Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
Today 25/9. The contract month is more important for gold than silver. Fed interest rate rise tomorrow now fully priced in but would expect gold to be put under some pressure before the rate announcement 'comme d'habitude'.
It's safe to say that this deal is not exactly loved by the analysts.
The winners:
Barrick's accountants. Barrick get gold assets and RRS cost control skill set for no cash outlay.
Randgold directors get control and status and perks as CEO and CFO of world no.1 gold co.
GDX investors. The ETF includes both companies. Now trading back above 19.00 for the first time since gold hit a low of $1161 15/8
Acacia shareholders. Now trading 128.2p +37% from 2.5 year low of 14/9. Acacia 64% Barrick owned. Bristow to sort out Acacia ?
Shandong Gold. FT reports today that they are a silent partner in the deal with a $300m share swap with Barrick. Likely to get some Tanzanian mine share once dispute there resolved ?
Passive funds. Likely to vote for shares in a giant even a slow moving one ?
Losers:
End of Randgold as an independent growing competitor with its share's higher beta price appreciation potential.
The FTSE100 index. Loses liquidity and down to just one major PM miner Fresnillo.
Shareholders sold out for a deal without a premium at the bottom of the gold price cycle. When the gold price rallies the mega miners like Barrick will not achieve the multiple gains of small majors or medium miners like Centamin.
Rebess I take the view that the publicity of a "possible" takeover will be good for raising awareness of the present extreme undervaluation currently in the precious metal sector as a whole. Barrick is on record as saying that their net mine production is in decline and that they need to buy replacement production and resources and reserves as do all the major miners. But is Randgold the right company at the right price right now ?
What kind of offer ?All cash buyout, or an all share takeover or a mix of both ?
What premium will Barrick offer in an "agreed "friendly merger ? A minimum +30-40% on Fri 21/9 close 4923p ? What is Barrick's maximum if it attracts others eg. Newmont making a counter offer ?
Are Randgold's large institutional shareholders onboard or hostile to selling out at this point in the gold price cycle ?
Barrick overpaid for a number of assets in the last gold bull run 2008- 2011 and spent years writing off some costly investment mistakes. Barrick has debt on it's balance sheet and 60% of Acacia. Is this takeover to be funded with more debt or share issue and a dilution of existing long suffering shareholders?
I can see the rationale for Barrick to approach Randgold at today's extreme low valuations and low gold price.What I don't understand is unless the premium is exceptional why would Randgold agree to a merger now ? On the last run up in H1 2016 Randgold share price hit 9265p and it's now 47% below that now.
If Barrick's offer doesn't come in at least in that ballpark wouldn't Randgold's shareholders be better off saying " thanks but no thanks" knowing that the process will likely re-rate the Randgold share price upwards anyway whatever happens to the gold price medium term.
If Randgold, the only pure gold Ftse 100 constituent gets taken out that will provide an attractive goal for the incoming new Chairman of Centamin to aim for. Bring it on ?
Bloomberg.com this evening posted:
Barrick, Randgold in late stage merger talks, according to mining blog incakolanews.blogspot.com, adding "multiple sources have told the desk the deal is on."
Barrick based in Toronto is valued at $12.2bn and Randgold about half that. Andy Lloyd, a spokesman for Barrick, declined to comment.
Apologies, last Friday 14/9, I said it was the ETF re-balancing day and therefore expect a larger than normal day volume. The volume last Friday was 7.3m.
Today's 31.7m confirms the ETF re-balancing was in fact todayIn fact it was today.
Centamin finished with the 2nd largest weekly rise in 20 months, +10.27%. Since the low of nine days ago Centamin is up 21.78 %. Mr Market seems to be telling anyone who will listen that the five month decline was overdone and a welcome bonus for bargain hunters.
Centamin and other miners consolidation continues as does that for gold five weeks after the YTD low of $1161.
