Silver Wheaton’s ‘train wreck : bought deal is getting snubbed

Silver Wheaton acquires silver and gold “streams” from mining companies to help them finance their projects. That has been a very active business during the mining downturn, and Silver Wheaton has kept bankers busy.

Nicky Loh/BloombergSilver Wheaton acquires silver and gold “streams” from mining companies to help them finance their projects. That has been a very active business during the mining downturn, and Silver Wheaton has kept bankers busy.

The stock traded below the offer price all day Tuesday, and sources said a very large portion remains unsold. One source described the entire deal as a “train wreck.”

The bought deal, which was announced Monday night, was priced at US$20.55 a share by lead underwriter Scotiabank. The pricing was very aggressive, as it represented a 3% discount to Silver Wheaton’s closing price that day. Typically, the discount on bought deals is larger, as a reflection of the risks taken on by the underwriters, one of which is that the stock price drops. On this deal, the underwriters are also charging agents’ fees of 3.75%. – or $0.77 a share.

Amid weaker precious metal prices Tuesday, Silver Wheaton shares did fall, by 5.5%, and closed at US$20.02. On heavy volume – trading in New York and Toronto at 11.4 million shares was about 1.5 times normal – the shares hit an intraday  low of US$19.83.

Silver Wheaton is a very liquid stock, so if investors want to build a large position, they can buy it on the open market and bypass the bought deal. Deal insiders are hopeful that metal prices will rise on Wednesday and they will be able to sell more of the offering.

Investment banks lined up to be part of this bought deal, because Vancouver-based Silver Wheaton has been one of their top mining clients in recent years. Indeed there are four lines of underwriters (all with varying degrees of liability), with BMO, CIBC and RBC on the second line, BofA Merrill Lynch and TD on the third line, and Scotiabank signed on for a 25% share.

Silver Wheaton acquires silver and gold “streams” from mining companies to help them finance their projects. That has been a very active business during the mining downturn, and Silver Wheaton has kept bankers busy.

A source said there has been no serious talk so far about trying to cut the price on the offering, or reduce the size. Scotiabank does not typically lead mining offerings this big.

This is the third time in recent months where banks had trouble selling a very large mining stock offering. It shows that investor appetite for these stocks is not endless amid rough market conditions.

In late 2013, Barrick Gold Corp. did a US$3 billion bought deal, which was priced at a 5.4% discount to the market price. And in the middle of last year, Franco-Nevada Corp.’s US$500 million share offering proved to be a tough sell.

The Franco-Nevada bought deal has similarities to the current Silver Wheaton deal. Both firms are in the mining-royalty business, and in both cases, the discount to the market price was very small. It was less than 2% in the Franco transaction.

Silver Wheaton plans to use cash from the bought deal to fund its acquisition of a gold stream from Vale SA’s Salobo mine in Brazil. It is the second gold stream that Silver Wheaton is buying from this mine.

Protect your portfolio profits from the tax season goblin http;//www.youroffshoremoney.com

 

Are You Really Going To Trust A Fund Manager – Again?

How will You Improve Your Portfolio Results In 2015 ?

This probably comes as no big surprise, but the average fund manager hasn’t beat the market indices during the last 10 years. Amazing isn’t it?
 
And for those managers who do, it usually only in a bull market.
 
In bear markets, the number of profitable funds drops to almost zero! With those kind of odds, do you really want turn your money over to managers who won’t even move you to cash when its time to protect you from severe market declines?
 
As you have no doubt discovered, the old “tried and true” rules of investing may are still tried, but they certainly aren’t true. In fact, if the “buy and hold” strategy were really the best way to profit, why would institutional traders – the largest daily volume traders in the markets – move their money in and out of stocks like clockwork.
 
The truth is, they are making profits by selling to you when they know it’s time to go!
Unsuspecting investors buy when institutions are ready to sell, and sell when big money is ready to buy. Retail investors are the perfect  shills because the little guy will always trade on emotion or bad advice, and end up putting their money right into the hands of the hedge fund traders wanting to unload positions!
Our ( Jack A. Bass)  Managed Accounts keeps you from falling into that trap! It shows in advance when institutional traders are about to make the switch, whether buying or selling, and you’ll be moving your money to keep one step ahead of them – with much less emotion.
Now, instead of market “head fakes” causing you to lose money, you’ll leverage minor turns as opportunities to add to positions you are already holding. We call it trading the short term cycle.
 
