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Updated RNC 2005 Projections
These financial projections should be materially accurate, I hope...
San Andreas acquisition in 2005 continues to be key variable. My model shows this acquisition to be nicely accretive. RNC projected 5M share issuance in Oct 2004 presentation, I am using 7M shares. Am not totally sure about debt assumed, but 7M shares plus $5M debt seems reasonable based upon my understanding.
Canadian GAAP for stock based compensation line item is highly amusing. Reasonableness should be used instead of Black/Shoales model... To wit: there are 2.32M options issued to management at exercise price of C$2.18 that expire in 4.5 years. The stock is trading under C$.80 and somehow Candian GAAP made RNC expense an extra $382,000 in 4Q04 as stock based compensation. Go figure...
Nicaragua Politics...
Bolanos responsible for high cost of living/oil prices, like it or not...
_______________________
Nicaragua students clash with police over oil costs
25 Apr 2005 23:06:52 GMT
Source: Reuters
MANAGUA, Nicaragua, April 25 (Reuters) - Thousands of Nicaraguan students clashed with police on Monday when they protested transportation and food costs, while the nation's mayors challenged the president to solve the problems or resign.
At least two police officers and two students were injured in clashes in the capital, officials said, as protesters reportedly launched homemade grenades and set fire to police motorcycles and a bus.
Rising world oil prices lie at the heart of the protests. They began more than a week ago, when bus companies announced a rate hike to about 18 cents from 15 cents due largely to higher fuel costs.
Crude prices are also blamed for rising inflation in Nicaragua, the poorest country in Central America.
Press reports said students and peasants also took to the streets in the northern city of Matagalpa on Monday.
President Enrique Bolanos, a conservative, has refused to authorize government subsidies to avoid the bus rate hikes, as local officials, students and transport companies have requested. He calls the protests politically motivated.
On Monday, Nicaragua's 152 mayors, most from the political opposition, demanded that he take measures to reduce the impact of oil prices on basic goods and transportation.
"If Bolanos will not or cannot assume the responsibilities for which he was elected, with all respect and seriousness we ask him to resign his post," the mayors' association said
______________________
Protesters Demand Presidential Resignation in Nicaragua
Prensa Latina - Havana,Cuba
Managua, Apr 25 (Prensa Latina) Nicaragua"s Association of Municipal Mayors has urged President Enrique Bolaños to resign "if he does not want to or cannot" assume his responsibility with society in addressing the high cost of living.
The appeal released on Monday is included in a communique approved by most of the 152 mayors gathered in the capital.
The text, read by Mayor of Managua Nicho Marenco, said the nation is undergoing a serious energy crisis which the Chief of the Executive "has failed to answer."
Thousands of university students, workers and people in general have blocked several roads since early Monday as they face anti-riot forces with home-made mortar shells and stones.
Police forces are following Bolaños"orders "to break up by force" popular demonstrations against a rise in prices of transportation, groceries and services.
More than 10 people have been detained so far. Several people have been affected by tear gas whilst some others have been wounded.
goldheart update
http://www.gold-eagle.com/charts/goldheart.html
couple of updated analyst reports:
http://members.shaw.ca/dsk.consulting/klgold.htm
RNC Management/in response to a stockhouse question:
Can anyone explain why RNC HONDURAS AND RNC MANAGEMENT were not part of the original structure of the company? I only can envision horrible motifs for not doing so. Appears the principals are the same in all the three companies. RNC MANAGEMENT will run the Panama mine. Hope someone can allay my fears.
________________________________
My reply:
Good question. One that was on my mind when doing DD back in Aug/Sept 04.
San Andreas mine is 75% owned by a Honduras bank and RNC Management/Honduras owns the other 25%. My recollection is Honduras bank acquired San Andreas mine via foreclosure of prior owner around 2001. Thus bank owned the mine and had bad loan on the books, but had no mining expertise. Bank needed someone to operate the mine to get loan paid back and contracted with RNC management in exchange for 25% ownership. RNC management owns 25% of San Andreas and has right of first refusal on the bank's 75%. RNC Gold Inc. has the right to obtain 100% of San Andreas from RNC management and Honduras bank; RNC Gold Inc has 0% ownership now. Believe Honduras bank made it difficult for any ownership interest in San Andreas to be transferred to RNC Gold Inc upon its formation in late 2003.
My recollection is Honduras bank primarily just wants its loan repaid in full plus retain token ownership. Believe Honduras bank likely to sell some of the shares (about 50%) it receives if this deal closes and let the rest ride. Per company presentaion in 2004, RNC Gold Inc. believed it could obtain 100% of San Andreas for 5 Million shares plus assumption of Honduras bank debt. If the deal can still be closed via these terms, then this would be highly accretive to EPS and cash flow. The Honduras bank has been highly pleased with RNC's management of the San Andreas mine and the parties have a very friendly/good relationship with one another. Because of this, RNC Gold Inc still believes it can close this deal on favorable terms in 2005. We'll see...
Regarding your question on RNC Management running the mines, RNC Gold Inc. believes this is in the best interest of shareholders. I too was very interested in this potential conflict of interest and I asked many questions in this regard. For example, why not hire these guys as employees or contract to a fully independent contractor...? As it was explained to me, RNC Management is primarily a bunch of experienced, ex-patriate mine repairmen/engineers/troubleshooters. First, operating as separate entitiy RNC Management saves on taxes, both foreign income and payroll taxes. Second, these ex-pats are "permanent contractors, no overhead expense, all at an hourly rate, and can be freely moved from RNC mine to mine as needed". RNC believes that contracting out to a fully independent company would be much more expensive. These were their exact words in response to my questions, and FWIW my impression was this relationship did appear to be reasonable and likely in the best interest of RNC shareholders.
FWIW, SEDI lists Randy Martin "selling" 829,000 shares on 6/30/04. This is misleading. What really happened is that Randy Martin distributed these 829,000 RNC Gold Inc shares to the RNC Management ex-pats. These RNC Management ex-pats are essentially employees but are paid/classified as independent contractors for income and payroll tax reasons.
Sprott Comments 3/30/05, written after year end 2004 results conference call and visit to Aguablanca:
"A Month Here or There is Inconsequential: The weak 2004
results are the result of the struggling Spanish gold operations.
Moving forward these operations become non-material as all
eyes focus on Aguablanca. With Aguablanca, Rio Narcea would
produce 18 MMlb of nickel p.a. with average cash costs around
$2.40/lb over the next 10 years. With the development of the
Tasiast gold project in Mauritania underway with production
planned for the late 2006 and assuming a positive feasibility
study at the Salave gold project in Spain, Rio Narcea could
exceed 250,000 ounces of gold production annually by 2008.
While the markets may be volatile depending on the month to
month advance or delay in the Aguablanca commissioning, the
fact is a month here or there makes absolutely no difference to
the business case. We maintain our 8x 2006 P:CFPS valuation
and a target of $3.65 with a buy recommendation."
oh ye of little faith...
what makes you think I have learned my lesson...!!
Louis very timely with his COT update...
http://www.investorshub.com/boards/read_msg.asp?message_id=5191980
except for dear old RNC, which looks ever worse and not the same as the others... I'm saving up some money to buy at $.05 per share, should be there within 6 months given current trajectory... Will then double up at $.00!!
Sensitivity Analysis to POG
Here are model results for 4Q05 using various POG:
$390 POG........4Q05 EPS = $.002......PE=94.8x
$426 POG........4Q05 EPS = $.026......PE=6.4x
$450 POG........4Q05 EPS = $.041......PE=3.9x
$475 POG........4Q05 EPS = $.051......PE=2.8x
$500 POG........4Q05 EPS = $.071......PE=2.2x
RNC is nicely levered to the POG. Prices below $390 and RNC would have a net loss although cash flow would still be positive at $1.1M, using prices of $475 then EPS would be $.05 for the 4Q and thus US$.20 annualized. Negative cash flow results using POG under $347.
Updated Financial Projections for 2005
Have not firmed up these numbers, but thought I would share a first look... These financial projections are for Nicaragua operations only. Honduras acquisition would be accretive to both EPS and cash flow. I am using only 97,000 ounces of production for 2005 although the company has projected about 100,000 ounces (71,222 La Libertad + 31,343 Bonanza). Recall RNC warned for 1Q05 already and projected 16K production ounces but RNC had 2,000 ounces produced and not sold from 4Q so I anticipate sales of 17,500 ounces in 1Q05. Using $426 spot price of gold for 2005 to be conservative.
1Q05 will be the worst quarter of the year. The hedge will be substantially gone by 1Q05 and all gone by mid May, IMO. My understanding is RNC incurred high stripping costs during 1Q05 which will all be expensed in 1Q05 rather than charged pro-rata against the future quarters benefitted per recently updated Canadian accounting guidelines.
Free cash flow I show at US$7M, so RNC should not need any additional financing. This US$7M will likely be used to fund Panama Capex of $14M. Honduras should require no cash outlay, it will likely be a share transaction + assumption of debt.
As stated, Honduras is key to RNC upside potential for 2005 as Honduras gold production would be very accretive to both EPS and cash flow, IMO.
My fully diluted shares now only include the recent Canaccord PP since the C$2.50 warrants are highly unlikely to be exercised by Dec 05 and Apr 06 (over a triple from here). If they do get exercised, I will very happily update my model...
Annualized quarterly PE ratio is now below 7x for Nicaraguan Gold Mining Operations only. For example using 4Q05, [(US$.65/($.026*4) = 6.4x PE Ratio].
Simmons beating the drug on energy...
http://www.simmonsco-intl.com/files/Boston%20Committee%20on%20Foreign%20Relations.pdf
All in good fun, if not in good taste...
The Unofficial RNC Gold Newsletter
http://download.xdrive.com/s/132603924HaJKf2wIAq34DPCfYy4&partner=plus
Annual Report released today
http://www.rncgold.com/downloads/AR2004.pdf
new SEDAR filings out yesterday
Annual Information Filing
http://www.sedar.com/csfsprod/data55/filings/00759207/00000002/e%3A%5CData%5CShared%5CLONNIE%5CSEDAR...
Proxy:
http://www.sedar.com/csfsprod/data55/filings/00767435/00000001/k%3A%5CSedar%5Cfilings%5Clivework%5Cw...
Gold Stock Bellweathers - Weekly
Gold Stock Bellweathers / 6 months
From the AIF
Hollister Development Block
In August 2002, Great Basin and Hecla finalized Earn-In and Joint Operating Agreements, whereby Hecla could vest in a 50%working interest in the Hollister Development Block, subject to a purchase price royalty in favor of Great Basin, providing that Hecla funds a US$21.8 million, two-stage, advanced exploration and development program (or otherwise achieves commercial production) and issues 4 million Hecla share purchase warrants to Great Basin. Concurrent with and in proportion to the Hecla warrants, Great Basin will issue 2 million share purchase warrants to Hecla. Since 2002, Hecla has performed engineering and permitting work in furtherance of an underground development program and has obtained the necessary permits to complete the Stage 1 underground development, drilling, and pre-feasibility work. The program budget for Stage 1 is estimated in the Earnin Agreement to cost US$10.3 million, with work to be completed in approximately 12 months from when the permits were issued in May 2004. Hecla commenced physical work on the site in October 2004. To vest its 50% working interest, Hecla must, upon completion of Stage 1, elect to proceed to Stage 2 within 60 days. The Stage 2 program of US$11.5 million is expected to be completed over the ensuing 12 months and consists of underground production development and procurement of production equipment and surface facilities, with an overall goal to develop the Hollister Development Block to the point of commercial production. Under the agreements, Hecla will be the operator of the Stage 1 and Stage 2 work programs, and will continue as the operator should a positive production decision be made.
The Earn In Agreement expires in August 2006. Hecla has stated that it interprets the program and budget differently than does the Company and has stated that Hecla amended the Earn In Agreement in a way that would combine, at least in part, the Earn In requirements of Stages 1 and 2. Hecla advised the Company that Newmont would not provide adequate rights to allow Hecla to enter onto the Reclaim Lands and consequently Hecla would not start on the Stage 1 Program. The Company has notified Hecla that the Company does not accept Hecla's interpretation of the Earn-in Agreement because Hecla has purported to unilaterally change the previously agreed Earn-in Stages. These changes in effect commingle the Earn-in requirements of Stages 1 and 2 which, if accepted by the Company, would result in an extended option period for Hecla to complete a larger and different Stage 1 program and would also result, in the Company's view, in uncertainty about the size and timing of Stage 2. The Company and Hecla have had some discussions with a view to resolving this difference but they have not reached any settlement of the matter. The Company is currently unable to predict whether this difference of interpretation will result in a significant legal dispute with Hecla if left unresolved nor is it able to predict the outcome of any such legal dispute if initiated.
______________
Added second shift..., about time.
The Hollister Development Block program was fully permitted on May 7, 2004. Hecla received authorization for physical work on August 20, mobbed to site and began physical work on September 15. The first portal blast occurred on October 22, 2004. The decline had been advanced 185 feet (56 metres) to the end of December. A further advance of 145 feet (44 metres) was achieved in January 2005, and a second shift of miners was added in February 2005 that will increase production. Other activities have included site preparation, construction of shops and other facilities, as well as development appropriate sites for collection of broken rock and environmental monitoring of these areas. Underground exploration core drilling is forecast to begin in June 2005.
The contract has no arbitration clause. Both parties would have to agree to arbitration.
Believe you mean August 2006 rather than Aug 2005. That is the firm/drop-dead date in the contract. The estimated 12 months deadline from BLM permit is more nebulous. HL may well be able to argue that 1) this was an estimate and unforeseen problems arose and 2) initial access to property because of NEM reclamation prevented them from starting until late Sept. This is malarky, but something HL can argue in court and should be successful for at least a few months added time.
"By current contract they are obligated to complete the decline by the end of August or lose all of their interest in the project."
Listen to Thiessen comments at BMO conference. My impression is GBN will not be kicking HL off the property until at least Dec 2005 if HL has not finished Stage 1 by then. Then there would be legal fees to get this done.
In any event, Aug 2006 is the firm drop-dead date. HL must be finished by then AND have fully funded the entire capex of the project.
here's a bedtime story...
http://www.investorshub.com/boards/read_msg.asp?message_id=6069688
Final words on HL/GBN Earn-In Agreement...
The recovery of the silver price from Aug 2002 to 2004 and thus HL finding better projects with higher internal rates of return than Hollister, does NOT give HL the right to withdraw, terminate or perform at Hollister via its Earn In Agreement with GBN.
The governing law per section 17.5 is under the jurisdiction of Nevada. HL is hoping, praying, and exercising its right to have this contract re-interpreted or clarified to its benefit.
GBN - A Bedtime Story (HL Earn-In Agreement)
(based upon my understanding of the facts)
Once upon a time not so long ago (2002), there was a company named GBN that had delineated a 1M ounce inferred gold deposit at Hollister (on the Carlin Trend) in Nevada. Gold was trading below $300 an ounce and silver below $4.75/oz. This inferred gold deposit was very close to the surface so that the economics to drill additional holes was not as economic as simply proceeding direct to underground mining/development of the deposit. That is, it would have cost $5M-$8M to drill additional holes to convert these inferred ounces to measured and indicated/PP versus $11M to complete (Stage 1) underground development. No mill, tailing ponds, or other major mine infrasture was necessary to be built since there was significant overcapacity of mill capacity in the immediate Carlin Trend area.
Thus, on a cost vs. benefit basis it made more since to proceed direct to underground development rather than to drill more holes. Further, all the incline and other infrastructure built for exploration/development could be used for commercial production and there would be pre-production gold as a result of digging the incline estimated at 53,000 ounces (see Section 9.5 @ http://www.secinfo.com/dqd6r.2t.b.htm#1stPage ) which would largely offset the initial cost.
"Proceeds from all Products produced from the Area of Interest during the term of this Earn - In Agreement (estimated to approximate 40,000 tons at a grade of 1.29 oz Au and 7 oz Ag diluted by 50% for a total tonnage of 60,000 tons; equivalent gold ounces produced expected to approximate 53,000 ozs)"
(At the time, 50K ounces of gold at $300 POG less toll milling/processing costs would have likely funded over $12M. My current understanding is this pre-production gold cannot be sold until commercial permit obtained to proceed with Stage 2.}
Enter stage right, Hecla Mining (HL), a silver mining company with excess mining equipment and struggling to eke out a profit at $4.50 silver and also desiring to increase its gold ounce production relative to silver back in mid 2002. HL viewed a Hollister joint venture as a great short term opportunity to utilize its existing mining equipment and US workforce since silver was still very much in a bear market. HL and GBN started talking in 2002 and came to a tentative agreement in June 2002 which was formalized on Aug 2, 2002.
Both parties envisioned that the Hollister permitting would be obtained in early 2003 based upon their knowledge of the project and discussions with the BLM. HL had all its equipment ready to move and actually did move some of it to Hollister area. All of the expenditures listed in Exhibit E of the Earn-In Agreement (again @ http://www.secinfo.com/dqd6r.2t.b.htm#1stPage )
were using HL's equipment and US workforce costs as of Aug 2002. It is also clear from reading the Earn-In contract that Stage 1 was estimated to take only 12 months, HL had all the equipment and personnel ready and waiting. In HL Form 10-K filed March 2003, it stated "Plans for 2003 include applications for all permits, construction of the surface support facilities and a drive of the initial 500 foot decline."
HL viewed Hollister as a low risk, potentially high reward project in Aug 02:
"Hecla's Mr. Brown said, "We see this project as one with low risk and extremely high future potential. At the very least, we would expect to recoup our costs, and at most, we could find the next major underground gold deposit on the Carlin Trend."
Well, neither GBN or HL ever conceived that the BLM would take until May 7, 2004 to approve the Hollister permits. And the Earn-In Agreement clearly specified a term ending Aug 2006 for completion of Stage 1 and Stage 2 exploration and development. In addition, I believe the BLM requirement in March 2004 requiring another permit for commecialization to proceed from Stage 1 to Stage 2 may have been unforeseen.
Now enter stage left, 4Q03 and 1Q04 and the huge leap in price of silver from $4.74 to over $6 an ounce. All of a sudden, HL needs the equipment and manpower originally budgeted for Hollister for its now highly profitable silver mine operations. What's more, the Hollister permit has still not been obtained as of early 2004. Thus, HL redeploys its equipment and manpower scheduled for Hollister to its other operations.
