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Gosh thanks Candid, v much appreciated. Roughly what do you expect profits to be this year? Do you mean the extra Capex this year and next will add about $115 to aisc, or mean we need a gold price $115 higher, over next decade, for same profit (+ more for mining inflation)? As said thanks a lot.
Also Gnome, yes inflation's likely to be higher but I just read interesting article looking at the correlation on charts between gold and inflation, there isn't really one as it depends how much interest rates are raised to knock inflation, if a lot this trounces inflation and gold falls. This time my guess is inflation with rise faster than rates, so more important, but the market is fixated on the wrong metric, interest rates, so an announcement of higher inflation will increase the worry on rates and could hit gold, although this will be the wrong move that will eventually right itself if I make myself remotely clear. Which is why I hold.
Major European stock indexes started the week marginally higher premarket on Monday with inflation and energy crisis still in focus. British Business Minister Kwasi Kwarteng reported that London will provide support to industries most affected by the rising gas prices.
The FTSE 100 gained 0.16% at 7:52 am CET, while the DAX rose 0.14%. The CAC 40 climbed 0.18%.
The euro was flat against the dollar at 7:53 am CET, going for $1.15740. The pound jumped 0.26% to $1.36500 at the same time.
Breaking the News / MD
Yes I agree Cowichan , that is a large figure. Not as big as it might seem at first glance though in some respects .
The $11 trillion is cumulative since 2004 which is about $650 billion per year
If timed properly , ( when share price is extremely undervalued ) this can be a shrewd thing to do .. it props up the share price by mopping up all sales , it also returns excess cash to shareholders in lieu of dividends because it reduces the share base and this leads to an increase in EPS for the same revenue ..it is also a way of returning excess cash to shareholders as a business contracts ..which many do over time.
Prior to investing in Centamin , I invested in New River retail and I was keen that they should follow that path when the share price fell to 43p.. less than a year later it was up to 106p. then they announced the sale of Hawthorne pub chain and their business size has now halved ..so has the share price and dividends .
I don't approve of share buy backs when there is already a lot of debt on the balance sheet as it puts too much risk on the company
An important factor that you also need to factor in are new fundraisings by companies , new entrants to the market , and companies experiencing exponential growth , Amazon , Microsoft and Tessla spring to mind but there will be others
It will be interesting to see the net growth v share buyback in the market value of the index as a whole .. in a way we have that , with the growth in market value of the US stockmarket in that time , although I would issue a caveat that it is probably overvalued at this time .
Gold stocks, along with gold bullion have underperformed other asset classes so far in 2021, weighed down by elevated US Treasury yields and a stronger US dollar.
The rollout of coronavirus vaccines and optimism of a global economic rebound have also dulled its lustre.
There are a number of catalysts that could propel a recovery in the yellow metal’s price into 2022 and in turn, its miners’ stock prices.
One of these is inflationary pressures.
Wednesday the 13th looms as a big day. It's the release of US CPI and the market is anticipating a result well above the 2% Fed target. At the time of writing the Bloomberg median estimate was 5.3%.
Should the result be so high, or even higher, we do not think the market can continue its ‘inflacency’.
Inflacency is inflation complacency, built on a belief that this year’s surge in global inflation was a short-term phenomenon caused by post-COVID reopening.
Inflacency cannot continue in the long term and the Fed has already started to open the door on tapering, not that you could tell from markets.
Other risks – including radical monetary policies, negative real rates and unsustainable debt levels – remain and are supportive of higher gold prices.
Additionally, gold equities appear cheap compared to the gold price and other equities. They stand to benefit, as their balance sheets remain strong and they typically rise more than the gold price in an upswing.
A spike in interest rates following the September FOMC meeting in which the Fed suggested it could begin tapering its US$120 billion per month purchases of Treasuries and mortgage-backed securities in November was the most recent event weighing on the gold price. The Fed also indicated it might begin raising rates as soon as late 2022. We believe there are a myriad of risks that will come with a Fed tightening cycle, including:
Stimulus-fueled economic growth could grind to a halt;
Debt service costs become a problem with higher rates; and
Bubbles in certain sectors, bonds, crypto assets, and housing could come crashing down.
