1) It looks like Century's posting for a VP, South American Operations, might be related to the previous person moving (potentially promoted) to the position of CEO of Module Resources (a PK affiliated company).
Here is Module's NR:
Module Resources Appoints New CEO
Blaine, WA: Module Resources Incorporated (TSX-NEX : MLE.H) is pleased to announce the appointment of Mr. Luc Duquette as the Company’s Chief Executive Officer. Mr. Duquette has over 10 years experience in senior-level accounting, finance and management positions for various mining companies in North and South America. Most recently Mr. Duquette held the position of Country Manager, Peru for Century Mining Corporation. His responsibilities included all aspects of Peruvian operations, including mining operations, exploration and administration. Prior to Century Mining, Mr. Duquette held senior accounting and management positions with leading companies such as Minefinders Corporation Ltd. in Mexico and Manhattan Minerals Corporation. Mr. Duquette is a Certified General Accountant, and is fluent in both English and Spanish.
Graham Eacott, Chairman of the Company said: “We are delighted that Luc has joined Module as Chief Executive Officer. Luc’s broad experience in the mining industry will be an asset as we develop the Ladner Gold project in British Columbia. In addition, his experience working in South America will be invaluable as we pursue acquisitions to grow the Company.”
2) It was good to see the $16 US billion injection into Fortis by the governments of Belgium, Netherlands and Lexumberg. It means that Fortis should be well protected over the next little while. Fortis will also be selling their share of a bank that was acquired last year (that transaction was the largest in banking history, but it was apparently a key reason for pushing them over the edge, with the subsequent dry up of credit - Fortis was 1 of 3 shared buyers involved in the deal). The bottom line for Century is that Fortis now being on more solid ground continues to provide the opportunity to close off the $70M debt facility. Naturally, this would not have been the case had Fortis gone under.
3) Hopefully the Fortis technical valuation turns out to be positive. I think this is most critical right now. If it's positive then it should increase the marketability of Lamaque. Increased market value means we get a better price for Lamaque if it needs to eventually be sold (as a back up plan), if the Fortis deal doesn't get closed off (for whatever unforseen reason). Hopefully Fortis will allow Century to release info (to the market) on the technical evaluation, once available.
4) The gold price will continue to fluctuate over the next little while, but the trend at least over the next year (or two) still looks positive for gold, even once the $700 US billion bailout gets approved by the US House and Senate. It represents much needed assistance to help global credit to flow again, but the fundamental problems with the economy will continue to exist for quite a while longer, in my view. In addition, this (necessary) bailout (along with other recent bailouts) will result in America's debt increasing from over $10 trillion to over $11 trillion (and counting). It hadn't impacted the US materially in the past, but there will probably be a tipping point in the future, especially if other strong nations around the world begin losing confidence in the US. If the US has to depend less on borrowing from other countries to make ends meet on a daily basis, or even if they want to begin reducing the $11+ trillion debt total, it likely means printing lots of money. Naturally, this will lead to a substantial devaluation of the US currency, and support fot the gold price and other key currencies. Only time will tell how the US will address all these problems, especially since growth should continue to slow, and leading to higher unemployment. The mortgage/housing issues are massive (and complex) and probably still have at least a year or two before we can see firm recoveries, one would think anyway.
Tuesday, September 30, 2008
Monday, September 22, 2008
Insider Buying?
The support at 4 cents is coming from Wolverton who has bought over 700,000 shares since Friday.
In the past, Peggy and Ross did their insider buying through Wolverton. We'll have to wait for a few days until the insider reports are filed to see if this is more insider buying, but I'd say that there is a good chance that this is insider buying.
In the past, Peggy and Ross did their insider buying through Wolverton. We'll have to wait for a few days until the insider reports are filed to see if this is more insider buying, but I'd say that there is a good chance that this is insider buying.
Friday, September 19, 2008
Summary and thoughts - development of global crisis yesterday and overnight
2 major developments yesterday that was close to initiating a complete collapse of the global financial system, with it leading into the general population:
1) there was almost a complete standstill with big commercial banks refusing to lend money to other big commercial banks - interbank loans dried up almost completely
2) $180 billion were withdrawn alone from Money Markets Funds yeterday - there was fear that the next step would be for people to line up (stepping over one another) at the ATMs to remove their cash
There was major panic in the world by early afternoon yesterday, hence gold jumped to around $920 per oz. Mid to late afternoon word got out that the US Fed/Government were about to roll out a major package to remove (buy) the illiquid assets/debt from many of the financial companies. This resulted in a major reversal in global stocks, and a subsequent sell off of gold.
Gold continued with a major sell off overnight (in the Asian and Euro markets), but it has bounced back decently this morning. I will explain my thoughts on the bounce back in a minute.
The US is racking up a major bill in trying to contain this problem. Here is how much money they have committed to initiatives just over the past 2 weeks (and earlier in the year in the case of Bear Sterns), but it doesn't even include the massive stimulus package for to the general public earlier in the year:
*$200 billion to save Freddie and Fannie
*$29 billion to enable Bear Sterns to be purchased
*$85 billion to save AIG (although, some of this should be paid back by selling assets, plus the government gets 80% ownership of what remains of the company)
*$500 billion fund created to buy out bad debts (illiquid debts/assets) from certain struggling (major) financial companies - this is a key part of the plan they are currently working on rolling out - it could end up being higher once the plan is presented
*$XX billion will be set aside to guarantee a greater number of market funds (I think it is at least $50 billion, but I can't remember - it might need to be much higher, as I think there are like $4 trillion in Money Market Funds
*No shorting (in the market) at all is allowed (not just naked short selling) effective today and until Oct 2nd (but it could be extended for 30 more days) - this applies to 799 financial type companies in the US (they have a list)
The UK eliminated all short selling effective last night and their bank stocks moved up between 30% to 70% (part of that of course were shorts scrambing to cover). The UK's rule will be in effect at least until the end of 2008.
