Updated Gold and Silver Forecast
Posted: July 21, 2013 Filed under: Forecasts, Gold, Hedge fund, Silver | Tags: Exchange-traded fund, Gold, Gold as an investment, Golden Star, New Gold, Pan American Silver, Sandstorm Gold, United States 1 Comment
Gold Buddha (Photo credit: @Doug88888)
ADJUSTING TO A NEW REALITY; TARGET GOLD/SILVER FORECASTS
LOWERED TO $1,350/$23 (FROM $1,750/$32.50)
We are lowering our 12-month forecasts for gold/silver to US$1,350/US$23 from $1,750/US$32.50 for equity target price setting purposes. Our price deck for earnings purposes has also been revised to reflect $1,350/$23 Au/Ag in 2014 and beyond compared to our previous forecasts that implied a decline to $1,600/$29 in 2017 and beyond.
We remain optimistic that the gold price should move substantially higher longer term, given our view that the current
environment will likely not justify development of meaningful new gold projects and could lead to reserve declines in the sector
thereby leading to declining global mine supply going forward.
We also believe that gold’s status as a precious metal, reserve asset and inflation hedge is unlikely to change, thereby continuing to drive ongoing investment and jewellery demand. Despite the year-to-date selling (ETF and COMEX speculative contracts) that has led to an approximate 23% decline in the gold price this year, we expect increased physical and jewellery demand to keep overall demand relatively stable going forward.
Despite our longer-term optimism, we believe that full recovery may take longer than 12 months (our investment horizon). Our valuation and forecasts assume a more cautious stance: i.e., prices of $1,350 Au/$23 Ag and beyond (5%/15% higher for Au/Ag from current levels) primarily reflecting our view that if the gold price recovery is modest over the next 12 months, investors are likely to make decisions based on the then prevailing gold price (irrespective of how much higher gold might go longer term).
Ratings revisions in this report include: Alamos Gold (HOLD from Buy), Golden Star (SELL from Hold), Pan American Silver
(HOLD from Buy), New Gold (HOLD from Buy), Galane Gold (HOLD from Spec Buy), Golden Queen Mining (HOLD from Spec Buy),
Goldrock Mines (HOLD from Spec Buy) and Midway Gold (SELL from Spec Buy). Our CG 2013
AMP Hedge Fund picks include B2Gold, Argonaut Gold, Fortuna Silver, Primero Mining and Sandstorm Gold. We believe these companies offer sustainable, low cost production profiles, manageable growth (lower capital requirements, higher returns) and strong balance sheets – characteristics that we believe should lead to share price outperformance over the next 12 months (relative to peers).
Our Q2/13 estimates have been updated to reflect actual metal prices during the quarter and pre-released Q2/13 operating results. Given the gold price decline, we forecast sequential decline in earnings of approximately 32% for our group of producers. Our estimates are notably below consensus (partly due to the timing of our update) for AGI and PAAS.
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- Gold and Silver Miners Likely to Tamper with Supply and Exploration (247wallst.com)
- Ben Bernanke Knows Why You Buy Gold (silveristhenew.com)
Alamos Gold Inc. Lower Precious Metals Reaction
Posted: July 17, 2013 Filed under: Gold, Intermediate Producers, Precious Metals | Tags: Alamos, Alamos Gold, Gold, Gold as an investment, Mexico, New York Stock Exchange, Sonora, Turkey Leave a comment
Fields of Gold (Photo credit: John-Morgan)
AGI : NYSE : US$13.67
HOLD
Target: US$15.50
COMPANY DESCRIPTION:
Alamos Gold Inc. produces gold from its 100% ownership of the Salamandra group of concessions, which includes the Mulatos gold mine in Sonora, Mexico. Alamos also controls 100% of the Agi Dagi and Kirazli gold projects in Turkey.
All amounts in US$ unless otherwise noted.
We are lowering our recommendation on Alamos Gold to HOLD from Buy, and our 12-month target price to US$15.50 from US$18.00 following our revised commodity price forecasts and sector outlook. Over the next 12 months, we expect challenging capital market conditions to persist, and only a modest improvement in the gold price.
Alamos remains better positioned than many of its peers to weather a prolonged period of depressed gold prices, thanks to a strong balance
sheet (US$373 million cash/US$496 million in working capital as of March 31, 2013) and low cost, profitable production from Mulatos.
Under our revised gold price forecasts, we see no external financing requirements to develop the Turkish projects, although we believe any
delays in the permitting process could push out our estimated start-up timelines.
Our target 1.25x P/NAV multiple for Alamos Gold is the highest among our covered stocks – since Alamos represents one of the best quality
growth stocks in our coverage universe, in our view. However, our revised target price still represents only a 13% potential return from
current levels. As such, we are downgrading Alamos Gold to HOLD from Buy based primarily on limited implied return.
