Better Off On Our Own!!! Or Are We???As already mentioned here several times before, people here soon forget about the C$0.60 share price we were wallowing in only 3 months ago, and when we were on our own. Quite frankly and truthfully, and at that time, I could not see an immediate end to this low SP either, without extraordinary news.
But Oh, how they cried about that then. Most times I felt I was standing next to the "Wailing Wall" then reading a stock bull board. They didn't buy more cheap shares at this low price. No! No! No! They just sat back and cried and complained.
Now here we are, only 3 months later, with a share price which is now double that price, and what are these same people doing now? They are crying and complaining, "This is Not Enough!", "Say No to the Deal!", "Hold on to Your Shares!".
Of course their logic and argument for this is that Sino Gold will come running back to us with a much higher offer if we say "No". Of course they back their argument without one smidgen of proof that Sino Gold would even consider such a thing, let alone do that. They lose sight of the fact that Sino Gold is the one with $110 Million Dollars in Cash, and had they not just bought some of our shares for C$0.85, we would be flat dead broke today.
But that was then, and now is now, right? They would like you to believe things have changed. That people are now flocking to Junior Gold Mining Stocks. That perhaps we would be sitting at C$2.00 right now if it weren't for that darned Sino Gold Bid, holding us back. I guess if I was short on this stock, I would like you to believe this to, but I am not.... TG!
There is no doubt that gold has crossed the $700 Physiological Barrier and is headed up, but what guarantee do we have this would be reflected in our present share price now?
We really have no way of knowing this now, as the Bid is on our table, and we are tied to Sino Gold's Price, so there is no point arguing about were we would be "If"... since no one can prove it. But I am a firm believer in past performance and comparisons, and from what I read from this we would be at C$0.80...tops, if Sino Gold walked away.
It is not that we have a bad stock or company. On the contrary! Our only problem lies in that we are 2 years away from production, if all goes well, and we still need to get the permits and raise financing for this mine. We need to raise ever increasing money. A Feasibility Study for Beyinhar can be very costly. Nibao is next! We need to continue drilling and exploring and paying our bills.
So our problem doesn't lie with us, but rather other gold miners closer to production, who completed a lot of this stuff, and who also had the living daylights knocked out of them last June. They will be the first ones to recover and go up in price.
I am not saying that this could not happen soon, and that investors won't start flocking to the Junior Gold Miners, like they did a few years ago. I wouldn't be here if I believed that couldn't happen. But so far that hasn't happened yet. That is important to know!
You also have to keep in mind we are not merging with a company that makes shoes. We are merging with a company who is producing gold from a wealthy mine and who soon will have 180,000 of Au/ pa at a low cash cost. So we would still be better off with them as they would see a price increase long before we would anyway, as we share in that now.
But hey, all speculation right? Or is it? Let's take a look at a stock which is perhaps the closest association we can find with our company, as we own 23% of it, Australian Solomons Gold.
Now here is a company who is already fully permitted. They have know resources of 2M oz of Au, which is widely expected to go up substantially ( double or triple) and has very high Institutional Ownership.
With financing SGA could have their mine into production by early first quarter next year, which is at least one full year ahead of us. They are expected to produce between 135,000 oz to 150,000 oz per year, our known combined expected total from both Beyinhar, and Nibao.
Although their gold grade is higher then Beyinhar, and their mine is proved very feasible to produce gold there, their costs are higher, as it stands today. But then we won't know this for sure until the Feasibly Study for Beyinhar is completed at the end of this year. SGA is however also working on ways to reduce their energy costs, with ever sign suggesting they will do that quite easily.
So what has been happening to Australian Solomons Gold (SGA), our partner, since all of these gold stock investors came flocking back in hoards to buy these types of small cap gold miners? On August 13th, 2007, the day this announcement of the Sino Gold / Golden China Merger came out, SGA closed at C$1.44, or C$0.04 higher then their previous day. Remember now, gold closed on that day at only $668.
On Friday, September 21, 2007, gold closed at $731. That is ~ $63 higher than what gold was on August 13th, 2007. More importantly for gold miners like SGA, because of their higher costs, higher gold prices gives them much better leverage.
So that news should be great for Australian Solomons Gold right? I mean with all these new investors flocking to junior gold's and throwing their money at them like there is no tomorrow. I see an easy double or triple happening here, Right?
SGA's closed on Friday, September 21, 2007, at C$1.10, which is a drop of 31%. Australian Solomons Gold has ~55M Outstanding Shares, which was the same as us, before we sold 5M to Sino. The total shares that were bought and sold for the past 10 days was 40,000 shares.
To save you time their average daily volume of shares that traded hands each of these past 10 days was 4,000 shares a day. The reason for that is the Bid & Ask were miles apart, but it is closer now, and judging from the present price you can see who is winning this race.
Now does this sound to you like investors lining up to buy Junior Gold's, who are not yet into production, like GCX? What it sounds like to me is what I have witnessed in Golden China Resources, for this past year, and that is "Shorts" Nickel & Diming that stock to death, just like they did to us for a long time, and would do again if it were not for Sino Gold. Do you really want to go back to that again? I for one don't!
Now get this, and understand this fully, before you make any decision to vote Yes, or No. Since August 13th, 2007, Australian Solomons Gold, our closest allied partner, lost almost one third of their value, or 31%. This is since this recent run up in gold prices, where none of this lose was based on any bad company news release.
We, on the other hand, and during this same time period, went from C$0.85 to C$1.20 and gained 41%. Had we been at C$0.85 and also lost 31% like SGA, our partner, we would now be sitting at C$0.65 right now, and where we have been for such a long time. So don't fool yourself! Without Sino, we go down, down, down!
Otherwise, how do you explain such a turnaround, and such a varied difference between two closely associated companies? The answer is simply this my friends and can be spelt with 4 Letters.
"S", "I", "N", and "O".
Our Big Brother pulled us out of that bottomless pit, and they will continue to do so until Beyinhar is into full production and we are paying our own way. So for all you dreamers out there, understand this clearly before you vote on this takeover merger.
If the "No Vote" succeeds, then all I can suggest is that you hang on to your hat tightly, and scream "Look Out Below", because this stock will "PLUNGE" like you have never seen before.
I suspect after the first day we would easily hit below C$0.80, but maybe settle there. Then, with the usual none share buying support, we will be Nicked & Dimed to Death, and back to C$0.60, or less, in no time.
Also get this clearly as well, as you need to understand this also! That is where we will stay for a very long time. That is at least until somebody else comes along to buy us out, perhaps cheaper, or the market sentiment changes on juniors like us, or maybe some fantastic news breaks.
But then again I use the term "Fantastic News Breaks", very lightly, as we have already had more than our fare share of very good news lately, and our stock still went down in price anyway.
So now you know my honest opinion about all this and why the investors place a premium on our stock now, and thus why we don't trade exactly at the 4.5 to 1 ratio of Sino Gold's Price.
In conclusion, all that I can say is that I am just very grateful that the destiny of this company, and it's stock price, looks like it would ride with our management, and not with these dreamers and wishful thinkers here.
If I thought this merger takeover would not go through, I would sell out tomorrow, and so should you. But then again we would not be trading at C$1.20 now, if big investors felt this way. We would be trading at C$0.80 (or less) if they didn't.
GB