MRX and Google Finance - charts and forum

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MRX appear to have finally found support - oversold more than i expected - see chart.
Anyone wants to know more about this company, you can ask questions at http://finance.google.com/finance?q=ASX:MRX - I have opened a discussion forum on this page.
At the same time you can check out Google's Finance page. Its catching up to Yahoo. Several failings though - it does not allow you to download CSV or excel format market data like Yahoo. Also they dont cover the currencies very well, but they do cover Australian stocks - hence this discussion. I like the fact that you can search for stocks by name - with the added benefit of auto word complete - unlike Yahoo!
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Andrew Sheldon www.sheldonthinks.com

RED 5 (RED.ASX) buy on weakness

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Red 5 is an emerging gold producer with an attractive gold project in Mindanao, in the southern island of the Philippines. The company has raised the equity component to debt finance mine construction. The much higher gold price and any weakness in the $A will have a positive impact on its future earnings. The project should start to generate cashflows in about a year. There is of course the prospect of locking in the higher gold prices that are likely to arise by then.

There is a strong upward sloping trendline offering support at 8c, and a strong horizontal support at 9c.
Join my discussion on Red at Google Finance Forum.

- Andrew Sheldon www.sheldonthinks.com

Matrix Metals (MRX) - great entry now

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Well I have been proven wrong on timing my entry into this stock. Why? I was too focused on business interests and commodity prices. Having said that - the stock just makes more compelling sense as a BUY - though the chart suggests it can go a little lower. So why a buy? Well you will find they are selling because they are falling. They are being oversold because foreigners are selling the stock to reduce forex exposure to the AUD - which is likely to fall back to USD0.80 from USD0.87 now. So MRX gets oversold, buteventually they become over-bought again because export revenues will be phenomenable as AUD weakens, they commission the 2nd plant - for a 60% lift in output.

Yes, I am aware that USD-denominated commodity prices are likely to come off, but consider that there are already significant supply constraints for all metal commodities.

Join my Google Finance discussion forum on MRX!

- Andrew Sheldon http://www.sheldonthinks.com/

Bendigo Gold (BDG.ASX)

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Just to update my recommedation for this stock - after a recent rally and retracement - I still think Bendigo represents good buying.

Batavia Mining (BTV.ASX) - what the?

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Batavia Mining (BTV.ASX) is an interesting stock drawn attention to me by one of my readers. Actually I have held this stock on occasion, and it remains on my watch list. The company has made several mistakes of late of late I feel. These are: 1. Diversifying into iron ore - I guess not a problem if they float off the project 2. Delaying the Delfector gold project - the problem being the dont understand gold, or where gold was always destined to go. So what do we know about this company? 1. Following an issue it has 114mil shares on issue at 12.5c worth $A14mil 2. It has liquid cash & investments of $8mil 3. It is publicly listed generally worth around $4-5mil, essentially making its gold project worth $2mil 4. It has a 0.8Moz gold deposit in WA 5. It has a 0.3Mtpa gold treatment plant remaining from prior mining at this site. The mine closed prematurely because of low metal prices, though BTV has since increased resources through exploration 6. The gold price has more than doubled since the project was acquired, but so have the costs to establish a mine, though operating costs have increased by less, I suspect more than the 6% they quote. 7. The company is considering a 0.23Mtpa processing capacity, though economies of scale favour 0.4Mtpa, though they might need to find added ore to make that option worthwhile. This all sounds very good. The company is sitting on cash in investments, it has a mine resource. Looking at the plant, it looks worse than the treatment plant (Orroyo - the Mt Gibson plant) that I looked at in WA, so it seems likely that the process water from mining previously had a high salt water content, or the wet season has resulted in surface corrosion. Hard to say if they are understating capital costs without a site visit or independent info. So that is reason for caution. Thats not to say you can't trade them. Afterall a rising gold price (tide) lifts all boats. I think they are a pretty good punt. I do however prefer other stocks for resource upside, in ground gold resources.

- Andrew Sheldon http://www.sheldonthinks.com/

Megnesium International Group (MIG.ASX) - any good?