Anyway, as you can see, the US government has committed over $1 trillion just in last few weeks, and they are already in major deficit positions to begin with. It looks like they will have to print an awful lot of dollars here, as most of this $1 trillion may not be recoverable.
This is why I think that gold hasn't totally fallen off. I think a lot of people that there is a long term price to be paid, and that price might be in the form on inflation. By the way, the fundamental problems in the world and the economy still exist.
Anyway, if there are able to ease up the credit crisis over the next few months then this might actually help to kick start investment dollars back into the juniors, as investors will start believing that these companies finally will have a chance to raise cash. It may not happen right away, but it increases the possibilities of available liquidity for small cap juniors.
With regards to Century Mining, the increase debt liquidity (if sustained) hopefully increases our changes of the bridge loan closing in 3 weeks, but also the Fortis debt closing in late November. By the way, I believe the Fortis stock price was up something like 15% early on, but it might have closed higher. The better shape Fortis is in then the better chance we have of closing off our debt with them.
1) there was almost a complete standstill with big commercial banks refusing to lend money to other big commercial banks - interbank loans dried up almost completely
2) $180 billion were withdrawn alone from Money Markets Funds yeterday - there was fear that the next step would be for people to line up (stepping over one another) at the ATMs to remove their cash
There was major panic in the world by early afternoon yesterday, hence gold jumped to around $920 per oz. Mid to late afternoon word got out that the US Fed/Government were about to roll out a major package to remove (buy) the illiquid assets/debt from many of the financial companies. This resulted in a major reversal in global stocks, and a subsequent sell off of gold.
Gold continued with a major sell off overnight (in the Asian and Euro markets), but it has bounced back decently this morning. I will explain my thoughts on the bounce back in a minute.
The US is racking up a major bill in trying to contain this problem. Here is how much money they have committed to initiatives just over the past 2 weeks (and earlier in the year in the case of Bear Sterns), but it doesn't even include the massive stimulus package for to the general public earlier in the year:
*$200 billion to save Freddie and Fannie
*$29 billion to enable Bear Sterns to be purchased
*$85 billion to save AIG (although, some of this should be paid back by selling assets, plus the government gets 80% ownership of what remains of the company)
*$500 billion fund created to buy out bad debts (illiquid debts/assets) from certain struggling (major) financial companies - this is a key part of the plan they are currently working on rolling out - it could end up being higher once the plan is presented
*$XX billion will be set aside to guarantee a greater number of market funds (I think it is at least $50 billion, but I can't remember - it might need to be much higher, as I think there are like $4 trillion in Money Market Funds
*No shorting (in the market) at all is allowed (not just naked short selling) effective today and until Oct 2nd (but it could be extended for 30 more days) - this applies to 799 financial type companies in the US (they have a list)
The UK eliminated all short selling effective last night and their bank stocks moved up between 30% to 70% (part of that of course were shorts scrambing to cover). The UK's rule will be in effect at least until the end of 2008.
Anyway, as you can see, the US government has committed over $1 trillion just in last few weeks, and they are already in major deficit positions to begin with. It looks like they will have to print an awful lot of dollars here, as most of this $1 trillion may not be recoverable.
This is why I think that gold hasn't totally fallen off. I think a lot of people that there is a long term price to be paid, and that price might be in the form on inflation. By the way, the fundamental problems in the world and the economy still exist.
Anyway, if there are able to ease up the credit crisis over the next few months then this might actually help to kick start investment dollars back into the juniors, as investors will start believing that these companies finally will have a chance to raise cash. It may not happen right away, but it increases the possibilities of available liquidity for small cap juniors.
With regards to Century Mining, the increase debt liquidity (if sustained) hopefully increases our changes of the bridge loan closing in 3 weeks, but also the Fortis debt closing in late November. By the way, I believe the Fortis stock price was up something like 15% early on, but it might have closed higher. The better shape Fortis is in then the better chance we have of closing off our debt with them.
Wednesday, September 17, 2008
Century Mining Announces Up To $3.7 Million Of Financings
BLAINE, WA, Sept. 17 /CNW/ - Century Mining Corporation (CMM: TSX-V) announced today that it has entered into a term sheet dated September 12, 2008 with U.K.-based Trafalgar Capital Specialized Investment Fund, FIS ("Trafalgar"), pursuant to which Trafalgar will provide to Century a bridge loan of up to $3.5 million, to be evidenced by a redeemable secured convertible note (the "Note"). The loan proceeds will serve as bridge financing, and allow Century to continue mine development, planning and other preparation activities at its Lamaque Mine. Century intends to repay this bridge financing through the completion of a financing relating to its Fortis Facility or through the sale of one or more of its mining properties.
In accordance with the term sheet, loan proceeds may be disbursed in up to four tranches, with $1.4 million, less fees and expenses, to be released at closing. Additional amounts of $850,000 and $720,000, respectively, may, at Century's request, be advanced at 30 days and 60 days post-closing, subject to approval by Trafalgar. A final advance of $530,000 may be released at Century's request at 90 days post-closing, subject to approval by Trafalgar.