None of this is slowing the market down. According to the Wall Street Journal, IPO activity has already surpassed that of every full year on record. Sales of junk-rated bonds and loans have also topped previous annual highs. In 2021, the average daily notional value of stock options traded is set to surpass the value of underlying stock trades for the first time. NFT’s (non-fungible tokens) of digital art are selling for millions in a bubble reminiscent of the seventeenth century tulip mania, when a single tulip sold for more than some houses. Frothy markets don’t worry about risks and don’t see a need for safe havens. As a result, so far in 2021, gold has not shone for investors.
However, that could change on Wednesday following the release of the US inflation numbers...
best
the gnome
Don't fear Sotolo... Capex doesn't come out of profit and therefore added to AISC in the year of spend ..
It is deprecated over the perceived life of the asset , which in this case will probably be the disclosed life of the mine which is currently 10 years , so only £23 million or about $57 per ounce will be added to AISC for each year , so not a huge amount ..but of course AISC will already include the annual depreciation for all capital expenditure in previous years , which gives a like for like comparison with previous years
It will however , come out of the $300 million cash reserves ..so that would fall temporarily to $70 million but this is where the cash profits from revenue come in.. the depreciation from cumulative previous capex is now non cash , so this is added to the reported statutory profits. Historically these two combined have generated enough cash in total, to finance capex and dividends in that year
If you recall though , rhe presentation predicted that current cash would reduce by circa $100 mullion because this time the cash earned from operating profits (based on reduced production levels ) won't be able to finance the £230 million capex plus the dividends it pays to us and Egyptian government (to the tune of around $100 million .)
I hope this explains it ...very complicated I know , there are other accounting factors in there to but these are the main items...
A short video explains the process. Current systems can manage 9Mt/year processing possibly expandable. Up to 70% energy savings.
https://youtu.be/WcPKUkjSFvM
https://seprosystems.com/
Summary: Basically blasting the ore with microwaves to microfracture for easier processing and pre select waste from ore bearing material - thus also saving on reagents etc. Good for the environment & profits.
Hi Mr Gnome,
We certainly need some green shoots in the UK but of the environmental kind because our lying government's policies are destroying rather than protecting it including going against the wishes of millions of decent ,caring responsible citizens by building HS2
https://www.independent.co.uk/news/uk/politics/hs2-cost-buy-billion-nhs-education-brexit-a9293021.html
Centuries of farming, building and industry have made the UK one of the most nature-depleted countries in Europe.
Extensive agricultural lands and road networks, in combination with other factors, have reduced the wildlife in the UK to a point hardly seen elsewhere.
While the UK has made some gains, natural landscapes have been so heavily degraded over decades and centuries that we are simply not doing enough to turn back the tide.
https://www.nhm.ac.uk/discover/news/2020/september/uk-has-led-the-world-in-destroying-the-natural-environment.html
The UK is one of the world's most nature-depleted countries - in the bottom 10% globally and last among the G7 group of nations, new data shows.
It has an average of about half its biodiversity left, far below the global average of 75%, a study has found.
A figure of 90% is considered the "safe limit" to prevent the world from tipping into an "ecological meltdown", according to researchers.
The assessment was released ahead of a key UN biodiversity conference.
https://www.bbc.co.uk/news/science-environment-58859105
Brexit has given a way out of complying with EU legislation restricting or banning the use of Bee other insect destroying chemicals
https://www.buglife.org.uk/news/wildflowers-to-be-contaminated-with-banned-insecticide-uk-government-says-herbicide-use-will-stop-flowers-poisoning-bees/
Friends of the Earth and our allies asked to see all the evidence? behind the decision as soon as it was made. But we only received the information in March - and only after submitting an information request under Freedom of Information rules
https://policy.friendsoftheearth.uk/insight/why-government-wrong-ever-allow-banned-neonics-our-fields
I'm' really not that worried about Centamin because I am confident all is going well now, what does concern me more is the state of the UK and our world, no point having loads of money if the environment around you is being destroyed at such an alarming rate!
The answer to your capex question Sotolo lies in how it’s has been accounted for in the past- cheers.