 
End Costly Investing Mistakes
 
Successful investing is can often be counter- intuitive to how most investors want to trade.

Proof of The Pudding:

Here is our recent letter:

Managed Accounts Year End Review and Forecast

November 2014 – 40 % cash position
Gold and Precious MetalsThe largest gains for our clients came from the exit from the gold producers at $18oo an ounce and continuing until we hold no gold and no gold miners . This from the author of The Gold Investors Handbook.2015 – We continue to be on the sidelines for this sector – regardless of the gnomes of Switzerland . As a safe haven gold simply wasnot there for investors despite turmoil in the Middle East, Africa and Ukraine.How much more frightening can the prospect for peace be than to have wars in multiple locations? Secondly the spectre of inflation – on which I have given numerous talks – simply failed to materialize. In fact economists and portfolio managers such as myself are now more concerned about deflation – and the spectre is a Japanese style decades long slide in the world economy.
Shipping Sector / Bulk ShippersYou can review our stock market letter athttp://www.amp2012.com to follow our profits in the shipping sector before our retreat as overcapacity has yet to effect continued overbuiding. In 2008-9 rates-  illustrated by the Baltic Dry Index – were at their peak. The BDI hit over 10,000. Today it is roughly 10 % of that benchmark and the sector slide continues. We have an impressive watchlist of former ” darlings” – but we are content to watch and wait.
Oil/ EnergyI am very happy for the call in natural gas prices – out at $12 and into oil. When oil was above $100 we lessened positions and that is our saving grace in the past two weeks. We are not bottom feeders and will wait for a turn in the market before reentering drillers or producers.On Friday November 27th, crude oil prices dropped to below $72 and the slide has continued into the weekend, with Brent crude oil at $70.15 as I write this post. Shares of major oil companies traded down on Friday. Our former energy sector holdings are down another between 4% and 11%, including SDRL, which dropped another 8% following Wednesday’s 23% plunge…

Have you avoided these sectors – you would have been better off to follow our advice in 2014 and now you have to decide for 2015.
No one – and I am not being humble here – can project the future with great accuracy but our clients continue to do very well and we offer that experience to you.

Fees : 1 % annual set up and a performance bonus of 20 % – only if we perform.

You can withdraw your funds monthly if you require an income stream.

Alternate Guaranteed Income Payments

Private client funds Minimum $10,000 Maximum Loan $500,000

Our client is seeking funds to expand their tanker fleet .

Interest 12 % compounded – paid 1% per month

Floating charge of the full $500,000 against the fleet – valued at  more than $ 1 M

 

Contact information:

To learn more about portfolio management ,asset protection, trusts ,offshore company formation and structure for your business interests (at no cost or obligation)

Email

jackabass@gmail.com OR

info@jackbassteam.com  OR

Call Jack direct at 604-858-3202

10:00 – 4:00 Monday to Friday Pacific Time ( same time zone as Los Angeles).

Similar to wise buying decisions, exiting certain underperformers at the right time helps maximize portfolio returns. Selling off losers can be difficult, but if both the share price and estimates are falling, it could be time to get rid of the security before more losses hit your portfolio.

Tax website  Http://www.youroffshoremoney.com

Get Out Of Gold Part 2

Cheap Oil Is Dragging Down the Price of Gold


Photographer: Carla Gottgens/Bloomberg

Bars of 10-ounce gold are arranged for a photograph

Gold, the ultimate inflation hedge, isn’t much use to investors these days.

Oil is in a bear-market freefall that began in June, spearheading the longest commodity slump in at least a generation. The collapse means that instead of the surge in consumer prices that gold buyers have been expecting for much of the past decade, the U.S. is “disinflating,” according to Bill Gross, who used to run the world’s biggest bond fund.

A gauge of inflation expectations that closely tracks gold is headed for the biggest annual drop since the recession in 2008. While bullion rebounded from a four-year low last month, Goldman Sachs Group Inc. and Societe Generale SA reiterated their bearish outlooks for prices. The metal’s appeal as an alternative asset is fading as the dollar and U.S. equities rally, and as the Federal Reserve moves closer to raising interest rates to keep the economy from overheating.

