Firstgold Corp (fka FGOCQ)

[GreenOcean]

Assets Swell to $213M Document & Reinstatement DD

Here are the assets and liabilities for FGOC. The $86M asset is now about $194M due to the rise in gold, DD after the documents.

http://www.scribd.com/doc/30832353/FGOCQ-March-2010-Mor





Before you read all of this, consider Goldman Sachs just upped its 12 month gold price to 1650/oz, and the bidders will be using data like this. If this happens our assets swell to $341M We are looking for a 20 cents on the dollar bid, currently $40M, but $60M or more could come as this would be more than reasonable and enough to get FGOC on its feet, not $200-$300M thats rididulous.

http://www.istockanalyst.com/article/viewarticle/articleid/4575397
Others call for $15,000/oz gold

http://investorshub.advfn.com/boards/read_msg.aspx?message_id=55804509

Promoting the details people.....Assets Swelling Bullets 5-9 below....Pertinent Docs at the end MUST SEE , a merger or reinstatement with commons in tact is the only way to go, what do you think that some guy is going to buy this land and equipment in a liquidation and just keep it for himself without trying to mine the land? No. The winning bidder will need a company and our NOL's to proceed forward. FGOC's NOLS are $50M, simply they are the net operating losses by FGOC over the past 2 years that can be used to offset taxes on profit going forward. This is why the winning bidder will want them and the law states our common shares must go to the new company and we must own 50%.

1) Relief Caynon technical report shows 262,000 ounces of gold, but admits all surface area and and depth ranges were not modeled. For sale purposes, FGOC has to post 262,000 ounces for sale, but the true estimation is a minimum of 430,000 ounces at .037 (ounces per ton). That means you would need to mine 27 tons of rock to get 1 ounce of gold, and this is on par with what Newmont, the worlds largest gold producer does. In fact, Newmont averages 30 tons of rock mined per ounce.

(430,000 ounces at 1350/oz is $580M by the way)

Check slide 10 here for the "unoffical" claims.

http://reliefcanyon.com/uploads/Relief_Canyon_Marketing_Presentation_-_Final2.ppt

2) Bidders here will aim for the 262,000 ounce claim, but will have the 430,000 ounce claim to speculate on. When the bk first occured a few lowball bids came in so there has been a change to the strategy. To maximize the return here you will see below that Firstgold and the secured lenders are now working together to try and find a group who wants to reinstate FGOC and utilize the NOL's.

3) Then there is this gem from the Executive Summary page 3.

http://reliefcanyon.com/uploads/Executive_Summary.pdf


Quote:
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The secured lenders are in control of the assets for Relief Canyon that include everything necessary for the full turn-key operation of the project. Recent developments through the bankruptcy court, Firstgold, and the secured lenders have simplified the situation as it originally related to Firstgold’s bankruptcy filing. The secured lenders are able to freely advance the project and find a buyer that is interested in near term production.--------------------------------------------------------------------------------

Why do you think our lawyer, Buddy Miller, is being so progressive? Answer:

Firstgold and the secured lenders are collaborating. They want a buyer who is turnkey and ready to go. This is not an exploration mine, it is a fully operational mine waiting on cash. We know Firstgold wants to utilize the $50M in NOL's and the secured lenders know that this will make a much more attractive offer so that they get paid, so behind the scenes Firstgold and the secured lenders must have come up with a package to pay off the debt, and reinstate FGOC through the upcoming bid auction. The Chinese investor group from a year ago is what they are modeling this after.

CAN ANYONE DISPUTE THAT IT IS CLEARLY LAID OUT THAT FIRSTGOLD AND THE SECURED LENDERS WANT RELIEF CAYNON TO BE MINED RIGHT AWAY AND WITH GOLD PRICES BEING AT RECORD HIGHS THAT THE ENTITY WILL BE PROFITABLE

4) The most concrete DD here comes from Downsideup, PM him if you have to

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I've checked out the current story at FGOCQ a bit more carefully. The DD wasn't that hard for me, given it is one I've been following very closely already for over two years now.

My bottom line on FGOC from before they added the Q was that the former Pegasus Gold's Relief Canyon project being reactivated by FGOC was mostly one that was going to be wholly dependent on a much higher gold prices. Two years ago it wasn't clear that would happen. Now... is seems it is unavoidable.

The obvious problem with the company was that the lenders had clearly "set the company up" for failure, by extending just enough credit to enable them to ALMOST get to the point of starting up... but not enough to enable them to begin operating. It was fairly obvious that was the case, in spite of the company claiming, even as they declared default, that the "bank is our friend". Yeah. Right. It looked to me like management was cooperating with the lenders in the effort that was made.

