Back from some holidays, new cars and hectic life. Quick 2c on...

Back from some holidays, new cars and hectic life.
Quick 2c on GDO before I catch up on life!

In Part 1, I posted a while back about Megamine, its attractive historical production and potentially a feather in the cap for GDO later down the track.

Part 2 Focuses on ME, NKP and the relativity via its neighbours.

* New production estimates out.
Start of something good or a disappointment?
The signal is for 120K oz for 2011.
If we were to look back at the previous estimates and line the ducks up you might be disappointed at first with the 120K figure.
The beauty about the 120K figure is that it appears realistic!
Mgt being able to deliver realistic targets is far more important, than mgt blowing smoke and not delivering unrealistic targets that were only ever a pipe dream.
For me, this is a win for holders.

* NKP impact.
It?s fair to say that SA is always going to be an interesting place to invest and the wheels turn in a similar way in many other countries. Wink, Nod etc.
Without being on the ground we need to step back and assess the impact and re evaluate value against peers in the same region, segue Great Basin

* Relative Peer - GBG
Great basin gold are interesting for many reasons.
If you drive about an hour east of ME you hit Burnstone, the flagship operation for great basin gold.
Burnstone is a shallow mine similar to ME and only commenced operation recently, after about 350M in capex!
The 2011 target for Burnstone is about 140k oz.
Fairly bold for a new operation, but let?s have a quick look at a comparison between GBG and GDO.

If we fully dilute down to a fair playing field we end up with,
- GBG
Shares 515M @ $2.90
Fully diluted mkt cap of about 1.49B
GBG also has Hollister over in the states.
Burnstone is the flagship and also carries about 60% of the 2011 production weight.
If we say 60% of 1.49B = 890M mkt cap

- GDO
Shares 1B @ 34c
Fully diluted mkt cap of about 340M

890M vs 340M, what the?
The value shift needs to move and either GDO is way undervalued or GBG is way overvalued. If we look at forward earnings, my guess is GDO is undervalued.

We have a producer, priced like an explorer, with credible production targets and a lagging SP. The HUI has been kind, how long before GDO SP catches up to peers or to a relative index?

The last item is that GDO is discounted heavily for sovereign risk already. The good part about the GDO team is that they have a heavy SA mgt team and this is fairly important for local contacts and support, just ask the likes of Lonmin who have just shifted their mgt team from London to SA, for good reason.

I leave it to others to work out cash and bullion and run some more numbers across EV and Oz's, but it doesn't take a genius to work out there is plenty of value in GDO.

Mav