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It's no use using an index til you look under the hood.
I went and downloaded the Excel for GDXJ today, did a sort by position value in $, and then went through and looked at the chart for every single US and Canada stock. (Some of the Londons and maybe even a few Aussies might be cross-listed on the TSX, but I'm not interested in hunting down symbols - this is a first approximation study).
Then I highlighted all the stocks whose charts look good - i.e., the stock price goes up. And I highlighted all the stocks whose charts look bad - either a collapse post-PDAC, a swan-dive in the past couple days (FVI's an example, but there's a few other surprises), or even a simple impersonation of the slow downward spiral of Kinross or Agnico.
Out of 64 US/CDN stocks, 8 look good. BTO, CGG, AR, RIO, SSL, MAG, TRX(US), and EOM.
34 suck: SVM, RMX, KGI, ARZ, NSU, CGA, CSI, FVI, XG, RR, AVR, TRR, SGR, LSG, SBB, JAG, ITH, GBG, OK, SUE, GPR, BCM, KGN, GUY, RIC(US), ATC, SPM, LYD, ORE, P, GCM, CAN, BRD(US), and MDW(US).
The remaining 22 are pretty much blah. Not collapsing, but not looking particularly good either, some just hanging at support, and none really informative by my own instantaneous subjective interpretation.
So, here's the question:
Why do the 34 suckers suck?
I know some reasons for a few:
GUY - will never be a mine
ATC - will never be a mine
ITH - might never be a mine?
SBB - might never be a mine, and its royalty stream might never be a mine
XG - might never be a mine, but we can't tell cos their PEA was a FS... or something?
SVM - never had a mine to begin with - come on, can you really trust the Chinese?
BCM - Would have been a mine but Ollanta Humala took it away. Though it was Garcia actually, not Humala.
AVR - good golly, it's Mali.
So what are the reasons for the others? - Note: I'm not looking for answers along the line of "management are morons", although of course we're all friends here and I'm sure we'd all like nothing more than to kick a few shrivelled & wobbly CEO 'nads. No, let's be entirely serious today: I'm interested in material explanations, along the lines of "their pre-feas came in uneconomical" or "their quarterlies keep proving they can't even mine $1600 gold at a profit".
Cos I'm trying to figure out why the GDXJ might continue to puke, or why it has been puking, despite my old refrain of "silver's at $31 and gold's at $1620, and India & China want more, so what's your problem".
If GDXJ is collapsing, I thought last night, it might be because all the speculative premium is being drained out of all the explorer prices. ATC, then SBB, then GUY, now BAT, have all become apparent non-mines. So they don't get valued at $50/oz now, they move towards a new target of $0/oz.
Or maybe, with the economic deposits (as Brent Cook will never stop saying, Lydian is definitely going to be a mine and get bought out), it's fear of a liquidity crunch meaning people jump ship before the next capital raise?
And as for the real miner stocks (hard to find real miners in the "junior gold miners ETF"), maybe it's capital cost escalation?
So, let me know what you think in the comments. They won't all get posted immediately - I'm hoping to be kinda busy this afternoon - but by tomorrow they'll be up and we all can begin to puzzle out what the problem is with the miners... uh, and explorers, as above.
Unless it's all down to the coming doooooom, of course....
I'll get the ball rolling as I think this is a good exercise:
ReplyDeleteTimmins -- Canaccord has a hate on for them and takes every opportunity to label them a sell
Golden Star, Brigus - can't make money at $1600 gold
Richmont - terrible PEA, and yet they still want to sink another $15M into the project.
Primero - market seems unhappy with the lack of consistency of production/grade. nevermind that they make a ton of $, and have a ton of $.
"Canaccord hates them" is no excuse btw.
DeleteNSU -- Nevsun
ReplyDeleteThe Good: Company has a market cap of ~$660-M, $347-M in the bank as of Dec. 31st, initiated a dividend of 5C/share, announced a share repurchase program, produced 379K oz of gold in 2011 at a cost of $295/oz.
The bad: Issued 2012 production guidance for 190-210K oz of gold... only half of what they themselves had predicted, their only mine is in Eritrea, have to use much of 2012 gold profits to enable transition to an equally lucrative long-life, high-grade copper mine.
The ugly: Current share price closing in on 52-week low.
What's the supposed NAV for this mine, at say $1200 Au? That might be good info. Cos really it looks like a lot of miners - actual miners - ain't getting no respect for their NAV. I guess you'd expect that, given NAVs seem to be collapsing recently into unprofitability (GUY, BAT, Meadowbank, Tasiast).
DeleteI can see the problem from an EPS model standpoint, since 397Koz at (say) $1200 profit means market-cap-minus-bank is about, oh, 80x EPS. Or something.
And to push a bit further here:
ReplyDeleteMickey and Brent and everyone love to rant about things not ever becoming a mine etc. this may be very true (*is* true in many cases)--but that's not the point here.
The point is that most people are stupid, and will invest in anything for almost any reason--- gold being $1600+ and silver at $30+ should be reason enough for WAY more people to be throwing money at WAY more projects. This sector should be in blast off mode just by virtue of the amount of money *good* companies can make---that should be enough to entice people into this space in droves---it's basic risk vs reward + spillover effect
So where's all the money? AAPL.
The end
OK, well, maybe the stupid people DID throw their money at the miners over the past 2 years? And now they're unthrowing it? And they're not coming back now cos Apple actually makes something and earns $80/share. Maybe the investors have become less stupid, and crap valuation will be the new normal for miners again.
DeleteBrent says "I want to sell my shares to someone smarter than me, not to someone dumber than me". So I guess you should buy only the best, and sell it to a major via buyout.
Y'know, speaking of which, we haven't really seen a lot of buyouts. If someone came along and bought a good near-term property - like someone buying Lydian, Sulliden, Candente or Bear Creek - maybe that'd light a fire again. Though most of those companies above still really just have moose pasture.
I'm happy selling my shares to idiots, but I think all the idiots have run away now.
Or maybe it's the smart people who've run away and the idiots have been left holding (looks in mirror).
DeleteBTW, how you can call EOM a success (bar looking at the YTD chart) is a wildness beyond my ken. If ever there were a "not gonna be a mine" it's Angostura (or whatever name change they'll run on that thing).
Hard to disagree with much there, but again, the baby is getting thrown out with the bathwater.
DeleteRichmont, for example, earned 81 cents per share in 2011, and it was $12-13. Now they come out with a crappy PEA on *expansion* plans, the shares fall nearly in half below $7 (also partially because they're CEO is leaving).
http://finance.yahoo.com/news/Richmont-Mines-Reports-Record-ccn-2948880788.html?x=0
Same with Aurizon - great Q4 and 2011 results. Nobody's interested. Gold stocks failed miserably as "hedge" last year (I think this is generally why most institutions hold gold stocks...leverage to gold (hahahahaha), which itself is a hedge), and now the institutional lemmings see no reason to hold them.
Yeah Otto, I'm lazy, you know me. I only looked at the past 6 months chart for EOM (and all the others). So fine, it's down from $12, but it's still done well in the past 3 months.
DeleteQuit that "dark night of the soul" stufff, you'll lose subscribers.
Michael: if you want leverage to gold, it's wiser perhaps to buy a leveraged gold ETF. Hey, when gold goes down? You can buy a leveraged short gold ETF too! Who wants to own a stupid miner?
DeleteI keep encouraging them to leave, one day they'll pay attention.
ReplyDeleteI have to start doing that here. Too many new readers.
DeleteThere's a Nietzschean epigram for that, btw:
"The voice of disappointment: 'I listened for an echo and heard only applause — '"
That's good.
Delete