ANV - Allied Nevada Gold

[prunes]

New Baupost purchase. Currently produces approximately 100,000 ounces of gold per year. They aim to produce 300,000 ounces per year by 2012 and 600,000 ounces per year by 2015, along with 27 MM ounces of silver. Anyone tracking this?

[cogitator99]

Between this and Gabriel Mining, does anyone have thoughts? It seems to me that GBU is cheaper, but then the risks of being in Romania might not compensate.

[Guest hellsten]

I was looking at the Gurufocus 52-week lows and found ANV at the top of the list:

http://www.gurufocus.com/52weeklow.php

 

Another reminder for me to not buy what Seth Klarman/Baupost is buying.

 

The Low/High ratio in the Metals & Mining category is very high compared to the other categories. Maybe time to buy the best and most beaten down stocks?

[Guest hellsten]

To answer my question, yes, it definitely looks like it's a good time to buy gold mining equities (the best ones):

 

The Most Hated Asset Class:

http://csinvesting.org/2013/05/23/the-most-hated-asset-class/

 

The above chart illustrates how historically cheap gold mining equities are to gold. Not since the Great Depression and Pearl Harbor have equities been so cheap on market cap to production, reserves and cash costs.

 

Dividend yields on the senior miners are above 20-year bond rates. The market is forcing managements to focus on returns and that bodes well for the future. And some input prices are falling.  However, many weak companies will go bust leaving less competition for the survivors. Therefore, you must diversify into a basket of WELL-FINANCED Companies operating with good properties in safe jurisdictions for mining and, of course, with proven management. Mining is extremely risky. However, the historic cheapness of mining equities give you a margin of error, but choose wisely.

[ItsAValueTrap]

The Most Hated Asset Class:

 

In my opinion, some "asset classes" and industries are just bad.  Most of the mining stocks out there have a Ponzi scheme element to them in my opinion.  They're the ones which spend a lot of money on blatant stock promotion (even Goldcorp does it) and are constantly issuing shares.

 

There was a massive bull market in gold and most gold miners didn't make as much money as they should have.  The senior miners might be better than airlines but... that's not saying much.  (The juniors are definitely worse.)

[Guest hellsten]

The Most Hated Asset Class:

 

In my opinion, some "asset classes" and industries are just bad.  Most of the mining stocks out there have a Ponzi scheme element to them in my opinion.  They're the ones which spend a lot of money on blatant stock promotion (even Goldcorp does it) and are constantly issuing shares.

 

There was a massive bull market in gold and most gold miners didn't make as much money as they should have.  The senior miners might be better than airlines but... that's not saying much.  (The juniors are definitely worse.)

 

Yes, I agree with you. There are too many variables in the gold mining business to make it easy to invest in. A basket approach would perhaps work, but I'm not a big fan of that. Finding the best manager with the best track record at creating value for shareholders might work, but I don't know who that would be.

 

Donald Smith & Co is not afraid of investing in gold and airline stocks:

http://www.j3sg.com/Reports/Stock-Insider/Generate-Institution-Portfolio.php?institutionid=5387&DV=yes

 

They own:

Yamana Gold (adding)

Aurico Gold Inc (adding)

Allied Nevada Gold Corp (new)

Newmont Mining Corp (selling)

[ItsAValueTrap]

A basket approach would perhaps work

That would be worse...  ;D

[wawallace]

Well, here we sit with market-cap at 1.5x cash. Top heavy with debt, some maturities approaching, and gold still above their cost of production, but getting closer. Is there any value here? Klarman liked it at $30, but bailed somewhere in the teens. Grant's recently began pumping another junior miner two issues ago. And alas, I have no opinion on the future price of the barbarous relic.

 

I wish this was an area inside of my circle of competence but since I can't identify the moving parts I'll have to watch eagerly from the sidelines and learn from my free 'error of omission' instead of the more costly 'error of commission'.

 

I'd love to hear the opinions from those with opinions.