Category Archives: Gold Shares

Weekend Charting 5 Oct 2014 – NST, DRM, TGZ

Gold and silver price (USD) continue to have a terrible time. Time for an update:

Gold (USD)

Gold currently sitting on a significant support line at $1190. The last two occasions the price hit this area in June 2013 and Dec 2013, the price rebounded back to $1250 in a matter of a few weeks (and then onto $1420). Should $1190 fail, then I’d expect at least $1065 to be hit.
XAUUSDO_scottreevecom_6oct2014

Silver (USD)

Silver recently broke support at $18.62 and hit below $16.92 support. Silver last consolidated strongly between these two levels between Sep 2009 – Aug 2010 and between Feb and Aug 2008, so there may be a bottom at current levels and some more sideways action? If not, then I’d expect at least $14.65 to hit next support level – a major support level that goes back to April 2006.
XAGUSDO_scottreevecom_6oct2014

NST (Weekly):

NST has some buying support in the $1.20s. Should this area fail, a test of $1.09 is likely. Next couple of days will determine next direction (see short term candlesticks with wedge formed).
NST_scottreevecom_5oct2014

Close up of Daily candlestick chart:
NST_daily_scottreevecom_5oct2014

DRM (Weekly)

DRM now fallen 11 of last 12 weeks, breaking some key support lines. Technically the only real potential support area on the chart is around 40 cents when DRM last hit the area in June 2013. Hard to see on my small chart, but the last two weeks have shown some “tails” to the weekly candles indicating current buying support below 50 cents.
DRM_scottreevecom_4oct2014

TGZ (Weekly)

TGZ is a fairly illiquid gold stock. Nonetheless, weekly candlesticks create a more clear view on the areas of resistance and support. The 80 cent region has been a dominant area of resistance, whereas 55 cent has been a strong support level, and the place to watch if the current trending support line is broken.
TGZ_scottreevecom_4oct2014

Cheers
Scott

Gold Shares Bloodbath continues

Half of 2013 down, and now the so called ‘defensive blue chips’ are now falling heavily like the gold sector…

au_vs_ncm

NCM is the largest gold stock on the ASX by far, and has clearly has some problems.

Here is a base 100 chart of the gold stocks in the ASX200
asx200_gold_stocks__scottreevecom_30_june_2013

So in percentage terms, all the gold stocks have crashed together (and remember these are some of the better ones on the ASX)
au_30june2013_asx200_percent
au_30june2013_asx200_percent

and a closer look at the handful which I think will be good buys when the dust finally settles… this could still be a while off – (refer to the my Gold Shares Bloodbath post below this one)
asx200_gold_stocks__scottreevecom_30_june_2013_ii

Gold Shares Bloodbath

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  • UPDATE: Post now includes charts for NCM, OGC, PIR, TGZ (as of 10 June 2013)
    =======================
    On Friday 12 April 2013, the US dollar gold price plummeted 5.6 per cent and silver fell 6.0 per cent. At time of writing on 15 April, both continue to slide with gold price in Australian dollars at A$1340 and silver at A$22. Major support lines have now been broken and the heavy falls are likely going to continue for a while yet.

    The bloodbath on the ASX today can be seen in the watch list below:

    gold_asx_15.04.2013

    As is clear above, the one gold major on the ASX, Newcrest Mining fell over 8 per cent in the session. Even the low cost producers got smashed as much as the marginal gold producers… (more on that later)

    As I posted at the end of 2012, Newcrest (and gold shares generally) have been underperforming for over two years now.
    ncm_2013_shoker_goldmarketscentral

    With today’s losses, NCM is currently down 20.8 per cent for 2013.

    In all seriousness who would want to touch gold and silver right now?

    I don’t blame anyone if they are leaving the gold or silver markets right now. Like trading anything, it’s all in the timing and the charts are showing that both gold and silver price will get cheaper (unless there is a major bounce in the next couple of days…unlikely).

    Gold and silver’s fundamentals today are better than they have been for decades. Yet again there is now a large disconnect between what’s happening in the physical market and what the gold price and gold shares are indicating. We have tens of thousands of paper gold and silver contracts flooding the market, yet we have the likes of central banks trying to repatriate their gold reserves, but being told the gold likely doesn’t exist yet. Take the German Bundesbank being told it would take 7 years for nearly 700 tonnes of its gold bullion reserves to be flown back to der Fatherland from Paris and New York (yet this amount of gold could fit on a couple of airliners tomorrow if the gold existed…).

