At $1,144.49/Oz. down just under $1 (0.91¢) Au had its lowest fall for some time, but its buddy (silver/Ag) came a long for the ride losing even more as a percentage. Now Hochschild (HOC's) All in Sustaining Costs for Ag are at 17.5$/Oz (a tad lower with the debt repayment my estimate is $17/oz.) its a wonder they have not sent their workers home and are buying it on the market to save a few $.
Now to save the face of a certain professional, I shall use this morning to point out the misunderstanding. Its asserted that HOC have saved $270M to improve the bottom line. There's no doubt as an investor/trader whatever term you need to use, savings made whilst maintaining production is always welcomed. Its akin to running a house at a lower cost as a basic example; this basic example is needed, because what is strange is this professional (and others) have failed to notice $22M of these savings are from suspension of the dividend.
There's limited cuts available now save for stopping production and the immediate impact of paying down debt, one assumes they'll claim that as a $2+ an ounce saving, akin to not buying washing power or detergent one week when its needed for the washing. Over to HOC to keep us abreast of their savings. HOC holders won't mind if they save a few quid by stopping production. Ironically this should be considered if the 18 month average Ag drops below their all in sustaining costs.
For those angry folk that were disappointed that yours truly hadn't headed to the nearest car park and hailed a victory to the longs as I learnt to fly, you were warned about HOC, like POG, like...and yet you choose to hug these shares in sheer desperation of a recovery. 150 pence was critical, 130 starting to tell the toll, 110 a sore lesson, sub £1 just silly, and circa 94-95 pence you really do need a mirror but there may be hope...not much but some.
The Ag market is, like the Au, needing volumes. Something that was thought to be coming and disappeared as fast as it came, even with the Indian Wedding Season. The main reason to ditch ones positions and ride the direction.
HOC admittedly have reduced their net debt to circa $365.952m as they did repay some in October ($114.9 million) out of cash resources that at the interims was $225.550m now $110m. What's ironic is if HOCs Inmaculada plant can gets commissioned on time the peso could just be their friend and the holders, with potential for a relief rally.
HOC, to their credit hedged 4,000,000 ounces of Ag at an average of $21.5/oz. Ag (Circa 20% of production (targeted 21m Oz. Ag)) and 33,000 ounces of Au at $1,338/ounce. This does assist but not much when the market is down at $15.31/oz (currently).
Avocet Mining (AVM) oblige us today with their third quarter results today, with everything reliant on the Carbon Blinding Circuit (CBC) to improve recoveries. Quite why a further Carbon in Leach (CIL) tank wasn't being considered before October is anyone's guess. The recoveries of 70% for Ag does not bode well and is reflected by the cash costs of $1,183/oz with guidance of $1200/Oz for the year. Quite why, when development is needed this company is unhedged is beyond sensibility, especially when considering AVM's cash costs, which are not disclosed as "all in sustaining." Should a company be unhedged in the current environment when requiring cashflow with the following (time for a picture folks):
Ignoring the fact their best cash cost period was Q1 2013, this company should have been hedged in Q4 2013 irrespective of the current cycle of gold. This is not hindsight, merely to ensure cashflow which is now "tight" at Inata. The only benefit in the short-term to holders being the lower oil/petroleum costs.
As such, this is one for the brave betting on some miracle of the CBC improving recoveries and AVM taking the post-it of their monitor with the live Ag price.
As such, this is one for the brave betting on some miracle of the CBC improving recoveries and AVM taking the post-it of their monitor with the live Ag price.
Having got off the phone with Li, whose main concern is the over supply of Iron Ore and the lower take up of loans including China’s small lenders pull back as economy slows, he sent me the following link Li Keqiang chaired a State Council executive meeting to determine the strengthening of policies and measures to promote the further opening of imported coal resource tax reform. It also covers the promotion of import and importation requirements on businesses...worth a read; grab a translator.
