Gold Prices In Limbo, BlackBerry BBRY Gradual Trend Upwards, Heinz Takeover A Foreign Acquisition HNZ

A lot has happened since my last post so I'll be brief. 
Gold and silver price shows weakness despite a surge in demand.
The price of gold (and even moreso silver) has been weak despite

1) Record sales of silver eagles during the months of January and February
2) Increasing demand on the comex for both precious metals
3) Russia and China continuing their buying spree
4) Growing evidence that some of the popular gold and silver ETFs have only paper claims - which they can't physically backup.

Though I maintain that over the long run, you're safest investment route is in physical gold and silver, over the short term, prices might trend lower ... much lower.
In fact Goldman Sachs thinks that gold is on its way down to $1200 an ounce - a fall of almost 30% from current levels, pushed down by US interest rates which are on their way up (whether the economy stabilizes or not, interest rates can't get any lower than they are now).

I can both agree and disagree with their assessment.  Higher interest rates can depress prices but I think that other factors will eventually come into play that will counteract the effect.  The fiscal cliff is just starting to kick in which will eventually create a need for more quantitative easing: QE3, followed by QE4, QE5, ... etc.  The US trade deficit remains only marginally lower than it was in 2011 ($540.4b vs $559.9b) despite big jumps in fuel sales to overseas buyers/crude output reaching 766,000 bpd which is a 15 year high, so imagine what would happen if oil production and fuel sales declined, which John Kerry's policies appear to favor.

But with the Chinese yuan renminbi continuing to depreciate against the American dollar, there's no reason to expect the trade gap with China to alter significantly anytime soon.
What about China ?  The world's second largest economy and key purchaser of US and European debt (electric grid in Portugal now owned by Chinese company) is facing new problems of its own some geopolitical others domestic.  Foxconn (Hon Hai Precision Industry) which is the leading supplier of components for America's biggest company Apple Inc (AAPL), has stopped hiring new workers - a stock selloff ensued as investors took that to mean that sales of Apple's products are falling off.  However, at the same time Foxconn expressed an interest in opening new manufacturing centers overseas (suggesting that perhaps the problem is with China/ Apple wants more American workers).
For January 2013, foreign direct investment (FDI) into China was down 7.3% to $9.3 billion which is a four year low, in fact it's the largest decline since November 2009 (-9.9%)

Interest in BlackBerry is Growing and it's not just from Business Clients

                    This month, BlackBerry launched the first in a line of QNX powered smartphones running on the totally redesigned blackberry 10 platform.  I spent a lot of time last year defending RIM's strategy, technology and reputation and so it's refreshing to finally see the company get credit for all the R&D that went into developing their current products (the Z10 is groundbreaking and that's just what RIM needed to keep detractors at bay, otherwise, attacking them would be very easy to do considering BlackBerry's US market share remains quite low). 

The company took quite a beating the last two years for sticking to its own platform (and apps) while remaining steadfast in their dedication to security and to serving the needs of corporate clients.  Though the PlayBook remains a work in progress (sales steady but only because the market is growing) the new line of handheld devices are proving popular among both business and non business clients, giving shareholders more reason to be optistic.  Investors take note ! - The new BlackBerry Z10 was first released in the UK followed by Canada (February) then finally the United States (March) meaning that sales figures won't fully show up in quarterly reports until the summer (next results will be released in March followed by June).  Over the last 3 months BlackBerry (Nasdaq : BBRY) is up +23.6% which outperforms other techstocks Nokia (+18.93%), Apple (-23.96%) and even Google (+19.24%). 

Demand for the BlackBerry Z10 must be solid given that RIM has already increased  production capacity.

According to CEO Thorsten Heins

"we still have an installed base of 79 million subscribers. And BlackBerry 10 offers something that Windows Phone cannot, namely, the strict separation of business and personal information. The Microsoft operating system cannot imitate times just between evening news and weather reports". 

Heinz Gets Acquired But Who's Really In Control ? Brazil's 3G Capital or Omaha's Buffet ?

                   And finally, Heinz Ketchup gets taken over by investment firms Berkshire Hathaway, 3G Capital.  It's $23 billion in cash with the rest of the $28 billion figure stemming from Heinz's $5 billion debt load ($4.1 billion long term).  What's notable about this takeover is that 3G Capital, the foreign company involved is actually the company receiving a controlling interest not Berkshire Hathaway.  Former shareholders are obviously happy with the 20% premium they received but what about the employees in Pittsburgh, who will now have to accept that most important decisions concerning the company will be made in Brazil.

