| | Published : March 28th, 2008 | Winston Reports on Peak Gold (PIK-TSXv) |
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Issue 11 Vol.15 March 24, 2008
Customer Service 1-800-528-0559
Hello everyone, I hope you had a good Easter weekend!
This past week started out with more devastating news for the U.S. dollar
as Bear Stearns, a major US investment bank, crashed and burned. Such a
blow had the expected results. Gold and silver experienced wild
volatility,
the stock market bled red and even gold and silver stocks couldn�t avoid
the negativity.
As bad as this latest bank crash is, I always feel concerned that so many
investors fearfully sell their gold and silver stocks which are backed by
real assets and opt to sit in cash. Clearly and sadly, many investors have
yet to make the connection that at this time; the U.S. dollar is one of
the
worst vehicles to hold your wealth and security.
In the course of world history, fiat money systems have never worked as
the value of the currency is based entirely on the ability and guarantee
of
the citizens to pay it back in exchange for their labor and hopefully good
investments. As governments invariably put their citizens in debt the
burden grows. And therein lays the flaw.
The Federal Reserve with its easy credit policies, continuing bailouts
from the sub prime mortgage fiasco, dealing with the Federal Governments�
trade deficits and mounting debt in the public and private sector, is
fuelling the fire as more money is printed out of thin air every week
which
is forcing the dollar downward.
The dollar has made another historic low versus the euro last week. $1,000
gold will soon be the new floor price as it heads higher toward $1500.
The U.S. dollar and its buying power internationally will continue to go
down.
It is interesting to note that since the Bear Stearns collapse that gold
has been hammered and the dollar has actually perked up a bit. Don�t be
fooled by this short term adjustment. Here�s what�s happening.
Bear Stearns was long on large positions of gold assets. These assets are
being sold off to offset their losses. The company also held a large short
position on ten year treasury bills. Again these are being liquidated and
have made the dollar look stronger then it really is.
Consider this your short term window to take a gold position.
Rather then sitting in cash, investors would be well advised to sit in
solid gold stocks like Yamana or Goldcorp � both of which our readers have
positions in thanks to investments that started at pennies per share and
now represent dollars per share with dividends payouts every quarter.
More great leveraged plays are ahead just like Peak Gold which is also in
the news this week�
Peak Gold (PIK, TSX-V)
This past Monday, March 17th, Peak Gold reported their first year
financial results that highlighted earnings of $14.6 million or 3 cents
per
share for the 13 month period ending December 31, 2007. Production from
their two mines was 212,933 ounces of gold at a total cash cost of $364
per
ounce.
Since the formation of Peak Gold last spring when they acquired the
Amapari Mine in Brazil and the Peak Mine in Australia from Goldcorp, the
management has focused on cutting operational costs and increasing cash
flow � mostly at Amapari.
Additionally, two financings were completed which have cashed up the
company to the tune of $182 million. These funds will not only be used to
expand organic growth but the management has made it clear they are
shopping for mines which have the potential to add value to Peak. And
monthly cash flow is increasing that cash position by $5-8 million a
month.
Amapari Mine
The Amapari Mine has the greatest upside for the company. Over 2008 the
operating cash flow is estimated to grow substantially from $6 million to
$39 million as gold recoveries and throughput increase. Cash costs will
also go down because of improved operational management that has led to
lower manpower requirements and other efficiencies.
The gold production of 96,400 ozs over 2007 represented a 15% increase
over 2006. Production could increase substantially to 300,000 ounces per
year if a wash plant and a CIL (carbon-in-leach) mill were built to
process
the sulphide ore. Peak has already ordered some of the longer lead time
items for the wash plant. So their growth curve towards 300,000 oz/yr will
start in earnest early in 2009.
*Based on Gold Prices of $850 oz in 2008
Peak Mine
The underground Peak Mine has successfully replaced its reserves and
resources for the past 15 straight years. Old and new zones are continuing
to be found at depth. A new surface decline into the mine has increased
the
access to ore and will save money in transporting the ore and mine
equipment.
*Based on Gold Prices of $850 oz in 2008
Conclusion
With the market cap of the company currently at about $450 million, $182
million of which is in cash awaiting an investment, and the robust cash
flow projections for 2008, it seems clear to me that Peak�s current market
valuation is low.
Three factors will move Peak�s share price higher this year. The first is
stronger cash flow quarter over quarter. Over 2008 we can look forward to
improved cash flow and earnings from Peak particularly with gold hovering
around $1,000 per ounce.
The second factor which could increase the speculative premium of Peak is
the near term organic production increases from both the wash plant in
2009
and the CIL mill in 2010.
I think the most interesting news this year though will come by way of an
investment in another gold mine. Adding another producing or near
producing
mine to the company�s portfolio has been in the works since day one. We�ve
seen how the management has streamlined operations to lower costs and
increase organic growth with their two mines. With $182 million on hand,
Peak is positioned to shop for a high potential mine.
In a conference call last week Bob Gallagher, Peak Gold President and CEO
stated that all gold producing companies are now cash cows and looking for
high quality acquisitions is difficult if not impossible. The company�s
plan therefore will be to look at mergers where Peak Gold can apply their
management expertise and cash to help develop mines. Whether it�s a
merger,
buying a mine or taking a partnership interest in a high potential mine,
Peak Gold will expand its production portfolio this year.
Peak is a buy for growth.
Disclaimer
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Peak Gold
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Peak Gold Ltd
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CODE : PIK.V |
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ProfileMarket IndicatorsVALUE : Projects & res.Press releasesAnnual reportRISK : Asset profileContact Cpy |
Peak Gold is a gold producing company based in Canada. Peak Gold is listed in Canada, in Germany and in United States of America. Its market capitalisation is CA$ 587.9 millions as of today (US$ 577.1 millions, € 367.4 millions). Its stock quote reached its highest recent level on December 31, 2007 at CA$ 1.10, and its lowest recent point on December 31, 2007 at CA$ 0.43. Peak Gold has 725 791 396 shares outstanding. |
Financings of Peak Gold Ltd |
Financials of Peak Gold Ltd |
Project news of Peak Gold Ltd |
Corporate news of Peak Gold Ltd |
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