Date: Thu Sep 08 2005 10:51
trotsky (@BGO, XAU) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
a lot of commentary lately about the risks and potential pitfalls associated with BGO, not to mention its colorful past of disappointing expectations and so on, but i note that the recent capital raising exercise doesn't seem to have hurt the stock price any. this is remarkable because it's the first time in a long time i remember an equity issue by BGO NOT resulting in the stock giving back ground ( also, previous equity issues were greeted with selloffs regardless of what the gold price did at the time ) .
it seems to me that the company-maker mine isn't getting the credit it deserves. Kupol may be in a difficult to access region beset by political uncertainties ( which i however rate as rather negligible at this point ) , but the fact remains that it has grades and continuity that represent a gold geologist's wet dream. note that provided everything goes as planned, this mine will sport the one of the lowest production cost profiles in the industry, comparable to GG's Red Lake and MDG's El Penon - and production of 550,000 oz. p/a at a cash cost of $47/oz. and total cost of $88/oz. really isn't to be sneezed at. furthermore, the recent drill results indicate that the deposit remains open to reserve additions and that a secondary orebody is present at greater depth. keep in mind that this is already the biggest epithermal gold deposit EVER discovered ( by way of explanation: epithermal deposits are hosted in volcanic rock, and tend to lie very close to surface ) .
in addition, BGO's current 'white elephant' Petrex in South Africa is probably discounted completely by now, and still offers upside potential if either the planned reorganization ( combining the underutilized Petrex mill with nearby operations owned by other producers in order to get costs down ) succeeds or the Rand weakens - both of which of course have yet to happen. otoh, if BGO proves unable to come to grips with Petrex it could conceivably sell or spin off that operation at a later stage - i doubt it will be on anyone's mind once Kupol gets going.
lastly, there's still Cerro Casale. no-one knows of course how long it will take for this project to get off the ground, but if the long term projections about China's and India's bids to become fully industrialized nations pan out, the world will need several more large copper/gold porphyries to come on-line, and Cerro is one of the more obvious candidates.
lastly, expect the boys to vigorously defend the September 100 call strike in the XAU - they've already had to give ground with the 95 and 97.5 strikes going into the money, but the 100 strike has considerable OI in the October series as well, so there's an even stronger motive to keep the XAU below this strike. imo it is no coincidence that pm stocks that are NOT optionable have begun to perform a bit better than their optionable brethren here.
Date: Thu Sep 08 2005 08:50
trotsky (@Indonesia) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
as recently observed, that's the left-of-field crisis that no-one's been watching ( including the simmering fiscal debacle in the Philippines ) .
get this: Indonesia, an OPEC member, trips over its oil bill. of course it has become a net importer of oil, something few people have noticed as well.
recall the crisis of 1998: one of its triggers ( or rather, not a trigger, but a reinforcing factor ) were TOO LOW oil and commodity prices ( major exporting nations such as Russia saw their forex reserves dwindle well below the comfort zone , and the desperate measures to halt the collapse were too little too late ) . now we seem to have the opposite problem - emerging economies are hit by too high oil prices ( Indonesia also has to deal with subsidizing prices internally, in order to keep social unrest at bay, a problem Iraq is battling with too - ironically also a major oil producer ) , and it is not difficult to see that Indonesia will likely not be the only one.
emerging market debt, along with junk debt of all sorts, has become a major playing ground for hedge funds and other reachers for yield. the risks have been ignored with amazing thoroughness - after all, so goes the theory, the herding events that create several sigma market dislocations are rare, and have always been survived and replaced with even more excessive risk taking shortly after they concluded. that is of course not synonymous with 'they won't happen ever again' - on the contrary, they will happen and will get more and more severe, as imbalances continue to pile up.
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