Monday, May 28, 2012

Xstrata (XTA) Offering Mick Davis $78.2 Million

With the merger between Glencore (LSE:GLEN) and Xstrata (LSE:XTA) set to be voted on soon, news that Xstrata CEO Mick Davis will receive a bonus package valued at approximately $78.2 million has been announced by the company, according to the Financial Times.

At this time the deal is expected to go through, although there are a number of things that could derail it, including the rejection of the giant bonus package offered Davis by Xstrata shareholders.

The payout would be over a three-year period, which would be guaranteed and not connected to performance.

Documents detailing the $30 billion deal will be released to shareholders this week.

Glencore, which owns just under 34 percent of Xstrata at this time, is offering 2.8 new shares for every one share of Xstrata.

It appears at this time the company won't be increasing the offer, although it has up that option up to several days before the shareholder vote.

If the merger goes through, it would make the new entity the fourth-largest mining company in the world.

Thursday, May 24, 2012

Are Goldcorp (GG)'s Problems Temporal?

The weak performance in the last quarter had analysts berating Goldcorp (NYSE:GG), making the company to appear to be facing a major disaster, rather than a probable minor blip that they are dealing with at this time.

Production issues at its Red Lake mine resulted in a drop in gold production of about 70,000 ounces from the same quarter in 2011. Another negative was the boost in production costs from $188 an ounce to $251 an ounce.

That isn't as important, as most gold miners experienced similar boosts in costs.

Goldcorp CEO Chuck Jeannes said this about the quarter, "Solid operating results throughout most of our mine portfolio were offset by a challenging first quarter at Red Lake."

Assuming this is an accurate assessment of the performance of the company, the problems at Goldcorp appear very solvable, and not as challenging as they have been portrayed to be.

That means the company could have been oversold, making the current price a good entry point for investors.

It is highly likely the shares of the company are poised to rebound, especially if the performance of the rest of the company remains in tact and Red Lake begins to add to production.

Goldcorp has been bouncing off its recent 52-week low of $32.16, as traders pushed down the price of the stock.

As of 11:51 AM EDT, it was trading at $37.32, down $0.17, or 0.46 percent.

Tuesday, May 22, 2012

Barrick (ABX) (EGO) (NEM) Jump Monday

After starting off strong on Monday, gold futures were up and down the rest of the session, closing the day at $1,588.70 per ounce for June delivery, down slightly from Friday's close.

Barrick Gold (NYSE: ABX), Eldorado Gold (NYSE:EGO) and Newmont Mining (NYSE:NEM) all finished up on the day, as the U.S. dollar fell against the euro.

It appears gold is ready to move up again after it dropped to $1,527 an ounce last week, the lowest level in 2012. That reversed significantly when gold traders scrambled to cover their short positions.

Expectations are when gold prices move slightly above $1,600, investors will jump back into the gold market.

Even so, the volatility of the price of gold because of the perceived safety of the U.S. dollar, which has been strengthening of late, along with the sovereign debt crisis in Europe, has investors jittery, and most are buying on dips until they get more clarity.

It's highly probable the greenback will weaken sometime soon, as it's a flawed currency itself, although it's been strong against the euro lately because of the financial crisis in the euro zone.

The question is whether the U.S. dollar will rebound yet again as the euro falters in full view of the world.

If it does, it makes gold more expensive for other currencies, putting even more downward pressure on it.

Until the crisis in Greece is resolved, we'll see this being the ongoing scenario. Much of this is now driven by headlines.

Friday, May 18, 2012

Soros Plows Back into Gold (GLD)

The schizophrenic words and actions of George Soros are back in play, as the billionaire investor, contrary to comments made in the recent past that gold is the "ultimate asset bubble," has now poured capital into the yellow metal again, presumably because it's probably nearing the end of its correction.

Even if the correction has some more room to run, there's no way to time how low it will go, so entering now, before he has to start chasing it, is a wise decision.

The major move by Soros into gold is the increasing of the holdings of his hedge fund in SPDR Gold Trust (NYSE: GLD) from SPDR Gold Trust from 85,450 shares in the fourth-quarter to 319,550 shares in the first-quarter, according to Fox Business.

He reportedly also opened up "a new position through call options in Newmont Mining (NYSE:NEM)," adding significant exposure to gold there.

This of course contradicts Soros' words, which proves one needs to watch what is being done rather than what is being said.

There is no gold bubble yet, neither are we close to one. As Soros former business partner Jim Rogers recently said, the gold bull market is far from being over. He's right.

Short term, because of gold and silver prices being driven by headlines from the European sovereign debt crisis, we'll see a lot of volatility in the prices, mostly because the U.S. dollar temporarily continues to perform strongly against the euro as people view it as the best place to safely put their capital.

Thursday, May 17, 2012

India Gold Jewelry Demand Falls 19 Percent

Gold jewelry demand in India dropped 19 percent in the first quarter of 2012, while gold investment demand plummeted 46 percent during the same period.

The horribly inefficient and anti-business Indian government announced it's going to slap a 10 percent duty on non-standard gold and gold jewelery, and another 4 percent import tax on bullion.

In response to the plans, Indian jewelers participated in a nation-wide strike for three weeks to protest the proposed actions.

This has created a volatile gold market in India, resulting in bullion dealers allowing their stock to contract because of the unknown consequences of the government interference in the market place.

After the uproar the Indian government backed down on the 10 percent excise duty on jewelry that isn't branded.

Tuesday, May 15, 2012

Jim Rogers: Gold Bull Market Not Through Yet

In an interview with Forbes, billionaire Jim Rogers was asked what his thoughts on gold were.

Rogers noted that it's unusual for any asset class to continue to go up for eleven years in a row like gold has, so it's not surprising to him that we are going through a period of correction, which Rogers believes will probably continue for a time.

There has been a flight to the U.S. dollar for safety as the euro drops in value against it. That has been the major impetus for the fall in gold prices.

Rogers also adds that the "The Indians are coming down hard on gold, and they’re the largest consumer of gold in the world."

He thinks that will keep pressure on gold for now, and he asserts that "if it goes down further – I hope I’m smart enough to buy more. To buy a lot more."

In the past Rogers has said if the price of gold falls below $1,600 an ounce, he'll become a buyer again. As of this writing gold is trading at just above $1,551 an ounce, suggesting Rogers has probably already been buying gold.

His conclusion is the gold bull market is far from over yet, and he'll continue to be a player, saying he continues to be a buyer and not a seller, although he is now thinking about hedging gold.

Tuesday, May 8, 2012

Randgold's (GOLD) Hammering Continues

Following its record breaking previous quarter, shares of Randgold Resources (NASDAQ: GOLD) continues to get pummeled by investors after its latest quarter results revealed the company profits were down by 28 percent and its gold production down 13 percent over the previous quarter.

So far it hasnt mattered to investors that the company profits were up 126 percent over the first quarter of 2011.

That hasn't influenced JPMorgan Chase (NYSE: JPM), which upgraded it from an "Underweight" rating to a "Neutral" rating.

Since its report on May 3, Randgold had plunged from $86.40 a share down to $77.37 a share, as of 1:56 PM EDT. It is down $3.55, or 4.39 percent on the day so far.

It appears the company is now being oversold.