price action, page-7

SaberX

"loki - what are your feelings/thoguhts as to why we're still being taken to the cleaners on most of the goldies despite macroeconomic and commodity price conditions?"

The issues are rising taxes and country instability (especially true for west African goldies), high operating and capital costs have meant that little of the rise in the POG has actually translated into bottom line profits for most goldies (there are a lot of articles/interviews on this subject - the weekend business Australian has an article on this - page 25 covers miners generally).

Add to that the feeling that the market has probably peaked for this cycle (now almost 4 years old) and is due for a significant correction in the US - this tends to impact the POG and gold equities as asset prices have tended to be positively correlated in recent times.

EVR's closest peer, PRU has also been doing very poorly, now down to $2.25 which almost 50% off its high (the delay in proceeding with their Ivory Coast project while they await clarification on a possible new super profits tax there).

The really low cost companies in lower taxing countries are doing relatively well - eg RRL, MML, BDR. I think TRY is also going to be low cost operator but there are country risks associated with one of their mines being in Argentina. NST may be a lower cost producer (at least in relation to its high grade underground operations) - I do not follow it.

The truth is that there are very few low cost goldies that are not being taxed to death for us to invest in.

West Africa has lots of gold but it is not delivering the sort of after tax profits we would wish.

I would keep an eye out for how SBM does with its new pacific island mines - if they can turn them around then this is one to own.

RED may become a low cost producer if they can fix up all their operational issues - be careful with them as the management has proven to be highly unreliable and the mine is subject to being affected by water/storms.

RMS has actually done very badly over the last 16 months or so, while RSG has basically improved a lot with major operational improvements and consequent cost reductions (more to come). RSG was undervalued if they could get their act together, which is what has been happening.

I think the market will wait to see how the expansion in EVR's Mali mine goes and how this contributes to bottom line profits.

So long as one believes the POG is going to stay up it is worthwhile holding EVR, unless you find a better bet. Obviously EVR price will be very sensitive to country instability.

I have reduced my exposure to goldies just in case the markets are going to go a bit pear shaped and plan to re-invest the funds from mid 2013. Being invested all the time has proven to be a wealth hazard.

Good luck.

loki