Ann: Amanda Resource Potential Increases, page-13

Cheers Sharpey,
I need to lock in some time and really dig deep so to speak on DEG. Although upon pondering my current holdings and the sector sentiment. Its a tough gig for either explorer's or small to mid tier producers. Only the likes of NST, RRL, EVN etc get extremely high valuations compared to even SLR, RMS, DCN etc. Even SAR has had to prove its self to get a large re-rate and it still is no-where near NSTs metrics due to, as far I can see, one thing, critical mass/production profile and a proven team.

I look at BLK, TRY, BDR, RED, MML, etc.... sure, their share price can move, but.... they are basically like flees compared to the big dogs. And damn does it take a lot to get close to those above the majority.

I will admit there are a small number of small/mid tier that have broken the mold, in particular, PNR, although they have fallen back hard from the lofty highs considering its current production rate is just 55k p.a. RMS has 4 times that, but... for a while, PNR had a higher MC than it. Go figure.

So... what am I jabbering on about. It would seem that for a gold stock, miner or otherwise, the first it needs, must must have, is a proven team in place. i.e.... GOR, their MC is far larger than any mid tier producer and they won't be producing for another 12 months. BUT.... they have a proven big dog building and operating what will be their first mine. They have proven themselves capable of finding 5m ounces.

Everyone else... well, I hate to say it, but they just flounder around. Sure, traders are doing well, but... for a true investor, well, its damn hard. Because so few gold stocks actually become miners, and then... even fewer actually pay a dividend. Look at MOY. Management seem to be about as good as can expected (I don't hold), but.... they just tread water and tread water and tread water! Even though they have done what many others have not, printed shares willy nilly.

The big dogs by and large, have it would seem, the best teams, and don't share.... Imagine, if... DEG was somehow, able to secure say, SARs team that built their second plant, or.... DCNs team that just built a $200m plant on time and on budget.... The market would not just take a look, they would back them. But it really does seem its very difficult to build up a top notch team. I am not saying DEG does not have the goods, but... from my read on things, they are ok, but.. are they NST caliber. If not.... well, what can be done?

Second, a aspiring gold producer, needs to have already proven up a lot of gold, I mean, more than 500k in reserves as a bare minimum. I actually think 1m ounces is needed to ensure that those with the right skills will join a company. The pros must surely be very selective on what projects they work on.... hence perhaps why so many fail. What I mean by that is not that the plants don't work, I think by and large, the plants always work. Its just that the plant never gets fed enough gold at a cost that allows for good profits. ie. BLK, BDR.

A stock I hold, EAR, as reserves of 812k, and can be in production within 9 months due to already having a plant, but.... only first 4 years of production will be highly profitable. Market snubbed their nose yesterday. Not interested. I could go on, but... I get the feel, that right now, the market only wants successful explorers, or the big end of town. Only a select few might break this prism, perhaps DCN, or... another I hold (GCY).

@Wack - I am so happy you reminded me of the timeline for when DEG needs to pay up for Indee. They do indeed have lots of flexibility with at least 11 months. This time.... could be used to really drill, I don't mean, a small campaign, I mean, 100,000 metres +. They clearly have very good ground to drill, drill it.
The market does not care if you have 10m ounces in resource, i.e look at WGX, all the 'market' wants to know is that you have proven to produce at around $1000 AISC. With a good sized production profile.
I hope DEG takes a very long term view on things, as for better or worse, trying to become a producer before you have a critical size of reserves, gets you almost no-where in regards to actual returns for shareholders, at least as far as I have seen over the past 10 years or so in the gold sector (again, big end of town is decidedly different).

So... after writing all this, I have come to the conclusion, that perhaps the best way for a small/mid tier wanna be gold stock to make real and significant returns for shareholders, is to copy GOR (or some version of it). No, not saying DEG need to find 5m ounces, but... if they can find 2m ounces (with 1m in reserve), with good grade, then perhaps the likes of SAR, SBM etc will partner, do all the lifting that usually breaks the camels back so to speak and then find the next project to partner up etc. Rinse and repeat.

I just wonder, for example, what would BLKs share price be, if instead of the $200m+ they have raised and spent getting their plant back online, producing etc... but basically be net cash of zero, they have thrown all $200m into just drilling..... would they have 2-4m ounces in reserves.. I bet their MC would be higher than $68m! ha. BDR.... same... TRY, same..... RED.... MML....

Most likely, none of this will occur, but... I feel the facts or, particularly, the share prices of those who have done well, prove that a change in mindset might be needed. As other than those that work in the industry, very little returns have been made on anything other than NST, RRL, EVN, SAR etc (although a rare few have done well in the smaller end of the sector). Hmm... I wonder if DEG management will read such a long winded post!