Well, low and behold the BLM finally does issue its EA and Notice to Proceed on May 7, 2004. So HL now has to purchase new equipment and find manpower for Hollister... HL tries to unload these extra costs (e.g. new vs. used equipment) to GBN via the contract. GBN objects. The procedures outlined in Section 9.1 (b) and 9.3 (c) come into play with HL as manager having the final decision.
HL, however, has a huge problem. HL cannot simply terminate or back out of the Earn-In Agreement. HL is fully obligated to perform Stage 1 at its own 100% expense regardless of anything. HL cannot terminate the agreement, it must fully fund Stage 1 (see Section 8 on termination):
"Hecla Ventures may withdraw from and terminate this Earn - in Agreement at any time subject to its reclamation obligations herein provided and subject to Hecla Ventures commitment to fund the estimated budget and program of the Stage I Earn-in Activities."
Further, HL cannot delay Stage 1 either or it will miss the Aug 2006 deadline and lose all its $10M+ investment. It gets even worse for HL... Upon termination, it appears HL does not even have the option to pick up its equipment and leave. GBN has the right of first refusal on keeping all the equipment that HL has paid for...
"Rodeo Creek [GBN] shall have the election respecting any Assets, the costs of which or title to which have been included in the Earn - in Activities (such election to made on 60 - days' notice) to either require the conveyance of such Assets to Rodeo Creek [GBN] at no cost or to require their removal by Hecla Ventures."
Now read Exhibit B, Accounting Procedures, in conjuction with the Termination Section 9 and HL continues to get into deeper trouble... Specifically Section VI of Exhibit B. Appears GBN will get HL's new equipment at a 25%-35% discount...
This Earn-In Agreement has to be the nightmare from hell for Hecla, they are damned if they do and damned it they don't. HL is fully obligated to Fund Stage I, regardless of cost and cannot simply terminate or withdraw from the agreement. If there are large cost overruns over 10% (and there are 50%+ cost overruns currently) and HL does not proceed to Stage II, then HL cannot recoup these cost overruns. See Section 9.3 (f)and 5.4 (b) regarding 10% overruns. HL cannot unduly delay or otherwise not spend cash to fully fund the Hollister budget either or this will terminate the agreement with very positive consequences to GBN (see Section 8.4).
The only hope and prayer HL has is for a Nevada judge/court to clarify or interpret this Earn-In agreement to its favor. This agreement is pretty much iron-clad in my opinion. The only hope is possibly Section 17.4 Force Majeure or maybe another re-interpretation of a section I am not aware (I am no lawyer, simply someone who can read contracts and form his own opinion, and I am biased toward GBN viewpoint). Here is the Force Majeure section, I especially like the last sentence:
17.4 Except for any obligation to make payments when due hereunder and except for matters arising out of a Party's lack of funds, the obligations of a Party shall be suspended to the extent and for the period that performance is prevented by any cause, beyond its reasonable control, including, without limitation, labor disputes (however arising and whether or not employee demands are reasonable or within the power of the Party to grant); acts of God; laws, regulations, orders, proclamations, instructions or requests of any government or governmental entity; judgments or orders of any court; inability to obtain on reasonably acceptable terms any public or private license, permit or other authorization, including access and occupancy rights from surface owners; acts of war or conditions arising out of or attributable to war, whether declared or undeclared; riot, civil strife, insurrection or rebellion; fire, explosion, earthquake, storm, flood, sink holes, drought or other adverse weather conditions; delay or failure by suppliers or transporters of materials, parts, supplies, services or equipment or by contractors' or subcontractors' shortage of, or inability to obtain, labor, transportation, materials, machinery, equipment, supplies, utilities or services; accidents; breakdown of equipment, machinery or facilities; or any other cause similar to the foregoing The affected Party shall promptly give notice to the other Party of the suspension of performance, stating therein the nature of the suspension, the reasons therefore, and the expected duration thereof. The affected Party shall resume performance as soon as reasonably possible. Commercial frustration, commercial impracticability or the occurrence of unforeseen events rendering performance hereunder uneconomical shall not constitute an excuse of performance of any obligation imposed thereunder.
In conclusion, this Earn-In Agreement expires Aug 2, 2006. GBN is rightfully not happy with HL's performance to date.
1) HL redeployed equipment and manpower from Hollister to its other mining operations. New equipment was purchased for Hollister which costs substantially more than the used equipment and hence a large reason for the cost overruns.
2) HL is way behind schedule at Hollister.
a) Stage 1 was planned to be finished 12 months after notice to proceed which would mean May 7 2005. It now envisions finishing Stage 1 in 2006.
b) HL has less workforce at Hollister (19 employees) than the 28/40 listed in the EA that HL filed with the BLM (see prior post).
c) Using 10-K comments issued in March 2003, HL planned to have 500 feet of decline and all surface facilities built by Dec 03 (within 4-5 months time period) yet even though HL got May 7 2004 Notice to Proceed, HL has only got 200 feet of decline and not completed the surface facilities as of 12/31/04 (within 7+ month time period).
http://www.sec.gov/Archives/edgar/data/719413/000089710103000181/hecla031150_10k.txt Page 33
3) HL has a huge problem, IMO, in terminating or otherwise withdrawing from this Earn In Agreement without losing all their Stage 1 Investment including the equipment on site. GBN may be able to get a mining contractor to complete the Stage II work within a reasonable time.
4) Now re-read these GBN press release comments:
"Ron Thiessen, Great Basin CEO stated, "Great Basin has been insistent on preserving its rights under the Earn-In Agreement. We have had the Agreement reviewed and are confident in our interpretation."
GBN @ BMO conference
most relevant part starts at minute 17:20
http://files.presentation-direct.com/presentations/200502/BMO_resources_02282005/great_basin/player/...
in that case, thanks in advance for next weeks update!!
Ok, tax season over, looks like HL is significantly over budget. Appears they have spent or will spend $14M-$18M (including the engineering/permitting?) on Phase I and the budget was only $10.3M.
But from the GBN news release, the issue appears to be HL achieving "certain earn-in milestones within specified time periods".
Here are the relevant press releases and HL comments on Hollister:
Hecla Files Request for Clarification of Agreement
Thursday April 14, 8:00 pm ET
COEUR D'ALENE, Idaho--(BUSINESS WIRE)--April 14, 2005--Hecla Mining Company (NYSE:HL - News) has filed a request for clarification and interpretation of the company's earn-in agreement with Great Basin Gold concerning the Hollister Block development project in Nevada.
