Cheap Gold in the Ground? (CELTF)
I'm not generally much of a "gold bug" -- I don't believe that the world economy is going to hell in a handbasket, and I don't think that paper currency is worthless. But I do believe that a little gold in your portfolio can be a nice buffer -- especially when prices are soaring, as they are lately.
But buying the gold ETF is so booooorring.
Kidding, sort of. Certainly if you like gold and silver the safe bet is the ETF for either.
But if you're going to dabble in minerals, not much beats the pop potential of a nice junior miner. I owned shares of Northern Orion a while back and enjoyed some nice returns there, then moved most of my commodities-related investing into Ambrian (AMNZF), which is the investment banker for many AIM listed exploration and mining companies (among other things). And though I'm not a mining expert and get sleepy-eyed reading the pages and pages of drilling assays, I can occasionally work up some enthusiasm for another miner.
This one, which I bought shares of a month or two ago after first hearing about them in June due to a fairly aggressive newsletter teaser ad campaign called "Gold of the Pharaohs," has been really fun to watch -- at least news-wise, if not stock price-wise.
Centamin Egypt is an Egyptian company, listed in Australia and Canada (CELTF on the pink sheets) that is aiming to rebuild the Egyptian gold mining industry. Egypt was a huge source of gold in the days of, you guessed it, the Pharaohs ... that's where all that gold came from that they found in King Tut's tomb, and that was so faithfully reproduced in the headdresses and jewelry of Yul Brynner (Rameses) in The Ten Commandments. Or maybe I'm mixing up my references a bit ... but the point is, Egypt and gold have been linked for a long time.
Until recently, however, there apparently hasn't been much modern gold mining in Egypt.
But this little company, Centamin, is on the verge of changing that. They bought a processing plant from Newmont that until last month was in Kori Kollo in the Bolivian boonies (it's now dismantled and is either in a warehouse in La Paz or on a boat, not sure of the precise details), and they're moving it to their mining site a few miles from the Red Sea.
A long way, I know ... and I hope they've got plenty of insurance for the sea voyage. This is an $11 million plant, not bad for some heavily used equipment half a world away from where you need it.
They're also building the infrastructure for the mining operation -- the roads, plumbing, electrical generation, housing, etc.
But that's not the exciting part -- it's nice to see that progress is being made, and they are good about alerting investors to how far they've gotten, including photos of the installations and updates on the progress of the plant dismantling, etc. I always like it when these little mining companies send out photos of their progress -- clearly they could still be lying or doctoring pictures, but at least they've made the effort to show that something real is happening on the ground, not just the churning of press releases.
The really nice part is that they're still exploring the property, even as mining operations are expected to begin by the end of the year, and the amount of gold they find keeps going up (up 25% or so in just the few months since I started paying attention).
Their mine looks to me (no expert) like it's going to essentially be strip mining away a few small hillocks called the Sukari Hill and what's underneath them, and they've still got several drilling rigs operating to help direct the first stages of the mining operations and further suss out their reserves.
Those drilling results are released more or less monthly, and they have been able to consistently say that they're finding or proving new veins of gold and that they are upping their reserves based on the results.
Every time.
And after close to ten years of drilling and exploring this site, the last month's release included the largest increase in the reserves that they've recorded so far. And they've so far drilled a fairly small portion of their potential minesite, though they do have nine drill rigs currently still looking.
So now, before the actual mining operation begins, they stand with an exploration cost for the gold of about $5 an ounce. That's compared to well over $700 an ounce as a current market price, so we'll just have to separate out the mining costs (Egypt, as you can probably imagine, is a very low cost country, wage-wise), the royalties (they've got a good deal on royalties and taxes from the government, at least for their initial few years), and the transportation costs, and whatever's left will be lining their (and our) pockets. Let me clearly note that I have no idea what the average exploration cost is for gold miners, and I'm sure it varies widely, but with actual mining slated to begin in the very near term I really like this cost structure so far.
There's a decent overview of the company (which they essentially paid for, I believe) at Minesite.com, and the company website has a good number of informative presentations, announcements of resource upgrades, and updates on activities. Trading volume is pretty decent in Canada (at least in comparison to the pink sheets), where it trades under the symbol CEE.
So reserves continue to climb pretty dramatically, they've got a proven mining plant on its way to their site, the infrastructure is on its way, and this looks like it's going to be a real, profitable gold mine for years to come, with plenty of potential in the areas of the site that they've not yet drilled.
Of course, the bad part is that I'm buying a company that's already got a market cap of over $750 million that has spent ten years spending money, and hasn't yet sold an ounce of gold.
Still, I like the ongoing potential for this speculative investment. Over 10 million ounces of gold and counting are likely to be under those hills, all they've got to do is dig it up ...