Palladium Production Leaders Record Lower Volumes, revenue by metal companies Norilsk, AngloPlatinum, Lonmin

Between 2003 and 2010 palladium prices averaged 20% to 25% the price of platinum before reaching today's high of around 40%.  There are many reasons for this
- Toyota using palladium in place of platinum in catalytic converters,
- Palladium was less affected by the problems in South Africa
- Lower Russian output.  The price ratio could increase even more in the future because supplies haven't been tight as compared to alternatives platinum and rhodium. 
- According to some analysts, there was a platinum overproduction of half a million ounces in 2012.

Norilsk Nickel nilsy is the world's largest nickel producer and ranks among the top five companies in terms of platinum reserves.  The company operates in Russia, Finland, Botswana, South Africa and Australia.  The Norilsk deposit in Russia was among the first exploited platinum deposits.

From January to September 2012 Norilsk produced 2.077 million ounces of palladium, down 1.2% from 2011.  Russia was the source of 96.1% or 1.996 million ounces.
In interim 2012 the company earned $1.481 billion (-22.0% from $1.818b) on revenues of $5.929 billion (-19.2% from $7.335 billion).  Revenue attributable to palladium:  1h2012 15.7% (1h2011 15.5%).

Anglo American Platinum pink:agppy - Palladium production down for the nine month period but up 4.3% in the 3rd quarter (376k oz -> 392k oz).  Sales of platinum group metals:  3275 million ounces (-7.45% from 3535m oz).
Prices achived:   Platinum $1513 (-14.8%), Palladium $637 (-17.4%), Rhodium $1304 (-39.3%), Nickel $17,159 (-30.1%).  Cash operating costs per ounce of platinum produced:  R14,976 +14.4%.  Unki production +20% year on year.  An illegal mine strike cost the company 2,000 oz of platinum output in the third quarter.
Biggest contributor to revenue is the Mogalakwena Mine.  Mogalakwena contributed 24.8% of six month revenue came from the mine (-8.6%).  9m2012:  $983,000 down from $1,038,000 in 2011.
% revenue from palladium:  16.4% down from 14.9% last year. 

Stillwater Mining Company nyse:swc, tsx:swc

• Has a three year agreement with General Motors Corporation for a monthly delivery of a fixed amount of platinum group metals (platinum, palladium, rhodium) which is set to expire at the end of 2013. 
• one year agreement with Tiffany & Co expires end of 2012.
• Supply agreement with Johnson Matthey.
• Year to year agreement with Ford Motor Company.
• No outstanding derivative contracts
• one of only two platinum/palladium companies based in North America (other one is Canadian mining company North American Palladium)

43% of total revenue comes from PGM recycling up from 37% last year.  Avg realized price in 3q2012 was $611/oz down -18.9% from $753 in 3q2011.  3q2012 palladium production:  97,500 ounces down -2.6% from 100,100 ounces in 3q2011.  94,100 ounces came from the Stillwater mine in Montana, down from 96.800 ounces in 2011.  Nine month palladium production:  294k oz -5.5%
% revenue from palladium:  46.9% down from 48.8%.

Lonmin lon:lmi
Fiscal year ends September 30. It's the 3rd largest producer of platinum in the world. All of its mines are located in the Bushveld Complex of South Africa. Production in the three months ended September 30, 2012 was down 45.7% due to a mine strike (-110,000 oz), however refined platinum was down only 20.8% due to stockpile usage.
9 months to Sept 2012: 216,974 oz -10.0%.
% revenue from palladium: 13.1% (15.6%). fiscal 2012
Fiscal year 2012 revenue: $1.614 billion -18.98% ($1.992b),
Total PGM sales: 1383.945 k ounces down -3.6% from 1435.929 koz the year before.

What CNOOC (CEO) Nexen (NXY) Acquisition Means For Oil Sands (China oil companies production reserves offshore)

After months of waiting for the Canadian government to approve it, on December 8, 2012 China's national offshore oil corporation (nyse:ceo) completed a $15.1 billion all cash takeover of Canada's tenth largest oil company Nexen (tsx:nxy).  The deal is the largest foreign investment by any Chinese company ever and will undoubtedly be a confidence booster to Chinese firms looking to buy companies abroad after having been spurned by Unocal Corp in 2005 ($18.5 billion offer rejected) .  In order to get the Canadian government to approve the deal, CNOOC had to make a few concessions:  It agreed to an annual review of its operations, that Nexen Canadian operations employ more Canadian workers than Chinese, CNOOC has also said that it will consider listing on the Toronto Stock Exchange.  The stipulations are not new, the Canadian government has a similar arrangement with Rio Tinto Alcan.

