| User | Post |
|
11:52 pm
June 16, 2011
|
Jae Jun
| | |
| Admin
| posts 1464 |
|
|
|
9:47 am
July 6, 2011
|
FIFOkid
| | |
| Member | posts 58 |
|
|
Post edited 2:48 am – July 6, 2011 by FIFOkid
The company has sustained a nice rally off of the Peru sell off. It is too bad I didn't nibble because I still have a very large cash position. One thing that I didn't see in these research reports is I think there is now a decent probability Nyrstar a zinc producer/smelter who intends to raise mining production to 50% of its smelting capacity may take this company out within 18 months especially if the future price lags and the company shows no operational issues.
I have seen in one report holding my suspicion true. They key for the stock to reallize a much higher price is dependent upon if the company can avoid building a new mill at Halfmile which would cost 250 million hence you will have to add amount that to its market cap. If they can pick up the new Brunswick mill after its useful life for very little it will add $2/share to its potential value.
|
|
|
8:34 am
July 6, 2011
|
Jae Jun
| | |
| Admin
| posts 1464 |
|
|
Trevali on the path to production.
FYI
Found this article from Northern Miner on Trevali and the potential it brings.
http://www.scribd.com/doc/5944…..i-07042011
|
|
|
2:02 am
June 17, 2011
|
FIFOkid
| | |
| Member | posts 58 |
|
|
Jae thanks for sharing I have sold my position down to profit shares here a little more than 2 months ago. I have been constructively bearish on the more economically sensitive commodities with exception to gold where I am neutral since April given the very poor market response to added liquidity caused by the Japanese earthquake thanks to a preciptious fall in money velocity so the perceived risk trades are likely going to be under pressure. The major positive catalysts at Trevali are still 3 months away so there is no rush to accumulate unless you see macro signs of improving market conditions. I think you need to see improving money velocity and perhaps another quantitative easing program before I believe the sector will be in major bullish mode again.
Although Trevali is cheap and a near term high cash flow story it does carry much more execution risk by the compliications of the new political enviroment in Peru and the future hefty capex requirement in Canada. One positive note: Nyrstar a zinc producer has been very acquisitive and is open to owning smaller projects.
|
|
|
11:50 pm
June 16, 2011
|
Jae Jun
| | |
| Admin
| posts 1464 |
|
|
Raymond James Ltd.
Canadian Equity Research - Jun-6-11
Trevali Mining Corporation TV-TSX
TV News Brief: Looking at a Post-Election Peru
Adam Low, CFA
adam.low@raymondjames.ca
416.777.4943
RATING Outperform 2
Closing Price C$1.30
Event: Peru held its runoff presidential election yesterday between centre-right congresswoman Keiko Fujimori and left-wing former army colonel Ollanta Humala, with preliminary results indicating Mr. Humala secured 51% to 52% of the vote.
We expect continued volatility in Trevali's share price based on the results and until Humala provides more clarity on his intended policies and cabinet members. We note that Mr. Humala's party represents only ~1/3 of the seats in Congress and thus will have to gain the support of the opposition parties in order to effect any change to policies. Additionally, Humala campaigned with a more free-market friendly platform than he has in past elections, and has maintained this moderate stance in his post-election victory speech.
Expected Impact:
* No value is currently being given for the Peruvian assets – Trevali's Santander project, Tingo hydroelectric plant, and other Peruvian exploration interests currently represent ~47% of our NAV estimate of C$3.45. If we ascribe no value to Santander and Tingo and cut the value of the exploration assets in half, our NAV would fall to C$1.83 (from C$3.45). In our view, at the present stock price Trevali's shares do not give any value for the company's Peruvian assets. For example, if we were to apply our 0.7x P/NAV target multiple to the ex-Peru NAV of C$1.83, it would imply a share price value of ~$1.30, which is essentially in-line with the current share price. We note that the shares have fallen ~39% since the end of March 2011.