Steve, that depends a lot on what cey profitability will be, so if Capex is included in aisc or as is more usual not or partially. From Centamin outlook for the year this August: · "2021 Gold production and cost guidance maintained: 400,000 to 430,000 oz at AISC of US$1,150- 1,250/oz ...Capex guidance of US$225 million and exploration expenditure of US$17 million". Is this Capex on top of the aisc if so it amounts to $242m spread over 415,000 ounces or near an extra $600 an ounce taking costs to $1750-1850 an ounce at which we have maybe just been breaking and are now about to be or already are loss making. This extra Capex also lasts through next year, with same again. If gold falls just a couple of hundred dollars would we be losing a lot? Now I expect/hope I am wrong and hope Capex or a lot of it is included in aisc, but I would really appreciate some help on whether we are heading for decent profit or losses. Of course if v little profit or losses this year and next, all depends how much Capex shrinks once the wall is sorted in 2023. Remember we also have hefty mine cost inflation though our solar plant will help. Can anyone sort through the figures and tell me expected profit this year and next at current gold price and if gold rises or falls 10%? Also how much this extraordinarily large Capex shrinks in 2023. Thanks so much.
Plus about 2.3trillion in crypto which was tiny in 2011…
If that’s the case Sotolo- buy gold and dump cey
Thanks Gnome, I always find Dalio interesting, especially on the history of money and debt, he has been suggesting gold for a while. And thanks ha'penny, what interests me is that a lot of the gold pundits who were calling the gold price to go higher, and were wrong, now see strong similarities between the charts in 2011 as a four year fall began and now, suggesting we are a year in and there will be a similar multi year fall in gold again as quantitive easing is cut back and interest rates rise. However I keep wondering why they don't mention the big difference to last time, do they think it doesn't matter: last time US inflation fell from over 3% to 0% from 2011 to 2015, just as gold fell. This time it seems likely that inflation will rise and faster than interest rates, which should make gold rise, which is why I am holding on to Centamin despite I think the next few figures will be bad?
Indeed...
"the head of the IMF, Kristalina Georgieva, warned last week. “We are unable to walk forward properly – it is like walking with stones in our shoes!”"
I would have thought it was more like trying to walk a tight rope, without any safety ropes (they are all compromised!) and no end in sight. The IMF and others simply latch onto any green shoot, no matter how faint the green, and declare a resounding recovery on its way, significantly greater than modelled...LOL
I think it is time they employed Shane Warne who was far better with the spin.
best
the Gnome.
This article dated Oct 8th may have been posted already, if it was then I missed it and apologise for the repeat weighing its importance to be greater than any nuisance.
…………
“As such the developers with feasibility studies and delineated resources are favoured. We like McEwen Gold or a package of juniors with feasibility studies like Ascot, Bluestone, Orla, or Sabina. Exploration successes, Skeena and K-92 are strong development situations but are in need of feasibility studies. Among the seniors we like Barrick and Agnico on this weakness. We also like B2Gold and believe that Eldorado, Centamin and Lundin Gold will be future participants in the M&A game.”
Centamin plc
Egypt’s largest gold producer Centamin’s main asset is the Sukari Gold Mine. Centamin has $312 million of cash, no debt and 3,100 km2 of exploration ground in Egypt. Barrick recently acquired four exploration licenses for 19 blocks in the Eastern Desert where Centamin’s mine is located Centamin produced 204,000 ounces in the first half and will produce 420,000 ounces or so this year. Centamin recently completed 79,000 m of drilling of which 49,000 m was underground as a prelude to a Phase 2 underground expansion. With reserves of 9.3 million ounces, Centamin has a 12 year mine life before going underground. Centamin has a two-year budget of $10 million and is ahead of Barrick as to knowledge of the area. Centamin earlier rebuffed a takeover proposal because the bid was too low. We believe that Barrick’s entry has vindicated the pioneering ways of Centamin and believe it will likely get another takeover proposal. Buy
https://www.gold-eagle.com/article/gold-america’s-forever-war-not-over
What does it all mean for the gold market? Well, stagflation should be negative for almost all assets. When we have a stagnant economy coupled with high inflation, stocks and bonds are selling off together. In such an environment gold shines, as it is a safe haven uncorrelated with other assets.