Don't be fooled !  Chinese investment in Nexen doesn't necessarily indicate their interest in the oil sands.  Nexen only accounts for about 6% of oil sands production (including shale, Nexen produces 52 thousand bpd in Canada), in fact the majority of Nexen's production comes from outside of Canada in regions such as the North Sea, the Gulf of Mexico and offshore West Africa (African production down from 18th boe/d last quarter to nothing this quarter). 

Bombardier Results Investor Analysis, Aircraft Deliveries Orders, Flexity Trains cs100 Jets

            Bombardier Inc (TSE:BBD.B) is a rare company in that it holds the disctinction of being both the world's largest train maker and the world's #3 manufacturer of aircraft.  The Germany-based train division dubbed Bombardier Transportation remains slightly more important to the company financially, however the gap is closing fast;  For the nine month period ended October 2011, sales of trains and related services accounted for 53% of company revenue and 59% of ebit - however during the nine month period ended September 2012 that fell to 49.8% and 54%, respectively.  Bombardier puts the blame squarely on European demand (lower activity/contracts reaching completion not being filled by as many new ones) which it says accounts for 88% of the decline in rail car sales (9-month period). 

I'm still optimistic about the Transportation division !  In China and Russia, demand for trains developed by Bombardier will inevitably go up due to key license agreements signed with major rail equipment companies in China (CSR Puzhen) and Russia (manufacturer Uralvagonzavod).  As well, business from North America is on the upswing which bodes well for Bombardier - 3Q revenue from North American customers was $373m (+17.7%) and $1,095m (+7.0%) in the nine month period.  Also, revenue from Asia-Pacific which was down considerably during the first two quarters, recovered strongly in the third when it increased by +31.3% qoq (still down -42.9% in 9M2012 but that's due to uncharacteristically low sales in the first two quarters).  Total company backlog as of September 2012 is $58.6 billion up +8.7% or $4.7 billion in just the last nine months:  44.5% aerospace, 55.5% trains.

Aircraft revenue is stable, which is a great sign considering more than $200 million worth of aircraft deliveries was postponed until the fourth quarter.  The postponement of the CS100 first flight by half a year (Jan 2013 to June 2013) is discouraging but nothing to be too concerned about;  The two larger aircraft manufacturerers, Boeing (787 Dreamliner) and Airbus (Airbus A380) ended up releasing their latest larger models three years behind schedule --> Bombardier's 100-149 passenger CSeries planes will compete directly with the Airbus A320 and Boeing 737.

The company remains a force in the manufacturing industry.  Its customer base remains diverse (Saudi Arabia was the biggest rail customer this quarter), it keeps innovating (Learjet 70 and 75 programs launched in May 2012, continuance of Learjet 40 and 45) and getting its jets certified in key geographic regions which gives it a competitive advantage (in June 2012 awarded aircraft type certification for the Q400 aircraft for operation in Russia).  There's also the well known fact that Bombardier's new planes are lighter and 20% more efficient on fuel.

Net profit remains stable and orders keep coming in !  

Up and Coming Natural Gas Companies Progress Energy (PRQ) Tourmaline Oil Corp (tse:TOU) Paramount Resources (POU) Intermediate

                  Over the last two years these rapidly growing companies (five billion dollar Tourmaline Oil Corp is only 4 years old !) weathered the steep decline in natural gas prices, which is quite impressive to say the least;  2012 first half revenues at Tourmaline (+32% --> $204 million), Paramount Resources (-6.2% --> $101 million) and Progress Energy (-12% --> $103 million) all stable despite the huge drop in natural gas price realized: Tourmaline -46.2% Paramount -43.2% Progress -33.5%.  What's more, these companies were able to attract the investment (Progress received $1.1 billion from Petronas) necessary to maintain capex spending (-3% Paramount, -22% Tourmaline) at a time when Canada's biggest player, Encana divested $2.2 billion in assets and lowered its 2011 investment plan by -37%. 

Yes, the federal government's ruling against the takeover of Progress Energy by Petronas complicates things for investors;  for many intermediate gas producers cash flow lags capital, making outside cash (investment) essential for asset development to continue, but I wouldn't be too concerned.  Cash flow will experience a natural rise over the coming quarters because natural gas prices are on the way up !  +73% in just the last six months. 

