Recent Sell – New Gold Inc

NGD

This will be another quick update on a sale in my portfolio.

Last week I shared opening a new position in New Gold Inc (NGD.TO). I saw an opportunity after the stock price was down 35% after management announced delays in Rainy River project and shortfall in liquidity. The stock was over-punished and I figured it was due for a quick bounce. Right after I bought, New Gold stock bounced 10% which was good but I wanted to see how management was going to navigate going forward.

Yesterday, it was announced that the company was selling its 4% gold stream in the El Morro project to Goldcorp (GG) for $65M. This is a much better deal for Goldcorp than New Gold. However, it seems that investors in NGD like the news (uncertainty is a bigger evil than bad deals, it seems) and the stock price popped further. I decided to cash out and take my profits after holding the stock for just a few days.

To summarize: I sold 1,000 shares and closed my position in New Gold Inc (NGD.TO) @ C$3.95.

Total profit: $511 (14.86%)

Holding period: 8 days

Full disclosure: Our full list of holdings is available here.

2 Recent Buys – CU, NGD

Some quick updates for the recent moves in my portfolio. I made a few purchases in January that I never got around to documenting, so here it is.

I made the following purchases in January 2017

  • 100 shares of Canadian Utilities Ltd (CU.TO) + 1 STO covered call
  • 1,000 shares of New Gold Inc (NGD.TO) *New position*
  • + New portfolio for my daughter – details coming soon in a separate post

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Why Gold?

Gold — It is the oldest form of currency, universally accepted by the human species across the world in different cultures and different eras of civilization. This shiny metal has always been attractive by one and all for a variety of reasons. But we are in interesting times….and while we get more educated and complicate our monetary system, the more people tend to forget what gold even is. Is it a currency? A commodity? Or as some claim, is it a pet rock (Hint: No)? In this article, I visit and present a few reason to own gold.

Money vs Currency

Over the past few months, I have been spending a lot of time reading and learning about gold and its place in human history and our current monetary system. Our present state has become overly complicated where central bankers control every little aspect of our lives through the currency. The fiat currency is only a piece of paper, a promise from the government that the value you hold in your hand is worth something. We can argue all day long about which paper is stronger than other forms of paper from around the world, but the point is just that — its a piece of paper that is worth something today but may not be worth the same tomorrow. In fact, that is the hope — that it is worth less tomorrow.

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3 Recent Buys – PAAS, FNV, NMI

Whenever I make a purchase, I like to share my buys to document my journey towards financial independence. As regular readers are aware, I have broken from the DGI pack and sold some of my investments to move to a cash position. I shared details on my motivation to do so in this post. In that post, I have indicated that I am bullish only on one type of investment currently — hard asset, and more specifically gold and silver.

Earlier in the month, during the Chinese national holidays of Golden Week, the gold and silver market saw significant pullbacks — thanks to the paper traders and shorts having a field day week. It was a great opportunity for investors like me to load up on some gold/silver equities at a discount. I managed to pull trigger on three such instances. One incremental addition to an existing position and two new stocks for my portfolio.

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Recent Buy – B2Gold Corp

Whenever I make a purchase, I like to share my buys to document my journey towards financial independence. As regular readers are aware, I have broken from the pack of DGI and sold some of my investments to move to a cash position. I shared details on my motivation to do so in this post. In that post, I have indicated that I am bullish only on one sector currently — the resource/materials sector, and more specifically gold and silver.

I continued adding to my precious metals equity sector as I still see tremendous value. Earlier this week, I added to my position in B2Gold Corp (BTO.TO) (also trades as NYSE:BTG) with 300 shares @ C$3.42. This is the third transaction to for this particular company in my portfolio. The company does not pay any dividends.

I usually present my thesis on why I bought a particular investment security and present the risks associated in the Recent Buys posts. In this case, I will simply link to my original post on B2Gold purchase. Note that there was one major event that occurred on Tuesday which caused the stock to take a ~12% hit after which I added to my position. More on this after the link below.

Recent Buy – B2Gold Corp

New Risk Event for B2Gold

The event was related to the Government of Philippines DENR (Department of Environment and Natural Resources) announced the results of the nationwide audit of metallic mines. This is a new added risk to the Masbate Gold mine that B2Gold operates and provides significant portion of B2Gold’s revenue. It is also a very economical mine in B2Gold’s arsenal where All-In Sustaining Cost (AISC) is a lowly $595 /oz. The audit definitely throws a wrench in the works and will add some complication and added risk — which the management assures shareholders will be handled and de-risked appropriately. We will have to wait and see how things progress.

Valuation

I believe B2Gold is attractively valued even after considering the above risk. In addition to the growing revenue and earnings expected from B2Gold in the coming years, there is also added tailwind from the rising gold prices (which I am bullish on). Following infographic from Simply Wall St (read my recent review here) illustrates the valuation. Note that the infographic represents the US-listed stock NYSE:BTG and in US$.

AMEX:BTG B2Gold Intrinsic value by Simply Wall St

AMEX:BTG B2Gold Intrinsic value by Simply Wall St

Full Disclosure: Long BTO.TO. My full list of holdings can be found here.