Gus Cosio says so

Ideas on the Philippine Stock Market

Mind my mine

5:10 pm  Thursday  2 December 2010

I noticed that many have expressed disappointment on ORE for delaying shipment until the first quarter of 2011.  I for one got anxious so I made some deductive thinking with the help of discussions with some friendly analysts.  One thing is for sure to start with – that there is a good amount of nickel ore in the mining claim of ORE.  What that means is that no matter what, ORE should always have value by virtue of what lies in the ground.  The question really is whether or not the values on the ground can be transformed into earnings.  It is like real estate development.  I have owned a few hectares of land in the hills of Siniloan, but unless someone develops the area, my land will practically be worthless.

A mine is actually more than just real estate.  Unlike real estate where values can be derived from what is built on top of the land and the potential appreciation on account of the development, a mine has value because of the intrinsic worth of the mineral reserve in it.  Extracting the mineral can be likened to developing real estate because you take what is on the ground and you sell it.  It may fluctuate in value; it may take some time to bring it to market,  but it will eventually turn into cash.  Some urban buildings do not even get finished and appear worthless, but because it is in a good location, it never becomes worthless.  Same thing with an unexploited mine, it will never be worthless.  It is simply time value.

With ORE, therefore, it is simply a matter of time.  Yes, the time factor makes it a bit risky, but If it ships and the shipment derives a high price, there will be a windfall.  The bet on ORE boils down to a high yield for the shipment or a low one.  If it is high, then the earnings to be shared will be high.  If it is low, then what will be shared will be less.  One thing is clear, there will be value.  It is merely a bet on how much it will be.  If there is one thing I am 100% sure of – a producing mine ain’t no bubble.

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December 2, 2010 - Posted by | Financial markets in Asia

29 Comments »

  1. now i’m thinking of accumulating ORE also… but right timing should be taken into consideration. i don’t want my money to sleep with ORE right now… what is the good entry price for ORE sir?

    Comment by RmR | December 2, 2010 | Reply

    • RmR,
      I lightened up on my position at 3.77 but of course kept my low cost core intact. I will be comfortable anywhere close to 3.50. It will really depend on how the market plays out. But that’s me.
      I suggest you think about your level of comfort.

      Comment by Gus Cosio | December 2, 2010 | Reply

      • thanks a lot sir Gus! God bless

        Comment by RmR | December 2, 2010

  2. MAYBE observe again for a few weeks, who knows there might be any shipment after all, so patiently wait for the first one….di baleng mahal basta cgurado

    Comment by mike | December 2, 2010 | Reply

    • Good point, Mike. It’s really about risk reward.

      Comment by Gus Cosio | December 2, 2010 | Reply

  3. I think people are attracted to ore because its like the lotto. Its a turnaround/asset grab situation so if you win, you win big. If all goes well, you’re looking at a multiple bagger.

    and yet, one should not underestimate the difficulties of operating a mine. i mean, if it was so easy to extract and ship mine, ORE would have been shipping way back in 2007

    for me, i am concentrating on things that I can see and a company whose products I can buy/appreciate.

    and DGTL would be a good turnaround situation too you know. they have been losing all these years, and now they are close to earning close to a billion pesos. I would buy that instead (or maybe even JGS so you get free diversification)

    Comment by jasper | December 2, 2010 | Reply

    • Jasper,
      I own some DGTL and I added to my JGS position yesterday. I also own CEB. I wanted to buy RLC but held back because it might be putting too many eggs in one basket.

      Comment by Gus Cosio | December 2, 2010 | Reply

  4. Sir Gus… do you know if the nickel is high-grade? also, if i may add to your very informative and helpful blog, we should also consider the market price for the nickel. i think over a year ago a very huge nickel mining in western australia was sold when the price of nickel plummeted.

    Comment by jOnLomBs | December 2, 2010 | Reply

  5. Hi Mr.Gus Cosio, may I ask you regarding ACR? Is it true that ACR is in took with foreign bank to fund their expansion their energy business project?

    Comment by ron | December 2, 2010 | Reply

  6. Thanks for your re-assuring words on ORE. You may be too humble to admit it, but YOU and this blog are a “MARKET MOVER”. I can only imagine the number of people who BUY or SELL based on what you even just merely hint.

    Comment by Jojo | December 2, 2010 | Reply

    • Fully agree Jojo, in fact some traders start referring to stock movements associated with Sir Gus’ perspectives as the “Cosio effect” 🙂

      Comment by Chris M. | December 2, 2010 | Reply

      • Then I say that those who trade by just getting an info from someone even if its name is Gus should be out of the market soon. Why? Because they don’t really know what’s going on.