Valuation
Our 5%/NAVPS estimate has declined by 38%% to US$12.45/share due to a reduction in our gold/silver price forecasts ($1,350 Au/$23 Ag from
$1,750 Au/$32.50 Ag). Our 12-month target price has been lowered to US$15.50 (from US$18.00) based on 1.25x (previously 0.90x) our
5%/peak NAVPS estimate.
Forecasts
Our 2014 EPS and CFPS estimates have been revised to US$0.41 and US$0.52, respectively, from US$0.71 and US$0.82 based on our lower
assumed gold/silver price forecasts.
Related articles
- Esperanza Resources acquired by Alamos Gold for $69.4 million (mining.com)
- Alamos Gold Provides Notice of Second Quarter 2013 Results and Conference Call (virtual-strategy.com)
Colossus Minerals Inc
Posted: July 16, 2013 Filed under: Speculative | Tags: Brazil, Colossus, Colossus Minerals, CSI: Crime Scene Investigation, Gold, Gold as an investment, Serra Pelada, Toronto Stock Exchange Leave a comment
Colossus and Wosog (Photo credit: Son of Groucho)
CSI : TSX : C$0.84
SPECULATIVE BUY
Target: C$2.15
COMPANY DESCRIPTION:
Colossus Minerals is a junior exploration and development company with a focus on gold in Brazil.
Colossus is under the stewardship of John Frostiak, Chairman, and Claudio Mancuso, President and CEO. The company’s primary asset is the Serra Pelada project, an extremely high grade gold-platinum-palladium project in Northern Brazil. Colossus has a 75% ownership interest in the project.
All amounts in C$ unless otherwise noted.
Investment recommendation
We maintain our SPECULATIVE BUY rating on the shares of Colossus Minerals with a revised 12-month target price of C$2.15, down from C$6.25.
Investment highlights
CSI reported that some of the dewatering wells and pumps at its Serra Pelada project in Brazil are not performing to design specifications. Additional dewatering capacity is required, resulting in a delay in the start of gold production to late Q4/13, from August 2013 previously. As a result, CSI will require additional funding to bring the mine online.
The company is working to develop five access drives for production in late 2013 for a target throughput rate of 500 tpd in Q4, ramping
up to 1,000 tpd in Q1/14 (unchanged).
Valuation
We estimate that CSI will require an additional US$25 million to fund development capex and working capital to bring Serra Pelada into production. There remains significant uncertainty associated with the resource, mine plan development timeline, and cost associated with the project. In light of this new development, we have increased our discount rate to 15% from 10%, we have eliminated all resource upside
potential, and we have factored in an additional assumed C$25 million equity financing at a price of C$1.00/share. The net impact of these
adjustments is a drop in our estimate of peak gold price NAVPS (15%, US$1,750/oz Au) to C$4.18, from C$8.36 previously. Based on the
development timeline, it could take up to 12 months for CSI to demonstrate that the Serra Pelada project is viable. Therefore, we are
reducing our valuation to 0.5x our estimate of peak gold price NAVPS, down from 0.75x previously.
Related articles
- Colossus Minerals shares plunge 50% after company reveals it needs more money for Brazil mine (business.financialpost.com)
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.
Related articles
- Ritholz on Gold and on Making Predictions; How Secular Bull Markets End; Winning vs. Investing (safehaven.com)
- ZeroHedge: It’s Official: Gold Is Now The Most Hated Asset Class (silveristhenew.com)
Gold Miners Have Gotten Crushed
Posted: July 2, 2013 Filed under: Forecasts, Gold | Tags: Cash flow, Commodity, Cost-of-production theory of value, Gold, Gold as an investment, Gold mining, Stock, Store of value Leave a commentAnd There’s ‘More Carnage Coming’
JEFFERIES: Gold Miners Have Gotten Crushed, The Business Is Terrible, And There’s ‘More Carnage Coming’
If you thought things have been ugly for gold, then you haven’t paid attention to the gold miners, which have just been decimated.
Check out this chart going back to 2004, which shows how badly gold-related equities have done during this time (both objectively, and relative to gold).
Jefferies
Despite the pain, Jefferies
says the miners have more “carnage” ahead.
As the price of gold declines further, gold will fall below the cost of production for these companies, resulting in years of negative cash flow.
Gold has declined by 37% from its highs in 2011. Therefore, we believe the myth that gold is a low risk “store of value” has been exposed for what it is to the latest generation of investors. Now, we fear that as understandably dissatisfied investors exit the market, selling could beget selling and send the gold price well below the cost of production. In our opinion, this risk is not discounted in gold equities valuations. In our opinion, an asset that declines by 37% in value doesn’t qualify as a “safe haven” or “store of value.” And, it never should have. Gold is a commodity whose price can rise or fall.
