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Prospero
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 Posted: Thu Feb 01, 2007 9:16 pm Post subject: Gold |
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Gold hit my buy level yesterday. There's a nice triangle pattern going back to the $725 peak. The technical breakout has received relatively little attention from the gold gurus, which is promising. Of course, some people have noticed, but there are not too many screaming bulls around that I've noticed (apart from the perma-bulls). The rest, I guess, have been lulled by several months of ponderous action.
I'm betting we'll go up to $725 before there's a serious reaction. |
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rffrydr
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| Posted: Tue May 12, 2009 10:06 am Post subject: |
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Lonmin launches rights issue to reduce debt
By William MacNamara
Published: May 12 2009 03:00 | Last updated: May 12 2009 03:00
Lonmin, the platinum miner, saw no price recovery ahead for the precious metal as it added a $457m (£302m) rights issue to a raft of measures undertaken this year to survive in a depressed market.
The pre-tax loss of $196m for the six months to March 31, compared with pre-tax profits of $396m, marks the clearest sign yet of the platinum sector's sharp reversal of fortune.
For years, supply was the problem facing the highly profitable sector, as the world's few platinum mines and smelters - mostly in South Africa - tried to keep pace with demand, especially from the automotive sector, which uses platinum to reduce pollutive emissions.
Ian Farmer, chief executive, said: "We need to see the automotive industry trending in the right direction before we can expect a significant price recovery."
Demand will remain at current lows for at least the next 12 to 18 months, Mr Farmer estimated.
Similar to industry analysts, Mr Farmer attributed the 20 per cent rise in the platinum price this year to investment buying from exchange-traded funds. He cautioned this was "fickle" and did not represent fundamental demand recovery.
Lonmin yesterday launched a 2-for-9 rights issue priced at 900p a share, a 44 per cent discount to last Friday's closing price. Approximately $457m in proceeds will be used to keep the company within its debt covenants: it will pay off net debt of $449m incurred in the interim period. The cash call comes less than a month after the group arranged a $575m refinancing package that will push debt maturities back to 2012.
"It appears management wants to bullet-proof the balance sheet," said Michael Rawlinson at Liberum Capital.
Xstrata, Lonmin's largest shareholder with a 25 per cent stake, has taken up its rights in full. Known for its acquisitiveness, Xstrata dropped its hostile bid for Lonmin in October.
The industry has buzzed with speculation that Xstrata, fresh from completing its own £4.1bn rights issue in March, will renew a bid for Lonmin after October.
"Good work is being done restructuring Lonmin, and if Xstrata is serious about taking this company, it needs to do so as soon as possible, before the benefits [from the restructuring] show in the numbers," said Leon Esterhuizen, analyst at RBC Capital Markets.
"Ian Farmer's job is to unlock as much value in the company as he can, so that when Xstrata bids again, it pays the highest price possible."
Lonmin will pay no interim dividend. Losses per share of 71.2 cents compared with earnings per share of 181.1 cents previously. Turnover more than halved from $907m to $436m.
Shares in Lonmin fell 162p to £14.60.
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rffrydr
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| Posted: Fri Apr 17, 2009 9:06 am Post subject: |
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Anglo getting interesting...for its paper:
| Quote: | This morning Anglo American announced it is to launch a US$1.5bn convertible bond in order to strengthen its balance sheet and lengthen its debt maturity profile:
Details of the issue: The principal is US$1.5 billion, which may be increased to US$1.7 billion in the event the over-allotment. The bonds will be convertible into shares of Anglo American and are expected to have a semi-annual coupon of 4.25-4.75% and an initial conversion price at a premium of 30-35% above the weighted average price of the shares during the course of today up to the time of pricing. The bonds will be issued at 100% of their principal amount and will mature in 2014 (5yrs);Attractive premium at 30-35% on a 5yr bond: This is clearly helpful in addressing balance sheet issues, improving liquidity and removing equity placing risk. The recent sale of the remaining 11.3% in AngloGold Ashanti (proceeds c.US$1.3bn) plus convert will allow Anglo American to term-out US$2.4bn of expensive South African debt with interest at 12% vs c.4.0% on Anglo American’s US$8.6bn “rest of world” debt (AAL net debt US$9.2bn) and expect the transaction to reduce the company’s overall cost of borrowing. With 30-35% premium on a 5yr note we think this an attractive issue;Rio Tinto Chinalco convertible now looking less attractive: In-light of this we feel this increases the probability that the Chinalco proposal for Rio Tinto will be voted down, unless the terms are amended. We see the terms of the Anglo American convertible more attractive and with Rio Tinto now trading at £24/shr, the premium to both tranches is significantly reduced. We estimate the first tranche of Rio converts is being issued at only a c.5% premium, down significantly from the 68% premium based on Rio’s share price when news of a potential Chinalco deal first surfaced. Similarly, on the tranche of bonds with the highest conversion price, the premium has fallen to below 85% from the 176% over the same time period. This, together with the fall out from the AGM yesterday suggest to us that compromise and amendments would not be out of the question;A positive step by Anglo American, with now no risk of equity placing. While we are still cautious on operations, recent sightholder sales for De Beers suggest the worst is behind; the stock is currently trading on 13.4x 2010E on spot prices vs Rio 11.4x, BHP 17.3x and XTA 12.5x. |
Showing another way. Look for more convertible offerings across the board--but is this what the Bug who bought this had in mind? In the end, no better than a bank--which is where the gold is.
