Monday, October 27, 2008

Stuff vs. Claims on Producers of Stuff

WOW! Spot Gold vs. mining behemoth Newmont. Contrarians with capital, risk appetite and safe custodial arrangements take note. NEM is at 1.2x book, 5x ev/ebitda and 10x '09 and '10 forecast EPS. OK its got a billion or so of debt coming due, but if you can't refinance against the most world-class deposits of gold-in-the-ground, then no one has any hope.

Here we have Barrick, the enfant terrible of Canadian mining. Ouch! Someone has been puked. Many people in fact have been puked. And looking at this price action, one would be forgiven for wondering if anyone is left with positions. Here too, ABX is "at book", 9 to 12x low and high ests for '09 and '10, and under 6x ev/ebitda. And they are sporting a FCF yield of 4 to 5%.

Pan-American Silver has suffered a similar fate, with similar values revealed undoubtedly through similar puking. Clearly, here too, "financial regurgitation" remains the operative word, with wife knife-catchers, and cow-tippers, no where in sight.


Finally, we see the result of over-exhuberance by the owner, chief and largest shareholder, Aubrey Mclendon, who being bulled beyond belief borrowed (oh such alliteration!) heavily to acquire even more stock than he'd fed himself over the years. By most accounts, he is NOT a nice man, so one perhaps shouldn't shed too many tears, but where most independent crude producers are historically rich to the product, here - thanks to Mr M - CHK is historically cheap to the product. If you've got the dry powder, go to town, for the moment even a whiff of risk-appetite returns, you'll have 20% in the bag before you can say "Jack Sparrow"

7 comments:

Devin Finbarr said...

If you've got the dry powder, go to town, for the moment even a whiff of risk-appetite returns, you'll have 20% in the bag before you can say "Jack Sparrow"

The dividend yield of CHK is still a pitiful 1.73%, even after this crash in price. That indicates to me that the stock is still over priced.

"Cassandra" said...

Devin FInbarr

1.75% given their caperx and investment is rather generous and says noting about +/- valuation. Last time I checked, Natty itself was - more or less - yielding noughts.....

Anonymous said...

Mc-Lend-on-what?

burnside said...

Cass, are PMs experiencing the same letter of credit/ bulk shipping stalemate as are other commodities?

Rosabarba said...

Thanks for the note on CHK, Cassandra. I made it my huckleberry before the fireworks today.

Props.

Anonymous said...

Burnside

I would guess L/Cs are a problem for traders/brokers of precious metals rather than the miners themselves, as I would imagine the miners deliver to established clients using other settlement methods.

Two cents

Etz said...

Jack Sparrow!

Thanks Cas.