Some gold and gold stock takeaways from Nigel Somerville...

MAJOR EXPOSE: IQE – more on Dr Drew Nelson’s EFH margin call(s): do you feel lucky, punk? From the Deputy Sheriff of AIM HERE

The online extravaganza of the one-off ShareProphets Shares Conference was sensational - all the videos are now up for a la carte selection if you are yet to view - with much to make me sit up and think. And that brings me to the yellow metal. It was a consistent theme: the money printing machines go “Brrrrrr….” debasing fiat currencies, and as night follows day, gold will go up. Whether or not you believe the Central banks will pull off the application of another round of Modern Monetary Theory without triggering Zimbabwe-style hyperinflation or whether we will just see the gap between rich and poor widen again as the haves borrow at near interest-free cost to invest in the markets whilst the have-nots toil to meet incredibly expensive credit card bills, almost everyone saw gold going higher. Of course, there is going higher a bit – perhaps to $2000 or $2500 and going to the moon. Bank of America hit the headlines the other day forecasting $3000 in the next 18 months. Jordan Roy-Byrne (our favourite technical analyst) recently suggested $30,000 – but over the next twenty years. Peter Hambro showed us that gold has risen by 48-fold over the last 57 years. If that is repeated, gold will be over $80,000 in another 57 years. Who is right? Well, from where we are now, if gold is going up then it is surely worth putting on your shopping list as an investor so in that sense it doesn’t matter.

Tern – the sudden change of auditors. Compelling evidence that it was not planned from The Sheriff of AIM HERE

But if gold continues to perform as it has in the last 57 years - and history suggests it will still be seen as a store of value in times - then it offers inflation protection. And if we reach the point of financial Armageddon then its protection as a store of value will surely be vital – even if you can't spend a brick of gold down at your local Tesco! That was Peter Hambro’s point. It was not to buy gold miners or clever EFTs with just paper or derivative backing: you want physical. Richard Poulden also suggested holding physical gold, warning off ETFs which are not backed by physical. He pointed to my article suggesting that the gold price could see a repeat in reverse of what happened to oil recently. I can’t take any real credit for it, as I was picking up on a point raised by Peter Schiff, but just as there was so much oil arriving and there is nowhere to store it, as the May futures ran down the clock to expiry oil longs were suddenly realising they had a loan of oil coming and nowhere to put it. The chaotic result was those oil futures turned negative: traders were paying people to take the oil away! With gold, there is potential for a perfect storm the other way around as short positions in the US are faced with having to deliver gold which simply is not available. There are no flights to the US and there seems to be an incredible shortage of physical. Worse still, for every real physical ounce of gold there are multiple ounces of “paper” gold. Expiry of the June futures contract is going to be very interesting! Richard and Tom also discussed the fact that nobody in the mainstream media (eg the Daily Mail) or financial press are really discussing gold. As I pointed out, Hargreaves Lansdown pointed its readers to funds other than gold – yet apart from Coronavirus bubble stocks, gold is about the only thing going up. Perhaps, they wondered, when it does hit the headlines that will be the time to sell!

The latest on continually stuttering rich man's plaything, Aston Martin Lagonda from Chris Bailey HERE

Well, if there is an inverse bloodbath as June futures expire, I bet it will make the headlines – and at least temporarily that may well be a good time to bank profits. But my general take is that if history is to be believed, we should see a gold bull market for a good couple of years from here. It remains to be seen how hard the Federal Reserve will run its printing presses, and how long for, but my guess it will be for longer and harder that the market seems to be pricing in. Perhaps that explains the magnitude of the market recovery too. I had a couple of interesting exchanges over Turkish gold producer Ariana (AAU) – firstly with head honcho Kerim Sener, and later on with an investor. I probed Kerim on what happens next: if the proposed corporate deal goes through and Ariana ends up with $30 million of cash burning a hole in its pocket, however hard I try I cannot see Ariana spending that cash on what we know about. After all, if the deal goes through, the Red Rabbit project will be self-financing, probably with new bank loans to cover major capital expenditure and Salinbas would be a free carry for the time being. So it seems that Kerim has something up his sleeve – something he did not deny, although we will have to wait and see what he has in mind. As to my chat with an investor, I am accused of being too conservative with my price targets. I completely get the criticism: for starters, if the proposed corporate action goes through the implied valuation of Ariana would be up over 4p and with major expansions in production lined up that valuation will surely head higher – not to mention if gold carries on rising in price. I admit it: I am being conservative! But I prefer to value what is actually there right now, not what might happen. So my 3.5p to top slice if you want to advice still stands – at least until we learn more. And whilst I would suggest a top-slice, I am thinking a small amount – not half or all of my shares.

Read HERE: KEFI Minerals – on the discounted placing...

But there is another problem, because my personal holding has increased hugely in size as the share price of Ariana has risen from a low point of near 1p to the current 3.45p. At one point it was about half the value of my SIPP and that is simply too big for me. So as each top-slice mark comes around I have been trying (not always successfully) to trim my over-sized exposure – even though I still completely buy the Ariana investment case. As for where we could be in, say, 2 years, Ariana could be sitting on 23.5% (following the corporate action seeing completion) of around 50,000 oz of gold production and Salibas could be heading for a mine to produce a further 50,000 oz. With historical production costs of around $500 per ounce and with the gold price having headed through perhaps $2000 or $2500 that is a lot of cash flow. Regular dividends could be on the menu by then, Ariana could easily have coughed up a special dividend on the back of the corporate deal and some interesting new assets in or around Turkey could have come to the fore. Oh, and the Cyprus project should have shown some decent drilling results too. What would that lot be worth in a raging gold bull market with the bulletin boards going crazy? 10p? 20p? More? But that is all for the future and I stand by my rather boring advice for now. Let’s not price in the upside until it actually happens!

Reviewed HERE: PHSC – adjusted EBITDA up… why the share price materially down?...

In the meantime I have been buying a bit more Centamin (CEY), the GDX ETF (of gold majors), GDXJ (supposedly gold juniors, but only in the sense that they would not top the FTSE100) and I am still riding my luck with Bluebird Merchant Ventures (BMV), having top-sliced, and the perhaps more dodgy triple-leveraged Wisdom Tree ETF. I can’t recommend that, but I will report back when it either roofs it or I call it a day with my tail between my legs. I have also taken a small position in Vista Gold (traded on AMEX and in Canada under the code VGZ) as a speculation on it getting funding….fingers crossed there! My formal recommendations from that lot are just Ariana and Centamin, but some of the others could be worth a look at. If the futures market feels the strain as June futures close out, I shall be selling a fair chunk of the others though and waiting for a new day. Remember things can go wrong. My expectation though is to be able to ride the gold bull for a good while yet, and then, as things start to settle down, I will want to cut my exposure and move some cash back into more normal equities.

Read HERE: OptiBiotix – now Taiwan agreement adds to confidence...Filed under: gold, IQE, Drew Nelson margin call, Tern, Aston Martin, KEFI Minerals, PHSC, OptiBiotix

2020-05-13 11:45:01