Alex, I must hand it to you. You do not discriminate.
RNO is a buy from a value standpoint. The reason it is down is because the last quarterly report was very disappointing. The grades and the recoveries were terrible, and the loss on their copper hedge was much worse than expected.
Management had affirmed production guidance at the Denver Gold Forum on Sep 25 when it should have been obvious that they were not going to miss their production goals for the quarter. That has called into question their honesty and competence.
Despite the poor results last quarter and the questionable management, this remains one of my largest stock holdings. The high price of nickel allows this company to print money, and that can make up for a lot of mistakes.
In Q4, the grades will likely remain low, but the recovery should improve since they cancelled the 2 month test on separating copper and nickel concentrate. The losses on the copper hedge should finally be played out as the future price of copper is finally dropping. The main wild card is the cost of shutting down their 2 high cost gold mines. The new low cost gold mine will not be producing gold until the end of 2007.
