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Thursday
Feb042010

Randgold Resources Limited: A Buying Opportunity Approaches

Randgold chart 05 Feb 2010.JPG

Randgold Resources Limited (GOLD) has been taking a battering lately along with most other gold producers which is interesting to us as we like this stock a lot but do not own any of it at the moment. The current correction could present us with the buying opportunity of the year so its now time to watch it carefully and be prepared to pounce.

As we can see from the above chart this correction could well bring Randgold back into the frame as a Buy having fallen 5.91% today alone and to close at $67.29. This is a fair way down from its recent high of almost $90.00 per share, a price that left us thinking that we might never own it again. Still never say never in this business, its so volatile and can change on a dime as we have said many times before.

The RSI looks as though it is about to fall through the '30' level which makes it a buy in our eyes, however, we will wait and see just what the next few days can throw at us before making a move. We have bought and sold this stock in the past and also traded Randgold's PUT and CALL Options with some success so we are keen to repeat the process.


Randgold Resources Limited trades on the NASDAQ under the symbol of GOLD and on the London Stock Exchange under the symbol of RRS and has a market cap of $6.06 billion.


All the best.

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Thursday
Feb042010

Yamana Gold Incorporated: Stock Price Clobbered

AUY Chart 05 Feb 2010.JPG

Taking a quick look at the above chart we can see that Yamana Gold Incorporated (AUY) has taken a clobbering of late dropping another $6.10% to close below $10.00 yesterday. The RSI is about to break the '30' level placing it firmly in the oversold zone.

We are not too keen on buying AUY just yet as we want to see the dust settle from this latest sell off before acquiring any more stock. It may just turn out that one stock is way more oversold than the others of a similar ilk, hence a bigger rebound may be on the cards.

It was a strange day for the markets with the broader markets losing a lot of ground along with the metals and oil etc. The only beneficiary appeared to be the US dollar which we don't see going much higher, but the market behaves as it wishes, so go gently if you are looking to acquire more stock.

Yamana Gold Incorporated trades on the following Stock Exchanges:

AUY on the New York Stock Exchange
YRI on Toronto Stock Exchange
YAU on the London Stock Exchange, giving it global exposure to investors.

Yamana Gold has a market capitalization of $7.22 billion, a P/E ratio of 20.97, with 733.25 shares outstanding, has a 52 week high of $14.37 and 52 week low of $7.27 and closed today at $9.85.

All the best.

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Thursday
Feb042010

Buy This Dip

Gold Chart 05 Feb 2010.JPG

We have warned in past that there would be days like this when gold gets hit for $50.00 and silver also suffers a similar fate. This is a dip and in our opinion it should be bought, we will look to add to our positions either tomorrow or early next week when the dust has settled.

Go gently with acquisitions, the adoption of a layered strategy could be very useful at this time, for example buy a few now and if it drops a little more then acquire a few more, just a suggestion. If gold continues to drop we should see support come in at $1050 and strong support at $1033, again just our view.

Gold is still a dollar play and the dollar is viewed, at the moment, as being the best of a bad bunch of currencies. The Euro is having a hard time hence the improvement in the dollar. The Euro is haunted by Greece as the Greeks are in a real financial mess, will the EU bail them out or not is the question. To alleviate the situation Greece could sell its reserves of gold which we understand is about 112 tonnes and that possibility could be casting a shadow over gold. But remember that India bought 200 tonnes in one hit so this transaction, if it happens, may just turn into a positive effect for gold.

If the EU does bail out Greece then Spain, Portugal, et al, will line up for a handout, how many Euros will have to be electronically created we wonder.

As the chart shows gold took a hit today as this correction continues and the technical indicators are almost on the floor suggesting that gold is in the oversold zone.

Hold tight and add to your core positions if you can, things will improve even though it looks bleak at the moment.

Got a comment then please add it to this article, all opinions are welcome and appreciated.

All the best.

Got a comment then please add it to this article, all opinions are welcome and appreciated.

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To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address.

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Wednesday
Feb032010

Gold to hit $1,350 - $1,400 by late Spring - John Embry

Mineweb logo.JPG

A very bullish statement from John Embry of Sprott Asset Management found in this article on Mineweb may be of interest to you and put a smile on your face.

