Reality behind super bull's Red 5 alert
BARRY FITZGERALD
November 23, 2009 .
Charlie Aitken at Southern Cross Equities has declared himself a super bull on gold. "Peak gold is a reality; buy Newcrest and Lihir today,'' Aitken said on Friday.
But Garimpeiro's interest today is in the final item in Aitken's Friday note on Perth-based Filipino gold group, Red 5 (ASX: RED). It was described as a highly leveraged call option over ''peak gold'' and was recommended as a buy up to 16c - a level Red 5 got to in a hurry on Aitken's note doing the rounds.
Friday's 2.5c gain to a closing price of 16c prompted a speeding ticket from the exchange, Red 5 mentioning, among other things, the recommendation from Southern Cross.
As luck would have it, a fuller explanation for the interest is expected this week with Red 5 expected to get the all-important regulatory clearance from Filipino authorities to develop its flagship Siana gold project.
In its response to the speeding ticket, Red 5 talked about the approval being close. The word out of Manila's mining circles on the weekend was that the required government orders to begin work on developing the $US72.5 million ($79.3 million) Siana are now in hand.
That means that once Red 5 secures financing, Siana will be on its way to becoming a producer by the March 2011 quarter. Based on an initial mine life of 10 years, with 850,000 ounces of gold produced, Siana is set to become a low-cost producer with expected costs of $US350 an ounce.
Assuming a $US1000 gold price, Siana is said to have a net present value of some $US252 million and an internal rate of return of 55 per cent. That's all very interesting for a company with a market capitalisation of $105 million, less $21 million in cash.
And while Southern Cross's Friday recommendation was to buy Red 5 at up to 16c a share, its net present value and target price for the stock was 27c, using a long-term gold price of $US850. Plug in $US1100 an ounce and the NPV becomes 35c a share
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30.5¢ |
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Mkt cap ! $2.074B |
Open | High | Low | Value | Volume |
29.0¢ | 31.5¢ | 29.0¢ | $6.131M | 20.29M |
Buyers (Bids)
No. | Vol. | Price($) |
---|---|---|
17 | 1710117 | 30.0¢ |
Sellers (Offers)
Price($) | Vol. | No. |
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31.0¢ | 290135 | 11 |
View Market Depth
No. | Vol. | Price($) |
---|---|---|
17 | 1710117 | 0.300 |
11 | 1296860 | 0.295 |
15 | 722402 | 0.290 |
30 | 1292788 | 0.285 |
31 | 1212793 | 0.280 |
Price($) | Vol. | No. |
---|---|---|
0.310 | 290135 | 11 |
0.315 | 805152 | 11 |
0.320 | 1058714 | 15 |
0.325 | 522609 | 11 |
0.330 | 885886 | 13 |
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