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Matt:
Could you please add me as the modearator of the Cumberland Resoources-CBD board. Need to update the iBox data.
http://www.investorshub.com/boards/read_msg.asp?message_id=1320996
Thanks!
Marcos:
If you don't mind, could you add me as an assistant to the Alamos board... I would like to update and revise the "iBox/Board info" for new/better links... You can then delete me as an assistant and/or revise the iBox data if you like...
Also, please advise how I can become the temporary moderator for the Cumberland Resource-CBD board. Again, I wish to update the "iBox/Board info" for new/better links, and this board currently has no moderator. What is best means to proceed, who can allow me to be the temporary moderator so that the iBox links can be updated.
Thanks for your time in this matter...
Would appreciate if you explained the dynamics of this shorting, per your understanding on how this works...
"To me, this is a free, no-risk shorting opportunity for the underwriters .... unload what you can greater than $3.75 up to a max of 2.7M prior to the closing and then just exercise the overallotment option."
My understanding would be the underwriters (via their favored institutional clients?) would sell short up to the 2.7M shares at $3.75 for $0 profit BUT keep the 1/2 share warrant. Thus, the favored clients have a $0 cost basis in the warrant which has considerable upside...
The underwriters likely get their 5%+ commission on the underwriting, so they are happy campers in regard to the 2.7M additional shares as well.
Is this your understanding, or do you have a better explanation as to how this likely works?
FWIW, the only good reason (I can fathom) for this 6.7M placement is it may better enable an AMEX listing...? Maybe AMEX listing would be contingent on a larger float, since about 49% of MVG's 43M shares (after this PP) are owned by insiders (Rich McNeely 9.1M, Jeff Ward 11.2M, others .3M, plus options) and likely restricted stock. Just a thought...
Sold CHK Sept $10 covered calls, FWIW believe as does Robry that this weeks EIA gas report will be bearish.
We'll know tomorrow morning...
http://finance.messages.yahoo.com/bbs?.mm=FN&action=m&board=7081371&tid=cwei&sid=708...
Bottom Line:
My understanding is MVG will begin production in 1Q 2004, and thus will have cash flow then.
Still have no good idea why this company desired to raise $C25M, this amount of financing far exceeds what MVG apparently needed.
Esmeralda mine somewhat behind in mining the inclines, caused by more faults encountered than expected. Also, renovation on the $10M existing mill is behind schedule as well. Yet, they expect 1Q04 production, hope they are not the "over promise and under deliver" types like AEM. Call them if you like, they insist they will meet 1Q04 production... Did not obtain annual production ounces anticipated for 2004 calendar year.
MVG burn rate is about C$4.5M for 1Q03 and anticipate the same for 2Q03. They likely have C$7.5M cash as of 2Q03 and will be up to $32.5M after this assumed full C$25 financing. Thus, MVG did have a need for at least a C$10M placement. But they originally thought they had a chance to get this mine into production with only C$14M... (although some warrants from a prior financing were not exercised it appears; could have been counting on this cash?, only 35M shares outstanding instead of 41M expected may be accurate?).
MVG has a slew of apparently qualified engineers, appears to be an mining/engineer driven company rather than an exploration and raise $ management team. I like this, i.e. engineering/mining expertise (reason I also like Alamos with Millar). See slides 6 and 7:
http://www.metallicventuresgold.com/pdf/presentation.pdf
In fact, this entire presentation is noteworthy and worth a review...
My recollection is Tice/Prudent Bear and Embry (either via RBC and/or Sprott) are large shareholders.
_________________
Partial Claude C. writeup, see issue #132, Feb03, well worth the subscription @ http://www.ormetal.com/en/report.html
"Metallic Ventures has 41M shares outstanding for a market capitalization of US$ 88 millions. MVG has US$15 millions in the bank and 10 gold properties in Nevada, Utah and New Mexico. Three of these properties located in Nevada have a total of 4.8 millions ounces of gold resources...
Metallic acquired Esmeralda, Goldfield and other properties following the acquisition of Romarco Minerals in 2001 and Converse from the acquisition of Cameco and Newmont respective interests in Converse. At Esmeralda, resources are made of more than 36 millions tons with a grade of 0.96 g/ton gold. The gold is contained in several quartz veins that also host very high grade gold As an example, drilling (some not included in the above resources) at the various veins returned the following intercepts:
not included
As you can see, the new grades are an order of magnitude higher than the average grade which is only 0.03 ounce per ton.
Following a recent initial public offering of C$24 millions at C$3.00 per share, the company intends to advance the Esmeralda and Converse property to pre-feasibility. At Esmeralda, which is a former producer equiped with a 300 tons per day mill (with a $US 10 million replacement value), the company anticipate expansion of the mill to 600 tons per day and near term production of as much as 75,000 ounces per year at a cash cost of $150 per ounce. Year 2003 underground exploration plans include the consruction of two declines to be driven into the Prospectus and Martinez deposits at a cost of $1.1 millions. This work will be followed by underground drilling that expand on 2002 results. These declines are also designed as a haulageways for the eventual production of the vein systems. Surface exploration will also continue with reverse circulation drilling along the central and southwestern end of the Martinez vein and step out into previously untested areas. The Esmeralda property is fully permitted and bonded with the Nevada State agencies and the United States Forest Service.
Metallic Venture’s Converse project is located along the prolific Battle Mountain trend of north-central Nevada that accounts for an estimated 45 million ounces of past and future gold production. Wide-spaced drilling on 400-foot centres has defined a gold resource at Converse of indicated plus inferred resources totalling 1,588,000 and 1,141,000 ounces of gold, respectively. Converse is hosted in similar rocks and geologic setting to those at nearby economic deposits. Converse is located within a six- to eight-mile radius west of the Lone Tree, Marigold, Trenton Canyon and Buffalo Valley deposits that define the centre of the trend.
