Replies to post #11072 on Value Microcaps Junior Miners

[Bobwins]

I don't know anything about LRR.v either. It appears they have some cash(20 million) and a development project in Mexico.

Looks like reserves/resources is about double before SMC updates it's reserves/resources with this summer's drill program. However their project is longer term and won't contribute to production near term so any production is going to come from SMC, not LRR.

There will also be a delay in Orosi production because I can't believe they will restart Orosi before the merger is complete and that's not set until the end of April. So you have to add 9 months onto April 29th before Orosi will be producing 80,000 oz per annum.

Until then, it is likely that LRR.v will lose money due to higher overhead. They will also likely have to take on debt or issue shares to completely fund Orosi.

So the question is whether the stock market will recognize the potential of LRR.v and reward the stock price or will only really boost the price when production is actual and contributing to reported revs. That won't be until early/mid 2010.

Your choice is whether to wait for the big upside in LRR or sell now and invest in something that has closer production and revs. Goro may not be much better because they are talking mid 2009 and that could slide more if they don't get their remaining permits soon.

I think existing profitable producers are a safer bet to increase in price. SMF.to/SEMFF.pk, WGW/WGI.to are two examples of profitable producers selling at forward p/e's of 5. There is no exploration risk, they have decent reserves and if the market likes gold stocks, these should move sooner than exploration stocks.

I think the potential of SMC is still there with LRR so the choice isn't easy. Bobwins

[cl001]

I hear of LRR before, I believe it is good undervalued company. The Kinross payment can easily top 4 dollar, it is still at 70-80c. Even cash on cash, LRR is a multi bagger.
It looks like a merger of equals. LRR is about 20 million CAD market cap. SMC is about 12 million CAD market cap at 50% premium. The new company will have 40 million CAD market cap.
It is still a tiny company together.
I had long conversations with SMC management this week. It was funny: When I was talking to the CFO he told me he was "expecting an important phone call". When I talked to the VP of exploration, he kept telling me what other mining companies to invest. I knew something is on, but I mis-calculated the timing. I thought something will happen first thing in the new year and I was preparing to buy everyday using the tax loss selling.
Any rate, from my conversation, I think Orosi won't be in production till Q4 earliest anyway. They are having a rainy season in the summer, very bad for construction. That's why they were planning to finish in Q1 of 09. That's why I think Kinross payment probably will carry Orosi without any financing. No financing means no hedge and a lot of more upside! With the $45 million from Kinross, they probably can start the third mine ahead of schedule. That mine is fully permitted as well. But out of production due to earthquake damaged the heap leach. They want to build a mill there.
Orosi is going to be a great mine. When they start to mine the high grade area, we are talking about 200K/year of production easily, maybe 300K/year. In comparison, NXG has a similar prospect, Young Davidson. Its production will be around 150K/year and requires 300 million capex! Imagine a tiny 40 million market cap company with 200+K of gold production! I think the combined company will a winner down the road.
In addition, Kinross has a good chance taken out the combined company for a song.
I have a slightly different perspective vs Bobwins. I believe we are in the very early stage of gold miner recovery. I want to invest in companies that were completely murdered in the bear market for maximum upside. Later on, I can move to more secure producers to take to ride. So far I have been doing great this month, got a 6 bagger of NG, double in AGT and probably SMC. I think the chance is high that both company will rally after the news since it is a good win-win situation. I intend to hold most of my positions.