RE: ennombrede14 Feb 2014 12:42
Sorry to read that. £60k isnt funny.
Resource stocks are certainly high risk-high return ventures. Sometimes ppl can get carried away with thinking a resource in the ground is home-and-dry money in the bank. Get to know your areas of interest well, and you can get a more 'onward and upward' feeling back. Otherwise diversify well.
AVM is a bit of basket case, but that also makes it very leveraged to the gold price. A 20% higher gold price for the coming year could save the company, whereas a 20% lower gold price is likely to make it toast. Compare that to other miners with a lot lower cost of production and diversified projects, like Goldcorp for example and the near term tick-for-tick influence of the gold price is of a lower concern. 'Safer' mining companies' shares of course dont move as much (less volatile).
If you have a go in this area, research the cost of production, balance sheet and funding requirements as critical assessment criteria. Management of ABG have reacted well to the decline in gold prices, and the market is factoring in a chance of reversing some of the impairments in the medium term should prices continue to rebound. In addition there has been registered interest from Chinese parties.
POG is a liquid and leveraged vehicle for speculators on the gold price. Its production is huge and has the ability to be generating huge amounts of free cash flow at a higher gold price.
The only gold stock I'm currently in is GBGR as management have beaten targets recently, the cost of production is low and declining, and production growth is very strong. An additional benefit to this company in the last week is that the Tenge has just been devalued. GBGR's revolving credit facility and the majority of costs are in Tenge (local currency) which is pegged but has just been devalued 19% versus the US$. Whereas the US$ gold price for Revenue has gone up in the last few weeks, thus margins have just expanded further.
Despite this, and though i consider it to be relatively cheap versus many peers, its certainly not a home-run. Theres relatively high capex in the next couple of years as the company moves to higher grade gold underground. This will translate to lower costs per ounce, but execution risk of course is present.
Wishing you well in your investments. Just to add that although any opinion should be taken with a pinch of salt - analyst comments can be useful in highlighting important factors for consideration in risk and valuation analysis. House broker comments are more likely to have a natural positive bias towards the company, but still can be useful.
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