Wednesday, July 19, 2017

Gold Resource Corp Is Not A Primary Precious Metals Producer Anymore

Today Gold Resource Corp (NYSE: GORO) released its 2Q 2017 production results. The company produced the following amounts of metals:

  • Gold: 5,696 ounces
  • Silver: 397,670 ounces
  • Copper: 294 tonnes
  • Lead: 1,207 tonnes
  • Zinc: 4,176 tonnes
Now, assuming the following, average metal prices recorded in 2Q 2017:

  • Gold: $1,258 per ounce
  • Silver: $17.21 per ounce
  • Copper: $5,662 per tonne
  • Lead: $2,161 per tonne
  • Zinc: $2,596 per tonne

the metals produced in 2Q 2017 were worth:

source: Simple Digressions

Or, look at another chart:

source: Simple Digressions

As the chart shows, the value of base metals produced in 2Q 2017 was higher than the value of precious metals.

So, GORO is not a primary precious metals producer anymore, which means that from now on the company's peers are base metals producers.

Wednesday, July 12, 2017

Silver - The Demand In Action

Although for the last two days gold and silver regained some ground but, generally, precious metals investors feel a lot of pain this year. For example, on July 10 the silver was trading at this year's lowest level  so far.

However, it looks like lower prices of silver attracted a bunch of investors who started aggressive accumulation of this metal. The chart of SLV looks very promising:

source: Simple Digressions

As the chart shows, July is an exception. Generally, Western investors buy silver when its prices are going up. And vice versa. However, in July SLV added as many as 9.4 million ounces of silver at lower prices than those reported in June (a loss of 4.2% - look at the blue row  where monthly changes in silver prices are plotted).

I think it is a very positive development for silver bulls.

Interestingly, a new pattern is developing - in May the Chinese withdrew the highest amount of silver from the Shanghai Gold Exchange (which should be read as "in May there was the highest demand for silver bullion in China):

source: Simple Digressions

Note that in May SLV reported a highest inflow of silver into its vaults.

Tuesday, July 4, 2017

Centamin plc - A Dividend Company?

Precious metals mining companies are not income companies. In other words, the investors hunting for dividend-generating picks should forget about the precious metals sector.

However, there are exceptions. For example, last year Centamin plc (CELTF), a mining company operating in Egypt (the Sukari mine), paid a very generous dividend of 15.5 US cents per share. Keeping in mind that Centamin shares are trading at US$1.96 a share, the dividend yield stands at 7.9%.

Now, investors get accustomed to good things very quickly. I am sure that some of them hope that this year Centamin is going to pay a high dividend once again. However, I doubt it. Look at the table below:

source: Simple Digressions

The table shows the way the company calculates its dividend. Firstly, cash flow, defined as revenue less all-in sustaining cash cost of production, is calculated.

Then the EMRA profit share (briefly, it is that part of the company's profit that is attributed to the government of Egypt) and exploration expenses (related to other Centamin's properties) are deducted, resulting in the so-called free cash flow. 

Now, the point is that this year Centamin wants to pay off not less than 30% of free cash flow in the form of a dividend (last year it was around 70%) so, as the table shows, the dividend yield should stand at a mere 2.0%.

At least that is what the company stated in its 2016 Annual Report:

source: Centamin plc

If, due to some reasons, Centamin's management decides to pay a higher dividend, that is fine. For example, if the payout ratio is 70% (as last year) the yield should stand at 4.6%, which is a very nice figure. 

However, the question is: will they change their dividend policy? 

Monday, July 3, 2017

Are We Close To The Bottom In Gold?

Look at these two charts:


It happens all the time - there is another divergence (red arrows) between gold prices (the upper panel of the chart) and the silver / gold ratio (the lower panel of the chart).

Generally, when gold prices are diving and the silver / gold ratio is going up, the precious metals market is close to its local bottom.

