Barrick Mining (ABX.TO)

(A Top Pick June 10/12. Down 48.16%.) Today, this is a compelling story. You are now buying it at 7X earnings and under BV. Very rare you get this kind of opportunity in a gold stock. (See Top Picks)

He believes in a basket approach and this could be part of it. One of their biggest headaches is their mine in Chili. There is a lot of uncertainty as to when it gets into production. 4.5% dividend. They will do everything in their power to maintain this dividend. Seeing signs of bottoming. New groups of buyers showing up, buyers from Asia. Thinks this is the time to be picking away.

Was surprised that gold had come down as far as it did, particularly with the background of all that quantitative easing in 3 continents, Japan, US and Europe. Had never traded below 2X Book. He is suspicious that there may be more downside in bullion. (See Top Picks.)

Seasonally, June and July is when you buy gold stocks because they bottom out around this time. This is such a large Cap company, it is always running on a treadmill to increase their production, etc. Has had a lot of problems with production in their mines. Really need to sort out their businesses. If you want to play gold, you should buy something far more pure like a Yamana (YRI-T) or a gold ETF.

Feels this is trying to form a base. You almost have to be a contrarian with this stock. Too far away from the 200 day moving average. With the bad news on Friday, the stock should have broken down and taken out the low but it didn’t. This indicates a divergence between news and price, which is a bullish sign so he thinks this is fine.

(Market Call Minute) He is short. A lot of compression in cash flows.

Its price is back at the mid-90's level. Has been a huge disappointment. Thinks it's a high quality business. They hold considerable debt. Might churn for a while. Thinks it might have a reasonable return going forward, but it all depends on the gold prices.

It got too big. They tried to fix it by buying copper. Now we have cost overruns and big negative free cash flow. It got oversold when it got to $18, but he would not own it. Prefers G-T. It will take a while for them to get it right.

(Market Call Minute) Avoids golds. If dollar gets stronger they will have a tough time.

Thinks it will go lower. There are liability risks on the balance sheet. Be concerned about political drama in Chili. Large construction implementation challenges in front of them. Flat gold prices. A debt downgrade is of concern to him also.

It is bouncing now because it is oversold. The bigger picture is bearish.

Had support at around $44 but broke through that. Then broke support at around $29 when a lot of other gold stocks broke support. Chart shows a typical descending triangle, which is bearish. This is not the seasonality for gold. Gold also broke down through that support pattern at around $1,550. Best time to be looking at gold stocks is July 12 to October 9.

He owns no gold stocks. With the decline of the gold stocks recently, his company has done a study on gold companies. With the price of gold so high, why are these stocks doing so poorly? Cost of production has probably doubled in the last 4-5 years, not for temporary reasons, but for long-term reasons.

(Has a small Short position on this.) Over the long-term, central banks are going to continue doing what they have been doing and that has historically been very inflationary for asset prices. Precious metals should be one of the largest beneficiaries of this. Problem with the company is related to some of the decisions they have made in the past and the overhang that this has created for them. Their actual financial fundamentals are not incredibly strong at the moment. There are better companies in which to play gold.

Trading like it is a broken company. People are focusing on Pascua-Lama right now where production has been held up. Even if you took this asset out entirely, the NAV of this company would still be in excess of $25. This is an opportunity to buy a stock that is trading at somewhat ridiculous multiples. Yield of 4.22%.