Hecla is currently driving the underground ramp to conduct exploration drilling on the gold deposit, earlier drilled from the surface by Great Basin. Access to the deposit via the ramp, the exploration drilling and drifting, and a feasibility study leading to a decision on production are expected to be completed in 2006. Phillips S. Baker, Jr., Hecla's President and Chief Executive Officer, said he expects that the request for clarification of the agreement, filed with the Fourth District Judicial Court of the State of Nevada in Elko County, will not affect Hecla's commitment or progress on the Hollister project. "We're merely looking for a third-party decision on a few parts of the agreement," said Baker. "We are continuing full speed ahead on this project and are excited about its upside potential."
Hecla Mining Company, headquartered in Coeur d'Alene, Idaho, mines and processes silver and gold in the United States, Venezuela and Mexico. A 114-year-old company, Hecla has long been well known in the mining world and financial markets as a quality silver and gold producer. Hecla's common and preferred shares are traded on the New York Stock Exchange under the symbols HL and HL-PrB.
______________________
"VANCOUVER, BRITISH COLUMBIA, Apr 15, 2005 (CCNMatthews via COMTEX) -- Ronald W. Thiessen, President and CEO of Great Basin Gold Ltd. (CA:GBG)(GBN) advises that Great Basin was notified on April 14, 2005 that Hecla Mining Company ("Hecla") has filed for declaratory relief from the Nevada District Court for Elko County in connection with Hecla's rights to earn into Great Basin's Hollister Gold Project on Nevada's Carlin Trend. Hecla and Great Basin have been unable to resolve a difference of interpretation respecting their August 2002 Earn-In Agreement which requires that Hecla achieve certain earn-in milestones within specified time periods. Hecla is seeking the Nevada court's determination in respect of the unresolved issues.
As described in Great Basin's year end disclosures, Great Basin and Hecla have had discussions about these issues with no satisfactory resolution, and as a consequence Great Basin has been unable to predict the outcome.
Upon reviewing Hecla's news release dated April 14, 2005, Ron Thiessen, Great Basin CEO stated, "Great Basin has been insistent on preserving its rights under the Earn-In Agreement. We have had the Agreement reviewed and are confident in our interpretation. I certainly concur with Mr. Baker's excitement about the upside potential of this project and we hope that this action will not prove to be a significant distraction to project operations."
_______________________
Hollister Development Block
In August 2002, our wholly owned subsidiary, Hecla Ventures Corporation, entered into an earn-in agreement with Rodeo Creek Gold, Inc., a wholly owned subsidiary of Great Basin Gold Ltd. (“Great Basin”), for the exploration, development and production of Great Basin’s underground gold property in the Ivanhoe Mining District of northern Nevada known as the Hollister Development Block (“Hollister”). Located on the northwestern extension of the Carlin Trend, the nearest active mining operations are the Dee mine, located eight miles to the southeast, and the Ken Snyder mine, located twelve miles to the northwest. The nearest major population centers are the towns of Battle Mountain, 38 miles to the southwest; Elko, approximately 47 miles to the southeast; and Winnemucca, 64 miles to the west-southwest.
The Earn-in Agreement provides Hecla with an option to earn a 50% working interest in Hollister in return for funding a two-stage, advanced exploration and development program. We estimate the cost to achieve our 50% interest to be approximately $21.8 million. Hecla is the manager of the exploration and development activities. Upon completion of earn-in activities, achieving successful exploration results, and completion of a favorable feasibility study, Hecla will be the operator of the property.
Pursuant to the Earn-in Agreement, we and Great Basin each agreed to issue a series of warrants to the other party, entitling the parties to purchase one another’s common stock within two years from the date of issuance of the warrants at prevailing market prices at such date. In August 2002, we issued a warrant to purchase 2.0 million shares of our common stock to Great Basin and Great Basin issued a warrant to purchase 1.0 million shares of its common stock to us. The warrant to purchase our common stock was exercised by Great Basin in November 2003, in which we received cash proceeds of approximately $7.5 million. In January 2004, we exercised a portion of our warrant to purchase 1.0 million shares, by purchasing 250,000 shares of Great Basin common stock. In August 2004, the remaining 750,000 warrants to purchase shares of Great Basin expired unexercised.
The Earn in Agreement obligates us to issue: (i) a warrant to Great Basin, entitling it to purchase an additional 1.0 million shares of our common stock, exercisable at the then market value of our common stock on the date of issuance, if and when we decide to commence certain development activities; and (ii) an additional warrant to Great Basin, entitling it to purchase 1.0 million shares of our common stock, exercisable at the then market value of our common stock on the date of issuance, following completion of such activities, if undertaken. Great Basin will issue warrants to us, entitling us to purchase 500,000 shares of its common stock immediately upon receipt of the second and third warrants to purchase our stock. In addition to the foregoing, we will pay to Great Basin from our share of commercial production, a sliding scale royalty that is dependent on the cash operating profit per ounce of gold equivalent production.
Hollister is defined by a 6,000-foot by 7,000-foot project boundary (964 acres) within a larger claim block held by Newmont Mining Corporation and Great Basin Gold. The area was a producer of mercury around the turn of the 20th century, and later a producer of gold. The most recent operation was the Hollister mine, operated from 1990 through 1996, consisting of two open-pit gold mines and an associated heap-leach facility.
The underground exploration project consists of approximately 8,200 feet of underground excavation, including a decline access to the mineralized structures, crosscuts, diamond drill stations, muck bays and miscellaneous openings. Approximately 5,000 tons of bulk samples from the different veins within the system are planned, along with approximately 55,000 feet of diamond drilling from underground locations. Surface support facilities for the underground exploration project will be located in the existing east Hollister pit, thereby limiting most surface disturbance to areas associated with previous mining activities.
In 2004, operating permits were secured, culminating with the receipt on May 7 of the Notice to Proceed from the Bureau of Land Management. Hecla Ventures had previously received, on December 26, 2003, the Water Pollution Control Permit from the Nevada Division of Environmental Protection. In total, 32 separate permits and/or authorizations were required from local, state and federal authorities, most of which were in hand by May 2004. However, site construction work was delayed until August 20 while agreements for access to the property were negotiated with Newmont and Great Basin. Approximately $3.7 million was expended for engineering and permitting prior to the start of construction.
