Sprott Inc. Eric Sprott :Gold Bug Humbled
Posted: August 9, 2013 Filed under: Eric Sprott, Gold | Tags: Asset management, Business, Chief executive officer, Investing, Market trend, Precious metal, Sprott, Toronto Leave a comment
Sprott School of Business (Photo credit: Wikipedia)
SII : TSX : C$2.58
HOLD
Target: C$2.75
COMPANY DESCRIPTION:
Sprott Inc. manages approx. $7.1 billion in client AUM. The company currently operates through four distinct business units: Sprott Asset Management LP (mutual funds and hedge funds), Sprott Private Wealth LP (wealth management services to HNW individuals), Sprott Consulting LP (management, administrative and consulting services to other companies), and Sprott US Holdings. Sprott Inc. is headquartered in Toronto, ON.
All amounts in C$ unless otherwise noted
LOWER PERFORMANCE FEE VISIBILITY
Investment recommendation
We are maintaining our HOLD rating and target price of C$2.75 per share. Sprott’s AUM declined 22% QoQ to $7.1 billion resulting from weak bullion and commodity markets, which lowers performance fee visibility at Sprott Inc. We have slightly lowered our performance fee estimates. In late July, SII closed the SIL transaction. Over time, SII will have access to ~$225 million ($350 million total) in invested capital for use to seed new investments and to build up performance fee eligible AUM. That said, we believe that co-investments in this depressed resource market will be difficult, which makes timing of deployment uncertain. Although initially, our analysis suggests the SIL transaction is accretive, we question the former over the mid-to-long term. We will account for SIL transaction during Q3/13.
Investment highlights
Base EBITDA slightly better than expected. SII reported Q2/13 base EBITDA of $8.1 million vs. our $7.6 million estimate. The variance related to higher than expected commission and other income ($4.4 million vs. our $2.8 million estimate) and slightly lower costs. Other income benefited from the early redemption of a secured note receivable. As expected, SII incurred significant negative marks on proprietary capital (-$9.5 million) and an impairment charge (-$5.4 million) as the carrying value of carried interest was above the recoverable amount. EPS of -$0.04 was slightly better than our -$0.06 estimate.
Valuation
Our target price is based on a sum-of-the-parts approach, derived by a: (1) 8.5x NTM base EBITDA multiple; and (2) DCF model to value the performance fee business (we value at $0.56/sh.).
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Credit Suisse On Gold – Is It Different This Time ?
Posted: July 3, 2013 Filed under: Forecasts, Gold | Tags: Business, Credit Suisse, Federal Reserve System, Gold, Gold as an investment, Investing, Market trend, Precious Metals 2 Comments
Gold Thailand (Photo credit: @Doug88888)
With the gold bull market in unwind, Credit Suisse says if history is any guide to the future there could be a long way to go DOWN.
Credit Suisse highlights that the multi-year gold bull s in the process of unwinding, and financial bubbles typically deflate more quickly than they inflate. Navigating episodes of rapid asset price deflation can be difficult for investors.
While past performance is no guarantee of future results (as the ubiquitous disclaimer reads) history may offer some clues. Given that the price of gold in USD was fixed until the end of the Bretton Woods system in 1973, there is only one period of recent history against which investors can compare the current price trajectory – that of the late 1970s through to 1982. Plotting the evolution of the late 1970s bull market using the real gold price (adjusted for U.S. CPI), and indexing the price to the point at which investors capitulated.
Then overlaying the current bull market, again rebasing price to the capitulation point and align the two curves. The result suggests that if history were to repeat, there would be a lot more downside to come for the gold price. If history were to repeat, gold would be trading in the region of
US$710-725 per oz by July 2014. Credit Suisse stresses this is not their forecast (their current price deck has gold averaging $1,150 in Q3/14). However, Credit Suisse adds that the risks to their forecasts are skewed to the downside and that short covering rallies should be sold – in the unwind of the 1970s gold bull market there were two rallies between 11% and 15% that proved to be excellent opportunities to sell.
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Eric Sprott Financial Chaos June 28,2013
Posted: June 29, 2013 Filed under: Eric Sprott | Tags: Bank run, Business, Chairman, Cyprus, Financial Services, IBM, King World News, Microsoft Leave a comment
Chaos in the distance (Photo credit: hanszinsli)
Nothing But Financial Chaos
I would suspect that we have bank runs going on in the periphery in Europe. How anybody could leave money in a weak country’s banks is beyond me. We saw what happened in Cyprus. It was a disaster for the depositors. I would imagine most people say, ‘It didn’t happen to me.’ Well, you know what, IBM, Microsoft, GE and multi-national companies, they operate in every country. They saw what happened in Cyprus and you can imagine the CFO’s of those companies saying, ‘Oh my goodness. Who’s next here?’
We all know who’s on the list of potentially who’s next. You know they’ve got to be taking their money out of the banks. That’s why we have that emergency G-7 meeting three weeks ago. That’s why we are talking about a ‘banking resolution.’
