kitcotodd@NSU -- trotsky, 14:53:51 07/11/07 Wed
contrary to Hambone, i completely disregard the political risk issue. imo the political risks to mining in Eritrea are probably far lower than in say, Montana (which has stopped all cycanide based gold mining cold, killing the huge CAU McDonalds project in the process).
as to the strife in the region, there are still unsettled issues between Ethiopia and Eritrea regarding their border, but the war ended in early 2000. it's really an inconsequential piece of desert real estate they fought over - now in a UN patrolled buffer zone. in 2002 international arbitration established the new border, and both parties officially accepted it - which admittedly means nothing. the possibility that the war recommences can't be ruled out in other words. i still think it poses less risk than being targeted by the environazi mafia in other localities. at NSU's Bisha project NGOs simply have no possibility to stir up unrest - because nobody's there. it's in a desert region.
once you get beyond the political risk fears (i repeat what i have so often said about this - the ONLY way to lessen the political risk factor is to have a diversified portfolio - ALL mining projects are subject to political risk, everywhere), you can progress toward checking out the deposit. it's one of the most impressive poly-metallic deposits discovered in the past decade. a high grade gold-copper-silver-zinc orebody, that begins extremely close to surface. the upper layer consists of about 1.1 m. oz. of gold grading about 7.5g/t., followed by a copper zone containing 750m. lbs. of copper, and a zinc-silver zone containing about 1.1 bn. lb. zinc and 10m. oz. silver. at present metal prices the project has an NPV of about $2bn. at 0% discount and nearly $1bn. at a 10% discount - which most certainly is NOT reflected in NSU's share price.
the Swedish mining concern Lundin agrees with me - it offered $5/share for NSU in a friendly take-over attempt last year, but NSU's management foolishly declined.
the project still awaits the final permits, but per the most recent company PR their discussions with the Eritrean authorities have made them confident they will be received shortly, and development of the mine has actually begun - i.e. the company has begun procurement of all long lead capital items (in other words, it will likely not take 7 years to get the mine up and running).
the Tabakoto mine in Mali, which is already in production has had a few teething problems, but that often happens when a new mine starts up. nevertheless, this is clearly a marginal mine - it'll produce about 90K-100K oz. per year, but to really boost NSU's bottom line, it requires a high gold price - which is a risk factor in case gold declines, but a huge share price booster if the gold price rises, as the mine's profitability will increase sharply in that case.
NSU has already taken the write-off, so the balance sheet remains untouched by any potential adverse developments in this case. in any event, it is Bisha, and the satellite deposits discovered around Bisha (two so far) where the real value lies.
as to the chart, it sure looks like it has bottomed (see the MACD and OBV divergences at the low).
stockcharts.com
so in summary, this is certainly a risky stock, but the current price more than reflects that, since it sure does not reflect the value of Bisha.
# @pm stock sentiment -- trotsky, 10:45:12 07/11/07 Wed
as of today, the XAU put/call open interest ratio clocks in at 1.76, only 0.01 below the new high reached yesterday. altogether nearly 86,000 put contracts are open, which is a record.
meanwhile, the cumulative Rydex pm fund cash flow ratio has fallen to yet another new low yesterday, at 114 points (the fund suffered nearly $5m. in outflows yesterday alone). Rydex traders are in fact selling the rally. note please that while this is a good thing from a contrarian standpoint as it denotes strong skepticism, we want this pessimism to eventually unwind.
in other words, for the rally to get legs, these outflows must turn into inflows at some point.
# @Ueber-CIGA Monty Guild -- trotsky, 10:02:46 07/11/07 Wed
so Monty thinks 'oil is tight NOW?' - how come then that US crude oil inventories are at their highest since 1998?
Monty thinks 'strong economic growth is good for gold?' - nope, it isn't. gold does best when economic growth falters - especially the one gold price that truly counts, namely the real price.
Erle@mortgage mess -- trotsky, 01:57:35 07/11/07 Wed
i don't know if it's been mentioned - didn't get around to reading the board today - but the ABX index for the CDS on AA rated early 2007 vintage pools has also joined the merry free-fall parade in recent days. meanwhile, the sub prime and Alt-A reference indices are plumbing fresh lows as well.
what this proves is that the contention that the bust would eventually eat its way through to higher rated pools/tranches is now becoming a reality.
in addition, CMBX spreads are blowing out to new wides, and lower grade corporate debt pool spreads have also been in a sharp uptrend since late May. interestingly, today the Yen also soared.
from my vantage point, all of this looks like TSHF , like right now (unless all of this garbage magically bounces as of tomorrow and the yen pipes down again).
meanwhile, the dollar index is back on death watch, although it must be said that the spec. short position against the dollar is truly vast - only rivaled by the one in the Yen.
so we're getting ever closer to the 'interesting times' segment here. today banks, brokers and retailers got whacked badly. and it sure didn't look like that was going to be all. the retailer plunge is especially noteworthy - since they had resisted the notion that the consumer may be with his back to the wall until now. no longer. |