In conclusion, while we’d like to believe the carnage in the group is over, we don’t. With short reserve lives, rising costs, rising political risks and a stagnant commodity price, we believe an argument could be made that gold equities should trade at valuation discounts to other resource equities. Instead, they continue to garner valuation premiums. In our opinion, that continues to make the risk/reward for the North American gold group unattractive. At a minimum, we remain confident there are better values within global metals and mining.
New Gold Acquisition of Rainy River
Posted: June 3, 2013 Filed under: Financing, Takeovers | Tags: Gold, Gold as an investment, Gold reserve, New Gold, NGD, Precious metal, Steven Butler, Toronto Stock Exchange Leave a comment
English: Crystaline Gold (Photo credit: Wikipedia)
Rainy River Resources* (RR : TSX : $3.65),
Taking advantage of a buyer’s market?
Canaccord bullish ratingon New Gold shares following the announcement of an acquisition bid for Rainy River Resources.
The offer is for 0.5 of a common share of NGD or $3.83 in cash. NGD will issue ~25.8 million shares and pay a maximum cash consideration of $198
million on a pro-rated basis. As part of the deal, NGD retains a break fee of $14 million and first right of refusal to match any other potential offers.
RR shareholder vote of 66 2/3 in favour required for acquisition to proceed but it is largely viewed as a friendly deal. The deal is expected to close in mid-July. Reserves at the Rainy River Gold project are ~4 Moz of gold and 10 Moz of silver at grades of 1.08 g/t and 2.76 g/t, M&I resources, including reserves, total 6.2 Moz of gold and 13.3 Moz of silver and inferred resources total 2.28 Moz gold and 6.9 Moz silver. Based on the NGD offer, this equates to approximately $77/oz gold reserve or ~$3 7/oz total resource ounce.
Of note, NGD indicated on the conference call they remain fully committed to Blackwater as their flagship project and believe they can successfully build the Blackwater (first production ~2017) and Rainy River Gold (first production ~2016) projects concurrently and management feels that this is an ideal time to be building mines as so many other competitors have been putting projects on hold there is plenty of available expertise for hire.
Canacord views the likelihood of another bid as relatively low, given the current gold price environment, strained balance sheets of other industry
peers, and NGD’s right to match any offer.
Related articles
- New Gold strikes deal for Rainy River Resources (theglobeandmail.com)
Who Says the Rally in Gold is Over? Not BofA
Posted: May 29, 2013 Filed under: Gold | Tags: Bank of America, Bank of America Merrill Lynch, Federal Reserve System, Gold, Gold as an investment, India, Middle-East, Precious metal Leave a comment
The front of an Austrian gold bullion coin (Photo credit: Wikipedia)
Gold prices headed lower on Tuesday, closing a volatile trading session at $1,381 per ounce. The falling prices stem partly from fears that the Federal Reserve may curb the $85 billion per month stimulus plan, which would mean the economy was looking stronger and so erode demand for the metal. Worried gold investors have pulled $18 billion from exchange-traded products this year. Physical demand for gold on the consumer side has also fallen. One small example: Jewelers in India, who in early May would pay a premium of $10 to $12 per ounce over the cash price of gold, will now only pay a $3.50 premium.
” Gold Bugs ” Remain True Believers
Posted: May 18, 2013 Filed under: Federal Reserve, Gold | Tags: April, China, Fed, Federal Reserve System, Gold, Gold as an investment, Jim Sinclair, Paper 1 Comment
Synthetic made gold crystals by the chemical transport reaction in chlorine gas. Purity >99.99% (Photo credit: Wikipedia)
from Jim Sinclair‘s Newsletter
History will look back on this manipulation of every market on the planet and people’s reactions to it as not simply a bubble, but a frenzy.
Of others writers on these subjects I know none other than GEAB who has a full grasp of the fundamental issues that markets, no matter how concocted, will overcome. I have advised all my friends to subscribe to GEAB and to ShadowStats.com in order to know the truth of the hidden causes that will defeat the illusion by the greatest injection of liquidity into the financial system in written history.
GEAB said this morning, “When certain countries must protect their economies to survive, going looking for tax revenue in tax havens and, at the same time, paradoxically let their banks use un-orthodox methods to avoid bankruptcy, others have chosen to bet on gold. Whilst paper gold saw a scary crash in mid-April, the demand for physical gold has never been as high, which confirms the complete decoupling between paper gold and physical gold markets. What happens when everyone realizes that paper gold certificates have no physical counterpart? When the title documents to an ingot can’t be honored the paper in question has no value. We must therefore expect more volatility. This is why some brokers won’t allow any leverage on gold paper positions. The decoupling also shows that major problems are ahead because confidence in now shaken.