Every time you hear the word ‘banking resolution’ just read the words ‘bail-in.’ That’s what they are talking about here because they have that template. And I suspect it’s going to happen again. I think when we get one more ‘bail-in,’ people are going to realize that having money in a bank is risky.”
“So my outlook for the world’s economy is not strong. We see a deep recession in Europe. We see depression in many countries in Europe. We see China slowing down, no growth in the (United) States. I’m not optimistic about the economic outlook here.
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Premier Gold Mines
Posted: May 24, 2013 Filed under: Speculative | Tags: Business, Canada, Mining, Mining and Drilling, Northwestern Ontario, Ontario, Open-pit mining, Toronto Stock Exchange Leave a commentPG : TSX : $1.74
Shares of Premier Gold jumped after the company announced additional high-grade results from ongoing drilling at its Trans-Canada Property in Northwestern Ontario, highlighted by an intersection of 400.53 g/t Au over 5.0 m in (infill) hole HR156.
Management also announced that drilling has discovered a new zone (North Wall Zone) to the north of the primary resource area, which included results of 132.32 g/t Au over 3.9 m and 13.96 g/t Au over 6 m. The new zone has the potential to extend the pit shell to the north. This area is not expected to be included in the upcoming PEA, so is expected to provide future upside to the economics.
Premier is currently working on completing a PEA for the Trans-Canada project (focusing on Hardrock and Brookbank deposits) which is expected to be completed in Q3/13. The PEA is expected to be based on the current resource, with a further resource update expected to be released at year-end 2013. The Trans-Canada Property is host to four gold deposits with open pit and underground mining potential. The Hardrock Project, which hosts the largest of the four deposits, is the focus of the current drill program
What Happens When Costs Match the Selling Price Of Gold ?
Posted: May 15, 2013 Filed under: Speculative | Tags: Business, Gold as an investment, Lake Shore, LSG, Ounce, Precious metal, Share price, Timmins Leave a comment
Map of Timmins, Ontario (Photo credit: Wikipedia)
LAKE SHORE GOLD
(T-LSG) $0.325 n/c
From $ 4.00 two years ago
One look at the two-year chart of Lake Shore Gold shows you how bad things are in the natural resource sector, if you didn’t know already. Lake Shore Gold is not the only story trading at nearly one-tenth of where it was.
The bad part of that is much of the company’s current building and mine development was financed with issues nearly ten times today’s price.
Hard to believe the Timmins Times featured an article on January 22nd with the headline, “Glittering year ahead for Lake Shore Gold says VP Dan Gagnon.”
Well at least their production numbers appear to be going up as their Timmins West Mine is the centre of three mines expected to be in operation
having done 85,000 ounces last year. The article quotes Gagnon is expecting 120,000 to 135,000 this year and 150,000 ounces in 2014. But can they make any money at it?
The suggestion these days is that there’s many mines with costs of production way up at $1250 to $1450 and that doesn’t leave a lot left. According to the Timmins Times article, the suggestion is that their costs of production is between $800 and $875 an ounce. As one looks at the share price, one wonders wouldn’t one? Or is it just that most people have given up on the precious metals sector. Not precious at all anymore.
Lake Shore is important to the folks of Timmins and area as the company has 500 full-time employees, 200 contractors at the mine and 125 other employees working on the expansion projects. And this work tends to pay well, or at least it did.
The very low stock price makes one wonder if there are some tidbits of bad news about to happen. Higher production costs, write-downs or even losses that will be coming out tomorrow at their annual meeting. For sure, it won’t be a bunch of happy people around if anyone even bothers to
show up.
Meanwhile one service suggests that several analysts follow the stock with the average target being $1.17. Really?
When was the last time a speculator made a buck in the precious metals market listening to analysts?
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Apprentice Millionaire Program Gifts – T-Shirts, coffee Mugs
Posted: May 11, 2013 Filed under: AMP Books and Seminars | Tags: Business, Ceramic art, Coffee, Italy, London, Mug, Shopping, United States Leave a comment
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Goldrock Mines Corp.
Posted: May 1, 2013 Filed under: Speculative | Tags: $100 million, $3 million, Argentina, Business, Nevada, Salta, Salta Province, TSX Venture Exchange Leave a comment
Español: Viaducto La Polvorilla en la provincia de Salta, Argentina. Se trata del tren “a las nubes”, cruzando un conducto de agua. La foto está tomada desde el último vagón. (Photo credit: Wikipedia)
GRM : TSX-V : C$0.64
SPECULATIVE BUY
Target: C$0.90
COMPANY DESCRIPTION:
Goldrock Mines (formerly Mansfield Minerals) is a development stage gold company advancing their fully permitted (Oct 2011), Lindero heap leach project located Salta, Argentina. Recent management changes have brought the relevant expertise (financing and technical execution) required for the company to execute the development of the project and realize the future cash flows from it.
Investment recommendation
The company released FQ3/12 (ending February 2013) financial results with an end of period cash position of C$3.4 million. We maintain our
SPECULATIVE BUY recommendation and target price of C$0.90.
