Member Info for UpDownFlat

the reason why I include cost of capital is because it is tying up large amounts of cash for extended periods of time, and capital is a limiting costly factor for POG. By overheads I dont mean POX, I mean central.

Variable + Overhead+ Cost of capital

Rusty, JRC1000,

If third party material only makes 10% GM, then POG is losing money and consuming cash after you take into account overheads and a cost of capital of 8.5%.

POG, is basically uncompetitive at lower Gold prices since it has much higher costs (variable and now a fixed POX hub as well). It loses money way before the other companies in that index group, and therefore the share price would fall much futher.

The solutions to this is are DA to focus on reducing the costs per ounce, reducing the cost of capital and increasing volume . A lot of people anticipate any Gold bull to finish twelve months before DA's options vest.

Actually, this is an incentive to get cost under control. If the Gold price goes down, there is no way pog will have the perfromance of that peer group, unless it gets its costs under control.

I think, since he has a proven track record, and he can't just rely on the Gold price, it seems fair. The right strategy's can turn this company into a superstar. The wrong ones as we have seen over the last ten years, can lead to massive underperformce.

Right I agree Q1 is going to be good.

From what I remember POG sold 20% of IRC to General Nice who didnt pay for the shares. They went into administration two years later. I wonder who owns these shares now ?

Copper seems to be going up as well as oil(above $50 today).

Rusty,
Maybe part hedge remember, in 2008 iron ore went to 236.

Inflation expectations are rising, 1.98 on the 5 Yr 1.91 on the 10 yr today. This provides tail winds for the price of Gold. We know that commodities are starting to really tick, and must lead to higher input costs.

Nominal Interest rates will be capped, because goverment debt is 100% of GDP or greater. Maybe the cap is 1% on the 10 year, 1.5% on the 20 year.

As inflation rises so should the Gold price and so should POG.

Retired Banker,
I appreciate you are pessimistic regarding IRC due to the past. You should have a look at the massive volume of Iron ore they are selling. I am scared to be proven wrong here, but theoretically they could generate more cash than POG itself, at these Iron ore prices.

I think they gave a 30% discount in Q2 and their cash cost is $48/t so assuming the same discount, they should make $50m cash in q4.

$156.60 Seaborne index 65% Fe

Lets hope we can say quality month, and then at the end of 2021 say quality year.

rbrand,
Total cash costs which is basically the variable cost element related to on-site mining. I also think Maksim was good. He wasnt as popular as Pavel, but I suppose that means it was cheaper for the shareholders.

In Jan 2016 Highland gold was 50p, in April 2019 (before the gold price increase) it was 190p.

I am excited to see what can be done with the TCC. Highland gold had a much lower TCC and DA might bring some expertise to this. He also has the potential to revamp supplier relationships and bring in new staff.

Good management has always been this companies archillies heel. Now they have that.

For POG

I think what is happening with Gold is the nominal yield on the interest rates has risen (10,20,30), without a corresponding increase in inflation expectations. I don’t think the Federal reserve will allow the nominal yield to rise to much right now as many things are priced on this. mortgages, company debt etc….
They are targeting inflation of 2+%, so we need to wait for inflation expectations to catch up before the real yield (Negative) on treasury’s goes down. This increase in inflation expectations should be made possible by a decline in the dollar, and improvements in the economy.
A twenty year of 1.5% with an inflation expectation of 2.5%, I think, gives a Gold price of just over $2000.
I would be much happier right now if inflation expectations were 2% (Historically 2.5% average, currently 1.83%) at least or the banks step in to control the yield (Maybe in December). Absent/until this I don’t think the price is going to bounce back up to $2000