold during Q1 2015, on track to meet 2016 guidance of $700 – $750.

        – 8% decrease in consolidated all-in sustaining costs (“AISC”) to $1,061 per ounce of gold sold, compared to $1,150 during Q1 2015.

        – Increased operating cash flow (excluding tax refunds) of $8.6 million compared to $6.1 million in Q1 2015.

        – Cash and cash equivalents of $18.0 million at March 31, 2016 compared to $15.3 million as at December 31, 2015.

        – Completed 11,892 metres of definition, infill, and exploration drilling in Q1 2016, up 33% over 8,968 metres in Q1 2015. Consolidated Mineral Reserves increased 34% to 357,000 ounces with a 9% increase in grade to 4.82 g/t Au across Southern Brazil operating mines. M&I Mineral Resources remain strong at 1.1 million ounces grading 4.45 g/t Au.

        – Pilar Mine Mineral Reserves increased 310% to 172,000 ounces of gold, after depletion, exceeding reserve replacement targets.

        —> 2016 Key Growth Drivers

        *Completing 2016 capital investment program to increase number of available working areas through increased development and exploration to grow sustainable production across all operating mines. Capital investments funded through operating cash flow during first half of 2016 with capital spending set to reduce in Q3 and Q4 2016.

        **Growing mine production, increasing throughput and reducing cash operating costs towards lower end of 2016 cost guidance.

        ***Commencing mine-wide Operational Excellence Program (“OEP”) at Turmalina Gold Mine to identify and eliminate waste, lower costs, and improve productivity to create and deliver results, which will drive future growth.

        May 14, 2016 14:27 AM

        Thanks for the great posts today!

    Tom
    May 13, 2016 13:35 AM

    Doc:

    Thoughts on the Vix? Weekly Vix a buy?

      May 13, 2016 13:56 AM

      Tom, not investment advice but I’m short this market and the Chinese market. It looks like the close on the conventional markets today will put it at risk next week.

        Tom
        May 13, 2016 13:16 PM

        I agree with you. As always, thanks for the perspective. I think we tumble next week and it could be a big tumble.

    May 13, 2016 13:13 PM

    OK, stupid question here folks – why continue to buy into individual miners over the summer and not just go all in on a handful of etfs such as GDXJ, GDX, etc, etc.

    Do you all perceive that individual miners will outperform the PM etfs?

    I suppose the follow on question is… if you believe that gold is going to continue to rally then why not just go into the NUGTs and such-like?

      May 13, 2016 13:59 PM

      I have 80% in selected miners that I have researched and selected based on my own criteria (Grade, LOM, Location, etc), 10% in ETFs that I trade in/out (SILJ, GDLX) and 10% in cash.

      Looking at my portfolio, I would have missed out on about 35%-50% additional gains if I just bought ETFs.

      Hope this helps

        May 13, 2016 13:18 PM

        Agreed Brian. I occasionally pick up ETFs or PM Funds from time to time to play a mid term macro trend in the miners, because a collection stocks is “safer” than an individual stock risk. Having said that most of my funds that are applied to investing in the mining sector are in individual stocks because my investing goal is to make larger gains than the ETFs and I do fairly regularly.

        Investing in individual stocks still involves more implied risks, but when you find companies at the right point in their cycle, and that are severely undervalued on many metrics, then I see that as less risky many instances, with more potential upside.

        Case in point is that most of the biggest gains I had since the beginning of the year in Gold and Silver miners were in the small producers and near-term producers that hadn’t been getting much fanfare prior to when they started smoking the ETFs over those periods and caught most investors out of the game.

        In contrast to most sites or news stories, many of the contributors here on the KER were discussing most of these winners in the Silver miners, Small Gold producers, and exciting development stories where their share prices went up 200-500% from the Jan 19th bottoms to the recent highs.

        The ETFs didn’t get anywhere close to the individual stocks many on here were invested in, even though they did have fantastic gains. Now, the 3x leveraged ETFs did keep pace with the individual mining top percentage movers. That just shows you that select individual miners, during certain phases of their business or due to a technical price pattern, can have substantial torque to make startling gains, and to outperform the spot metals or ETFs or Index averages.

        There is the caveat that only a small portion of the miners will do this on any given rally, some don’t kick in until half way through a cycle, so you need to keep an eye on the horses you bet on.

        There are certain development stories that will peak prior to production or after going into production, but then pull back and so there is some degree of staying up to date with announcements on a company. There are some companies that surprise the market with their increasing production profile, or revenues/free cash flow as a result of lowering costs, or by announcing much lower AISCs. Often times they gave foreshadowing of the coming changes an entire year earlier, and each quarterly review of activities. If you follow along and see the trend of improving revenue and lowered costs, then it is easy to see where the company is overdue for a higher valuation than it’s peers will receive. Then there are companies that forecast far in advance their desire to sell an asset for good value or a strategic JV they are in, so if you get in before it happens, and then sell the news when they do finally sell the asset or merge, etc…. then you make an out-sized gain.

        Also, it is important not to get married to a company if something big changes in their outlook or throws a wrench in the gears. Mining is one of the riskiest and more difficult businesses on the planet…..it’s not an ice cream stand. So sometimes, companies go off the rails from an outside influence or due to bad management decisions, bad timing, bad finance raises, challenging environmental issues, union strikes, changes in the political environment, changes in currency, changes in taxes….. and on ….. and on……

        There are times to take profits in one area (like after a merger) and rebalance into one of the companies on your watch-list when it is going to be their time to shine next.