Gold should continue to consolidate over the next few weeks but, the next big move is likely to be up.

This is the view of Sprott Asset Management's chief investment strategist John Embry, who says he is looking for the price of the yellow metal to hit around $1,350 to $1,400 by late spring.

Speaking on the inaugural Mineweb Gold Weekly Podcast, Embry says the recent downward trend seen in the gold price is nothing more than a healthy correction.

"Gold had a 300 dollar plus run in US dollars from July into the early part of December and it has come under heavy pressure subsequently. It certainly has engendered immense bearishness amongst the commentators which is actually good from my perspective. I think the fundamentals are undisturbed and as a result it is setting up for another strong buy."

Asked about the link between gold and the US dollar, especially the recent strengthening of the dollar against the euro, Embry, says, while there is often a very clear link, the problems in the US and, by extension, the US dollar, are everywhere - especially given the huge budget deficit it is sitting with - so "the idea that one should run away from gold and into the US dollar because it is strengthening against the euro and several other currencies to me is actually preposterous.

"The idea that the US dollar is a safe haven today is flat out wrong," he added, "and that is going to be one of the major factors that are going to change the perceptions in the gold market going forward."


To read the report in full please click here.


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Tuesday
Feb022010

Agnico-Eagle Mines Limited Options Update

AEM Chart 03 Feb 2010.JPG

On January 25th, 2010, we purchased more stock of Agnico-Eagle Mines Limited (AEM) at an average price of $53.24 and we also acquired a few Call Options and they are the MAY 2010 series at a strike price of $60.00, symbol AEMEL for which we paid a price of $2.85 per contract. At the close of trading in NYC today the last price for these Options was $3.10 so we finished in positive territory by about 9%.

If gold prices can continue to head north for a few more days then Agnico-Eagle could do well and these options should behave accordingly in a leveraged manner increasing our possible profits on the trade. Should this happen in the next day or so we will place a sell order with a 'stop' in order to lock in some of the profits and avoid a loss if the market moves against us.

Taking a quick look at the chart we can see the RSI has hit '30' and bounced off it, which is a good sign. The STO is heading north from a low level and a crossover on the MACD would be positive for AEM, in the short term.

On our silver-prices site we recently wrote the following:

Sticking our necks out we don’t expect to see the dollar go much higher than ‘80′ however as the broader market sells off the dollar strengthens. As a currency we think that its future is bleak, but the alternative currencies especially the Euro appear to be performing just as badly with problems in Greece and Spain grabbing the headlines. As currencies go its a race to the bottom with the occasional upward spike to keep us all on our toes.

Gold is still a 'dollar' play so keep at least one eye on it.


All the best.

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Monday
Feb012010

Leverage: Its Your Option

USD Chart 31 January 2010.JPG
USD Chart

Analysis of the USD, Gold and the HUI shows us that the inverse relationship between the USD and gold remains intact and that the relationship between gold and the producing stocks also remains in place. We can also glean some rough ratios from these relationships, for instance, the USD is up 6.7% compared with gold which is down 11.4% and the HUI which is down 24%, since hitting their December 2009 highs.

So in terms of leverage we have the USD:Gold at 1:2 and Gold:HUI at 1:2 making the USD:HUI at a ratio of 1:4. This only applies to the time period that we are observing and it should be remembered that these ratios can produce various aberrations depending on a number of outside influences. For instance we have George Soros talking about gold being a bubble which no doubt influenced a number of investors last week.

However if you are an active trader or have in your financial armory the funds to allocate to the occasional trade with a little more spice than your core position offers then these ratios have a use. To go a step further and introduce options trading where contracts can double or half in a short time and we have the ingredients to get your adrenalin pumping.

Gold Chart 31 January 2010.JPG
Gold Chart

Taking a look at the above chart we can see that gold is not only in a bull market but also that its progress has been of a volatile nature. The gains are eked out one step at a time and the losses come in the form of severe pull backs rattling the nerves of most investors. Those of us who have been in this tiny space for some time have seen our holdings of precious metals return a handsome profit. The associated quality stocks have also done very well and they usually deliver leveraged gains to the metals. If you stand back and take a look at the charts of your favourite mid caps you will see that even they have mostly been through a roller coaster ride of late, again offering nimble traders the opportunity to rack up some decent profits.

