gold producer, page-9

re: back to 17c - scd HI SCD

When you have time I wouldnt mind a gander at your spreadsheet thanks. [email protected] if you are willing.

I was just perusing the PNA quarterly. This company now has a market cap of nearly $100 million because it has a rather generous 630 million shares on issue (without considering options).

The quarterly shows that the PNA Laos gold project is a curiosity in that it has low production costs <$US200, good IRR of 35% yet the NPV is not that flash at US$9.5million (considering they are spending US$15 million to build the project). Note too that the discount rate used is a low 7.5%, one of the lowest I have seen for a long time for a mining project. The discount rate for mining projects typically varies from 8 to 10% so it seems PNA are pushing to the low end to get the NPV as high as possible??

With the gold reserve grade of 1.1 g/t it seems that the project is going to have a good couple of years when they mine higher grade (did you say 1.7 g/t?) then its seems from Year 3 onwards they are pretty much make nothing as the remaining grade from that point will be crap ......

The NPV of the gold project compared to the company market cap clearly shows that a large amount of the market value of this co is placed on the copper-gold project. And considering they are still in-fill drilling to permit feasibility work to start I dont think the market will rerate PNA further for the copper-gold project for some time yet until some of the feasibility work firms up the project assumptions and some of the larger investors get more interested.

Pehaps a large company buy-in to the copper gold project might stir this stock. Or good exploration results from its outlying prospects?

I cant see the market is going to get excited about the 2005 gold production. At 50,000 ozpa (not 75,000 oz as the company was originally talking about) the gold project is unlikely to get any instos excited.

I note too that Oxiana recently had its govt royalty increased from 2.5% to 4.0% and the govt took up its 10% buy-in option. Those sort of changes really hurt a project valuation. I wonder if PNA will suffer the same fate..... There would have to be a good chance.

It must be frustrating for shareholders to see the market cap of this co increase from $80 million to $100million in the last six months yet the share price has fallen from low twenties to mid teens.

This is going to be a capital intensive stock for some time (noting Phutep copper in Thailand has to be drilled and exploration in Laos is not cheap) and the punters you are giving quality information to should take this into account.

acturtle