Sunday, July 2, 2017

Volume By Price Indicator - Quite A Helpful Tool To Trade Stocks

My readers know that I am not a fan of Technical Analysis in its classic form. However, sometimes I have a look at a few interesting indicators that are not in common use.

Let me take the so-called  "Volume By Price" indicator. According to Stockcharts, this indicator is defined as:

"Volume-by-Price is an indicator that shows the amount of volume for a particular price range, which is based on closing prices. The Volume-by-Price bars are horizontal and shown on the left side of the chart to correspond with these price ranges. Chartists can view these bars as a single color or with two colors to separate up volume and down volume. By combining volume and closing prices, this indicator can be used to identify high-volume price ranges to mark support or resistance"

In my opinion, the Volume by price indicator is sometimes very helpful to find major resistance / support levels. Look at these two charts:


The chart shows the price action of B2 Gold, one of the best gold miners (although most recently in some kind of trouble). Notice that its shares are fighting against a strong resistance at around C$3.9 a share. Interestingly, this resistance level has been disclosed by a long, horizontal bar on the left. In other words, this bar means that vast amounts of shares changed hands at C$3.8 a share.  

Now, another example. This time it is Kirkland Lake Gold, similarly to B2 Gold one of the world's best gold miners:


Here we can easily spot what happens when the shares break their strong resistance level (depicted by a long, horizontal bar on the left). Notice that after some struggle Kirkland shares ultimately broke above their strong resistance at C$10.0 - C$10.5 a share. Since that event the company's shares are appreciating at high speed (the red arrow).

Tuesday, June 27, 2017

Paladin Energy - The Road to Zero

Paladin Energy is (or was?) one of the world's largest uranium producers. Now the company is generally non-existent - most recently Paladin shares have been withdrawn from exchanges.

Below I present a few charts showing the Paladin's road to zero.

Uranium prices:


Uranium prices topped in 2007, ahead of a big financial crisis. Then, in 2011, the Fukushima disaster set the downward trend in uranium prices. For many years...

Poor prices = poor investment and impairment charges

When uranium prices  go down, a uranium producer generates lower cash flow from operations:

source: Simple Digressions

Poor prices have a negative impact on the value of assets. Hence, impairment charges:

source: Simple Digressions

Then, when there is no cash, a company has to borrow money to keep operations going:

Negative cash flow from operations + debt service + impairment charges are a poisonous mixture. As a result, a company's equity goes to zero...or even lower:

source: Simple Digressions

End of story

Oh, is it? Not really - now Paladin tries to restructure its debt and...sell its best asset (the Langer Heinrich mine)

Monday, June 26, 2017

Simple Gold Trading System

In an ultra short - term the relation between gold prices and US 10-year treasury notes prices generates interesting trading signals. Look at the charts below:

source: Simple Digressions

How does the system work? Trading signals are generated when the ratio gold / 10 year is close to one of the red lines on the lower panel of the chart.

The red and violet arrows point to BUY / SELL signals.

Now it looks like gold is very close to generating a BUY signal.

Sunday, June 25, 2017

Copper - A Big Move In The Making

Uncertainty precedes big price moves. Most recently I have spotted an unprecedented event in the copper market. The so-called spreading figures, the data delivered by the Commitments of Traders Report (the COT report), are standing at the highest level in history.

According to the COT report, spreading figures are defined in the following way:

"For the futures-only report, spreading measures the extent to which each non-commercial trader holds equal long and short futures positions... For example, if a non-commercial trader in Eurodollar futures holds 2,000 long contracts and 1,500 short contracts, 500 contracts will appear in the "Long" category and 1,500 contracts will appear in the "Spreading" category"

Look at the chart below:

source: Simple Digressions and the COT data

The circle marked in red points to the last spreading figure. It can be easily spotted that this week (the report was dated June 20) this figure was standing at its highest reading in history - as many as 8.6% of big speculators trading copper futures was very uncertain about future copper prices.

In my opinion, it is a very reliable data to take a position in the copper futures market. The only question is this: what position? Long or short?