* Sensitivity analysis to a potential tax increase in Peru – Humala has indicated that he may seek to increases taxes and royalties in Peru. Our analysis, based on what we believe to be the most plausible higher tax range, suggests that an increase in taxes would have only a slightly deleterious impact on Trevali's valuation. For example, a 5% increase in the corporate income tax rate (what we view as a worst-case scenario) from 30% to 35% would decrease our NAV by approximately 3% to C3.34 (from our base case estimate of C$3.45). A 2% increase in the sliding scale mining royalty to 3% – 5% (from 1% – 3%) of the net concentrate revenue would decrease our NAV by approximately 2% to C$3.38. Altogether, an increase to both the corporate income tax and the mining royalty would reduce our NAV by approximately 5% to C$3.28.
|
|
|
3:43 pm
January 20, 2011
|
Jason
| | Ontario, Canada | |
| Member | posts 24 |
|
|
I had put in an order for it around $1.60 when it was trading just under that, but for some reason my broker (Questrade) rejected the order. I was quite busy so I didn't bother calling them only to see the price rocket thereafter. Thanks for sharing your info with us, it has been a good learning opportunity.
|
|
|
|
|
10:58 am
January 19, 2011
|
Jae Jun
| | |
| Admin
| posts 1464 |
|
|
I sure did buy into this. I dont know as much as you on miners, but I can see clearly how big of a potential this really has. I bought a small 2.5% though hoping that I could get more later, but looks like people are catching on.
I even bought some ORVMF. Two solid picks.
Have you read the write up on GGAZF?
I've put it up on the G stocks forum.
|
|
|
9:28 am
January 19, 2011
|
FIFOkid
| | |
| Member | posts 58 |
|
|
Post edited 8:35 am – January 19, 2011 by FIFOkid
Hopefully Jae and Jason bought into this winner due to its gross undervaluation using future price/sales fundamentals as both Trevali and Kria are up around 50% since my original post. These easy ones don't come up that often.
|
|
|
1:08 pm
January 14, 2011
|
FIFOkid
| | |
| Member | posts 58 |
|
|
Post edited 12:10 pm – January 14, 2011 by FIFOkid
Jae- If you use debt to finance a mine the originator of the loan forces a certain percentage of the commodity produced at a fixed price at the date of the signing of the loan from a futures contract which usually shows backwardation in the price in order to guarantee the term of loan. It can cause a major problem should cash costs rise from unexpected production problems like excess mine dilution or rising operating costs. Now you know why cash on a balance sheet is king if you are screening for a producing microcap mining company to grow you eliminate these potential headaches.
The only time when this situation is potentially advantageous is when the market price of the commodity falls below the strike price coupled with a sector wide carnage of stock prices. The company's profitability would be enhanced.
Another way a mine can be financed is if they sell the production to a royalty company like Silver Wheaton, Sandstorm Resources, Franco Nevada etc where they usually get percentage of a life of mine production of usually a byproduct at a very low fixed price.
That is one reason why Trevali/Kria is attractive because in their agreements they can receive a market price for all of their production.
|
|
|
7:47 pm
January 13, 2011
|
Jae Jun
| | |
| Admin
| posts 1464 |
|
|
Ive been reading all the presentations and more info on miners, but not sure about what you mean by the following.
You must keep in mind most companies with a first mine is forced to
hedge a significant portion of their production at usually a low fixed
forward price provided there is a debt obligation.
Does this mean that e.g. a junior gold miner planning to produce from their first mine will not be able to get the $1300 price for gold? and they have to accept at a price much lower such as $800?
You must keep in mind most companies with a first mine is forced to
hedge a significant portion of their production at usually a low fixed
forward price provided there is a debt obligation.
|
|
|
3:21 pm
January 9, 2011
|
FIFOkid
| | |
| Member | posts 58 |
|
|
Post edited 2:50 pm – January 9, 2011 by FIFOkid
Jason said:
Wow, thanks for the thorough reply! It seems I have a lot more to learn about mining and resource companies in general. I haven't looked at many resource companies in depth so I can't really say which ones I like. Though I think natural gas is definitely bottoming out and that future demand will inevitably increase prices. The play on that macro picture would be Exxon (XOM) if you're looking for safety as it has been buying nat gas properties at these depressed prices. A riskier call would be Chesapeake (CHK), which I believe is mainly engaged in nat gas and is a company that Icahn has recently increased his stake in (from 2.5% to 5%, according to Bloomberg).