As Amara Mining's (AMA) Directors acquire some shares (but small fry), yet again, it makes you wonder if their bet (and mine) is correct...time will tell...John McGloin, Chairman and Chief Executive Officer acquired a few shares. Staying with that theme, Randgold's 3rd Quarter Results are out, suffice to say it clearly states in the unwritten segment they need to acquire lower cost, high grade prospects to develop to avoid a deteriorating shareholder list and bottom line.
Sadly or as some cheer, there is not enough time to consider the importance of yesterday's announcement by the Chinese Government to improve credit and support imports. Via Reuters China details measures to support imports as economy cools as the direct link disappeared to the article. With the Chinese economy normalising its with no surprise that in an effort to protect and adhere to growth the Chinese are proposing cutting by more than half the number of sectors restricted or off limits to foreign investors. Now who would have thought it!
No time either for the Iron Ore stories overnight, but as it looks similar to my ramblings of past, you can read it here, Chinese traders tip iron ore to hit $US70. My final thought goes to a child I dropped off home yesterday that asked me...Fraser, you know, you know with Ebola can I have chocolate before Ebola. Answers to Lotti aged 5...
Atb Fraser
Morning, any more chat from your 'lowlife' poster?! Thoughts on MRW today?
ReplyDeleteFraser- Hi- The sun is shining here too, but whats that Yankie saying about the sun shining and dogs---- hmmmm, here it is--
ReplyDeletehttp://clichesite.com/content.asp?which=tip+3071
Perhaps some of gold and silver investors need a bit of luck if they are overcommitted at this time.... I wont mention eggs and baskets at this delicate time, but your mirror offer is valid here too. My number 1 principal is Don't Get Greedy and this refers to overcommit to any one position. Its the one rule I don't break or even bend.
I did come across this article last week, which highlighted the fact that at least one silver miner was refusing to sell stock, preferring to keep it until it went over $17/oz again--
http://silverinvestingnews.com/26780/first-majestic-ceo-explains-decision-to-postpone-silver-sales.html
Either v brave or v foolish, given the continued drop this week -- I haven't looked at their cash position but perhaps they can afford to stockpile for a year or two, certainly most haven't got that option. Perhaps they need to face reality, stockpiling could really cause issues if they have got this price call wrong. And are they paid to gamble the whole company on the silver price turning ?? I doubt it and I would sell if I was holding there.
MRW seems to have rallied on the same basis as MKS today-- relief that their likely disaster is only a mess, their LFLs look v worrying but the mgmt are being given a free pass to turn the juggernaut around- both MKS and MRW will have to start performing soon, patience is v short in the business world.
Cheers. The Leggie
@Leggie, what's your connection with NXT? You clearly (judging by FT-AV-ML) possess great insight on retail and NXT in particular. Do you blog also? rgds
ReplyDeleteHi- no direct connection with NXT- I worked for HSBC for years and looked after some of their execs financial planning and we became friends. They are a v focused group, they work well together and they know their target audience, like all good retailers. And they are good fun too, but that's another story. I get the odd anecdote re the competition, MKS being one they like to highlight the tribal nature of their internal fighting, given the rivalry over the years. I don't blog, apart from my comments here and on FTML. No doubt NXT will now screw things up, but they guide in a conservative manner and often surprise on the upside. My type of company, as the bulk of my money is in a v v v long portfolio, which allows sleep at nights :-))
DeleteCheers. The Leggie
Leggie, do you have a spreadsheet like Mo? (He presented it on FT-AV-ML some time back, if you remember.
ReplyDeletesull24
sull24--No- sorry, I cant remember that- Mo again is a chartist which is not a religion I subscribe to but I do have a passing interest as I like to know when the chartist will be buying and selling, that's all. Those chartists have some pretty crazy ideas, as Mo has exposed in the past. Good luck to them all, they need it :-))
ReplyDeleteI would hope that charting tools are pretty readily available. I use fair value calculators which I helped develop in my HSBC days and I have kept re my portfolio. Unfortunately I cant provide them due to the parting agreement I had with them.
Cheers. The Leggie