Stagflation is so terrifying because the Fed won’t be able to rescue Wall Street simply by cutting interest rates, as it could only add fuel to the inflation fire. The only viable solution would be to engineer another ‘Volcker moment’ and tighten monetary policy decisively to combat inflation. Given that debts are much higher than in the 1970s and some analysts even point to a debt trap, it could put the economy into a severe economic crisis. So far, investors seem not to worry about high inflation, but just as things go well until they don’t, investors are relaxed until they aren’t. For all these reasons, it seems smart to own such portfolio diversifiers as gold.
Concern is mounting over the strength of the global economy, with expectations that rising inflation could force major central banks to reduce their pandemic stimulus measures at a time when the recovery from Covid-19 remains incomplete.
With supply shortages set to persist well into next year as the coronavirus Delta variant prevents a return to relative normality, a period of stagflation – stagnant growth and high inflation, reminiscent of the 1970s – could be on the cards.
It’s all a long way from the IMF’s optimism of the spring. If the outlook were to deteriorate at anything like the pace of the past six months, could a renewed winter of discontent lie ahead?
Steve cheers FOR DATE.
yes hoping for some good news this time as we've had a rough year to date .
I'm very confident in CEY to get things back on track in the next 6 months or so.
Ray Dalio is interesting ... gold is mentioned, "cash is trash"
https://www.bridgewater.com/research-and-insights/ray-dalio-on-how-hes-seeing-the-world-right-now
Hi Mr Gnome,
Same situation in the UK, although listening to Boris and his shower of party faithful at their conference they seem to be living in another world , certainly not the one that most people live in, the UK is really buggered and Boris and the BrexIteers deny it despite everything falling apart!
Thousands of healthy livestock being slaughtered on farms and then sent for rendering because there is no way to get them to abattoirs and even if there was there is'nt enough staff to process them, in the meantime our supermarkets have empty shelves and increased prices on whatever is available
We need a good opposition leader, Kier Starmer seems to be in the wrong party, no fire in his belly, doesn't want proportional representation, despite the Tories changes to the electoral system to make it less democratic and harder to vote them out, Kier is certainly out of touch with the ordinary people, if Kier were a meal i would describe it as bland, very bland indeed !
Having picked up PERIL, by Bob Woodward, I am in a minor state of amaement at how close the US came to an end as we know it, when Trump refused to accept the electoral outcome.
The Prologue starts with the perspective of General Milley, chairman of the Joint Chiefs of Staff, and his conversations with Chinese military personnel during the events of Jan 6th 2021 at the Capitol. Milley reassures China of America's stability, and makes sure the rest of his chain of command is aware of the nuclear weapons protocols, reminding them that he needs to be involved in any proposed military strike.
https://www.amazon.com/Peril-Bob-Woodward/dp/1982182911#customerReviews
The pundits are calling a return of Trump in the 2024 election, as the opposition (Biden) cant even remember the name of the Australian Prime Minister, and a host of other gaffes, too many to list...and he wants a $4 trillion package to pass through congress...LOL
https://www.youtube.com/watch?v=Ve3i7ts-OXM
Good ol US$, stronger for longer, I dont think
best
the gnome
Stupid indeed and expensive, but then Pardey is good at making promises and an expert at kicking the can down the road, not much else, but his sort always go away with a good golden handshake and references to avoid embarrassment for their former employer, so they lways seems to get a place on some board or other!
Drilling company and a corporate Office in Mauritius, not many gold mines there I would have thought, wouldn't be to avoid tax would it?
It's about time countries like Mauritius wised up realised they are being taken for patsies and started charging these companies more tax!
Yes, Pardey in, and I am out of Predictive Discovery. You wonder how companies make such stupid decisions.
I don't follow rent seekers with dubious records.
Made a nice profit of 120% for a few weeks "at the office".
We have piled on so much personal debt in Oz, many households will go to the wall if there is much of an interest rate rise.
But inflation is rising, wages cannot, social discontent rising, hospitals full, borders open..etc
havagoodweekend all
YES.