Mind me asking where you learned so much about investing in mining/resource companies? I did see the links you provided on the other thread (Global Resources Investment link), but you seem more knowledgeable than someone who just dabbles in investing in miners.
-Jason
Have an education in chemistry (some geochemistry) accounting and finance and have decades of experience in investing and how things work so I generally know what to look for. Most of the geology was self taught.
BTW I think its still a little too early to get excited about the natural gas stocks unless there is legislation to use it in the transportation sector. Too many producers are operating on forward hedging done a couple years ago at fairly attractive prices thus overproducing and still actively exploring. I contend the contango is going to shrink markedly that will show up in 2012. Unless you can make a profit at $4-$5 per mcf its going to be tough going that likely will shake out the marginal pure play producers. Another sector to avoid in energy is oil sands as returns on new projects subject to very high capex and high taxes are very poor. I believe BCF went bankrupt and OPC is going there.
I think a a good turning point to buy into the natural gas sector is when the price of it finally starts to rise during the summer months and looking a decade out yes I agree it is going to be a great sector to own.
|
|
|
10:12 am
January 9, 2011
|
Jason
| | Ontario, Canada | |
| Member | posts 24 |
|
|
Wow, thanks for the thorough reply! It seems I have a lot more to learn about mining and resource companies in general. I haven't looked at many resource companies in depth so I can't really say which ones I like. Though I think natural gas is definitely bottoming out and that future demand will inevitably increase prices. The play on that macro picture would be Exxon (XOM) if you're looking for safety as it has been buying nat gas properties at these depressed prices. A riskier call would be Chesapeake (CHK), which I believe is mainly engaged in nat gas and is a company that Icahn has recently increased his stake in (from 2.5% to 5%, according to Bloomberg).
Mind me asking where you learned so much about investing in mining/resource companies? I did see the links you provided on the other thread (Global Resources Investment link), but you seem more knowledgeable than someone who just dabbles in investing in miners.
-Jason
|
|
|
|
|
9:11 am
January 9, 2011
|
FIFOkid
| | |
| Member | posts 58 |
|
|
Post edited 8:36 am – January 9, 2011 by FIFOkid
Jason-
The environmental permit is the big hurdle. The major risk I find with the Halfmile/Stratmat project now lies in how long they can keep using the toll milling agreement with Xstrata which is dependent upon the mine life of Xstrata's Brunswick 12 mine which is at the earliest is a 2011 event and projected to be a 2012 event and how the transition of production plays out. Of course the longer they can use the Brunswick facility on a toll basis the better because it will give them more time to accumulate cash and/or permits if they proceed with a new mill. One other potential problem is a higher than projected mining dilution of the ore we don't know about.
In the future the company I think has two options going forward either they build a mill near the site which will take another environmental permit which is their proposal (and the project at current prices has an undisounted NPV of around a billion, FS NPV 820 million) or they may be able to broker a deal at a good price to buy the oversized Brunswick mill from Xstrata which will likely close at a stink price and produce it at a higher tonnages which is my hope. It will result in higher cash costs from transportation of ore but eliminates the permitting, transition risk and the higher capex to construct the new mill. Both of course requires cash if they fall short they will have to issue more stock or debt which will require them to make a hedge.
I think the major allure to this stock is the unhedged metals positions for both mines, the valuation as the current market cap is about 1/3 of the lowest comps using P/S ratio measure at current prices (not past prices) on future annual production implying 200% potential upside and a high probability they won't have any additional dilution down the road which is absolutely the major killer of owning the junior mining sector.
Other stocks that are positioned well in the future are Endeavor Mining and Gobimin but currently don't have shorter term catalysts for growth (keep them on a watch list).