During the last four months of 2004, work concentrated on constructing the surface facilities required to support the underground exploration project. Facilities under construction include the lined waste rock storage facility and integral water collection sump, the water management ponds and de-silting basins and installation of temporary offices and services. Hecla crews completed the portal structure, and the decline advanced nearly 200 feet as of December 31, 2004. At December 31, 2004, there were 19 employees at Hollister. Total project costs through December 2004 were approximately $6.1 million.
Plans for 2005 include excavating approximately 6,000 feet of decline, crosscuts, drill stations and miscellaneous openings. For 2005, approximately 35,000 feet of diamond drilling is planned from underground platforms. Hecla expects to spend between $8 million and $10 million in 2005 on exploration activities. The feasibility study is expected to be completed in July 2006.
_______________
Ok I am biased toward GBN, but the Earn-In Agreement sure does not appear to me to give HL any wriggle room for "clarification and interpretation".
http://www.secinfo.com/dqd6r.2t.b.htm#1stPage
Read Sections:
*Article 2.1 (b) Capacity
*Article III Term - Earn-In Agreement expires 4 Years from 8/2/02 = 8/2/06
*Article 9.2 b 2, HL is the manager and "lack of sufficient funds shall be deemed a default"
*Article 9.3 c 4 Duration- "one calendar year" seems to be implied for Phase I
*EXHIBIT E - This clearly states "The estimated costs to complete Stage I is $10,300,000 and the estimated time to complete is 12 months after date of issuacne of permit(s).
From the EA/FONSI dated March 2004 which culminated in the May 7 2004 Notice to Proceed:
Page 6
*Construction of the surface facilities is expected to take 4 months vs. HL comments that "during the last four months of 2004, work concentrated on constructing the surface facilities. Well, it was only supposed to take 2 months, it apparently was not finished in 4 months (12/31/04) and HL actually got the notice to proceed in May 2004...
* "This brings the daily exploration personnel to 28" which does not include the support personnel. The EA clearly states HL will have 28 exploration personnel plus support staff that would bring total employees up to as many as 40 people VERSUS the HL comments "At December 31, 2004, there were 19 employees at Hollister".
* The exploration phase (PHASE I) is expected to last approximately 18 months. From May 2004 that gives HL until Dec 2005.
I am trying to be objective, but will someone else please read these documents and determine what exactly HL hopes that a judge/court can interpret or otherwise clarify... It seems to be very clear to my little beancounting brain.
Will continue to review these documents, about 60% done but time to go home...
Somebody else please READ these documents & press releases carefully and post your analsyis.
Thanks & Good luck...
The plot thickens (GBN/HL):
Here is link to Earn In Agreement
http://www.secinfo.com/dqd6r.2t.b.htm#1stPage
_____________________________
"VANCOUVER, BRITISH COLUMBIA, Apr 15, 2005 (CCNMatthews via COMTEX) -- Ronald W. Thiessen, President and CEO of Great Basin Gold Ltd. (CA:GBG)(GBN) advises that Great Basin was notified on April 14, 2005 that Hecla Mining Company ("Hecla") has filed for declaratory relief from the Nevada District Court for Elko County in connection with Hecla's rights to earn into Great Basin's Hollister Gold Project on Nevada's Carlin Trend. Hecla and Great Basin have been unable to resolve a difference of interpretation respecting their August 2002 Earn-In Agreement which requires that Hecla achieve certain earn-in milestones within specified time periods. Hecla is seeking the Nevada court's determination in respect of the unresolved issues.
As described in Great Basin's year end disclosures, Great Basin and Hecla have had discussions about these issues with no satisfactory resolution, and as a consequence Great Basin has been unable to predict the outcome.
Upon reviewing Hecla's news release dated April 14, 2005, Ron Thiessen, Great Basin CEO stated, "Great Basin has been insistent on preserving its rights under the Earn-In Agreement. We have had the Agreement reviewed and are confident in our interpretation. I certainly concur with Mr. Baker's excitement about the upside potential of this project and we hope that this action will not prove to be a significant distraction to project operations."
TD Securities has sold 929,000 shares since 4/7.
Octagon up to 511,000 shares purchased since 4/7. What makes Octagon of significance is that my trading records show that Octagon made no trades in RNC from Aug 23, 2004 through April 6, 2004. Whoever is buying is new...
any comments on this Louis...?
that is, possibility of ECB buying...
"ECB dents gold sales hope
David McKay
Posted: Tue, 12 Apr 2005
[miningmx.com] -- The prospect of central banks selling less than the 500 t/year quota of gold this year had diminished owing to the surprise sale of 47 tons by the European Central Bank (ECB) in March.
This is according to Goldman Sachs which also said that an appropriate level of gold holdings by central banks was up for question following the ECB’s gold sale.
“In our opinion, this supports our base case view that the 500 tonne a year quota will be filled, as opposed to falling short as some commentators are speculating,” Goldman Sachs analyst Alberto Arias said in a report (April 1).
“We believe ECB sales are largely in the price because it is a signatory to the Central Bank Gold Agreement (CBGA) and because selling can come from any of the signatories,” Arias said.
Goldman Sachs said the likelihood of the CBGA being re-signed for a third time, in about five years time, had also increased.
Goldman Sachs also observed that the ECB sales had raised the issue of appropriate gold reserves held by central banks. It said when the ECB controversially established gold holdings of 20% when it was established in 1999. This compared to the 40% to 50% average of eurozone members.
As a result, the ECB had issued “a telling indicator that gold was considered less important as a reserve asset than previously,” Goldman Sachs said in the report. “With the ECB now unexpectedly joining other signatories as sellers it makes us wonder what the appropriate level is: seemingly lower than the 20% notional floor that the ECB holdings may have represented,” it said.
Williams said the sale was probably linked to balancing against the weakness of the dollar. “The question is whether the ECB will buy gold again should the dollar strengthen,” he said."
I'll be waiting... Glad to see you Canadians have so much confidence in the "full faith and credit" of the US government.
In the FWIW category, someone at Octagon is buying...
