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.

Eldorado Gold sees Turkish mine shut down

It came to me as a complete shock, seeing one of my favourite mines down 30% on Thursday. A Turkish court had apparently ordered the shut down of Eldorado Gold's cash cow, the Kisladag mine, responsible for 60% of the company's gold production in 2006. According to Eldorado, the final decision by the court is still pending "on the appeal of a lower court order in favour of the company confirming the legality and validity of the Mine's Environmental Impact Assessment". The closure will be implemented in about 30 days. To clarify things, the company planned a conference call on Thursday evening and I was all ears. During the conference call, CEO Paul Wright was talking of a group of people whose only interest was to discourage mining in the country. He did not know the name of that group and he did not go into details on the specificalities of the court case. Last year, there was a problem with cyanide poisoning of villagers, which means that high levels of cyanide were found in villagers' blood. This was a result of the sodium cyanide heap leach method that was used by Eldorado during trial production and that presumably has been used until now. From what I found, the Environment Impact Assessment was initially accepted in 2003, but was later found incorrect by doctors and scientists and challenged in court by villagers, combined through a group called "Elele" (hand in hand). In addition to the cyanide poisoning, there were also reports of levels of arsenic in local drinking water. I can imagine if this all has been proven correct, that there are serious issues. Unfortunately, nothing was said about all this during the call. Problems with people opposing to the use of cyanide in the Kisladag region have been known since 1999, at the company did exploratory work. The first mining company that used cyanide in Turkey was Newmont Mining at its Ovacik mine in 2001. The mine was sold in 2005 to Turkish printing and mining company Koza Davetiye. The reason then given for the sale was the divestment of non-core assets. However, the Ovacik mine was - like the Kisladag mine - given bad publicity by Greenpeace and fought by locals in court, despite the company's approvals from Turkish Government. It sounds to me that this may be the start of something bad. According to Eldorado Gold's CEO, the decision that has been made was not supported by legal proof. But opposition against the use of cyanide in the local mining industry is clearly nothing new in Turkey. Maybe Newmont was not to keen on bad publicity either? I am however forced to review my position in Eldorado as the bad publicity is certainly not going to do the company any good and these environmental issues are usually not solved overnight.
At the time of writing, the author had a long position in the above-mentioned stock.