dont wait until too late

http://www.stockhouse.ca/bullboards/forum.asp?symbol=AUC&table=list

read these very good posts by goldbuggy2 on canadian stockhouse forum.

http://www.stockhouse.ca/bullboards/viewmessage.asp?no=12505830&t=0&all=0&TableID=0

Some people on this Bullboard have expressed concerns that the merger with Michelago is nothing more than “being taken over by an insolvent Aussie group desperate for a new life”.
I have asked to see what information that they have read that makes them feel this way, and since they did not respond I can only assume it is based purely on their own feelings, and nothing else. Let me now share my views based on fact, and not feelings.

Michelago, above other things, has a 99% ownership in the Bacox Bio-Treatment Plant in Shandong China called BioGold. In July 2005 Michelago completed the registration of, and was issued a Business License for, the Shandong MIC BioGold Plant.

This new license, and the one from Bactech, will allow Michelago to hold the license to the exclusive rights to “Bactech's Patented Bacterial Oxidation Technology” for a period of 10 years in China, Siberia, Korea and Mongolia

BioGold is already a producer with a profitable history. Since the first years results will not come out until August, or later it has been estimated that revenue for 2005 will be approximately RMB499m (A$96m) in MIC first year of operations.

I expect it will be less, as the first year is usually a steep learning curve, and many mistakes are made, but this still translates into about $80M Canadian Dollars.

What must not be confused is the term “revenue” and “profit”. The Bio Plant has very high costs because they buy concentrated gold ore bodies at a discount, and then process this at a profit. As it stands now, their cost is about 85% of the current price of gold, so their profit is about 15%.

There is some variation into this as if they pay the producer after the gold is refined, they pay them about 85% less chemical and process costs. If they pay them before this time, they pay about 83%, less their cost again. Supply and Demand at the time is also a factor, so it is difficult to get an exact figure, but a good average of all cost is about 85%.

Taken this into consideration then revenue of $80 CAD turns out to be about 15% of that which is about $12M CAD. The Corporate Tax Rate in China is about 33% but the Royalties and Exploitations Taxes are iffy. To be on the safe side I used a total tax rate of 40%. So this Gross Income of $12M CAD is now a Net Income of $7.2M, or profit.

In terms of share dilution with this merger, before consolidation, there will be about 275M Shares fully diluted. It is estimated that from these shares there will still be about 50% Institutional Ownership. After the consolidation of 5-for-1 we will end up with about 56M shares.

However, since I think it is easier to understand when you compared this profit of $7.2M to the maximum future outstanding shares of 275M, I will use this. The near future Net Profit Price to Earnings Ratio for Golden China Resources would be $7.2M / 275M Shares, which is $0.026 per share. No Screaming Hell at first, I admit, but non-the-less still a decent profit to Shareholders.

But let’s translate this $0.026 into actual share price. Most Junior Gold and Mid Tiers are trading at about a P/E of +40. Considering that with this cash flow and us holding several other potential properties a, 40 PE would be normal for Golden China.

So a $0.026 Earnings x 40 P/E = $1.04 per share. This is 400% higher than where we are at today and we are not talking 15 years from now here. But there is more!

As stated on Michelago Home-Page http://www.michelago.com/index1.html
“The Company has been operating BioGold since July 2005 and has commenced a plant expansion to increase the Bacox© Processing Capacity from 150,000 ounces and therefore total plant capacity to 230,000 ounces per annum. “

This represents also an increase in production of over 50% and thus net profits, earnings per share, and share price of over 50%. So now we are looking at a share price of approximately $1.59.

This represents a share price increase from $0.25 to $1.59 of about 630%. And for doing what? We don’t have to wait and hope for positive drill results. The news is already there! The difference in making money here is to reconize good news when you hear it, and not take it automatically as bad news.

IMOHO my advice is this! This is an easy 6 Bagger if you can take this stock and stuff it under your bed for 18 months, or shove it wherever it feels comfortable. Then forget about it until then.

GB

http://www.stockhouse.ca/bullboards/viewmessage.asp?no=12508584&t=0&all=0&TableID=0

As mentioned in my earlier post, some people on this Bullboard have expressed concerns that the merger with Michelago is nothing more than being taken over by an insolvent Aussie Group desperate for a new life.
I already discussed the Michelago Bio Treatment Plant, which should produce a $7.2M CAD profit from last year and after the expansion later this year it should now be around $11M. Especially since they received a huge increase in ‘Working Capital” from Golden China, and are now getting more favourable loans.

I also showed that by using this figure of $11M and dividing it by the maximum total number of shares, 275M, we end up with a net earnings per share of about $0.04. I then showed that by using a conservative P/E Ratio of 40 we should end up with a share price of around $1.60, based on this news alone. But, if I may, I would now like to discuss other assets Michelago owns.

