all that glitters is gold., page-14

Disco Stu

I have only just now started reading the betahotcopper site and came across you question.

Cash backing for this company is around 30 cents (could be a bit less due to cash burn in the last quarter).

So at around 40 cents supposedly not much downside left.

However, I suspect they will issue at least another hundred million shares or so but at what price? If they are issued at over 30 cents (highly likely given where things stands now then the cash backing will remain at 30 cents (possibly a bit higher).

My main concern is the POG. If it falls closer to 1250 then I do not think they will go ahead with this project. Plus the hedging required to get a loan would be pretty costly and keep the share price from appreciating if the POG goes back up to USD1600 level.

Lets look at some figures. Production cost of say $700/ounce (not sure if that includes admin costs). Sustaining capital pa (not sure what that is pa, but need to work what that adds per ounce of output - $80/ounce), interest payment on $180m loan at 12% comes to 22m, or another $100/ounce. 5% royalty on POG$1300, comes to $65 (need to check if that was included in the $700 cost of production). Have a look at the BFS for figures.

So far costs add to around $945/ounce.

There is usually some ongoing exploration (say limited to $10m pa), so another $45/ounce.

Outlays now $990/ounce.

So at a POG of USD1300 they make $USD68.2m after covering cash costs. Still need to make payment to Bank for loans - so net cash left is lower. Note they would take almost all of the surplus cash to meet repayment of borrowings over a 3 year period. So divvie for a long time or funds for second mine.

Add depreciation on say a total investment of $340m, ie another 34m pa or $155/ounce.

I am assuming annual production of 220k, but could be less or more.

So net profit (tax rate is 65%, they own 90% of mine) ((1300 - (990+145)) x 0.22 x 0.9 x 0.65 = 21.2m

500m shares day, so profit per share comes to 4.2 cents, on a multiple of 10 that means 42.4 cents/share.

Please check the figures, I may have been pretty harsh on costs - I am about to go out and this is as far as I can take you.

Note - there may be a tax holiday period until they have recovered capital cost - often is in west africa - this lets them have the cash to cover repayment of loan.

Is it worth it. Note figures do not account for higher AUD (means lower AUD profit per share).

Dunno - if you are keen buy a portion on the expectation of a takeover or that POG will recover at some stage.

loki (goldies are on the nose).