HUI Chart 31 January 2010.JPG
HUI Chart

A number of our subscribers have portfolios that wear two hats, one is their core position which they do not trade as they are in this sector of the market for the long term. The other is their trading hat whereby they have allocated a portion of their portfolio for the taking of larger risks in order to reap greater rewards. However, we live in a world of instant everything, coffee, action replays and “if I buy ABC Limited how much will it be up by the end of the day” you get the drift.

One such vehicle which can be used to satisfy the needs of the active trader is the use of Options, where a small deposit can give the trader control over a number of stocks or their favourite commodity and return a reasonable profit over a relatively short time period. Options expire at a given time in the future so it is essential to lock in profits by taking money off the table or using the 'stop' facility should the value start to erode. For instance if gold moves 2% in either direction, a stock could move 4% and a well placed option could move 40%. Its an exciting experience when you close a winning trade, you feel like a genius, however, when you are positioned on the wrong side of the move the bloody nose hurts. So go gently when you venture into the options playground and ensure that your exposure is small no matter how good you think the trade is or who told you it is a sure fire winner – theres no such thing.

On our web site www.gold-prices.biz we have had many requests to provide such a service usually from subscribers looking to add some extra zip to their trading activity. So we launched a new letter called OPTIONTRADER where we have closed our last 7 trades for an average gain of 51.17% in an average time of 37 days per trade. Feel free to drop in and take a peek it may be just what you are looking for in terms of leverage on your trading activity.

All the best.

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Saturday
Jan302010

Kinross Gold Corporation: Reserves now stand at 51 million ounces

KGC Chart 31 January 2010.JPG


As the above chart clearly indicates Kinross Gold Corporation (KGC) has taken a hammering over the last few months as the shine was wiped off gold prices. Down from $24.00 at its recent high this stock closed at $16.26 on Friday. The technical indicators have hit the oversold zone so once the metals stabilize this could be a wonderful buying opportunity.

On the good news side of things we have this news release from the company:

Highlights
•  Total proven and probable mineral reserves increased by 5.4 million ounces to 51.0 million ounces of gold, an increase of 12% over 2008.

•  The Company declared its first mineral reserve at the Lobo-Marte project in Chile as planned, with proven and probable gold reserves of 5.6 million ounces grading at 1.22 grams of gold per tonne.

•  Kinross upgraded mineral resources at Fruta del Norte (FDN) in Ecuador in 2009 as planned, declaring a measured and indicated gold resource of 5.7 million ounces grading at 11.2 grams of gold per tonne, plus an inferred resource of 6.1 million ounces.

"With proven and probable gold reserves increasing by 31 million ounces over the past five years, a compound annual growth rate of 21%, Kinross has now surpassed the 50 million ounce milestone," said President and CEO Tye Burt. "In 2009 we achieved our goal of declaring a first reserve at Lobo-Marte and are pleased with progress at this strategic project. We also upgraded our mineral resource at FDN and are proceeding with our 2010 drilling program. Exploration success at our growth projects during the year offset production depletion by a wide margin, delivering a net gain of over five million ounces in new reserves."

To read the news release in full please click here.

Kinross Gold Corporation trades on the Toronto stock Exchange under the symbol of ‘K’ and on the New York Exchange under the symbol of ‘KGC’

Have a good one.


Got a comment then please add it to this article, all opinions are welcome and appreciated.

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Friday
Jan292010

What’s a Company’s Gold Worth?

Gold Mining.JPG


Louis James & Andrey Dashkov, Casey’s International Speculator

At any given time, there's a single international spot price for an ounce of refined gold. Gold is priced in U.S. dollars: $1,076.50 per ounce as we go to press. But what about the gold an exploration or mining company has in the ground – how do we value that?

Given sufficient data, you can estimate a reasonable net present value (NPV) for a project and deduce what each of the company's ounces should be worth. To do this, you need to know annual output of the proposed mine, proposed capital expenditures, energy and other costs, and many more things. For most deposits held by the junior companies we tend to follow, there's just not enough data available.

