Kuppy–In the last thirty days an average of five analysts has raised their projected earnings for EGD from .58 to .60. How do you explain how they come up with these figures?
If you spend more than a few minutes looking at analyst reports, you’re wasting your time. These guys still think EGD does $160-$180/m in revenue. I hear they’re signing new business at over $200/m. They should do at least 800,000 meters in 2012. Every dollar increase is worth nearly 2 cents a share in additional EBIT. What if they pick up $30-40 next year in incremental revenue per meter? Then throw in Bertram…. these analysts don’t have a clue.
1. Any thoughts on why you like MERC over CFP? There has been some strong insider buying on CFP and they seem to have less leverage, and not the cash trapped in one of their plants like MERC. Good write-up on both can be found here. http://valueslant.com/2011/12/14/mercer-international-merc-opportunities-market-pulp/
2. The other question is on mining capex for EGD. Let’s say we get a 2008 redux, by which I mean, modest gold pullback to 1300 (so profits are still strong at producers), but a market/credit collapse and miners fall maybe not 80% this time but 50-60% (admittly probably not from this really beat up attractive relative valuation today). In such a scenario does gold mining capex get temporarily cut back really heavily again or do they keep going giving their strong balance sheets and continued cash flow? In that worst case, how does EGD which has been ramping capacity so much fair? Obviously not a reason to not own EGD today even if I think this scenario is very plausible but hoe would that play out for EGD.
3. Also I know you hate the miners, with good reason particularly on a stock by stock basis, but with gdxj down 40% in the last 12 months vs gold up 20% largely due to retail dumping of all stocks, are you interested in switching allocation? Not considering that macro scenario above (which would be just another super buying opportunity), the miners look almost as attractive as they were at those ridiculous end of 2008 prices.
1. I like MERC b/c it is more of a pure play on the NBSK market vs CFP which has other moving pieces. I sort of like leverage in a bull market b/c small changes in EV will accrue disproportionately to the equity holders.
2. I think that in a total collapse, EGD does poorly. However, if that were to happen, it only pushes back the inevitable boom in exploration spending by a few years. In the end, you can’t mine it if you can’t find it. EGD is the low cost provider. In 2009, everyone lost money but EGD. EGD was the first to pick up new market share as well.
3. I’d possibly buy a basket of them, but honestly, they’re such terrible businesses that they deserve to trade at single digit multiples. The more I think about it, the more I realize that these things just aren’t all that cheap at today’s prices. What were we all thinking when gold was under 1,000 and GDX was 500?
Kuppy, I read that the weather forecast for tomorrow is -41f and smoke in Ulaanbaatar. Is that true?
Lol. Pretty much. Heat in my building is turned off and it can’t be over 40f here in my apartment, and I have all 4 burners on my stove going full blast to heat the place…
On the smoke, when we landed, the pilot had to circle about 5 times because he couldn’t see the runway with all the smoke. They’re cancelling about half of all flights b/c visibility is only about 100 feet due to smoke. Cleaning up the pollution here will be a huge business.
You want to thank me for reading you this year? I want to thank you for writing. I will mention specifics, incl. 1. GROW (actually, it was a 2010 opp’ty which let me sell for profit in 2011); 2. Energold–I bought in kind of late, still manage to book some gains and re-establish the position; 3. MERC; & 4. Andean. As you could probably surmise, 3. & 4. haven’t paid off yet, but MERC shows much promise, IMO, and thanks to the guarded comments of you and that Fleckenstein character, I knew what I was getting into w/Andean, so I kept it small. So, thanks are owed not to your readership but to you.
Feliz ano nuevo!
I’m glad you’ve found value in my writings.
I’m a 28 yr old chiropractor who wants to switch careers into the investment industry. I spend most of my free time reading and thinking about investing. I’m absolutely fascinated with business and the process of investing. My goal is to join an hedge fund that i admire doing anything they want so i can learn how to be a successful investor. Entry level/ intern doesnt matter as long as i’m part of a successful team. What is the best process to accomplish this ? Would you recommend me getting a mba or cfa?
MBA or CFA can help you to get hired and a good background in accounting is a must, but you can probably learn all that you need by reading a few good books on forensic accounting. I’d suggest going to sites like sumzero.com and going through the classified sections looking for jobs in the industry.
I decided to google trend the word ” gold invest “. Google trend shows top results in countries googling a particular word you want to know.
I wanted to see if the retail investor has started to increase searching in gold investment.
To my amazement, the U.S. ranked 7th on this list. India, Malaysia , UAE, South Africa, Singapore , Slavikia were all ahead, and China doesn’t even use google.
I read in Malaysia , banks have run out of security boxes, in India the safe business is booming 10x fold over last year, etc… These countries retail investors already seem to be in a gold rush and in the US were blind to the fact. Where’s our gold vending machines?
I don’t know if my friends or family will ever get excited about gold, but I’ve come to the conclusion it doesn’t even matter. The rest of the world doesn’t need the US this time to create gold mania all over again. Far from the money gold options here I come for a 100 bagger ;).
We’re still in the early stages on the gold boom. You really don’t need the US. If every chinese guy buys his wife a set of earings, you use up all the gold produced this year…. Bet on the Asian consumer, not the investors.
Hi Kuppy, I’ve been following and investing in Ivanhoe Mining and Entree Gold for a few years now. I understand that there are a few scenarios that could play out for Ivanhoe, now that the arbitration decision has come down. My question is; how do you see Entree’s Mongolian properties being taken out and do you have any thoughts on the time line for this piece of the puzzle. Would Ivanhoe want to bring in someone with deep pockets to combat Rio? Would they need to do that, given Entrees low valuation. Do you think that Entree will do it’s best to prove up it’s value in the immediate future? Do they have time to prove up they true value? I appreciate your comments and opinion on this matter.
I really don’t know much about Entree except that they have a small part of the massive OT deposit, but their assets will get mined late in the mine-life. I don’t really have an opinion on how Rio will play their hand to acquire Ivanhoe. There are lots of options. Let’s just say that I think there’s easier ways to make money in the world than trying to figure out this complex game of chess. If you want to buy Mongolian mining, buy Tavan Tolgoi. It’s a 14% dividend yield and the dividend more than doubles each year… It’s at about 4x cash flow.