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rffrydr
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| Posted: Tue Apr 07, 2009 7:08 pm Post subject: |
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How 'bout the discounting of DEflation?
Short View: Gold loses lustre
By John Authers, Investment editor
Published: April 7 2009 19:27 | Last updated: April 7 2009 19:27
Gold’s desirable properties are a part of popular culture. It is indestructible and, throughout recorded history, people have believed in it.
But it yields nothing, making it hard to value or to compare with other assets. If its price moves sharply, those who want to know what it is worth have nothing to hold on to.
Gold has just undergone a sharp correction, taking it down 14 per cent from $1,000 per ounce, which it briefly hit in February, before a slight bounce on Tuesday. Why?
Supply and demand have a role. Talk of International Monetary Fund gold sales at the G20 summit dented prices. So did anecdotal evidence that individuals were selling their gold, notably in India where there is heavy retail demand for gold and where gold in rupee terms rallied throughout the crisis, making sales attractive.
Gold is an inflation hedge but inflation expectations cannot explain this sell-off as it has coincided with a rise in inflation expectations, as derived from prices of inflation-linked bonds.
Much of the sell-off is down to returning risk appetite, which can also be seen in the equity rally. But comparisons with other commodities suggest there is more to gold’s sell-off.
The oil price in gold terms has been stable over history but not recently – from the top of the oil bubble last year until the start of gold’s correction a few weeks ago, oil fell by some 77 per cent relative to gold.
Platinum, a precious metal that should have a lot in common with gold, dropped 55 per cent in gold terms from its recent peak, while copper, an industrial metal, fell 66 per cent. All remain significantly cheaper in gold terms than they were at the outset of the financial crisis almost two years ago.
This suggests that the gold price had raced ahead of itself as investors looked for insurance during the crisis and also suggests that the correction could go further.
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rffrydr
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| Posted: Sat Mar 21, 2009 8:53 am Post subject: |
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Funny they use the word "vulnerable"....
Bubbling gold
Published: March 20 2009 09:42 | Last updated: March 20 2009 20:22
The stock market has been to hell and back, literally: on March 6, the S&P 500 hit a low of 666 points. Since then, the Federal Reserve, Bank of England and Swiss central bank have opened the taps. Equity markets have risen, as have government bonds. Their currencies have done less well. The dollar has flopped, so too the franc, and sterling remains on the floor. Many fear all this money printing will debase the fiat money system. This has found its usual counterpart: a rally in gold.
Yet if the “end of money” really is nigh, it is odd that the gold price has not risen more. At $953 per ounce, it remains half the level it reached, in real terms, at its 1980 peak. Looked at another way, the value of all gold reserves, some $900bn, is worth a quarter of total money in circulation. If any asset looks vulnerable to a big speculative squeeze, it is gold
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rffrydr
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nodoodahs
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| Posted: Mon Feb 23, 2009 4:55 pm Post subject: |
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Beer and chocolate, looks the same leaving as arriving.
Gold's chart looks stretched, but I'm still in it on this go-round. Like last time (was that already years ago?), planning to overstay my welcome.
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diesel
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| Posted: Mon Feb 23, 2009 4:54 pm Post subject: |
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Maybe the answer is that given there is no savings holding up the banking system, gold has stepped in to provide this function i.e. sitting in its vaults, waiting in the dark?
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rffrydr
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| Posted: Mon Feb 23, 2009 4:42 pm Post subject: |
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That other (black) gold:
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rffrydr
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| Posted: Mon Feb 23, 2009 4:37 pm Post subject: |
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Looks like we're defying sentiment--that's 'cause Poland isn't in Hulbert's sample.
| Quote: | | Warren Buffett: "It gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head. |
Another of Buffett's "surprises" in this collapse.
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HenryTo
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| Posted: Sun Feb 01, 2009 9:01 pm Post subject: |
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Latest sentiment levels in gold, per Mark Hulbert:
http://www.marketwatch.com/news/story/Gold-headed-south-short-term/story.aspx?guid=%7BD2E4C666%2D3DF3%2D48E7%2DBA2E%2D4EF8F7AAA1C6%7D
| Quote: | Unfortunately for those hoping gold's recent rally to continue, the conclusion of contrarian analysis is that the metal's short-term trend is more likely to be down.