Octagon has purchased 342,000 shares between 4/7/05 - 4/12/05 at prices ranging from C$.84 to C$.88. Pretty amazing that someone could acquire this large amount of shares at [apparently] such good prices without driving up the share price...
thanks for that link, this added some facts heretofore not known to me:
"In 2004, operating permits were secured, culminating with the receipt on May 7 of the Notice to Proceed from the Bureau of Land Management. Hecla Ventures had previously received, on December 26, 2003, the Water Pollution Control Permit from the Nevada Division of Environmental Protection. In total, 32 separate permits and/or authorizations were required from local, state and federal authorities, most of which were in hand by May 2004. However, site construction work was delayed until August 20 while agreements for access to the property were negotiated with Newmont and Great Basin. Approximately $3.7 million was expended for engineering and permitting prior to the start of construction.
During the last four months of 2004, work concentrated on constructing the surface facilities required to support the underground exploration project. Facilities under construction include the lined waste rock storage facility and integral water collection sump, the water management ponds and de-silting basins and installation of temporary offices and services. Hecla crews completed the portal structure, and the decline advanced nearly 200 feet as of December 31, 2004. At December 31, 2004, there were 19 employees at Hollister. Total project costs through December 2004 were approximately $6.1 million. "
Only 19 employees, this is understaffed compared to the FONSI documents which called for 28 as I recollect.
32 separate permits...
that NEM/GBN access to the property rights is a bunch of malarky IMO..., HL delayed Hollister to try to get better contract terms negotiated IMO and was unsuccessful (i.e. higher rates for using new equipment rather than old equipment as planned), this is my opinion.
thanks
any comments this week...?
http://www.investorshub.com/boards/read_msg.asp?message_id=5191980
ANO
8 Apr 2005 : BEE deals increase 29% in 2004
Black economic empowerment (BEE) momentum continued unhindered in 2004, with the number of transactions increasing 29% to 244 from 189 the year before. BEE deal value increased from R42,2 billion in 2003 to R52,9 billion in 2004. In the last four years, BEE has surged, becoming the dominant feature on the mergers and acquisitions (M&A) landscape in South Africa.
This is according to the annual mergers and acquisition survey titled Ernst & Young Mergers & Acquisitions: A Review of Activity for the Year 2004. The publication, now in its 14th year, is an independent analysis of all merger and acquisition activity in South Africa.
“Since the inception of Ernst & Young’s M&A research, the Corporate Finance team have analysed 8 507 transactions with disclosed values in excess of R2 327 billion,” says Dave Thayser Ernst & Young Partner and Corporate Finance Director.
It has become a reference of record for the corporate finance, legal, brokerage, academic and media communities, providing the longest-running objective overview of the industry in South Africa, designed as a service to the M&A industry.
In 2004, the top ten BEE transactions were:
1. Acquisition of 10% of FirstRand by BEE Consortium R7,895 billion
2. Sale by Thintana of 15.1% of Telkom to the Elephant Consortium R6,600 billion
3. Acquisition of 7.6% of Standard Bank by Tutuwa R4,140 billion
4. Sale of 18% of Lonplats to Incwala R3,187 billion
5. Acquisition of 25% of Uhambo Oil R3,000 billion
6. Acquisition of 4.8% of MTN by Umthunzi Telecoms Consortium R2,500 billion
7. JCI unbundling R1,840 billion
8. Merger of Rebserve and Mvelaphanda R1,546 billion
9. Nail unbundling R1,428 billion
10. Pelawan Investments/ Anooraq Resources Corporation merger R1,276 billion
Two of the BEE deals mentioned, fall into the mega deal category (defined as those in the R5 billion category and over) of 2004’s survey – the FirstRand BEE deal, and the Thintana disinvestment from Telkom. Thintana’s stake was sold to BEE group, the Elephant Consortium, which was unable to come up with the R6,6 billion within the required time period. Controversially, the Public Investment Commissioners – the public sector pension fund – stepped in to warehouse the shareholding to give Elephant Consortium time to raise the funding.
Interestingly, the number of transactions on the R1 billion-plus category almost doubled in 2004, from 19 to 37. According to Thayser, “This increase reflected the number of organisations continuing to consolidate their positions by buying out minorities and by concluding BEE transactions.”
“The key issue now is not whether BEE deals will be done, but how they will be done,” says Thayser. “BEE in 2004 contributed in no small part to the controversy around M&A. The Financial Sector Charter of 2003 stimulated a number of financial services groups concluding significant BEE deals during the year.”
However, the release of the Codes of Good Practice on Broad-Based Black Economic Empowerment, published by dti (previously known as the Department of Trade and Industry) has questioned whether these and other BEE deals comply with stipulated Government requirements.
According to the Ernst & Young 14th edition of M&A, the corporate finance community has raised concerns about the Codes, saying it may force dealmakers to do non-commercial transactions.
Furthermore, they say that the uncertainty around BEE has added an extra dimension to transactions. Many have either taken longer to do, or have been cancelled after many months of negotiation.
Ernst & Young Corporate Finance Director, Sanjay Soni, says that one of the emerging trends in BEE in 2004 is that companies are preferring to bring staff into BEE schemes rather than outside parties. “The sense is that these structures create greater value-add and greater empowerment. Employees who have experience in the sector concerned, can help fill key vacancies, influence the client base as well as engage with Government.”
Soni says experience has indicated that bringing in outside shareholders into empowerment deals can create morale problems, particularly if the outsiders are vendor-financed. “Giving employees a share in the company has been shown to be a successful way to motivate the workforce, and it is more broad based, which goes some way to alleviating Government concerns about making empowerment more representative.”
Other new trends that gained prominence in 2004 included the growing popularity of new financing structures for BEE deals. Soni says that in privately owned companies, currently the best option is to leverage the financing through the creation of a new company. “No shares change hands between vendor and BEE acquirer, so the debt sits at the operating company level rather than with the BEE entity. The Newco is indebted, and all the shareholders – vendor and BEE acquirer – share equally in the risk. The financing of such a structure would typically be a mix of third party and vendor funding, and the debt is usually repaid out of dividends.”
In the past, BEE deals were funded through the creation of Special Purposes Vehicles (SPV) against which the BEE entity borrowed from an independent institution and repaid the debt out of the capital appreciation of the shares and dividends. However, in many cases this didn't happen, and in terms of the way the SPVs were structured, the shares held by the BEE companies reverted to funding institutions, and the empowerment transaction fell apart.
