agm/pen - my views

This year has been one we would all rather forget in regards to the share market generally, not just PEN. However like all things harsh in life they never last, I am convinced more than ever this won't last either.

Since the AGM I have been inundated with email wanting my viewpoint. I gave just that offline to most of them and others that contacted me during my ‘holiday’, of which was 7 days by the way not 2 as someone incorrectly stated, it ended 8:08pm last night).

Here I have summarise MY personal current view of the AGM and PEN as I see them now (put together mostly over the last 2 nights with a few edits today as I had time). Based solely on feedback from four attendees and the facts as we know them to be at this point. With no communication from Gus or PEN as I never requested nor wanted any, I wanted a clear mind without any influence. The feedback I had from four (unrelated company) sources I trust from the AGM of which I considered in preparing this was invaluable. Three of them on HC and I thank them, they know who they are.

I will make this as clear as I can, I am not defending Gus or any of the PEN management in any form, to the contrary. I will however be candid in my view, without slinging off at management or posters. May I also say if anyone expects a response from me to any post you make from this, if it is personal or derogatory I won’t be responding.


AGM –

Personally I am very disappointed there was neither chairman’s address nor company presentation. For shareholders (and there are many) that can't be at the AGM this is invaluable and also basic marketing and courtesy. PEN failed miserably in this basic shareholder expectation IMO.


DFS -

PEN has disappointed me (and many others loyal shareholders) greatly over this, not because of the ongoing now incorrect public statements made by Gus and others at PEN regarding the timing of this.

It is clear to all (after the AGM) the DFS as it was in July was uneconomical due to:

1. The resource size used; and
2. The dramatic drop in the U price post Fukushima.

I, and I am sure many others, would have accepted that had it been announced at that time. However it wasn't disclosed to market for whatever reason, IMO a big mistake that could have possibly halted the continued share price drop at least in part and would have halted all of the innuendo and ongoing negative sentiment. IMO the handling of this critical aspect was very poor, that is hindsight and water under the bridge for me now. However this is not terminal as far as I am concerned, hands up (if honest) anyone that has ever made decisions they have regretted.

IMO there could have been many reasons for this. One of which is very common, they may have been attempting to optimise the DFS by looking at lowering OPEX costs (the biggest single aspect being piping/pumping), in fact they stated as much. IMO this was the only option left to them without a larger resource to place in the DFS. This now to me seems logical as they are progressing with a significant increase in resource size.

A first pass DFS indicating that it isn't economical, isn't the end of a project. One we are doing here now for a junior gold miner was in the same state just that 6 months ago. It has now been re-modelled on a much larger resource (ring a bell) and optimised costs and is expected to be very positive and planned to be released early 2012 according to latest announcements. PEN will do the same IMO, now basing the DFS on 41m/lb will be a game changer, if they achieve it, of that I have no doubt.


Planned Production 4th Qtr 2012 -

I personally find this target very ambitious now.

PEN will need the DFS and both permits and funding in place early 2012, latest March/April IMO. They will need approximately 6 months for the construction of the central process plant, DWDW placement and initial wellfields placement to commence. The balance can be placed post production as they ramp up. However that is the company target and I accept it but will watch this closely for any negative development.

If PEN achieves this IMO it will be nothing short of a miracle. Not impossible, but definitely ambitious to state the least.


"Performance” Shares –

I stated previously I was dead set against them in the form presented. As it turns out most (individual) shareholders were also. However as many did not vote it was PALA as the decider and they were always going to vote yes. I read here conjecture as to whether PALA’s votes should count, IMO no they should not have as a senior executive of PALA was also a beneficiary. The legalities of this I have no idea, nor do I have the time nor inclination to seek further information on this. I feel very sure PEN and PALA would have checked this before the AGM, if not then a major oversight on their parts.
I agree with my friend who attended that stated to me in his opinion this now a dead issue and not worth discussing further.


Funding –

Your guess is as good as mine, they seem confident and I am in no position to argue this nor have any evidence to the contrary. It is clear funding is now difficult, of which I am certain PEN are acutely aware. PEN will require a positive DFS to achieve this.


Permitting –

I have no concern over this and have only recently RE-READ all of the meeting notes and RAI's and today the WWC 3rd round response again. Strata/PEN are doing superbly from what I can see, despite 3rd round RAI, most of which is the regulators not checking previously provided information. Usual government department incompetence IMO, the information was there and Strata had consistently replied to that effect all the way through the process.

They do need the signed Form 8 the Berger estate (according to what I read on the latest from WWC on NRC ADAMS today) and they do need the restoration bond assigned. PEN indicated at the AGM this is in hand. I trust they are right as this is a critical aspect as I am sure they are aware.


Claimant Outcome –

Feedback I have and have confirmed for myself is the claimant against the Ross project is about "10km outside the lease area boundary". According to my sources to be successful and considered they MUST be inside the lease area or at least directly adjacent, of which they are not.


Lance Project -

My viewpoint has not changed one bit, this is an outstanding project and will go ahead IMO with or without PEN.


Takeover Talk –

In this market anything I now believe anything is possible. If it occurs with PEN, IMO it will be only after both permitting and funding has been finalised. I tend to agree with some that in fact PALA may do so or at least orchestrate, it if in fact it does occur. PEN management remain adamant PEN want to proceed all the way to production alone, However feedback from the AGM seems to indicate even management are acutely aware of this possibility.
End.


In closing, may I take this opportunity to publicy state binbin that you were right in your assessment of Fukushima in regard to the sentiment fallout that ensued. I clearly underestimated the effect this would have, I also did not expect the silence that ensued from PEN of which aided the fallout in PEN's case. Kudos to you on that.

That said, I hold the effect will not last and that Lance IMO will go ahead as I stated here. Will it be as PEN?...who knows.

Finally, I am convinced more than ever that the market general, PEN included is shorted to the max now. Everything I have read from trusted sources points to just that. I am also just as convinced a short covering is about to occur, as it doesn’t go on forever they simply MUST cover to make a profit.

I am also more confident than I have ever been of a major U turn (excuse the pun) in the supply/demand equation, the uranium price and sentiment. All of the evidence in front of us is supporting just that.

Where are we heading? The million dollar question I have no answer to, however I believe it is more likely to turn positive than negative, just a matter of when.

“BUILD IT THEY WILL COME”