cool down

Let’s take a deep breath and lean back for a moment. BTR’s perfomance is still impressive. 262 % in the last 3 months or 134 % in the last 4 weeks and obviously 6 % lower then 1 week ago. So what has changed? a) outstanding drilling results from Mumbwa have shown that the potential of the area is very probably a lot higher then assumed so far b) Perkoa is on track. Although the zinc price – at least for the time being – shows no sign of a massive uptrend the current price suggests a robust cash flow and future net profit. Perkoa remains leveraged to the zinc price and especially the enhancement of the production (silver, open pit) has a substantial impact on future figures. The decision is pending (1st half 2012). c) Performance and drilling results was a wake up call for the market and for the analysts to deep dive into the BTR story. Not surprisingly – at least for the „believers“- the realized that obviously in the last 12-24 months nobody really took notice of the interesting progresse made (Perkoa, JV, Mumbwa) and the conlusion was: BTR is undervalued. Looking at the different valuations a SP target price of between somewhere around A$ 1.20 – 2.60 should be possible. So we have just experienced the typical re-valuation of a company.

If you look at the volumes I think that roughly 1/3 of the people that bought in the uptrend were interested into a short term profit. Typical short term trader mentality. I guess that at least some of them have made a nice profit. Others – probably those that have bought at 1.80 or above are starting to getting nervous. Obviously it is a difference if you have bought at 50 cents, you have then seen a SP of 1.90, consolidating at 1.5 or so. In this case you are still 200% positive territory. Whereas if you have bought at 1.80 or at 1.40 the story is a little bit different. Probably this has a lot to do with the behaviour of the average investor (mental accounting). Obviously everybody was wating for the jump above A$ 2.00 (my trading range was 1.50-1.70) and then when for what reason ever the SP was not able to make further progress some of the weaker hands started to sell (still making a profit and hoping to buy back on a lower level). Well, the theory of buying back on a lower level is always a little bit shaky. Just because – especially with BTR – you were able to sell but then you are not able to buy back (just because the volumes are to small…). If we are talking of 10k shares, well…fine….but if you want to buy back a few hundred thousands, well…then the story looks completely different. Bare in mind that one exciting announcement (a „gamechanger“) and you will not be able anymore to buy back your shares on a lower level. Therefore I have the feeling that those which have bought a larger number of shares have bought the story and not the short therm movement.

We have seen a lot of speculation and discussion about the drilling results. Fact is: the grade and the results are outstanding. Even analysts are of the opinion that the grades are amongst the best that the industry has seen in the last 10 years or so. Also the drilling results delivered yesterday were good and robust. Not sensational like hole 33 but a lot better then a lot of drilling results in the last 24 months. The outstanding results obviously will generate room for speculation. Will they be good, excellent, outstanding…or maybe a gamechanger? What is clear if 36 delivers similar if not better grades then 33, then the SP will explode. If 38 will confirm the high grades of 33 and maybe even down to 600m…well…..no matter what happens, the Kitumba ressource upgrade should be substantial at will catapult BTR into the liga of the 5-10 largest known deposits in the world (maybe as large as Prominent Hill or Ernest Henry). Well…that’s a word I would say. Not just a gimcrack.

As Scott is not the type of manager flying around the world just to speak a little bit about BTR within a well organized roadshow I guess that there is a deeper meaning behind it. It could be that Scott wants to attract more long term holder, believers of the story, investors that are not happy to make 10 or 20 % of profit but are looking to a really substantial SP increase and are willing to wait for 2 or 3 or 5 years. Investors that at some point in time (when the time is right) are ready to participate in a capital increase, maybe with the aim to bring Kitumba into production and bring the market cap above 1bn. I just remember that on slide 35 Scott is speaking of a market cap of > 1 bn. Hello ? Somebody at home ? There must be a lot of conviction in the room if Scott is exposing himself to such a prediction.

But maybe Scott has a crystall ball on this desk (like me) and knows exactly how the future looks like.

From time to time some clouds...but overall very bright.