Position Updates (September 14, 2010)

I spent the last week going over my positions and finding out what I’ve missed while on the road. Since I’ve gone over this exercise, I might as well share the results. You can see the full list at Positions Mentioned. The last position update was on June 23, 2010.

AAG.v   Price At Mention   $0.56      Current Price $0.87     Change   +55.36%

Since I first wrote about Andean, the company has finally started to tell the story—it’s a good story. The share price performance is proof that investors like what they’re hearing. The company raised $3 million at $.50 which now looks silly, but at the time, it was a slight premium to the market. The company continues to push ahead with getting bank debt to fund their Invicta asset. Earlier this summer, it looked as if the European banking system would potentially disappear before this could get funded. Now it looks like there is some stability there. These banks are eager to fund this project as they cannot keep investing in government paper that yields nothing. This will be an attractive coupon with lots of banking fees and a quick payback. I think we will know a lot more about the bank debt in the next few months. In the interim, the stock continues to rally a few pennies a week as the company tells people what they have in the ground. I first wrote about Andean on July 18, 2010.

AXM.ax   Price At Mention $0.019    Current Price $0.023     Change +21.05%

Second quarter results were a bit light, but roughly in-line with my thinking as the company almost broke even. July showed yet another increase in production (6,670 ounces). If they can just maintain that rate, it would be 20,010 ounces for the quarter compared to 16,307 produced last quarter and 14,109 the prior quarter. As long as they can continue to ramp up production, Apex should hit profitability soon. The one thing to watch out for is the price of gold in Australian Dollars. When I first wrote about Apex, Aussie gold was at $1,500. Now it’s $1,350. That’s a whole lot of profit margin that they will have to make up with increased production. On August 5th, the company raised $5 million. I had a hunch that they may raise money one last time. Hopefully, this is the last raise. I first wrote about Apex on June 8, 2010.

 

EGD.v    Price At Mention $2.70        Current Price $2.94       Change  +8.89%

I didn’t expect much for Q2 as they were spending considerable sums to ramp up for increased demand. They also still have a number of old contracts at lower prices that aren’t too profitable. Listening to the conference calls with competitors, it’s obvious that demand for drilling is exploding and pricing will increase significantly on new contracts.

Energold now has 94 drill rigs and meters drilled per rig was 945, which is the highest level since Q3/2008. I anticipate that number will continue to increase. While Revenues per meter have been stalled out at $150, this is the 3rd consecutive quarter with increased pricing. EBIT was $1.1 million or their best quarter since Q3/2008. Things are improving, but it takes time to ramp up a business like this.

I still think the company earns something around 40 cents a share in 2011. Normally, industry leaders in rapidly growing industries with high returns on capital trade in excess of 20 times earnings. During the summer, the shares declined into the low 2’s and I bought a pile more shares. I believe this is now my fund’s largest position at cost. I first wrote about Energold in Mining Services Part I and II on March 16, 2010. I intend to update this soon.

 

GLD      Price At Mention $108.28    Current Price $124.02     Change +14.54%

Both political parties are intent on bankrupting the country and destroying our currency. Just when you think our politicians are the worst, you find out that the Europeans are racing us to insolvency.

I like to think of gold in terms of the cost of producing it. The large acquisitions recently announced by some of the major mining companies in the gold industry are stunning. These mining companies are desperate for gold reserves as they’ve depleted their own reserves. They overpaid in most instances, but they need the reserve growth. If companies have to start paying up for reserves, it will further increase the cost of producing gold. I have a feeling that the next few years will see real fireworks in gold. I got stopped out for a small gain on what I added while in Australia—I sure regret not having my extra helping of gold. Of course, I NEVER sell my core position. I first wrote about Gold on March 20, 2010.

 

GROW      Price At Mention $5.38      Current Price $6.82      Change +26.77%

US Global Investors released earnings last week and they were right in line with my expectations. Once you dig into the numbers, you realize that the company increased marketing spend which cost them a penny a share beyond what they spent the prior quarter. I’m all for a company spending money today to increase the value of the business tomorrow—especially when the alternative is to pay taxes on the earnings as they’re received now. The company has had a rough time generating inflows into their funds, even though their track record remains quite strong. I think this will all change when investors begin to seriously contemplate investing in gold. While I wait for that to happen, I am earning a 4% dividend yield. It’s not the worst thing in the world. I first wrote about US Global Investors on June 28, 2010.

 

VXX  Short     Price At Mention $20.60    Current Price $17.57   Change +14.71%

Right after I posted this, the VIX (a measure of volatility) doubled. The VIX has now returned to a more normal level. VXX is a decaying asset, and it has been doing exactly that. This product will eventually go to zero, but it sure is a wild trading toy. I am thankful that I have kept this position small. I’m up quite a bit on it now, but there was a time when it really was causing some pain. I first wrote about VXX on April 28, 2010.

 

New Opportunities

There are a number of interesting investment opportunities that I’m exploring (there always are), but right now, my mind is really on Mongolia. You always want to invest in the strongest bull markets before they take off. I am desperately looking for a way to invest in Mongolia that makes sense.

Categories: Current Investments
Positions Mentioned: none

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