        Comment by donlyn | December 2, 2010

    • Jojo,
      You overrate me. I do this blog because I am an investment literacy advocate, not to move market.

      Comment by Gus Cosio | December 3, 2010 | Reply

  7. I completely agree on comment no, 5 about Mr. Cusio being a “market mover”. I, for one, base my decisions on which stocks to buy, which to accumulate,on his analysis. But even without the analysis, this blog is such a delight to read because all entries are simply well-written. By the way, I feel stuck with Nickel shares that I bought during the IPO. Mr. Cusio sees the potential in ORE, I hope that the same applies to Nickel as well.

    Comment by Cel | December 2, 2010 | Reply

    • Just watch out the foreign selling at NIKL. Once they are done…there will be a big move on this stock.

      Comment by Raymond | December 3, 2010 | Reply

  8. Pls advise regarding FGEN, coz i lost a lot when correction began, and i tried to keep it in my vault and wait till correction to get done.

    Comment by Edmund Concepcion | December 2, 2010 | Reply

  9. Hi Sir,
    Would appreciate your thoughts here. I own mpi,dmc and ore but wanted to shed some mpi and dmc for ap. How would you split mpi, dmc and ap.
    Thanks

    Comment by Mark Anthony | December 2, 2010 | Reply

    • Mark,
      I’ll probably take 15% each out of DMC and MPI to do that; although at this point I see a 30% to 35% move in both MPI and DMC over the next few months. I also see a 30% move on AP so I would be indifferent among the three stocks.

      Comment by Gus Cosio | December 3, 2010 | Reply

      • Thanks sir. Ive been circulating my investment in these stocks and so far yield has been phenomenal. Just need to further maximize my mix. Ive been observing ap and dmc price moves and seems that both have been somewhat chasing each other or moving opposite direction while trending up. Just like today, ap down..dmc up. It was the reverse for the last 5-7 trading days.

        Comment by Mark Anthony | December 3, 2010

  10. Hi gus,

    You mentioned you wanted to buy RLC. I also want but is torn between buying or just adding up more VLL.

    Since before I was choosing between them. I thought VLL would have more upside because it was below book and has the lower pe. but events tells us that both stocks performed almost the same (+20% based on the prices when I first considered them)

    VLL has started going into vertical development but RLC already has a stable of malls/hotels. Quite a few already in fact.

    I can’t decide between the two again..

    @btw – have you entered TEL again? or is saving it for later?

    Comment by jasper | December 3, 2010 | Reply

    • Jasper,
      I’m more into VLL right now for the same reason as you. I mentioned RLC for the more conservative investor wanting a play on property.
      I haven’t entered TEL yet because of cash constraints. What I intend to put into TEL is permanent cash for yield rather than trading cash.

      Comment by Gus Cosio | December 3, 2010 | Reply

  11. Sir Gus,

    I’m thinking of buying MER but just waiting for the right timing. What do you think is a good entry point for this stock? Also, would you know the reason for the decline of the value of the stock early this year? It was trading beyond 200 last December but plummeted after that. Thanks!

    Comment by chechako | December 3, 2010 | Reply

    • The time to buy MER was when it was 175 pesos.. Actually, buy now. At its current price, it’s still on the low end of its trading band.

      If it goes up to 190, I don’t think well see 180 again for a long time..

      Comment by jasper | December 3, 2010 | Reply

      • Thanks for that, Jasper. 🙂

        Actually I was itching to buy yesterday when it was 178, but didn’t have the funds until today.

        Couldn’t help crying over spilled milk.

        Comment by chechako | December 3, 2010

      • Thanks for that, Jasper. 🙂

        I was actually itching to buy at 178 yesterday, but didn’t have the funds until today. Today, I didn’t want to rush buying at 184/185.

        Couldn’t help crying over spilled milk.

        Comment by chechako | December 3, 2010

      • Did you manage to buy? I manage to buy only 181 per..

        I didn’t put too much on MER though. Just enough to wet my feet.

        Comment by jasper | December 3, 2010

  12. ORE is really cool. I like it very much! time will tell it’s potential.

    Comment by marketbeginner | December 3, 2010 | Reply

  13. Hi sir,

    Is it already a good time to position to MPI? I remember reading one of your last posts that you would still wait a bit before entering.

    Thanks

    Comment by Ria | December 3, 2010 | Reply

  14. sir gus, what can you say about mgmt of ore and lcb? I am choosing between the 2 for my mining

    Comment by bush | December 4, 2010 | Reply


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