Member Info for Daisan

Yes, it is not the sort of place I would like to live currently with corruption, the economy dipping due to the dependence on oil and 'tensions' with Armenia. All of which add to the geopolitical risk. But that is one factor as to why this has been so cheap. The important thing is to understand how to operate in the country and that means having senior people who are locals. As long as this remains the case, AAZ should continue to thrive. However, the geopolitical risk is the reason why you don't put all of your eggs in one basket so it should only constitute a small portion of a portfolio.

How weird! I looked at this on my tablet and it said 'link removed' but the link is there when I look on my laptop. Never noticed that before!

No link I'm afraid

Kev4, I am aware of your background with the company and sympathise. I hope it comes right for you with your other investments.

I agree on the fundamentals but I have no idea on how long the COMEX market can override physical. It has done so for quite a while and the volume traded is colossal. However, if 2011 taught us anything it was that true price discovery can be realised even in an environment dominated by paper gold. I suspect all that happens is that volatility is just increased and the likely slingshot higher will be all the more dramatic as the paper shifts to the buy side.

I understand that Kev4 but I would point out that a large number of miners/explorers fell 90%+ in the period between 2011 and 2015. It was certainly a painful period to be a holder of commodity related companies.

It is hardly unique though Kev4. A lot of companies associated with gold have been smashed over the last few days. Sentiment is pretty low in the whole sector.

If you do read around all the analysts, one thing that is clear is that some well respected analysts are going to end up looking pretty stupid as the predicted gold prices range from $400 to $10000+/oz. They can't both be right unless of course they plunge and soar or soar and plunge! I find it difficult to imagine either scenario encompassing both the lower and upper limits.

Technically there are a lot of arguments for a return to the Dec/Jan lows or even just below them but less clear technical arguments for lower prices. Or at least from the analysts that I have read. The market is turning its thoughts from deflation to inflation currently as indicated by the dramatic rise in bond yields. Trumps policies are potentially highly inflationary as well but also potentially beneficial to the dollar in the short to medium term as they raise the spectre of interest rate rises and the potential for repatriating overseas profits (suggested as $3tn). It is the strengthening US dollar that has hurt gold and there is some support to suggest this continuing for a while. I have read Harry Dent and also one other writer (whose name escapes me) who is suggesting $500 gold. Harry isn't too optimistic about the world and I tend to agree. However, the main issue with gold at these levels is that every gold miner in the world will go out of business as I know of none with AISCs of less than $500/oz. So there will be nothing left to invest in should gold pop from there! I can certainly see where Harry Dent is coming from. However, I am still looking for closer to a hyperinflation blow off than a deflationary blow off. And given that the current vogue is to meet deflation with negative interest rates, I'm not entirely convinced that gold won't react positively to that scenario as well (the gold price is driven by real interest rate differentials rather than inflation rate)

Labro will buy up to their limit, of that there seems little doubt. Quite sensible of them to let it drift for a while, particularly as people are spooked by the weakness in gold. I agree that any movement here will ultimately be quite rapid but there seems little point in Labro moving in with a takeover bid until they have bought their maximum on the open market. Sorry for not posting in a while. The situation hasn't changed much so there seemed little point in posting for the sake of posting!

But as usual prices are driven by sentiment rather than fundamentals so these arguments make little difference in the short term as people are fearing a drop. AAZ is in a massively stronger position now than when gold prices hit their lows in Dec/Jan with net debt down $12m to $37.7m as at Q3 2016 and falling and this despite poor first and third quarters. To put that into context, over half of that debt reduction was achieved in Q2 which was more 'normal' production. I see no reason why this trend shouldn't continue in Q4.

Yes, all gold miners feeling the pain over the last few days and the potential for a drop to the Dec/Jan lows is there if the $1180 region doesn't hold (some suggestion of support at $1172). Unfortunately ASA's gold operations are likely to be particularly hard hit from a margin perspective as its costs are quite high in comparison to some although the nickel asset should provide some support with nickel prices remaining firm.

Shanta inevitably reacting to the fall in the gold price even though it is probably the least affected of the gold miners with low cash costs/AISC and its hedging programme significantly above current gold prices. Given the sentiment driven nature of the price of gold and miners currently, I suppose that there is little point in constructing logical arguments around the fact that, when gold went to its lows in Q4 2015 Shanta generated cash of $17m and since then has generated $30m. Or that Shanta has $25m cash on hand with net debt now on a downward trajectory. Or that the majority of its accelerated capital investment programme has now been paid for, including a pre-payment for the power plant that will reduce costs further. Gold is at key support now around $1180 and if this breaks it may well test the lows of Dec/Jan. However, Shanta is in MUCH better shape now compared to then and can easily weather the storm associated with such a drop. Unfortunately the market is driven by sentiment and such a drop will cause a drop in the share price here. How low, who knows? But a fall to levels seen late last year would result in a generational buying opportunity I believe.

