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Thanks Blue_eyes for your response. My point is that is that the underlying business at FRES is now burning cash when you factor in the high levels of sustaining and expansion capex that is being spent. That's ultimately why the shares are de-rating coupled with the sky high profits multiple.
I think that the price here is front running a drop to gold/silver in the next couple of days. I’ve picked some up at 570. Looking for a large bounce in precious metals after this final drop. I am of course hoping that their operational issues are behind them and that they can maximise their enormous reserves. Silver price historically gains much more than gold in a PM rally. No reason why this can’t double over the next year.
I do have a rationale but TBH I'm not in the business of necessarily explaining myself to anyone as I invest for myself and don't spam the boards. I'm not saying I'm right just what I do but I like to have a read and make the occasional comment. That's in no way a slur upon your good self you are entirely allowed your POV. I know you are a fan of FXPO I have a few there but in spite of the low PE which I'm not sure applies to PM miners in the quite the same way I'm put off by what goes on in the Ukraine and the position of the majority shareholder. For me that takes some of the shine off the figures but it's a purely personal opinion and not one that I put up on the FXPO BB. As far as I am concerned those investing there will have factored that in, and I don't need to badger them about it. I still hold a few shares there but they are pretty much free ones now so I'm not too bothered. The SPDR gold trust is undergoing similar action what happened in 2016 reference withdrawal rates and my belief it that history might well repeat itself but as is always the way PM miners will overshoot both ways they always have done ever since I first started investing in them in 2009. I am investing in tranches which means I won't catch the bottom in it's entirety but then I didn't with FXPO but still made enough to make me happy. The whole PM market is getting battered and FRES being as liquid as it is is a decent short on these occasions rather than getting stuck with something when the market has turned and you can't exit. I have no faith in this market and at these kinds of levels I am happy enough to accumulate some shares as I feel that PM's will have their day FRES are sorting out the issues they had this year and next year I believe I will be pleased to have made the purchases I will continue to make in a few of the PM miners. I hope you do very well with FXPO - who knows if they get hammered again at some point I'll probably add to my position there again but currently PM's are the only miners I am buying. x
TT - FrEs has a NAV just over $3.1bn so it’s break up value is less than its market cap . I agree that pricing ounces value and NPV is crucial to the Long term picture but the present value of cashflows is currently under the spot light . FRES need to start growing their cash again and until capex falls off the cliff (not for another 12 months) and production sorts itself that’s not going to happen. Net impact is a weaker balance sheet for the foreseeable which hits shareholder distributions and wanes confidence in the valuation . That’s why this move is happening . We will have to disagree on price to earnings as 40x is madness compared to sector peers
Fres reached a low point exactly this time last year. Then headed 25% higher dec an han feb
Nickel forgive my cutting in with your comment to blue eyes. If you put up a weekly chart of Fresnillo and you compare it to HOC, Centamin and Polymetal you can see how they nose dived on Fresnillo. All the companies were treated the same Monday to Wednesday. This has all the hall marks on a big fund deciding where to off load before their mate dumps a lot of silver and then gold. PE rates are a poor indicator for high NAV companies with huge resources in the ground. Your forgetting it has a high takeover value or has tons of assets it could sell which may well exceed $6B. To extract those assets it is easy to get loans and exploit them. PE is better on value stock not growth stocks which is Fresnillo for the very reasons why your concerned about them. All the best. TT
Blue-eyes -if you’re looking to buy or have bought some FRES then surely there should be fundamental rationale behind it ? The price action is a consequence of buyers and sellers responding to fundamentals and technicals. The bearish view is clearly that buying a stock that trades at 40x earnings is not value for money. It’s super expensive. Also buying a stock which is burning cash because of the significant capex requirement and downgraded production levels isn’t positive either. In summary if the valuation is extremely lofty still and future newsflow is going to demonstrate a weakening balance sheet then where’s the bull case ?
NI - I don't come onto these boards looking for an argument. I don't want to try and persuade you to buy anything. I've traded around a core holding in FRES since 2009. I'm not actually buying it for today I'm rebuilding my position for 2020 based on where I think PM's are going to be. I've pretty much stayed away from FRES since early this year other than the few that I keep to remind me to keep an eye on them. The reason for staying away where production issues etc . Your thinking around the share price is different to mine - I think it's more to do with poor sentiment around PM miners at the moment rather than being quite so FRES specific. I'm starting to like it around these prices so I'm going to continue - if I'm wrong then I'm wrong but I've always done OK out of FRES. I bought some HOC at close as well today.
Blue_eyes - do you have any comeback re my earlier posts about FRES eroding cash, trading at over 40x profits? To me, it's clear why it's dropping
Bought a few HOC on the bell as well,. We'll see but I don't trust this market,
6th biggest drop in a day all year. No RNS which gave 3 big drops. Gold price drops explain 2 others. This is on nothing.
...drop today. This is the biggest silver and 2nd biggest gold miner in the world. With prices headed higher this will recover.