RE: AGMTo be sure Igor will be reading this, so again Igor, thank you for coming to Toronto.
Good to see other HRG folks at the meeting! I see the POG took a breather today, but that should not be a big surprise. I expect some pressure on the stock, but then again, it can be an excellent buying opportunity IF you believe the gold bull is just taking a break while some profit taking is going on. HRG is probably not something you want to fret over daily, I see far more upside, just not tomorrow, or next month, but I would say before FY2010 is over we will see HRG at multiples higher from where we are now. We just need gold to continue above $1,150 anything over that is good gravy.
It was the best of times it was the worst of times, however in my opinion we are somewhat in alignment now. Though it may be the motivations are very different and time lines less clear. Severstal is not being altruistic, but rather pragmatic in getting our house in order. Nor can Severstal lay claim to superior business acumen, rather the convergence of a higher gold price and some hard working managers. Hard work and some luck, a good combination to have, especially after all the crap we have been and had to put up with.
To use a racing metaphor, HRG is now running under a yellow flag. Meaning we will not see (again in my opinion again) an upward sizable revaluation in the share price until such time as other factors are settled. Meaning until the second quarter results are released, and some more positive news emerges. The wild card is Bissa, we know from the new HRG corporate presentation 1.6 million oz have been identified. Additionally there are more claims to be drilled and Burkina Faso is quickly gaining a reputation for a good place to be. Bissa alone will bulk up the gold reserves, and we will know by the third quarter. In my mind the low reserves were a knock against HRG when compared to SEMAFO and some other players, they have 5 million+ oz to work with.
Igor did a good job in explaining what the problem is with Royal Gold. Understandably Royal Gold holds all the trump cards. Apparently one of the conditions not yet met has to do with any claims against the Taparko project (Somita SA). As we all know HRG purchased used equipment for Taparko. Igor explained that there is an outstanding invoice in the amount of approx 20 million due to the party which I assume sold the equipment to HRG. Needless to say, nothing but trouble with the wonky equipment. Since HRG has not paid this amount the other party has filed some of claim against Taparoko (Somita), and it is the claim status which is causing Royal Gold not to release there covenants. Igor further explained that HRG is countering with “faulty equipment” and refusing to pay the last invoice. He also said he felt confident all matters will be settled within a month or so in our favour.
The Prognoz situation is kind of bizarre, I think it will come down to whose Oligarch is bigger and better connected, ours with Mordashov or the other party. As John Helmer pointed out, Russian bankruptcy courts are anything but predictable. However Igor was confident of more upside then downside. As for myself I would just like to see some of the valuation in our stock price.
Ok enough of the pleasantries. I believe he was sincere and credible, I can’t believe I am writing that. He was not evasive nor gave babble goop answers to questions. He is an engineer and has done a fine job in getting things in order. He also mentioned, the equipment problem was solved, albeit with some equipment loaned from Severstal. Who knew! I asked why there has been no guidance so far this year. His reply was, gold production in FY 2010 should be higher than FY2009. Just that some mines will have higher output and others less.
So Igor I now have a little more faith in management. Just please, no more games, delays in statements, dilution and musical chairs on the board. You now have some momentum, cash in the bank and a much improved balance sheet from a year ago. As I mentioned you at the AGM, we need to have more coverage of the company, and the goods things you have accomplished, and the upside to your strategies.
Thanks
CJ