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MoneyWorksforMe (< 20)

Aurico Gold is a BEAST



August 11, 2011 – Comments (29) | RELATED TICKERS: AUQ.DL

This morning they announced their second quarter earnings, and my god, it was an excellent report. They are firing on all cylinders and they hit the ball out of the park, there's no better way to put it...Their share price has a long way to go before investors begin to accurately reflect the current and future earnings growth of this grossly undervalued mid-tier miner.

I'm not going to try and summarize the details, as it's all nicely compiled here: 

Shareholders enjoy!  

29 Comments – Post Your Own

#1) On August 11, 2011 at 12:11 PM, goldminingXpert (28.75) wrote:

Gammon is a joke. There stock is flat today in a huge up market on these supposedly great earnings. Get out before they get any more strikes going at their mines.

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#2) On August 11, 2011 at 12:40 PM, XMFSinchiruna (26.58) wrote:


You're hopeless. You have never been, and nor will you every be, a "gold mining expert". Your repeated drive-by assaults against individual operators, without ever offering a shred of supporting evidence or rational analysis, paired with your admittedly wrong-headed analysis of the precious metals market over the years, has left you with zero credibility on the topic.

Stick to what you know, which is definitely not gold or silver.

P.S. - I recommend a name-change.

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#3) On August 11, 2011 at 12:55 PM, goldminingXpert (28.75) wrote:

Gammon's history of poor labor relations is legendary. When should we be expecting another strike at El Cubo?

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#4) On August 11, 2011 at 1:01 PM, goldminingXpert (28.75) wrote:

For those unfamiliar with Gammon:

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#5) On August 11, 2011 at 1:12 PM, XMFSinchiruna (26.58) wrote:

GMX, You simply must include yourself within the category of "those unfamiliar with Gammon".

I challenge you to retain the red-thumb you just placed on the stock for a period of two years. Go ahead ... I dare you! :)

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#6) On August 11, 2011 at 1:17 PM, goldminingXpert (28.75) wrote:

I'll probably be out whenever the next strike hits. I've red-thumbed them 3 times and greened them once, all with success. Their track record of constant poor drilling (Ocampo) and strikes (Cubo 2009, Cubo 2010, etc.) speaks for itself. The constant output decreases, especially following the implentation of their "turnaround" strategy in 2007 is also quite humorous. Sure output is up this year because they bought a successful miner, but give it time and they'll bungle that too. 

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#7) On August 11, 2011 at 1:21 PM, goldminingXpert (28.75) wrote:

 GMX, You simply must include yourself within the category of "those unfamiliar with Gammon". 

As long as I get to include you in the "those unfamiliar with ECU Silver" camp, it might be a fair trade. How is that takeunder by "Golden Minerals" (i.e. a bunch of management bums that destroyed Apex Silver) working out?

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#8) On August 11, 2011 at 1:26 PM, XMFSinchiruna (26.58) wrote:

poor drilling at Ocampo? ... you really do live in your own distorted world, don't you?

For those unfamiliar with GMX, he is legendary for spewing drive-by aspersions against stocks while constently exhibiting a woeful failure to understand even the basic parameters by which a mining stock is properly assessed.

There's this whammy, where he confidently advised investors to sell half their holdings of SLW on December 1. 2008, after the stock had risen to $4.33 from $2.51 when I noted the shares were like buying silver for $1 per ounce. With a current share price of $37, I sure hope no one here heeded his advise. That advise, by the way, was accompanied by the admission:

"I don't understand how they generate money, some sort of agreement to buy GG's silver and then sell it or something. I've never understood it and haven't tried to."

