Still under valued, page-11

MML definitely stands out as the most disappointing stock in our OZ portfolio. Can't blame short sellers because they are mostly absent. This is straight selling down by real shareholders. Surprised that holders would sell at 50 cents (the horse has already bolted), but time will tell if that makes sense. I suspect the selldown is partly from funds specializing in gold stocks, where they need to sell when fund units are redeemed.

My guess here (which should NEVER be relied on -- I've been wrong before) is gold will stabilize above USD $1000. The global AISC was around USD $1100 a couple of years ago (don't have the report now unfortunately). AISC seems to have since fallen (according to a smaller report on US/Cdn miners this year) due to increased efficiencies, reliance on higher ore grades, much less capex, sell-off of poor performing mines, and less exploration activity. I recall Barrick's CEO drawing a line in the sand in 2013, saying the company will start shutting down mines if gold falls below $1200. However, the average AISC Barrick's mines is currently around USD $870.

I also expect that MML's AISC will decline (but I've been saying that since December!) because capital expenditure will soon revert to normal (major shaft work completed). MML's current sustaining capex is well above the industry average (2 to 3 times, actually -- i.e., around $450/oz vs between $150 and $300 at other gold miners according to 2014 data). Meanwhile, MML's operating costs are among the LOWEST at under $400/oz.