The company is currently completing geophysical surveys at Converse and will soon proceed with detailed analysis of all previously collected geological data. This initial program will then be followed by 13,000-foot reverse circulation drill program in the early fall of 2003.
The company has been exploring since 2001 at Goldfield which is their third active project in Nevada. In 2002, Metallic Ventures completed 114 drills holes totalling 21,000 feet. These holes have yet to be included in the gold resources. As for Esmeralda, Goldfield average grade is near 1 gram per ton gold but the property also has high grade sections. The best holes of the 2002 program included:
not included
The plans at Goldfield for 2003 have not been detailed yet but the company expect to start a prefeasibility study with a 75,000 ounces per year rate of production in mind."
Starting a new board for Metallic Ventures Gold. This board will list useful links, etc.
Only have a small position now, purchased below the prior C$3.00 private placment. Interesting company with all mines located in Nevada. The co-founders (McNeely & Ward) owned 57% of the company before today. What irked me was the C$25M private placement announcement today:
"Metallic Ventures Gold Inc. (CA:MVG) (the "Company") is pleased to announce that it has entered into an agreement with a syndicate of underwriters led by Canaccord Capital Corporation pursuant to which the underwriters have agreed to purchase 4,000,000 units on an underwritten private placement basis pursuant to exemptions from prospectus requirements, at a price of $3.75 per unit for aggregate gross proceeds of $15,000,000. The Company has also granted the underwriters an option to purchase up to an additional 2,700,000 units at any time prior to the Closing at $3.75 per unit for additional aggregate gross proceeds of $10,125,000. Each unit consists of one common share of the Company and one-half of one common share purchase warrant. Each whole warrant shall entitle the holder to purchase one common share of the Company at a price of $5.00 at any time prior to the date that is 18 months from the closing of this financing.
The financing is scheduled to close on or about August 28, 2003 and is subject to certain conditions including, but not limited to, the Company being a "qualifying issuer" under Multilateral Instrument 45-102 at closing and the receipt of all necessary approvals including the approval of the Toronto Stock Exchange, in respect of the transaction.
The securities offered have not been registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an application exemption from the registration requirements. This press release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the securities in any State in which such offer, solicitation or sale would be unlawful.
The Company intends to use the net proceeds of the financing for further exploration and development of Goldfield, Esmeralda, Converse and for general corporate purposes."
What irked me was per Annual Report page 12, MVG stated they could get by without any additional PP financing. They had $C14M in the bank as of 12/31/02. Now all of a sudden, they want C$25M in new funds...? What the heck is going on, so I gave them a call...
More info to follow soon, but am relatively comfortable still with my token share ownership, and likely will look to add more, if the price drops. Per my understanding, the 4M shares have no warrants at all while the added 2.7M shares do have 1/2 warrant. So not much future warrant dilution, and management is not selling any shares, management will be diluted in same proportion.
Welcome back Marcos!!
Do you have any speculation on when we should learn of the ejidos decision...?
Mostly classical...
FWIW, updated gold recovery analysis on Alamos, can now go to bed...
http://www.investorshub.com/boards/read_msg.asp?message_id=1313705
FWIW, Claude's reply:
Looks like it should be 87%. But you have to average this with the non-sulfide ore. Also I am not sure if I read the PR correctly? Is it 87% of the gold can be recovered at 87.5% of the gold can be recovered at 87%. In that case you have to multimy 87.5% by 87%.
Nevertheless, this is very positive news and bodes well for Alamos. Not as cheap as CBD but still a good proposition.
Claude Cormier
Ormetal Inc.
____________________________________
My best educated guess per my understanding and recollection that 67% of Alamos reserve is the sulfide ore and 33% is the non-sulfide ore (non-sulfide has higher recovery rate, assuming this is 85%), AND using Claude's more conservative guess (i.e. multiply 87.5% time 87% = 76.1%):
33% of reserve @ 85% recovery = .28
67% of reserve @ 76.1% recovery = .51
Total = 79%
Thus, recovery rate for the total resource would increase from 67% to 79%. Given all the assumptions above are correct...
If this analysis is correct, this will greatly enhance IRR/NPV on the Salamandra mine.
Same NPV impact as a 17.9% rise in the price of gold per the RBC analyst report... (79%/67%=17.9%):
"Our NAV estimate for Alamos Gold is quite sensitive to gold prices. A 15% increase in our long-term assumption to $403 per ounce results in a 33% increase in our NAV estimate to C$2.24 per share. A 15% decrease in long-term exchange rates from our current assumption of $0.750/C$ to $0.638/C$ increases our NAV estimate by 19% to C$2.01 per share... Variations in our gold recovery assumption have a more dramatic impact on NAV, and are similar to changes in gold price assumptions (both effect the revenue of the operation)."
quote above from RBC report pages 16 and 17:
http://www.alamosgold.com/i/pdf/30351647.pdf
Assume Sinclair uses futures because futures trading tends to always lead the spot. More volume gold ounces
in futures than spot. Believe he uses the most active contract, which now happens to be December:
http://charts-d.quote.com:443/990444275790?User=demo&Pswd=demo&DataType=GIF&Symbol=GC03z....
(too long a link for ihub) here it is below, substitute http for hxxp
hxxp://charts-d.quote.com:443/990444275790?User=demo&Pswd=demo&DataType=GIF&Symbol=GC03z&Interval=90:255&Ht=400&Wd=600&Display=0&Study=VOL&Param1=0&Param2=0&Param3=0&FontSize=10
Usually it would be the futures 2 months out (namely October, but I find it very enlightening that the specs
are buying many more Dec contracts than Oct contracts.
October contracts here:
http://charts-d.quote.com:443/990444275790?User=demo&Pswd=demo&DataType=GIF&Symbol=GC03v....
