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Cut down version of an article in Alpha
Why Gold And Bitcoin Are Popular
...few asset classes are quite as controversial as gold, bitcoin, and other alternative monies.
Since they are not cashflow-producing businesses or industrial commodities with analyzable supply and demand balances, the bull/bear gap is unusually wide when it comes to valuing things like gold or bitcoin, not just in terms of price but in terms of the very purpose for their existence as investable assets.
It was illegal for Americans to own gold for about 40 years, from the mid-1930s to the mid-1970s. In some places today, it’s illegal to own bitcoin. Governments (and economists, there I go again, sorry) sometimes find them to be dangerous. How could something so useless, also be so dangerous? Useless things rarely get banned, and instead can be safely ignored as they work their way towards oblivion over time.
The Concept of Self-Custody is Rare
There are remarkably few financial assets in the world that you can hold for a long time without trusting a centralized counterparty to hold it for you.
The vast majority of assets, like stocks and bonds and cash accounts, are held by financial institutions on your behalf or rely on centralized databases listing you as an asset owner.
Real estate is the biggest asset class that you self-custody (in a manner of speaking), but it’s not portable or liquid or fungible.
Collectibles are often a self-custodied form of asset, but they’re not very fungible or liquid, meaning that each individual unit has various quirks such as date, condition, or type that make it hard to exchange for other goods or services. The same is true for gems.
That leaves physical cash, precious metals, and cryptocurrencies as the only asset classes that can be self-custodied and traded with others without a trusted/centralized third party, while also being sufficiently liquid, fungible, and portable. In other words, they are among a small number of money-like bearer assets.
If you think about it, it’s actually really hard to invent a money-like asset that derives value from itself. If you and me want to exchange fungible value in any arbitrary amount without a third party, online or offline, there are remarkably few ways to do it. Usually we don’t particularly want to do that so it’s not a problem (we’re fine with a third-party involved, like a credit card transaction), but if we think about how we would do that if we wanted to, there are surprisingly few options.
Just about any mechanism that we can exchange value with, in a way that is liquid and fungible, requires processing/verification by a centralized third party, and that third party can spy on the transaction or block the transaction. Physical cash, precious metals, and cryptocurrencies are the exceptions, where they can be both held and transacted with outside of any centralized third party custodian or verifier.
Thanks for sharing this Mr T.
Some very interesting commentary and analysis. I like what I'm hearing about Doropo, and this does look like a worthwhile diversification of production, and increase in production to 700-750k per ounce pa. I think there is a lot more work to be done in Cote Ivoire, and far more opportunities, so getting a better footing in this country is an excellent move. Governments take a lot more notice of you when you are in production.
I get a good feeling that the production base in Egypt is in good hands , and they only need an exploration win, and this will fly.
Dips in the SP inspired by the FED's rantings and misplaced ideolgies are great buying opportunities, and I am in again.
best
the Gnome
What a last 24 hours in thed fin markets, not just for gold, but for just about anything. The Oz currency plummeted 1 per cent to as low as US75.98¢ , the US dollar surged 0.8 per cent in a move that went against the expectations many strategists had pencilled in for this year.
The comments from the Fed “had a profound impact on currency markets,” said NAB’s head of FX strategy, Ray Attrill. “We’ve had our forecasts at US80¢ for the end of the [June] quarter. That’s now being seriously challenged.” (trashed?)
A sell-off in US 10-year bonds pushed the yield up 8 basis points to 1.58 per cent while inflation expectations, as measured by breakeven rates, dropped, creating a favourable setting for the US currency.
“You had this background where many traders were short the US dollar and long the euro, and what we saw last night was the Fed conceding that economic dynamics are good enough that tapering discussions have been given the green light,” said ANZ FX strategist John Bromhead.
Powell emphasised that this was an “extraordinarily unusual time”, and emphasised that forecasts for the timing of future interest rate hikes should be taken with a “big grain of salt”. In fact taking note of what 500 or so PhD economists think has got to be a red flag at the best of times. The power bequethed to these fine brethren is frightening.
IN fact all bets on the future prices of anything would have to be with a grain of salt, except, real income producing assets?
Got you sussed.
There is nothing hypothetical about it. Do you even understand the makeup of the stakeholder and royalty payments. It's basically paid so cey can operate in Egypt.
Secondly cey are break even around 1600 - 1700. Dyor before commentary
Adrian, what hypothetical nonsense you have been coming out with.
It's going to 97p then around a quid.
We have about another 8 years of the commodity bull market. All metals took a smash today, as the US dollar rose. These things happen and all bull markets try their hardest to throw you off. You just have to ride the ups and downs. The best thing to do is get in your E-types and have a nice drive in the sun.
Price drop, paper golds the problem, buying and selling between a select group, designed to look like big sell of in gold, Bassell 111 creeping up on em, then it will all change big style
IMHO
Adrian77 --> re: the coming destruction of Centamin
Do you know the average price of gold for the last 10 years? No? Have a look.
2020 $1,773.73
2019 $1,393.34
2019 $1,268.93
2018 $1,268.93
2017 $1,260.39
2016 $1,251.92
2015 $1,158.86
2014 $1,266.06
2013 $1,409.51
2012 $1,668.86
2011 $1,573.16
As you can see prices have been low before and might well be again and yet
Centamin has managed to avoid destruction — which is more than I can say for your assessment of their future.
The only positive is cash balance to survive the next few years. The stakeholder/royalty will destroy this share they simply take too much out.
It's all very well posters posting positive fundamentals,but we are at 106p,and the chart looks like a 3 wave Bear market rally since our previous low !!!.
It ain't looking good !!!
