NEM

NEM, Newmont Mining update

Hamilton

See our previous blog of April 27. Then we assumed the whole process was starting with a 1-2, 1-2. In this count we abstract from that. For the moment there is little difference in the outcome, first stop was expected at around $39. Here are the charts again;

nem jul 2012 bnem jul 2012 s

At today’s low the stock is down 40% from the recent peak. There are two big picture counts with either a 5th wave from the lows in 2001/3, or a large B-wave that coincides with gold’s 10/11 year rise over the same time, from about 300 to 1900 an ounce, double the increase of this stock! Either way we should revisit the $15 level before all is said and done.

NEM , Newmont Mining update

Hamilton

On July 26,2011 we put out the following chart of Newmont;

NEM jul 2011

You can find this chart in a earlier blog on NEM (under Stock index). Below is the same chart as of yesterday;

NEM apr 2012

The high was around $73 and we are at $45 down about $28 or almost 40%. The p/e is at 47x according to Bigcharts. The stock is at levels that it first reached 8 years ago. At this time we have no reason to change the outlook.

NEM, Newmont and Gold and Silver.

Hamilton

NEM aug 8 2011

GLD aug 8 2011

slv aug 8 2011

The “conundrum” continues. Above we have NEM, Newmont, one of the lager or at least mid tier gold producer.  Below that , the stuff, by way of the GLD which represents 1/10th of the gold per ounce price, and below that silver by way of SLV, all in US$ terms.

These are 5 year charts. Newmont has gone nowhere, the stuff has roughly doubled over the last 3 years and tripled over 5. Silver out-performed the other two by a wide margin, more than quadrupling in just 3 years. But there is no harmony between the 3. Clearly there is a complete and total disconnect between the miners and the stuff, and then there is a disconnect between gold and silver. Silver looks like it has already peaked and is completing a corrective retracement. Gold has just broken out of its channel.

I suspect that the cause of these non-confirmations lies in the massive growth of the various ETF’s. The simplicity and liquidity of these investment products diverts capital in a disproportionate way into what happens to be in vogue at a certain point in time, without the limitations with regard to individual participants and volumes such as apply to commodity futures. Raw capitalism at its best, someone will be in tears before it is over.

NEM. Newmont Mining, Gold the stuff and the Conundrum

Hamilton

Greenspan was flummoxed by the fact that bond yields did not drop after he started up the printing presses. He referred to this phenomenon as a conundrum. Being an ardent advocate of gold, at least in his youth, he must be even more baffled by the disconnect between the major gold miners and the “stuff” . This is true for almost all large producers, ABX, G, AEM, K and a few others but we will use Newmont as an example. Here is the chart, above that of GLD, the gold ETF that represents the stuff;

nem

gld july 29 2011

Both are in US$$ and lined up as best as I can get it. Newmont just reported and like all of them complained about rising operating costs. But how is this possible?  All the big guys still operate at a cost of under $500 an ounce, some a lot lower, so if you look at Newmont in early 2007 it would receive $650 an ounce (the GLD is 1/10th of the spot gold value) for a “profit” of $150 in our example. Today they would receive $1600 for a “profit” of $1100 or 7 times as much, (Even if we assume much lower cost, say $300 an ounce which may be more correct in Newmont’s case, it still works out to more than 3 times as much), yet the stock is now trading  below the level it was at then. Go figure. Production is not down in most cases and the cost of earth moving equipment certainly did not inflate by that much. This is the mystery!

It will, over time, be resolved by the stocks going up or the stuff going down. Unfortunately, looking at the stock there is literally no believable or plausible count that would have this go up. Like AXP years ago,(a sell by the way) this stock has a perfect wedge 5th wave, either the whole thing or just the 5th of the 5th. Does not matter much, it should go down, and not a little either.

The Economist blames the arrival of the ETFs (such as GLD) but also calls the stuff as useless as tulips. And when you think about it, humanity spends fortunes digging the stuff up, and then hides most of it in the underground vaults of Fort Knox and other such places. It is truly a mystery how humanity at large benefits from this. Greenspan ,who argued for the gold-standard , may even agree that that system worked, at the time, mostly because of the conventions and agreements that existed, and not by virtue of the value of the stuff itself, in other words it was also a fiduciary currency. There was a time that cigarettes worked equally well, with so many non-smokers that too may be hard to revive.