“Forget inflation — all of the talk now is about deflation,” Peter Jankovskis, who helps oversee $1.9 billion as co-chief investment officer of Lisle, Illinois-based OakBrook Investments LLC., said Dec. 16. “Obviously, oil prices dropping are adding to deflationary pressures. We may see a rate rise next year, and we could see gold come under pressure as the dollar continues to move higher.”

Even though there’s been little to no inflation over the past six years, investors have been expecting an acceleration after the Fed cut interest rates to zero percent in 2008 to revive growth. Those expectations, tracked by the five-year Treasury break-even rate, helped fuel gold demand and prices, which surged to a record $1,923.70 an ounce in 2011.

Eroding Appeal

Now, inflation prospects are crumbling, undermining a key reason for owning the precious metal.

Crude-oil futures in New York have tumbled 44 percent this year, dropping below $54 a barrel last week, as global output surged. The five-year break-even rate is down 33 percent this year, the most since 2008. In November, the cost of living fell 0.3 percent, the most since December 2008, government data show, and economists surveyed by Bloomberg predict the annual gain in consumer prices will slow in 2015 to 1.5 percent from an estimated 1.7 percent this year.

Cheaper energy means there are no signs that inflation is approaching the Fed’s 2 percent target, Gross, who used to run the world’s largest bond fund at Pacific Investment Management Co. before joining Janus Capital Group Inc. in September, said Dec. 12 in a Bloomberg Surveillance interview with Tom Keene.

Shunning Gold

Investor holdings in exchange-traded funds backed by gold last week were the lowest since 2009, and $7.68 billion has been wiped from the value of the funds in 2014, according to data compiled by Bloomberg. Open interest in New York futures and options dropped 5.3 percent this year, set for a second annual loss and the longest slump since 2005, U.S. government data show.

After rebounding 4.4 percent from a four-year low in early November, prices will average $1,175 next quarter, below the Dec. 22 close of $1,179.80, according to the median of 31 analysts tracked by Bloomberg. Goldman forecasts a drop to $1,050 by next December, while SocGen expects $950 in 2015’s fourth quarter.

Since touching a six-week high on Dec. 9, futures fell 4.9 percent to $1,178.20 on the Comex in New York today, heading for a second straight annual decline, down 2 percent. The Bloomberg Commodity Index dropped 15 percent this year, while the Bloomberg Dollar Spot Index climbed 11 percent. The Standard & Poor’s 500 equity index is up 12 percent, after touching a record high Dec. 5.

Rebound Bets

Speculators haven’t given up on gold. Money managers remain bullish, increasing their net-long position to 103,738 futures and option contracts as of Dec. 16, more than doubling bets since early November, according to U.S. Commodity Futures Trading Commission data.

Signs that central banks in China, Europe and Japan will add to stimulus efforts have increased speculation that global inflation could rise, even as U.S. consumer costs stay stable. While dollar-denominated gold is down this year, bullion is up 12 percent priced in yen and 9.6 percent in euros.

“It’s confounding that inflation is not rampant on a worldwide basis, based on the amount of liquidity that has been pumped into the system,” Michael Mullaney, chief investment officer of Fiduciary Trust Co. in Boston, which oversees $11.5 billion, said Dec. 16. “We are not there yet, but once this starts to percolate, we will see headlines on inflationary pressures” that can support gold prices, he said.

Rally Ends

Gold climbed 70 percent from December 2008 to June 2011 as the U.S. central bank bought debt and held borrowing costs at a record low. Prices slumped 28 percent last year, the most in three decades, after some investors lost faith in the metal as a store of value.

The Fed’s benchmark interest rate will be 1.125 percent at the end of next year, quarterly estimates from U.S. central bankers showed Dec. 17. Chair Janet Yellen said in a press conference that day that inflation will eventually reach the Fed’s target, allowing the central bank to raise borrowing costs.

Bullion’s link with inflation dates back more than 2,000 years, with the first use of coin currency in 550 B.C., according to the World Gold Council. While countries from the U.S. to the U.K. adopted a gold standard by the 19th century to limit inflation, no nation links currencies to the metal anymore. The Fed cut the dollar’s ties to gold four decades ago.