Aisc is $1150-1250, plus another $200 an ounce this year and next for extra capex by my calcs so totals $1350-$1450. However this should fall in 2023, (see also the analysts Tibbs reported today who have a low price of 60p and high of 300p so likelier to double than halve) Therefore we currently make approx ÂŁ40m at $1700 gold which is not bad for a bad year. However if gold bottoms sub $1500 that is obviously worse. The gold market seems to be concentrating very hard on nominal interest rates rather than real ones, real ones seem even likelier to continue to fall so hopefully this will come good before we go bust.
Could not agree more. Cey is in trouble sub $1700
Brave
Rebess they have a licence to do financially what they like.
Cannot be prosecuted and important to do anything that will maintain the US$ as WORLD R ESERVERVE CURRENCY .
Blatantly.
Written into Law and important national Strategy.=Total Control .
Transfer
of
wealth
Was there ever anything more blatant than today's take-down. - They are not even being subtle about it and the whole process is being watched from the sidelines by the Regulator - They've been handed a free-pass to rob and plunder at will. - It's hard to believe what is happening.
Nice gap above us
Took positions today between 107 and 108
Cont 2
The Long View
| Scenarios
Base Case
- LT gold and silver prices of $1,500/oz and $20.00/oz
- Improvement in UG and OP grades drive higher
production in 2021/2022
- PT Derivation: 50/50 weighting between P/NPV (1.25x)
and EV/EBITDA multiples (4.0x)
- Price Target: 175p
Upside Scenario
- Stronger gold/silver prices; peaking at $2,500/oz &
$35/oz, long-term $2,000/oz and $30/oz
- Optimisation drives cash costs lower
- Valuation discount vs peers is not fully erased until
second producing mine or geography
- PT Derivation: 50/50 weighting between P/NPV (1.25x)
and EV/EBITDA multiples (4.0x), same as base case
- Price Target: 300p
Downside Scenario
- Gold and silver prices decline to $1,250/oz and $15.00/
oz with no improvement thereafter
- Increased political concerns over Egypt lower
multiples investors are willing to pay
- Operational disruptions push cash costs higher
- PT Derivation: 50/50 weighting between P/NPV (1.0x)
and EV/EBITDA multiples (3.5x), discounts to base case
- Price Target: 60p
| Investment Thesis / Where We Differ
- Sukari is a world-class gold asset, though recent
difficult operating periods have clouded its underlying
valuation
- Clean balance sheet with no debt and cash & liquid
assets of $331m as of 1Q21
| Catalysts
- Higher metal prices
- Brownfield exploration success at Sukari further
increases reserves and resources
- High-grade discoveries through ongoing exploration in
West Africa
- Increasing shareholder returns
- Value accretive M&A
Key Takeaway
We hosted Centamin CEO Martin Horgan, CFO Ross Jerrard and Head of IR
Alex Barter-Carse for a group call with investors. Key topics of discussion were
importance of the divi, stability of the open pit and longer-term upside in the
underground. A replay of this call is available upon request. Reiterate Buy with 175p
PT.
Commitment to the Divi. With a 7% yield, the divi is a true differentiator (global peer
average: 2.3%) and hallmark of CEY's investment case. Despite the significant pickup in waste stripping in 2021 as part of a multi-year campaign, CEY has already
committed to a payout at least equal to last year. With capex decreasing and
production increasing from 2021 onwards, the FCF profile (JefE 8.3% 2022) is very
supportive for coverage of a robust yield. Even as Doropo advances (current capex
budget $275m, incl 15% contingency) there was a confident tone around the ability
to fund development capex and not impact the divi. A likely outcome discussed was
a project finance facility at the asset level for the majority of capex and cash injection
from funds already ring-fenced for development.
Stability in the Open Pit. With c90% of reserves and c75% of annual production from
the open pit, this remains the backbone of Sukari's production base. The current
20km infill drill program is focused on conversion of waste to ore within the current
pit design, predominantly for Stage 5 & 6 West and the Cleopatra zone.
Unlocking the Underground. Returning towards the 500koz per annum production
target will ultimately require a higher contribution from the underground. With mining
now in the relatively lower grade Ptah zone (vs Amun), returning to or potentially
exceeding the 500koz mark is expected to be dependent on moving deeper into
the higher grade Horus zone in several years. Mgmt is optimistic about additional
targets at depth, and we would expect the Phase 2 update (December) to focus on
the additional drilling and potential to bring in additional ounces into resources.
Cost Reductions. By year-end, CEY expects to have achieved c60% of its targeted
$100m per annum cost savings by YE23. Remaining savings will come from an expat
reduction program, processing plant optimisation and reduced power usage, among
other items.
Longer-term Ambitions. The Doropo project provides CEY with a feasible second
producing asset that would not just provide diversification but could lift conceptual
group production to 700koz by middle of the decade (recap note here). CEY is already
pushing ahead with a pre-feasibility study, expected to be completed by mid-2022,
and conceptual first production remains late 2024/early 2025.
Valuation. CEY trades on 0.6x P/NPV and 3.3x 2021 EV/EBITDA. Reiterate Buy with
PT of 175p and divi yield of 7% for TSR of 64%. We believe the key re-rating for CEY
is hitting operational targets following the adjustment of the mine plan and catch up
in waste stripping. Catalysts - 2Q21 productio
Amendment to my last post after a look at the chart, low 80's appears likely.... see 23rd and 24th April 2019.
Looking likely to be a penny share, may be short lived but a dip into high 80's appears a contender.
The question is, will it be oversold. Going to monitor, cey is a good share, even more so being dept free.
I have been watching this for a few weeks and surprised to see these levels, thinking of selling up elsewhere and dipping in here. Can anyone direct me to the the RNS where the mine reduction is discussed and possible reopening etc .