Hi Fitzi, Andy & all,
Apart from KRM's lack of confirmation to full ramp-up and beyond to
500 ton/day via the $2mil plant upgrade, the volatility in the POG
is not helping.
It seems that the POG is in no mans land at present:
-positive news of the US has knocked it down over the past week
-while if the US economy is successful in the longer term it will
mean considerable inflation which, in turn, is good for the POG.
-lack of other catalysts
I came across this article about a referendum in Switzerland at the end of
November which, if successful, could give gold the lift that many are waiting for
and set an example for other small currencies:
Will the Swiss drive up gold prices?
(OLIVER MARC HARTWICH 30 OCT, 6:29 AM POLITICS INDUSTRIES RESOURCES AND ENERGY MARKETS)
"If you are invested in gold, you should mark November 30 in your diary. That Sunday could have an impact on your portfolio as Switzerland votes in a referendum on a partial return to the gold standard. The Swiss have a habit of voting for policies that mainstream political parties would never touch. If opinion polls on the ‘Save our Swiss Gold’ campaign are to be believed, they might be doing it again next month. This would not have only have implications for the Swiss National Bank (SNB) – it could also drive up the gold price. Two current and a former member of the Swiss parliament initiated the campaign for a referendum on the Swiss central bank’s gold reserves. Having collected more than 100,000 signatures, their three proposals are now being put to a national vote:
– To stop the SNB from selling any more of its gold reserves.
– To return all Swiss gold reserves stored abroad to Switzerland.
– To mandate that the SNB will hold gold reserves equivalent to 20 per cent of its balance sheet.
The referendum is the culmination of a long discussion about Switzerland’s national gold reserves. Until the turn of the century, the SNB had reserves of 2,590 tons of gold – approximately 40 per cent of its total assets. But then the Bank declared its gold holdings to be unnecessary and started selling a large proportion of them. A total of 1,550 tons were sold, at relatively low prices, leaving only 1,040 tons as gold reserves (equivalent to 7 per cent of the SNB’s assets)."
(source: buisnessspectator.com.au)
Perhaps we should look at KRM SP movement with respect to the POG:
If KRM produces 40K ozs for FY 14-15 as per forecast then every A$50 /oz variance
in POG should mean $2 mil difference to its bottom line or 5.5c movement in SP @ a p/e of 10.
Of course this should only apply when the market has priced-in the 40k ozs production
with a SP in excess of 69c.
Our current SP problem, IMO, is being caused by;
(a) KRM not announcing full ramp-up mid Oct (as announced Sept 1st.)
(b) the collateral effect of downward pressure on the SP of high cost producers (see NCM).
(c) speculation re downward pressure on the POG.
IMO, the company should address these issues together with detailed
plans/ assumptions for tonnage, grade and AISC and the POG over
the next year. Management and board need to promote KRM to the
investment community as a reliable low cost producer that can be very profitable
even at these low gold prices to offset the negative effects of the mine closure
from Sept '12 to July '14.
An Australian major city broker presentations drive before Christmas is required
IMO to re-establish KRM as the premier gold junior on the ASX and save us from
being thrown out with the bathwater.
I attended a mining conference in Brisbane during the week and it was interesting
to listen to the enthusiasm of "would be" gold miners who were forecasting AISCs
much higher than KRM and who were at least 3 years away from production.
Perhaps KRM should have been there.
Cheers
Moorookamick
KRM Price at posting:
36.5¢ Sentiment: Buy Disclosure: Held
(20min delay)