But as mentioned, for gold shares, I really like the goldheart index best. Located here (read the link & commentary):
http://www.gold-eagle.com/charts/goldheart.html
Also, be sure to read this commentary on goldheart index:
http://www.gold-eagle.com/charts/gegfi.html
http://www.gold-eagle.com/charts/gegfi_intro.html
Here is Sinclair's chart for August 8, using 8,18,7 for MACD.
Decided to apply his chart settings on natgas a few days ago to see how it works, they both are commodities..., but it may or may not be useful for natgas... It does seem to work rather well for price of gold...
But my favorite indicator for gold/gold shares is the goldheart index, link here:
http://www.gold-eagle.com/charts/goldheart.html
Like to review both the goldheart long term and mid term indicators, graph here:
NatGas Daily
using Sinclair's chart settings for gold...
http://stockcharts.com/def/servlet/SC.web?c=$natgas,uu[h,a]daclynay[dc][pb50!b200][iUk14,20,80!Ua8,1...
The longer term contraryinvestor charts are what makes me pause on XNG for the timebeing... FWIW, a subscription to contraryinvestor is worth the price, IMO...
full link here if you subscribe...
http://www.contraryinvestor.com/subscriber/chartroom.htm
my cut and paste of contraryinvestor is at the bottom of this link:
http://amarks.homestead.com/chk.html
their chartroom link also contains the daily XNG as well as the daily, weekly and monthly XOI...
As mentioned, it is the weekly and monthly XNG which gives rise to my current caution. Am still holding CHK but have sold the rest of my NatGas stocks (i.e. XTO, CRK and XEC).
thanks for posting at SI, am not a member over there...
okay, you non-gurus, need an opinion on this latest Alamos news release... See:
http://www.investorshub.com/boards/read_msg.asp?message_id=1312381
http://www.investorshub.com/boards/read_msg.asp?message_id=1312145
Thanks for any comments, where is Marcos these days...
okay, here are the facts, it appears...
from http://www.alamosgold.com/i/pdf/30351647.pdf (page 11)
"Metallurgy – Test Heap Leaching Gold mineralization at Mulatos is associated with and within pyrite, and recovery rates vary with the amount of oxidation that has occurred. Previous laboratory testing indicated that dominantly oxidized ore is amenable to cyanidation by heap leaching, with gold recoveries expected to average from 75% to 90%. Sulphide ore, on the other hand, returned much lower recovery estimates of around 55%. Alamos Gold intends to complete a small test heap-leach program in late 2003. At this time, the company is proposing to develop three, 2,000-tonne pads containing oxide, sulphide and mixed ore. The program is to evaluate several aspects in an attempt to improve recoveries, including finer crushing of the ore and agglomeration."
Thus the oxidized ore has 75%-90% recovery rate and the sulphide ore has a 55% recovery rate? Is this correct?
Today's news release appears to involve only the sulphide ore?
http://www.alamosgold.com/s/News.asp?ReportID=66566&_Title=Positive-Results-from-Metallurgical-T....
"Alamos Gold Inc. is pleased to announce that metallurgical test work carried out by Resource Development Inc. (RDi) on sulfide-rich gold mineralization from the Company's Mulatos Gold Project indicates a maximum of 87.5 % of the total gold in sulfide mineralization can be leached with cyanide. This test work confirms that Mulatos ore is not refractory due to sulfides and that previous projected heap leach recoveries can be increased with finer crushing and/or extending leach times.
These tests indicate the sulfide ore is not refractory, but leaches at a slow rate. These results in conjunction with cyanide soluble data indicate the finer the particle size the faster it leaches and the more it leaches. This is new, positive data. The ultimate gold deportation from sulfide ore was not known, but it was previously reported that leaching 18 mm (3/4 inch) sulfide ore in a column for 525 days resulted in a gold extraction of 71.5 % compared to 48.9 % gold extraction for 12 mm (1/2 inch) sulfide ore leached in a column for 28 days. These test results were a strong indication to Alamos that sulfide ore gold recoveries might be increased by crushing finer and/or leaching longer. Alamos has now proven this to be so.
Alamos recognized the potential of raising the overall heap leach recovery of the orebody by crushing the ore finer and conducted preliminary field column tests in 2002 on fine crushed (- 1/8 inch) sulfide ores and obtained between 85 and 88% recovery."
----------------------
Finally note page 17 when discussing IRR sensitivity:
http://www.alamosgold.com/i/pdf/30351647.pdf
"Variations in our gold recovery assumption have a more dramatic impact on NAV, and are similar to changes in gold price assumptions (both effect the revenue of the operation)."
The question: what recovery rate should we use now, it was 67% now what should this recovery rate be...
Very positive news on revised recovery rate... Posted on this a few weeks ago. Link is here: http://www.investorshub.com/boards/read_msg.asp?message_id=1185968
Looks like we have recovery rate increased from 67% to 87%, am I calculating this right??
See page 11 which shows 67% recovery (life of mine):
http://www.alamosgold.com/i/pdf/30351647.pdf
If so, this would increase annual gold ounces mined by 20%, and thus IRR over 20%???
___________________
NEWS RELEASE
Positive Results from Metallurgical Tests on Sulfide Mineralization from Mulatos Gold Project, Sonora, Mexico
Vancouver, British Columbia – Alamos Gold Inc. is pleased to announce that metallurgical test work carried out by Resource Development Inc. (RDi) on sulfide-rich gold mineralization from the Company's Mulatos Gold Project indicates a maximum of 87.5 % of the total gold in sulfide mineralization can be leached with cyanide. This test work confirms that Mulatos ore is not refractory due to sulfides and that previous projected heap leach recoveries can be increased with finer crushing and/or extending leach times. The heap leach recovery of finer crushed sulfide ore and the economics of achieving this recovery will be determined with column and bulk sample leaching tests, and engineering currently underway.
