Minyan Mailbag: Sticking With Golden Star Resources?
The upside is enough that it may be worth the wait...
I enjoy reading your articles. I have a question regarding Golden Star (GSS). I saw that Prof. Fleckenstein hated the convertible deal and sold what he had. Do you think the company will finally turn the corner (i.e. start to be profitable) in 4Q and are you sticking with it?
Thanks for the kind words. I've been quiet, because there's not a whole lot to say, I guess? I think it's pretty clear now that we're immersed in a stagflationary mess, where the Fed is feeding the "flation" with rate cuts. In that environment, you want to be in gold. What else is there to say?
As for GSS, Prof. Fleckenstein is a friend of mine. I was the one that had actually put him on to GSS. I can understand his unhappiness with the company when it did the offering. I wasn't too happy about it either at the time. That said; my time horizon is a little longer than Bill's, and I believe the company's 4.7 mil oz. of P&P reserves in the ground are severely undervalued, especially if one thinks gold is headed higher in the future.
In time, I believe that will change as the kinks are worked out of the sulfide expansion project. Startups of new projects rarely come off without a hitch, and between the power problems and the rains in Ghana over the past year, GSS has had its fair share of bad breaks. I'm a patient guy. The upside is enough that it's worth the wait in my view. That's what investing is all about though: buying a dollar for 50 cents and waiting for it to be valued at a dollar again by the market.
I don't think GSS will have a "clean" quarter until 1Q of next year (i.e. work all the kinks out of the BIOX process). But with gold rallying and the gold mining group rallying, I suspect the stock will be higher before the market gets the confirmation that the operation is progressing as the company has said it would. The only question is how much higher? Other than Newmont Mining (NEM) (before the stock rocketed last month), I can't think of a gold miner that is more hated (and undeservedly so, much like NEM was, due to what are short-term problems that all miners go through) than GSS. That's the sort of situation that makes for dramatic upside moves, and I still believe that lies in GSS's future, much as we saw with NEM last month.
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