The Note will bear interest at the rate of 12% per annum, compounded monthly, and will mature on the date which is the earlier of (i) four months from the closing date, and (ii) the date on which Century completes a financing transaction relating to the Fortis Facility with minimum proceeds of $5.0 million. If the Note is not repaid within four months of the closing date, amounts outstanding thereunder may be converted by Trafalgar into common shares of Century ("Common Shares") at the fixed conversion price of $0.05 (the "Fixed Conversion Price"), provided that no conversion will be permitted if it would result in Trafalgar holding greater than 9.99% of the Common Shares. Provided that the Common Shares are trading at or below the Fixed Conversion Price, the Century may at any time redeem the Note in exchange for cash, a 12.5% redemption premium and payment of all accrued interest outstanding thereunder.
Subject to the occurrence of an Option Share Redemption (as defined below), on the Maturity Date, Century will be required to redeem the Note in exchange for cash, a 7.5% redemption premium and payment of all accrued interest outstanding thereunder. Alternatively, on the Maturity Date, Century may elect to redeem the Note in exchange for Common Shares to be issued over a 24-month period (an "Optional Share Redemption"), in lieu of all principal outstanding, together with a 15% redemption premium, and interest accruing over such period. In the event of an Optional Share Redemption, Century will issue to Trafalgar (weekly, in four equal installments) such number of Common Shares as are equal to the principal, interest and redemption premium owed pursuant to a monthly payment schedule, divided by the then prevailing market price of the Common Shares (provided that such market price may not be less than $0.05 per share).
The Note financing remains conditional on completion of due diligence and receipt of TSX-V and other necessary regulatory approval.
The Note will be secured by a first charge/mortgage over Century's Québec milling assets, and a second charge/mortgage over Century's Québec mineral concessions. The terms of the Note will contain provision compensating Trafalgar for any appreciation of the European Union euro versus the Canadian dollar. Century will not receive the benefit of a reciprocal adjustment mechanism should the Canadian dollar strengthen against the euro.
In connection with the issuance of the Note, Century has agreed to pay to Trafalgar a commitment fee equal to 7% of the Note proceeds, and issue to Trafalgar from treasury a total of 15,000,000 Common Shares. At closing, Century has also agreed to pay a finder's fee of approximately $20,000 to two arm's length entities. The bridge financing is expected to close within the next three weeks.
For Century's immediate need to finalize the due diligence requirements for Fortis Bank and provide immediate working capital, an officer and director of Century has subscribed for a $200,000 secured convertible note. The note will bear interest at 15% and is convertible into units at $0.05 for a term of 18 months. Each unit is comprised of a common share and a common share purchase warrant exercisable for 18 months at $0.07. The note is secured against a package of exploration properties.
Margaret Kent, President and CEO of Century, said, "The combination of these two financings will provide the immediate and near-term financing necessary to take Century to a position to draw the senior secured financing Century is arranging for its Lamaque Project from Fortis Bank."
About Century Mining Corporation
Century Mining Corporation is an emerging mid-tier gold producer that is aggressively acquiring producing mines and exploration properties in Peru in addition to its Canadian projects. The Company owns and produces gold at the Lamaque mine in Québec that historically has produced over 9.4 million ounces of gold. In Peru, Century wholly-owned subsidiaries own an 82.6% interest in the San Juan Mine where the Company accounts for 100% of gold production.
"Margaret M. Kent"
Chairman, President & CEO
The TSX Venture Exchange has not reviewed and does not accept
responsibility for the adequacy or accuracy of the contents of this press
release.
In accordance with the term sheet, loan proceeds may be disbursed in up to four tranches, with $1.4 million, less fees and expenses, to be released at closing. Additional amounts of $850,000 and $720,000, respectively, may, at Century's request, be advanced at 30 days and 60 days post-closing, subject to approval by Trafalgar. A final advance of $530,000 may be released at Century's request at 90 days post-closing, subject to approval by Trafalgar.
The Note will bear interest at the rate of 12% per annum, compounded monthly, and will mature on the date which is the earlier of (i) four months from the closing date, and (ii) the date on which Century completes a financing transaction relating to the Fortis Facility with minimum proceeds of $5.0 million. If the Note is not repaid within four months of the closing date, amounts outstanding thereunder may be converted by Trafalgar into common shares of Century ("Common Shares") at the fixed conversion price of $0.05 (the "Fixed Conversion Price"), provided that no conversion will be permitted if it would result in Trafalgar holding greater than 9.99% of the Common Shares. Provided that the Common Shares are trading at or below the Fixed Conversion Price, the Century may at any time redeem the Note in exchange for cash, a 12.5% redemption premium and payment of all accrued interest outstanding thereunder.
Subject to the occurrence of an Option Share Redemption (as defined below), on the Maturity Date, Century will be required to redeem the Note in exchange for cash, a 7.5% redemption premium and payment of all accrued interest outstanding thereunder. Alternatively, on the Maturity Date, Century may elect to redeem the Note in exchange for Common Shares to be issued over a 24-month period (an "Optional Share Redemption"), in lieu of all principal outstanding, together with a 15% redemption premium, and interest accruing over such period. In the event of an Optional Share Redemption, Century will issue to Trafalgar (weekly, in four equal installments) such number of Common Shares as are equal to the principal, interest and redemption premium owed pursuant to a monthly payment schedule, divided by the then prevailing market price of the Common Shares (provided that such market price may not be less than $0.05 per share).
