conference notesbridgemiller51 shared the following notes from the SF Hard Assets conference on the DMM board. We're hearing once again about the electricity problems that caused numerous distractions these past few weeks. Hopefully the ministry has worked its way through the issues and can move ahead with with green lighting more mineral exploration activities and re-employment.
Post #27658401:
First of all, as a Palo Alto resident, that is in the SF bay area 25 miles from San Francisco, the conference started at 8 am Saturday and went through today, and I was there from 12:30 to 3:30 Sunday only. If my 3 hour visit was representative sample of the conference. there is no evidence whatsoever of a gold mania yet. Very modest attendance, and the auditorium had no more than 80-100 people listening, with at least 2 or300 empty seats. I listened to a lecture about China and it's strategy to globally acquire natural
resources, and presentatons by Jaguar Mining and Dynasty (Washer, CEO). There were no questions following the presentations, I saw two people talk to Washer after his talk, and there were only a couple of people who came by the booth after the presentation. I was there for a solid half an hour talking mostly with Nick Furber, the CFO, and to a lesser extent with Washer....By way of contrast, I made and lost over a million dollars in the dot.com boom, and attended several investor conferences in those heady days that were literally jamed with people, questions, and optimism. Speakers were mobbed following their talks like rock stars, and beseiged with questions. If a gold mania ever develops, it's not even close to gathering momentum which I took as a great sign. Maybe this is a bad comparison because the bay area was the breeding ground for the dot.com companies, everyone was getting rich with stock options, jumping companies, etc., and perhaps you have to live in a town like Vancouver to feel mining fever. Still, shoe shine boys on the streets of SF are not buying gold stocks, and there was no sign whatsoever that 49er gold fever has returnded to California.
Washer's presentation was very similar to his other presentations and I didn't hear any new information. He was clear that while most mining companies are valued at a minimum of $100/oz of gold, Dynasty's 6,000,000 ounces are currently valued at $38/oz. He estimated they would produce a 'minimum' of 75,000 oz at Zaruma in 2010 and 100,000 oz in 2011. Once they get their other two properties into production, they expect to be at 300,000 oz/y. He stressed the elephant exploration potential, with only 10% of Zaruma's
trend explored and Jerusalem's close proxity to Aurelian. Dynasty Goldfields has 2.5 million oz 'on the surface' and they plan on trucking in this ore sometime next year, though the decision to do this has not yet been made. He stressed how much they had accomplished in a nation with no infrastructure. They employ many Ecuadorians, and have two engineers from Chili running their mining school. Their declines will be one kilometer deep. The Zaruma plant has a lot of capacity.
The political situation is improving. Copper Duke drilling in Dynasty Copper-Gold belt to commence in 2010.
Talking with Nick Furber, he did not seem concerned that Dynasty skipped what would have been a 20 million dollar feasability study to build the Zaruma mine due the amount of gold that has already been taken out of that area and their familiarity with the geologic strutures. There is no plan for a feasibiity study at Jerusalem either, as the pre-feasibility studies already conducted for Zaruma and Jerusalem were promising enough to move forward. Banks like more holes to lend money, but they plan on having their own cash flow bank starting next year.....
Specific mining contract with Equador is anticipated first quarter next year with a 50% tax rate. They have verbal reassurances that windfall profit taxes was intended for oil, and will be very high for gold, over $2000, because Ecuador does not want to discourage investment in mining, but nothing is in writing....Dynasty has over $400,000 in gold and silver from their first pour that they have not sold. The mine has been closed for a few weeks to make improvements and is about to re-open. This was done now because they did not want to shut down operations next year once they are bringing out the ore. They anticipate commencing production in the first quarter. Burn rate is over one million/mt, they have about 11 million cash now, and anticipate this burn rate to drop quickly during the first quarter as they begin to ramp up production. Anticipate making money, cash flow positive, by second quarter. Getting to their highest grade ore is 5-6 months away....Present drilling is for discovery of new declines for Zaruma, not to increase resource estimates. They believe the quickest way to get the ball rolling is to get Zaruma up to 200.000 oz/y....No concerns about a hostile takeover because Sprott owns 20% and Washer owns 23% of the shares. When I asked Nick if he had any idea at what price Washer might begin to sell some of his 9+ million shares, Nick said he had no idea 'but not at 6 bucks!". I liked this answer a lot.....
Cant remember if it's the wet or dry season in Ecaudor, but whichever it is, for at least a few weeks, they have been losing power 4 hours a day, and Dynasty has installed back up diesel powered generators to guarantee power at all times. Ecuador used to get their power from Columbia during this time of year, but the politics have changed and no more. An Ecuadorian woman working in the Dynasty booth said that a deal with Peru may be forthcoming. Very attractive woman, and she smiled and said
Friday nights in Ecuador had become a drag, that it was impossible to do your hair due to power outages. She was great, and clearly found power in SF.......
Nick asked me what I thought their biggest monthly expense was, and let me know it wasn't labor. Dynamite. They spend over $300,000/mt on dymanite to blast the rock out of the declines. (Incidentally, with mining ramping up in Ecuador, if anyone knows of dynamite companies in Ecuador listed on any
stock exchange, please let me know. I am serious, I believe big money will be made in dynamite).
Nick said the two big factors holding the stock price down are the absence of a specific mining contract and the beginning of actual ore processing, both anticipated in the first quarter. Because Dynasty will be the FIRST producer in Ecuador, he thinks they may have a contract before Kinross. I mistakenly thought that Kinross already had this contract, but they do not, only permission to continue the development of Aurelian. Nick also said that the ore quality they are taking out of the declines is about 5 grams, good enough to process. With gold about $1100 lower grades become economic as well.
I like the management. I am not a sophisticated investor, however, and I have no backgound in mining, geology, or finance, and thus I am incapable of asking the hard questions necessary for professional level
due diligence. I am a psychologist. I have seen a lot of incredibly intelligent people in my practice, several CEO's, VC's, lots of people from leading companies such as Google, VMware, Yahoo, Cisco, quite a few Stanford professors. etc.. Can I judge character? No better than anyone else. Can I tell if someone is lying? Nope. In fact, one thing I've learned from being a psychologist is that it's impossible to know what's really going on unless someone trusts you enough to tell you. Neverthess, for what it's worth, I like the character of this group of people a lot, and they seem to know what they are doing. I trust them.
Great sushi afterward with my wife looking out at street life in SF. California dreaming kind of day. Conference was free, lunch was $40, parking was $14. Will DMM evenually pick up the tab?
Good luck to all longs.
Bridge
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