Well, it is hard to say - spreading figures cannot help here. What I know nearly for sure is that a big move in copper prices is in the making.

The validity of this signal is additionally strengthened by the total open interest in copper futures:

source: Simple Digressions

As the chart shows, the total open interest is close to its highest readings now. Therefore the message is this:

  • the copper market is ahead of a big move
  • due to a very high open interest in copper futures (there is a vast amount of traders on this market), this big move should be additionally supported
  • the problem is that the direction of this move is unknown

Thursday, June 22, 2017

SLV - The Downward Trend Has Reversed

Most recently the iShares Silver Trust (SLV), the world's largest silver ETF, has been reporting the increased silver inflows to its vaults:

source: Simple Digressions and SLV

As the chart shows, since the beginning of 2017 there was a continuous outflow of silver from SLV (the red arrow). However, in the middle of April this trend reversed and since that time (with a short break in May) we have seen a rapid increase of silver holdings at SLV (the green arrow).

Interestingly, the metal is hoarded at relatively low prices.

Tuesday, June 20, 2017

Jaguar Mining - I Am Touched...

Just to finish the previous post on Jaguar Mining (JAGGF) - here is an excerpt from the last company's announcement (SEDAR):

"The following subscribers who are “related parties” within the meaning of Multilateral Instrument 61-101 (“MI 61-101”) participated in the Offering:
  • (i) 2176423 Ontario Ltd., a company controlled by Eric Sprott, an insider of the Company, subscribed for 4,545,455 Shares;
  • (ii) Tocqueville Gold Fund, which, together with its investment adviser, Tocqueville Asset Management L.P., is a control person of the Company, subscribed for 3,770,909 Shares;
  • (iii) Resolute Performance Fund, an insider of the Company, subscribed for 4,637,000 Shares;
  •  (iv) Rodney A. Lamond, the President and Chief Executive Officer of the Company subscribed for 35,000 Shares"
Well, it is fine to see other, besides Eric Sprott, notable investors among Jaguar shareholders (Tocqueville Gold Fund and Resolute Performance Fund - two very active funds investing in mining companies) but I am very, very touched by the last acquisition. The company's CEO, Mr. Lamond,  subscribed for...35 thousand shares of the company. Well, investment of C$15.4 thousand is very impressive. Let me look at his salary:
source: Jaguar Mining
So last year Mr. Lamond made C$268.5 thousand. Apart from this basic salary, the CEO owns 2.33M not-exercised options valued at US$625.6 thousand:
source: Jaguar Mining
Well, it is good that Jaguar's CEO invests in his company but the size of this investment is very "impressive". I am touched...

Friday, June 16, 2017

Jaguar Mining Finds Investors For Its New Shares

Despite poor 1Q 2017 financial results (mainly attributable to the unfavorable exchange rate between the Brazilian real and the US dollar), Jaguar Mining (TO:JAG) was able to find investors for its new 17.6M shares, issued through the last non-brokered private placement financing.

When the private placement was announced I was curious whether Eric Sprott, a notable Canadian resource investor, was going to increase its stake in the company. He was.

According to the last announcement (SEDAR), now Mr. Sprott controls 64.3M shares in the company (18.7%, including the new shares added through the private placement).    

What is more, the placement was priced at C$0.44 a share, around 10% above the current market price. 

As a result of the placement (and including the second tranche of the Sprott debt financing of US$5.0M), the company should hold cash of around US$29.0M and debt of US26.3M.

Additionally, this quarter the US dollar has strengthened against the Brazilian real (which is good for the company) but investors do not care and Jaguar shares are 40% down.


Wednesday, June 14, 2017

No Logic In Financial Markets - The Case Of Fairfax

I know it sounds trivial but there is no logic in financial markets. Let me take Fairfax Financial Holdings (FRFHF) as an example.

