Category: blog

Gold has been in rallying mode lately and is now around the 1365.10’s levels. This seems to have helped push up Avocet stock strongly and its been trending for a number of days now. As the time of writing Avocet is trading up 36.95% on the day trading at 20.20p – that’s one hell of a rally and my 16p average position is in profit. 😛 I’m determined to continue holding the position for the near-term but won’t let a profit turn into a loss.

Meanwhile am very excited. Have been sent email by FBI saying they are holding $10.5m with my name on it and they just need my bank details and a written letter saying it’s not drug money to release the funds. I don’t know any drug barons, and am not sure why they’d be sending me $10.5m, but hey-ho.. not to look a gift horse in the mouth. I won’t be putting my windfall millions into Avocet just now, I hate to tell you.

Risk Warning: This is a high risk stock and trading it is high risk; just consider that it was trading over 200p in 2011!

Centamin reported second quarter and half year numbers to June 30 this year with pre-tax profits amounting $123.6m for the six months to the end of June – up from $92.9m a year ago.

Revenues rose to $272.5m – up from $87.9m – and gross profits increased to $140.8m from $102.1m. The company has $168m (£107.5m) in free cash

Company says relations with Egypt ministry “positive” although the company still faces a legal challenge over its operating license to operate the Sukari mine in Egypt.

M/C 410M PROFIT FOR 6 MONTHS 123M these are cheap down to the riots.  The army and the people of Egypt want to get back to work – of course the Muslim Brotherhood remains a problem and there is a risk that the situation will worsen before it gets better (and even then there are no guarantees!). The share price going up when the army moved in did seem counter-intuitive though. The share price jumped before we knew the gold would continue to go out and the fuel would continue to come in.

Mursi or at least a couple of his ministers seemed pro CEY and I thought of their statements as being the MBH put for a couple of months. They appeared to be angling for a hard bargain behind the sense though and the company felt the need to more generous. Luckily even with the unrest, the Sukari gold mine is very remote from Cairo. Also, the gold price doesn’t seem to affect CEY as much as a lot of other miners due to CEY’s relatively low production costs. But alas you shouldn’t forget. However unlikely, CEY are still facing a court case which could send their share price to 0p. Irrespective of how unlikely this is, it’s a good reason why investors are still cautious and the share price remains suppressed. In its yearly statement, management has tried to reassure investors, insisting that the mine is continuing to operate normally and hasn’t been impacted by the crisis in Egypt where several hundred protesters have been killed since the military took over in July and that it remain on track to meet its targets. The company is expecting to meet its planned production of 320,000 ounces of gold at an average cost of $700 an ounce, and while second quarter revenues have been lower due to the weak gold commodity prices Centamin has managed to improve output by 8% over the last quarter. In fact mining activities have continued to improve during the last quarter and Centamin has managed to produce a record 94,000 ounces. Unlike rivals like Randgold and smaller counterpart Avocet , Centamin management hasn’t felt the need to cut costs. Output in 2014 is expected to continue increasing with the company’s long term goal of reaching a production of 450,000-500,000 ounces from 2015 onwards.

But given the cost of production at $700 per oz, no debt, un-hedged, El-Ragghy bought 500,000 shares this year at 47.80p and a low P/E.

I liked this paragraph of the financial report:

– Centamin remains debt-free and un-hedged with cash, bullion on hand, gold sales receivables and available-for-sale financial assets of US$169.4 million as at 30 June 2013.

So as the price of gold increases this one should do ok, providing the appeal is upheld on the Concession Agreement Court Case. If the Diesel Fuel Court Case appeal is upheld that will be a bonus. On that basis I have purchased some more shares, will keep an eye on RNSs but for the meantime stick them in a drawer for the future.

But is it the fundamentals or technicals which are driving the share price?