Alamos submitted 11 samples of sulfide mineralization from 2 tunnels in the heart of the orebody to RDi for compositing and testing. The results are as follows. The composite sample assayed 1.89 g/t gold, 4.26 % sulfur and 120 ppm copper. Hot cyanide shake tests performed on the pulverized composite sulfide sample indicated 87.5% of the gold was cyanide soluble. Bottle roll tests were performed on the composite sample at a grind of 80 % minus 200 mesh. Cyanidation of the finely ground ore for 72 hours resulted in a gold extraction of 87 %. The extraction vs. leach time curve indicated gold recovery was not complete.
These tests indicate the sulfide ore is not refractory, but leaches at a slow rate. These results in conjunction with cyanide soluble data indicate the finer the particle size the faster it leaches and the more it leaches. This is new, positive data. The ultimate gold deportation from sulfide ore was not known, but it was previously reported that leaching 18 mm (3/4 inch) sulfide ore in a column for 525 days resulted in a gold extraction of 71.5 % compared to 48.9 % gold extraction for 12 mm (1/2 inch) sulfide ore leached in a column for 28 days. These test results were a strong indication to Alamos that sulfide ore gold recoveries might be increased by crushing finer and/or leaching longer. Alamos has now proven this to be so.
Alamos recognized the potential of raising the overall heap leach recovery of the orebody by crushing the ore finer and conducted preliminary field column tests in 2002 on fine crushed (- 1/8 inch) sulfide ores and obtained between 85 and 88% recovery.
With these encouraging results, Alamos contracted RDi to perform an independent review of the previous metallurgical test work on the Mulatos Project. Alamos and RDi developed a series of metallurgical test programs to obtain the data to raise gold recovery. The test programs consist of laboratory, column, crushing and bulk heap leach tests.
The next phase of testing, column tests on bulk samples from 2 tunnels, are in progress at Metcon Research Inc. (Metcon) in Tucson, Arizona. Fine crushing tests with a high pressure grinding roll (HPGR) crusher have been completed on a similar bulk sample at Polysius Corp. in Germany. These samples are being shipped to Metcon for testing to determine if there is a more favorable recovery response and economics from HPGR crushed ores. Alamos personnel are preparing to mine a 2,000 tonne sample from the tunnels for a bulk heap leach test at the mine site in Sonora, Mexico. Alamos will do trade-off studies with the results from these tests. The more favorable economics of crushing ores finer and/or leaching longer to raise overall heap leach recovery will be incorporated in the new Mulatos Feasibility Study that is currently in progress at M3 Engineering in Tucson.
Against my better judgement, added 15% more MOY shares at US$.76
At NEM $38.80, this values MOY at NEM distribution alone at C$1.59 as follows:
$20,000,000 NEM consideration 20,000,000
$25.50 share exchange rate $25.50
784,314 total NEM shares to MOY *** 784,314
distribution to MOY shareholders 100%
549,020 share distribution to MOY shareholders 784,314
26,414,014 MOY shares o/s 26,414,014
NEM shares per MOY share 0.02969309
$38.80 NEM share price $38.80
$0.67 arbitrage value of MOY share in US$ $1.1521
Can/US$ exchange $0.7249
Arbitrage Value in Can$ $1.5893
MOY consistently retaining a 33% discount to NEM share price it appears... i.e. C$1.06 vs. C$1.59 = 33% discount
Here is link for NEM to MOY comparison:
http://finance.yahoo.com/q?d=c&c=nem&k=c1&t=6m&s=moy.to&a=v&p=s&l=on&....
Since above link shows parity, 33% discount has been consistent.
FWIW, I graph Robry's natgas storage and pipeline receipt models here:
http://www.amarks.homestead.com/robrymodel.html
http://www.amarks.homestead.com/RobryNGModel.html
Out of all of my natgas stocks now except CHK (redeployed the funds into gold stocks, holding CHK for LTCG and selling near term covered calls from time to time).
brief chk comments & presentation link here:
http://www.amarks.homestead.com/chk.html
If anyone interested, will reproduce some long term xng charts (weekly and monthly) that are less positive than the daily...
Okay, thanks, but please explain...
This news release is dated August 8, i.e. today. When was this document available on SEDAR? How did someone know about this placement a day before public(?) issuance... Please advise.
I subscribe to secinfo which e-mails me all SEC & SEDAR filings for companies I specify. Have not gotten this e-mail yet for AGI...
Sure wish you guru's would update the Alamos (or other gold stock boards) when you get advance notice on a PP, or am I going to have to start monitoring this mostly classical board as well (LOL!).
Thanks!
edit somewhat:
whoops, never mind see your post was dated this morning not yesterday... Still mad that SEC info apparently did not send me a notifcation e-mail yet...
From your link, was this Alamos financing ever verified?:
"Hmmmm...the plot thickens. Alamos financing just announced at 1.45 plus 50% warrant coverage."
or just a rumor thus far? Would think AGI would need to wait for the ejidos decision first, otherwise they may have a fiasco like Gabriel had?? Also, sure wish they could do the deal without the 1/2 warrant, how about no warrants at a lesser price...
Jackc: the GBN combo...
thanks for your comments.
I certainly shared your concern when GBN did the Burnstone deal. It has altered the analysis on valuing GBN dramatically. That is, we have gone from valuing:
1) a 1M ounce, low cost mine in US$; to
2) a 1M ounce, low cost mine in US$ plus a likely 10M ounce high cost mine in S African Rand
This certainly complicates the analysis from the previously easy to value Ivanhoe 1M ounce deposit alone...
Nonetheless, one has to like the ten fold increase in reserves from 1M ounces to 11M? likely ounces. As described in prior post below, the added leverage of Burnstone's 10M high-cost ounces seems to be good value added for the 34% likely dilution. (i.e. from 64M fully diluted shares to 97M fully diluted shares -- 33M shares to Southgold equals 21M shares + 10.5M warrants + 1.5M "added" shares per likely bankable feasibility study results).
