On reserves alone, the company's valuation is in the billions. In 2011 after acquiring Massey Coal, the company was worth more than $10 billion - it is now a measly $434 million. So what went wrong ? the debt it absorbed when it acquired Massey was substantial and just after making the deal the company was faced with a series of write-downs which took away its profitability and damaged its reputation. Some of that stems from an overall decline in the coal price, but not all of it ;
Rumors of an Obama war on coal have been rampant but have yet to come to fruition - in some states coal is just too important to simply phase out. ANR is a major producer of thermal coal (used in electricity generation) and it relies heavily on sales of this in states like Kentucky - Obama recently mandated a 30% cut in carbon emissions by fuel burning power plants by 2030. The easiest way for the states to accomplish this is to completely overhaul the way power plants generate electricity in states like Kentucky where thermal coal is the number one source of electricity.
However, given that public opinion is against it (full implementation will cost a quarter of a million jobs) and that democrats have a strong interest in winning Kentucky, it seems unlikely that those radical changes will be implemented anytime soon. Add to that the higher costs associated with using natural gas (9c per kWh) and renewables (23c per kWh vs 4c for coal) to make electricity and you have a lot of reasons to invest in undervalued coal stocks like ANR.
The Gold Price Fell 5.4% In September Then Another 4.6% In October = Down US $126 In Just 61 Days !
It's not just equities and the dollar that are pressuring the price of gold.
gold: not as popular among hedge funds
Total holdings by gold exchange traded funds (ETP) is now at the lowest level since 2009.
SPDR Gold Trust GLD is the largest physically backed gold ETF (two-fifths of industry holdings) - SPDR net holdings are at their lowest level since 2008.
It doesn't matter whether it's for jewellery or bullion, gold demand worldwide has been down for the better part of this year.
In the first and second quarters it was probably the price that turned consumers off (remained in a tight range between $1250 and $1310 after hitting $1385 in late March 2014), and with currencies such as the Indian Rupee and Canadian Dollar nearing four year lows against the greenback, the price may have just been too high. In Q1 demand fell -26%, Q2 -16%.
A Reason To Be Bullish - India
The Indian festival of Diwali is a big reason India is the world's largest market for gold (#2 in 2013 but #1 in 2Q2014). Last year, demand for gold during Diwali was down -33%, but this year jewelry sales are up +20% !2014 Diwali : the price for 10 grams of gold averaged 27.5th rupees which is 15% less than in the previous year (32.5th).
Gold Price In US Dollars
sept 2013 1392.25 -> 1326.50 -4.7% sept 2014 1286.50 -> 1216.50 -5.4%
oct 2013 1290.75 -> 1324.00 +2.6% oct 2014 1216.50 -> 1160.40 -4.6%
I'm Still Bullish
Though recent trends point to a bear market I remain somewhat bullish, at least for the long run. US dollar, though up has been unsteady. It appears to be stronger versus the key reserve currencies yuan, yen, Canadian $, Australian $, Euro, but I don't consider the current level to be sustainable.US economic growth forecasts remain subdued, the effects of a strong dollar can wreak havoc on exports of US products since prices get more expensive in other currencies (why China has long maintained a low yuan policy). Also, less exports tip the US trade imbalance even more in China's favor - this will stunt jobs growth as companies would rather pay employees in a cheaper currency. With QE3 down to only $15 billion a month from a high of $85 billion a year ago, any growth the US experienced earlier this year could disappear just as quickly as it appeared (less stimulus / harder for small businesses to borrow).
Yes, US interest rates may rise, but given the record lows we've seen this past year, that shouldn't really be unexpected.
Also note that in other currencies, the fall in the gold price hasn't been as pronounced.
Gold price since May 2014: in US dollars is down 9.8%, in Canadian dollars is down 5.5% and in Euros the price of gold is actually unchanged.
Don't like the short term outlook for gold ? try palladium
The price of platinum remains quite high and palladium is a cheaper alternative for use in jewelry, catalytic converters, electronics, aerospace. Disruptions to the supply chain in South Africa and Russia (dwindling stockpiles) caused demand to outstrip supply since last year.
Virtually all of it is consumed by industries exibiting robust growth (auto, aerospace) so there is no reason to expect a downturn in demand. By comparison, only 10% of demand for gold comes from industry.
Seabridge Gold nyse:SA owns 100% of Canada's Largest Gold Project - Undervalued Companies & under the radar stocks
2P reserves are ~ 40 million ounces for gold, 200 million ounces for silver and 210 million pounds for molybdenum. All of these reserves are located at one property in northern British Columbia (KSM). At only $330 million the company's valuation seems very low all things considered - In September Seabridge obtained key early stage construction permits, neighboring Pretium Resources (nyse:PVG) has fewer reserves at Brucejack but its market capitalization is 64% higher; According to Pretium commercial production at Brucejack will begin in 2016 with output at around 504,000 ounces per year. You can be sure Seabridge is paying close attention to what's going on at Pretium's property, eventually I expect both companies to work together on mine construction and planning since the projects coincide.Over the last three months nyse:sa -32% has outperformed key Canadian players including Barrick -35%, Yamana -53%, Goldcorp -32%, Pretium -33% and Detour -46%.
other notes
Smart move gives Brookfield Asset Management a lift !If you're looking for a company with high class assets and lots of growth potential that is more diversified than its competitors look no futher. Has interests in electric power plants, wind farms, commercial real estate, agriculture, retail properties and now casinos ! early this month (October 2014) Brookfield bid and won the Revel Casino complex in Atlantic City. The $2.4 billion structure cost it only $110 million.
Plans are already underway to reopen the casino. Without having to go into debt to buy it there's no doubt that Brookfield will turn Revel into a money making asset.
- nyse:bam 1mo +8.7% 3mo +8.9% 6mo +15.4%
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