Another approach is to compare the value the market is giving a company per ounce of gold in hand against the average value the market gives companies with similar ounces.

The most obvious way to define “similar” ounces in the ground is to use the three resource and two mining reserve categories defined by Canada's National Instrument NI43-101 regulations – the industry standard. We combine these into three broad groups, as we believe the market tends to do as well:

Inferred: the lowest-confidence category, based on just enough drilling to outline the mineralization.

Measured & Indicated (M&I): these higher-confidence categories have been drilled enough to establish their geometry and continuity reasonably well.

Proven & Probable (P&P): These are bankable mining reserves – basically Measure and Indicated resources with established value.

So, what does the market give a company, on average, for an Inferred ounce of gold? M&I? P&P?

To answer this, we combed through every company listed on the Toronto Stock Exchange (TSX) and the TSX Venture Exchange (TSX-V) and pulled out the ones with 43-101-compliant gold resource estimates (or mostly gold) – no silver, copper, etc. Of these, we kept only those with resources that fall almost entirely into only one of our three broad groups: Inferred, M&I, and P&P. In other words, we did not include companies with half Inferred and half M&I resources (though we did include companies with mostly P&P reserves, because most are producers – or soon will be – and are regarded that way). That left us with about 90 companies to calculate some averages on.

That's not a large sampling universe, and we had to make some judgment calls when it came to defining what companies should fall in each category, but it's what we have. So take these averages with a large grain of rock salt, but here they are:
US$20 per ounce Inferred

US$30 per ounce for M&I

US$160 per ounce for P&P

Armed with this information, if you didn't know anything else about an M&I resource (political risk, type of ore, etc.), but you saw that the company that owned it was trading at $10 per ounce, whereas its peers are valued at around $30 an ounce, you can conclude that there must either be something very wrong with the project or the stock is a great speculation. If there's nothing wrong with the project, there's an implied growth potential in the stock price, based on the difference between what the company is getting per ounce and the market average for similar ounces. In this case, it would be:

$20 x # Ounces ÷ # shares.

As a matter of perspective, a few years ago the market was giving a company about $25 per ounce Inferred, $50 for M&I, and about $100 for P&P. Then, when gold ran up over $1,000 before the crash of 2008, these valuations went out the window, and some companies were getting over $100 for merely Inferred ounces – do we have your attention now?

Conversely, just after the crash, there were companies having a hard time getting $10 for M&I. That was clearly a sign that it was time to buy, and we did, with gusto.

It's also why, when the Mania phase gets underway, we'll be selling into it as gold approaches the top; we will not be attempting to time the top. It's far better in this business to be a day early than a day late.

Today, the market is willing to pay more for advanced and producing stories ($160 P&P) but is discounting earlier-stage stories, hence the lower M&I valuation than in previous years ($30). These figures will change again as the market's appetite for risk changes.

Now let's compare these numbers to those of a few sample gold companies. This table includes the market capitalizations (share price x # shares) of our sample gold companies expressed in USD (because that's what gold is priced in), not the usual CAD. The second column has the value of each company's resources, as per the average numbers given above (i.e., [# Inf. ounces x $20] + [# M&I ounces x $30] +[# P&P ounces x $160]). The implied growth is a simple ratio of these two numbers, expressed as a percentage.


MCap (US$M)
Value of Gold Underground (US$M)
Implied Growth (%)

Luiri Gold (LGL.V)
18.6
17.44
-6.2%

Gabriel Resources (GBU.T)
1,420.5
2,230.13
57.0%

Coral Gold Resources (CLH.V)
16.3
68.0
317.2%

Gabriel and Coral Gold look pretty cheap, Luiri slightly expensive, but in most cases there are good reasons for this. For example, these averages by confidence category ignore the typically greater cost of extracting gold from low-grade sulfide ore, as compared to high-grade oxide ore.

We don’t follow the companies in the table above -- they are just examples -- but here's our take on their implied growth ratios:

LGL: Luiri's flagship Luiri Hill project, located in Zambia’s Central Province, has only 800,000 ounces in total resource, 82% of which fall within the least reliable Inferred category.

