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Credit deflation and the reflation cycle to come.


DurhamBorn

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In the meantime I completely missed Q2 production data from First Majestic on the 15th. Very solid quarter, with San Dimas beating expectations on production and grades. New mill at Santa Elena should ramp up production and recoveries in Q3. Things look promising and recent price action seems justified.

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Hochschild Mining said it it was "firmly on track" to meet full year production as its strong start to 2019 continued with second quarter attributable production of 123,959 gold equivalent ounces.

The company said it produced 245,325 gold equivalent ounces or 19.9m silver equivalent ounces in the first half, the second highest in Hochchild's history, due to solid delivery from all of the company's mines especially Inmaculada in Peru.

"Hochschild has continued its strong operational performance in the second quarter of 2019, with year-on-year increases at all three of our mines, resulting in our second strongest half of production on record," said chief executive Ignacio Bustamante.

"Consequently we remain firmly on track to meet our annual production and cost targets."

Great start to the morning!  Cheers @DurhamBorn and all other contributors!

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Bricks & Mortar
21 hours ago, NogintheNog said:

The prime PM, Gold finally got back to 2011 prices in GB pounds last week! But this was largely ignored by the MSM as the price in US dollars seems to be all that matters!

Excellent point.
Some of the predictions on here are for it to end up around $1600.  Noted David Hunter latest saying it might go a bit higher.  $1600 is only another 12% from where it is now in USD terms.  But UK investors should be thinking about the exchange rate - at $1.26 its about as good as its been this decade.  And within this thread there are other predictions for the USD to weaken from here. - (12% weakening would see the rate at $1.42 - I think that's easily within the realms of possibility)
Gold, in GBP terms, might not get much better from here, (if these predictions come true).
* Initially thought I wouldn't do anything myself, because all my miner shares produce both gold and silver - but now thinking I may look at them all again and consider punting the one that produces most gold relative to its silver, to reinvest in something that produces mostly silver.  Endeavour is most likely.  I should have been doing this 3 days ago!

DYOR - I'm a complete AMATUER!

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1 hour ago, stockton said:

Great start to the morning!  Cheers @DurhamBorn and all other contributors!

I like Hochschild as a company, they generate shareholder value and have been very good for my family over last 5 years.  If silver continues to run and Arcata comes back online then I will be looking for 300p minimum.

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sancho panza

 

1 hour ago, kibuc said:

Their operational performance has been decent (at last!) but I think their financials might be a rude awakening. I've been talking about it at length, so just to re-summarize:

1. 2/3 of their RR gold production is capped at $1300/oz

2. Lower grade at RR should translate into higher AISC

3. New Afton is predominantly a copper mine, and copper has been flat at best

4. Their debt hasn't moved and it costs north of $50mil per year to service.

For me the alarm bells start to ring whenever NGD exceeds WDO in market cap. That's why I sold half my holdings @1.67 and will be liquidating the rest this week or the next. I see very little chance that the financial report in two weeks' time will support current valuation.

Cheers for that summary Kibuc.I'm not the sharpest card in the pack but I can follow logic and your logic here is sound.Grade/Hedging restricting profits(any idea when the hedge stops?)/Debt.As I said in another post on something else, debt is real. As long as there's enough equity on the balance sheet then companies can carry on but equity is a lot less tangible than debt and grade

You got a view on the current run up.XAU has hit 89 from 66 on 29 may ---6 weeks or so.My charts are saying overbought but each day the pull back ends with another melt up.

It seems to me that the bull has really begun .We had a similar face ripper at the start of 2016 that pulled back but the wider macro picture is just getting worse and worse.We got our intial three tranches well spread now-with particular thanks to yourself @DurhamBorn and @Majorpain   ,but have to say that I'm beginning to think we could deploy more here purely as a momentum play.

Ref Wesdome-we still don't own any because I was too tight to buy a stock that had quadrupled since it's 2015 low.............hangs head in disappointment in self.

On a side note,have you got a view on B2G/PAAS by any chance?

 

52 minutes ago, kibuc said:

ASOS with another profit warning this morning. How many can you give in a single year?

It's an impressive effort by any standards.They should merge with Marks & Sparks....

