SFF, Seafield update

Hamilton

sff june 23 2013 ssff june 23 2013 b

The stock may still climb back to 10 cents briefly, but if the count on the right is remotely correct there is little hope of it staying there. Next week (25th of June) is the big general board meeting held at the posh address of Toronto street. In advance of that  we have had some stock option repricing , poison pills, and now a new study to examine the feasibility of the main project.

Cash costs, the equivalent of variable cost pricing, are estimated at $724.77 per ounce of gold. Silver is ignored due to its secondary role. Total capital plus maintenance costs are estimated (in great detail) at $154,349 mln. For this it is expected that 529,453 ounces will be produced over the life of the mine with a recovery rate of 89%. That works out to a “fixed” cost of $291.52 per ounce ( using the fixed/variable analogy further). The total cost per ounce is then $1016.29. A table in the report shows the sensitivity to the gold price as follows;

sff sensitivity

The report uses $1500 for the baseline. $1295,00 , where the yellow stuff is as we speak, is conveniently NOT featured as a possibility. Interestingly the $200 drop in the gold price causes an almost halving of the return. Another $200 drop would eliminate all profit which is not all that surprising as that is approximately where the cost of production are if certain elements that are not included in the full costs, such as royalties etc. are included. Lately just about every miner has managed to incur costs overruns of colossal proportions so there is no reason to expect these chaps to be much different. So, this is a screaming buy if you expect gold to climb to $2000 and up. If you expect gold to maybe hit $1000 or lower, don’t touch it with a twenty foot pole. By the way, you only have about 8 months or so and then the cash facility is gone, fully utilized. By definition therefore, this is as close as you can get to buying an option, which is exactly what everyone else from management to employees and financiers now has. Only difference will be that you are fully vested from the start and the expiry date is undetermined!

All of the above is predicated on a discount model that uses 5%. To what extent that is representative of a junior exploration company yet to move to actual production, is an interesting question. Judging by the 7% charged on the finance facility (not including the equity bonus) one would have to conclude that it is not representative at all.

See also; http://www.northernminer.com/news/seafield-envisions-a-smaller-operation-at-miraflores/1002413491/#

or; http://www.stockhouse.com/companies/bullboard/v.sff/seafield-resources-ltd?threadid=21545904

XAU Philadelphia gold/silver index, update and ZJG

Hamilton

Then 11/20 /11, and now charts;

xau 20 nov 2011xau june 21 2013 b

At the time we had identified the top around 240 quite accurately and were looking for a drop of about 100 points in wave 3 and a further 80 points in wave 5 after a 4th wave rally. So far we see no compelling reason to change the analysis. Wave 4  (of C) may start here at around 90, slightly lower than the 100 or so anticipated but the difference is not material.

As a reminder, the XAU consists of 13 senior gold miners so that does not bode well for them but  a lot worse for the juniors. First, however, we should get a tradable 4th wave. Below is the 30 year detailed chart, in brown this scenario, in purple a possible bullish alternative.

xau june 21 2013

Notice that we are already trading well below the 30-year average. Like in all wars, the Fed. is fighting the last one and is surprised to find itself trying to create inflation rather than dampening it.     The idiosyncratic characteristics of gold stocks are such that they do not necessarily move in tandem. Some may be chocking on colossal misinvestments while others are trying to digest badly managed take overs. Some have political problems and again others are not in areas where you would like to go on vacation. As a group, this is what can be expected. Below are the juniors by way of BMO’s ZJG, see also previous two blogs.

zjg 21 june 2013

IAMGold , IMG, update

Hamilton

img june 21 2013

A few months ago at about $8.50 this stock looked as if it might have been a buy. It wasn’t, but here again things are looking a lot brighter. The two legs down A and C are presently vector equal. Both the RSI and MACD are pointing up and the stock yields 5.6% and trades at a p/e of 7. Looking at the big picture, the stock has now dropped close to the lows of the 4th wave of previous degree (at $3 ?), see below.

img 21 june 2013 b

Just under $4 you hit the line from the lows going back to 2001. If it goes there or even a little lower remains to be seen, but regardless, it is already pretty obvious that buying at $4 beats buying at $24. This is what is known as buying low and selling high (as we suggested, see many blogs ago), it is what almost nobody ever does, it is that difficult..

ELD, Eldorado update

Hamilton

Then  (Sept. 2012) and now;

eld sept 2012eld june 21 2013

The target then, calculated on the basis of equality between the A and C legs worked out to , roughly, $5. The low, so far, is $6.23. We caught the high of the B-wave precisely to the tick (see previous blogs) so there is no reason to tempt the Gods for an encore. Suffice it that somewhere around here or a little lower, this low cost producer is a more attractive buy than at $22. By the way, $4 is roughly the low point in a 4th wave of previous degree.