Investment Q&A

Q: could you explain "short squeeze" and how it pretains to the gold sector with this continued shorting of the gold price

Q: I currently own AR (Argonaut Gold), BTO (B2 Gold) and SSL (sandstorm Gold), and am considering adding SLW (Silver Wheaton). There is usually a good seasonal trade (i.e. buy) in gold & silver beginning around mid-July. With the price of gold so low, and sentiment seemly continuing to be poor, do think the seasonal trade may still be there? Also, with the price being low do you see any issues with the 4 names mentioned? i.e. ability to finance debt, or closing mines (like Barrick & Kinross), etc... thanks again!

Q: Hello, ABX - My last question on ABX (and your answer) on Jan 8, 2013 is mentioned below. How do you feel about it now. Down 50%, shall I keep holding expecting a turnaround in 1.5 -2 years. Is dividend safe. OR shall take a loss and move on.
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January 08, 2013 (asked by r)
Question: Barrick - ABX. What is your opinion about the stock prospect in lieu of recent developments. Is it buy hold or sell.
5i Research Answer:
Barrick continues to have problems. The lack of sale of African Barrick is disappointing, but it is not a devastating blow. ABX's interest is worth just over $2 billion. Pueblo Viejo in the DR is another issue, and has not yet achieved commercial production. ABX will likely have to lower its production guidance for 2013.
But, many of its problems are reflected in the price. Down 30% in a year, trading a 8 times' earnings with a 2.4% dividend, it is attractively priced for a senior gold company with massive leverage to a higher gold price.
A few years ago, if we said you could buy Barrick below 10 times' earnings with a yield greater than most fixed-income investments, no one would have believed it.
Longer term gold investors should still be OK and do well with ABX.

Q: Hi Peter and 5i: Can you please comment on this as one possible case against investing in gold equities: Ultimately you can't fully evaluate the situation on the basis of how much the gold stocks have come down and how "cheap" their current prices may appear compared to themselves of 6 to 12 months ago. The bottom line is all about the price of the commodity. The price of gold went up more than 450% over a dozen years reaching its most recent peaks. It has now backed off about 30% from those peaks to just about where it was three years ago. Is gold itself cheap or expensive? Will it be worth more or less in 6 months time? I have no way of knowing. Gold is just worth what people want to pay for it; there is no industrial need that it serves that could kick in and provide a reliable floor. Gold equities only have any value at all relative to some assumed commodity price. If gold itself drops to below the cost of production for a gold miner, that miner's stock has close to zero value - all that is left is what it might be worth if the price of gold turns around and zooms back up again. Thanks!

Q: Hello,
Would you recommend to start building a position in the silver market through SLW at this time ? I have a 3-5 year time horizon. Thank you agsain for the great service. Regards.

Q: A BNN guest suggested selling resource and materials stocks which are down 15-20 % ytd now before tax loss selling begins in the Fall which is sure to drive them down much further. The idea being that they can be bought much cheaper later in the year.

That sounds pretty drastic. Would you agree, disagree or have a different perspective?

Thanks.

Q: I believe you have recommended Goldcorp in the past. Is there a junior and inetrrmediate gold producer that could recommend?
Thanks for thn excellent service.
GUY

Q: Hello 5i,
Can you tell me why SSL (Sandstorm Gold) is in freefall, beyond the rest of the golds? Do you still recommend the "do nothing" approach? It is very painful to be here! Thanks for your response.

Q: Hi Peter and group,With the recent gold slide would you consider buying osk or yri and please comment on relative strength of the companies. Thanks Darryl

Q: With the price of gold apparently sliding lower by the day, I am wondering if gold mining companies are worth a review. To that end,could you advise where the best place is to get information on the average cost of mining an ounce of gold, and the historical annual demand and supply.Also, what would Goldcorps cost of production be at the moment and their breakeven for new mines.
Mike

Q: Rye Patch Minerals (RPM)
Would appreciate your thoughts on:
1) Value of the deal
2) Is there an element of being friendly to a possible buyer, in addition to legal costs
3) The stock hit 20 cents this morning. At 155 million that's 31 million.

Q: Peter I was watching BNN and one of the guests was talking about Gold Corp . {G} He was saying their was some type of a problem with the government in the in the Dominican Republic that is affecting their mining operation .
Do you have any information about this .
I do own some [G] should I hold or sell .
Jim.

Q: Hello, as with all gold stocks, MND has been on a downward slide. Do you think this company will recover when the sector turns around?

I'm considering selling and cutting my losses. I bought in @ 1.14?

Should I sell or keep losing my hair and stick it out?? :)

Thanks as always.

Q: Lake shore Gold (LSG) is a gold company that i am looking to build a position in. It's at or near its lows and i think it way undervalued. As it is a beaten down sector, i want to start accumulating this stock , however i would like your view on LSG? Thank you,

Q: Hi Peter and Team,

I would like to add some exposure to Silver at current silver prices as i now believe that the paper price is now trading below actual all in production costs. In addition, the ratio of SLW:Silver is almost 1:1 which means no leverage is being given to Silver Wheaton, SLW, do you think now is a good time to add a position?

Q: Hello, I have a question regarding the escalating costs of gold producers. I am always hearing and reading that their costs keep going up without any specifics as to why. Is is it labour? Machinery ? Fuel? Land? Taxes? Supposedly there is little inflation out there but this explanation for resource company woes is constantly being stated in everything I read, watch, or hear. Any explanation or comment would be greatly appreciated. Thanks for your ongoing assistance.

Q: Clearly there is now some panic in the market, especially in gold. Having 'done nothing' in that sector, I am now substantially underwater in Goldcorp. Can you please provide me your estimate of Goldcorp's real market value based on current gold prices? At what gold price would you either consider averaging down or consider throwing in the towel on this position? Thank you.

Q: Hi Peter, I have a mix of 11 stocks in my RSP portfolio averaging about 7-8% weighting of each except for PPY and RY that are about 12-15% respectively and I was thinking of adding "G". I don't wanna bother you with listing the stocks but they are known names that pay dividends, oils, telecom, pipeline etc. diversified I think but no golds. What's your opinion on G and is it worth adding just because I don't have any gold and the price is low? Thanks, Nick

Q: With the recent declines in the gold sector my exposure to gold has dropped from about 15% to 7%. I have been adhering to your "do nothing" approach and as I write this gold is down another $75 dollars this morning before the market open. I am considering increasing my exposure. Would you endorse such a move (i.e.trying to time a bottom) or would you advise sticking with the "do nothing" approach until there is a meaningful upward move in the price of gold or gold stocks.

Q: Peter , could you sujest a good gold play in all three areas , small cap , medium cap , large , cap .

Thank you Jim .