Monthly Archives: August 2016

While I’m on the Gold Bandwagon

26/8/16

Some undervalued Gold Producers

ASX:DRM ASX:RED

I seem to be in some kind of Gold fever

the price of the metal is now in the $ 1330 USD and the AUD is currently buying around 76 US cents, therefore the current AUD gold price is 1740 ish per ounce

we’ve been seeing some dips in the gold price over the last 4 weeks on the speculation that the US febs will raise interest – which would be a bad thing for the gold price as holding gold doesn’t yield any income.

on the back of that I have noticed 2 small cap gold producers drop in Value

ASX:DRM – Doray Minerals

The Stats

Price $0.765
Mkt Cap ~$260 M
Revenue generation: Gold producer

What they do

Produced 80,000 Oz this financial year at Andy Well with costs of $1200 per ounce

Have started producing at Deflector and should be 60,000 Oz

they believe they can achieve Margins of $600 with the current Price of gold

if they can and can achieve their targets of 140,000 oz then they will make somewhere in the order of $84 M
at current Market cap puts them at about 3.09 PE

if we assume they meet targets and will be re-rated to between 8-10 PE (noting the historical ave for the ASX is 15) then they should hit a price of somewhere in the vicinity of $2- 2.50

which on the lower end is a 160% increase on the current price

so might be worth a look

ASX:RED – Red

The Stats

Price $0.12
Mkt Cap ~$100 M
Revenue generation: Gold producer

What they do

Expect to produce 60,000 Oz going forwad with costs of $1200 per ounce

this year they expect to do 80,000 oz @ $1000 per Ounce

If things happen as suggested and if they can and can achieve their targets then they will make somewhere in the order of $56 M this year and $30M not withstanding they are still digging for more

they are also in an interesting jurisdiction in the phillipines and there may be possible risk around geo political instability in the region

at current Market cap puts them at about 3.33 PE on future earnings

if we assume they meet targets and will be re-rated to between 8-10 PE (noting the historical ave for the ASX is 15) then they should hit a price of somewhere in the vicinity of $0.30 -0.36

which at the lower end is a 150% increase on the current price

worth watching

Disclaimer : 

this is my own personal opinion

You should seek professional advice for your own investment decisions

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Taking Advantage of the Gold Price

25/8/16

ASX: AYC and ASX: KBL

Currently the fundamentals for the yellow metal seem to be on the uptrend

what with the ultra low interest rates all around the world (including the negative ones) the uncertainty in the European union with some of the not-so-well performing economies of Italy, Spain, Greece etc
The recent Brexit which has left the UK in the land of the unknown
The US with upcoming election and potential president Trump
China Slowing down
Bond prices at record lows

it seems like global growth and the search for yield is driving a lot of dollars into Gold
on top of that the 5 year lows of gold has put it in a position which has made it quite undervalued

Since December the Gold price has shot up 30% and is one of the best performing asset classes on the market

in light of all this a lot of the major Gold producers have increased significantly

there is some value for the smaller gold companies which are entering or have entered the production phase and have market caps which warrant some re-rating

my first pick is ASX:KBL – KBL mining

The Stats

Price $0.003
Mkt Cap ~$8M (fully diluted ~$14M)
Revenue generation: Gold producer
Why

Been producing gold since Sept 15 – ave over last 3 qtrs has been just under 7k oz = ~30k oz per year

current margin at gold prices currently mean they should be generating as much cashflow as their market cap or more

other factors to consider
still need to prove up a large enough resource

catalyst will be if they can keep generating cashflow from the existing reserves and shore up a resource large enough to warrant further mining

speculative buy at current price

my second pick is ASX:AYC – A1 Consolidated Gold

The Stats

Price $0.025
Mkt Cap ~$15M (fully diluted ~$30M)
Revenue generation: Gold producer
Why

Has JORC resource of 500oz +

aiming for 25koz of gold production

have proved the gold production facility is up to standard

Director recently purchased $100k worth of stock

current margin at gold prices currently mean they should be generating as much cashflow as their market cap or more

other factors to consider
still early stages of mining so not a sure thing
catalyst will be if they can keep generating cashflow and operate efficiently at the costs they claim

speculative buy at current price

Disclaimer : 

this is my own personal opinion

You should seek professional advice for your own investment decisions