Shandong bought around half the then 9 billion shares for 5...

Shandong bought around half the then 9 billion shares for 5 cents each, making a payment of AUD225 million. Some of that went in the unprofitable operations that were being pursued by the pre-Shandong crew, then some went in rationalising ownership of the tenements so that FML has 100% ownership, some went in exploration that has produced excellent results and some of the money is still there.

The 1 for 50 consolidation did not rip anyone off: we all had the same share of the pie after the consolidation as we had before it. 9 billion shares trading at a fraction of a cent was silly: 180 million shares trading at around 50 cents is much more sensible. Plus, when you add Shandong, Lloyd Miller III and a few others you have 120 million of the 180 million shares tightly held: that will be a plus when you have a lot of people chasing a few shares when the price of gold moves up as it is now doing.

The price of FML shares went down for two reasons: first, the price of gold fell; secondly, they mothballed operations. That mothballing was a good decision and we now know, after the recent AGM, that when the resumption occurs it will be on a low cost, high grade, sustainable basis. The share price has yet to reflect the rebound in the gold price. When operations are resumed I expect the share price to head back to or beyond what was previously 5 cents and is now $2.50. Look at other gold miners listed on the ASX and see what happened to their share price when they went from being an explorer to being a producer. One day the market will wake up to the fact that FML is not just an explorer but a producer in hibernation which is currently exploring.

As I have previously suggested, even if FML resumes and only processes 180,000 ozs pa then, even at a gold price of AUD1,800 per oz and a cost of AUD1,000 per oz the profit before tax would be 80 cents per share. Even assuming 30 cents of that is spent on exploration and assuming 30% tax on the balance, that would leave 35 cents available for a dividend. What price FML then? What ASX listed gold miner is paying that kind of dividend? And consider the price history of other ASX listed gold miners to see what kind of a run up in share price can and does occur. Bear in mind that when Shandong bought into FML their presentation expressed the aim of making FML dividend paying as soon as possible.

Speculators and day traders may not like FML but longer term investors know that they secrets of a good investor are (1) picking which stock to buy, (2) picking when to buy, (3) picking when to sell, and (4) being patient after buying, before selling. It seems to me that an increase in the share price of FML is a question of when rather than if.

Finally, I am grateful to the Shandong people because without them we would have all lost all our money: they have stemmed the cash burn, obtained good exploration results and are now working towards a resumption of processing that will have four vital ingredients: (1) good gold price, (2) low cost, (3) high grade, and (4) sustainable operations, ie no stopping and starting which is very expensive.