Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: ild who wrote (46026)	11/23/2005 11:49:57 AM
From: ild	Respond to of 110194

Date: Wed Nov 23 2005 11:14 trotsky (Aurum@GSS hedges) ID#248269: Copyright © 2002 trotsky/Kitco Inc. All rights reserved apparently Sinclair's paranoia and fear-mongering have impressed you too much. need i remind you that he previously promised us that the whole gold world would be in flames if gold traded only 1 cent above $354? and what happened, except NADA? hedges of the sort GSS has entered into are usually a condition of project loans - there is little that can be done about that. as to what happens if e.g. gold goes to $1,000 next year ( highly unlikely by the way ) , probably not much. the hedges are only a small part of GSS's production and reserves, and they can always buy calls at a higher strike to mitigate the opportunity cost. this is not to say that i'm happy with these put- buying-financed-by-call-selling strategies ( for obvious reasons ) , i only want to point out that you worry too much. the implications are not as dire as Sinclair suggests. of the 90K call options GSS sold ( strike $525 ) , 15K expire this year, 60K next year and 15 K in 2007. iow, we're actually looking at only 75K oz. spread over the next two years, while GSS production is set to rise to 500K oz. per year over the same time frame. so in the event that gold rises over $525 in this time frame, only a small portion of production stands to be sold at less than spot, and that price will still be $35/oz MORE than the current spot price, i.e. a very comfortable margin. Date: Wed Nov 23 2005 10:19 trotsky (@morningstar) ID#248269: Copyright © 2002 trotsky/Kitco Inc. All rights reserved and this is supposed to be an analysis? example: "DRDGold ( NasdaqSC:DROOY - News ) Mining gold in South Africa is a high-cost business that started more than a century ago. As more gold is mined, mines get deeper and costs generally rise. In addition, older technology and strong labor unions in South Africa also contribute significantly to the high costs prevalent in that country. Even by South African standards, DRDGold is saddled with relatively high cost and older mines. While recent efforts at operational improvements mean that DRDGold is less of a "cigar-butt investment" than before, we do not think the company is out of the woods. Even with all the improvements, we still expect the company's cash costs to be more than $300 per ounce, compared with the industry average of around $250 per ounce. For DRDGold to consistently turn a profit, gold must trade at prices comfortably above the firm's operating costs and relevant currency-exchange rates must cooperate. As a commodity producer, DRDGold has little influence over either of these factors because it is a price-taker in both the gold and the foreign-exchange markets." well, first of all, about 65% of DROOY's market cap now consists of its Australasian operations. this can be seen by looking at the Emperor share price in Sidney , multiplied by DRD's 90% stake. regarding the 270K oz. of production and 4m. oz. of reserves remaining in South Africa, those are valued at less than half of e.g. HMY's assets, in spite of the fact that HMY's production costs are actually higher. in fact, the valuation of DRD's assets, whether in SA or in Australasia is at a more than 50% discount to its industry peers! this is in other words currently one of the cheapest mid tier producer stocks on the market - and it has seen its margins expand recently. the 'industry average' for producing an oz. of gold is at $250/oz. ? wish that it were so! i think that number is from 1999. these guys haven't analyzed spit - they don't even mention the Autralasian assets, plus they have clearly not looked at industry-wide valuation parameters like oz. of production or oz. of reserves. in these terms, DRD is one of the cheapest stocks around. however, i know what they have probably done - they've looked at other analyst's ratings instead of doing any work of their own. the fact remains, if DRD were not beset by the 'we all hate DROOY' discount, it would instantly rise to $3 to merely be valued similarly to its industry peers. numbers: DROOY valuation per oz. of SA production: $630/oz. ( HMY : $1630/oz. ) SA reserves: $42/oz. ( HMY: $145/oz ) note also that DRD's resources a Blyvooruitzigt alone amount to about 20 m. oz. - i'm not sure how much of this will be converted to reserves due to the higher gold price, but it's a good bet that the SA reserve base will be rising, which means the valuation per oz. of reserves is even lower than suggested above. valuation per oz. of Australasian production ( based on the 90% of Emperor's market cap ) : $760/oz. note: most mid tier producers are valued at $1,500 per oz. of production MINIMUM ( i.e., that's the low end of the range, which is to say that even DRD's best assets are valued at less than half of the low end of the valuation range ) . verdict: ignore morningstar - or better even, buy whatever they pan. if their other analyses are as shoddy as this example, they're certainly not worth listening to. Date: Wed Nov 23 2005 09:38 trotsky (drats...) ID#248269: Copyright © 2002 trotsky/Kitco Inc. All rights reserved the mythical 'al-Zarquawi' got away again by the skin of his teeth...and we still only have a few grainy black&whites of a grim looking bearded turban-wielder. but not to worry - we killed all 717 of his second lieutenants. they're desperate now. desperate as they are, the violence may well intensify in the short term...you know how it is. typical of an insurgency in its last throes.

To: ild who wrote (46026)	11/23/2005 3:13:21 PM
From: ild	Respond to of 110194

HOUSTON (Dow Jones)--U.S. Gulf of Mexico oil and gas volumes suspended a result of recent storms showed little improvement on Wednesday, according to data released by the federal Minerals Management Service. Some 615,623 barrels of oil a day, or 41% of daily Gulf oil production, remained off line, an MMS release said, down from 41.4% on Tuesday. Shut-in natural gas volumes stood at 3.20 billion cubic feet a day, or 32% of the region's gas output, down from 32.2% on Tuesday. Most of the shut-in production is located on the New Orleans offshore district, heavily affected by hurricane Katrina. The Lafeyette and Lake Charles offshore areas, struck by Hurricane Rita, also contain significant shut-in oil and gas volumes. Cumulative oil production shut-in since Aug. 26 - when Hurricane Katrina triggered the first wave of evacuations in the Gulf - reached 91.7 million barrels on Wednesday, or 16.75% of yearly Gulf crude oil output. Total lost natural gas production amounted to 473.54 billion cubic feet, or 13% of the region's annual gas output. About 134 platforms remained evacuated, one fewer than on Tuesday.