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I'd appreciate everyone's thoughts on silver ETFS Metal Securities Ltd (PHSP) - got a small amount in there and it's done well this week.  Hold or sell?

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5 minutes ago, Loki said:

I'd appreciate everyone's thoughts on silver ETFS Metal Securities Ltd (PHSP) - got a small amount in there and it's done well this week.  Hold or sell?

I have the Smith & Williamson Global Gold & Resources fund and am probably going to sell this instead of the miners (no dealing charge) as a way to hedge any drops from here.

Not as good as selling the miners but I wouldn't want to miss out on another leg up, at least if that happens I could buy the fund back free of charge or put he money into BP/CNA/BT/RDS which are all on my radar

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sancho panza
58 minutes ago, Bricks & Mortar said:

Excellent point.
Some of the predictions on here are for it to end up around $1600.  Noted David Hunter latest saying it might go a bit higher.  $1600 is only another 12% from where it is now in USD terms.  But UK investors should be thinking about the exchange rate - at $1.26 its about as good as its been this decade.  And within this thread there are other predictions for the USD to weaken from here. - (12% weakening would see the rate at $1.42 - I think that's easily within the realms of possibility)
Gold, in GBP terms, might not get much better from here, (if these predictions come true).
* Initially thought I wouldn't do anything myself, because all my miner shares produce both gold and silver - but now thinking I may look at them all again and consider punting the one that produces most gold relative to its silver, to reinvest in something that produces mostly silver.  Endeavour is most likely.  I should have been doing this 3 days ago!

DYOR - I'm a complete AMATUER!

I think that call on Gold in GBP has some backing from the COT data.Commercials are long GBP at near year highs.Gold in sterling-by it's very nature- is always arbed ref the dollar price.

 

Have to say that longer term I personally think gold will get reported on in 1000's not 100's in the longer term.The Central banks/legislators(think Glass Steagall repeal 1998/Basel 1+2+3) have made an absolute mess of the last twenty years.

BP.png

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sancho panza

Worth also noting that commercials are record net short on the yellow stuff.Maybe adjusting to the new normal of $1400 but hedging it they are.This was discussed earlier ref the commercials being net long back in Oct 18

GC.png

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7 minutes ago, sancho panza said:

On a side note,have you got a view on B2G/PAAS by any chance?

NGD gold/copper hedge is for the entire 2019.

I'm underweight on major producers as they usually experience lower volatilty and volatility is what I want when the bull starts. Harmony nad First majestic are by far the biggest ones I own. Hence, the likes of B2G or PAAS hardly ever enter my radar. All I can say is the fact that PAAS still hasn't made any significant progress on Escobal since acquiring Tahoe doesn't really bode well, and that acquisition (along with all the liabilities it entails, which may not be fully known at this time) might turn out to be quite a poison pill.

My silver allocation of FR, EDR, GPR and IPT is not for the faint-hearted but it sure has been fun recently.

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20 minutes ago, stockton said:

 

Not as good as selling the miners but I wouldn't want to miss out on another leg up

That's exactly what I was considering!

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sancho panza
1 hour ago, kibuc said:

NGD gold/copper hedge is for the entire 2019.

I'm underweight on major producers as they usually experience lower volatilty and volatility is what I want when the bull starts. Harmony nad First majestic are by far the biggest ones I own. Hence, the likes of B2G or PAAS hardly ever enter my radar. All I can say is the fact that PAAS still hasn't made any significant progress on Escobal since acquiring Tahoe doesn't really bode well, and that acquisition (along with all the liabilities it entails, which may not be fully known at this time) might turn out to be quite a poison pill.

My silver allocation of FR, EDR, GPR and IPT is not for the faint-hearted but it sure has been fun recently.

Thanks for that That hedge has really reduced their room for manouvre.Incredible really when it could have really helped bail them out.

I've set things up a bit more conservatively,weihted us towards the $1bn + producers in HUI/GDX/XAU, then tailing off through GDXJ/SIL components into the smaller explorecos.I learned from my experiences with EGO and NGD so don't regret them but I do wish I'd put more upfront into HMY/SIB.

Ref PAAS/B2G,somethign jsut stopped me investing in them for whatever reason.PAAS chart reminds me of Barclays bank for some reason....