As another blogger has pointed out:
the fundamentalist…who ‘presumes’ that the fundamentals drive the shares…
With Centamin…record production profits…very little effect…
State of emergency in Egypt bordering on civil war…zilch effect…
In fact…the shares seem to climb as unfortunately the ‘body-bags’ increase in number…even surprised Guessti TA guru mate that one…
What if the mine was nationalised ?….some may ask.
My answer is….look….mines have been ‘snatched’ in far safer places than Egypt…and will be again.
If one’s worried about this one shouldn’t even invest in gold mines…if it happens it happens…and it brings us back to only investing money one can afford to lose. It’s not about ‘law’…look where Morsi is now……he thought he was the law…
As long as the company is publicly traded…..focus on what those traders are doing…..not what you think ‘might’ happen in a worst case fundamental scenario.

But to conclude a play on Centamin is mainly a play on Egypt both in terms of country stability and the court case with 20% resting on what happens at Sukari which most analysts agree is an excellent operation. It took Algeria ten years and lost of over 200,000 lives to restore some sort of peace. Egypt could be worse than that if the Brotherhood are dissolved as they are powerful and well supported. The best way forward is through negotiation and inclusion of all parties but we will see…

Avocet Mining has had a rough year and things have been looking bad for sometime now. It has been falling sharply because it has rising cash costs (now well over $1000), earlier this year announced a large fall in its reserves at the operating mine, had to borrow $15m from one of its major shareholders just to get through the year (which are secured on the assets in Guinea and must be repaid in full by Dec 31st 2013), still has around 130k oz in a hedge agreement with Macquarie at $938, which is just further eroding any possible profit from the rest of the production ozs, a falling gold price during 2013 and is burning through its remaining cash pile quickly (and $12m of that is restricted due to the revised terms of the hedge).

But perhaps the situation is not as disastrous as the above might make one believe and we could have reached bottoms now. In its latest interim statement on 8th August 2013 the mining company reported an improvement in gold production (recovered ounces amounting to 960,000 ounces compared with March 2013 LOM plan of 707,000 ounces) with a plan for refinancing and bringing costs down. AVM might just survive with the new mine plan and the fact that H2 2013 should produce 12k oz per month at lower cash costs than H1. Assuming they come in closer to the $938 of the hedge and the exploration costs are kept under control then they could generate enough cash to pay off Elliott and Macquarie. I still think they need a cash call at this point in time but I’m less of a doom merchant after the Qlies, even though costs this Q were above $1200. Not one I’m willing to continue adding due to the high risk and also because I already hold a chunk but there are some encouraging noises and developments for rest of FY.

July has been a busy month for me. Gold has been taking a hammering over the last few months but I’ve taken the plunge by taking a position on Centamin a few days ago. I bought them at 32p and they’re now at 38p – yes I know I must be mad to buy into a company which is based in Egypt but at least they have real gold in there and the new liberal government should be more business-friendly.

Money is also flooding into Egypt from aid and speculation that the large rises on the stock exchange fueled from foreign investment. Record production and the mine continues to operate as normal, cash and equivalents roughly 10p per share and held out side the country. Unhedged and debt free.

Mr-Alkady-Alsukary CEO & EMRA’s representative- :

-One ton produced in June.
-The same production expected in July.
-No problems with production or export.
-Last Wednesday the latest shipment 580kg was exported.
-Phase 4 expansion is expected to be completed by the end of the year to reach a monthly target of 1.25 tonnes by 2014.
-The petroleum authority supply the mine regularly with diesel.
-Nothing is affecting or reducing production at the moment.
-The purity of the gold produced is 90%, the remaining 10% contains around 5-6% silver.

I can’t possibly say with a hundred percent certainty that there will be no civil war in Egypt, but there is no civil war now despite the recent horrific death toll. The military have been in full control of Egypt for decades, even during the Morsi era as it is now. It is not only the largest army in the Arab world but also the largest in Africa and it is well trained, motivated and equipped (much of the equipment supplied as aid from the US).

So its really just a personal opinion, but I don’t see see Egypt in the same vein as Syria. It’s a different situation.