Seabridge Gold (SA) Hecla Mining Company (HL) May Draw Interest; reserves,production,mining

                      Seabridge Gold (tsx:sea) and Hecla Mining Company (nyse:hl) are two companies that investors can't seem to figure out.  Prior to the temporary shutdown of Lucky Friday, Hecla was one of if not the largest pureplay silver producer in the United States.  After the Lucky Friday incident, investors fled the company resulting in an immediate loss of 30% of its silver output, half of its lead output and some of its reputation.  But today, Hecla is reporting not only that it will restart Lucky Friday within half a year but also that it will be expanding it with the construction of a fourth shaft which will lengthen mine life, possibly to 30 years.  With $233 million in cash equivalents Hecla is also active in the M&A department;  Hecla laid out $110 million for US Gold & Silver back in July 2012 (which was turned down).  The bad news for the company ?  Total operating expense last quarter was steady with the previous four quarters even though revenue was way down (averaged $108.105m over those quarters but just $67.02m in the last).  Not all was bad though, Hecla did manage to double dividends q2q (2c per share up from 1c despite eps being only 1c).

Seabridge Gold really is A gold mine !

According to the company's second quarter report it "will continue to advance its two major gold projects, KSM and Courageous Lake in order to either sell them or joint venture them towards production with major mining companies."  
Ivanhoe Mines potential ?
Ivanhoe Mines (now Turqoise Hill Resources) more than quadrupled in value after Rio Tinto took interest in it.  Whether or not Seabridge does the same the fact remains it controls 100% of what will someday be Canada's largest gold mine.
Three days after releasing the last quarterly report, on September 5, 2012 Seabridge released data from exploration drilling done last summer.  Drilling revealed veins with the highest gold grades found to date !  The findings are sure to bring KSM's 2P gold reserves closer to 40 million ounces (was 38.2m according to last estimate done).  Over the entire deposit, the average gold grade is 0.55 grams per tonne but at a 2 meter intercept, one of the newest holes drilled revealed 66.7 grams of gold per tonne in addition to 287 grams of silver !! (average grade over the entire hole was 8.94 g gold, 41.6g silver).
Seabridge also revealed that it is only focused on KSM and Courageous Lake which is why it's in the process of divesting all other assets (big chunk let go last quarter in Red Mountain Project) but don't be fooled into thinking it's letting go of all other interests;  When it sold Red Mountain and various Nevada projects, in addition to cash Seabridge Gold received more than 4 million shares of each company.  So, when those other projects pan out (no pun intended) Seabridge will realize even more in return not that it isn't already giving investors a healthy return (sept 5 - oct 4 : +15.05%, july 5 - oct 4 : +30.16%).  Bad News:  No production means no dividends.

Watch Out !  Seabridge Comes With Risks
Core assets Kerr-Sulpherets-Mitchell (BC) and Courageous Lake (NWT) are located in regions where aboriginal groups also have land.  The First Nations people could be entitled to key land and thus other agreements may need to be reached.  Shifts in political conditions and/or regulations (environmental laws, tax laws) could impact the company's ability to continue developing either project.  Right now though everything appears to be stable and, considering exploration at KSM has been ongoing for more than six years without any major disputes, I'd say the rewards outweigh the risks.
Notes:  Last quarter, cash resources declined by -$19 million due to advancements at KSM and Courageous Lake - Courageous Lake 2P reserves surpass 6 million ounces - All of KSM's 10.3 million ounces of proved reserves reside in the Mitchell open pit deposit (including probably it's 27.5m) - 10.2 million ounces in probable gold reserves must be mined from a block cave (Mitchell 7.4m, Iron Cap 2.8m) - Iron Cap is the newest of the four deposits (added May 2011).

Hecla Mining Company

      Hecla stock price has been on the upswing since September 13, 2012 (+10% that day while adding modestly to that gain since then).  On August 7, 2012,  the week before it acquired an interst in Dolly Varden Corporation, Hecla Mining Company reported on the 1st half / 2nd quarter of 2012.  The results were mixed;  On the one hand Greens Creek produced less: 1.365043 million ounces of silver down from the previous year (1.5m ounces), steady with the previous quarter (1.328704m oz) while on the other hand the cash cost per ounce of silver produced was down significantly from the prevous quarter ($2.24 --> $1.03 /oz).  So why the 49.7% q2q drop in gross profit ?  A couple reasons;  Average realized silver price down -26.1% between last two quarters (1st and 2nd) $36.59 --> $27.05.  Production was steady but payable ounces was not;

Payable silver sunces sold: 1,133,764 oz (-39.7% vs 2q11, -20.6% vs 1q12).  Gold, lead, zinc