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I made the following response to a forum, so I have provided here for my reader's benefit. Magnesium International Group (MIG.ASX), a listed ASX company has acquired farm-in rights to a iron ore project on the south coast of PNG. A statement was made on the forum that since PNG is closer to China than South American competitors, then MIG's project must be good. Sorry, not that simple. It is not just a matter of 'distance to port' as implied. Sure PNG is closer to China, the major market, but shipping from PNG involves some hurdles. 1. Larger vessels have far greater freight advantages - can this part of PNG handle large vessels? Nope, so either $50-100mil needs to be spent dredging or buiilding a wharf going out to a depth of 18-25m to handle capesize vessels, as large steel mills in China are used to handling this size vessel. This side of PNG is a low energy coastline so the coastline is generally shallow.2. Larger vessels are expensive so you need to have high capacity shiploaders to reduce demurrage costs. This requires alot of low capacity floating cranes (not viable) or dredging to build a fixed shiploader on the jetty.By comparison, WA and South America where the bulk of iron ore comes from have lovely deepwater coastlines, shared infrastructure (rail and port) which are developed by third parties, so its a unit cost, not a capital item that will create a barrier to development. They are building greenfields capacity, WA and Sth America essentially brownfields (incremental) capacity. So with these factors in mind, South America is looking pretty good. Anyway, given the freight penalty from Sth America, and the fact that most new mines are being built in WA, this project is competing with Australia, not Brazil. And Sth America ships into Europe, not Asia, since they have an advantage over Australia there albeit a smaller one in the Atlantic because of WA's capesize capacity. MIG does have the advantage of handling unconsolidated ore, so no crushing, they have little handling cost, though its a small benefit since most mines freight from site by conveyors into crusher, into rail, into ship. They will not have the economies of scale because of the shiploader constraint. They have the disadvantage of lower ore grade, though they might get significant metal credits from titanium, gold, though this will increase the processing cost. But it might actually subsidise iron ore mining. We dont know the primary ore grades - at least herein, we only get the concentrate grades. I trust that helps. Join my discussion forum at Google Finance. - Andrew Sheldon www.sheldonthinks.com

Gold miners - which companies to buy?

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The great news about any boom is that 'a rise tide rises almost all boats' - except those that sink by default, eg. Bad grade control, high capital costs, hedging debacle (eg. LAF, SGW in Australia). Keeping it simple. I started researching when I was 15yo. I had no degree then, but if you read enough company reports, you can see the factors that matter. Having degrees has not helped me a great deal with investing. Reading technicals "Market Wizards' by Jack Schwager is important, or the like. Anyway, 1. Gold content in the ground (more than 1mil oz to be safe, or better still confidence it will be found, eg. orebody not closed, drilling only to 50-70m depth, so likely extensions. 2. Prospective areas, look for companies with >1000km2 of tenure, as more likely to be under-explored area. Better still in Africa or Asia, where virgin areas. 3. Sovereign risk - An over stated problem...rare! In the last 20 years, only Bolivian (strategic) oil assets have been nationalised and gold projects halted by environment concerns in Ghanian forest parks. Companies are negotiating upfront agreements with natives before exploring these days. 4. Entry - Avoid explorers still along way from production, since they need to spend more money, unless they are at pre-feasibility stage, committed to plant construction. Need to watch equity raisings, ie. dilution. Better still if the company has a 2nd hand treatment plant, or access to toll treatment facilities in established gold provinces. 5. Geometry - It takes time & money to access deep orebodies, so look for Open Cut projects. The wider the average gold intersections the better (8-100m) is grade, with corresponding grades of 4 to 1g/t. Larger deposits can tolerate lower grades because more mechnised, less selective. Best if orebody <150m> 6. Exploration - look for geochemical or geophysical anomalies along structural trends with at least anomalous gold, but preferably already some signs of commercial drilling intersections, eg. >6metres at >2g/t. Think about how easy to get out. eg. Are the richest grades near the surface, or deep. Is the ore distribution patchy requiring selective (more expensive) mining? 7. Capital - Watch their cash reserves - avoid dilution to finance project construction. 8. Hedging - Hedging removes the upside and also poses a risk. eg. Lafayette Mining had a mine spillage in the Philippines. The govt closed the plant down, so LAF was loosing $3mil a month on hedging. 9. Risk - The lowest risk entries are often the projects with the highest risks, meaning that the risks are priced in, so they can only go up. Be strategic. Look for exposures that provide the best upside. The perfect company has a 2nd hand treatment plant (or is close to a plant), $3-5mil in cash, 0.5-1mil oz of gold indicated resources, grades 2-4g/t, 10+ untested anomalies to test, no hedging, few shares on issue, company listed options (to maximise leverage), and is located in Australia or Canada. Get good at this, you will get strategic, being able to anticipate deals.You said or the big companies are already expensive. Bear in mind, that assumes a certain gold price, which can change. I can see gold going at least to $US1250/oz, maybe $2000. There has been alot of inflation since 1980, so adjust that $850/oz high for that. A blue chip gold stock is a yield proposition with most of the risks stripped out. You want risk if you want return. RISK is good! You dont avoid the risk, you understand it, you learn to read it & manage it. Whats risky to you is less risky for me because I know something about gold mining & gold prices that you dont. So learn. The benefit of knowing investment is that you can live freely without being tied to a job or mortgage. Money makes money. Know how to manage it. The best areas to pick are IT (project & capital leverage) and commodities (volatile prices, project & price leverage).

PS: This is an old posting of mine - from Jun'05 - see http://www.gaijinpot.com/bb/showthread.php?t=11552.

- Andrew Sheldon www.sheldonthinks.com