I believe the major issue with PEM is the hedge book. I remember that a few years back for sold forward millions of ounces of silver, when the price was US$7/oz or so. Now spot is $20... The silver was sold to CXC I believe, which is also a major shareholder in the company. Then there was a forward sale of zinc production to a Korean company. I am not sure which price was paid.
However, who would want to own shares in company which must sell their production at discounted (Zn) to deeply (Ag) discounted prices?
Of course, this was a decision of the management and their advisors. We got into a precious metals secular bull market in 2000 or so. Prices have been going up since all the time. So why would you sell forward in 2003-4 knowing that they downside of a commodity is very limited to technical analysis.
The problem is that shareholders pay the price of bad management decisions.
I think that PEM should stop any talks with CBH and regroup for the rest of 2008.
PEM Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