Briefly, Fairfax is an insurance company run by the so-called Canadian Buffett, Prem Watsa. The company, apart from running a typical insurance and re-insurance business, is also an active portfolio allocator (investing in equities, holding large long / short positions in equity futures, betting on major economic events etc.)

Now, shortly after the US presidential elections Fairfax made the following adjustments to its investment portfolio:
  • the US bonds exposure was radically reduced (the company sold-off a large portion of its US and Canadian treasuries)
  • a short position held on Canadian and US equity markets was radically cut
As a result, Fairfax positioned itself for higher equity prices and lower treasury prices.

What is more, the company (or, better said, Prem Watsa) was right. Since the US elections the prices of treasuries went down and the US and Canadian stock markets went up.

However, Fairfax share prices did something strange - they went down:


In the lower panel of the chart I have plotted Tembec share price action (Tembec is one of the largest equity holdings acquired by Fairfax a few years ago; a few days ago Fairfax sold part of its stake in Tembec).

Summarizing - Prem was right but the stock market was...more right?

Monday, June 12, 2017

Is The Copper Market Worth Nothing?

The copper sector looks like the precious metals segment at the end of 2015. Look at the current market valuations of a few copper plays:

source: Simple Digressions

Now most of the copper miners are trading at very low EV / EBITDA ratios. It looks as if the entire copper market was worth nothing or close to nothing.
Interestingly, most recently the copper mining companies made similar progress as the precious mining companies did and cut their costs of production significantly. Look at a number of copper plays and their operating costs:

source: Simple Digressions

Note: operating cost is defined as: direct cost of production + royalties + depreciation + administrative expenses + share-based payments + other operating costs

As the chart shows, Southern Copper (SCCO), Taseko Mines (TGB) and Atalaya Mining (TO:AYM) are very-low-cost producers (with operating costs below $2.0 per pound of copper). 
The other miners also produce their copper at quite low prices so...what is the problem?

As usually - the problem lies in copper prices. However, the copper price action does not look bad:


Although I am not a fan of Technical Analysis, sometimes it is good to look  at the big picture. And the big picture delivers an important message: since late October 2016 copper has been in a strong bull market. Now, after the last correction, copper prices try to break out to the upside.

Additionally, the data delivered by the Commitments of Traders report supports a bullish thesis:

source: Simple Digressions and the COT data

The blue circle on the chart above shows the current net position held by Money Managers (mainly hedge funds) in copper futures. Notice that the blue circle is well below the red circle, which indicates the excessive optimism among traders. It means that the copper market is now generally neutral (or far away from overbought conditions).

Now, combining the last two charts it looks like the chances for another leg up in copper bull cycle are higher than the chances for the opposite move...

Thursday, June 8, 2017

Gold Bullion Flowing Into Private Hands

A positive gold price action this month is supported by gold bullion inflows into GLD and IAU:

source: Simple Digressions

On the other hand, two big silver holders, SLV and JP Morgan (its COMEX warehouse) have delivered mixed signals up to June 7:

source: Simple Digressions

As the chart shows, in June JP Morgan has added 1.6M ounces of silver but SLV reports the outflows of silver (1.4M ounces).

Friday, June 2, 2017

US Stock Market - A Rare Red Flag Waving

I stated many times that it is very hard, or even impossible, to predict the stock market. However, sometimes Mr. Market delivers quite clear indications that something different is in the making.

Let me take the US stock market. Here is the chart showing the so-called NAAIM Exposure index:

source: NAAIM

According to the NAAIM:
"The NAAIM Exposure Index represents the average exposure to US Equity markets reported by our members"

It looks like most recently American investment managers are a little bit less bullish on US stocks than before (despite the index printing new historic highs).

Additionally, the red arrow depicts the divergence between the S&P index and the NAAIM. Interestingly, such divergence is quite a rare event. The last time it occurred (middle 2015 - the blue arrow), the US stock market dived 20% shortly after.

Well, I know that the US stock market is unstoppable (forgive me for being a little bit sarcastic) but now it is waving a rare red flag...

