Facts to consider for KMN
As I have mentioned earlier that one of the drivers for the share price of juniors is takeovers.
The other driver which is coming soon is the price of gold and silver.
Consider this before you decide to take any action.
Remember that San Anton has about 4 million ozs of gold; 200 million ozs of silver and 650kt of copper. You need to believe that the bull run of gold and silver is far from over to hold this stock!! And here are the reasons:
Consider this:
There is a great disparity between physical demand and paper prices at this point in time for both gold and silver. In other words the smart money is going into precious metal. There were a lot of speculative money in commodities in a rising market and now they are deleveraging hence pulling down all commodities because of the recession and also bankers calling back their loans to shore up their capital. Yet with all this deleveraging gold has performed extremely well compared to all the other commodities. The problem now is the fact that with this low price of commodities you are seeing explorers decimated, projects cancelled and postponed because of a lack of credit. Already in the environment of easy credit, mines have difficulty keeping up with demand. Last year there was a fall of 9% in gold production (That’s from the world gold council report) .Now with the credit crisis there will again be shortages in one or two year’s time when the economy picks up. And the economy will pick up considering the amount of money put into the economy over this past few months and the coming few months and years. Believe me there is a huge disparity between the price of physical gold and silver to the paper price. Just call up any gold coin dealers and you will see that what I am saying is fact.
The demand of gold and silver has been buoyant over the last few months due to the financial crisis even though this is not reflected in the price. There are talks of China, Iran and Russian central banks buying gold. Jeff Christian from CPM is saying that the demand of gold and silver has been rising over the last few years. The world gold council also has to admit the rise in demand of gold. You may ask why are people getting into gold and silver. The one word answer is inflation as in monetary inflation. That is to say that the central bankers of the world has printed a lot of money over the last few months. Have a look at this:
and this:
When the Fed has pumped in that much money into the system there cannot be no consequences. Once the deleveraging starts to slow the inflation problem will surface and I mean high inflation.
And by the way it does not stop there . The US would still need to print or borrow over a trillion dollars just to pay her account deficit. Add in all the stimulus program which are promised by Obama they will easily need to print or borrow over 3 trillions over the next year. Don’t just believe me on this read it for yourself in financial sense .com or many other excellent sites. To understand the amount of 3 trillion that they have to print/borrow you will have to compare it to their entire GDP of only about 13 Trillion. Also this is not just a US problem it is worldwide. Australia is going to spent over 10 billion just this Christmas as announced by Kevin Rudd. And there are other fiscal stimulus to come. China has announced that they will spend over 600 billion US dollars to stimulate her economy. By the way 600 billion dollars spent in China would easily equate to 3 trillions worth of spending if it is spent in the US. Then you have a low interest rate policy (negative in some countries after accounting for inflation) for virtually all the governments of the world which would help to urge consumers to borrow and spend more. It is this that the smart money are anticipating which is highly inflationary. By the way the IEA in its forecast of oil demand still thinks that there will be an increase of demand by about 0.4% next year. (if there be the case then where is the recession? Answer is recession in OECD countries but growth in developing countries.)
With gold at 740 dollars and silver at 9 dollars you can be assured that a lot of mines will be closed if the price stayed at these levels for a longer period of time especially those in South Africa where the cash cost of mining gold is more that 450 dollars per oz meaning that they are not be making money at the current price of gold.
The risk is so low and the upside is so tremendous now. Yes the share price of KMN is dropping but look at how low the volume is. There are very very few sellers at this price. What are left of the shareholders now are mainly the strong hands which are those who understand the fundamentals of the company. Be patient a little longer. When the gold price starts to assert itself that will drivet the share much much higher.
And lastly have a look at this chart which shows the gold seasonal prices.
You will notice that November is usually the month which starts off a resumption of the gold bull run seasonally.
One more last thing; the bond king Bill Gross is getting out of bonds and going into tangible type of assets and the stock king Warren Buffet has gotten totally out of bonds into stocks. That says something!
Cheers
