RE: Terrible 2007
I have not seen many comments on the following issues:
1. Mining costs far above management guidance. (This happened in Kiniero, is part of doing business and is behind us-time to buy is when a company is beaten down, not when it is fully valued-listen to John Embry from Sprott-he owns a lot of shares)
2. The hedge that will continue to lose money as gold goes up.(again, this is an UNREALIZED LOSS and is totally gone after two years-that is not that far off, and gold may be $1500 by then-any sophisticated investor looks at cash flow vs losses from UNrealized Loss-this does not affect the company in a negative way as far as their cash flow or valuation is concerned)
3. The debt coming due. With 180,000 ozs at 450 or more margin, this is very manageable-perhaps another financing at a higher level-which it will be after 1 or 2 quarters of positive cash flow
4. The costs involved in starting a new mine. Covered by the debt and cash spend you already alluded to
5. Possible dilution. Not the end of the world, but not likely at these prices and not necessary with positive cash flow-a financing in the 2-3 range wouldn't be so bad as there is likely much more gold at Wona Nyafe based on the drill results- More Proven, Probable, Measured, Indicated and Inferred, More NAV-the better chance for a takeover at a substantial premium
There was a comment about the hedge loss. Unfortunately, a loss is a loss. It may be an "unrealized" loss today, but if gold does not go down, the loss will eventually become realized. Promising to sell gold for $350 is a BAD DEAL and will result in losses. (This is already accounted for, and THE LOSS is not a loss so long as they deliver on the hedge, and clear it at the end of the day-as I stated the hedge will be cleared in two years, with only 40K ozs per year average to pay down-not that far away and cash flow will be positive and gold will likely continue to increase and OZs likely will too)