With gold at $1203 this morning and the leading GDX ETF closing last night at 18.43, Centamin could justify a price of 97p-98p. However, it seems content to just sit mid 90's for now. Perhaps gold and the miners will remain becalmed until key events next week :
25/9 September Comex options expiry
26/9 Fed Meeting expected +0.25% interest rate rise
Algos don't analyse they simply react and execute. Friday's US economic data was mixed which continues a recent pattern and the markets were very volatile as a result. Is this a sign that the algos are starting to take note ? Is the US recovery and Trump's control of the narrative starting to be questioned and thus the strength of Wall St vs other markets, the dollar, the gigantic US debt and the likely impact of additional tariffs on China ? Then there's the US mid term election coming up in November and a likely fight over the next US Budget.
Into this uncertainty hedge funds have built up record short Comex silver and gold positions while the banks (who never lose) are net long. Morgan Stanley's latest client note is recommended that its clients sell some of their general equities and build a 3-5% position in gold. That is a big deal when you consider that the average US investor only has 0.4% gold exposure. Last week hedge fund billionaire Ray Dalio said now is a good time to buy gold and get defensive.
I feel we may be on the cusp of major market gear changes which could benefit gold and Centamin. Patience and fortitude will be rewarded.
Last Friday the billionaire gold mine investor Eric Sprott was asked what he would advise the bruised and demoralised gold miner investor in the face of the continuing price slump. He said make sure that you have manageable position for your personality and finances and be patient because the cycle will turn...it always does.
We'll know soon enough just how precient Sprott may have been if Tuesday's half year lows for CEY and many other UK, US and Canadian miners and the ETF's GDX and GDXJ now hold and confirm the end of a 16 week down cycle.
mizolgit put it well in his post last night at 21.25. For long term value investors this pullback is an opportunity to add at a cheap price shares in a profitable debt free miner that will do very well when gold and miners up turn is confirmed.
Centamin's average realised gold sale price for 2017 was $1261 p oz. It was the same for the 8 months Jan-Aug. The 2018 first 8 months average monthly closing spot gold price was $1285. So Centamin may well be able to negate some of the rise in oil costs and we sell have 3.5 months till year end. The gold price hasn't gone below $1161 for 4.5 weeks and looks to be consolidating to test higher. I expect Centamin to respond to gold's move.
Today's total volume is likely to be high because it is the quarterly ETF re-balancing.
mrtibbles I will be very surprised if they stand aside. JPM have never taken a PM trading loss in 6 years and they are now net long when historically they have played the paper PM market from the short side ever since they took over Bear Stearns silver book when the bank collapsed. One thing the bank cartel does not do is sell into price weakness. They seem to have played a blinder here taking profits on their shorts just as the hedge funds have built up record shorts.I wouldn't take much buying to trigger hedge fund stop losses.
3/9/08 Cey closed for the first time above 85p at 92.36. Gold was trading at $995. On 29/3/10 CEY closed at 125.50p on the day of an RNS announcing the first 1 tonne of gold poured (32,151oz).
That historical data should at least make investors consider Centamin's relative value factoring in every element of a well established miner : 9 years of production growth (now 15.5x more than the first tonne poured); 4 years of rising dividends; the 20 largest mine in the world, increases in reserves and resources; Cleopatra zone on its way; exploration progress of the wider tenement; 4 years of exploration and planning in W.Africa and no debts and cash representing 30% of current market cap.
This downdraft is very unusual in length and ferocity and seems to be solely driven by algos chasing negative sentiment and downward momentum in a feedback loop. Currently we're back in 2009 with no goodwill value for the added value since. If we close down today it will be the 7th day in a row. We haven't had 7 consecutive down days since the turmoil in Egypt in November 2011. The last time we had a 5 day downtrend was May 2016 form which the price rose 50% over the next 5 weeks.
