Thursday, January 12, 2012

Interesting Observation On Mining Stocks

I just noticed to day that two days ago Blackrock filed a 13G with the SEC, reporting a 10.4% ownership position in Agnico Eagle (AEM) stock. We won't know for sure if this is part of a larger wave of big institutional money flowing into the extraordinarily cheap mining stock sector, but just like hedge funds are "monkey see, monkey do," big institutions tend to run in herds...


  1. Dave - Thanks for your blog, much appreciated and enjoy daily. If you have a quick moment, could you take a quick look at BRD (Brigus Gold) today. It's just sitting flat at 1.12 while at pretty good volume. What does it mean when a stock just sits at a price all day? Do the market makers do this to process a big trade? I found it strange that the stock made a good move over the past few days and then released a PR yesterday and now this strange pattern today.

    I know you don't run your blog to take requests, just had to ask.

    Thanks for your consideration

  2. The Financial System is a Farce:

    Just as we wrote back in October 2007, and again in September 2008, we feel compelled to state the obvious: that the financial system is a farce. It’s a complete, cyclical farce that defies all efforts to right itself. This past year continued the farcical tradition with some notable scandals, deferrals and interventions that underscored the system’s continuing addiction to government interference. With the glaring exception of US Treasuries and the US dollar (which are admittedly two of our least favourite asset classes), it was not a year that rewarded stock picking or safe-haven assets. Many developments during the year bordered on the ridiculous, and despite some positive news out of the US, we saw little to test our bearish view. If anything, our view was continually re-affirmed.

  3. Visitor. You actually answered the question yourself lol. The stock ran up a bit ahead of the news announcement, which tells me that a lot of people knew the announcement was coming and decided to "front-run" it, hoping the news would drive the stock even higher. I'm guessing today, after the news was released, some people bought more stock and some "traders" were selling.

    I think there's a couple of newsletters that promote Brigus and so to some extent the stock is captive to reports issued by the newsletters.

    It has a decent looking chart, like all the mining stocks, but I just took a quick look at the company and I'm not really excited by what I see. It already has a lot of shares outstanding and I think the market cap fully reflects amount of mineralization reported on the 43-101 resource filing.

    I like to look for juniors with under 100mm shares o/s and I like to see a market cap that is at a big discount to the resource base (the way I value resources). Rye Patch is a good example of this, although fully diluted it has a bit more than 100mm shares.

    Also, Brigus has a very high cost/oz of production and I don't believe the reductions they have pro forma'd in their latest presentation.

  4. Speaking of companies with a big discount to the resource base, take a look at Sandspring Resources SSP, on the venture. Beaten down for a number of reasons and trades a little bit on the thin side but still incredibly cheap in my opinion.

    Interesting post today to say the least. Lets hope that big money starts trickling back into some of these plays.


  5. Vaudeville couldn't compete....

    Fed’s image tarnished by newly released documents

    The leaders of the Federal Reserve went around the room saluting Alan Greenspan during his last day as chairman of the central bank. Then Timothy F. Geithner, the future Treasury secretary, made a prediction.

    “I’d like the record to show that I think you’re pretty terrific, too,” Geithner, who was president of the Federal Reserve Bank of New York, told Greenspan amid laughter on Jan. 31, 2006. “And thinking in terms of probabilities, I think the risk that we decide in the future that you’re even better than we think is higher than the alternative.”

    The year began with adulation all around for Greenspan. In that January meeting, Roger Ferguson, then Fed vice chairman and now head of the TIAA-CREF financial services group, called Greenspan a “monetary policy Yoda.”

    Janet L. Yellen, then president of the Federal Reserve Bank of San Francisco and now the Fed’s vice chair, told Greenspan “that the situation you’re handing off to your successor is a lot like a tennis racket with a gigantic sweet spot.”

    Pure geniuses...but art imitates life once again...

    ...and remember follow the yellow brick road!

  6. Black rock bought gss a few months back too

  7. Ciao Dave,

    Grazie per aver risposto a me per quanto riguarda BRD.

    What is the significance of the number of shares out relative to the market cap? Is there a general ratio one should look for? Roughly speaking, I generally look at market cap as it relates to ounces/cost of production . . etc. I had been following BRD since they were Apollo and they seemed to have overcome a lot of issues. I like the small miners that sit between producer and explorer. BRD seems like a take out candidate. I was fortunate to own NXG before they got bought and believe there will be much more consolidation in the industry.

    Comunque, grazie ancora e buona serata!

    1. Ciao Visitor (Marco?)

      Con piacere. Di niente!

      I forgot that Brigus used to be Apollo. I never really like Apollo and they for sure have put in small production since the Apollo days. I played Apollo a long time ago and then decided I didn't like it. It is for sure, for whatever reason, a newsletter "darling."

      Brigus could be a takeout candidate but it could be a long time. In the meantime, if you compare Brigus' reserve base vs. RPM - and then layer in RPM's prospects, management team, the fact that KGC owns like 16% of RPM etc - RPM is a much better junior play.

