UPDATE: TD Newcrest has maintained a buy rating for LSG but has lowered its NAV5 estimate to $2.83 at LT $1000/oz gold (I don’t know what they mean by “LT”–and this is a huge problem with analysts who not infrequently drop unexplained abbreviations into their reports with no explanation) and its target price from $5 to $3. But when was the last time we saw $1000 per oz gold and is there anyone who thinks we will ever go back to that price? If gold were to stay at $1600, that NAV5 would be over $4.
LSG: current price CDN $2.04
Is Lake Shore Gold (TSX: LSG) a value now? TD Newcrest in its Action Notes May 30, 2011, stated that it’s NAV5 was $3.45 when gold was selling at $1535 and LSG had a estimated cost price of $575. Two days ago, LSG came out with revised their production cost and lowered their production estimates for 2011 to 85,000-100,000 oz from 125,000, and they indicated their production cost from the Timmins mine was $583 per ounce. Today, gold is at $1590 per oz. There is a possibility that NAV will have to revised downwards, but still, for the speculator, LSG may be a bargain right now. I’ve therefore doubled my position today.
Apparently, according to a bullboarder (not necessarily a reliable source), the institutional investors are now increasing their positions while the retail investors have become frightened:
Not to worry. Top seller of the day is TD — just a panicked herd of retail and small time players. TD over past three days was a big buyer at higher levels and now is emerging as a big seller as apparently some retail investors bit off more risk than they could chew.
MacQuarie, today, has loaded almost $6 million and has not sold a share. Sprott is also moving up the ranks and is now net buyer #4. I wouldn’t worry about the “unlimited” retail selling — it is not unlimited and will fizzle off. Then the stronger hands will take over.
There is a story going around that the London Bullion Market Association has sold as much as 45-100 times the amount of gold futures as there is physical gold underlying the notes. I first heard about this story from Monty Pelerin’s blog which featured a Max Keiser interview with Jim Willie (see videos below). Then, on the Peter Schiff Radio Show, Adrian Douglas claims that gold should be selling at $56,000 per ounce. Even Peter Schiff was incredulous about it (see http://www.schiffradio.com/pg/jsp/charts/audioMaster.jsp?dispid=301&pid=51169 ).
The futures markets are fractional reserve systems running at very low reserve ratios, something like 45 to 100 ounces of electronic gold and silver obligations for every unencumbered ounce of physical gold or silver. The day is coming when the physical price of gold and silver disconnect from the electronic price and they can not be brought back together again except through a massive devaluation of the dollar in terms of gold and silver. On this day the future’s markets in gold and silver will be stopped. There will be secret meetings. Those holding electronic gold tickets will be paid in be paid in dollars at the price of gold before the disconnect. And then I believe that there will be an explicit devaluation of the dollar with respect to gold on the order of 20 to 40 times.
Once this happens, the dollar will be further devalued against a large number of other commodities and will probably actually collapse altogether as the world’s reserve currency. Few believed the warnings about fraud which was going on in the real estate market and yet that bubble collapsed. Lying, manipulation and greed is the common story in our times. I’m preparing for this one. I am long on Barrick ABX, New Gold NGD, Lakeshore Gold LSG, and Detour Lake Gold DGC; and I’ve now also taken a long position on Sprott Physical Gold PHY.U, which claims to keep actual physical gold in the Canadian Royal Mint. I’ve sold puts on ABX, GG, DGC and NGD.
Here is Max Keisar interview Jim Willie in three parts: