Long gold again with $700 coming close?

After this month's changes in my mining portfolio, I have now decided that it's the right time to invest in precious metals again. I already bought (speculatively) DRDGold at $0.78 and after the 10:1 reverse split, the stock kept going down. I consider $6.50 a critical level and decided to sell once that level was broken. At $6.42 my sell order was executed, while the stock ended above $6.50 again. I am still quite convinced that DRDGold will manage to get its act together, but I am also certain that it is not the best stock for short term profits. Instead, I took a long position in gold at $662, knowing that there should be some support at $660 (being 61.8% retracement level), which was successfully tested and spot gold moved up to $665 today. Should gold move below $660, there is a high likelihood of a full retracement to $640 which for me would be a very bearish sign and possibly a reason to liquidate all my positions in precious metals and certainly a reason to reduce the mining share in my portfolio. But, being the positive-minded chap that I am, I added a position in Taseko Mines Limited (TGB). I actually bought back shares in TGB. Previously, I bought TGB at $2.30 and sold at minor profits as there was little news to move the stock up. Now the situation is a lot more fruitful. The company is one of the very few AMEX-listed precious metals miners that actually makes money. Taseko has successfully positioned itself as a copper & gold miner and has a good cash position with a positive cashflow. Taseko's Prosperity and Harmony mines alone should account for some 7.5 mio ounces of proven & probable gold reserves, which already makes the company's USD 600M market capitalisation look reasonable. Add to that the company's young & producing Gibraltar copper mine and you have a clearly undervalued stock, despite its recent rise. This stock will go through the roofs in two or three years from now as the Prosperity mine will get closer to production. I think we have a winner.
The author bought TGB at $4.60 and closed his position in DROOD at $6.42.

Portfolio shake-up

The past months I have been busy trying to diversify to a certain degree. This was highly necessary as a great part of my portfolio was in mining stocks. I usually do not buy the very risky junior miners - which does lower my risk profile - but having to great a share in mining makes your portfolio very volatile. I sold Yamana Gold earlier this month at USD 12.65 as the technical picture started to become a bit more cloudy. This was followed by the announcement of a proposed threeway deal with Northern Orion and Meridian Gold, which made the stock drop to the lowest close of this year at USD 11.12. Among my current mining favourites are still Endeavour Silver Corp and uranium miner Uranerz. These will stay in my portfolio, whilst other miners I may sell off in the coming months. Aurizon Mines (AZK) may be added to this. I sold AZK last week at $3.90 as I expected there to be some resistance around that level. I might buy back at a later stage. I sold EGO last week at $4.80. To replace these miners, I am specifically looking out for alternative energy stocks. One of my favourites is still the slugglishly moving Evergreen Solar, which I believe is suffering from a temporary correction in a multi-year uptrend to be followed by a higher peak - well past the previous high of USD 17.50. I bought this stock in February of this year around current levels. Before that, I benefited of the 2005/2006 uptrend from USD 8.60 to USD 15.00. Even though this month I sold Beacon Power Corp at USD 1.50 (bought at USD 0.89), it is certainly not my idea to all of a sudden neglect this stock. I was purely safeguarding some profits and plan to get on the Beacon train again at lower levels. The excitement surrounding Beacon Power Corp is triggered by growing interest for the company's flywheel technology, which I believe will further grow from this point. However, the current hype cannot be argumented by numbers. Beacon Power is still not making any money and therefore any gains are purely based on prophecies. I do believe in this company, but it will take some time until earnings reports can justify a USD 1.50 share price. I will continue to keep an eye on the technical picture and will buy when much of the excitement has evaporated. At the same time, I am looking at Fuelcell; a company that produces fuel cell power plants that are ideal for the replacement of 'dirty energy' and thereby help reduce emissions. With a number of customers ranging from hospitals and universities to utility companies and manufacturing plants, the fuelcell technology is gaining popularity across industries. To come back to the mining industry, I added DRD Gold (now changed into ticker code DROOD) at $0.78 because of improving technical indicators. DRD Gold remains a very uncertain share to invest in. I see it purely as a speculative buy and I watch the technical indicators very closely to determine whether to buy or to sell. Investors seem to be a bit cautious because of the management change. Looking at the first quarter, the main issue for DRD is that the reserves are there, but the production is not. There have been too many hiccups in the past few years and even this first quarter showed a drop in production, both in Australasian and South African mining operations. On the positive side, I consider the Argonaut project to certainly have very high potential. A positive response to the Prospecting Right Application of the company's Argonaut project may be applauded. Once again, I still consider this stock a speculative one. Not a good basis for a stable portfolio but like my earlier purchases of GRZ and KRY, speculative buys are not always bad buys! Finally, with regard to the indices, I am currently short AEX and short S&P. 1520 will be a critical level for the S&P as will 550 for the AEX. Later this year, I plan to move some of my investments from North America to Europe as I see better growth prospects for European companies. The author holds long positions in EXK, URZ, ESLR and DROOD at the time of writing.