I think I'm just going to top up stocks we already own rather than buying those two.Poss HMY/SIB.

Thanks again.Always appreciate your insight.

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3 hours ago, kibuc said:

ASOS with another profit warning this morning. How many can you give in a single year?

Single point of failure.

Which failed.

 

 

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1 hour ago, kibuc said:

Hence, the likes of B2G or PAAS hardly ever enter my radar. All I can say is the fact that PAAS still hasn't made any significant progress on Escobal since acquiring Tahoe doesn't really bode well, and that acquisition (along with all the liabilities it entails, which may not be fully known at this time) might turn out to be quite a poison pill.

I don't think that's strictly true, the consultation is going through the courts which is always going to be a slow process.  There is a legacy from Tahoe of very screwed up relations with the locals so it was always going to be a rather difficult process.

Escobal and Navidad are two of the biggest silver deposits going, a decent deflationary crash and high silver price may be the grease needed for the political objections to dissipate, i don't think either of them are too highly built into the share price at the moment so there shouldn't be too much downside IMO.

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33 minutes ago, Majorpain said:

I don't think that's strictly true, the consultation is going through the courts which is always going to be a slow process.  There is a legacy from Tahoe of very screwed up relations with the locals so it was always going to be a rather difficult process.

Escobal and Navidad are two of the biggest silver deposits going, a decent deflationary crash and high silver price may be the grease needed for the political objections to dissipate, i don't think either of them are too highly built into the share price at the moment so there shouldn't be too much downside IMO.

I'm not sure if PAAS is any closer to getting local support than Tahoe was, but as mentioned before I don't really follow it too closely.

https://www.business-humanrights.org/en/guatemala-xinka-people-demand-that-pan-american-silver-respect-their-rights-and-put-an-end-to-the-violent-legacy-of-the-escobal-mine

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17 hours ago, leonardratso said:

i mean look at cna, ftse blue chip, major company, fell like a piece of shit

Yes my CNA is down 30% from when I bought it!  I shall need a good few divis to compensate.  But..........the miners and GDX are making up for it and my mini portfolio is in danger of going green:).  Shame I haven't got more to put in but if I had 6 figures to play with I doubt I'd get much sleep.  I s'pose the best outcome is to build up slowly then as the 000s multiply it's not too much to handle:D

Come the deflation lets hope CNA/VOD/RMG etc recover a bit.

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Castlevania

Barrick’s put up or shut up deadline for their acquisition of Acacia is tomorrow. Any thoughts on whether they’ll sweeten the deal? 0.2 Barrick shares for each of Acacia would be enough in my opinion, seeing as they already own 65% of the company. At least that’s what I’m hoping so I can dump my Acacia shares for a decent profit (already have enough Barrick).

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1 hour ago, kibuc said:

I'm not sure if PAAS is any closer to getting local support than Tahoe was, but as mentioned before I don't really follow it too closely.

https://www.business-humanrights.org/en/guatemala-xinka-people-demand-that-pan-american-silver-respect-their-rights-and-put-an-end-to-the-violent-legacy-of-the-escobal-mine

Yeah, there are a couple more articles floating around which paint a similar picture.  However in a nutshell its 300m oz of AG and the Guatemalan govt needs the tax money, so I think a fudge will be found eventually.  Even so im pretty diversified PM miner wise as even the mighty FRES is not immune to a hiccup every now and again.

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8 minutes ago, Castlevania said:

They cut production yesterday whereby thanks to a stronger silver price they held up. Today was analysts downgrading them. Ouch! 

Largest silver producer going down while silver is going up. That's a bit depressing, considering it's my largest PM holding. 

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Outside of the PMs the tobacco stocks roaring ahead today and this last week.Looks like some real sector rotation going on now.Saw the So-Called BBC say Brexit would cause a recession,typical rubbish.We are already heading into one.China being hit hard now i expect,very hard,next they will cut imports themselves so the rest of Asia should get whacked as well.As always it took us a few bumps along the road map,but we are hitting the home runs now.My place is getting shot of 50+ tomoz,lots of worry today in there with all those lease cars.

Vod got the go ahead today for the Liberty deal.

 

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