      I agree that the number of shares o/s should be mostly irrelevant, although with junior it tells me how much issuance they've had to do up to the point where they are able to show resource. If you look at Brigus' 43-101 reserves/share vs. RPM's, you'll see what I mean. Also, the market for these types of stocks irrationally places a premium on lower shares o/s. I disagree but I won't fight the market.

      Spero che aiuta - buon fine settimana lungo!


  8. (Quinn)

    Dave: Do you ever speak in Denver or do anything like that? I have been reading your blog for over a year, and if you ever do will you let me know. I can send you my email in private. Your blog has been a beacon of truth and it is appreciated. Q

    1. Hey Quinn.

      Thanks for the feedback and encouragement. I appreciate it. I'm not sure anyone would want me to speak in Denver LOL.


    2. I don't know about that Dave. We have so many great minds in Denver that work in the precious metals field. I would love to attend a conference where you and Mike Krieger were speaking. It seems as all the hard money conferences are always in Canada. Denver has such a wonderful mining history that it seems only fitting we have something here. Just a thought, Quinn

  9. Hi Dave,
    I absolutely love your blog, it is very insightful, plus now I know know what a "Geithner Fluffer" is...lmao
    What is your opinion on TAKU Gold?

    1. Rumble,

      I just took a look at Taku. I'm definitely adding it to my watchlist. It's obviously a play on the Yukon. They don't have enough drilling information for me to evaluate it. It's a serious venture capital play and I think you have to really understand geology to make an educated guesstimate. It's a very high risk/high return play - but the junior sector is loaded with those.

      They just raised $7mm - let's see how long it takes to burn thru that and what kind of drilling results they can turn out burning the cash. I can guarantee you they will have to issue a lot more shares over time, but that's not necessarily a negative if the money they spend produces a well-defined deposit.

  10. Cenk Uygur rips New York Times over ‘truth vigilante’ column

    The Young Turks host Cenk Uygur blasted New York Times public editor Arthur Brisbane on Thursday for his column which questioned when reporters should challenge statements made by politicians.

    “When should you challenge it? How about every freaking time! What do you think your job is? Do you think you’re a stenographer? Oh, Politician X said this, and Politician Y said that. Let’s all go have cocktails together!” Cenk said. “Of course you should challenge them on the facts.”

    “Please have the courage to do actual journalism,” he added. “I don’t give a damn what the Republicans and Democrats say, tell us what the reality is.”

  11. Thx for your response Dave, I appreciate it.
    Taku has Shawn Ryan as a geologist advisor, and I think that bodes well for them. I can remember seeing him in the news a few years back....he was a dirt poor guy with his wife and 2 kids making $12,000 a year, living in a trailer with no running water or electricity. He did a lot of prospecting and delving into the geology of the area, and eventually struck it big...I knew nothing of silver and gold back then myself, I just remember thinking "Good for him!".

    A quote from Taku website...
    "In 1997, a century after Skookum Jim Mason, Dawson Charlie and George Carmack found the gold which triggered the 1897 Yukon Gold Rush, one man set out to find its mother lode.

    12 years later, that commitment is producing extraordinary results.
    Writing The Next Chapter In A Golden History

    Born in a mining camp, and having spent much of his life in the Yukon, Shawn Ryan is a truly rare find.

    A devoted believer in rigorous science, he set out to survey the trenches and faults which fed the basins and streams where most of the Klondike placer gold was originally found.

    Unlike many areas of Canada, the White Gold region has never been glaciated. This particularly important feature of the region means the soil profile at surface is the weathered equivalent of underlying bedrock. As a result, sampling the soil and analyzing for gold content is an effective and accurate exploration tool for locating gold enriched bedrock structures.

    Armed with this knowledge, Shawn Ryan set out on an intensive 12 year program that included over 70,000 soil samples in highly regimented grids across the vast area south of Dawson City where the Klondike Gold Rush took place.

    It's the most comprehensive exploration ever conducted in the Yukon.

    The results speak for themselves. In the past 18 months alone, his properties have demonstrated resources of over 1.4 million ounces of gold."

    I've bought 70,000 shares of Taku, and I guess I'll see how it goes!

    Thx again for all your work Dave, you post great stuff. ;-)

  12. Dave - Crocodile Gold is victim of one of these private equity takedowns. They want 85% of all the shares and are offering CAD .56 The offer is made by ARMANT LLC which is a front for LUXOR capital partners. Croc will actually be producing gold soon so why not take them out when the Jr Shares have been naked shorted/hammered/ETF'd down to nothing.

    Watch for more of this as time progresses.

  13. Thanks for sharing this info!

  14. Hey some interesting article posts on Yahoo about AEM about Goldex from VP of AEM. Maybe the Hedge funds saw an eventual min restart

    "According to the Deputy Director General, it may be easier to move forward in the second quarter of the yea"