Hi Punters.I thought we'd finished up our discussion.LOL*The...

Hi Punters.I thought we'd finished up our discussion.LOL

*The process of finding companies that adhere to the necessary criteria for a substantial investment can often be a haphazard one Punters.

Take Aim as an example.

My initial interest was spurred by their Mooiplats annmnt(4/3/2004) and was part of an investment learning curve for me as I bought on the spike at which 110M shares were traded.The results published in that annmnt were not JORC compliant,consequently the sp retraced.The point being this attracted my initial attention to Aim so that even though I had a very negative view on the company post the retrace,I was AWARE of Aim.

This is an imporatant point as it is impossible to be aware of what a multitude of companies are up to in terms of their project portfolios so if one is simply aware of that company one will tend to bother to read annmnts due to whatever the motivation to do so.

It was not until mid-late 05 I became aware of Aim's Perkoa project and if memory serves it was in fact from a HC post that it refocussed my attention to Aim.

You have to be aware that I did not have the experience that I now have in researching companies as I did not really start to get very serious about researching company fundamentals until the last couple of years,so one could say Aim has taught me much in this regard,although my market cap model was observed from a conglomeration of speculative companies around the time I was involved in Anvil.A comparison process if you like.

I have referred to Anvil previously and my interest in this company which was spurred on by one of my major criteria for a spec companies project to be robust,and that was the extreme grade that the Cu existed(6-8%) at Dikulushi.

I had,since exiting Anvil,been looking for something similar in terms of a project with extreme grade in the ore body and with my reading of the Perkoa annmnt I nearly fell off my chair.

Here was a company that had a project with one of the highest grades of zinc(14-17%+) in the world.But there were questions still to be asked.

The primary ones were

- Was the resource continuous in terms of structure and grade(measured/indicated/inferred?)

- Was it JORC compliant!!!

- How feasible was the project as an operating mine given the then zinc price was languishing below 80c(but trending up)

- Just how robust was the resources boom going to become to underpin this project and the market confidence that would be needed to kick off such a relatively high risk African project.

Some of these answers WERE consequently answered by the Snowden report and then the BFS.The basemetals boom research has been an ongoing process and one in which I am only now becoming a little more settled that it will remain strong at least through this period of offtake/finance finalisation.

So the actual process of finding such a company/s can be quite random in nature and one might even say an element of luck is involved.However I have at times been invested in 4-6 companies(in the early days of my investing mainly)which also gave me a good grounding in the importance of reading annmnts/media items etc.That is,developing my research skills I suppose.

*Your second point re timing of taking the position.

My timing and size of position has varied due to the fact that the firming of my research in Aim did not become fulfilled until late 05/early 06 when I took a much stronger position(for the long term)in the options-to give me more leverage.The options at that stage allowed one to attain 50% more leverage over the heads.The options also have till mid 2009 to run and the project should be up full production well before then(further project developments willing) which should allow one to easily convert if required.

So the process of taking a position on a fundamental basis is not a black and white process either.It may be with a float but floats are fraut with danger imo and I tend to stay away from them as its no better than punting on an oil drilling program.Risky to say the least.

*The financials

Always a controversial aspect amongst us fundamental investors.

A few criteria to be met here too.

- Does the company have the necessary board to rasie the required capital to not only get the project going but also to maintain their necessary operating capital.The accounts must be relatvely strong and they must show an ability to raise cash when needed.

- The project must be robust enough to stand the "worst scenario" if the market for the commodity collapses.This is where the grade/quality of the resource becomes so important as it reflects itself in the good margins that high grade ore bodies allow.

- Ideally the project should have a quick payback so that the market warms to any likely returns.

- The company must ensure that their due diligence in raising the financials for the project is up to par.Aim has had several advisors that have ensured the company has followed he correct path towards the approach to the capital arising for Perkoa thus far.The company has used a "flexible" approach which has changed the finance package a few times now(which some invetors- myself included at times)have not agreed with.The logic in this approach is beginning to dawn on the market as it has allowed Aim to minimise dilution as the market has taken a more serious attitude to the comapany.A la North Sound taking a postion allowing the UK/ASX issue to be doen with half the dilution.

- And probably some others I have missed.

You will note these are GENERAL financial criteria as Im not one to believe in running an exact ruler over such companies as long as they keep a decent buffer of operating capital on hand.

*Reasons for exiting

If I took a substantial position EARLY IN THE PIECE it would be on the basis that the project was sufficiently robust(grades/ore body quality etc)to ensure a likelyhood of success of 85%+ in getting it to production.Once again grade is of extreme importance,hence my nearlly falling off my chair when Id effectively found another Anvil(but with less risk associated)

There are very few reasons one would exit such a position at that stage if taken and they could only be considered way out of left field if it did occur.

Further down the project development phase there are many reasons one would possibly exit.In fact I reduced my options holding not a couple of months back when it looked as though the project would not be producing prior to early-mid 2009 due to some management issues but this has now been addressed by the company and I have consequently re-entered(luckily just prior to the last significant rise in the sp)

*The long term viability

Hell where do I start,apart from to say,I have referred to many reasons I have taken a strong position in Aim in this post thus far as a part of my reasoning in decision making on the points you have referred to,and these reasons make up much of why I would consider a project has long term viability.

BUT a few very salient points.

- Obviously there must be a good market for the commodity,which there will more than likley be for the next few years if not the next decade due to Chindia growth rates.Yes it may dive on China tightening monetary policy or devaluing the renminbi but this is where the robustness/grade of the project becomes important.For example the LONSEC report maintains that Perkoa is still very viable at even $1/lb of Zn.

- The project must have at least 7-8 years run time.The market will rarely seriously consider backing a project unless it will be viable in the medium to longer term

- Management MUST have a good relationship with the host contries authorities,particularly in Africa.This good will is usually developed over a period of years.

which brings me to

- The country must be relatively stable as must any associated country in terms of logistics relationships etc.

- The company/contractors(if used) must have experience in training up a local workforce as it allows longer term sustainability of the operation via interaction with the regional/national economy.

- The quality of the plant/contractors must be good to enable smooth running of the project hence consistenet production/revenue flows.One would NOT like to see the capital thrown at such a project to be on the low side that would allow possible compromise of this smooth running of a project over 8 years+

- Im not sure I understand your last point but imo this company may as well have changed names when Marc Flory joined the company.Since he joined in 2003 he has added Perkoa and Mumbwa to Mokopane.Companies are always in a fundamental flux Punters.A times they have virtually nothing going for them,the next minute they are worth nearly $300M pre-finance.

Imo a much better reflection of a companies worth is not the chart related sp but the market cap which reflects what the market thinks the company is worth relative to the number of shares on issue at a particular moment in time.

For arguements sake Aim may have been trading at $2/share but how many shares were on issue and why was it capitalised at that amount.It may well have had a low number on issue and a small,but promising, undeveloped project which could have resulted in this market cap and therefore sp.

No doubt Ive missed others but other posters may want to chuck in here as there are a veritable host of reasons that support the long term viability of the project.


Forgive any mistakes as its late and Im off to bed.If you need clarification of any points(as you know my mind wanders delphically)dont hesitate to ask.

d.