Wednesday, May 24, 2017

The Update 2 To The Top Five Portfolio Dispatched

Please, check your e-mail boxes to find the Update 2 to the 2017 Top Five Portfolio.

If any of my subscribers did not receive it - please, let me know. Bad things happen (then I will send it again).

Tuesday, May 23, 2017

A Message To The 2017 Top Five Portfolio Subscribers

On Wednesday (May 24, 2017) I will be dispatching the second update to the 2017 Top Five Portfolio report.

Tuesday, May 16, 2017

Silver Still Rapidly Hoarded

Despite weak silver prices, this month  the metal is aggressively accumulated by SLV:

source: Simple Digressions

As the chart shows, during the first two weeks of May as many as 12.1 million ounces of silver have been added to SLV vaults. It is a vast amount. For example, in 2016 the largest world's primary silver producer, Fresnillo plc, delivered 45.7 million ounces of silver.

In theory, at the current rate of 24.2 million ounces per month, SLV would have accumulated 290 million ounces of silver within one year (six times more than Fresnillo's annual production).

The question is: will that heavy accumulation have a positive impact on silver prices?

Tuesday, May 9, 2017

The Precious Metals Market Looks Better Now (At Last)

The precious metals market is probably bottoming. Generally, the best entry points are when this catastrophic correlation between gold and the precious metals stock market (represented by GDX, for instance) stops working*.

* - I mean a pattern where gold goes, say, 1% down with GDX dropping 3%. And then again and again and again...

Look at these two charts below (the upper panel shows GDX and the lower one gold) in an ultra-short perspective:


It looks like the market is sending a positive signal for gold bulls (at last). Since May 4 gold prices have been going down but GDX has chosen the opposite direction (look at two red arrows). In the past such divergencies were very promising...

Thursday, May 4, 2017

B2 Gold And OceanaGold - Time To Relax

B2 Gold and OceanaGold may relax. Their big enemy, Gina Lopez, has lost her job as an environment secretary in the Philippines.

Well, apart from closing a number of mines, most recently Mrs. Lopez banned the open pit mining in Philippines. It means that a mining company trying to start a new open pit mine in that country is not allowed to do it. Or, better said, it was not allowed a few days ago (as Mrs. Lopez held her post).

The country is open for mining once again.

Tuesday, May 2, 2017

Mineral Drilling Sector - What A Day!

My DRILL index went up 7.8% today. Let me list today's winners:
  • Energold: up 10.3%
  • Major Drilling: up 3.7%
  • Geodrill: up 3.8%
  • Orbit Garant: up 6.3%
  • Capital Drilling: up 18.5%
Now look at the DRILL index:

source: Simple Digressions

Well, while big gold miners did nothing today, the DRILL index rocketed up. Now I am waiting for the traditional mining sector to follow its drilling fellows...

A Rapid Increase In Silver Held By SLV

iShares Silver Trust (SLV) is following JP Morgan now. Since April 25 as many as 9.6 million ounces of silver have been added to SLV vaults. It is a large figure - look at last changes in SLV holdings:

  • April 1 - April 25: a decrease of 5.0 million ounces
  • April 25: 2.0 million ounces added
  • April 26: 2.9 million ounces added
  • May 1: 1.1 million ounces added
  • May 2: 3.5 million ounces added

So between April 1 and April 25 SLV reported an outflow of 5.0 million ounces of silver but in just four trading days (since April 25) as many as 9.6 million ounces were added.

Interestingly, most recently silver prices go down nearly every day but SLV and JP Morgan are hoarding silver bullion...

Another thing, in January, February and March SLV was reporting outflows of silver. In April this trend was stopped and now SLV reports a rapid increase in its silver holdings: 

source: Simple Digressions

Saturday, April 29, 2017

Shanghai Futures Exchange - What Is Going On?

