Comments for Metal Augmentor

Comment on Worse Than 2008 by Giuseppe

Giuseppe — Wed, 22 Feb 2012 17:33:04 +0000

silverax :@Giuseppe ... As far as MMT (Modern Monetary Theory), gold standards and the such with direct impact on our investment field, it does make sense to address them and I wish that I had more time these days after all the other stuff we do at MA … but for now I don’t. To the extent I will spend some time on this area to put together educational material, it will be to go back to the very basics and build up a useful model that includes consideration for monetary gold and the asset value of PMs, mostly drawing on existing work such as Prof. Fekete, Mises and the various economic theories. I will of course keep looking into specific areas like the gold and silver markets such as the recent stuff on hypothecation, gold lease rates, and especially the gold basis and hopefully at some point we can build a similar approach to understanding the gold market itself as we plan for gold stocks. I’d also like to spend some more time here and there simply talking about why it makes sense for the average investor to have some gold and silver (most importantly gold and silver in their own secure possession). That is something bears repeating and frankly NOBODY does a good job of it out there (the guys who call for it go overboard and keep saying it is because gold will go to $10,000 but that is not the reason and the guys who try to be more balanced end up looking like shills or even gold bears like Kitco’s Jon Nadler).

I will be very happy to hear some economic theories review from you, but maybe it is dangerous for you to write about things with not enough conspiracy smell for some MA subscribers... Maybe you could just spend 2 words about your opinion about the new fashion in economic theories: MMT. I'm very curious to hear William Black, Michael Hudson, Stephanie Kelton, Marshall Auerback and Alain Parguez at the 3 day long MMT Italian Summit in Rimini beginning this friday. It seem they will explain us how Greece is not being saved, and its populace could avoid the severe depression it will certainly face if it doesn't default and exit the euro-zone, by following their economic rules. Is this an utopia? Is there really a conspiracy that doesn't want states to have monetary sovereignty from banks? I'll try to make an opinion on my own spending 3 days in this summit, but if you think MMT is a scammish utopia please give me an hint, because maybe I would be better to spend the weekend with my family...

Comment on Orvana Completes a US$13.8 Million Increase in Its Credit Facility With Credit Suisse by Tweetie

Tweetie — Wed, 22 Feb 2012 15:52:38 +0000

Also interesting is what Haywoods Joe Mazumbar says about Orvana for the Gold report: TGR: You cover Orvana Minerals Corp. (ORV:TSX, Sector Outperform, CA$2.25 Target Price), which is in production at its Don Mario mine in Bolivia and its El Valle-Boinás/Carlés (EVBC) mine in Spain. From June to October 2011, gold grades there increased incrementally from 1.4 to 2.17 grams per tonne (g/t). Nevertheless, Orvana’s throughput at EVBC is below your forecast. Results at Don Mario in Bolivia also were below estimates. Is this a make-or-break year for Orvana? JM: It is a critical year for the company. Bill Williams, formerly Orvana’s vice president of corporate development, is now the CEO. He is an ex-Phelps Dodge vice president and has been instrumental in generating the revised technical reports on both operations, EVBC and Don Mario Upper Mineralized Zone (UMZ), while advancing the Copperwood project. We believe his appointment reflects the company’s focus on getting the operations back on track. Orvana is currently in the process of re-benchmarking both EVBC and Don Mario UMZ. For Don Mario—an open-pit mine with an upper mineralized zone containing a lot of copper, as well as gold and silver—Orvana has delivered a new life-of-mine forecast that addresses the difficulty of getting copper out using a leach precipitation flotation circuit on a much bigger scale than has been used before. The Don Mario operation also has been troubled by high costs of reagents for the circuit, which has raised the processing costs. We had originally forecast an annual production profile of 10–15 Koz per year of gold and 10–15 million pounds (Mlb) of copper. We are now looking at a production profile of 9–10 Mlb copper and 8–9 Koz of gold, whereas Orvana is still signaling 13 Mlb of copper and 12 Koz of gold. In Q411, the Don Mario UMZ operation produced 2.5 Mlb of copper and 2.3 Koz of gold, which is a positive. Now, it has to consistently achieve its new benchmarks over the next few quarters so the market can gain confidence in its operational abilities. At Orvana’s flagship, the EVBC gold-copper project in northwest Spain, the operational issues have been related to head grades. Underground bottlenecks have hindered the company’s ability to blend higher grade feed to the processing plant. We anticipate that a shaft will be in place by April/May 2012, which should alleviate some of the bottlenecks. We had originally forecast that the feed grade, at steady state levels, would be in the area of 5 g/t. However, revised guidance indicated that it would be lower, 3–3.5 g/t gold, which also conspired to lower our target. We anticipate a revised technical report for EVBC prior to March 2012 with updated life-of-mine forecasts. Orvana’s Copperwood project in upper Michigan is a 50 Mlb/year copper project, now in bankable feasibility study, and Orvana is seeking to permit this year. Even with up to 800 Mlb of copper reserves, we believe that the Copperwood asset is not being valued at its current price levels as Orvana has been heavily discounted in the market due to poor operational performance. TGR: Given the lower recoveries and production estimates at Don Mario UMZ released in late January, you lowered your target price by $0.15 to $2.25. Yet you still give it a sector outperform rating. Why? JM: Due to the heavy market discounting related to disappointing results from both operations over the past few quarters, Orvana still provides about a 100% return to our target from where it is trading right now. I continue to believe that management can redeem themselves by achieving the revised benchmarks consistently over the next few quarters. As Orvana meets its goals, I believe the market will appreciate the cash flow being generated, worry less about its working capital position and give the company credit for its advancement of the Copperwood project.

