gold producer, page-23

re: back to 17c - acturtle Hi alpha,

I think PNA is a good investment if you have a view that commodities and thus copper will continue to run. A rising metal price nullifies the technical risks of mining projects for the investor.

PNA has an extremely large resource position with respect to copper and this provides a large option play on the copper price. they are also in early feasibility stage and this is a good time to get set from a perspective of future capital growth.

To give PNA credit also they have always had good support from institutions. I think this is due to potential size of their projects.

From a risk perspective it should be noted that PNA chose to bypass the banks to get its gold project up and running. There may be good reasons for this but the investor should know that in the mining industry it is the banks who play the quality "police" and prevent many projects from going ahead by setting strong financing standards.

In my view PNA have used a discount rate that a bank wouldnt have accepted. A discount rate of 8% is probably acceptable for a fully debt funded project however the cost of equity is much higher - for PNA perhaps 14% or so due to its high beta. As PNA used 100% equity to fund the project (to the cost of existing shareholders) their discount rate should have been at least 12% or higher. Their gold project is also technically challenging and in a country with some sovereign risk. Factors that also support the use of a higher discount rate. If this had been used the NPV of the gold project would have been pretty skinny.

Dont take me wrong, I personnaly think copper will continue to go up, and thus so will PNA probably. The intent of my post on thread was to point out that the gold project is really a pimple for PNA and and the institutions.

The aspect of sovereign risk in Laos has shown its head a little. The Laos govts raising of the royalty for oxiana is a sign of this. It wouldnt happen in Aust.

acturtle