    Most years since the gold/silver secular bull market started 12 years ago, gold and silver always had at least one savage sell off each year. This is why many investors always warn about investing in gold/silver with leverage – it’s easy to get caught out. See this chart I did back in Sept 2011, which shows these severe pull backs. This current sell off is just another example of volatility in gold and silver markets. In the past these sell off periods have all been fantastic buying opportunities. In a debt laden Western World, in a world where Japan is destroying its currency, and China has printed more credit than the entire US financial system since 2009 …. then I’m pretty confident to say that gold and silver will remain being a desired currency to store wealth and maintain purchasing power.

    Back in 2008, the gold price fell 34% from peak to trough before returning to its bull market
    . Silver when from around US$20 to about US$7.50 – when I first became awake to gold and silver’s fundamentals.

    By the time Lehmann Brothers went under, and like.. half the world’s financial industry on 15 September 2008, gold and silver had already been falling for 6-7 months and bottomed soon after the GFC panic started in that September. Perhaps gold and silver is yet again being a leading indicator of things to come later this year?

    The best part about the current sell off is that the lowest cost producers, which high-grade gold near surface are getting sold off just as heavily as the marginal gold stocks. When the dust settles, there will be some big bargains.

    In my opinion (no buy recommendations or advise here… just my opinion), these are some of the gold stocks worth watching. Who knows when they will bottom.

    (Click to enlarge)
    scottreeve_gold_stocks_april2013
    Disclosure: I currently have a small parcel in TGZ.

    My observations are based on gold resource, production, cost… the “economics”. Political/management risks can change the desirable attributes of these stocks rather quickly!
    I would also say that there are few gold stocks in Australia worth touching these days because the cost structure is getting out of control. The last few years there have been too many mid-tier and major gold companies that have put $100s millions into growth and expansion, and are paying for it in their cost structure. Now is the time to find the best of the best in terms of high-grade gold and low cost. Right now South America looks good and as always gold deposits that are very high grade and shallow to get to!.

    ** Important note: Not all gold companies report complete total cash costs. Some companies excludes taxes, exploration, depreciation, depletion expenses, financing etc from their calculation. This can make it difficult to compare companies cost structure – the difference can be large. For example, in January 2013, one Australian analyst found that

    “the average total production cost was $1,170 an ounce, compared with an average reported cash cost of $773 an ounce.”


    Quick background on these companies mentioned above:

    Two weeks ago I charted BDR and DRM and their support lines are clear to see. In the coming days I will update this post with technical analysis of the other stocks. They will also be posted at www.goldmarketscentral.com

    Newcrest Mining
    Newcrest is on my list as it is the only gold major on the ASX. NCM has had consecutive years of underperforming, but when the gold market bottoms, NCM should bounce. Following the stockmarket lows in 2008 NCM rebounded around 90 percent in 6 months (from $21 to $40 p/share). Yes, dogs can turn into market darlings quickly. I suspect one day soon NCM will resolve its expansion issues at Lihir and Cadia and solid returns should result.

    NCM_scottreevecom_10june2013

    Oceanagold
    The Didipio Mine (Philippines) is estimated to be one of the lower cost gold mines (net of by-product credits) globally. Didipio Mine estimated cash costs of FY2013 at negative $370 to negative $50 per ounce, due to net by-product credits from 15,000 – 18,000 tonnes of copper.

    OGC_scottreevecom_10june2013

    Beadell Resources
    Beadell has just commissioned a new gold mine in northern Brazil. One of the starter pits has arguably the highest grade gold deposits in the world with grades at 30.9g/t au (almost 100,000 ounces). Another start pit contains veins of iron ore between the veins of gold bearing ore. BDR is soon to commission an iron ore concenerate plant to sell it as a by-product. This will lower BDR’s total cash cost to the lowest quartile of around US$425 per ounce.

    BDR_scottreeve.com_31.03.2013

    Papillon Resources
    Papillon raised $52.9 million in March 2013 to complete a 100,000 metre drilling program at its project in western Mali. The company already has over 4 million ounces resource from shallow drilling completed to date. There is potential for many millions of ounces to be defined in the coming months.