Enter DRDGold, Exit Gold Reserve

The past few months have been very good for my portfolio. With a ROI of 62% since September, it's certainly been the best five months ever. But the months from April until September were not particularly good, which has once again taught me a lesson about the importance of timing - even in a secular bull market. Today, I decided to sell GRZ at $4.87 (purchased at $4.05; it is still in my list of stock picks for the long run) and use the money to benefit from the improved technical picture of DROOY. In addition to the technical picture, the fudamental picture looks brighter, too. DRDGold subsidiary Emperor Mines announced on Friday that it saw a significant increase in its mineral reserves at its Porgera Mine. A statement on the update of DRD Gold's reserves can be expected in the near future. As far as I can see, this is the first significantly positive news in years after having seen the stock plummet to a price below one Dollar. I added DROOY todat at $0.87. Price target remains $1.10 for 2007, which I hope to see in the first quarter of 2007 on rising metals prices.

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.

DRD Gold's stockpiles of misfortune

DRDGold Limited, a once very succesful South African mining company which had a share price peak of USD 50 in 1980, might need some four leaf clovers. Today's announcement that the company will restructure its 79%-held subsidiary Emperor Mines after the Australian company shut its Vatukoula gold mine in Fiji, saying it was no longer economically viable to continue operations, was certainly not the first bad sign this year. A fire at its South African Blijvooruitzicht gold mine led the company to halt production, leaving investors worried. Just prior to that, investors swallowed news on a gold production halt at Tolukuma, the Papua New Guinea mine wholly-owned by DRDGold's 79% subsidiary Emperor Mines. In addition to that, there is the uncertainty regarding a new successor for soon to retire CEO Mark Wellesley-Wood as it is a well-known fact that investors are generally not too keen on management instability. All this has led the share price to drop 35% this year and almost 25% in the last month. In the 2006 financial year gold output of its Vatukoula mine decreased by 81% as all sections of the mine were temporarily closed. The Fiji mine was to contribute practically one third (!) to the 2007 output target of the company's subsidiary Emperor Gold. On a more positive note, most of DRDGold's restructuring costs have been made, leading the company to drastically narrow its losses in FY2006. But one should wonder what is left of its new strategy to focus more on its Australasian mines, which leaves only a 20% stake in the Porgera joint-venture and its fully-owned Tolukuma gold mine, both located in Papua New-Guinea. There is certainly a lesson to learn here: investing in mining companies knows many risks other than geopolitical risks or price fluctuations in metals. But it must be said that with so much misfortune, there aren't many risks left for DRDGold. With a share price below one US Dollar (NASDAQ:DROOY), we can only wait until better news comes. For the moment, this is certainly a stock that needs to bottom out, but things can really only get better from here. And that... is the reason for me to start putting this stock on my watchlist as of today. Update: This post has also been supplied as a column in Dutch to edelmetaal-info.