allied gold for true believers

I'm only addressing this to the true believers (existing shareholders) here - short term speculators please ignore what I have to say.

These are some very significant facts (if they are not "facts" then certainly let me know):


(1) Allied Gold has about 2.5 million ounces of gold underground (quite often called "deep reserves")

(2) I'm not certain how many issued shares should be used for calculations but let's go on the high side and say 200 million

(3) At A$800 per ounce of gold, the deep reserves have a pre-mined value of 2.5 million times 800 equals A$2 billion dollars.

(4) Every share is backed by 2 billion dollars divided by 200 million shares equals A$10 per shareholder.

(5) If production costs are A$400 per ounce (a high side estimate) then every share has A$5 of produced gold as its backing.

For shares selling for less than 40 cents it seems crazy to say that each share is backed by A$5 of gold.

The only weakness I see in this project is the management. They have made two mistakes recently that we should watch closely: the first mistake is with the project engineers it seems, who apparently bungled the conveyor design and the management did not discover the weakness in the design. This is not a really bad mistake for management, who are not engineers usually (they should have an engineer on their board of directors by the way). The second mistake they have made is borrowing money with a mandatory hedging contract attached. These hedging contracts have been the downfall of numerous aussie gold miners over the past few years. If Allied enters into another hedging contract I'd probably be selling up but while it's only 20% of future production I will live with it.

Do your own analysis of course. I have been buying the dips over the last week and obviously have a vested interest in what I am saying.