Year to date, gold has averaged $1,611/oz on the front month futures. Assuming these prices, ABX can be expected to earn around $3.38 in EPS. This puts the company at 5.6x forward earnings. This figure seems super cheap, but when in the context of mid-single digit production growth it makes sense. Gold production is only expected to grow 4.9% in 2013, and the average production growth until 2017 is expected to be flat 0.7%. Moreover, at these prices ABX is expected to be FCF negative this year.

From the prospective of technical analysis, the October low of 2008 will prove to be an important pivot point. This low is roughly $17.27 and it seems as though we are destined to touch it.  Should ABX and the mining sector snap back, a decent target could be the 50 DMA at $29, while this may seem aggressive, it only took 12 trading days to get to this level from the aforementioned level.

All things considered, the mining sector is full of problems, but when everyone is looking down, maybe it is prudent to look up…with a tight stop.

salerno.mark.a@gmail.com

Paper bought 2795 GCI May 20 Puts for $.65 when stock was trading $21.09
Paper bought 3000 SFD May 22 Puts for $.20 (2.5 times usual volume) when stock was trading $25.22
Paper bought 500 IWO May 106 Puts for $3.20 (7.7 times usual volume) when stock was trading $103.95
Paper bought 2000 AVP May 20 Puts for $.675 (3.8 times usual volume) when stock was trading $21.16
Paper sold 6650 CBG May 24 Puts for $.80 (38.2 times usual volume) when stock was trading $24.36

Paper bought 2000 DPS May 50 Calls for $.40 (6.8 times usual volume) when stock was trading $47.39
Paper bought 1198 QEP June 35 Calls for $.15 (26.5 times usual volume) when stock was trading $29.26
Paper bought 700 NCR April 28 Calls for $.15 when stock was trading $27.41
Paper bought 500 GSS Nov 1 Calls for $.30 (5.7 times usual volume) when stock was trading $1.00
Paper bought 700 FORM Oct 5 Calls for $.40 (11.4 times usual volume) when stock was trading $4.61

Paper bought 4500 NFP July 25 Calls for $.55 (15.4 times usual volume) when stock was trading $25.17
Paper bought 25,000 DLPH May 40 Calls for $3.30) 122 times usual volume) when stock was trading $42.75
Paper sold 6650 CBG May 24 Puts for $.80 (38.2 times usual volume) when stock was trading $24.36
Paper bought 20,000 LUX May 45 Puts for $.05 (42.7 times usual volume) when stock was trading $50.20
Paper sold 7000 HCA June 37.5 Straddle for $4.05 (5.2 times usual volume) when stock was trading $37.51

Paper bought 5000 NFP July 25 Calls for $.55.  This was a huge order
and there could be more upside and another potential buyer in this
stock.

The Trade:  Buying the NFP July 25 Calls for $0.55
Risk: $55 per 1 lot
Reward: Unlimited
Breakeven: $25.55

Greeks of this Trade:
Delta: Long
Gamma: Long
Theta: Short
Vega: Long

—
Andrew Keene
President/Founder
Andrew@KeeneOnTheMarket.com

These trends include but are not limited to an aging population, inflation goal, debt to GDP, revolving door at the Ministry of Finance, and QE efforts by the BOJ.

The debt to GDP ratio is over 230%. Tax revenues are shrinking and The Bank of Japan (BOJ) has been enabling this for years with low interest rates, but now that the BOJ is currently targeting 2% annual inflation, according to Governor Haruhiko Kuroda, the interest expense is may soon increase and be more than what the government takes in from revenues.

 In addition to the market worrying about the BOJ and the debt crisis, the investment community also seems to be worried about the Yen. Investors seem to be scrambling to get out of Yen and into more productive currencies. The market has seen some massive momentum as of late. From low to high, the USD/JPY has rallied 30% recently, but this move could be just the start, as the pair formerly traded around 250.

—
salerno.mark.a@gmail.com