The Note financing remains conditional on completion of due diligence and receipt of TSX-V and other necessary regulatory approval.
The Note will be secured by a first charge/mortgage over Century's Québec milling assets, and a second charge/mortgage over Century's Québec mineral concessions. The terms of the Note will contain provision compensating Trafalgar for any appreciation of the European Union euro versus the Canadian dollar. Century will not receive the benefit of a reciprocal adjustment mechanism should the Canadian dollar strengthen against the euro.
In connection with the issuance of the Note, Century has agreed to pay to Trafalgar a commitment fee equal to 7% of the Note proceeds, and issue to Trafalgar from treasury a total of 15,000,000 Common Shares. At closing, Century has also agreed to pay a finder's fee of approximately $20,000 to two arm's length entities. The bridge financing is expected to close within the next three weeks.
For Century's immediate need to finalize the due diligence requirements for Fortis Bank and provide immediate working capital, an officer and director of Century has subscribed for a $200,000 secured convertible note. The note will bear interest at 15% and is convertible into units at $0.05 for a term of 18 months. Each unit is comprised of a common share and a common share purchase warrant exercisable for 18 months at $0.07. The note is secured against a package of exploration properties.
Margaret Kent, President and CEO of Century, said, "The combination of these two financings will provide the immediate and near-term financing necessary to take Century to a position to draw the senior secured financing Century is arranging for its Lamaque Project from Fortis Bank."
About Century Mining Corporation
Century Mining Corporation is an emerging mid-tier gold producer that is aggressively acquiring producing mines and exploration properties in Peru in addition to its Canadian projects. The Company owns and produces gold at the Lamaque mine in Québec that historically has produced over 9.4 million ounces of gold. In Peru, Century wholly-owned subsidiaries own an 82.6% interest in the San Juan Mine where the Company accounts for 100% of gold production.
"Margaret M. Kent"
Chairman, President & CEO
The TSX Venture Exchange has not reviewed and does not accept
responsibility for the adequacy or accuracy of the contents of this press
release.
Dramatic Reversal in the Price of Gold
As I write this gold is up to $862.20 - up an astounding $84.50 for the day so far.
What does mean for CMM? Well so far, not much it seems. The last trade was 20,000 shares sold at 3 cents for proceeds of $600 less commissions.
However this rebound in gold prices above $800 is very important for CMM's fortunes. The most recent technical report for Lamaque filed at Sedar showed an NPV @5% of $197 million based on 1.1 million ounces of reserves. This is based on a gold price of $800.
As gold prices increase beyond $800 and resources get converted into reserves, the NPV increases dramatically. Yet at a share price of 3 cents, CMM's market cap is a pathetic $5 million.
The chances of securing the Fortis financing is also greatly enhanced IMO with a gold price above $800.
The present gold price is now over $400 above the most recently reported cash costs at San Juan. A modest investment of $1 to $2 million would increase production there to 25,000 - 35,000 opy. At 25,000 opy and a differential between cash costs and the POG of $400, results in $10 million per year in cash flow which is 2 times our current market cap.
We are trading at these levels for many reasons including the Wega dumping, and management blunders , but mostly because of our precarious financial condition that is exacerbated by the current financial climate. Whether or not the company is successful in obtaining financing, the liquidation value of the company far exceeds its current market cap.
Should we become successful in obtaining the needed financing, there is no reason why the share price cannot return to its high for 2008 and it will still be grossly undervalued compared to many other companies.
I think what is needed most for the junior gold mining sector is for a change in sentiment and for some of the money that is leaving the financial services sector to find its way into gold and gold shares. The large and mid-caps will be the first beneficiaries of this move, but obscenly under-valued juniors like Century should also benefit and will have the most dramatic moves.
What does mean for CMM? Well so far, not much it seems. The last trade was 20,000 shares sold at 3 cents for proceeds of $600 less commissions.
However this rebound in gold prices above $800 is very important for CMM's fortunes. The most recent technical report for Lamaque filed at Sedar showed an NPV @5% of $197 million based on 1.1 million ounces of reserves. This is based on a gold price of $800.
As gold prices increase beyond $800 and resources get converted into reserves, the NPV increases dramatically. Yet at a share price of 3 cents, CMM's market cap is a pathetic $5 million.
The chances of securing the Fortis financing is also greatly enhanced IMO with a gold price above $800.
The present gold price is now over $400 above the most recently reported cash costs at San Juan. A modest investment of $1 to $2 million would increase production there to 25,000 - 35,000 opy. At 25,000 opy and a differential between cash costs and the POG of $400, results in $10 million per year in cash flow which is 2 times our current market cap.
We are trading at these levels for many reasons including the Wega dumping, and management blunders , but mostly because of our precarious financial condition that is exacerbated by the current financial climate. Whether or not the company is successful in obtaining financing, the liquidation value of the company far exceeds its current market cap.
Should we become successful in obtaining the needed financing, there is no reason why the share price cannot return to its high for 2008 and it will still be grossly undervalued compared to many other companies.
I think what is needed most for the junior gold mining sector is for a change in sentiment and for some of the money that is leaving the financial services sector to find its way into gold and gold shares. The large and mid-caps will be the first beneficiaries of this move, but obscenly under-valued juniors like Century should also benefit and will have the most dramatic moves.