Although the current resource estimate is based on lower-grade material, the company’s gold looks fairly valued. However, LGL is working to define more high-grade areas of mineralization both within and outside the resource boundaries, and not without success. For example, drilling from the Matala deposit, lying in the heart of Luiri Hill, has delivered high-grade intercepts from the central shallow zones, like the recently published 21.1 g/t Au over 5.6 m (starting from 56 m), including 41.1 g/t Au over 2.8 m (starting from 56 m of the same hole #114).

Conclusion: The company looks a bit expensive at the moment, probably because the market sees Luiri’s upside potential coming from the new high-grade ounces being added in forthcoming resource estimates. If the marker were underestimating how much gold Luiri might be adding, it could still be a good speculation, but you’d have to be pretty sure of your calculations projecting that greater value to be added soon.

GBU: Gabriel Resources appears undervalued when using average ounce prices, plus there is a lot of upside outlined in the economic study on the company’s Rosia Montana project in Romania, released last March. The study suggests excellent project economics, including low cash cost (US$335/oz), after-tax NPV of almost 1 billion USD at 5% discount, and after-tax IRR of 20.4%, all at an uber-conservative US$750/oz base case gold price.

However, the company was sued by environmentalists in September 2007 and suffered regulatory setbacks. GBU shares tanked, and this is why the company’s gold is still selling at a discount; there is high political risk. Gabriel’s share price has soared recently on words of support from the government officials, but it’s still perceived – rightly – as high-risk. If Rosia Montana gets permitted to go into production, GBU shares should make very rapid gains.

Conclusion: The government of Romania has made supportive noises about Rosia Montana before, to no avail, and the company doesn't appear screamingly cheap right now, so the risk-to-reward ratio looks too high to us.

CLH: The company is focused on the Robertson project located on the Cortez Trend in Nevada. Coral Gold has recently revised the project’s resource estimate at $850/oz gold (which looks fairly conservative, given the recent price action) to 3.4 million ounces, all Inferred. Our guidelines suggest that these ounces should be worth about US$68 million. Mind you, this gold is contained within what CLH believes to be well-known Carlin-type mineralization in a mining-friendly jurisdiction. Why does the market value these ounces way cheaper then?

We think it’s a metallurgy issue. Lacking sufficient metallurgical data from all Robertson targets, CLH used numbers from a deposit called 39A to stand in for the whole project. The problem is that 39A is one of the deeper Robertson deposits, and large-scale heap leach operation, the preferred scenario for Robertson, showed high strip ratio, which would probably result in high capital expenditures and operating costs.

Conclusion: Robertson ounces are cheap due to valid concerns over the project’s economics. If the company can fix these problems, its resources could be revalued upward dramatically.

Bottom Line
We often get asked what an Inferred, or M&I, or P&P ounce is worth in the ground. The $20, $30, and $160 figures are only rough guides, and you must consider the reasons why some ounces are given more or less by the market, but they're a good starting point.

What makes Casey’s International Speculator so different from other investment newsletters? You don’t just get stock picks, you get an education… and before you know it, you’ll be recognized as the mining expert in your social circle. And most likely as “the wealthy guy” as well. For more on how Canadian junior mining stocks can literally make fortunes for smart investors, click here.



Got a comment then please add it to this article, all opinions are welcome and appreciated.

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To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address.

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Tuesday
Jan262010

HIGH RIVER GOLD (HRG.TO) – should trade 4-5 times current price.

HRG Logo 31 July 2009.JPG

In the mail bag this morning is this update sent to us by Chris Charlwood who is doing a fantastic job on keeping us all in loop with HRG.