Michelago also has a 41% interest in a mine in the Solomon Islands called “Gold Ridge”. This mine has already been built and was in full operation in 1998, so other than spending some pocket change to get it back to tip-top shape, it is ready to go. The people caused the shut down of the mine in 2000 due to civil unrest and a rebellion. Since this time however things have stabilise and the mine can once again be put back into production safely.

At the time of this mine closure, in July 2000, the mine had proven resources of 2.3M ounces of gold, and further reserves of an addition 1.7M ounces of gold. Australian Solomon’s Gold, of which Michelago owns 41%, fully intend to bring the mine back into production by late 2006. The production rate is expected to be 150,000 ounces per annum with cash operating costs of $230USD/oz for the first 5 years of production. The total mine life, based only on the current resources, is expected to be in excess of 10 years.

In July 2003, the Australian Government and a number of other Pacific Nations were invited by the Solomon Islands Government to intervene in the ongoing conflict. The Regional Aid Mission Solomon Islands (RAMSI) comprised of over 1,000 police and armed forces as well as a number of commercial and political appointees was formed. Over $1BN has been spent since the formation of RAMSI and it is understood that this will be a long-term commitment by the Australian Government and the Pacific Arena. Since this time the country has now been considered to be a safe place to do business again.

The Gold Ridge mine operated between September 1998 and June 2000, producing approximately 150,000 ounces of gold annually at a cash operating cost of approximately $150USD/oz. The mine will need some capital to grease and oil the wheels and bearings but the main plant is still there. Since 2000 the costs have escalated from $160USD/oz. to $230USD/oz., but this is a typical cost price increase for anyone in the mining industry today.

So using today’s price of gold of around $630USD/oz. and a cost of $230USD/oz. we are left with a Gross Profit per ounce of gold of about $400USD. This now translates into about $440 CAD/oz. Since production is expected to be 150,000 ounces and our portion is 41%, we end up with 61,500 oz. Au. From these figures our Gross Income then would be 61,500 x $440 = $27M.

Again the tax situation for gold mines on the Solomon Islands is not perfectly clear but it is safe to assume they will be inline with many other countries, or better. For practical purposes again I will use a combined Corporation and Royalty Tax Rate of 40%. So with a Gross Income of $27M and a Tax Rate of 40% we end up with a Net Income, or Profit, of $16.2M.

Again using the greatest possible amount of total shares we could have, it would be 275M. Since our profit from this mine would be $16.2M we then have a P/E of $16.2M / 275M = $0.059 / Share. Using a conservative P/E Ratio of 40, which is very typical for small cap miners, we have a share price increase from this mine alone of $2.36.

Add this $2.36 to our share price from the Bio Treatment Plant of $1.60 and we now have a total share price of $3.96. From our current share price that is a whopping 1,600%. That is a 16-bagger folks! That is 4 Grand Slams in a row!

We are not talking 15 years down the road either Ladies and Gentlemen. We are talking by next year or 2008 at the latest. We do not have to wait for some great news. The great news is already here!

I did not make up these facts and figures! They are there, right under your nose. Just go to the Michelago Web Site and do your own calculations. Why do you think we are now 80% Institutionally Owned?

Sure, you could sit back and wait and hope to buy in a few hundred shares at a time at a price of $0.23. I am sure that the Lemmings, who bought this stock on the advice of a co-worker, or relative, and who did zero research into this company will sooner or later be glad to sell you his shares at a loss. That is once he sees that this stock didn’t triple in the 2 weeks he thought it would.

We are at a slow time for our company right now (Pre-feasibility studies ongoing) and for gold. I will never advice anyone when, how, or at what price they should buy or sell shares. I have enough trouble playing my own hand, let alone someone else’s. But I will tell you this.

I have seen “Canaccord” and “Research Capital” buying small amounts of shares at the $0.23 to $0.28 range. That tells me they know about Golden China Resources. Either one of these two companies could jump in anytime and buy 5 million shares without blinking an eyeball.

They appear to be waiting for something to, but the question is for what, and for how long? When they make their move, you will be out of the game holding your few shares in a Marble Bag. Of this I am sure.

When buying AUC now at these extremely low prices just do like they did in that old Clint Eastwood Movie, and just ask yourself this. “Do You Feel Lucky Punk?’

To get back to my original statement which was that some people on this Bullboard have expressed concerns that the merger with Michelago is nothing more than being taken over by an insolvent Aussie Group desperate for a new life, may I add this?

The real question you should be asking yourself is why is a company like Michelago, who’s future is predetermined and bright, want to merge with a nobody like us? My thoughts and theory on this will be “Golden China Michelago Merger / Part 3”, just in case you are interested.

GB