Friday, September 12, 2008
When the gold's all gone, the market will go nuts
John Embry: "When the gold's all gone, the market will go nuts"
By Gold Report
By Gold Report
Sep 12 2008 4:37PM
http://www.theaureport.com/
John Embry, Chief Investment Strategist for Sprott Asset Management and renowned industry expert, has researched the sector for 30 years. He expresses disbelief as he explains today's irrational pricing in this exclusive interview with (The Gold Report). He attributes gold's alarming distress to "violent intervention by the paper players." But he's convinced they can only hold prices down for so long and forecasts four-digit gold by January 2009. Juniors present the best opportunity to leverage the coming gold price explosion.
John Embry, Chief Investment Strategist for Sprott Asset Management and renowned industry expert, has researched the sector for 30 years. He expresses disbelief as he explains today's irrational pricing in this exclusive interview with (The Gold Report). He attributes gold's alarming distress to "violent intervention by the paper players." But he's convinced they can only hold prices down for so long and forecasts four-digit gold by January 2009. Juniors present the best opportunity to leverage the coming gold price explosion.
The Gold Report: In our last interview you said gold would unquestionably detach from the dollar. Ten months later, gold is still tethered.
John Embry: The downturn in both gold and silver was literally preposterous in magnitude relative to the rise in the dollar. This was a violent intervention by the paper players. Three U.S. banks on COMEX shorted something like 8,000 contracts in a very short time. That’s more ounces than all the world's miners produce in a month.
TGR: Can they keep doing that forever?
JE: No, they can’t. This is similar to what happens when you compress a spring. You hold it down but when it comes up, it springs back hard. We'll see a violent reaction in the gold price soon.
TGR: Will we have to wait six months or six weeks?
JE: If gold hasn’t moved up by the end of this year, I would be very surprised. People don't realize how distressed the gold mining industry is. Even at $1,000, miners weren’t doing very well. At $800, the entire industry is in crisis. Costs have risen so much, nobody’s making any real money. In fact, some mines are starting to close.
TGR: Could mines reopen when gold reaches $850 or $900?
JE: Gold would have to be at least $1200 before mines reopen.
TGR: Is now the time for the majors to start acquiring?
JE: I don’t understand why the majors aren't acquiring because I've never seen anything like the discrepancy in value between the big cap stocks and the small stuff. Many interesting smaller companies are trading for a song; whereas, Agnico-Eagle and Goldcorp and Kinross are aggressively valued.
TGR: Some of the juniors have lost 80%.
JE: If you had told me we'd see this kind of carnage in the juniors while the gold was still north of $800, I would have said impossible. One of the reasons is that investors are giving up and gold funds, ours included, are under redemption pressure. This creates forced selling with insufficient buying and that leads to the most depressed prices since this cycle began in 2000.
TGR: How long can this go on?
JE: I don’t know but I’ve got some that actually are selling below the cash on their balance sheets.
TGR: Should investors wait for gold to go above $1,000 before investing in the juniors?
JE: Things have gone much farther down than I could have imagined in my worst nightmare. If you are confident that the gold price is going higher, this is an ideal time to be picking away and buying a diversified list of very good quality, cheap juniors. I’ve made the most money in my life buying things that are out of favor because there’s no downside risk, certainly from a fundamental standpoint. When the worm turns, these things could double very quickly. When that happens it’ll be hard to buy. Start picking away now, as long as you share my opinion that the gold will see a hefty price rise over the next 12 months.
TGR: How does an investor determine which juniors merit a closer look?
JE: It all revolves around the people and the asset. I look for companies with strong financial support, a legitimate project with a 43-101 resource and sound management. Using those criteria, you can make a reasonable evaluation of what the net asset value is. You can put in your own gold prices while knowing that they’re not going to be cash-starved.
TGR: Do we have to work through this panicked selling before stocks will change?
JE: As long as people are abandoning the sector and taking money out of these funds, then there's a lot of irrational selling. The fund manager has no choice but to sell. This is creating a phenomenon where prices don’t make much sense. The larger cap stocks are the ones being bid up; they trade because generalists buy them. There’s a far bigger pool of capital prepared to buy them. That’s why you’ve got this remarkable discrepancy in valuation between the little guys and the big guys.
TGR: Other people we've interviewed are concerned about a real crash in the overall markets.
JE: We’ve already had the crash in the junior gold shares. That brings up the naked short selling of these stocks. I think there are grounds for a suit. A lawyer has been phoning me on this subject. Someone is trying to bring a suit against the perpetrators. There has clearly been nefarious activity in these stocks because they get driven down to a level where they can’t put their head up without getting pounded back down again.
TGR: If the market crashes, it'll pressure the gold funds.
JE: That assumes that the gold price doesn’t explode. If the market crashes, the authorities are going to pour so much money into the system to try to avert economic disaster. Money has to go somewhere. Some of it will go to gold. If the gold price heads higher, you’ve got the cheapest gold stocks in history. Maybe they won’t get dragged down in the crash. Maybe the big caps are going to crash.
TGR: Big caps gold stocks?
JE: Big caps period. Investors have already abandoned the illiquid stocks and huddled in the big caps.
TGR: A lot of people are saying that they see a slowdown in deflation. Do you agree?
JE: I think the problem is potential deflation because I am a great believer in Austrian economics and we’ve had the greatest credit abuses in history. There’s an awful lot of debt and you're stuck creating more of it to keep the momentum going. The real issue here is, can you do it? There is a good argument for a deflationary spiral like the Great Depression. On the other hand, this time paper money isn’t anchored. Everything’s fiat and the government can create it with the stroke of a pen or the touch of a computer key. If you really want to pin me down, I'd say we’re going to have a hyper inflationary depression. The value of money will be destroyed and economic activity will grind to a halt. It'll be the worst of all possible worlds— a South American meltdown. If that happens, the one thing I want to own is gold. I have been investing more in bullion recently than in stocks. I already own some stocks. But I do believe that if bullion performs as I expect it to, the stocks will do well. If you go back to the 1930s, the best performing things on earth were the gold stocks.