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#9) On August 11, 2011 at 1:33 PM, XMFSinchiruna (26.58) wrote:

And for those wish to see what it looks like when one refuses to learn from their past mistakes, try pairing this post by GMX with his unapologetic resumption of overly-confident and still equally uninformed assessments:

GMX: "I've been reflecting on the past recently. As part of that, I've read through my older blog posts. Honestly, I'm kind of disappointed. I noticed two things. A) I've been quite immature at many times during my stay at CAPS, and B) I'm wrong far more often than I'd like. "

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#10) On August 11, 2011 at 1:39 PM, XMFSinchiruna (26.58) wrote:

P.S.  GMX's "successful green thumb" call on GRS warrants something of an asterisk. He closed the pick at a 25% loss that was outpaced by a 33% decline for the S&P.

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#11) On August 11, 2011 at 1:41 PM, Frankydontfailme (29.37) wrote:

He's clearly an idiot. That being said, the strikes are a risk, no? Do you believe the labor relationship has improved?

This is why you diversify miners... 

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#12) On August 11, 2011 at 1:42 PM, MoneyWorksforMe (< 20) wrote:

I agree with Sinch, a name change is WAY overdue...I'm not going to feed this troll...Soon he'll go back to sleep again, when his CAPS score takes another plunge, which looks to be imminent as his score goes through a boom/bust cycle on order of a few months--a sign of a poor investor if you ask me. I'm calling a near term top in goldminingneophyte's CAPS score, with a precipitous, severe decline to follow. 

It's also rather sad that goldminingneophyte chooses to compare the relative stock performance to the broader market as oppose to the rest of the gold mining sector, which is a much better gauge and where it is strongly outperforming...Gold is actually significantly down on the day as well, while AUQ continues to trade in the green, so I view current sentiment on the stock to be very positive.

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#13) On August 11, 2011 at 1:49 PM, XMFSinchiruna (26.58) wrote:

Well ... let's not let it degrade to character assassination. GMX has a strong mind, and he's no troll. He's merely wrong-headed in his aproach to gold and silver, and lacking in his ability to effectively assess mining stocks.

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#14) On August 11, 2011 at 1:51 PM, leohaas (30.06) wrote:

I would not reject negative information on any company I own out-of-hand, even if it comes from someone who does not have a stellar track record, and even if the most recent results are excellent.

From the blog GMX links to: "In our view, this shutdown of the El Cubo operations puts Gammon's 2010 production guidance of 260,000-305,000 gold equivalent ounces at risk, given that it is unclear how long the mine will be non-operational. In our model, we had forecast 25% of Gammon's production coming from El Cubo. This mine constitutes approximately 15% of our US$7.67 NAV, and a three-month loss of production impacts our 2010 adjusted EPS by about US$0.07."

From AuRico Gold's website:
Gold eq. production (oz): 2008: 259,498; 2009: 230,228; 2010: 204,133. The strike suspended operations "during the last seven months of 2010". No mention of costs to the company other than the $9,214 in "mine standby costs".

I don't know the details, but it cannot be a coincidence that production was down significantly (both relative to 2008 and 2009 and relative to company guidance) in 2010. If there is a chance of new labor disputes, I'd like to know that, especially if they have a tendency to drag on for months. But considering they have a realized margin of $750 per gold eq. ounce, they definitely can resolve "labour" disputes...

Disclosure: long AUQ at the time of writing.

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#15) On August 11, 2011 at 1:54 PM, XMFSinchiruna (26.58) wrote:

Yes, the labour situation at El Cubo has been well resolved, as per my prior conversations with CEO Rene Marion. But yes, mining is a difficult enterprise fraught with operating risks, which is precisely why a basket approach is the preferred means to navigate a secular bull market.

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#16) On August 11, 2011 at 2:05 PM, XMFSinchiruna (26.58) wrote:


As if it required stating, I would not reject any negative information about a company out of hand either.

If anyone here is learning about the El Cubo disruption for the first time, then they failed to conduct DD ... pure and simple. The El Cubo disaster was precisely what set the stage for the most powerful turnaround story in the industry this year. Of course production was impacted by the closure of El Cubo.