GBN is now a nice combination of Ivanhoe's low cost ounces with Burnstone's high cost ounces. This is a more viable business model, IMO, given the rise of gold against all currencies.
Okay, this is the end of my recent GBN posts until next month or so...
Why many analysts love the Burnstone sizzle...
One only has to replace the US$ price of gold with the Rand price of gold in this analysis below, gold needs to appreciate against all currencies, especially the Rand:
This "graph illustrates gold stock leverage, using LowCost and HighCost as models. The red lines apply to LowCost, the blue lines apply to HighCost, and the yellow line is gold itself. The X-axis at the bottom of the graph shows the gold price between $275 and $350 per ounce. The left axis of the graph outlines the actual dollar-per-ounce profits that both LowCost and HighCost can earn at various gold prices. The dashed lines are profit lines tied to this left profits axis. The right axis, to which the solid lines belong, is the percentage gains in profits and the gold price.
LowCost can produce gold at $150, HighCost at $270, and the gold price is rising 27% from $275 to $350. Which company benefits more and has the highest potential investment returns in this gold rally environment?
Each $5 increase in the gold price translates into the same $5 per ounce profit increase for both LowCost and HighCost. This is evident in the graph above with the two dashed profit lines for each company, which are exactly parallel. The magic of leverage enters the picture because each company is coming from vastly different base levels of profits.
LowCost could sell gold for a $125 profit at $275 gold, very impressive. As gold rallies up to $350, it still costs LowCost the same $150 to produce an ounce of gold, but it can now sell it at $350 for a $200 per ounce profit. LowCost, with only a 27% increase in the global price of gold, was able to see its profits per ounce increase 60% from $125 to $200. Therefore it follows that eventually the market should factor in the new higher profits to LowCost’s stock price which, ceteris paribus, should also ultimately see a 60% rally.
HighCost on the other hand, while struggling with tiny $5 per ounce profits at $275 gold, witnesses an enormous explosion in total profits as gold rallies 27% to $350. HighCosts’s costs remain constant at $270 per ounce, but its profits explode by 16 times from $5 to $80 per ounce, a massive 1500% gain! Because earnings ultimately drive stock prices, the market will factor in HighCost’s glorious new profit picture and, given a constant earnings multiple, HighCost’s stock price will eventually rally by 1500% as gold stock investors bid on it.
The exact same modest $75 rally in gold that added 60% to LowCost’s bottom line was like manna from heaven for HighCost, driving its huge 1500% bottom-line profit gain. By deploying capital in LowCost an investor could have reaped a 60% gain from a 27% gold rally, not too bad. But, by instead deploying capital in HighCost, the same 27% gold rally could yield a monstrous 1500% windfall for its shareholders.
Behold the power of leverage!
Now please realize that leverage is certainly not the only important factor in selecting gold stocks. If a company has high costs, it may have serious problems that should best be avoided. High-cost stocks must be carefully investigated before deploying capital in them. High-cost gold mines are often marginal producers and are much riskier investments than low-cost producers.
Leverage is very important to consider, but investment decisions should never be made based solely on it. Nevertheless, the greatest gold stock gains are inevitably born from the gold stocks with the highest leverages.
Full article here:
http://www.zealllc.com/2002/goldstk101.htm
Note: Harmony had an average cash cost of US$272 for 1Q 03 vs. $222 for 4Q 02 (primarily because of Rand increase). The equivalent Rand cost per kg were R73,144 and R68,500 for 1Q 03 and 4Q 02 respectively. The Evander mine cash costs were likely above this average. See slide 12 @ http://www.harmony.co.za/webdata/quarterlies/2003/March2003_WEB.pdf
SouthGold Warrants:
Okay, lets have some posts estimating the stock price required to meet "the market price threshold". This info is important because there will likely be some 5M warrants coming onto the market within the next few months and all must be exercised by April 1, 2004. I come up with around C$2.09 but the terms and conditions are somewhat nebulous, anyone else care to give their calcs to come up with this "market price threshold"?? If C$2.09 is correct, GBN should be under no "fundamental" selling pressure until we reach that level assuming POG is rising?? Also, you would have to think that GBN will be assisting SouthGold Shareholders in placing many of these shares with funds/institutions...??
Full filing @ http://www.secinfo.com/dqd6r.2t.c.htm
"1.2.3.12.2 the warrants shall be exercised within 12 months of the date on which they are issued, provided that if:
1.2.3.12.2.1 at any time following the expiry of the four-month hold or selling restriction period prescribed by the TSX Venture Exchange, the 20-day weighted average per share published closing trade price of GBG common shares on the TSX Venture Exchange is greater than or equal to 200% of the exercise price of the warrants ("the market price threshold"), GBG will give the Southgold Shareholders notice that the warrants will expire 45 days following the date of such notice if not exercised, during which period the Southgold Shareholders shall be entitled to exercise the
warrants"
also read section 1.2.3.12.1 from http://www.secinfo.com/dqd6r.2t.c.htm
Facts:
Warrant Exercise Price = US$.75
200% of the Exercise Price = US$1.50
@C1.39 exchange rate = C$2.09
Also, FWIW, the 4 month lock up period on the 10M issued common shares to SouthGold shareholders expires 9/1/03. As stated, do NOT expect too many of these common shares being sold SouthGold shareholders in the next few months. However, the 5M warrants will have to come to market within the next 8.5 months...
On another issue...
GBN management/analyst opinions on whether GBN will go it alone on Burnstone or joint venture (similar to HL/Ivanhoe) seems to wax and wane from one option to the other, depending on who and when you discuss the issue...
Given recent info and insights into this matter, my opinion:
If GBN proves up a large, e.g. 7M ounce target using a 100cm mining width (Burnstone is narrow width reef mining), then the Burnstone project will be joint ventured or sold outright. If a lesser reserve is proved up, then GBN will likely have to go it alone.
(Do your DD on narrow width reef mining, it is the key factor on Burnstone. Many majors are skeptical of any deposit using below 120cm width-it kills the project, but Harmony has had proven mining success using 90cm width at Evander. My understanding is the results on Area 1 seem to have improved upon these narrow reef economics (i.e. found economic widths exceeding 90cm along most of the gold vein lengths), and Area 2 presumably has better structural complexities and grade variability than Area 1, we'll have to see if this presumption is accurate when feasiblity study is released. This all goes back to payability and continuity in mining methods which in turn depends on structural complexities and grade variability -- simply ...how much face will be payable and available and how selective will mining methods need to be.)
If the scale of the deposit exceeds e.g. 7M ounces (using 100cm mining width) and the structural complexities and grade variability turn out okay (still not known) then the target after a Bankable Feasibility Study would likely be irresistable to a major. Under this scenario, GBN should be able to find a mining and financing partner on attractive terms.
A much smaller project (e.g. under 3M ounces at 100cm width) will reduce the options and alternatives to GBN and going it alone may be the only way to proceed. But my understanding is S Africa does have project finance available for this type of project so excessive dilution could conceivably be avoided.
Be advised, I am no mining expert and practically illiterate on the dynamics of thin reef mining. But these issues are key to the economic viability/IRR on Burnstone. What I do know is that you need expert mining engineers and staff to develop and mine a 100cm thin reef deposit, and many majors (especially outside S Africa) do not appear to have such expertise. Harmony does have such thin reef mining expertise, as shown by their successful 90cm gold mining at Evander. We'll know more once the Burnstone feasibility study is released in first half 2004, but for now ignorance is bliss or at least we have a better understanding of the issues...
GBN update...
Per the 20-F comments:
"A re-interpretation of exploration information for the eastern half of the property resulted in the recognition of a second major structural trend on the Ivanhoe property. The north-northwest trend of the newly identified major fault structures is the same as the principal ore-bearing structure at Ken Snyder and other mines in northeastern Nevada. This new structural trend provides potential to find significant, additional high-grade gold vein systems...The best exploration potential for the more traditional Carlin-style deposits in the lower plate rocks occur at depths ranging from 5,000 to 6,000 feet (1,524 to 1,829 metres) in the silty carbonate host rocks of the Rodeo Creek, Popovich and Roberts Mountain Formations...The Little Boulder Basin discovery may provide the best analogy to the deep exploration planned for the Hatter area and the Ivanhoe Property as a whole, as it demonstrates that high-grade gold mineralization exists over a considerable range of vertical depth throughout the Carlin Trend"
My understanding is a target of this trend is between the W Hatter Fault and E Hatter Fault specified as Hatter Graben Escan Anomaly (see slides "Structural Cotours Valmy Unconfirmity" and "Epithermal & Carlin Targets"). That is, this is where GBN thinks this north-northwest trend is...
Drilling continues on Area 2. My belief is that Area 2 drill results will likely be better than Area 1, this would be in line with what SouthGold shareholders originally expected. My understanding is GBN analysts are most excited over Area 2. Personally, I am more excited about getting the Ivanhoe drill permits than Area 2. Once the Rand price of gold gets above R95,000/kg, I will get more excited about Burnstone. What I want is cash flow now, and that means getting the drill permits in the 4Q 2003 so that cash flow starts coming in full throttle in 2005.
My understanding is the Ivanhoe drill permits may not be granted until later than the August 2003 hoped for date, but my impression is these all will be granted by October 2003 or so... My understanding is the deadline on the public debate/opposition to the water permit has transpired, and there was no public opposition to GBN's Ivanhoe water permit. If so, this bodes well for eventual permit approval. Who knows what is taking the Nevada BLM so long to issue these permits, but HL still thinks they will be 500 ft down the decline by Dec 03, so the permits will have to be issued in the next few months...
With its expected 10M ounces of gold, Burnstone Areas 1 & 2 is certainly the "sizzle" for GBN. But, we need to see the Rand price of gold get above R100,000/kg for Burnstone to be highly profitable... Note these comments from mineweb.com @ http://www.mips1.net/422567D90030EAB4/0/4225685F0043D37A42256D6A005927AD?Open&Highlight=2,evande.... :
"The low rand gold price has exacerbated the margin pressure being felt across the industry. In rand terms, bullion is hovering around R84,000/kg, against an industry-wide mine planning price of around R95,000/kg... Other operations, like part of Harmony’s Evander operations, AngloGold’s Savuka mine, and parts of Gold Fields’ Kloof operations are also in jeopardy, analysts said."
Recall that Burnstone is often compared to Evander, so if Evander is hurting at current POG, then Burnstone economics/IRR cannot be all that favorable right now. (It's funny how those S African companies quote the POG in tons rather than ounces.) On the plus side, Burnstone should be much cheaper to mine (i.e. cash cost) than Evander because the deposit is only 600 yards down as opposed to Harmony's 2,000 yards down. We will have to wait for that Burnstone feasibility report to know for sure, but I expect at current R84,000/kg that Burnstone economics leave something to be desired. Please note, the gold price was over R103,000/kg for June 2002 and September 2002 quarters (see Harmony quarterly presentations). Above R100,000/kg, Burnstone economics/IRR will be highly profitable...
Per my understanding, GBN has declined several private placements/bought deals offered to them recently. GBN has no plans to issue more shares anytime soon, IMO. It appears GBN position is that if institutions/funds want shares, then they can buy them on the AMEX... That is the best news I have heard. Let's hope GBN still has the same attitude when its shares are over US$2.00 hopefully in the next few months... As stated previously, Ivanhoe will be generating $27.5M operating cash flow in 2005 at $350/oz POG. There will likely be some G&A overhead and exploration costs, but adding $24M cash flow to the cash account is achievable. So why would GBN want to issue e.g. 20M shares at US$1.20 and dilute existing shareholders 20%+, better just to wait on that cash flow in 2005 for that $24M if they need it, IMO. FWIW, I am opposed to issuing shares at US$2.50 let alone the current price. Now if GBN gets over US$3-$4, then let's think about it (closer to my NAV calc), but not until then...
