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« GOLD: Hits $900/oz! | Main | Gold and the USD rise together! »
Jan222009 Portfolio Update 23 January 2009

HUI Chart 23 Jan 09
Chart courtesy of

A quick look at the gold bugs index chart and we can see that gold stocks are trending higher and have gained 100 points over the last few months. The danger still exists that the DOW could close below 8000 and stay there, which according to some analysts signals a further fall to 6000. If this happens then once again we could be caught in the crossfire as the precious metals go out with the bath water. Hopefully the effect of having a new president will generate a rally in the markets at least for the next few months. We still need the de-leveraging to come to an end and the US Dollar to u-turn to in order to get some impetus into the precious metals sector.

Our portfolio as been updated as follows:

Randgold Resources Limited (GOLD) On the 18th of June we bought Randgold Resources Limited for $37.65. This stock quickly rallied to $55.00 before being caught in the ensuing sector sell off to trade as low as $27.70, Randgold closed at $40.41 yesterday.

Agnico Eagle (AEM) we originally paid $30.88 and it now stands at $31.15. On 31st January 2008 we reduced our exposure to this stock and sold about 50% of our holding for an average price of $63.27, locking in a profit of 104.8%. On the 24th July 2008 we bought again at $59.17 doubling our position with the average cost now standing at $45.03. Agnico Eagle closed at $51.26 yesterday.

Kinross Gold (KGC) we originally acquired Kinross at $10.08, Kinross then went through a bit of a pull back so we signalled to our readers to “Add To Holdings” at those discounted levels of around $11.66. We also gave another ‘Kinross Gold BUY’ signal when we purchased more of this stock on the 20th August 2007 for $11.48. On 31st January 2008 we reduced our exposure to this stock when we sold about 50% of our holding for an average price of $21.96 locking in a profit of about 93.60%. On the 24th July 2008 we doubled our holding with a purchase at $18.28 giving us a new average purchase price of $14.50. Kinross closed on yesterday at $16.97.

Silverado Gold Mines (SLGLF) we bought at $0.08 and it now stands at $0.0115. We are disappointed in the poor performance of this stock. The B.C. Securities Commission had issued a cease-trade order against the company, citing a host of filing deficiencies. On the 5th August 2008 this order was revoked the B.C. Securities Commission. However this stock continues to limp along and closed yesterday at $0.0115.

Yamana Gold Incorporated (AUY: NYSE) we paid $9.37 on 27 September 2006, and we bought again at $12.89 on the 7th December 2007 and so our average price moved up to $11.13. On 31st January 2008 we reduced our exposure to this stock and sold about 50% of our holding for an average price of $16.50 locking in a profit of about 49.41%. Then on the 3rd April 2008 we bought our Yamana position back at $14.43 in expectation of a bounce, which arrived on The 23rd May 2008, and we sold for $16.00. On the 11th July 2008 we bought again at a price of $14.95 taking our average purchase price up to $13.04. This stock closed at $6.95 yesterday having traded as low $3.99.

High River Gold Mines: (HRG: TSX) We bought this at $2.49 and we increased our position in the company on December 7th, 2007 when we wrote; We strongly believe in the company’s long-term fundamentals, especially with rising gold prices. However it has been a victim of this recent sell off, which has dragged the price down to $0.105 yesterday, rendering a hammer blow to our portfolio. HRG is a small gold company and so its stock price is very volatile, but this pullback has been devastating. Production last year of 140,000 ounces, this year 280,000 ounces, next year 350,000 ounces going to an estimated 600,000 ounces by 2012. We will hold and watch for now.

Fronteer Developments Group (FRG) Fronteer was originally bought as both a uranium and gold play as FRG owns the lion’s share of Aurora Energy Resources making it a gold/uranium play. On the 24th September 2007 we sold 50% of this stock for an average price of $10.44, banking a profit of 122%. Fronteer is currently trading at US$1.92 up from US$1.51 recently, Our original purchase was made on the 15 July 2006 at around the $4.70 level, which is now showing a large lose. Hopefully FRG established a bottom at $1.25 and will continue to make progress.

Options Trades;

The Randgold Christmas PUTs bought on 22 December 2008 for $2.90 were sold on 30 December 2008 for $1.70 for a loss of 40%.

On the 24th July 2008 we re-purchased the KGC JAN09 Call options at a strike price of $20.00 for $2.50, and they expired.

On the 28th November 2008 we purchased Yamana Gold JAN 2009 Call Options at a strike price of $5.00 for an average cost $1.04 per contract, they were sold for $1.70 each for a profit of around 70%.

On the 14th August 2008 we purchased the Agnico-Eagle JAN09 Call options at a strike price of $60.00 for $5.50, and they expired.

As we can see our latest options have delivered to us a financial loss. It is worth noting that these contracts are extremely volatile and can move 50%, even double or halve in a single day, so take great care when buying them.

Trading decisions belong entirely to you as your circumstances are different from ours and we trade to suit our investment criteria and cash position.

The bottom line is that we have got to mange the risks better on options trades and pull the pin earlier when we the trade goes the wrong way.

Have a sparkling week.

Stay tuned for updates in this fast moving market…

If you are new to investment in the precious metals sector then you may wish to subscribe of our FREE newsletters regarding gold stocks, silver stocks and uranium stocks, just click on the links.

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