Kinross+TVX=million oz. loser!?
Both companies are struggling with high costs and production problems, especially Kinross. It doesn't matter how much one hates Macassa, the mine still accounts for 1/6 of the company output. The
US mines, especially Delamar, as well as the Golden Kopje in Zimbabwe,
are equally troublesome. Kinross stated recently that it was looking
for a buyer for Kopje. But who would want to even take for free, let
alone buy, a mine with dwindling reserves and a cash cost in excess of $400, at current gold prices? Furthermore, central banks have finally
decided to shun gold for good. Any runup to even $370 will be met with selling. EU or no EU, the banks are simply fed up with gold. Gold has
underperformed even money(dollars) under the mattress over the past 15
years. For them, it is dead obvious that it is better to use gold to pay off their national debt, which carries interest, or buy US t-bills, which also carry interest. (It's like an ounce of gold going up $30/year, guaranteed!) Furthermore, the US just came out with a balanced budget amendment, and many other countries, such as Canada and the UK, are following up with similar measures. Unless a meltdown of horrific proportions takes place in the US stock market, Gold will not budge from its current price. Even in that case, 400 is simply unbreakable. Period. Central bank selling will simply stop any rally in its tracks, not to mention producer selling. With so many fundamentals against it, gold is simply dead, or in a severe coma.
In the best of scenarios, I see gold rallying back to $375, carrying Kinross to $10. Then, I would simply buy some puts and watch Kinross
hurtle towards $1. Even in a market collapse, gold is no longer the place to hide, for big mutual funds like Fidelity own huge stakes in Kinross. As they liquidate to meet redemptions, Kinross is an obvious target. If you're bottom fishing, then wait at least for the stock to sink below $5. I'm looking at this one, but there's no way I'm buying at these prices right now. I will make no further posts here until I'm bullish again on the stock. Until then, good luck to everyone!
Regards,
Ming |