“Gold as an inflation hedge is unnecessary,” Atul Lele, who helps oversee $5.1 billion as the chief investment officer at Bahamas-based Deltec International Group, said Dec. 16. “ We think inflation in the U.S. could rise, but nothing that should be a cause of worry.”

 You Have Options:

What To Do ?

Here is our recent letter:

Managed Accounts Year End Review and Forecast

November 2014 – 40 % cash position
Gold and Precious MetalsThe largest gains for our clients came from the exit from the gold producers at $18oo an ounce and continuing until we hold no gold and no gold miners . This from the author of The Gold Investors Handbook.2015 – We continue to be on the sidelines for this sector – regardless of the gnomes of Switzerland . As a safe haven gold simply wasnot there for investors despite turmoil in the Middle East, Africa and Ukraine.How much more frightening can the prospect for peace be than to have wars in multiple locations? Secondly the spectre of inflation – on which I have given numerous talks – simply failed to materialize. In fact economists and portfolio managers such as myself are now more concerned about deflation – and the spectre is a Japanese style decades long slide in the world economy.
Shipping Sector / Bulk ShippersYou can review our stock market letter athttp://www.amp2012.com to follow our profits in the shipping sector before our retreat as overcapacity has yet to effect continued overbuiding. In 2008-9 rates-  illustrated by the Baltic Dry Index – were at their peak. The BDI hit over 10,000. Today it is roughly 10 % of that benchmark and the sector slide continues. We have an impressive watchlist of former ” darlings” – but we are content to watch and wait.
Oil/ EnergyI am very happy for the call in natural gas prices – out at $12 and into oil. When oil was above $100 we lessened positions and that is our saving grace in the past two weeks. We are not bottom feeders and will wait for a turn in the market before reentering drillers or producers.On Friday November 27th, crude oil prices dropped to below $72 and the slide has continued into the weekend, with Brent crude oil at $70.15 as I write this post. Shares of major oil companies traded down on Friday. Our former energy sector holdings are down another between 4% and 11%, including SDRL, which dropped another 8% following Wednesday’s 23% plunge…

Have you avoided these sectors – you would have been better off to follow our advice in 2014 and now you have to decide for 2015.
No one – and I am not being humble here – can project the future with great accuracy but our clients continue to do very well and we offer that experience to you.

Fees : 1 % annual set up and a performance bonus of 20 % – only if we perform.

You can withdraw your funds monthly if you require an income stream.

Alternate Guaranteed Income Payments

Private client funds Minimum $10,000 Maximum Loan $500,000

Our client is seeking funds to expand their tanker fleet .

Interest 12 % compounded – paid 1% per month

Floating charge of the full $500,000 against the fleet – valued at  more than $ 1 M

 

Contact information:

To learn more about portfolio management ,asset protection, trusts ,offshore company formation and structure for your business interests (at no cost or obligation)

Email

jackabass@gmail.com OR

info@jackbassteam.com  OR

Call Jack direct at 604-858-3202

10:00 – 4:00 Monday to Friday Pacific Time ( same time zone as Los Angeles).

Similar to wise buying decisions, exiting certain underperformers at the right time helps maximize portfolio returns. Selling off losers can be difficult, but if both the share price and estimates are falling, it could be time to get rid of the security before more losses hit your portfolio.

Tax website  Http://www.youroffshoremoney.com

Sell signals from Eric Sprott

Sell signals from Eric Sprott according to information published by the Canadian Insider, Mr. Sprott has made four separate sales since the end of September. In all, Mr. Sprott sold 375,000 units at prices ranging from US$10-to-US$9.44.

 

Bloomberg Despite those four sales – which resulted in gross proceeds of US$3.6-million — Eric Sprott still has almost US$35-million of skin in the game.

Over the past six weeks, Eric Sprott — one of the country’s best known gold bugs — has been selling units in the Sprott Physical Gold Trust, a fund formed to hold physical gold.

A

Here are the details: Sept. 30 (15,000 at US$9.96 per unit); Oct. 2 (40,000 at US$10); Oct. 31 (210,000 at US$9.62) and Nov. 6 (110,000 at US$9.44.) Despite those four sales – which resulted in gross proceeds of US$3.6-million — Mr. Sprott still has almost US$35-million of skin in the game. According to the most recent filing on SEDI, he owns 3.49 million units in the fund.