Consider the latest readings of the Hulbert Gold Newsletter Sentiment Index (HGNSI), which reflects the average recommended gold-market exposure among a subset of short-term gold-timing newsletters tracked by the Hulbert Financial Digest. As of Tuesday night, the HGNSI stood at 60.9%.
This is identical to where the HGNSI stood at the end of December, when I last devoted a column to gold sentiment. ( Read my Dec. 29 column.) |
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rffrydr
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diesel
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| Posted: Tue Jan 27, 2009 3:51 pm Post subject: |
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I think the gold bugs have figured out that if rates go above zero percent, the huge accumulation of risks the US taxpayer soaked up from the banks will be much harder to pay off.
Furthermore, we can’t inflate the currency because, unlike in 1971 or 1933, most of this debt is held by foreigners.
The only way out of this is for the US is to cut expenses dramatically. I vote for axing the Pentagon which has to be the most inept American institution of all.
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rffrydr
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| Posted: Tue Jan 27, 2009 9:24 am Post subject: |
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Deflation: gold's best friend.
| Quote: | Gold
Published: January 26 2009 14:46 | Last updated: January 26 2009 15:50
Gold’s time may have come. The precious metal, as gold bugs will tell you, is unique. As a traditional store of value, it is a hedge against inflation. As a financial asset without any corresponding liability – unlike stocks or bonds, which represent a call on future cash flows – it also provides protection against the forces of deflation. And while investors can’t decide whether inflation or deflation is the bigger threat, gold prices have soared. On Monday, gold popped through the $900-per-ounce barrier, and hit record highs in sterling and euro terms.
Gold is unique in other ways too. For one, it produces no cash flows. Yet here too the deflationary bust has played into gold bugs’ hands. Falling interest rates have slashed the opportunity cost of owning gold; it may yield nothing, yet government bonds offer little more. That is also why gold-linked assets that do produce cash flows, such as mining companies, have done particularly well. Over the past three months, gold has held its own in dollar terms. Meanwhile, the Amex gold bugs index of mining stocks has doubled in value.
Another problem with pure gold is that it is in essence a momentum investment. It goes up until investors stop paying more for it; then it goes down. Because gold prices are already high, another alternative, as research outfit Gavekal suggests, may be platinum. Go back 20 years, and platinum has traditionally traded at 1.5 times the cost of gold. Now that ratio is 1.07 times; in relative terms, platinum is therefore cheap. Platinum also has a range of uses, in iPods, computers, car catalysts, anti-cancer drugs and spark plugs, to name a few. That also makes it a cheap option on economic recovery. “The only metal fit for a king,” Louis XV declared about platinum. And, perhaps, for investors too. |
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rffrydr
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rffrydr
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| Posted: Tue Nov 25, 2008 9:40 am Post subject: |
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For the Bugs, RIO valutions courtesy Alphaville:
| Quote: | Investors need to focus on the EV ratio and not the equity ratio. You could make
actually a massively bearish case if you take the historical EV exchange ratios between the two Groups and focus on the low point of that ratio (which was around 0.61x). At the moment the exchange ratio on an EV basis is around 0.93, so the EV would have to fall by 35%, implying that the Rio Tinto share price could fall by as much as 60% from here. THAT SAID, this ignores the potential of metal prices bouncing back and a stronger US$ also having a positive impact on costs for Rio Tinto. SO if you take the historical EV exchange ratio (of 0.81) between the two stocks you would probably get a better indication for now.
NH:
This would then imply a fall of c20% in the Rio Tinto share price from last
nights close assuming that BHP Billiton stays at the current level. So this would then point to a fair value on the basis of that exchange ratio of around 2,000p. A new fair exchange ratio would then be 2x based on the equity;
NH:
The focus now needs to be on the US$ and hence the metal prices. If you believe that there will be a bounce back in metal prices then Rio Tinto will be more geared to this than it is the case for BHP Billiton. If not, then you really should stay away from Rio Tinto for now. Having said that, investors at this point in time seem to ignore the benefits of a stronger US$ on costs, which is not insignificant.
NH:
Rio Tinto itself said that 50% in the fall of metal prices tend to be offset by lower costs. Remember most of the miners produce in countries such as Australia, South Africa and Chile, where a stronger US$ reduces local costs significantly. Most LME based metal prices now trade at or below the marginal cost of production from which they normally tend to bounce back. The fear now, however, is that the marginal cost of production would have to fall back as well, so that prices will fall more than so far anticipated. We would say that although a risk the market ignores the positives from lower costs;
NH:
The stock’s valuation appears attractive on the face of it, but the higher debt matters. We price our new target price for Rio Tinto at 2,000p on the basis of the historical EV ratio, which would price the stock at 6x 09E P/E (using marginal costs of production for the price assumptions).
NH:
This sounds attractive against the historical lows, but then we investors should note that if the stock falls back to its historical low on a sales multiple basis, the stock could fall significantly more. As said, it all depends on metal prices or on how quickly the Group gets rid of its debt from here |
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