TGR: They went down in the beginning.
JE: They did, but these have already gone down. That would make the case that we had the bear market in gold. I guess they could go down 90% from the peak prices, but still the risk/reward heavily favors the reward side. That is not true for large cap stocks, particularly those that make up the indices.
TGR: But if the price of gold doesn't turn around, don't a lot of juniors risk bankruptcy?
JE: If they’re not in production and are fairly careful, they can gear back. The ones in production and losing money are at the greatest risk of bankruptcy. If gold doesn't turn soon, they won't be able to finance their operations. A lot of these guys lose money and just kept going out and raising more. They just keep losing money, so they close the mines. That’s also very bullish for gold. We're going to have less and less gold in production.
TGR: What about the juniors that aren't in production?
JE: I'm not worried about the ones that have real ore bodies and have gotten pounded down to where they’re trading at $10, $15, or $20 an ounce in the ground.
TGR: Because they’ll be taken out?
JE: They’ll be taken out or they’ve hit bottom and, as long as they have enough capital to move forward, they can gear down. Small, quality gold shares are proxies for a higher gold price. The problem is that the gold price is so severely suppressed vis a vis other commodities that the whole business has become uneconomical.
TGR: What percentage should an investor have in bullion and in what form?
JE: If the worst happens and everything goes to hell in a handcart, you want bullion. So the core of your portfolio has to be bullion. Depending on how much money you’ve got, you can decide what percentage you want to wager on the upside.
TGR: So you recommend a core holding of bullion. Do you believe people should have coins?
JE: Absolutely. I’m a big believer in coins and actually have them in addition to physical gold as part of my position.
TGR: Would the balance be in producers and exploration companies?
JE: I can't pound the table for any of the large cap producers because they don't represent terrific relative value. However, when the gold price goes up, they’re going to go up in price. My view is that some of the smaller ones will go up a lot more. It depends on what your goal is. If you only want to protect yourself, own nothing but bullion. But if you want some leverage and to make some money, then you should probably get some intermediate and smaller gold stocks that have been really taken to the wood shed and pounded.
TGR: Could the powers that be continue to drive gold down?
JE: They have a financial crisis of epic proportions and the last thing they want is for gold to become the go-to asset, so they’ve been throwing everything at it but the kitchen sink. That strategy has resulted in unprecedented shortages of physical gold. Half the bullion dealers and coin dealers in America can't get it.
The U.S. Mint suspended production of Gold Eagles. They claimed it was due to a shortage of blanks. I don’t believe that. I think it’s a physical shortage. COMEX has created an irrationally low price and people are coming out of the woodwork buying it.
TGR: And they can’t replace it.
JE: The fact is that all this stuff at central banks has been leased and swapped and sold into the market. It’s gone; it’s not coming back. So we’re running out. The question is when will it be completely gone—that's when the market will go nuts.
TGR: Are you forecasting that for January of 2009?
JE: That's when we’ll have four-digit gold—maybe higher four digits. As this credit crisis unfolds, the gold market can come into its own again. Attempts to discourage people by pounding the gold will end. When everyone realizes what’s going on, I think it’ll have a salutary effect on the gold price.
TGR: John, as usual, we appreciate your time.
JE: It’s always best to talk when things are at their worst because I think that’s when the opportunity is the greatest. When we have another conversation six months from now, I think it’ll be a much happier one.
John Embry is chief investment strategist at Sprott Asset Management. Embry, an industry expert in precious metals, has researched the gold sector for over 30 years and has accumulated industry experience as a portfolio management specialist since 1963. He joined SAM as Chief Investment Strategist in March 2003 with focus on the Sprott Gold and Precious Minerals Fund and the Sprott Strategic Offshore Gold Fund, Ltd. Prior to joining Sprott, Embry was Vice-President, Equities and Portfolio Manager at RBC Global Investment Management, a $33 billion organization where he oversaw $5 billion in assets, including the flagship $2.9 billion Royal Canadian Equity Fund and the $250 million Royal Precious Metals Fund.
Gold Report
12th September 2008
Tuesday, September 9, 2008
OPEC decides to curb overproduction
Although it is not an extremely large amount, 500,000 barrels per day in oil production reduction is still decent. Hopefully it will help to stabilize the oil price (and stop it from falling below $100) and in turn help to curtail the (temporary) rocket like power of the US dollar (which is a joke in the first place, in my view, given all of the fundamental data continously out of the US - major housing issues, major banks imploding, major credit crisis situation, major government bailouts of corporate companies, a US financial system that is held together with pins and needles, poor retail sales data, high unemployment rates, ongoing inflation issues, ongoing growth issues, major deficit issues, ongoing devaluation of the US dollar by having to continually print money to pay for everything (including 2 wars, and now bailouts), and I can go on and on and on). The US dollar has rocketed upwards recently partly due to concerns with the other economic powers around the word (Euro, Britian, Japan, Australia, etc.), but it has absolutely nothing to do with improvements in the US, in my view. As you can see, all of the problems I have listed with the US economy still exist, with absolutely no solutions in sight. The fundamental issues with the US still exist. If anything, it is growing worst by the day. IMO, the US system would have come close to collapsing (or resulted in serious panic) had the government not taken control of Fannie and Freddie, as those 2 companies are either directly or indirectly linked to about 40% (maybe 50%) of US mortgages, apparently. However, this is just a bandaid solution for these companies, as they still have to find the permanent solutions to their major problems. So, what ball is going to fall next in the US financial market, and will the government keep propping up all of these companies? Based on news today, Lehman Brothers could be the next major problem, hence the big market sell off today. Who is after that? Washington Mutual? Bank of America (as they don't seem to have a solution as yet for the ABCP Countrywide problem they took over)? Citigroup? These are major financial institutions that are at the backbone of America.