Very good reading. Thanks for posting Valency. So it looks like the 'act of God' may well be one of benevolence rather than malevolence after all!

Of probably more significance is the cash generation to continue paying down the debt, which will be even better than indicated.

This has been doing the rounds today. I posted this on the VAST board in response: "Fascinating stuff. I hadn't realised that gold was treated in such a fashion by Islam. As usual, they find some way to get around it (not that this bothers me). I suspect that this will have less impact than people suspect. The gold price is largely controlled by futures trading where the volumes traded on a daily basis exceed annual mine production. Physical purchases ultimately translate but the link is far from direct and I suspect that this will just add another load of traders on the futures market. I also suspect that this just legitimises a process that has been going on for centuries anyway. You'll probably find that a number of central banks miraculously come up with tonnes of gold that they have held for years."

AAZ suffering from the sentiment associated with a falling gold price and gold has taken a hit today on the back of durable goods orders in the US and the resultant strong rise in the dollar. AAZ only has limited hedging (at last report) so its revenues are directly impacted. However, it should remain significantly profitable at current or much lower gold prices. Despite this the share price will naturally come under pressure as long as gold price weakness is foreseen. Gold is currently in the middle of the technical battlefield at about 1190. It is important that the zone 1180-1200 is maintained as a drop below this could see a significant reversal. If it remains at or above this level it is likely that there will be at least a short term relief rally. The dollar, however, is looking pretty strong at the moment and is likely to continue to pressure gold prices whilst it remains so.

Whilst Shanta is hedged to a large extent, it cannot escape the sentiment associated with a falling gold price and gold has taken a hit today on the back of durable goods orders in the US and the resultant strong rise in the dollar. Shanta's revenues are also impacted as they do not hedge 100% of production. In addition, should the fall continue for some time, Shanta's hedged sales will fall with the gold price. Currently, however, Shanta's operations should fare better than un-hedged producers. Gold is currently in the middle of the technical battlefield at about 1190. It is important that the zone 1180-1200 is maintained as a drop below this could see a significant reversal. If it remains at or above this level it is likely that there will be at least a short term relief rally. The dollar, however, is looking pretty strong at the moment and is likely to continue to pressure gold prices whilst it remains so.

It's just an analyst visit. They take place regularly but it is a chance to market the company. The presentation associated with the visit is significant. I haven't had a chance to look at it all (it is pretty comprehensive) but a couple of things stand out on an initial scan that haven't to my knowledge been announced/ stated before, namely: 1. There is an initial cut of a revised Base Case Mine Plan that is due in Q1 2017 (see slide 17). Very significant this and shows a 7 year mine life based on underground operations. I find it hard to believe that they could come out with this unless they were very confident (i.e. 100% sure) that this was the case. Real egg on their faces if they do not deliver at least this base case now. Which suggests that there may even be potential upsides but I would be happy with the 7 year mine life. This is not currently reflected in the price in my opinion. 2. Slide 8 states something I have not seen stated before and actually goes against what I believed was likely to happen, namely that there will be a "Reducing capital demand going forward". This was always possible with the current significant capital expenditure items coming to an end. However, my expectation was that they would want to push forward with further developments, particularly at Singida but also at the satellite deposits, as soon as possible which would suggest continued capital outlay. I still expect this but, given the timescale of the pilot at Singida, I suppose that there will likely be a 6-12 month lull in capital expenditure (not that it will disappear entirely). Such a period will materially and positively impact the debt position given the cash generation currently being achieved. Given that the Shanta share price has always been hampered, so it is said, by the relatively short mine life and the debt position, these two items should materially affect the valuation of the company. If the gold price remains supportive, I suspect that we will find out over the coming months.

It was commented recently about large buys and smaller sells. Well, this trend seems to be continuing and we have seen a few very chunky buys and a swathe of smaller sells (as well as a couple of larger sells). Forget the buy/sell indicators on here as they are incorrect - no way would this have stayed where it was given 2m sells and no buys in a day and you only have to look at the prices to realise which ones are which. So, it would appear that we have the support of some larger players in the current market, presumably taking advantage of the weakness inspired by the drop in gold price.