Abx mar 2011 abx apr 2011

On the left last months take on American Barrick. Of course it did not work out exactly that way. As is all too often the case lately,  the “market” manages to use every excuse to delay and frustrate as many people as possible. What looked like the end of wave 2 (or B) proved to be just the a leg of a more complex correction, delaying the inevitable by a whole month and adding only a fraction of a dollar. In the meantime RBC had announced it was a buy and gold kept making new highs. But the company itself gave the impetus for a ride down, a little bit like Mercedes Benz taking over Crysler. Rather than stick to its knitting the company has decided to branch out into copper miming in a big way.To accomplish this they are upping the bid on Equinox and are now at a level where even the Chinese are unwilling to play.

Overpaying for an asset is all fine and dandy, except when gold companies are normally valued at 10x cash-flow ( for whatever reason ) and copper companies at only 6x. Assuming the deal is accretive from day one and that the market will go for the middle of the range, that is 8x, the stock should find its way to $42 easily and then on to our original target of $36.