Yet, there is currently this love fest going on with the US dollar. It is quite amazing to watch, and hard to justify.
Anyway, here is the article on the OPEC reduction. By the way, OPEC controls 40% of the world's old production.
"VIENNA, Austria – OPEC oil ministers have decided to curb overproduction by more than 500,000 barrels.
The move is a compromise meant to avoid new turmoil in oil markets while at the same time reflecting OPEC attempts to prevent prices from falling too far. Crude prices have dropped nearly 30 percent since spiking to nearly $150 a barrel in July.
An OPEC statement issued after oil ministers ended their meeting early Wednesday said the organization agreed to produce 28.8 million barrels a day. OPEC President Chakib Khelil said that quota in effect meant that member countries agreed to cut back 520,000 barrels a day in overproduction."
Yet, there is currently this love fest going on with the US dollar. It is quite amazing to watch, and hard to justify.
Anyway, here is the article on the OPEC reduction. By the way, OPEC controls 40% of the world's old production.
"VIENNA, Austria – OPEC oil ministers have decided to curb overproduction by more than 500,000 barrels.
The move is a compromise meant to avoid new turmoil in oil markets while at the same time reflecting OPEC attempts to prevent prices from falling too far. Crude prices have dropped nearly 30 percent since spiking to nearly $150 a barrel in July.
An OPEC statement issued after oil ministers ended their meeting early Wednesday said the organization agreed to produce 28.8 million barrels a day. OPEC President Chakib Khelil said that quota in effect meant that member countries agreed to cut back 520,000 barrels a day in overproduction."
Sunday, September 7, 2008
Some thoughts
Optimusprime, The Ref and Carib, I also agree that a lot of baggage has been eliminated since earlier in the year. Of course, we all know that we need cash in order to get back on stable ground. Hopefully that will arrive soon, in the form of debt financing (with incentive shares thrown in) - this seems to be the typical finaning package other small companies are getting in this environment. (if a deal goes through) the cash will hopefully be sufficient to eliminate a large chunk of the accounts payable liability, which addresses not only one of the company's primary concerns, but eliminates (what would likely become) a requirement to closing off the Fortis deal.
Anyway, here is a recap of some of the major issues that have been eliminated since earlier in the year:
1) BCSC
2) Rosario - we got out without paying the $13M balloon payment, and the remaining smaller payments, and the $1.2M accounts payment amount - would have been a Fortis barrier
3) Shashuindo/Algamarca - we got out without making the outstanding quarterly payments to Algarmarca, and shut the door on what was a very damaging situation for Century shareholders - would have been a Fortis barrier
4) Sulliden's $200M lawsuit - it was thrown out without any cash payments by Century - would have been a Fortis barrier
5) Wega gone (hopefully)
6) Eliminated hedge position - 3,200 ounces exist at Lamaque, which will be used to cover the $2.1M owing to Gerald Metals (expected to be closed off in Q4 - Century may be waiting for the gold price to increase again, before settling with Gerald Metals)
7) 100 ton o/p trucks and lease obligations - the trucks seem to be still booked as both an asset and a liability on the balance sheet (which is normal). The trucks are probably currently being sold off with the rest of the open pit equipment. The cash from the sale of the 100 ton trucks (I imagine) would be sufficient to cover a large portion of the remaining liability. As such, (if they get a resonable price) the sale should enable them to remove both the asset and the capital lease obligation from the balance sheet (an offset, naturally).
8) Ongoing support from IQ - we tend to take this for granted, but I find it to be essential. They allowed us to move the $1M interest payment (that was due this year) into the future. Also, by allowing Century to spread payments of the principal amount over a 15 year period (of equal payments) has turned out to be huge for Century, especially during these difficult times. It has allowed the company to focus entirely on addressing the accounts payable situation, without having to worry about the senior LT Debt. This will prove to be privotal in our recovery, IMO.
Anyway, here is a recap of some of the major issues that have been eliminated since earlier in the year:
1) BCSC
2) Rosario - we got out without paying the $13M balloon payment, and the remaining smaller payments, and the $1.2M accounts payment amount - would have been a Fortis barrier
3) Shashuindo/Algamarca - we got out without making the outstanding quarterly payments to Algarmarca, and shut the door on what was a very damaging situation for Century shareholders - would have been a Fortis barrier
4) Sulliden's $200M lawsuit - it was thrown out without any cash payments by Century - would have been a Fortis barrier
5) Wega gone (hopefully)
6) Eliminated hedge position - 3,200 ounces exist at Lamaque, which will be used to cover the $2.1M owing to Gerald Metals (expected to be closed off in Q4 - Century may be waiting for the gold price to increase again, before settling with Gerald Metals)
7) 100 ton o/p trucks and lease obligations - the trucks seem to be still booked as both an asset and a liability on the balance sheet (which is normal). The trucks are probably currently being sold off with the rest of the open pit equipment. The cash from the sale of the 100 ton trucks (I imagine) would be sufficient to cover a large portion of the remaining liability. As such, (if they get a resonable price) the sale should enable them to remove both the asset and the capital lease obligation from the balance sheet (an offset, naturally).
