thoughts re pna

I have been thinking about investing in PNA and would appreciate comments from fellow HotCopperites about some thoughts/ issues that seem to me to be relevant in considering this option. They are detailed below.

In brief, my concern is that while the PNA picture looks very good, perhaps the full view picture is not so cut and dried, and that the investment risks are not well enough brought into the open, either in the context of PNA itself, or the market generally.

These concerns are heightened by the apparent gap between what seem, on the one hand, to be very positive assessments of PNA’s outlook and very positive announcements about its exploration successes, and on the other hand, a related (muted) share price response – ie, if the news is so good, why is the market so reluctant to better support the PNA share price. In essence, do industry peers view PNA’s finds and outlook as very positive, or are they skeptical, distrustful?

Issues/ queries

1. PNA’s leaders – its movers and shakers. Main issues are:

• Have these people a PROVEN record of being able to efficiently take PNA from an exploration company through the mine development phase, and through to being an efficient producer?
• Is their background history evidence of competent, honest management? Conversely, is there any hint of sharpness about them? Has the recently announced change re Phu Bia gold production level raised concerns that they are not as competent or honest as previously thought, either at the management or field operations level?
• What is the view about their releases to the Market (are their releases seen to be objective, complete, truthful or is there some concern that they may be playing to an audience in a way that might cause a prudent investor to make an investment decision that he/ she might not make if the releases were more balanced/ objective, ie. playing up the good [or overplaying the good] and omitting, or down playing the adverse, or the uncertainties).

2. The Loatian Prospects. Main issues are:

• In the context of the metals mining industry, are PNA’s exploration results indicative of an average, better than average, or much better than average find/ finds (in the sense of volume of resources in place, grade of resources, estimated cost of establishing a mine/ mines, and extracting the metals), access to markets etc.?
• When in place resource sizes and expected annual production volumes/ grades are announced in the industry, how much reliance can be placed on their accuracy? Are PNA’s estimates seen to be within the norm for the industry, or is there scope for there to be material errors in their estimates?
• How much reliance can be placed on announcements within the industry about expected annual production volumes, costs of extraction? Are PNA’s estimates seen to be within the norm for the industry?
• If all is OK on these fronts, the PNA price seems to be consistently below fair value, hence, how attractive is PNA as a take-over target? When would it likely be most attractive?

3. Mine Development. Main issues are:

• It seems that reputable companies are presently experiencing difficulty in developing new mines within budget. PNA has what seems to be a limited contingency for cost blow outs, having regards to the extent of cost over-runs elsewhere in the industry.
• PNA seems to be trying to paint a picture that they are on time/ on budget with Phu Kham, having let some 20% of the mine development budget.
• Are the contracts let to date fixed price? Is there confidence that they will stay on budget/ time? When will there be a fuller picture about their ability to deliver in line with their expectations?
• What are the risks in this area and what are the associated probabilities/ possibilities?
• PNA seems to be saying that they may have good commercial grounds to develop Phu Bia as a separate mine, and, judging by the Phu Nai announcement, the scope for a yet further mine might also be emerging. Is all this too much for PNA to manage or finance?

4. Loatian Government. Main issues are:

• What is the level of political stability? Policy certainty?
• I understand the government has a right to gain up to a 10% interest in the Phu Kham mine. Is this correct? Is it likely to be exercised? When? Under what conditions? What are the implications for the PNA share price?
• Do they have similar rights to any other new PNA mine in their current exploration areas?

5. PNA Issued Capital

• With some 1.4 million shares on issue, is this likely to suppress the share price, as compared to what would be the case if there were a (say) 1 for 2 consolidation?
• Any prospect of a consolidation in the near term?

6. PNA share price drivers. Main issues are:

• What are the expected key share price drivers for PNA and when are they expected to occur?
• Is PNA’s proper value unlikely to be achieved until main risks with Phu Kham’s development/ commissioning are out of the way?
• Is so, does that mean that PNA could be highly volatile (risky) until then?
• Also, if so, does that mean that PNA’s price (if not theoretical valuation) is likely to be strongly left open to other market influences in the meantime? (eg. Metals price reductions, share market gyrations)?
• How do the above potentially influence timing of making PNA share purchases?
• Looking at a 6 to 18 months timeframe, how risky is PNA as an investment at current prices?

7. Investment Outlook – Potential Impact of Other Considerations

Apart from the above, in evaluating a possible investment in PNA, with Phu Kham not scheduled to come into production until mid 2008, what weight needs to be given to:

• the overall outlook for the share market AND
• medium term outlook for metals price (including other new mines/ expanded mines coming into production – in particular, I have in mind here that there has been a very strong surge in metals prices in recent times, that there now seems to be some more serious retracement underway).

Also, having regard to the above, and notwithstanding that some brokers valuations for PNA shares are based on much lower than current metals prices, might it not be presently more prudent to delay investment in PNA, or even quit current investments and buy back later, because the potential negatives presently outweigh the present positives. Any thoughts?

Thanks in anticipation of assistance from fellow posters.