Gold is down a few pennies at $1244.10. We have called shorting the miners our "highest-probability-of-not-losing-everything" trade with the GDX being the bogey and the DUST being the instrument. Here's the last month via
Yahoo Finance:
GDX down 3 cents at $22.34, DUST up 18 cents (0.63%) at $28.96. DUST is triple-leveraged inverse with a half-twist. Not a move for kindergarteners.
From Barron's:
In April, Newmont Mining (NEM) rejected a potential merger with Barrick Gold (ABX)–and
now must go it alone. The problem: Newmont is stuck having to choose
between letting production decline or spend money to boost it, Morgan Stanley says.
Morgan Stanley’s Paretosh Misra and team explain Newmont’s bind:
NEM’s volumes could fall by 10-15% by 2020, if no new
projects are added. We think current capex is low by historical
standards. NEM’s 2014 capex/revenue at spot gold of 18% is below the
historical average of 23% (15-year ttm basis). As a result, volumes from
operating mines could fall to ~4.4 moz by 2020 vs. (5.1 moz in 2013),
posing de-rating risk.
Some growth projects, due for an investment decision in 2014-16
would, if approved, require $2-3 bn of additional capex. On average,
these projects need >$1,400/oz gold to earn 15% IRR. NEM’s ~3.5x
debt/EBITDA and relatively high gold ($1,200/oz) required to be FCF
positive both limit options.
Small competitors are a better bet, Misra says....MORE