Related
Barrick Gold co-president joins insider buying spree
The gold mining meltdown is so bad even activist investors won’t touch it
Sprott adds to investment management team in Toronto, New York
In its IPO, the fund raised US$442.5-million. Since then it has been back to the market on six separate occasions and has raised almost US$2-billion. Its most recent offering was in September 2012.

Glen Williams, a spokesperson for Sprott, said in an email message. “We don’t comment on Eric’s personal trading activity but Sprott’s view on gold is unchanged.” Another Sprott source said that Eric has been using the proceeds to invest in gold and silver equities which offer greater leverage.

********

IAMGOLD Corporation

CAVEAT: long time readers are aware that I am the author of The Gold Investors Handbook and have been a seller of all gold and gold stocks from $ 1800 until today.
This shift out of gold and out of shipping has allowed Jack A. Bass Managed Accounts to prosper – our position remains very cautious to both sectors preferring to maintain watch lists rather than positions.

IMG : TSX : C$2.17
IAG : NYSE
HOLD 
Target: C$3.00

COMPANY DESCRIPTION:
IAMGOLD is an intermediate gold company which
produced 764,000 oz in 2013 at a total cash cost of
$796/oz. Its key producing mines include Rosebel (95%)
in Suriname and the Essakane mine in Burkina Faso. Key
development projects include the Westwood (100%)
project in Quebec. Its key non-gold asset is the 100%-
owned Niobec mine in Quebec, which produces niobium.
All amounts in C$ unless otherwise noted.

Metals and Mining — Precious Metals and Minerals

TAKE A KNEE OR HAIL MARY?

Investment recommendation
At lower gold prices the operating outlook for IAMGOLD is not
favourable and based on the third quarter results the situation is even
more concerning. Grade control issues at Rosebel are expected to persist
into YE and management’s ability to fully fix the problem is unknown.
Near $1,100/oz we believe Rosebel may generate negative FCF. At
Westwood, IMG continues to evaluate different production profiles to
conserve development capital that could result in a slower ramp-up. At
Essakane, the Q3 results provided an insight into longer-term operating
costs for the hard rock expansion and the cost structure looks to be 5%
higher than anticipated. At all three core operations, there appears to be
limited opportunity to materially improve costs structures to defend
against a declining gold price environment.
IAMGOLD faces a fork in the road – utilize the Niobec windfall to pay
down debt and survive in a low gold price environment, or take a long
shot by purchasing a transformative asset (or possibly a combination of
both). In a low gold price environment, neither option will likely be
applauded by the market.
Investment highlights
 Q3/14 adj. EPS of $0.00 vs. CG at $0.01 and consensus of $0.03.
IMG generated positive ($55m) operating FCF for the first time in
two years. We forecast $16m in Q4/14 or negative $26.4m in FCF
(incl. G&A, expl., int. and ex Niobec). In this note we deconstruct
quarterly cash flows by assets.
Valuation
We have revised our target price to C$3.00 from C$4.25. Our target is
predicated on a 0.5x (from 0.6x) multiple to our forward curve derived
operating NAV of C$5.21/sh plus net cash and other assets of C$0.44/sh.
Our low target multiple reflects higher operating, financial, political
(Burkina Faso instability) and acquisition risk.

Silver Wheaton Corporation BUY Target Price $29

Metals and Mining — Precious Metals and Minerals
SLW : TSX : C$21.51
SLW : NYSE
BUY 
Target: C$29.00

COMPANY DESCRIPTION:
Silver Wheaton is uniquely positioned as the purest silver
producer. The company’s asset base consists of silver purchase
agreements with the San Dimas and Penasquito mines in Mexico,
Pascua-Lama project in Chile/Argentina, Zinkgruvan mine in
Sweden, Yauliyacu mine in Peru, Stratoni mine in Greece. Most
recent streaming deals with Hudbay minerals (silver and gold
streams at 777 and Constancia) and Vale (gold streams at
Salobo and Sudbury mines).
All amounts in C$ unless otherwise noted.