8) Ongoing support from IQ - we tend to take this for granted, but I find it to be essential. They allowed us to move the $1M interest payment (that was due this year) into the future. Also, by allowing Century to spread payments of the principal amount over a 15 year period (of equal payments) has turned out to be huge for Century, especially during these difficult times. It has allowed the company to focus entirely on addressing the accounts payable situation, without having to worry about the senior LT Debt. This will prove to be privotal in our recovery, IMO.
Friday, September 5, 2008
Century Mining Valuation
At a share price of 3 cents per share and 168.7 million shares outstanding, CMM has a market cap of just over $5 million. With almost 5 million of 43-101 certified ounces, that is equivalent to $1 per ounce for a commodity trading at $800 per ounce. Absurd to say the least!
However a more realistic valuation may be based on the enterprise value of the company. This is defined as market cap - cash + debt and is equivalent to what someone would have to pay to buy the company based on its current market cap.
In CMM's case they have cash + investments + accounts receivable + inventory (primarily 3,200 oz of gold in the Lamaque milling circuit) + prepaid expenses = $9.7 million.
On the debt and financial obligations side they have long term debt + loans+ accounts payable + lease obligations + hedge payouts + asset retirement obligations = $48.2 million.
Therefore their enterprise value is $5 million - $9.7 million + $48.2 million = $43.5 million.
So what does a potential buyer get for $43.5 million?
We have buildings, plant and equipment and spares that cost us $73 million, but original capital costs for most of this for the previous owners was much higher.
We have 43-101 certified 4.9 million oz of gold, including 1.3 million ounces of reserves and it's only a matter of time before a lot of the resources get converted into reserves.
We have $80 million in future tax credits at Lamaque.
We have significant exploration potential at S-L and other surrounding properties.
We have good exploration potential for a copper-gold porphyry at the Erika property at San Juan.
We have the potential to receive millions of dollars in settlement of the Poderosa property.
What we don't have is the cash needed to realize all of this potential. If we do get the Fortis financing then the current share price should be the bargain of the century. If not, I can't imagine we couldn't get multiples of 3 cents for the sale of the company.
However a more realistic valuation may be based on the enterprise value of the company. This is defined as market cap - cash + debt and is equivalent to what someone would have to pay to buy the company based on its current market cap.
In CMM's case they have cash + investments + accounts receivable + inventory (primarily 3,200 oz of gold in the Lamaque milling circuit) + prepaid expenses = $9.7 million.
On the debt and financial obligations side they have long term debt + loans+ accounts payable + lease obligations + hedge payouts + asset retirement obligations = $48.2 million.
Therefore their enterprise value is $5 million - $9.7 million + $48.2 million = $43.5 million.
So what does a potential buyer get for $43.5 million?
We have buildings, plant and equipment and spares that cost us $73 million, but original capital costs for most of this for the previous owners was much higher.
We have 43-101 certified 4.9 million oz of gold, including 1.3 million ounces of reserves and it's only a matter of time before a lot of the resources get converted into reserves.
We have $80 million in future tax credits at Lamaque.
We have significant exploration potential at S-L and other surrounding properties.
We have good exploration potential for a copper-gold porphyry at the Erika property at San Juan.
We have the potential to receive millions of dollars in settlement of the Poderosa property.
What we don't have is the cash needed to realize all of this potential. If we do get the Fortis financing then the current share price should be the bargain of the century. If not, I can't imagine we couldn't get multiples of 3 cents for the sale of the company.
CMM Announces Resolution Of All Remaining Litigation With Sulliden
BLAINE, WA, Sept. 5 /CNW/ - Century Mining Corporation (CMM: TSX-V) announced today that the lawsuit brought against it, Century Mining Finance Corp. and others, in the Ontario Superior Court of Justice has been dismissed at no cost to the Company. This brings to an end all proceedings in Ontario against Century and those associated with it relating to the Shahuindo Property, Sulliden Exploration Inc. and Minera Sulliden Shahuindo SAC.
Today's announcement brings to an end all litigation between Century and Sulliden in Canada and Peru.
Margaret Kent, President & CEO said: "We are pleased that the lengthy litigation process regarding Shahuindo is now ended. As we move through the current transitional phase, management and the Board of Directors are confident that the Lamaque and San Juan gold mines will provide significant value to shareholders and provide a solid foundation for growth."
Today's announcement brings to an end all litigation between Century and Sulliden in Canada and Peru.
Margaret Kent, President & CEO said: "We are pleased that the lengthy litigation process regarding Shahuindo is now ended. As we move through the current transitional phase, management and the Board of Directors are confident that the Lamaque and San Juan gold mines will provide significant value to shareholders and provide a solid foundation for growth."
Tuesday, September 2, 2008
Link to the Q2 News Release
Margaret Kent, President & CEO of Century said, "we are working diligently to arrange a short-term bridge facility. Concurrently, we are looking at a number of strategic alternatives which may include the sale of certain assets or the Company as a whole."
Link will be posted in the comment section also.
http://www.newswire.ca/en/releases/archive/September2008/02/c8866.html
Link will be posted in the comment section also.
http://www.newswire.ca/en/releases/archive/September2008/02/c8866.html
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