While JP Morgan accumulates silver, the Chinese do the opposite (or something different is happening):

source: Simple Digressions

Since the beginning of March the Shanghai Futures Exchange (SFE) has reported silver outflows. What is more, last week as many as 4.0 million ounces of silver were withdrawn from the SFE vaults (spot the red bar on the lower panel of the chart).

Now the question is: how to interpret these changes?

There are two possible answers:
  • similarly to gold withdrawals, silver withdrawals are a sign of silver accumulation by the Chinese
  • the withdrawals are an indication of the decreasing demand

Wednesday, April 26, 2017

Each Day JP Morgan Adds Silver Bullion To Its Holdings

Since April 17 each trading day silver prices have been going down. I realize that precious metals bugs are in despair. Yes, it is an awful market. The question is not whether gold or silver prices go down  but how deeply they are going to drop.

However, JP Morgan does not care about it. Look at the chart below:

                                        source: Simple Digressions

As the chart shows, each trading day the guys at JP Morgan are adding silver to the bank's vaults at the COMEX.

Interestingly, the accumulation of silver by JP Morgan has just entered its parabolic stage (red circle):

                                     source: Simple Digressions

P.S. Today (April 28) they added another 915 thousand ounces (the chart has been updated)

Tuesday, April 25, 2017

What Is Going On With Barrick? My Answer: Nothing Special

Today Barrick Gold (ABX) released its 1Q 2017 report. In my opinion the results were decent however Barrick's shares are diving now (at the time of writing this post they are 9.8% down). What is going on? Well, the company also published its updated production outlook for this year. Look at the table below:

all figures in thousands of ounces

 source: Simple Digressions

The table compares the current and initial outlook (I have plotted the average values). Here is my comment:
  • firstly, according to the current outlook, the overall production is estimated to stand at 5,428 thousand ounces of gold
  • it means a cut of 365 thousand ounces, compared to the initial outlook
  • the biggest cut in production is attributable to the Veladero mine (345 thousand ounces of gold less than in the previous estimate)
  • however, this cut is mainly due to the strategic agreement with the Chinese gold miner, Shandong. According to that agreement, starting from July 1, 2017 Veladero will be shared 50%:50% with this miner. Hence, the overall Veladero production is going to be lower by 200 thousand ounces, compared to the initial outlook
  • unfortunately, due to the technical failure at Veladero, the mine is temporarily suspended. Barrick estimates that the production will be negatively impacted by around 145 thousand ounces of gold
  • the other changes are marginal (for example, production cuts at Kalgoorlie or Porgera)
Interestingly, Barrick estimates that costs of production should remain unchanged, compared to the initial outlook. 

Summarizing - I think that investors are overreacting and the current drop in share prices should be perceived as a nice speculative buying opportunity.

Friday, April 21, 2017

The Chinese Are Less Eager For Copper And Silver

It looks like the Chinese pressure on hoarding some metals is dissipating. Look at copper:

source: Simple Digressions

The blue circles indicate periods of decreasing copper stocks at the Shanghai Futures Exchange (SFE). Note that during these periods the prices of copper go down or level off. As the chart shows, since middle March the Chinese have been cutting copper stocks with copper prices following this decrease.

Another example - silver:

source: Simple Digressions

Similarly to copper, since middle March the Chinese have been cutting silver stocks.

Finally, a different picture. This time it is about gold:
source: Simple Digressions

As the table shows, in February and March of 2017 the Chinese withdrew more gold than in the corresponding months of 2016. It looks like the Chinese still show strong demand for gold...

Thursday, April 20, 2017

Is JP Morgan Taking Silver Out Of SLV?

Yesterday I asked this question: What is going on with silver? The question is still open but let me show a probable solution.

This year (till April 19) the SLV silver holdings decreased by 15.0 million ounces. However, in the same period JP Morgan has added as many as 19.9 million ounces of silver to its COMEX holdings. Interestingly, all that silver added by JP Morgan belongs to the category called "Eligible" (held by JP Morgan on its own account). In other words, JP Morgan increased its silver holdings (belonging to JP Morgan and/or its customers only) by 19.9 million ounces.