Physical gold itself has its best days ahead. China has clearly understood this and buys gold en masse.”
On the Fed it was said, “the poker game played by the Fed is coming to an end. The bet was that support of finance and real estate would allow a revival of the real economy before having to withdraw this support because of an untenable position going forward. This program enabled the country to gain access to cheap credit, which is already a success. But as regards to the real economy, apart from having caused new bubbles, the bet appears to be lost. As we have seen, the situation hasn’t gotten better, quite to the contrary.”
I know it hurts, but stand firm. If you have no margin then you have no debt.
Remember that producing gold companies have physical and will sell at physical price.
Remember that the future of a producing company has a great deal to do with location, location, location.
The politics of gold will have a great deal to do with how well the host country enjoys the fruits of the labor.
Remember some enlightened gold companies have made the host country equal partners already.
Remember that some gold companies are better than good citizens with a long history of significant contributions to the welfare of the people.
Hold tight to these and to your physical. While it is legal store your physical internationally as allocated with people of trust. Ignore the illusion and the Trojan Horses in the gold industry that do not seek your best interest. They have and have had an agenda for a long time. One seeks acceptance amongst the establishment more than anything. They have worked and will continue to work at your disadvantage.
Sincerely,
Jim
Related articles
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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?
Related articles
- Why Peter Grandich Is Still Telling His Wife Gold Will Hit $2,000/oz (goldinvestingnews.com)
Jim Sinclair Predicts Gold Silver Low – Turning Monday May 13th
Posted: May 11, 2013 Filed under: Forecasts, Gold | Tags: Buy and hold, Gold, Gold as an investment, Monday, Precious metal, Price, Silver, Tuesday May 14 2013 Leave a commentGold Buddha (Photo credit: @Doug88888)
QE to Infinity, followed by Gold balancing the balance sheets of the sovereign balance sheet disasters. Just as there is no tool other than QE to feign financial solvency, there is no tool to balance the balance sheet of the offending entities other than Gold. It is just that simple. –Jim Sinclair
Today, May 10, 2013, as you are all aware, gold and silver dropped as was posted April 19, 2013:http://www.jsmineset.com/2013/04/19/1300-goldnever-again/
It stated… “As you are aware, I sold my silver at $49 and gold at $1900. Since January 2013, I have provided you my Gold Updates. Today I provide you what I expect to see from Gold these next few weeks. Please see the below Gold chart with specific dates and approximate price targets that might/should be reached on those specific dates.
Please note the blue chart arrows are date sensitive, not price sensitive. As the dates are hit these waves will end and change direction regardless of price.
The next two dates to watch for are as follows:
(I) May 2-3, 2013 – INTERMEDIATE TOP
(II) May 10-13, 2013 – PULLBACK BOTTOM
NOTE: PRICE TARGETS MIGHT VARY, DATE WILL NOT. WATCH DATES.”
This drop will mark the low off the May 3, 2013 high and turn date. I am providing you an updated chart on GLD for your careful review:
For GLD/Gold, the target for the bottom to re-enter long is Monday, May 13, 2013, HOWEVER there is a possibility of one extra day down into Tuesday, May 14, 2013 for the FINAL LOW. Therefore, the safest re-entry would be Monday only if Gold is closing UP at market close or Tuesday’s close if Gold closed down on Monday. After Tuesday, it is all over… that is key!
For SLV/Silver, silver’s current price is NOT FAR FROM A SUPPORT BREAK! Like Gold… there is the possibility of ONE EXTRA DAY DOWN into Tuesday, May 14, 2013 for the FINAL LOW. Therefore the safest re-entry for silver is the same as gold above.
Please remember, price is not as important here as time! If you wait for “your” price, you may never get it! Pay close attention to the day count posted above and the next UP CLOSE and this will give you confidence in your trade. Buy the up close, the price is the price period!
For those of you who buy and hold, sleep well my friends and know that your decision is a wise one into the year 2020; gold and silver however will have a very long and bumpy road ahead! Lastly, the “true” Bull Run you all wait for is not just yet, the general markets will first correct.
I wish you all well.
Have a great day!
CIGA Bo Polny
Related articles
- An Update On Gold From CIGA Bo Polny (financialsurvivalnetwork.com)
- Bo Polny: Silver Extremely Vulnerable to a Break of $22 Bottom Fri-Mon (silverdoctors.com)
AMP Gold and Precious Metals Portfolio 