    PIR_scottreevecom_10june2013

    Teranga Gold
    Teranga has a proven gold mine in eastern Senegal. The company made significant inroads in 2012 by reducing its operating costs by expanding its plant; found a new gold deposit nearby (at grades of 5.3/gt au), and will soon eliminate its hedge book in the coming months.

    tgz_ax_price_weekly.10dec10_to_25jul13

    Doray Mining
    Currently developing one of the highest grade gold projects in Australia at Andy Well. The main pit at Andy Well has a resource grade of 15.1g/t au. First gold production is expected in September 2013 at an annual rate of 74,000 oz per annum. Total cash costs expected to be around A$868 per ounce.

    DRM_scottreeve.com_31.03.2013

    Cheers
    ~ Scott

  • Newcrest Mining – 2011 a year to forget

    NCM_bubble_chart

    2011 was an awful year for many stocks and stockmarkets around the world. Despite the global debt problems, many companies, particularly in the resources sector are making very healthy profits, are cashed up and have little or no debt. Newcrest Mining fits this criteria, but ended up falling - 27.8% in 2011, despite gold prices rising by 10.0%. Newcrest, like many other miners had its worst year since the commodity boom started a decade ago.

    Increasingly, it now seems that Newcrest, BHP Billiton and other resource stocks are a proxy for world sharemarkets rather than move up or down on their company fundamentals or value of commodities of which they produce.

    NCM – Yearly candlestick chart

    Newcrest’s market cap at the end of 2011 was $22.7 bn (down from $30.9 bn at end of 2010). Newcrest now accounts for around 47% of total gold company market cap (*excludes copper focused miners such as BHP, OZL, PNA).

    The next largest gold stocks are RRL (at $1.5 bn), PRU (at $1.1 bn) and EVN (at $1.05bn).

    2011 Market capitalisation bubble chart – ASX listed gold stocks

    ~ Scott

    2011 Annual Tipping Results

    1st_2011_shares_com_au_annual_tipping_comp

    Each year, for about seven years now, I have participated in the Annual Shares.com.au Tipping Comp. These are the three stocks I selected for 2011, with the reasoning (the comp used 31/12/10 for opening prices):

    posted: 2 January 2011

    Always struggle to pick three.. narrowed it down to four, so DRM will have to miss out.

    Three gold picks:

    NST – Northern Star. NST bought the Paulson’s gold mine from IAU in mid-2010. The mine is performing above expectations. NST should be revalued. Currently has a low market cap of $116 million.

    KRM – Kingrose Mining. A small gold producer in Indonesia which is has very low production costs (US$147 p/ounce). KRM should make significant profits throughout 2011 and has good exploration ground.

    PIR – Papillon Resources. Small gold explorer in West Africa. Had a good run in 2010, should continue with more exploration success.

    The results:
    NST: + 101.3%

    NST - Northern Star

    KRM: - 0.7%

    KRM - Kingrose Mining

    PIR: - 0.9%

    Papillion Resources

    Overall I finished 1st out of 23 entrants, whereby I made an average gain for the three stock selections of + 33.3%.

    Only one other entrant had a positive result from the three selections. This is how the group of 23 compared to the All Ords.

    2011 Shares.com.au Annual Tipping Results

    Interestingly, the forth pick I couldn’t include:
    DRM was down only - 1.1%

    In comparison:
    * the Australian All Ords Index fell - 15.4% in 2011;
    * physical gold (US/oz) increased by + 10.0% in 2011; and
    * physical silver (US/oz) increased by - 10.4% in 2011.

    The overall theme for stocks in 2011 was major volatility, a trend I expect to continue for many years to come. The Australian market, and most world stockmarkets are in a secular bear market which may last for another 10 to 15 years.

    Money can be made in any market though, if you trade with discipline, by using trailing stop losses on the gains, and keeping the losses small.

    Cheers
    Scott

    2011 ASX-listed Gold Company IPO Summary

    I’ve compiled a list of 2011 IPOs which mentioned they were actively exploring for gold, held interests in gold companies or had prospective tenements for gold. 35 companies in all. Full results attached.

    Overall a terrible year for IPOs and the market generally.

    ~ Scott