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#17) On August 11, 2011 at 2:27 PM, goldminingXpert (28.75) wrote:

" I'm calling a near term top in goldminingneophyte's CAPS score, with a precipitous, severe decline to follow. "

I agree that my score is likely to top out near term. The market is set for a strong rally, and my portfolio is stuck in "uberbear" position due to some poor red thumbs in 2009. However, as TMFSinch and I agree, in the long-run the economy is heading back down and my macro short stocks bet will play out.

He is also right that I've been frequently wrong on gold, as I expected deflation to trigger a move out of gold. I missed on that call badly (thus far). I totally missed gold becoming a safe haven currency (the metal equivalent of Swiss Francs); I was aware of the possibility but thought deflation fears outweighed it. I was wrong on that. I have stopped prognosicating on gold/silver price outlooks because I realized I am frankly not very good at it.

However, I continue to cover individual stocks, as I am always looking for shorts (I'm a bear at heart, I can't help it), and perenially underperforming companies are great shorts on pops (as Gammon/Aurico has done recently). The Gammons, Seabridges, Novagolds and ECU Silvers of the world continue to be reliable shorts whenever the miners rally.

Gammon's past history of terrible labor management and continual dissappointing results that have resulted in the stock being dead money for five years now make me question it deeply as an investment. In particular, the name change is nice icing on the cake in laying out the thesis that management is trying to run and hide from its poor past.

(Of course, I am aware that TMFSinchurina is likely to reply that Jaguar Mining has followed a similar trajectory. This is true. I became emotionally attached to that stock and I have been quite wrong about it as well.) 

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#18) On August 11, 2011 at 2:49 PM, XMFSinchiruna (26.58) wrote:


You will avoid my wrath in the future if you can continue to channel that sort of humility in your posts, end explain your opinions more fully rather than just calling a company a "joke".

You are wrong about AuRico... and time will bear that out. Given the powerful momentum of late, any correction in gold could of course trigger some profit taking in the shares. But operationally the company is on tremendously solid footing, and after an admittedly poor handling of the El Cubo situation, management has now emerged from that challenging period in stronger shape.

Your short-side bias is precisely one of the reasons you and I have butted heads over the years. There are plenty of sectors out there where shorting would carry far less risk, because in essence you are fighting against the most powerful bull market of our time by trying to select near-term shorts within a long-term bull market. Worse yet, when you are wrong, the results can prove disastrous, as your CAPS account will attest. A near-term focus with a short-side bias is 180-degrees removed from the proper stance toward navigating a secular bull market. It's that simple.

By the way, ECU Silver has never been one of my favorites. I own a tiny slice that I picked up in 2006, but I appriach the shares with an appropriate level of caution as a speculative play. You incurred my wrath on your bearish pitch for ECU not because of the call, but because of the content of your pitch and unsubstantiated nature of the claims you made against the company. Even in cases where management has not unlocked the value of mineral resources in a timely way, I maintain you routinely overlook the value of underlying resources, and particularly the potential for new discoveries to expand those resources. I might not be willing to to raise ECU from a fringe holding to a core holding, but I certaiunly would never dream of shorting it. It may work out for you from time to time, but it remains the wrong approach to a secular bull market ... even toward the relative laggards within a secular bull market. ECU Silver still lays claim to some substantial underground resources, and I have half a mind to double down at these levels to see what an injection of capital and an AMEX listing might bring to the equation.

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#19) On August 11, 2011 at 2:52 PM, kdakota630 (29.05) wrote:

This blog post should have more then 5 recs based on the back and forth between TMFSinchiruna and goldminingXpert alone.

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#20) On August 11, 2011 at 2:57 PM, catoismymotor (< 20) wrote:

+ 1 Rec.

I'm being a team player, kdakota.  :)

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#21) On August 11, 2011 at 3:46 PM, kdakota630 (29.05) wrote:

Thanks, cato.