The lenders clearly fully intended to "take the assets" whether or not they foreclosed on FGOC, just by forcing them into a tough spot where they had no choice but to take whatever deal the lenders pushed forward to resolve the default. The deal that DID get pushed forward was for the Chinese to buy in to pay off the debt and take a controlling interest. It seemed pretty obvious to me that Sterling, the lender, was working with the Chinese investor from the point of the initial loan, intending that result in a "forced deal" would occur.

The problem was that it seems the Chinese perhaps appeared that interested mostly due to the proximity of the properties to a U.S. Navy training range... and the Treasury Department stepped in to prevent the Chinese from buying the properties.

Now, in bankruptcy, the project is likely a lot closer to viability, given the direction gold prices are moving.

The company turned over control of the assets to the lender... leaving them able to sell the assets, mostly facilities and equipment, along with the leases, to try and recover the money they are owed. It is pretty likely that in any straight up sale they conduct, they'll get less than they are owed.

The former CEO is now trying to work a new deal in BK, looking at maybe doing some sort of a R/M... with the carrot in the deal being the 40 to 50 million worth of NOL carryforwards, while posturing a R/M with a new company he runs, Dura Rock, or SELR.

The "deal" that has been postured seems to make sense to everyone, and the lenders are being patient to see if it can work out... with the only obvious issues I see being that they may not have the financing required to complete a deal, and that those companies talking about making a deal don't appear to have any earnings that would enable the offsets to matter.

So, it seems likely that any deal done would require a "two step"... either a new financing deal being done through Dura Rock / SELR, which could end up basically reconstituting FGOC, with Dura Rock being acquired by FGOC... or, they'll need to find another company to do basically the same thing.

The deal, from the lenders perspective, seems almost a no brainer... since their choice is either to try to sell the assets at market prices, say, with luck, getting $14 to $20 million back, paying off and breaking even on the loan... or they might cooperate with FGOC in packaging a deal in which the assets would still be sold to a buyer, with the lenders being paid off, but with the buyer getting the assets, including the properties, along with a 40 to 50 million NOL carryforward/back...

From the lenders perspective, that means they'll get the chance to sell the properties for $20 million, with up to a $40 million rebate on taxes for the right buyer to sweeten the deal... making it a lot more likely to happen.

The primary reason to be interested in FGOCQ now... is that the rules for NOLs are restrictive, including that the benefit proposed to facilitate the sale would require that current stakeholders (shareholders and secured lenders) would need to retain 50% or more of the new company.

Here's the best summary of the rules I've found... noting it is dated in 2007. Recent tax law changes might be a factor, but, my understanding is that they've sweetened the deal on some of the time lines, and not made anything more problematic.

www.nysscpa.org/cpajournal/2007/307/essentials/p52.htm

My reading of it is that means it would make sense, perhaps for some FGOC neighbor like Newmont, to buy the entire deal intact, first getting the benefit of the mill and equipment co-located with properties they own already, while adding a few leases to the portfolio they have in the area now, and, with the benefit of the NOL's, they'd basically be getting the whole package (or half of it) for free... given the value of the NOL's would appear to more than offset the money that would be used to buy up half.

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5) Gold costs 900/oz to produce in Nevada

Link to what it costs to mine gold in Nevada, Note the number quoted does not include G&A and exploration costs, it ends up being 900/oz

http://iancassel.com/2010/09/19/nevadas-gold-production-flat-as-miners-hold-back/

6) FGOC has 430,000 ounces of gold to be mined, and the reason why this has increased is because with the price of gold so high the mine can dig in areas with lower grades of gold.

7) In March 2010 when gold was 1100/oz the gross profit was calculated as $86M (check the document below) and this becomes an asset based on Discounted Cash Flow (sale of gold minus costs to produce the gold)

The $86M comes from 200/oz profit x 430,000 ounces.

8) Gold is now 1350/oz, so if mined this asset becomes 450/oz times 430,000= $194M. Yes, that's right, if mined this mine would produce $194M in gross profit and this would be over only 4 years as this mine has a life expectancy of 4 years at 110,000 ounces/year. Thats a profit of $49M/year.

The profit margin more than doubled.

What if gold goes to 2000/oz? That is a profit of 1100/oz times 430,000 ounces= a profit of $473M. Yes $473M over for years that is $118M/year. I hope everyone understands that gold is at record highs, so record profits are to be made, just like when oil went to 150/barrer, Exxon had record profits in the 10s of billions of dollars. It happens.

9) FGOC's liabilites are a peaslely $32M. Financing is coming and so is a reinstatment here. Period.