Originally posted by Dazedandconfused
Hi Sector
Currently I am not as well informed about the gold sector as I have been in the past. That's because I am not as keen on it as I once was. A lot of the main names seem well priced at the moment.... for them to offer a good risk reward the macro picture has to change fairly radically.
I don't know about you, but personally, I get a bit sick of the 'talking heads' that populate the gold commentary space. After a while it becomes clear there is not a lot of creative analysis happening... rather everybody is just talking either their 'book' or their prejudice. The one thing I am alert to is how this trade war washes out. China is the long term determinant for the macro picture to change. They have been accumulating gold now for a very long time.... it all depends if they find a way to leverage that to their advantage. Donna Frump is certainly doing her utmost to push them in that direction.
On the local scene I gravitate to the longshots. In that regard DEG is top of my watchlist. They will be publishing their DFS early 2019 so we will get some reliable numbers to contemplate... but it is only if they demonstrate their conglomerate gold can play a significant role.... which won't be known for maybe another 12 months or so.
The other one I continue to watch is ALK. They recently used some of their considerable cash in the bank to buy into CAI and EXU... plus they will be extending their own gold mining in NSW. The wildcard is the Dubbo rare earths project which is ready to go if finance ever appears. It is not something I am doing but the stock trades between 20 cents and 22.5 fairly reliably so patiently trading in and out is a possibility. I just watch and if it ever comes out with an announcement they have the finance for Dubbo it is an instant buy for mine.
RSG is a puzzle to me. On paper they look good... so why does it trade the way it does? It has times when it gathers some pace and just when you start to feel comfortable the price dumps... I don't understand. I think SAR is a quality gold Co but it has run recently and not sure it has much left in the tank for more.
In the bigger stocks I think NCM is something to keep an eye on. My reason for thinking that is they are looking to acquire and they have the cashflow to do something interesting.
The other company I really like is SGM... they are hurting badly because of the trade war and I think it is going to fall well below current levels. Currently it trades around $11 but I think it will go below $8 where it is a buy [especially if the markets tank in which case I will be looking for about $5 at some point]. I like it because we are heading into tight supply for anything related to EV commodities and I think SGM will do very, very well recycling copper. At the moment, a lot of SGM's business comes out of the US. Its market of shipping scrap to China is badly affected by the tariffs and if there is a general economic turn down it is a double whammy because their business is high volume low margin in nature. But they are a fundamentally strong company and one worth watching for a buy opportunity.
RSG is in a transition, with higher costs and larger cash outflows currently.
Long term looks good but the new African mine has the market wait and see.
I think they will look very good in 2-3 years, and management have a good track record.
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