Full disclosure: For those who haven't guessed, I do own shares of Centamin Egypt, bought on the pink sheets over the past few months at an average cost of $1.08.
But buying the gold ETF is so booooorring.
Kidding, sort of. Certainly if you like gold and silver the safe bet is the ETF for either.
But if you're going to dabble in minerals, not much beats the pop potential of a nice junior miner. I owned shares of Northern Orion a while back and enjoyed some nice returns there, then moved most of my commodities-related investing into Ambrian (AMNZF), which is the investment banker for many AIM listed exploration and mining companies (among other things). And though I'm not a mining expert and get sleepy-eyed reading the pages and pages of drilling assays, I can occasionally work up some enthusiasm for another miner.
This one, which I bought shares of a month or two ago after first hearing about them in June due to a fairly aggressive newsletter teaser ad campaign called "Gold of the Pharaohs," has been really fun to watch -- at least news-wise, if not stock price-wise.
Centamin Egypt is an Egyptian company, listed in Australia and Canada (CELTF on the pink sheets) that is aiming to rebuild the Egyptian gold mining industry. Egypt was a huge source of gold in the days of, you guessed it, the Pharaohs ... that's where all that gold came from that they found in King Tut's tomb, and that was so faithfully reproduced in the headdresses and jewelry of Yul Brynner (Rameses) in The Ten Commandments. Or maybe I'm mixing up my references a bit ... but the point is, Egypt and gold have been linked for a long time.
Until recently, however, there apparently hasn't been much modern gold mining in Egypt.
But this little company, Centamin, is on the verge of changing that. They bought a processing plant from Newmont that until last month was in Kori Kollo in the Bolivian boonies (it's now dismantled and is either in a warehouse in La Paz or on a boat, not sure of the precise details), and they're moving it to their mining site a few miles from the Red Sea.
A long way, I know ... and I hope they've got plenty of insurance for the sea voyage. This is an $11 million plant, not bad for some heavily used equipment half a world away from where you need it.
They're also building the infrastructure for the mining operation -- the roads, plumbing, electrical generation, housing, etc.
But that's not the exciting part -- it's nice to see that progress is being made, and they are good about alerting investors to how far they've gotten, including photos of the installations and updates on the progress of the plant dismantling, etc. I always like it when these little mining companies send out photos of their progress -- clearly they could still be lying or doctoring pictures, but at least they've made the effort to show that something real is happening on the ground, not just the churning of press releases.
The really nice part is that they're still exploring the property, even as mining operations are expected to begin by the end of the year, and the amount of gold they find keeps going up (up 25% or so in just the few months since I started paying attention).
Their mine looks to me (no expert) like it's going to essentially be strip mining away a few small hillocks called the Sukari Hill and what's underneath them, and they've still got several drilling rigs operating to help direct the first stages of the mining operations and further suss out their reserves.
Those drilling results are released more or less monthly, and they have been able to consistently say that they're finding or proving new veins of gold and that they are upping their reserves based on the results.
Every time.
And after close to ten years of drilling and exploring this site, the last month's release included the largest increase in the reserves that they've recorded so far. And they've so far drilled a fairly small portion of their potential minesite, though they do have nine drill rigs currently still looking.
So now, before the actual mining operation begins, they stand with an exploration cost for the gold of about $5 an ounce. That's compared to well over $700 an ounce as a current market price, so we'll just have to separate out the mining costs (Egypt, as you can probably imagine, is a very low cost country, wage-wise), the royalties (they've got a good deal on royalties and taxes from the government, at least for their initial few years), and the transportation costs, and whatever's left will be lining their (and our) pockets. Let me clearly note that I have no idea what the average exploration cost is for gold miners, and I'm sure it varies widely, but with actual mining slated to begin in the very near term I really like this cost structure so far.
There's a decent overview of the company (which they essentially paid for, I believe) at Minesite.com, and the company website has a good number of informative presentations, announcements of resource upgrades, and updates on activities. Trading volume is pretty decent in Canada (at least in comparison to the pink sheets), where it trades under the symbol CEE.
So reserves continue to climb pretty dramatically, they've got a proven mining plant on its way to their site, the infrastructure is on its way, and this looks like it's going to be a real, profitable gold mine for years to come, with plenty of potential in the areas of the site that they've not yet drilled.
Of course, the bad part is that I'm buying a company that's already got a market cap of over $750 million that has spent ten years spending money, and hasn't yet sold an ounce of gold.
Still, I like the ongoing potential for this speculative investment. Over 10 million ounces of gold and counting are likely to be under those hills, all they've got to do is dig it up ...
Full disclosure: For those who haven't guessed, I do own shares of Centamin Egypt, bought on the pink sheets over the past few months at an average cost of $1.08.
This article posted by One Guy @ 9/20/2007 01:20:00 PM 2 comments
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