Investment highlights
The company’s previous cash position (FQ2/12) was C$5.30 million. During FQ3/12, operating expenditures were ~C$0.46 million with an additional ~C$1.70 million related to investing activities (Lindero FS) and ~C$0.23 million in positive FX adjustments resulting in a ~C$3.35 million cash position at the end of FQ3/12 versus our estimate of C$4.1 million. We estimate that GRM will close its fiscal year (May 2013) with a cash position of ~C$3 million.
Following the release (April 17) of its feasibility study (FS) on its wholly owned, fully permitted Lindero open pit/heap leach project in northwest Argentina (Salta province), we anticipate the company to redouble its efforts to crystallize financing sources to fund its development ($160 million).
We have modeled a debt facility for ~C$100 million (five year, 12%, FQ2/13), allowing for initial construction and purchasing long lead items, followed by an assumed equity raise of ~C$56 million (80 million shares at C$0.70/share, FQ2/14) and a WC facility (C$40 million, 15%) to enable commercial production by FQ1/15 (August 2015).
Additional potential catalysts include the maiden resource estimate on the Arizaro copper-gold porphyry (3-4 km from Lindero) expected by fiscal year-end (May 30, 2013). Arizaro represents upside potential to not only extend the mine life of Lindero, but to offset processing the lower grade stock pile to a later date.
B2BGold Update
Posted: April 30, 2013 Filed under: Intermediate Producers | Tags: Business, Chief of police, Gramalote, Masbate, Naga Camarines Sur, Philippine, Record producer, Share price Leave a comment
Masbate City (Photo credit: Bella Abelita)
Q1/13 production and 2013 Masbate guidance better than expected
We reiterate our BUY rating on B2Gold following the release of Q1/13 production results
and 2013 production guidance for Masbate, both of which were better than we
expected. B2Gold remains a 2013 Canaccord Genuity Focus List pick based on one of
the best production growth profiles in the sector, relatively low permitting, financing
and new mine development risk, and several upcoming catalysts that we believe should
pave the way for strong share price performance in 2013. With a strong, debt-free
balance sheet and relatively low capital requirements to fund growth to 540 koz by 2015
(relative to the expected cash flow profile) we see B2Gold as very well positioned to
weather even an extended period of low gold prices.
Investment Highlights
Consolidated attributable production for Q1/13 (Masbate effective Jan 16) was 79,661 oz and better than our estimate of 70,656 oz. All of the company’s operations performed better than our forecast.
Attributable production from Masbate was 36,467 oz (in line with B2Gold’s internally budgeted numbers) but better than our estimate of 29,500 oz. The company has provided 2013 production guidance for Masbate of 175,000 – 185,000 ounces for the full year. While we had expected guidance to be below the 200,000 oz indicated by CGA, it is actually better than we had forecast. Management attributed the variance in guidance (vs CGA’s budget) to a change-out of the old SAG mill to a new SAG mill expected to be delivered in late August or September.
Valuation
Our 12-month C$5.00/share target price is unchanged based on 1.1x our 5%/peak NAVPS estimate of US$4.59, assuming US$/C$ parity.
Upcoming Potential Catalysts
Gramalote pre-feasibility study (Q3/13E) and EIA submission (May 2013E)
Masbate geological model, mine plan and reserve update (mid-2013E) and possible
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Agnico – Eagle Invests In Sulliden Gold
Posted: April 11, 2013 Filed under: Exploration Companies | Tags: AEM, Agnico-Eagle Mines, Business, Mining and Drilling, New York Stock Exchange, Peru, Sean Boyd, Toronto Stock Exchange Leave a comment
English: Logo of Agnico-Eagle Mines Limited . (Photo credit: Wikipedia)
SUE
TSX : $0.83
A mining company named Sue!
Vote of confidence. Sulliden Gold announced that Agnico-Eagle Mines (AEM) has entered into a subscription agreement to
make a strategic investment of $24,000,000 into SUE through a non-brokered private placement of units. As a result of the
transaction, AEM will own 9.96% of SUE’s issued and outstanding shares on a non-diluted basis. Under the terms of the
subscription agreement, AEM will purchase a total of 26,966,292 units at a price of $0.89 per unit. Each unit comprises one
common share and 0.7 of a common share purchase warrant. Each whole share purchase warrant will entitle AEM to acquire
one common share of SUE at a price of $1.31 for a period of two years from the date of issuance.
Commenting on the deal, AEM’s President and CEO, Sean Boyd, stated, “Our investment highlights the quality and potential of SUE’s Shahuindo
Project. We also view this as an opportunity to gain exposure to another jurisdiction with a well-established mining culture. We look forward to participating in the advancement of Shahuindo towards production.”
SUE’s Shahuindo Project is located in a world-class gold producing belt in northern Peru. In September 2012, SUE completed a Feasibility Study highlighting a straightforward open pit mine with heap leach recovery, with capital requirement estimated at $131.8 million, supporting a
mining rate of 3.65 million tonnes per year and annual production of ~90,000 gold equivalent ounces at average cash operating costs of $552 per ounce.
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