Comment on Frontier Rare Earths and Korea Resources Corporation Sign Definitive Strategic Partnership Agreement by 1mh0tep

1mh0tep — Wed, 22 Feb 2012 15:49:55 +0000

Frontier announces PEA : http://www.frontierrareearths.com/images/Frontier%20PEA%20announcement%2021.02.12.pdf IRR of 52.5% , after tax and royalties, and 2 year payback from start of production NPV of $3.65 billion, after tax and royalties, at an 11% discount rate Capital costs of $910 million for a 1 million tonne per annum open-pit mining operation and concentration and rare earth separation plant facilities It sounds good at first sight, except maybe for capex : almost 1 billion ! What do you think about this ?

Comment on Orvana Completes a US$13.8 Million Increase in Its Credit Facility With Credit Suisse by Zurbo

Zurbo — Wed, 22 Feb 2012 15:45:25 +0000

@Ras Also, LOM cash cost forecast at $700-$800 after by-products is well above forecast. From the old numbers we were calculating an expected CO-PRODUCT cash cost of under $600 per ounce, which means cash costs have crept higher by probably at least $300 per ounce if measured with the same yardstick. Nevertheless, the company is still considerably undervalued even under these new assumptions with a calculated base case valuation of about $4 per share at current metal prices. Split of valuation is about 40% EVBC, 30% Don Mario and 30% Copperwood.

Comment on Market Update February 21 2012 by Blair Doyle

Blair Doyle — Wed, 22 Feb 2012 15:44:21 +0000

Do you expect the trendline coming down off the spring and summer tops in silver could be a major hurdle?…

Comment on Orvana Completes a US$13.8 Million Increase in Its Credit Facility With Credit Suisse by Zurbo

Zurbo — Wed, 22 Feb 2012 14:52:58 +0000

@Ras Don't forget this is net of by-product credits from copper and silver (about 20% of total) during a month where recoveries were well above forecast (blip or sustainable?). More importantly the "EVBC 2011 Mine Plan - Production Projections" shows a mine plan that is WELL BELOW FORECAST. Previously the company was expecting to produce over 100,000 ounces per year beginning sometime around 2013/2014. Silver and copper production is also way off from previous estimates.

Comment on Speculative Options Trades – February 17 2012 by 1mh0tep

1mh0tep — Wed, 22 Feb 2012 12:26:48 +0000

@silverax With a lot of pleasure … what are you thinking about specifically ? As you could see, i like options trading and i like to share…

Comment on Orvana Completes a US$13.8 Million Increase in Its Credit Facility With Credit Suisse by silverax

silverax — Wed, 22 Feb 2012 11:53:53 +0000

@Ras This is an underground mine and therefore may take 2-5 years to get under control (less if things go really well, never if they don't). As a matter of principle I would avoid owning an underground mine developer unless I was very, very familiar with that particular mine's issues and risks-opps ... or the mine has reached a long-term stable operating basis. For things to go well, the mine plan, startup, sequencing and operations have to be simple, straightforward and adequately buffered with spare time, space and effort. Rarely does that combination happen for reasons that are peculiar to management, the company or the mine itself.

Comment on Speculative Options Trades – February 17 2012 by silverax

silverax — Wed, 22 Feb 2012 11:45:25 +0000

@1mh0tep Yes very true ... but for most intents and purposes you'd want a large account and diversified holdings before using option writing to augment portfolios. We thought about and almost did a calendar spread for a big net credit in AGQ (double long silver ETF) last year -- would have worked out very beautifully -- but didn't spend enough time evaluating it to feel comfortable putting it on. And I think we also mentioned writing calls on a few of the Chinese or scam companies in the past year ... didn't end up doing too much there either. Personally I find that futures spreads can actually generate much better returns (though with greater risk) and we did have a couple of those last year that ended up working out quite well (Cotton and sugar crop spreads, WTI/Brent). The thing is that you can't just generally go out and find good credit spreads (beyond just a few bips here and there) ... they tend to be special situations -- but why don't we discuss anything really interesting that we run across from time to time?

Comment on Crazy Market Thoughts: What if We Run out of Fools? by silverax

silverax — Wed, 22 Feb 2012 11:36:07 +0000

@John Thanks for adding your thoughts...too bad Hurricanes apparently had such a strong affinity for your comics! I still have a #252 somewhere I believe (I kept one of each key X-Men and Spiderman issues ... well-read ones, so if any of my (then future) kids wanted to read a series start to finish they wouldn't have to skip the expensive issues). I just reminisced this past weekend with one of my comics "investing" buddies who still actually has most of his collection -- he hasn't tried to sell anything in a decade. The dealers apparently want key issues to be professionally graded ($20 or more)...and then barely pay that much for the book. Oh well! There is no hope for comics alright but maybe the "younger" generations can still get interested in "investments" that actually produce something inherently valuable (gold, silver, copper, whatever). Not to say that good money cannot be made simply buying the right mining companies and then getting rewarded via earnings (whether distributed as dividends or plowed back into growth) but it sure would be more fun if some "mania" money were to show up from time to time.