Councilgritter has outlined a number of relevant points in...

Councilgritter has outlined a number of relevant points in regard to the comparison between RED and AAM. I don't want to bag another company, but I do want to emphasise that the comparison between RED and AAM is almost chalk and cheese (but they are both going to produce gold!), although for the riskier shorter term trader AAM has its advantages.

The positives for AAM are that its project is Australian based, it is very close to production, it has considerably less shares on issue. That should translate into a jump in share price with any positive short term announcements re successful gold production etc.

RED is Philippine based, it remains about 12 months out from first production, and it has got a lot more shares.

Market cap of AAM is just $56 million, RED market cap is $109 million.

Thats where it ends as far as I am concerned!

I haven't been able to find a Working Capital Report for AAM in the Dec 09 quarter, but from the presentation of Nov 2009 the funds in bank were only $5 mil - I assume that has dropped appreciably with the recent works on site.

RED currently has around $65 million in cash! ie MORE CASH than the market cap of AAM. That should put the risk profile into some perspective.

RED's RESERVES total 850,000 ozs in one discrete coherent ore body. AAM's total reserves are 150,000 ozs!!! Those 150,000 ozs are scattered all around the area!!! How to compare the reserves other than to say there is no comparison. RED's project is predicated on a LONG life, LOW cost operation, AAM's project is subject to the vagaries of it translating in the future quoted resources (measured, indicated, inferred) into reserves. But as yet that has not been done. AAM's reserves are higher grade, but not considerably so.

In terms of operating cost, I haven't seen the commentary that suggests AAM's at US$400/oz, at best if that is the estimate, well that can only be based on the first 150,000 ozs of production, but IMO would be highly questionable - when you have a 300,000 tpa plant the trick will be to maintain considerably high grade tonnnage otherwise the costs will burn the profit! On the other hand RED's operating cost, at estimated US$351/0z, is based on a 10 year mining/milling schedule.

With respect to the operating costs, RED has a considerable advantage with LOW POWER COSTS onsite, based on the government grid, at US$0.07 cents/Kwh. The AAM power, presumably from generators will be of an order of 3 times higher than RED's!!!

RED has a 4 (possibly 5) yr tax-free period, AAM is taxed day 1 at 30%!!!

AAM, at start up should enjoy the benefits of high grade, low mining cost ore at surface, and this may continue for a couple of quarters, but the orebodies (at this stage at least) are not large and whether they are continuous at depth are yet to be determined.

IMO RED management has taken a considerably lower risk to the project development, and it will make considerable profits for a long time - this will translate into a higher P/E and therefore support higher RED share price.
AAM management has cut the corners to develop a project reducing the costs and timeframe to get into production, but will be risking the future investment of shareholders funds by developing ahead of having sufficient reserves to support a long-life operation. This should translate into low P/E's thus supporting lower AAM share price.

In terms of investor support, RED now has got a considerable support base from australian and international investors, institutions etc. AAM support base is unclear.

I know which of the companies I am more prepared to support!