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At the time of our last update on the 26th May 2009 we said that the dollar now looked oversold and a short term bounce could be on the cards thus capping the progress in gold prices. We also said that Gold was technically close to the top of its range so it too could experience some short term consolidation or a slight pull back. Gold has moved down since then from $957.90/oz to $935/oz as we write however the dollars rally appears to have stalled as it is still hovering around the '80' level.
For short term traders we suggested taking some profits on both Randgold and Yamana, we decided to sell all of our holdings in Randgold Resources and we then took an aggressive stance and bought PUTS on Randgold as we perceived that it was more overbought than similar stocks in the pack. We do however remain tight hold of our core position as gold could take off in an explosive manner catching many by surprise. We hope to close our down bet on Randgold shortly and re-position ourselves for the coming rally in gold prices.
Our portfolio as been updated as follows:
Randgold Resources Limited (GOLD) On the 18th of June 2008 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, on the 28th May 2009 we sold our entire holding for an average price of $68.69 for a return of 82.44%. This is a quality gold producer so we must now wait patiently for a suitable entry point at cheaper price levels.
Agnico Eagle Mines (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 $54.43 on Friday.
Kinross Gold (KGC) we originally acquired Kinross at $10.08, Kinross then went through a bit of a pull back so we signaled 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 at $18.92 on Friday.
Silverado Gold Mines (SLGLF) we bought at $0.08 and it now stands at $0.013 up slightly from $0.0125 at the last update. 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.
Silverado (OTCBB: SLGLF) has managed to arrange a line of credit of up to a staggering $US100 million as detailed in a news release by the company recently, which came as a surprise to us considering their recent performance. We are holding at the moment however we are not buyers of this stock until things become a little clearer.
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 $9.12 yesterday, having traded as low $3.99 not so long ago.
Yamana has agreed to sell some of its properties to Aura Minerals as per this news release from Aura Minerals:
The Company intends to use the net proceeds of the Offering to acquire from Yamana Gold Inc. (collectively, the "Acquisition"), the San Andrés GoldMine located in Honduras (such Honduras property being hereinafter referred to as the "First Stage Property") and the Sao Francisco and Sao Vicente Gold Mines located in Brazil (such Brazil properties being hereinafter referred to as the "Second Stage Properties"). Please refer to the Company's June 9, 2009 press release announcing the Acquisition.
We need to take a closer look at this deal before determining whether or not it is a good move from an investors standpoint.
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 was a victim of this recent sell off, which has dragged the price down. 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. HRG closed at $0.235 on Friday, having traded as low as $0.04. In a recent news release the company had this to say:
TORONTO, ONTARIO--(Marketwire - June 25, 2009) - High River Gold Mines Ltd. ("High River") (TSX:HRG) and ZAO Severstal Resources ("Severstal Resources"), the mining division of OAO Severstal (LSE:SVST)(RTS:CHMF), jointly announce that High River and Severstal's affiliate, Lybica Holding B.V. ("Lybica"), have mailed a take-over bid circular dated June 24, 2009, a directors' circular dated June 24, 2009 and related documents (collectively, the "Offer Documents") to High River's shareholders today. The Offer Documents are in connection with the previously announced offer (the "Offer") by Severstal for all of the issued and outstanding common shares ("Shares") of High River (excluding Shares currently held by Severstal and its affiliates) at a price of $0.22 per Share in cash. The Offer expires at 5:00 p.m. (Toronto time) on July 31, 2009, unless extended or withdrawn by Lybica.
Sadly we are now in the hands of the bigger shareholders who will decide whether or not to accept this offer, it would be nice to see another bid on the table which could drive the price up, but there we go.
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$3.51 up from US$1.51 recently, Our original purchase was made on the 15 July 2006 at around the $4.70 level, so we are sitting on a large lose. Hopefully FRG established a bottom at $1.25 and will continue to make progress. Fronteer Development Group Inc., announced that it has acquired all of the remaining common shares of Aurora Energy Resources Inc. So this investment is well and truly a two pronged attack via both gold and uranium.
We purchased the September $65.00 PUT contracts in Randgold Resources Limited (GOLD) in anticipation of a pullback for $5.00 per contract as Randgold looked vulnerable as the stock price had increased from $41.59 on 17th April 2009 to $70.93 today, an increase of 60% in two months, and the P/E ratio was standing at a large 148. Randgold fell quickly but then staged a mini recovery just to keep our nerves tingling. The last trade was at $5.80 so we are up slightly.
Trading decisions belong entirely to you as your circumstances are different from ours and we trade to suit our investment criteria and cash position.
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Conventional wisdom suggests having 5% or so of your portfolio in precious metals with some commentators upping this figure to around the 15% mark. We however are far more cavalier in our approach to investment and only invest in the precious metals sector such is our enthusiasm for it.
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