“Such transactions were possible in the past in the absence of sector charters. If a BEE deal fell through, there was no real cost to the vendor in terms of BEE points or credentials. Now the vendor has an interest in making BEE deals work because it is assuming risk and sharing risk, and the failure of any deal has an effect on its sector charter compliance,” says Soni?
Dave Thayser says BEE will continue to dominate the headlines, given its controversial nature. “As we move into an era of increased compliance related to BEE, we need to ensure that we are not allowing compliance to blur the overall objective, which is to increase the size of the economic cake and share it more equitably. The greater focus in the short term on empowerment measures other than ownership could be very beneficial in the long term.”
some interesting after close trades today..., don't know what that means if anything but 369,000 shares traded after the close at 15:59...
16:33 0.840 400 OLT TD Securities TD Securities
16:33 0.840 209,000 +0.000 TD Securities TD Securities
16:25 0.840 40,000 +0.000 Octagon TD Securities
16:23 0.840 40,000 +0.000 Octagon TD Securities
16:22 0.840 20,000 +0.000 Octagon TD Securities
16:21 0.840 20,000 +0.000 Octagon TD Securities
16:20 0.840 20,000 +0.000 Octagon TD Securities
16:13 0.840 12,000 +0.000 Octagon TD Securities
16:12 0.840 8,000 +0.000 Octagon TD Securities
15:59 0.840 2,000 +0.000 Octagon TD Securities
Nicaragua Politics
U.S. Fears Comeback of An Old Foe in Nicaragua
April 6, 2005
Ginger Thompson
It has been more than two decades since this tiny nation of five million people and its revolutionary strongman, Daniel Ortega, kept Washington awake at night. In recent months, new fears, but the same old politics, have revived that tossing and turning.
Ortega, one of the United States' fiercest opponents during the cold war and the entrenched leader of the leftist Sandinista National Liberation Front, has opened his fourth campaign for the Nicaraguan presidency.
Washington is worried once again that its old nemesis might win, this time with consequences for a new global war, the one on terrorism.
Even though the Nicaragua elections are more than a year and a half away, and even though Ortega's chances seem slim, the Bush administration is taking no risks and has begun concerted efforts to stop him.
The clearest signal came two weeks ago when the United States suspended about $2.3 million in military aid to Nicaragua to put pressure on the government, and an army with roots in the Sandinista movement, to destroy its arsenal of Soviet-made SA-7 missiles.
But pressure had been building since January, when a sting operation by the United States and Nicaraguan authorities netted two Nicaraguan men trying to sell an SA-7, a shoulder-fired missile that terrorism experts consider a potential threat to civilian aircraft. The sting set off alarms among conservative Republicans, and the State Department sent two high-level delegations to Nicaragua.
In political magazines and congressional testimony in Washington, cold war alumni almost as masterly at political resurrection as Ortega issued strong, although vaguely substantiated warnings about Qaeda recruiting operatives in Latin America; about a new "axis of evil" forming across the Western Hemisphere, from Venezuela through Nicaragua to Cuba; about a "destabilization," or a "backslide away from democratic principles" south of the border; about Daniel Ortega's serving as a tool to Fidel Castro of Cuba and Hugo Chavez of Venezuela.
The missile issue consumed public attention during Secretary of Defense Donald Rumsfeld's recent tour through the region. Rumsfeld told reporters that Nicaragua's SA-7s could "be operated by terrorists, by revolutionaries and others," who "are anxious and willing to kill people."
A diplomat traveling with Rumsfeld, and other diplomats in Washington and Managua, made it clear that the United States was specifically concerned about the missiles' coming into the hands of the old Sandinista leader.
"There's no doubt about it, Daniel Ortega is still the pivotal actor in Nicaraguan politics," a senior State Department official said in an interview. "The Sandinista Party that Daniel Ortega represents is not a democratic party. They may play in democratic processes, but it is not a democratic party. So if you are hearing that the United States is worried about missiles, and about who might come to power in 2006, there is basis for that."
Nicaragua was once as much an epicenter of American foreign policy as Iraq is today. This destitute country was transformed by hundreds of millions of dollars into a front line of the global struggle against communism. On one side were Ortega's Sandinistas, who had overthrown a 40-year-old dictatorship and allied themselves with the Soviet Union. On the other were President Ronald Reagan's contras, rebels armed and organized by the United States to overthrow Ortega's Marxist government.
The armies fought each other to a standstill, until both sides agreed to elections in 1990, which Ortega lost. The Sandinistas demobilized as an army, and it seemed that Ortega would fade into the political wilderness.
In fact, though the Sandinista leader has not governed the country since 1990, he has been a force in its politics. Particularly among Nicaragua's desperately poor masses, Ortega, now 59, has remained popular, and he has been able to call on his support to make the country ungovernable when he pleased.
Every one of the three Nicaraguan presidents since 1990, beginning with Violeta Chamorro, has had to share power with Ortega in one way or another to keep protesters off the streets and investors in the country.
President Enrique Bolanos forged his own alliance with Ortega as a way to keep political peace after his government convicted a former president, Arnoldo Aleman, of corruption.
But the terrorist attacks against the United States hardened the Bush administration's stand against its old opponents in the region. At the end of 2003, Colin Powell, then the secretary of state, traveled to Nicaragua to warn Bolanos to break with Ortega.
That break not only turned out to be disastrous for Bolanos, it also energized support for Ortega, who called on the fractured Sandinista leadership to close ranks against the threat of an "imperialist intervention."
Ortega used his influence over the country's courts to get Aleman released from prison to serve his sentence at home. The men then used their control over the Congress to go after Bolanos.
In December, legislators passed a series of measures aimed at reducing Bolanos's control over the government, including one that prohibits the president from destroying military weapons without congressional approval. That would include the SA-7s.
Source: (C) 2005 International Herald Tribune. via ProQuest Information and Learning Company; All Rights Reserved
Don Coxe, why didn't someone link this a few days ago...?
http://corporate.bmo.com/HarrisNesbitt/bresource/basicpoint/default.asp?id=4887
Here are the rules while I am busy with tax season. Thou shalt link all new articles written by:
1) Faber
2) Coxe
3) Martin M
4) Richard R
5) Jim Rogers
Thanks for you time and prompt attention to this matter...!!
got a new hiding spot I see...