Summarizing, it looks like this bank is withdrawing silver from SLV to increase its holdings at the COMEX.

As a result, the thesis that something strange is going on with silver is not correct. Quite opposite, it looks like the silver, similarly to gold, is heavily accumulated and the main entity doing it is JP Morgan.

source: Simple Digressions

Wednesday, April 19, 2017

What Is Going On With Silver?

As I discussed in my previous article, since the beginning of 2017 two large gold ETFs, GLD and IAU, have been generally accumulating gold. However, the largest silver ETF (SLV), has been doing the opposite:

source: Simple Digressions

The chart shows that every single month SLV reported an outflow of silver from its vaults. As a result, now there are 327.3 million ounces of silver at SLV vaults:

source: Simple Digressions

It means that since the beginning of the current bull phase in gold and silver (December 2015), the SLV holdings increased by a mere 3.0% (look at two red circles). To be honest, it is not an impressive result because, for example, GLD gold holdings went up by 29.6%!

So the question is - what is going on with silver? 

Monday, April 17, 2017

Gold ETFs Do Not Always Do The Same

Generally, gold ETFs should behave in the same way. For example, when one gold ETF accumulates gold, the other ETFs should do the same. However, sometimes it is not the case. Look at these two charts:

source: Simple Digressions

Note that in January the first gold ETF, IAU, accumulated 125.2 thousand ounces of gold (its total gold holdings increased by this amount of gold) but its much larger counterpart, GLD, decreased its holdings by 742.7 thousand ounces.

Over the next months both ETFS were doing the same:
  • added gold in February and April (up-to-date)
  • got rid off the gold in March
Interestingly, gold prices were going down or got stuck only in March, when both ETFs were selling gold...

Friday, April 14, 2017

JP Morgan - Heavy Accumulation Of Precious Metals In April

JP Morgan, apart from being an active trader in precious metals futures, has been also aggressively accumulating gold and silver bullion this year. Look at the bank's precious metals holdings at the COMEX:

Interestingly, the bank has been particularly active in April, adding 380.8 thousand ounces of gold and 6.8 million ounces of silver to its COMEX vaults. It looks like this big speculator wants to hedge itself against something big... 

Thursday, April 13, 2017

Is The US Stock Market Topping?

Here is the chart of the week:


The chart shows the 30-year treasury bond price to S&P 500 ratio. The blue circles show cyclical lows of this ratio. Note that these lows correlate with the tops printed by the US stock market (red circles), represented by the S&P 500 index. The one-million dollar question is:

Is the US stock market topping now? 

Richmont Mines - Very Good Operating Results In 1Q 2017

Today Richmont Mines (RIC) released its 1Q 2017 operating results. Let me show just three charts showing what is going with this miner.

The first chart shows cash costs of production at Richmont's flagship property, the Island Gold mine:

source: Simple Digressions

This year the company is going deeper into Island Gold (deeper than 400 metres below surface) and expects to increase production (to 87 - 93 thousand ounces vs. 83.3 thousand ounces in 2016) and cut cash costs of production (C$715 - C$765 per ounce). As the chart shows, the start into 2017 was really good and the cash cost of production was much lower than company's estimates (C$668 per ounce for 2017, on average).

However, the second mine, Beaufor, was kind of a problem to Richmont:

source: Simple Digressions

As the chart shows, between the beginning of 2015 and middle 2016 Beaufor's production was in a steep decline. This negative trend was stopped last year (red arrow) and the company expects Beaufor to deliver 23 - 27 thousand ounces of gold this year (19.6 thousand ounces in 2016).  

What is more, the declining production was not the only problem at Beaufor because last year the mine was a high-cost gold producer:

source: Simple Digressions

According to the company, this year Beaufor should be producing gold at cash cost of C$1,265 - C$1,320 per ounce (C$1,444 in 2016) so the first quarter (red circle) shows that this forecast is not overly optimistic...