Easy to think your onto a winner, when everyone else does, and the SP is soaring accordingly.
The real test, is to test your convictions when the SP is being sold down due presumably to overall market sentiment/ conditions.
Someone said, you have to buy when everyone else is selling, giving it away, and sell when everyone else is buying.
When MAK was 2 bucks, didn't we all say, "love to have grabbed a larger parcel at 40c,??" So nows the test.
While RP has come off highs, so long as it maintains something like 100/t margin AU, thats still enough to propel it into a developer, and we a still talking about EPS of several dollars, and dividend of maybe a dollar per share. And that, given that capex will be paid back in the first year, whether it be 2 months, or 6 months, irrelevant, that its all gravy form that point on, will set it apart from all other new producers, ie available cash to dividends.
So, the faith, is all about whether RP can maintain a healthy AU margin.
Who knows what the RP will be in 2010?
The hungry world argument goes a long way.
I think AD touched on a very important point, not made enough of, that, the new supply, will be constrained by unavailable credit in this credit squeeze.
So what does that do for the price of RP?
It will certainly be interesting to see what the morocons price setting will do on their next contract.
If bread is sold cheaply, does that mean the price of flour must follow? Or does it mean that there is a lot of happy seaguls for a while, until the local bread makers have to go broke, and then its back to the big boys to control things again?
I get the feeling that this 40-50c is it, and the oppies will remain in the money. I think after the scoping study is released we may see a return to 80c for a while, but that general bear sentiment will see some selling pressure, and that 60c might be the order of things until we get 6 months further down stream, or until an anouncement of firm RP contracts, to bolster sentiment back to the believers.
Greed for dividends is what its all about.
cheers
AEV Price at posting:
50.0¢ Sentiment: Hold Disclosure: Held