STRONG MOMENTUM INTO Q4
Investment recommendation
Silver Wheaton remains the preferred vehicle for exposure to silver
given the strong growth profile, margins, liquidity and diversification.
Further accretive streaming transactions are possible over the next 12
months, although new equity should be expected for larger transactions.
SLW is currently trading at 1.20x its forward-curve-derived NAV,
modestly above the silver producer group, but below SLW’s royalty
peers. Our NAV continues to assume a 25% permitting/development risk
discount for Pascua and Rosemont. We maintain our BUY rating.
Investment highlights
 SLW reported Q3/14 adjusted EPS of $0.20, in line with our
estimate and consensus. While attributable AgEq production was
below expectations (8.4 vs. 9.2Moz), a 1.3Moz inventory drawdown
resulted in sales beating our estimate (8.7 vs. 8.4Mozs).
 SLW wrote-down Mineral Park $37.1m following Mercator Minerals
Chapter 11 filing, and Campo Morado $31.1m given questionable
viability of the satellite resource base (metallurgy and low prices).
We have removed Mineral Park from our valuation and reduced our
Campo Morado’s valuation by 70%. Overall, these two small streams
are non-core and have limited impact on SLW’s overall profile.
SLW’s key streams remain well insulated to lower prices.
 SLW made a final $135m payment to Hudbay Minerals (HBM-T,
BUY, covered by Gary Lampard) relating to the Constancia gold
stream. While the payment was expected, SLW paid through the
issuance of 6.1m shares (dilution of 1.9%) rather than cash. The
preference for equity is understandable with the net debt to EBITDA
at 1.66x, which may not be high relative to SLW’s producing peers,
and is easily manageable, but remains high for a royalty company.
Both Franco-Nevada and Royal Gold have net cash positions.
Valuation
We have revised our target price to $29.00 from $30.00. Our target
remains predicated on a 1.55x multiple to our fwd. curve derived
5%/operating NAVPS estimate of C$20.02 (previously C$20.76) less net
debt and other corporate adjustments.

Detour Gold Corporation

DGC : TSX : C$14.90

HOLD 
Target: C$15.00

COMPANY DESCRIPTION:
Detour Gold Corp. is a gold development company presently focused on advancing the Detour Lake project in the Abitibi Greenstone Belt of northeastern Ontario.
All amounts in C$ unless otherwise noted.
Investment recommendation
We maintain our HOLD rating on Detour Gold but are raising our target
price to C$15.00 from C$11.00. The company has made considerable
progress in de-risking the balance sheet and ramping up the Detour Lake
operation. Year-to-date, the stock is up 234% relative to the S&P/TSX Gold
Index, highlighting the market’s favourable response to management efforts
in addition to potential M&A speculation. While progress-to-date has been
encouraging and the plant is expected to hit nameplate capacity by year-end,
we still see a long way to go before the ramp-up is complete. As per the
latest mine plan, the head grade is expected to gradually increase to reserve
grade in 2017 while mining rates are expected to continue to ramp-up to
peak at 389 ktpd in 2020.
Detour Gold currently trades at 0.81x P/NAV and 8.1x P/CF 2015 vs the
large cap producer average of 0.89x and 10.2x respectively. At this stage of
the ramp-up we believe the discount is justified – continued execution on the
mine plan and successful completion of the ramp-up could lead to a
meaningfully higher multiple over the next few years. Considering the stock’s
higher leverage to the gold price, we also see the potential for the share price to move higher if the gold price continued to increase.

Valuation

We have updated our valuation and forecasts to reflect our revised commodity and currency price deck. The stronger assumed C$ has had a negative impact on our valuation and forecasts, but offset by lower assumed sustaining capital forecasts and longer-term operating costs closer to the recent mine plan (We had previously modeled 20% higher LOM sustaining capital and 20% higher longer term site costs beyond 2020).
The combination of the encouraging progress to date, expected meaningful operational improvements in H2/14, greater comfort level following the recent positive site visit and productive meetings with management have resulted in us increasing our target P/NAV multiple to 0.85x from 0.70x which is the primary reason for the increase in our target price.
Our 12- month target price has increased to C$15.00 from C$11.00 based on 0.85x (previously 0.70x) our operating NAVPS estimate plus working capital and other adjustments.