Thoughts on Some Recent Winners and Losers
by Travis Johnson, Stock Gumshoe | July 12, 2013 7:54 pm
Friday File thoughts on some of our recent "Idea of the Month" picks -- what to buy now?
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Source URL: https://www.stockgumshoe.com/2013/07/thoughts-on-some-recent-winners-and-losers/
Excellent and well researched article as always Travis.
I did buy LGND when you first recommended it as well as PNC-WT. Thanks again for the tips.
I’ve had the resource/streaming stocks on my watchlist for awhile now, but am not really sure when to jump in. Perhaps the wise thing would be to start buying incrementally, buts they seem to have false starts on the way to a steady slope down.
For example, Valentinoamoro, STTYF went down the tubes today by 25%. Does anyone know why?
Yes, Donner Metals today announced that ore grades are lower than forecast at the Bracemac-Mcleod mine, and, as noted above, that’s really their cash cow for the foreseeable future so if it’s not as good as expected that’s a substantial disappointment (from a company that has had a long series of disappointing streaming deals). Donner explains it in their press release here.
I have not run the numbers again on this, but they are slowing production markedly for July and August (because Xstrata is going to process the remaining stockpile from the mine that they’re closing nearby, so the mill will have a higher priority user for those months), so if you combine that with the lower grade expected for the rest of the year it’s likely the copper delivery will be substantially lower. They do say they are on track with the feasibility plan as far as production volume, so it may be that they’ll average out on the grade over the life of the mine (or maybe the feasibility estimates were just too high, it will be a long time before we know).
This is what was in the feasibility plan, the numbers I was working with in guessing at the value of the stream:
They ramped up the mill to handle 3,000 tonnes per day, so that helps a bit, but we knew that already. But both the resources and the reserves were graded much higher — the copper is actually better than the zinc at the moment, which is in Sandstorm’s favor since they care about zinc only so far as it impacts the decision to keep the mine operating. Here’s what they say in today’s press release:
So … how much of Sandstorm’s drop is because the value is really lower for that mine now over the next few years, and how much is just investors saying “enough already!” and selling in frustration that they’ve had so many streaming deals end up being far weaker than expected (partly because they chose weak partners who needed more financing — not the case with Bracemac, I don’t think, since Xstrata is plenty well funded to operate — and partly bad luck and falling commodity prices). I don’t know. I’ll have to look at it in more detail — it could easily be a strong overreaction, since the value of the copper stream sure didn’t drop by 25% because of this slow ramp-up in ore quality and production in 2013, but there’s also little sign in sight of stronger zinc or copper prices so it’s not an easy choice, particularly in the short term. My knee-jerk response is to buy more at this lower price, not to sell, but I’ll have to think on it some more and run the numbers again based in this lower-grade ore.
When it rains it pours — Colossus announced today that Serra Pelada is having dewatering challenges, so delays there on gold and who knows whether it might end up impacting SND’s palladium stream. This kind of news goes over a lot better when commodity prices are climbing, investors really don’t like the combo of falling commodities AND lousy mine-specific news. Here’s SND’s press release on that today: http://www.newswire.ca/en/story/1198955/sandstorm-metals-energy-provides-development-update-on-serra-pelada
Stan, I dont know. Seems like it went down on heavy volume as well.
I dont think gold/metals/commodities will shine for a few years, esp if China slows down. Long term (10+ yrs) they are a good bet.
Meanwhile recommend staying away – BUT, who knows??? 🙂 Interested in what Travis thinks here.
STTYF just ruined my day…. 🙁
Will await Travis’s comments and consider a double down!
Cheers!
I would love to see big insider buyins right now!