          May 13, 2016 13:37 PM

          I didn’t think that response was long enough so I wanted to add one more thing… 🙂

          I just beat on the drum for choosing individual stocks with the PMs, because I like to follow the stories, and hunt for the winners. It’s the same story with Uranium miners that beat URA, or the Lithium miners I picked that beat LIT, etc…. Individual stocks often cream the ETFs, but it is a lot of work and research, that many don’t like or have time for.

          Having said all that, I’m actually a big fan of ETFs for investors that don’t want to spend all the time and do the technical and fundamental analysis on individual companies, or may not feel comfortable with the risk of holding only a handful of individual stocks in a given sector.

          I use EFTs with the many other sectors where I don’t really follow the individual stocks closely enough (like Emerging Markets, Biotech, Healthcare, Renewable Energy). Then there are instances where I don’t want to chance a short-term set up on for a move up/down in the Gold Miners so I’ll use JNUG/JDST for trading the Jrs, or I’ll use DWTI/UWTI for playing a oil directional move, or XLE and XOP for the oil companies.

          ETFs definitely have their place and can give investors instant access to a sector where there is an analyst rebalancing the stocks for you. There is value in that for sure.

            May 13, 2016 13:48 PM

            One last thing is that ETFs are often easy to remember and so you can shovel money into one of them quickly if you think there is trend setting up and if you haven’t had time to decide what companies you want.

            NUGT or DUST are easy to remember for the larger Gold miners.

            SOIL for agricultural and fertilizers

            TAN for Solar companies, FAN for wind companies

            HACK for cyber security

            RUSL for Russia Long or RUSS for Russia Short

            Sometimes it less stressful to just pick a sector ETF and trade the trend correctly, without the potential detours and side-tangents that an individual company can take.

            May 13, 2016 13:56 PM

            Excellent posts, EX !

            May 13, 2016 13:32 PM

            Thanks Brian – Sorry, once I got geared up it got a bit long-winded (shocker…) 😮

            May 13, 2016 13:46 PM

            Rich post as usual, Excelsior!

            Speaking of some of these industrial commodity ETFs as well as some EMs. In the next week or so, they are going to get a serious bid! Either liquidity through infrastructure funding or money from the European and American markets come rushing in, or both! But something’s going to get a fire lit with this stuff! Maybe next week, but for sure real soon😳

            May 13, 2016 13:02 PM

            Yes Chartster, I’m getting interested in reviewing the Emerging Markets again and may start positioning in some of the ETFs. I’m watching what the US dollar has been doing and what Dr Copper has been doing lately to get feel for the industrial metals.

            At the present I’m undecided on the industrial miners, but there are a number of interesting Copper/Gold/Base Metal companies I am nibbling at and watching regardless because I think they are making good progress and present interesting opportunities. The PGM miners also have my interest and have for the last 6 months, and they straddle the PMs and Base Metals as a form of semi-precious industrial metals. Then there are the many specialty metals of which a few companies have my bid and my attention.

            The next 6 months is going to be fun….

            Cheers!

          May 13, 2016 13:40 PM

          Great Points,Excelsior

            May 13, 2016 13:49 PM

            Thanks Pete. Welcome to the Weekend!

    May 13, 2016 13:36 PM

    If banks can be disrupted by hackers or worse I would think relying on electronic money or other non physical investments is unwise.

    May 13, 2016 13:17 PM

    Hi Cory and Doc
    Doc, if you look at a long term chart on SLW,is that a big inverse head and shoulders pattern?
    And if it is,how do you think it will move from here?

    May 13, 2016 13:25 PM

    Way off topic but this is very good:

    Afraid of President Trump? How About Presidents in General

    https://www.youtube.com/watch?v=rg6qM3cnVhQ

      May 13, 2016 13:39 PM

      Matthew, Republican or Democrat we must understand that the forces that get elected always do it on a premise of giving us more social handouts. We as a people need to realize we will never be in the sight of the day when poverty will be banished from any nation. There is no guaranty against poverty equal to a job for every man. Prosperity only happens when you have people in power who understand business. Then and only then will you have prosperity. DT

        May 13, 2016 13:09 PM

        DT, “a job for every man” is best provided by the free market. More government equals more poverty. Nothing delivers prosperity to more people better than the free market.

        Tom and Michael provided the best reasons for supporting a minimum wage.

          May 13, 2016 13:04 PM

          Matthew, you must have a government that is business oriented, you can’t simply go back to the days of prohibition, we live in a different world. Rules and regulations are strangling business dynamics and these can be changed by having a business friendly government in place.

            May 13, 2016 13:18 PM

            DT, tiny, unobtrusive government is the most “business oriented government” there is.

            Yes, rules and regs are strangling business and the economy for the vast majority of the population but not for the connected few. No candidate, including Trump or Sanders, will do anything to disrupt what the cronies in big business and government have going.

            The biggest and most powerful businesses hate free markets as much as governments do and love the favors and protection they get from government. Left or right, most people just don’t get it and never will.

    Tad
    May 13, 2016 13:58 PM

    Anyone got any views on Patriot Gold? May dump it.
    Been holding it for a while and it’s done pretty much nothing…
    They have a JV with Hecla.

    May 13, 2016 13:44 PM

    Al, Doc, and the gang, what kinds of physical gold and silver do you recommend for accumulators? Eagles, Maple leafs, bars, 90%, semi-numismatic etc. is there an advantage of one over the other? Thanks.

    May 13, 2016 13:15 PM

    Any comments on this week’s Gold & Silver COTs is appreciated.

    If I am interpreting correctly, it looks like a slight reverse in direction for the GOLD Commercials