Freeport-McMoRan Inc.: Does Mining Have A Silver Lining?

July 29, 2015 at 06:10PM

  • By mid-afternoon Tuesday, FCX’s stock price was up 9.9% on announcements of cost reductions, and the firm was ranked among the most heavily traded bond issuers on Monday.
  • We use modern default probabilities and credit spreads to assess FCX. We find the firm is in the riskiest 20% of its peers from a default perspective.
  • That doesn’t necessarily mean that the bonds are not good value. When we do our normal “best value” rankings, however, all 4 heavily traded FCX bonds offer below-average value.

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At Current Prices Of Gold And Silver, It Is Much Harder To Find Economically Viable Projects

July 29, 2015 at 08:05AM

  • At current, relatively low prices of gold and silver, many mineral projects will probably be delayed or even suspended.
  • Fortunately, there is a limited number of projects that should be developed even at current low prices.
  • The worsening economic efficiency of many projects plus the decreasing number of new discoveries are serious threats to the entire precious metals industry.

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Silver Is Fundamentally Undervalued

July 28, 2015 at 05:57PM

  • Silver is fundamentally undervalued due to the actions of a handful of large speculators in the futures markets.
  • During a one day period at the end of June, silver shorts overwhelmed the broader market and depressed prices, even as investor demand for silver was high.
  • The U.S. Mint sold out of silver coins at the same time the price of silver hit its 2015 lows – this should not be possible given economic laws.
  • The amount of silver available for delivery is well below the amount represented by short contracts.
  • This indicates that silver is significantly undervalued at its present price.

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Pan American Silver: On My Buy List

July 28, 2015 at 09:09AM

  • If I didn’t believe that silver (and gold) would eventually make a substantial rebound, I would have no desire to be investing in this sector.
  • If we compare cash/debt positions to other primary silver producers, you can see how formidable Pan American’s balance sheet is in relation to the others.
  • La Colorada and Dolores are flagship operations for Pan American, and these two mines have aggressive expansion projects in the works.
  • A few of the company’s other operations are in decline and are at/near the end of their mine life.
  • When I analyze all aspects of Pan American – from its balance sheet, production profile, expansion projects, development projects, cash costs, etc. – the company stands out amongst the pack.

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