Buy Gold & short gold stocks ?...What is your current opinion on MFN--buy, sell or hold ?
MB, When you net the increase in P&P reserves with the slight increase in cash costs, you get about a 5% decline in MFN's NAV at $900 gold (which is was never trading anywhere near even before this news, which once again highlights how cheap the gold shares are right now on a historical basis).
As a result of this NAV decline (or NPV depending on how you look at it), two analysts lowered their price targets from a lot higher to a little less higher late yesterday (BMO) and this morning (Dundee). Yesterday's decline in the stock (5%+) more than discounted the decline in NAV. But it looked like people panicked this morning when the stock sank on the charts. Then the shorts came in (there's a big long gold/short the gold stocks trade among many hedge funds that are betting on deflation).
There's also a good deal of fear about rising cash costs at juniors given the 50% collapse in NovaGold (NG) when it said its cash costs were going to be dramatically higher than originally expected back in November. But MFN's slight increase in costs is nothing like what we saw with NG. In fact, depending on silver prices, MFN's actual cash costs net of silver revs will probably be negative. Basically, it just looks like people are panicking in MFN in a generally soft gold equity tape today, with shorts piling on and making it worse. I wouldn't be surprised if we closed higher than where we are now though given the way bids have come in mid-day.
It's a buying opportunity in a world class 5 mil ounce asset if you are bullish on gold and betting on the continued "existence" of the financial system. In other words, if you think the Fed will inflate to defend the system, then MFN down 6% is a gift, just as it was when it was last briefly at this price back in December.
- Prof. Lewis
Link: https://www.minyanville.com/articles/index.php?a=15953