they call me evil knievel - no schist!, page-5

Bacci,

Aaaaarrrrrrhhhhh! Thats just me flying over the canyon!

The reason for my little aside about Evel (I see that is the correct spelling. Cant even spell my own nickname) was to point out that this stock and this type of investing is not without risk. This is not a stock for the mums and dads seeking dividends for their retirement nest egg although I must say I am a dad in retirement and seeking to protect and enhance my nest egg. I have approximately 3 percent of my assets in Penrice and I am comfortable (though bleeding) with a holding of that size even if I get it wrong. It is definitely not a stock to bet the house on.

I disagree that net tangible assets are irrelevant. I give them a much stronger rating than most investors do and I think that when a stock is under pressure the banks would be keeping a good eye on the tangible assets too. That said, probably the thing I am most uncomfortable with at Penrice is the treatment of the schist. I see they have changed its name to landfill probably because too many of us were dropping an 's' when pronouncing it. For those who are unaware, Penrice has been removing overburden at its quarry and valuing it as schist or landfill in its inventories - I hope that is a fair description of it. So far the Company does not appear to have been able to sell any of it which leads to the question as to whether it does have the value afforded to it. The schist appears to be the primary reason why this company has been announcing profits while consistently producing very little cash flow. It has actually had a small positive operating cash flow for the last two and a half years but the free cash flow (which including spending on property, plant and equipment) has been negative. But even if we decide to treat the schist as totally worthless and write the lot off then the net tangible asset backing would still be around 59c or double the current share price. The jury is still out about the value of the schist and a sale, any sale around book value, would give the Board some credence for its approach in this matter.

My mention of the price rise by General Chemical and the decrease in exports of soda ash by China was to show that there are some signs of a tightening in supply and world prices after a pretty tough couple of years. I dont think Penrice's future lies in the exporting of soda ash but I thought that it showed that there might be some relief from the pressure of imports.

Dividends are not where we are looking for in any returns from this stock. If we get it, it will be through capital gains although I certainly wouldn't knock back a divi. Just by way of highlighting that, in Forge, the stock I had a terrific win in, the capital gain from the lowest purchase price to the highest sale price was 1328 percent if I have my maths right e.g. (300-21)*100/21. I think they paid a dividend of 3c, but it is obviously immaterial in these figures. I am not suggesting that Penrice can do a Forge although I wouldnt mind, but we are looking at a big gain or loss either way - you seem to think it is all one way, I do not.

I think it is important to point out that whichever one of us gets this wrong is not a fool and whoever gets it right is not a genius. If the end result is that we do our investing better and more knowledgeably then I am satisfied with that and I hope the readers are too.

In regard to the chairman paying 52c, he got off cheaply compared to some of the prices the rest of us have paid. In such tough circumstances as these though, I do like to see Board members and CEOs put their money where their mouth is and buy shares. Two of them have done so and I see that as a positive sign.

I am surprised you wrote off Windimurra so quickly. I would have thought that this contract is important to the company and its share price and I would be interested to hear the views of others. I am surprised that there has been no mention in the press of Penrice's interest in this matter.


GPASAS