The Big Picture in 2004 (if things go right):
* Ivanhoe begins production in Dec 2004, cash flow starts coming in, and GBN starts reporting positive EPS in 2005.
* Burnstone is proved up to 10M ounce reserve in 2004, this is the sizzle, why many of the analysts love GBN. If Rand POG can then exceed R110,000/kg, GBN will be trading closer to US$10 per share than $1.25 IMO.
Really like the future GBN story, good cash flow coming in from Ivanhoe combined with the sizzle of Burnstone. Even if Rand POG remains at only R84,000/kg in 2004-05, GBN still retains that sizzle, the perpetual option on 10M ounces of gold just waiting for Rand POG to cooperate. It all starts with getting that Ivanhoe permit, the sooner the better.
let me revise and extend my remarks:
This deal will not get finalized until the 4Q 2003. By finalized, I mean MOY shareholders actually receiving the NEM shares. No reason for NEM to dilute shares and thus 3Q EPS results if they can get away with it, thus the shares will not be issued until the 4Q.
NEM could announce the deal in Sept at the Denver Gold Show and still likely delay the distribution until the 4Q 2003.
On the otherhand issuing MOY 784,314 shares when NEM has 402M shares outstanding is not that dilutive...
Anyone care to speculate on shortly be available...:
"Further details will shortly be available on the company website www.moydow.com "
Likely, this is details on the True Grit drilling, but for MOY shortly may well mean a few weeks from now...
http://www.moydow.com/news.html
Nonetheless, MOY does run a tight ship as far as expenses, e.g. their Prof Engineer and Qualified Person is also head of investor relations...
"Results were checked and verified by Michael Power P.Eng., Qualified Person, in accordance with National Instrument 43-101. Mr. Power is also a director of Moydow...
FOR FURTHER INFORMATION PLEASE CONTACT:
Moydow Mines International Inc.
Michael Power"
FWIW, got a partial fill today... At NEM = $37, this values MOY at US$1.10 for the NEM share distribution alone...
___________
Also FWIW, no I do not think the NEM deal will be changed. NEM has historically been slow to finalize their deals, but they have always closed them/honored their commitments... NEM will have these ounces on their balance sheet by year end IMO.
http://www.globeinvestor.com/servlet/WireFeedRedirect?cf=GlobeInvestor/config&vg=BigAdVariableGe...
Please note:
"Details of the sale are currently being finalized and it is expected that an announcement will be made in the coming weeks.
Further details will shortly be available on the company website www.moydow.com "
Thoughts on selling 25% of my Alamos position...
1) Timing will be after a presumed favorable decision on ejidos issue, likely within the next 30 days...? AND
2) Before the presumed private placement to raise C$7.5M (per RBC report, page 15) which will likely come shortly after the ejidos decision...
Will then look to buy back these 25% trading shares after the likely 2003 private placement, hopefully at a cheaper price. That's the game plan for now...
Well, it was quiet trading until that 250,000 RBC cross trade six minutes before the close??
Time.. Price.. Shares.. $ Chng Buyer Seller
15:54 1.500 250,000 +0.140 RBC RBC
Any thoughts on that last trade???
Got a love AGI shareholders, they exercise 773K options and warrants even when these were out of the money...
45,223,664 fully diluted shares 4/9/03*
45,007,998 fully diluted shares 7/23/03**
215,666 warrants/options not exercised
* see page 5, http://www.alamosgold.com/i/pdf/30351647.pdf
** see http://www.alamosgold.com/s/ShareStructure.asp?ReportID=61356&_Title=Share-Capital-Information-a...
Since April 9, AGI stock did not trade above the $1.29 and $1.30 strike prices of 998,702 warrants/options. Yet only 215,666 options/warrants were not exercised... Thus, 773,036 out of the money options/warrants were exercised even when AGI was trading below the strike price. AGI shareholders have faith in their company...
On today's trading, one troubling aspect is the very light volume today compared to the last 10 days. We may well fill that down gap first before proceeding higher...
52 week high just C$.04 away...
Alamos has been trading quite well, good accumulation and money flow...
Capex Lotto = C$215M
Cash Cost = US$168
IRR = 20.1% @ $325 POG
2.3M ounces measured reserve
1.2M indicated reserve
3.5M ounce total reserve at Meadowbank
Estimated Capex per Research Capital is C$215 per report dated 04/24/02. See page 12:
http://www.researchcapital.com/docid.cfm?docid=2678
Part of this C$215M will be for construction of cofferdams which likely accounts for some of the large capex: "A challenge at Meadowbank is the construction of cofferdams to allow for extraction of ore at Third Portage and Goose deposits - a portion of both deposits lies under a lake." (Note this dam construction not necessary for Vault Open Pit deposit which is largest resource...)
Also, note the annual budgeted capex:
2002-03........C$12M
2004.............C$71M
2005.............C$116M
Per Research Capital page 11:
"By 2Q03, we expect a production decision may be made, and that in the shipping season for 2003, all prerequisite preparation materials and necessary equipment would be delivered to Baker Lake. Over the 2003 winter road, equipment would be moved to site, followed by physical construction commencing in the spring of 2004. Larger items like SAG and ball mills, gensets, etc. would be shipped to Baker Lake in mid-2004 for transportation to site over the 2004 winter road, followed by nine months of physical construction.We expect production could start late 3Q05. The construction schedule is complicated by the need to use an ice road to move heavy items."
