HRG vs IndustryWHEN the so-called independent committee SOON tell us that their so-called independent valuation review show that our minority HRG shares are worth less than even bread crumbs at a breakfast table (I’m trying to be polite here), we should (among many other indicators we can look at) remind ourselves of HRG’s operating performance in Q1’09, and refuse to give into their scare tactics (at least, this is my personal position anyway – I cannot give investment advice to anyone). HRG’s performance compares very strongly to high profile producers in the gold space. Even though we are still in ramp up mode, and we are still addressing the mechanical issues at Taparko, the performance in Q1’09 clearly demonstrates the future potential of OUR COMPANY.
And, by the way, the gold price is $980 US and about to push to well over $1,000 US, with HRG being 100% unhedged with production ounces (ready to fully capitalize). The math is simple, we get $1,000 US in revenues to sell each one of our tiny pieces of gold nuggets and we only have to incur $414 US in operating costs to generate each finished product. One can only conclude that one is in an amazing business environment when one can generate a 59% operating profit on one’s sold product. This conclusion stands the test of time, be it 4,000 years ago or 2,000 years ago or now.
Also, more and more experts (like never before) are now fully expecting the gold price to hit $1,200 US per ounce at some point this year. The yield curve has steepened dramatically over the last week - short-term rates remaining low and long-term rates skyrocketing. This has the money managers totally spooked about long-term monetary inflation, thus this is partly why we are seeing the heavy movement into gold recently. Coupled this with more and more money managers now admitting that the US $ is in major trouble, with dramatic $ devaluation pretty much a certainty from huge quantitative easing commitments, as well as the rapidly growing massive debts and various major deficits, potential of substantially less funding support from China, risk of the US credit rating being downgraded (similar to the risks the UK is facing), among many many many other issues. There is also now serious talk that the US will need to seriously consider monetizing its debt (meaning, print money, BIG TIME, to pay down debt) as there are absolutely no other viable options, given their crumbling situation.
Olderwisernow, feel free to also forward this analysis to that reporter person in Vancouver, or anyone else for that matter.
Note: The difference between “cash op cost” and “total cash op cost” is typically royalties. Both numbers are usually the same for companies with royalties. Also, I do not have detailed knowledge with every company listed below, therefore there can be no assurances that my interpretation of the numbers (i.e. “cash op cost” vs “total cash op cost”) has been interpreted exactly how those respective companies intended.
A) PRODUCTION ounces for some randomly selected producers with less than 100,000 ounces in Q1’09 / most recent reported quarter (where comparable numbers were reported):
1) Golden Star - 96,971 ounces, $571 US Cash op cost per oz
2) Red Back Mining - 70,408 ounces, $389 US
3) High River Gold - 69,118 ounces, $414 US (ounces represent attributable to HRG only, at 100% production was 76,794 ounces in Q1)
4) Eldorado Gold - 61,429 ounces, $296 US
5) Semafo Inc. - 58,100 ounces, $460 US
6) Gammon Gold - 55,480 ounces, $430 US
7) New Gold Inc. - 54,938 ounces, $513 US
8) Alamos Gold – 46,000 ounces, $306 US
9) Aurizon Mines - 38,966 ounces, $379 US
10) Jaguar Mining - 32,868 ounces, $409 US
11) Uruguay Mineral - 19,371 ounces, $547 US
12) La Mancha Resources - 18,515 ounces, $451 US
13) Richmont Mines - 16,614 ounces, $653 US
14) Claude Resources - 10,613 ounces, $617 US
B) CASH OPERATING COST per Ounce for some randomly selected producers (including larger producers) in Q1’09 / most recent reported quarter (where comparable numbers were reported):
1) Eldorado Gold - $296 US Cash op cost per ounce ($315 US Total cash op cost per oz), 61,429 ounces
2) Alamos Gold – $306 US ($353 US Total cash op cost per oz), 46,000 ounces
3) Aurizon Mines - $379 US, 38,966 ounces
4) Red Back Mining - $389 US, 70,408 ounces
5) Northgate Minerals - $396 US, 107,477 ounces
6) Barrick Gold - $404 US ($484 US Total cash op cost per oz), 1,760,000 ounces
7) Jaguar Mining - $409 US, 32,868 ounces
8) High River Gold - $414 US, 69,118 ounces
8) Randgold Resources - $414 US ($461 US Total cash op cost per oz), 110,313 ounces
10) Kinross Gold - $419 US, 526,888 ounces
11) Gammon Gold - $430 US, 55,480 ounces
12) Newmont Mining - $435 US, 1,270,000 ounces
13) La Mancha Resources - $451 US, 18,515 ounces
14) Semafo Inc. - $460 US, 58,100 ounces
15) Iamgold - $464 US, 212,000 ounces
16) New Gold Inc. - $513 US, 54,938 ounces
17) Uruguay Mineral - $547 US, 19,371 ounces
18) Golden Star - $571 US, 96,971 ounces
19) Claude Resources - $617 US, 10,613 ounces
20) Centerra Gold - $644 US ($871 US Total cash op cost per oz), 103,204 ounces
21) Richmont Mines - $653 US, 16,614 ounces