Gryphon Minerals (GRY.ASX) is a stock that I recommended a number of times back in 2007, 2010, and finally Jan 2009 (draft only - I never published this blog post - probably because I was waiting until I buy myself). Anyway, based on the chart, the entry price was 12c. Exploration has since taken the stock to $2.00. Today the stock has issued 52mil shares at 60c, and is now 34c. This stock conveys the cycles inherent in mining stocks. So here we are today, Gryphon Minerals has:
1. Some $52mil in cash, $30mil in investments
2. A resource of 4mil oz
3. A mine construction plan expected to deliver a capital cost payback of 2.5 years near current ($1500/oz) gold price, or 1.5 years at $2000/oz gold price
4. The added potential to offer expanded resources
5. The added potential to expand mine plant capacity from 2Mtpa to 4Mtpa
6. A large tract of exploration acreage
7. A mid-tier mining stock which has appeal for a takeover/merger, either of which proposition which result in a re-positioning of the stocks.
It is apparent that we can see short term upside to 60c in this stock, but there is an opportunity of course to wait for longer-term sustainable earnings. There are however reasons not to wait, and that is the prospect of a takeover or exceptional drilling results from new areas, resulting in resource upgrades. This company has strategic gold acreage in Africa - it will be a target for other Australian and Canadian miners who will look to diversify away from their specific country risks. Mind you, after a Australian Labor Party (Rudd/Swan/ Gillard) -inspired mineral resource rent tax (MRRT), I have come to regard Western governments as the worst offenders in the sovereign risk stakes. Not to say that there is not a justification for some type of resource 'rent' in mining; but you don't extort wealth from title holders, or equity investors with a stake in those companies. So Africa looks good to me. Ghana is one African country that adopted a modest tax.
The other short term reason favouring gold stocks is the gold price - which is currently sitting at its support level. This stock has just been removed from the ASX-200 Index, so it has been punished for that reason. We are however confident that it will return to the index in due course, and that it will out-perform the broader market.
I will however caution investors that there is no strong chart 'technical support' for this stock, so whilst a consolidation is evident, you might want to use technical indicators to pick an entry. It has not yet become a technical 'buy'. It is however clearly good long term value. One should of course also keep an eye on the gold price to ensure it has support at $1550/oz. The market is currently divided on the outlook for gold. We provide our reasons why we like gold (and Japanese foreclosed & Philippines property) here.
Asian property markets outperforming Japan Foreclosed Guide Philippines Property Guide
Profit from mining with Global Mining Investing eBook
1. Some $52mil in cash, $30mil in investments
2. A resource of 4mil oz
3. A mine construction plan expected to deliver a capital cost payback of 2.5 years near current ($1500/oz) gold price, or 1.5 years at $2000/oz gold price
4. The added potential to offer expanded resources
5. The added potential to expand mine plant capacity from 2Mtpa to 4Mtpa
6. A large tract of exploration acreage
7. A mid-tier mining stock which has appeal for a takeover/merger, either of which proposition which result in a re-positioning of the stocks.
The other short term reason favouring gold stocks is the gold price - which is currently sitting at its support level. This stock has just been removed from the ASX-200 Index, so it has been punished for that reason. We are however confident that it will return to the index in due course, and that it will out-perform the broader market.
I will however caution investors that there is no strong chart 'technical support' for this stock, so whilst a consolidation is evident, you might want to use technical indicators to pick an entry. It has not yet become a technical 'buy'. It is however clearly good long term value. One should of course also keep an eye on the gold price to ensure it has support at $1550/oz. The market is currently divided on the outlook for gold. We provide our reasons why we like gold (and Japanese foreclosed & Philippines property) here.
Asian property markets outperforming Japan Foreclosed Guide Philippines Property Guide
Profit from mining with Global Mining Investing eBook
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