net debt load 4 142 000 000 = huge risk, page-34

thanks Lute, glad you enjoy my ramblings, hope your killing it.

Was certainly a massive week for NCM, if it wasn't for that sudden announcement of a management shakeup and part production disclosure, she would be along way south IMO

Management shakeup is good, looks like First Eagle spat the dummy on the back of the ISS proxy recommendations, end result Chairman going and CEO "expected to be replaced" in the second half of NEXT year,,,,

but the gold market waits for no company to get things together and we can only play the price, which was smashed yet again this week, finishing at 1340!AUD....Looks like people are still selling the SPDR GOLd ETF which hit another low of inventory on Friday....Its still a massive inventory used by flash cash to gain exposure to gold so there is potential for it to go on for a while.



Below is an AUD gold price chart for one year, clearly in a downtrend and only 40 bucks off its yearly low,,,which coincided with NCM hitting 9.07......the problem is this time, the AUD isn't at 88,,,its at 94 and climbing as FX markets swirl around in anticipation of some disaster and supported by data from AUS and China that isn't saying recession,,,USA would be loving seeing the Euro fly ever higher and other competing countries FX also gaining,,,,,,,,,,

This ever lowing of the gold price will make the new project in PNG marginal,,,lots of reserves but at this price, the costs of getting them out of the ground is not going to work on paper ATM.......All about margins

ANd we should consider margins are still contracting,
I have been using the total costs since June 2010, cash costs are meaningless unless you want to make sure they have capacity to get the job done.....

following is a history of production and margins, note total costs used last QTR was 1069, a drop of 20/OZ,,,but that is reflected in them slashing offices and people at that moment of crisis,,,

so if we assume the number reported this week of all in sustaining costs was 1001USD ( say, be generous and give them .95 for the entire QTr which is huge, that 1053/aud) and we give NCM an estimate of achieving the SAME gold price as last QTR (again super generous considering the falls but possible) then the margin was 381AUD/OZ,,,,,,again another small improvement but hardly AWE inspiring considering the amount of debt it has on its books in terms of overdraft and bonds, not exactly going to make a dent in that truck imo

I'd also point out,,,,,,,a major contract for airline services was entered into just three days into the this QTR,,I wonder if that was included and weather or not that was just a bit of window dressing to make everyone feel better after the first few days of bad press

Anyway, production was down on last QTR, which is disappointing even though it was flagged,,,but up on the YOY number, but after you take on an extra 2BLN in debt from that time, it was more than expected, I suppose one might say,,thats 2BLN borrowed and spent for approx. an extra 100K in production,,,,,I still maintain what a crappy investment......

One should also note,,,the margin has HALVED since last years numbers, so clearly they didn't read the market which had been consistently edging lower since the peak in 2011 as people become more comfortable with the fact there is no hyper inflation, markets are rising as well as earnings and the mega billions chasing disaster slowly exit.....

I note the biggest gold Hedge fund, PAulson and Co is slowly moving away from Gold to buy other equities and positions in companies all over the globe but he still has a large position in percentage terms of the ETF SPRD GLD and many others have followed him are still sitting there whilst he is gradually putting money to work.......potential for a retrace to the july low of $1183 usd isn't unreasonable as those that followed realise he has been putting mega money out of gold and into other productive assets

On a basic technical note, again another close for both Gold AUD and NCM on their lows, all moving averages are pointing down and the 100 has now crossed indicating to me those caught up high continuing to sell and those going for the short term trade are getting hammered trying to hold much larger position being sold down,,,this will continue near term imo unless there is some spectacular and sustain explosion in company margins imv

We will see how the week goes, sensitivities to EBIT from NCM's own published presentation were not good on Saturday morning, finishing at -293088000....

AUD continues to grind higher and that isn't good for business,,China data isn't crap despite what the sceptics think, our unemployment isn't too bad and confidence is rising in both property and equities, so AUD should see continued support.....

Either way, I still think they need to act on capital soon, they don't control the gold market and if it does fall and they are unhedged but a price taker holding debt, the restructure is going to be very painful imv...

As for restructure, the new guy, who doesn't start till Jan and "expected to take over" in the 2ND half of 2014 seems to be making the right noises,,,UTS has plasted a few interviews he did this week,,,,,,,,,,,,,,,and note he also sees that he might need to realign the business and deal with issues of balance sheet stress and high costs mines.............that's great,,,,,,,,

but suggest anyone with half an idea on business would see that they need to take action now, why operate 50CP of the business at a loss when your holding that amount of debt and the margins you don't control are getting nailed from the top line,,,,,,they can cut costs but cant cut to zero or production will be zero.........If gold keeps falling and their margins keep eroding, then either they need to immediately double what is produced or face reality..............and the reality is,,,they are playing chicken with the market, they should have done something at 22, at 16 and as recently as 14 imo, they might get lucky, but at some stage they need to be prudent....

So I see the risks as increasing as the price falls, I don't care about some guy that will be here in the future, all I care about is what is happening to gold price in AUD terms, so Im still not buying it.....

Have to watch if some big insto stops get hit soon, if there is redemptions in the Gold Hedge fund space, they will have to choice,,they have to pay their investors and that could really hurt the SP, obviously the new First Eagle is feeling the heat going in this week with Blackrock(so was the rumour) and shacking management....they have just completely burnt a lot of investors money, they have been averaging in and the price continues to tank so they are even more exposed,,,,,,,,bulls better be mindful of big bets that have gone horribly wrong, especially when they are on the register with such a huge holding

(actually think many people have been averaging in, have a lot more exposure than they wanted and that at some stage, if gold falls, there is going to be a huge flush across the gold equities sector)

Anyhoo,,,back to the cave for beers and foxtel and wait for the retest

check your mirrors