This info corroborated via loantech who notes that some of recent 7/03 financing proceeds will be used to begin infrastructure construction:
http://www.siliconinvestor.com/stocktalk/msg.gsp?msgid=19117733
"3.CBD has a tentative plan and proposal to use the dollars from the new financing to purchase supplies and material to start infrastructure at Meadowbank. As heavy equipment cannot be flown in it is sent by barge or boat. Construction to begin in 2005. They have a short by sea shipping time frame so all material must be sent one year early to make sure the narrow window of time before ice up is met. They are confident future studies etc will be positive so they are planning on moving forward now.
4.Tentative proposals are to have about $50,000,000 in cash or and infrastructure in place. Makes it easier to obtain a potential proposed bank financing of $120,000,000 for most of the needed $200,000,000 to build out the mine. The remaining $30,000,000 may come from an additional financing.
Of course this is the plan, it's tentative and this post is in no way the feasibility study that CBD will utilize to finalize their mine. <g> Do your own DD."
Finally, as Claude C has noted, CBD currently trading at below US$15 per inferred ounce:
"At a market capitalization of $C150 millions, that is $C100
($C150M minus $C50M cash = US$71M) millions for the
gold resource or less than US$15 per ounce (US$30 per
measured ounce)."
Cumberland Reports Drill Results from Vault Deposit at Meadowbank
13:10 EDT Tuesday, August 05, 2003
VANCOUVER, BRITISH COLUMBIA--CUMBERLAND RESOURCES LTD. (CBD-TSX) is pleased to report the results of the first 53 of 102 diamond drill holes completed in the spring of 2003 at the Vault deposit and surrounding area as part of the Phase 1 field initiatives at the Company's 100% owned Meadowbank gold project, located 70 kilometres north of the Hamlet of Baker Lake, Nunavut.
The drilling is part of a $10.5 million 2003 work program at the Meadowbank project designed to define and explore for further resources, complete a feasibility study and commence mine development permitting. The Phase 1 activities included 14,000 metres of diamond drilling in a total of 148 drill holes at the Vault, Goose, Third Portage and Connector Zone deposits. Phase 2 activities are now underway with drilling commencing at the recently discovered PDF gold deposit.
full story at link below:
http://www.globeinvestor.com/servlet/WireFeedRedirect?cf=GlobeInvestor/config&vg=BigAdVariableGe...
Thanks...
Recalling my prior post(s), NEM mangagement must have this deal done by Dec 31 to get rewarded by their compensation plan which is based primarily on reserve replacements/NAV as of 12/31 each year... So, the MOY deal must be done by Oct 2003, at the latest??, to fall within the NEM capex and 2004 budgeting plans, and also some time must be allowed for MOY shareholder vote...
Yep, next stop:
"provide an opportunity for Alamos to do their small
financing at 1.50-1.70 range, very soon"
Anticipating that financing as well, and also anticipating that it should be relatively small... Time for Alamos to get a few larger investment banks/funds on board and anything above 1.50 as you suggest would be viewed as positive by me... BUT, NO WARRANTS or 1/2 WARRANTS only is key, better to take less price and NO WARRANTS!!!
Believe if we see a successful ejidos decision, Alamos should be driven up in price closer to that MFL or even CBD enterprise value per ounce..., at least a double from here with any luck...
MOY will take entire distribution in shares and forego the $2M cash, taking 100% shares is their option, see press release.
Value of MOY, based on NEM $35.40:
$20,000,000 NEM consideration......20,000,000
$25.50 share exchange rate......... $25.50
784,314 total NEM shares to MOY..... 784,314***
26,414,014 MOY shares o/s.......... 26,414,014
NEM shares per MOY share........... 0.02969309
$35.40 NEM share price............. $35.40
arbitrage value of MOY share in US$.....$1.0511
US$1.05 = Can$1.45 for NEM shares alone
estimated MOY cash on hand 6/30 = Can$.024
Arbitrage value of NEM distribution and cash = Can$1.47
*** This 784,314 confirmed in MOY press release/quarterly
a few tidbits:
"Warrants to purchase 2,586,250 common shares of Alamos at $0.90 per share were exercised by shareholders by the July 22, 2003 expiry date".
from 1Q03 financials:
2,088,794 July 22, 2003 0.90
2,562,500 October 11, 2003 0.90
Interesting that 2.586M warrants exercised when only 2.089M were outstanding as of 3/31/03... That's pent up demand...
This sounds very positive to me:
"Agrarian Court proceedings stemming from two disputes concerning the Company’s contractual rights to reduce surface areas leased and payments to the Ejido Mulatos (the surface rights holders) have been completed. The judge’s rulings in these cases are expected soon. Ejido Mulatos officials and the Company have been conducting meetings and are forming a committee to promote communications. The Company is nearing completion of interviews with community members to identify concerns and establish a baseline of information. Access road improvements and evaluation of utility services has begun. Work is being provided through exploration, sampling, metallurgical testing, construction and camp services programs."
Find the reported meetings with Ejido Mulatos encouraging... Speculate the court ruling will go AGI's way, and then AGI in return will bend over backwards to accomodate the community via infrastructure improvements, etc. in $ amounts to exceed anything lost on the reduced exploration property payment...
What I like best about Alamos is their mining expertise. It cost GBN 50% of the Ivanhoe/Hollsiter property to find a company capable of mining the reserve (i.e. HL)... That would seem to be a problem with most junior gold companies, they only know exploration and have no mining expertise..., they find it difficult to mine their own property and thus have less leverage in negotiations if they want to sell the property. Chester Millar's gold mining/heap leach experience is a big plus.
If and when the Ejido Mulatos issue is successfully resolved, I believe Alamos stock price will start making new highs, given $350 POG... The fully diluted Alamos market cap per gold ounce is a bargain. See pages 18-19:
http://www.alamosgold.com/i/pdf/30351647.pdf