Novagold Part 2 Wednesday, November 28, 2007
Posted by croatz in capital markets, finance.Tags: finance, gold, novagold, teck cominco
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After listening to the conference call that Novagold hosted regarding the Galore Creek work-stoppage the news isn’t as bad as it first sounds.
Recap of The Bad: Costs are roughly $3.2B higher than initially estimated ($5B instead of $1.8B), Mine Construction Halted
Updates: Canadian Dollar NOT a factor in decision, Not all of the engineering studies are in and $5B may prove to be in the upper-range of cost estimates
Major Factors: Scope and Duration – changing these factors also increases the Complexity
Right Now: Firms (Novagold and Teck Cominco) Spending $72M to determine feasible alternative mine development methods
Caveat: The long-term commodity prices used in their assumptions
During the CC Management alluded to the fact that the copper price used was in the range of $1.50/lb – Current trading price is $3/lb
While they did not commit to a price range for gold it is safe to assume that they are using gold prices significantly below $800/oz
Assumption of Price Used: $475/oz
The Upside: This remains one of the largest recent copper finds in the world and it is located in a Politically Stable Region
If commodity prices remain high this project may find itself feasible (and very profitable)
Listen for yourself:
Nova…gone Tuesday, November 27, 2007
Posted by croatz in capital markets, finance.Tags: equity, finance, markets, novagold
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Novagold turned upside down and gave a perfect illustration of company-specific risk that investors assume when selecting individual firms versus an entire industry or the commodity itself. Look at this (scary) chart:
Where do we go from here?
Reason for decline: Cancellation of a major mining project by their partner Teck Cominco
Reason for cancellation: Dramatic Cost Overruns
What changed? Labor Costs, Surging Canadian Dollar
Opportunity? For long-term risk-tolerant investors who believe that the firm will make the transition from explorer to producer. Current levels could prove an attractive entry-point, however, barring a dramatic rise in the price of gold, weakness in the rest of the North American Equities markets may continue to weigh on the stock.
Sources:
A Forbes article explains the matter in detail.
Chart courtesy of BigCharts.com
A MisAdventure? Sunday, November 25, 2007
Posted by croatz in capital markets.Tags: adventures, finance, markets
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I’ve begun to rethink the nature of this blog, as I don’t really provide any value by talking about what already happened – apparently other people do this – what a crazy world. I’m contemplating shifting it (yes, I pretend that I have readers that are invested in this blog) towards a focus on out-of-favor stocks, or firms that, for some reason or another, have suffered dramatic losses in their stock value. A good example of this would be what TASR went through with its lawsuit process, what Vonage is currently going through and what the homebuilders/mortgage lenders/banks are beginning to experience. I’m not quite sure why I am drawn to catastrophe, perhaps it reminds me that it takes failure to create success and that the greatest opportunities are the ones that are discarded, impossible and laughed at. I derive a certain amount of pleasure from being able to ride out the storm. It is a brutal process, where you are forced to ignore what everyone else is saying and believe that for some reason, you are right and they are wrong despite all evidence to the contrary.
As the saying goes, It is always darkest before dawn.
The losses pile up Tuesday, November 20, 2007
Posted by croatz in capital markets.Tags: credit, fannie mae, finance, markets
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The credit market deterioration spreads to the “safer” areas of the market while FreddieMae continues to struggle as new Congressional reserve requirements restrain its abilities to purchase additional mortgages. These rules, while sharply curbing the liquidity in the system, have forced the Mae’s to sell into inclement market conditions, leading to a further decline in the value of these securities. There is a bottom somewhere out there but it is clear that the credit markets have yet to find out, leading to the likelihood that homebuilders, mortgage lenders, and any firm with exposure to this market will continue to face challenging market conditions for at least 2008.
Credit Markets enter the rabbit hole… Tuesday, November 20, 2007
Posted by croatz in capital markets.Tags: , credit, finance, markets
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And the pertinent question is…how deep is it? No one knows at this point, but the markets are going to spend the next year determining and clearing out the damage. The current round of write-downs is merely the beginning of the game. Years of excess credit sloshing around the mortgage markets will take much more time, and pain, in the form of steep losses, to erase the exuberance that was. A NYT article discusses this, as they point that firms continue to write down billions more, even after they publicly state that they are done devaluing their assets. This is leading to a confidence crisis, which is deepening the credit crisis, as witnessed by the bank run on Northern Rock earlier this year, the first time a British bank has encountered this catastrophe since 1866.
Right now, the big question in the Credit Markets is, Who’s Next?
Public Philanthropy in Asia Saturday, November 3, 2007
Posted by croatz in capital markets.Tags: china, philanthropy, wsj
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A Hong-Kong billionaire rises from the bottom of war-torn China to become one of wealthiest men in the world and the CEO of Hutchison Whampoa Ltd with a personal fortune estimated in excess of $10 Billion. Along the way Chairman Li decided to do something with his fortune that is unheard of in China, give it away. As he breaks down the societal barriers to the acceptance of public philanthropy in China he is opening a whole new avenue for charity in what remains one the world’s poorest countrysides.