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#22) On August 11, 2011 at 5:58 PM, SN3165 (< 20) wrote:

+1.  Please check out my recent post on Franco Nevada FNNVF.PK. They are a beast as well!

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#23) On August 12, 2011 at 11:02 AM, goldminingXpert (28.75) wrote:

So far so good on my Aurico red thumb. May not even have to wait for another labour dispute. Still six days until I can close my red thumb though. ;)

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#24) On August 12, 2011 at 2:07 PM, XMFSinchiruna (26.58) wrote:


I'm disappointed. I was hoping you'd take my dare and keep the position open for 2 years. If the company is such a "joke", and additional labor disputes are imminent as you claim, then surely you could do well to keep the position in place over a longer timeframe!

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#25) On August 12, 2011 at 2:16 PM, goldminingXpert (28.75) wrote:

I think the market is going to tank in coming months, and that gold will outperform the S&P over that time period. Due to the S&P being our metric we are judged against, I am scared to red thumb even lower-quality gold miners. I can easily envision a scenario where Aurico falls 30% but the market drops 50%. I would be intellectually right but still down 20 points.

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#26) On August 12, 2011 at 2:45 PM, MoneyWorksforMe (< 20) wrote:

With 0% interest rates until mid 2013 and more QE ahead...people will not be staying in cash or fixed income....where will the money go? 

I think you also need to recognize and appreciate the absolute fiscal mess the U.S. and europe are in to understand why gold and silver will continue to be in a bull market...There is only two ways each country can get out of their debt problem at this point: grow your way out of it or inflate your way out of it....well guess what? The former is NOT that leaves us with one option... Massive currency devaluation...Politicians will not have the will to cut our way out of it, as unemployment is already extremely high, and RGDP, anemic in both the eurozone and U.S. You saw this first-hand with the debt-ceiling bill....

U.S. debt 14.6 trillion. U.S. unfunded liabilities: 115 trillion

U.S. RGDP : .85% annualized... 

Unemployment: 9.2% 

If they don't significantly devalue the currency I don't see how one can even think of the U.S. government being able to pay this money back...A trillion dollars and 1 trillion euros five years from now will buy significantly less than it does today.

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#27) On August 14, 2011 at 12:59 AM, XMFSinchiruna (26.58) wrote:

Consider the source, Fools! GMX has a pattern of referencing hit-pieces by one particular blogger for each of his recent bearish outlooks on mining stocks. That blogger he's relying on for his opinions, apparently without lifting a finger to corroborate the claims, has been fully discredited. His source has not the vaguest idea what he's talking about. Food for thought.

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#28) On August 14, 2011 at 2:41 AM, goldminingXpert (28.75) wrote:

Fully discredited eh? I am glad my friend Otto does not take you seriously because you are making yourself a real laughingstock.

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#29) On August 15, 2011 at 3:56 PM, XMFSinchiruna (26.58) wrote:

I've decided I'm done engaging directly with GMX. Attempting to reason with him in discussions of fact have proven to be a complete waste of my time over the past several years. Although it's a simple task for him to level baseless allegations against companies, my wish to ensure that my fellow Fools not fall victim to unsubstantiated claims or misinformation has compelled me to rebut those drive-by attacks as I have here above and throughout the CAPS archives. For the record, I have put in my time in that pursuit, and I am now done.

So let this serve as fair warning to all members of CAPS who may in the future be tempted to permit their opinions of a company to be even remotely impacted or swayed by this individual's posts: you risk walking into a world where facts are not welcome, where research consists of a link to some dude's blog, where prior failures never yield a less authoritative tone, and where shorting stocks against the tide of our generation's most powerful secular bull market is somehow not considered folly. Only you can protect yourself from that world by not walking through that door, because I will no longer carry responsibility for revealing the emptiness or carelessness of his future allegations.

I'll leave a sign hanging on the door: "Danger: do not enter!" But I will not be there to stand guard. Enter at your own risk.

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