Petaquilla Minerals Ltd. (fka PTQMF)

[JustForFun7]

Wait a minute. Don't take much comfort in reports like Zacks that say your PTQ shares will be worth 2.00 dollars in 6 months time.

If you think the report provides an independent unbiased objective valuation of the company in six months time, you are sadly mistaken. Zacks report is a paid for report. PTQ pays Zacks to provide the report. Zacks relies on the company to provide them with the information that goes into the report.

The report does not even base that 2 dollar valuation on cashflow or earnings estimates. The report only estimates cashflow / earnings for the last quarter (3rd) and the quarter we are currently in (4th). Even this report indicates that they estimate the company will lose money this last quarter and just break even in the current quarter. They expect to finish 2012 with 5 cent per share earnings which would put us at a 9 P/E right now based on the current 45 cent share price.

There is no breakdown of what the expected earnings will be based on ounces to be produced and associated production costs. The 2.00 target is simply the sum of arbitrary valuations of each of the company's assets based on some chosen metrics. It's a spreadsheet model of the value of the company assets that could be pretty much any value you want it to be simply by changing the metrics you choose to use.

And don't be swayed by arguments that management is world class and you would be stupid to question them. If they blitz and boggle you with technical mining explanations to the point that you can't follow their arguments, don't just give up and accept their conclusions. Judge them by their actions and the accuracy of their performance vs their guidance. If that doesn't measure up, you have every right to be suspicious and leery of the promises they make.

Zacks reported increase in valuation to 2.00 bucks is based on the Spanish mine advancing production 18 months. They were told this was possible by management so they just update their part of the spreadsheet that relates to the Spanish mine. Again this is not adjusting expected earnings or cashflow but just a tweak of a metric based valuation of the Spanish mine.

Did Zacks actually evaluate the proposition that production could be moved up 18 months or did they just take managements word for it. Maybe you should check with the analyst that prepared the report to find out. This Spanish mine is a former pyrite mine (not a former gold mine). The appropriate government approvals have to be obtained before work can begin. How long will this take? The mine has been underwater for 20 years. It has to be dewatered before the mine can be prepped for production. How long will this take?

The ore coming from the Spanish mine is supposedly worth 750 dollars a tonne. That's pretty high grade stuff compared to what they are currently mining in Panama. Where did this number come from? The Spanish mine has only inferred resources which is the lowest quality estimate you can have. I'd want a lot more confirmation that inferred resources are real before I hang my hat of a valuation based on unproven high quality grades.

An 18-month, 50,000 meter core-drilling program was planned to upgrade the inferred deposits to an indicated mineral resource and/or probable mineral reserve but now the plan is to move to production within 9 months.

And what does the Zack report say about the Spanish mine and the probability / challenges of getting the mine into production?

"Despite having some of the higher gold grades in the Iberian Pyrite Belt, extracting the resources at Lomero-Poyatos may prove challenging. As a consequence of the diversity of ores (60% cupriferous, 32% arsenic/pyrite, 8% massive sulphide)33
, metallurgical testing is required to better define the nature
and distribution of the gold, silver, zinc, copper and lead mineralization (the mineral deposit anatomy), along with the optimal extraction process. Cupriferous ore would likely require a grinding and copper flotation plant while arsenic-pyrite ore involves grinding, sulphide oxygenation and cyanide leaching. In
addition, the depth of the deposit would require an open-pit depth of at least 250 meters, which is on the verge of the transition depth from open-pit to underground mining. As a consequence, the permitting would be difficult, and the waste:ore ratio would probably exceed 50:1. "

Difficulty in permitting? 50:1 strip ratio? 3 different types of ores? Does this sound like something that can be brought online in 9 months? Is PTQ management setting itself up for more missed deadlines?

All I am saying is don't believe everything management tells you or what "in-the-know" local investors spoon feed you. When deadlines and production guidance comes and goes without being met (how many dates have come and gone, what did they miss production guidance by this quarter ? by 30+%?). Think for yourself a little and don't just sit back waiting for your ship to come in based on information from a management team that tells you what you want to hear. Measure them by their delivery record and act accordingly.

JFF7