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The Good, the Great and the Ugly – Start with the Ugly and OceanaGold

Lots of news and lots of portfolio changes so far this week.  When earnings season come I’m generally adding and removing positions on the fly depending on whether the results are meeting my expectations.  Add to that the debt ceiling issues and the need to hold more cash than usual with that uncertainty, and you end up with a lot of changes.  I want to talk about 4 items in the next few posts.

  1. The Good – Oneida Financial released solid results yesterday and Lydian International released a solid economics study
  2. The Great – Coastal Energy announced some extremely good results
  3. The Ugly – OceanaGold…

I’m going to start by talking about OceanaGold in this post.

What can you say other than what a terrible update!  Lower production and much higher costs (61,335 ounces of gold at cash operating costs of $921 per ounce) than anyone would have expected.  The chart below looks frighteningly like a hockey stick (we don’t know costs per tonne for the quarter yet).  You can’t even blame the cost increase on the New Zealand dollar.  Costs are spiking regardless of currency.

Investing in gold companies right now is turning out to be difficult.  More difficult then is worth while.  The market is not giving the companies any respect for the current price of gold, and the companies are almost all disappointing.

I sold out of OceanaGold this morning in the first six minutes after the market opened. When a company announces an obviously bad result, and you are fairly small fish as I am, you have to take advantage of the situation by selling BEFORE the market figures out what the new fair value is.  In the case of OceanaGold, I sold at $2.58, which was a lot less than I would have gotten yesterday, but a lot more than I would have gotten a couple hours later.  As you can see below, it took a couple tries before I finally got someone to buy my shares.  Unfortunately if I wouln’t have put in such a high bid at the open I might have been able to get out in the 2.60′s.  Oh well.

I’ll take another look at OceanaGold some day, but right now I have been disappointed a couple times in the stock, so I’m walking away for a while.

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