        (All numbers below are approximate and in C$)

Summary

High River Gold (HRG.TO) is a very established Canadian un-hedged gold mining company. It generated $33M in positive cash flow from operation in Q3 2009 and is expected to generate $45M in Q4 due to the increase in gold prices. At the current $.75 share price it is trading at 4.5 times annualized Q3 cash flow and 3.4 times annualized Q4 projected cash flow. It’s gold mining peers are trading at an average of 18.1 times Q3 cash flow. If HRG were trading at this average multiple on Q3 and projected Q4 cash flow, the share price would be C$2.99 and $4.08 respectively. HRG was trading at $3.50 in 2008. For yearend 2009, the company should have enough liquid assets to cover off all debts with a surplus of $50M. One of Russia’s largest steel companies, Severstal, is the majority shareholder and has done a good job of turning this business around. During 2009, it was Severstal’s intention to buy out minority shareholders. Clearly, there is the potential for a significant short term return if Severstal makes another offer. However, if  no buyout offer materializes, there remains an even more significant upside of 4-5 times the current  price if HRG reaches the cash flow multiples of its peers. These price predictions exclude any value generated from the Prognoz silver deposit – one of the world’s largest and highest grade. Olma Investment Firm recently put a $2.48 target price on HRG
 
Financial Performance first 9 months 2009 
1)     $263M revenues vs. $123M in first 9 month of 2008 – a 114% increase
2)     increase in Gold production to 241,781 from 133,130 in first 9 months of 2008 – an 82% increase.
3)     $86M positive cash flow from operations – an increase of 12 times over first 9 months last year. (HRG projected Q4 cash flow at $180M annualized).
4)     $67M of debt paid down to a balance of $121M at end of Q3. At 2009 year end, HRG likely had a $50M surplus in liquid assets after allowing for all debts.
5)     $18.5 million in working capital at end of Q3, up from a $42.1 million deficit at 2008 yearend.
6)     25% and 38% decrease in Q3 direct mining costs (cost per ounce produced) compared to Q2 2009 and Q3 2008, respectively.
 
Prospects
11) HRG says 300,000 oz to be  produced in 2009
12) Bankable Bissa feasibility study to be completed in 2010 with goal to advance resource to multi-million oz level.
13) Prognoz value not reflected in price. It is ranked # 10 Silver deposit in world with highest grades in the world.             
14) Many analysts predict gold prices to trade in the $1200-1300/oz range in 2010. This could increase 2010 cash flow from operations by $88-127M.
15) Low entry price at $.75 with Q4 expected cash flow multiple at 3.4 times with peers trading at 18.1 times.
16) There may be asset write-ups in 2010 once reserves are increased from new exploration and drilling programs.
 
Debt coverage & Surplus
Based on the Q3 numbers and the completion of the Troika investment, HRG has a significant surplus after allowing for all debts. At the end of Q3 the total debt was $121M plus $23M in payables for a total of $144M. To counter this, there was $39M in cash (and equivalents), plus $53M in third party stock investments (at latest share prices) plus $57M investment from Troika - bringing the total to $149M. If HRG produces gold at the same rate as in Q3, the Q4 cash flow is expected to have improved by $12M to $45M -  due to $141.57/oz  increase in gold prices (Q3 gold price avg. 960.07, Q4 price avg. $1101.64). If so, HRG will have a surplus of $50M on a net basis at year end 2009.
 
HRG’s Peer Comparison
HRG’s peer group of mid-tier public gold companies (Randgold Resources, Northgate Minerals, Centerra Gold, Golden Star Resources, Red Back Mining, Eldorado Gold, Semafo Inc., Gammon Gold, New Gold Inc., Alamos Gold, Aurizon Mines, Jaguar Mining) is trading at an average of approx. 18.1 times Q3 Operating Cash flow on an annualized basis. If HRG were trading at this average multiple on Q3 and projected Q4 cash flow, the share price would be C$2.99 and $4.08 respectively.  HRG was trading at $3.50 in 2008.
 
2010 Cash flow

The average price of gold was $972.34 in 2009. In Q3 2009, HRG achieved $388/oz in cash flow from operations. If the gold price moves to an average of $1200-1300/oz in 2010, then HRG would likely increase its cash flow by $88M - $127M.
Ownership
There are  approx. 799.2M shares outstanding. Severstal owns approx. 400.7M shares (50.1%). Minority own approx. 398.5M of which institutions own approximately 270M shares. Troika is the largest institutional holder followed by Sprott Asset Management. Eric Sprott has confirmed that he believes HRG’s shares are worth $2 minimum currently.
 
