12/03/2010
December 3, 2017
11/26/2010
December 3, 2017

11/29/2010

Have u read the new Apex presentation that came out a few days ago?

http://apexminerals.com/reports/AGM2-Presentation261110.pdf

What are your thoughts? I mean, it looks like it is doing a runrate of 85,000oz ~850 cash cost

So can I assume that cashflow = 1350-850 * 85,000 = 42.5m??

Let’s not declare victory yet. One good month doesn’t mean that Wiluna is out of the woods yet. The slide on page 10 of the presentation really tells the story though. Pretty much every month has seen an improvement in production over the month before. Even more importantly, the cash cost has started to finally trend lower. Finally, it looks like they will have about $500k a month in expected future savings. I’m encouraged enough that I bought a few more shares at 1.9c today, but this is mining. I guarantee you that something else will go wrong. On your math, I’d add in SGA, cap-ex and some increase in exploration expense. But I don’t see why they can’t do 25-30m a year in cash flow at AUD1350 gold if they can continue producing at October rates. That gets you a low teens share price I would think because if they can stabilize things and build a cash buffer, they should be capable of increasing production beyond the 85,000 oz run rate. If gold in Aussie can get going, there could be real fireworks as this is such a high cost operation. Then again, this is underground mining, something will go wrong that pushes results out yet again. It’s been a slow start, but it seems to be moving in the right direction (finally).


Kuppy, I love it, always a little bit of history with finance. But then as Benjamin Disraeli, said “What we have learned from History, is that we HAVEN’T learned from history”.
But, in the meantime, do you believe that futures based ETF commodity funds, will fare any better than ETF’s that own commodities, or mutual funds ?
I cannot (after many years of speaking with people in the grain business) find publically traded farms. Would you know of any ?

The problem with these futures commodity funds is that the futures curve is steep so you are paying for the contango roll every few months. The costs of that will eventually grind you up. You can buy longer deferred futures contracts, but you are still playing along the commodity curve and the contango will cost you money.

There are a few publicly traded farms along with some publicly traded ranches in Australia but none of these really have very good economics unless agricultural prices really ramp up. You have to ask yourself how high you think these prices will go. I think the answer is much higher, but I still wonder how good these will be as investments. I’d rather invest in the guys that service the ag business. So far, I haven’t found anything that makes sense to me. Trust me: I keep looking. I don’t have a list of these companies on hand unfortunately.


Hello Dear Kuppy,
Many thanks for such a wonderful blog. I would like to know your opinion on couple of trends.
1) As third world countries are getting wealthier, they have begun the long journey towards higher eating standards, i.e. consuming more of sugar and protein. How can one best benefit from this trend?
2) How can one best play the aging of the first world societies?
3) As energy prices raises due to decades of underinvestment in production, would that increase the investment in alternative energy? If yes, what do you think of Geothermal Energy, e.g. Magma Energy (mxy.to)? [A best on the CEO: Mr. Ross Beaty ]

Glad you enjoy the site. As per your questions; 1) Agree completely. I have no idea how to play this, but I want exposure to it. 2) There are lots of ways to get exposure to this, but I worry that government intervention will take away a lot of the profitability here. I’m also not that up to speed on medicine and medical devices. There are guys that specialize in that stuff. I’m really more of a generalist so I usually avoid things that take specialized knowlege which takes a long time to learn. 3) Investments in alternative energy will certainly increase going forward. Alternative energy will also become more competitive as other forms of energy grow more expensive. I don’t know the particulars on Magma Energy, but if I were to make an investment in geothermal, I’d rather bet on Ross than anyone else, almost irregardless of the particulars of the company. Ross is a winner. He repeatedly makes money for his shareholders. You want to invest in winners.


Good cotton article. It shows that just because an asset class has been depressed for decades, it doesn’t mean it’s coming back any time soon either. Imagine having to wait 140 years to get back to break even on your cotton long?

The crazier thing is that if you bought Erlanger cotton bonds, you’d actually be up quite a bit of money. They’re pretty popular collectible items for people who appreciate financial arcania…


How do you factor in increases in productivity into your forecast?
I assume we produce more per acre than 100 years ago and will produce more per acre 100 years from now.

Of course productivity will eventually kick in and yield per acre will increase again. I’m not saying to be long agriculture forever or anything. I’m just saying that there are decade-long lags to this stuff. Before you have productivity increase, you need a few years with big profits for producers so that they can pay off debt and afford new tractors and new tools.

Most of the increase in productivity (going forward) will come from the 3rd world. Unfortunately, many of those countries are actively trying to suppress agricultural prices and limit the ability of farmers to sell produce into countries that are willing to pay more. This is all done in the name of protecting local consumers, but it really just means that these productivity increases will take longer to filter their way through.


Hi Kuppy,
I know that opinions are like noses and everbody has one, but I would love to hear your take on the future of natural gas in the US as a significant fuel source?

I think gas usage increases a good deal in the coming decade. It’s cheaper than oil and we have a lot of it. That doesn’t mean it’s something that I’m looking to invest in right now, but it’s good to be aware of its increasing use.