Petaquilla Minerals Ltd PTQMF

Comments on PDI (repost from IH)

[oullins]

Here are a few comments about PDI

The problem with PDI is that most people have no idea how big PDI is. When you drive to the mine all you see are PDI heavy equipment. Did you guys know that out of 800 or so people working at the mine 500 of them are PDI?

I asked the company to give a much better picture of PDI in the corporate presentation so people can really understand the valuation of PDI. I will get my wish at some point trust me.

The financial split of PDI and PTQ in the quarterly report does not reflect an arms length relationship. All charges for running the mine are not represented, only outside revenue. If PDI was an independent company they would charge PTQ for services and PTQ would charge PDI for the aggregate. The 2 maybe a wash but who knows. I can assure you that the tax man would want to know. Without a fair transfer price and I mean by that a "market price" of the goods (aggregate) and services (extraction of ore)the company would be able to book profit in either companies at will. Inter company pricing has been the source of many heated discussions in my career.

The reason I would prefer to see a spin-off 2 years from now is that it would give a much better short term valuation for PTQ and PTQ needs that valuation for better financing terms. PDI will get at least $100M from FQ in the next 3 years and that maybe heavily front loaded since that number maybe closer to $200M. Doing the spin-off 2 years from now is a much better timing IMO.

Now for the long term strategy of PDI and the reason for a spin-off at some point.
One word of caution, this is only my interpretation of data collected and is not confirmed by management.

I personally think the perceived strategy is brilliant. The long term goal in my view is to create a multinational mining infrastructure construction company by leveraging the work done for a "friendly" customer and that customer is PTQ. It is after all what was done in Panama. If you want to expand out of Panama it is very difficult to start a construction company in a new country. To get the jobs you need equipment, to get the equipment you need money. What if you had a startup customer (ie PTQ) in a country like Spain? Develop the team/equipment for a couple of years working for PTQ and then you can expand to other jobs. Repeat the same thing in Portugal then Africa add to that an engineering team and after 5 or 6 years you are leading a multinational mining infrastructure company worth a lot of money.

Nobody jump the gun and expect all of that to be done in a few months. It will take at least 5 years and maybe a lot more.

Anyway, just some food for thought