References
National Post Article
http://network.nationalpost.com/np/blogs/tradingdesk/archive/2009/12/16/high-river-on-track-massively-undervalued.aspx
 
Olma Investment Research Report ($2.48 target price)
http://freepdfhosting.com/8264920e79.pdf  
Note: If you are distributing any info from the Olma report to your subscribers, please include the disclaimer located at bottom of Olma report.
 
HRG Global Peer Group Comparison & Third Party Investments
http://freepdfhosting.com/da69a70746.pdf
 
Prognoz Silver Deposit rankings:
http://news.silverseek.com/SilverSeek/1172041200.php
 
High River Gold:
http://www.hrg.ca/s/Home.asp          
 
HRG Q3 2009 press release:
http://finance.yahoo.com/news/High-River-Gold-Reports-Third-ccn-1899805673.html?x=0&.v=1  
 
HRG 2008 yr end press release:
http://www.sedar.com/GetFile.do?lang=EN&docClass=8&issuerNo=00002764&fileName=/csfsprod/data97/filings/01410540/00000001/s%3A%5CHRG429.pdf          
 
HRG Q3 2008 press release:
http://www.sedar.com/GetFile.do?lang=EN&docClass=8&issuerNo=00002764&fileName=/csfsprod/data94/filings/01359505/00000001/y%3A%5CSEDAR%5CPRs%5Cpr_press_081218.pdf        
 
Disclosure
I am a retail investor who has been very active in HRG and I own 5.5M shares.
 
Disclaimer
I have gathered the above information from the above sources and others on the internet. Please do your own research to confirm the findings. Please do not rely in this information solely to make your investment decision.
 
If you received this communication by e-mail, you are already on the communication list. If not and you would like to be on the list, please e-mail to my address below.
 
Chris Charlwood
Retail Investor
Rainerc7@gmail.com
604-718-2668 office
604-718-2638 fax

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Tuesday
Jan262010

Why I Hope Gold Falls to $1,000

Jeff Clark, Senior Editor, Casey’s Gold & Resource Report

As a self-professed gold bug, why would I possibly want my favorite investment to fall in value? Have the long hours finally caught up with me?

Au contraire; my near-constant devotion to all things gold has only served to crystallize one of the things I really want out of this. Here’s a hint.

I had lunch with a reader at a recent conference, and while talking about one of my favorite subjects – gold stocks – I asked why he was invested so heavily in them. “Greed,” he said bluntly and with little hesitation. I appreciated the honesty.

Let’s be frank: I’m here to make money, and so are you. And that’s why I hope gold falls to $1,000 again.

Let’s say Bob has taken our advice and has been storing cash. I’ll use $1,000 as an example. If Bob buys Yamana Gold now, he’d get about 93 shares as I write (at $10.73 per share).
Now, let’s say gold drops to $1,000, about a 10% fall from here, and due to its leverage, AUY sells off by a 2-to-1 margin, meaning 20%. So with that same $1,000, Frank, who’s waited for the downturn, buys 116 shares at around $8.58. Thus, instead of owning 93 shares at $10.73, he owns 116 shares at $8.58.

When Frank sells, he doesn’t just make the difference between $8.58 and $10.73 (an extra 25%), he also makes 125% on the extra 23 shares he owns if Yamana doubles in a couple years, which I expect it to. So two years from now, Bob would have $2,000, but Frank would have $2,500 because he bought more shares and at a lower price. Frank makes 25% more than Bob on the same dollar investment simply by buying when gold and gold stocks fall in price.

Got $5,000 saved up? Multiply the profit by 5. And with larger amounts, you can see we’re talking serious money.

I don’t know if we’ll see $1,000 again or not, or if Yamana will fall that low, but I would point out that corrections in the gold price can range as high as 20% (2008 notwithstanding), so a further sell-off in price would not be out of the ordinary. A 20% correction from gold’s peak at $1,212.50 on December 2 would equal $970. That’s not necessarily a prediction, but it shows you that price is certainly possible.

Don’t like my wish? Remember, it’s called a bull market for a reason; it’s not a cow market or a puppy market. It’s going to try and buck you off. But a correction to $1,000 or even lower can give you the chance to buy more, cheaper. Don’t view sell-offs as a bad thing but rather as an opportunity.

Bring on $1,000! 

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