congrats on our marriage with keegan, page-25

Disco Stu

I have finally woken up a bit a day late!

I have CAS on my watch list, but am not fully familiar with it. I like Brazil as an investment destination - probably comes next after Australia, because they are generally pro mining, low operating cost and low taxing, but one needs to watch out for the greenies there.

The obvious problem with CAS is that it is a low grade gold deposit (about 1.1 grams/tonne) so is highly capital intensive. They need a DFS to give guidance on costs, waste stripping ratio and milling recovery rate. They have big tenements so they may find more ore in the vicinity at higher grade (like BDR is doing).

The iron ore project is helpful now that they have approval for a 300k tonne pa operation (they want approval for a 1 million tpa operation if the govt will allow). It will pay for their admin expenses and some drilling thereby enabling them to survive and hopefully the share price will go higher so less dilution if they ever get to develop the gold project.

At present I am just watching it and will think about it sometime next year when market conditions are clearer. They do not have a lot of cash on hand.

Interesting comment by tsisboss. I think we all agree that the Keegan/PMI merger has significantly reduced the upside to PMI shareholders if they could have actually got the funding for Obotan project without further significant dilution. However the merger means that the risk for this project is much less.

I assume PMI's Board put a lot of thought into this decision and it was the best outcome possible under current market conditions - but perhaps they should have waited a year or so to see if things had improved. I did not like the deal they got from MacBank for the $30m borrowing facility, and we need to remember that PMI listed in Oz only because Canadians were not all that interested in it despite what looks like an excellent project (except for the high upfront cost of developing the pit).

I am not so negative on Keegan's deposit unless the metallurgy is complex or there is a high strip ratio. PRU is doing pretty well with its low grade operation in Ghana, but they had the advantage of ordering their plant when costs were much lower - perhaps these costs will fall when Asanko gets to build that operation one day. I am hopeful that they find another deposit to be developed ahead of the Keegan project because the upfront costs are so high that they would probably need to borrow to fully fund it (ie retained profits would not fully cover costs if it is to be operating in 2017).

Someone asked if there will be dividends when Obotan is developed. PRU and EVR are holding back on paying dividends so that they have the funds for other projects. I think Asanko will do likewise and a dividend will not be paid until 2017.

Based on how goldies are trading now, the upside in PMI seems to be around 50-80% over the next 20 months, and the downside looks relatively small unless gold or the markets go pear shaped. I would be interested in the views of others on what they see as the upside to 2014, especially tcisboss.

loki