RNC Gold Inc fka RNC

[amarksp]

a justifiable rant...

If RNC cannot turn around La Libertad, then it has a real problem. La Libertad must produce 70K ounces/yr to get its cash costs down below $300/oz. More fixed costs being spread over less ounces produced is the cause for its 2Q05 higher cash costs. This is readily resolved only via increased production... The current valuation is cheap only if one accepts La Libertad can produce 70K ounces/yr. RNC was /is overvalued (until today...?) at its current annual run rate this quarter of 35K ounces/yr.

Now RNC has year-end tax selling pressure until Dec 05. In addition, production will disappoint for this quarter as contract miner production will not begin in earnest until 4Q05.

Moreover, RNC gets double whammied today via its disappointing drill results at Bonanza in addition to its poor earnings/production results.

FWIW, I do not believe RNC top management are liars or incompetent per my discussions with them many times including today. However, RNC La Libertad mine operations have been mis-managed, so this may qualify as incompetence in your view. My understanding is:
1) the 30K/oz year Bonanza mine is operating at a decent profit and should continue to do so
2) La Libertad mine is a disaster in regard to digging and hauling the ore to the leach pads. That is, keeping its fleet of trucks and digging equipment working.
3) There are no problems with La Libertad processing the ore into gold from the leach pads. That is, crushing, agglomeration, leaching, and carbon in column recovery system.

It is indeed frustrating that RNC La Libertad cannot use its excavators, bulldozers, and trucks to load ore onto its leach pads. One would think this would be the easiest part of the operation, how hard can it be to dig and truck ore to the leach pads... For whatever reason, RNC La Libertad employees have not been able to do this.

To solve this problem, RNC will hire a contract miner for these digging/hauling operations. This contract miner is primarily in the road construction business and has confidence it can get the ore onto the pads at about the same cost as RNC budget, i.e. RNC cash costs should be below $300/oz. This contract miner has its own employees to replace RNC employees as needed, has an existing fleet of equipment which will supplement the RNC fleet, and can get the tires and other consumables necessary to keep the fleet running.

Likely this is not the time to be buying RNC stock, wait until Sept-Dec tax loss selling has ended. If the contract miner can get the tonnage onto the leach pad at La Libertad, then RNC will be profitable.