The majority of Egyptians see the removal of Morsi as a continuation of the revolution, the majority of Egyptians support the military (at least for now). If Morsi had delivered economic stability, maintained diesel, bread and electricity supplies then I strongly suspect that no one (or not many) would have taken to the streets to oust him. Like people in the west the average Egyptian doesn’t care enough about abstract political issues, they care about bread and the value of the money in their pocket, even if they claim otherwise.

The military installing technocrats, accountant types and business people to the top jobs will eventually see a rise in standards and unlike Syria, Egypt enjoys economic support from other Arab countries, the KSA, Kuwait, Libya and others have all given aid and donations of cash and fuel to Egypt. I strongly suspect that these donors will supply more aid aid if needed, it’s in their interests to do so.

The military is the biggest in Africa and the biggest in the Middle East. It is well trained, disciplined, well-armed and motivated even by Western standards. It would take a hellof a lot to beat it in a civil war, much more than the Muslim Brotherhood could muster even drafting fighters from outside given the fact that most Egyptians support the military.

Regardless of what the USA or the EU say in public they will continue to support Egypt given its strategic position and the Suez canal.

All in all there is no civil war now and in my very honest opinion there will be no civil war in the foreseeable future. Egypt has received billions of USD and goods in aid and gifts from other Arab countries. Too many countries want this “coup” to succeed for it to fail. Egypt is keen to settle international court actions asap, and avoid others. The mining concession is law not a contract (or the important part is), stage four expansion is due to be completed early 2014, record quarter on quarter production.

Most of the population welcomed the military action, they see it as the revolution is now back on track.

Well I’m still here and trying to spread bet as and when I get the chance. I think it’s pretty safe to say that my passion for spread betting and developing this site has dissipated somewhat since it all started two and a half years ago. I’m hoping it will return and indeed my recent win in BUMI and some wins in the GBP/EUR have nearly returned my account balance to where I started from. I hope that it’s a trend that is set to continue however I am still cautious as I know that losses can mount far quicker than any profits.

My biggest enemy as it always has been is time. When I first started the site back in 2010 I had high hopes that it may get to a point where it would generate sufficient income to free up my time to dedicate more to trading and other pursuits however it has not turned out to be the case. Quite the opposite infact, I probably have less time now than I did when I started the site and site maintenance, updates etc. etc. only make the problem worse. Fear not however, I will keep plodding away and hopefully at some point I will get back to my usual ‘posting a few times a week’ self. I can’t say for sure when that will be but I hope sooner rather than latter.

I don’t know about you but I still do the rounds of the old spread betting websites and I see that Tony Loton is still going strong over at better spread betting. I’d be lying if I said I follow his blog as religiously as I once did but he seems as if he’s doing ok. I wonder what his total P&L is over he past couple of years. I remember the days when he would post weekly updates of his account status I see they have stopped.

Then there is Chris at ‘spread bet beginner’. Not to be confused with spread betting beginner. He seemed to be doing ok with his own spread betting but I see he hasn’t posted an update since 20th December. It’s funny as I guess my website must have inspired him to start a site, indeed if I recall correctly he e-mailed me a few times with feedback and questions. You may be interested to know that it was Tony Loton that inspired me to start blogging. It was his trading trail back in 2010 which made me think I should do the same. There is also ‘Rachel uncovers spread betting’ which I am a bit dubious about to be honest. I sent her an e-mail once reaching out to her as a fellow spread betting site owner and had no response. The interesting thing is I mentioned this to Vince Stanzione several months later, and he said the reason she didn’t reply is because I’d made a derogatory comment about Vince of over on the trade to win forums. To me it seemed a bit to coincidental that she happened to see the comments and talk to Vince about them? Anyway you can draw what conclusion you want from that. I have my own opinion about what might be going on but I don’t want to cause trouble to I’ll keep my thoughts to myself.

Anyway, it’s a bit more of a bits and bobs post today rather than any juicy spread betting tips or information so I’ll leave it there and catch up with you again next time. In anyone still reads this that is.