base metals, page-13

Blue - I recall asking for some advice here while trying to run some numbers on this one - probably like you are trying to do. Oly suggested it was a waste of time - too many variables - nevertheless - I had to try it myself - its my money after all - so can well understand you trying too. But I was doing it at a higher price - she's now fallen so far that she seems a pretty safe 50c punt with the odds well in our favour

BTW - with so many variables - It sent me mad! So dont liten to anything I say lol

I was certainly able to come up with numbers that made the priject unviable but to get that I had to use some pretty nasty numbers price wise and assumed no effort made to reduce opex - it only took a modest improvement to get to break even and another modest improvement to be able to pay debt off over I think 2 - 3 years. However, Oly was right - just too many variables to factor in to come out with anything more than a gut feel yes its doable or no its not - and I came up with its probably ok

After that I switched to trying to figure out what the smart money was doing. Came up with idea HNC was trying to keep price down for take over - looks like was wrong on that one - reckon they'd have moved by now if going to - unless waiting to sort the AII thing out. But you would think they would move before production confirmed but that didnt happen - next thought was Cornel - and that seems to be adding up now.


As to profit potential - perosnally, I am hoping they dont seek to use profit to pay debt back. Would much rather see a cap raising of some sort (but not at this price level) to pay debt off

The best way to clear that debt would in my mind be via a placement - the bulk of which went to blokes like GT and JP and friends and a token amount oferred to us retail level punters. Not sure that retail level players would take it up too enthusiastically so just offer us a token amount. Our sentiment would of course change once we saw some big players putting money down on it - then we'd hear the cries of - what about us lol.

We'd probably need to see some sort of sharprice re rating for that to happen so regardless of what metal prices do - what I want see is

1. Over next few months - they demonstrate that they are successfully producing decent quantities of metals/concentrates -

I dont care so much about short term metal prices because I am convinced they are at artifical lows - while I am not expecting new highs for a while yet - nor do I expect them to hang around these levels much longer - I expect them to return to the upper ranges over the next few months - say copper 3.50 - 4 - she might poke her head above $4 now and then just to get our hearts fluttering - then she'll probably moon us now and then by sticking her bare bum out under 3.50 when she feels a bit rebellious.

2. Once production is bedded down they move on to demonstrate that they took on board the warning the recent cost analysis gave them and have worked to reduce opex.

The company cant influence metal prices so they need to focus on what they can control - costs! In a phone call some weeks back with NG he conceeded something along the lines that yes, the costs put forward in the recent cost analyisis were above the "norm" but he was putting forward worst case senario - (I didnt bother asking why he didnt put forward worst case senario on cobalt etc lol - the reasons there are obvious - even if it made em look like dills.)

So in my mind all they need to do is focus on what they can control - ie. demonstrate the ability to produce decent quantities of metals and reduce opex - the rest will look after itself.

That should see some sort of re rate on share price - and then would be the time to offer some bigger players an opportunity to participate at a modest discount. Use that cash to retire debt and their participation as an indication of what the smart money thinks.