A CEY price consolidation is overdue (gold has been consolidating for a month) and a gold surprise move up may be the catalyst. After all the cartel banks are now net long gold for the first time since 2002. Do you think they will just stand aside and let the record hedge fund shorts take their profits or do you think the bankers will stiff them ?
I remember it was the same gloom as now. The COT data at the time signalled the Commercials (banks)and the large Speculators (hedge funds) positions became square by end Dec after the first Fed rate hike. And then gold took off like a scolded cat +$200 in 6 months and Centamin from 60p to a high of 184p.
The past is no guide is no prelude but... the COT data released on Friday evening shows that the Commercials are now net long Comex paper contracts for the first time since 2002. And 2002 was the start of the gold bull first leg to $850 by 2008, before the second leg from end 2008 to 2011 high $1923.
If there is a lagging effect for the gold miner sell-off it is worth bearing in mind that gold's recent low $1161 was almost a month ago as was the dollar index high. The September Fed rate hike is arguably priced in.
China is not defenceless in the tariff war and the US economy is certainly not immune to blowback from ill-advised policy by the US government.
Centamin and other miners are at their cheapest bargain prices for at least a year. But at some point I expect them to mean revert especially as gold our ultimate value determinant is signalling consolidation. The miners are overdue to take notice.
No traditional post NFP Report paper gold price smack down. Worst was -$5 and it's now -$2.10 and -0.28% for the week.
Silver to gold ratio which was over 85:1 this lunchtime is now 84.2:1 and silver +0.74% today so far. Silver leading gold is a positive indicator.
The ETF's which have monstered CEY this week are up today,GDX +0.48% and GDXJ +0.86% .Notably since the ETF's opened CEY has rallied from the day's low at lunchtime. Note also CEY's low volume.
A bull market train takes the fewest passengers. CEY share price is down 11.5% this week the worst weekly performance since the RNS of 25/5. HOC is indeed down 4.78% today but as of yesterday's close it and 6 other LSE co's were unchanged on the week. Only CEY is down more than 10% . Is GDX telling us that the CEY selling is getting exhausted ?
I agree with your sentiments. Actually gold has rallied 3.5% since Wed 16/8 low $1161 while form that days low of 103.65p CEY has lost a further 13%.
I didn't think we would see a price below 100p and now it's happened people panic sell. But just look at today's volume it's the lowest for months.
US Nonfarm payrolls report is due out at 13.30 UK time and gold is currently $1201 +$1.50. A downside surprise from the +193k jobs expected could give gold a nice nudge.
At some stage the now arguably detached and irrational selling in Centamin will meet bargain hunting demand for a sub 100p bargain.
The silver to gold ratio now at a historic high of 85:1. Normally anything over 80:1 sees silver sentiment rally. Silver leading gold is a sign to look out for.
Today's 10.8m volume traded was the most in 5 weeks.
One of the dubious benefits ? of the dual listing with Toronto is that CEY then became eligible for a multitude of US based ETF's. These ETF's buy or sell parts of the fund on a pro rata basis. US money managers prefer to put their clients into ETF's and avoid doing individual company research. Likewise the majority of gold miner GDX holders will not know or care about Centamin production or site visits.
That is the harsh reality of modern trading for 96% of investment whose logos and derivatives moves individual share prices...often irrationally. The algos follow sentiment and momentum for the sector. Vanguard closed their gold miner ETF last month citing poor performance and decline in interest. No doubt they have shoved all their passive investors into tech like Amazon at a massive $1trn valuation. I prefer the odds of a scorned sector that is wildly undervalued when most others are overvalued and autumn storms gather.
Today Trump was due to enact a further 25% tariff on another $200bn of Chinese exports. So far today there has been no word and the gold price and Yuan have risen.
Further evidence that CEY's drawdown has been leveraged more than peers this week because of ETF"s GDX and GDXJ that most peers are not in.
Despite gold +$4.80 right now GDX and GDXJ have traded new 52 wk lows today. GDX 17.80 and GDXJ 26.77