I am curious what resource companies mining/ag /oil and gas you like or currently own.
|
|
|
9:00 pm
January 8, 2011
|
Jason
| | Ontario, Canada | |
| Member | posts 24 |
|
|
Living in Canada, I'm quite interested in mining companies as well since outside of a few large companies, most investment opportunities are in the form of miners (on the TSX that is). I've read up so far on the company and it seems there are 99.4M shares after accounting for the acquisition and warrants/options outstanding on both Traveli and Kria stock (~15M on Traveli, 8.2M on Kria – that's after adjusting for 0.2:1 exchange).
What I want to know are the risks associated with investing in miners (that do not as of yet have operating properties). And whether those risks are mitigated in the case of this company. Would you say the odds of the Halfmile/Stratmat mine being given all the permits required are high? I know that recently they've gotten a positive response on the Environmental Impact Assessment (EIA) filed for the operation of the mine, is this the only major regulatory hurdle (i.e. does it clearly indicate the Government will not oppose the operation of the mine hereon)?
Now, when you say that the future operations of the company (which will generate cash flow, no doubt about that) will not be funded via dilution you mean to say direct issuance of common shares, correct? And that this definition of "dilution" doesn't include the issuance of shares to option and warrant holders – since we are accounting for these shares anyways, and the company will likely require the funds from those purchases to pay for ongoing operational expenses.
Lastly, doesn't the Santander agreement w/ Glencore signify a type of hedged production (Glencore to buy 100% of production at benchmark agreement rate)? Forgive me if I am misinterpreting this as it is my first time looking at a mining company at depth.
-Jason
|
|
|
|
|
7:49 pm
January 8, 2011
|
FIFOkid
| | |
| Member | posts 58 |
|
|
Jae-
FWIW Kria Resources which is the acquired company by Trevali is another investment where Forbes and Manhattan Group principal Stan Bharti has a significant stake in the company much like Sulliden Gold a company you have mentioned to me before.
I think you have until the merger is complete and as long as the stock can be arbitraged you will be able to acquire a stake at a decent valuation (i.e. short Trevali and going long Kria to cover the short so you can make a guaranteed profit). However, it won't be that long afterwards before catalyst number one takes hold (Kria's Halfmile project being produced at Xstrata's Brunswick mill on a toll milling basis) and then I feel will be the time where the stock starts its run higher.
You must keep in mind most companies with a first mine is forced to hedge a significant portion of their production at usually a low fixed forward price provided there is a debt obligation. The merged entitiy has no hedge requirement so they can sell at spot prices.
|
|
|
5:35 pm
January 8, 2011
|
Jae Jun
| | |
| Admin
| posts 1464 |
|
|
fantastic.
After missing out last year, I'm itching to learn more about mining stocks and invest in another one.
Please keep us updated of any further news or information if you find it. I'll do my best to read up as much as possible.
|
|
|
6:56 pm
January 6, 2011
|
FIFOkid
| | |
| Member | posts 58 |
|
|
Post edited 6:00 pm – January 6, 2011 by FIFOkid
Jae – I FINALLY found a mining stock that has similar value parameters, growth catalysts and lack of share dilution to build the mines as Orvana Minerals had before its massive run from 50 cents CDN to current levels and which btw has about another $9 of future upside remaining by 2014 after discounting its 3rd mine (a massive copper mine with 3 billion lbs insitu at current prices).
Trevali is in the process of acquiring Kria Resources KIARF on a 5 KIA for 1 TV basis. Fully diluted the merged entity's market cap will be around 140 million. The catalyst: The company is in the process of operating 2 mines on a toll milling basis within a 12 month period without any additional share dilution and I have calculated at current metals prices the annual revenues from both mines should be 310 million USD all with unhedged production.
The cheapest producing mining stock out there Amerigo Resources ARG.TO has a P/S ratio of 1.3 using current metals pricing. I see a minimum of 200% upside from here within 12 months.
|
|
Home
