24 January 2007

DRDGold: Time to take a chance

A little while ago, I wrote a column on DRDGold and mentioned that I put DRDGold on my watchlist. Main reason for this was that the South African mining company had seen so much going wrong in one year, that it had to turn at a certain moment. All production halts and small disasters should now be priced into the stock and I am therefore writing a couple more lines now. Basically, I feel that DRDGold has almost bottomed out now and a chance can be taken to buy at the current prince of USD 0.83. There is quite a lot of support around USD 0.75 and stoplosses can therefore be placed below that level. In my opinion, it is just a matter of time until better news arrives and the technical picture looks sound enough to buy. Speculative buy with a price target of USD 1.10 in the first half of 2007.

12 January 2007

Two speculative gold plays

Within the mining industry as well as in the oil & gas industry, geopolitical risks are becoming more and more influential on share prices. This became quite clear this week when Chavez mentioned in a speech that all that was once privatised should be nationalised again. He specifically mentioned his desire to re-nationalise CANTV (CompaƱia Anonima Nacional Telefonos de Venezuela). The share price (NYSE:VNT) plunged as a result and took many other funds with it. Among these were certain mining funds that have at least part of their operations in Venezuela, including Crystallex International Corp (AMEX:KRY) and Gold Reserve Inc. (AMEX:GRZ). The risk in the mining sector was already priced into these two companies' shares last year when GRZ dropped from its April peak of USD 9.58 to USD 3.96 two months later. The same happened with KRY, which fell from USD 6.07 to USD 2.84, also in two months' time. Not helped by gold moving sideways for a period of eight months since its April peak, both stocks are now not far from where they were in June last year. The problem is clearly not their reserves. Both companies share prices are way too low if you take all proven & probable reserves into account. For only one reason: geopolitical fears. Crystallex issuing a press release to eliminate investor fears after Chavez' speech this week did not help the share price and was completely ignored. The Government of Venezuela has previously even confirmed that the present contract will be honoured by both parties, i.e. Chavez & Crystallex. The financial world now seems to neglect the 13.6 mio ounces of proven & probable reserves that Crystallex holds. With a market capitalisation of USD 785 mio, the market cap per ounce ration lies at USD 58. For comparison's sake, this is less than one tenth of that of Kinross Gold (NYSE:KGC) and Bema (NYSE:BGO). Gold Reserve has an estimated 10.1 mio ounces of gold and 1,290 mio ounces of copper at its major project Las Brisas in Venezuela, which means that it has an even more ridiculous market capitalisation per ounce of USD 11.30! And even though GRZ has a similar agreement with the Venezuelan Government, this too was ignored by investors. Then there is also a bilateral treaty that offers some protection to Canadian companies in case of nationalisations. So all and all, we can say that the risks are to a great extent priced into the stocks and there is a great possibility that the stocks moved down too much on the news and that fears have been overrated. Would, in my humble opinion, these companies have had all their operations in politically stable countries, both share prices would have been at least 300% higher based on their reserves. It's a simple calculation. The only thing to rate is the risk and will always be a subjective rating. But the potential rewards certainly outweigh the risks and I therefore recommend both stocks as buy candidates. My preference however goes to Gold Reserve Inc for a number of reasons, of which the market capitalisation per ounce is the most obvious one. Do however still keep the risk in mind and therefore consider this a speculative buy. I would set price targets for this year at USD 6 for Crystallex and at USD 12 for Gold Reserve Inc.

08 January 2007

Silver: the chance of a lifetime

Lately, we've seen precious metals take a serious dive. The start of the year has certainly not been good for those who have put their money in mining companies, including the undersigned. Gold looked destined to surpass its previous peak at USD 650, but failed to do so and lost 6%. Its usually more volatile 'little brother' silver had showed a sluggish performance since early December and has now lost another 9% since the start of 2007. Knowing that silver is widely expected to be the best performing metal in the coming years -simply based on the laws of supply & demand- I myself have been looking to diversify and invest part of my money in this metal. Let's have a look at the below chart: This chart is the price of one oz of gold divided by the price of one oz of silver. What the chart shows is that around 1 December at USD 150 and with the RSI showing that silver was overbought compared to gold, the latter was the better option to buy. However, now we are at a stage where the RSI has fallen below 40, showing a good chance to buy silver. The same happened early October, when silver started to move up from USD 10.80 to USD 14! Silver itself looks quite good as well with the RSI showing a slight oversold status in the March 07 future chart. To summarise: silver has stayed behind gold since early December and silver itself currently shows an oversold status. Hence, enough reasons for me to take a long position in silver today at USD 12.05.

02 January 2007

Predictions...

First of all a very happy New Year to all readers. I have taken a short holiday to do some work in the house and will be following the exchanges a bit more closely again as of today. At the end of each year, there are usually quite a couple of stock competitions online, of which I would like to mention my picks. The first one is the annual mining competition at golddrivers, where you choose ten junior mining stocks that will make up your portfolio for the year to come. I've selected ten interesting mines, some of which are currently in my 'real' portfolio, too. These are the following:
  1. Franklin Mining Inc (FMNJ.PK)
  2. Canadian Arrow Mines Ltd (CRO.V)
  3. Odin Mining & Exploration Ltd (ODN.V)
  4. Consolidated Gold Win Ventures (CGW.V)
  5. Canasil Resources Ltd (CLZ.V)
  6. Noront Resources Ltd (NOT.V)
  7. Silver Wheaton Corp (SLW.TO)
  8. Yamana Gold Inc (AUY)
  9. Searchgold Resources Inc (RSG.V)
  10. Exeter Resource Corp (XRC.V)
There is a second mining competition that is very interesting two follow, which you can find at www.edelmetaal-info.nl. In this competition, five mines must be selected. Hence, I selected from the above top 10 numbers 3, 4, 5, 6 and 9 (in bold). The third competition is one that I've set up end 2005, but which has now been taken over by Dr Money. This is a competition where you are to select your favourite five Dutch stocks. I'm very thankful that Philippe helped me last year, as it was simply too time consuming to keep the competition up-to-date. Now of course I would like to thank DrMoney for organising the DFT Top5 Competition 2007. My top five Dutch stocks for 2007 are the following:
  1. ABN Amro
  2. Aegon
  3. Hagemeyer
  4. Qurius
  5. TNT Post
The first two I have selected based on their potential roles in the consolidation of European financials. I selected Hagemeyer based on my previous posting, Qurius based on a successful turnaround towards profitability (I might cover this pennystock shortly) and TNT Post based on its attractive p/e. Last year, I ended in the top five. Now I am going for the big price! Finally, I would like to wish everyone a lot of luck & wisdom for 2007. May all your wishes come true and may your trading account grow substantially! Update: In my top 10 list for golddrivers.com, I changed Taseko and Rubicon into Silver Wheaton and Exeter Resource Corp. The competition will commence on January 15th.