why should i ignore shandong's words?, page-5

Finally.

I had to change tack in my postings several times to try and get everyone off how much money we would make in sp etc as if its a foregone conclusion and look at the rocks, beautiful plumage.

The focus is where it should be, on SD. You got it neddy.

Now...two things...

wait to see the latest quarter results,

wait to see the next wordage about the deal. I presume there will be more in the voting docs.

In other posts I have put up SD financials, I trust someone more skilled than me can analyse them and determine the benefit to FML 49ers and SD of this deal. I did a very rough calc and if POG goes up its a no brainer for SD.

Other important phrases in the SD Chairmans letter

Shandong Gold prides itself on the ability to control costs whilst increasing annually its reserve/resource inventory through targeted exploration and developing new deposits.

with

...to help add significant value for all shareholders.

Being a bit of a nit picker, nothing about sp appreciation, and when the letter was written, all shareholders refers to SD sh currently. Not all SD and FML sh. FML is not in the net yet.

When you read my post about this years SD divvies you see 1.5 RMB for every 400 RMB invested. Not a lot of focus on sh returns.

China has a great desire for gold to back its currency, I posted on CTO about three years ago that China must achieve at least 5000 tonnes minimum, and at that point they will be glad to see the price lift to $5000. At the time I emailed James Rickards in March 2010 (thats two and a half years ago) about the number of goldies I owned, even crappy CTO getting sniffers from Chinese companies.

Hi XXXXXXX,

Thanks for the news items. Not really surprising as we both know.

Good luck with your mine!

Best,
Jim


I even wrote recently to Greg Cavanan that he was 18 months late with his "I chatted with a mate in the pub about China and gold..." email. (I didn't get a response BTW)

So given my prescient observations, the shock to get a TO on FML out of the blue.

My concern is that China has discovered its not getting it fast enough internally, and can't buy it fast enough on the market without raising the price ridiculously (and they have been lucky that the US has been doing the heavy lifting in keeping the POG down). The timetable for the 5000 tonnes is compressing. What this means for "ALL" sh is that its about proving up gold, but not necessarily wanting the POG up. The only way I can conceive of achieving that is through putting their foot on it, and then obtaining future borrowings by pledging gold through hedges. The borrowings for "more growth" i,e resources or M&A.

While the resource base climbs through the roof, the hedges limit the amount of cash i.e discounted POG achieved by FML. I didn't say none, but discounted. The problem is I can not see a logical end to the strategy given that Barrick hedged for decades. For the next at least 5 years, there will be plenty of consolidation (M&A) to soak up borrowings even DT said this. Where does it end, a TO of Newcrest?

Finally,

We (SD) are a significant gold producer in China and understand the nature of the opportunities that Focus could realise with a serious investment in exploration of its tenements.

Please explain "nature of opportunities".

Remember, you are not paranoid if you turn out to be right.

The issues then are:
1. will there ever be divvies
2. will there be shenanigans limiting returns using hedges in a rising POG environment
3. given 1. and 2. above will someone else be mad enough to pay a big premium on my FML sh? In my view getting more and more resources does not necessarily translate into a proportionately larger sp.

BTW - in CDU the chairman has stated CDU will never go chasing other copper mines and CDU was about mining Rocklands and returning divvies quarterly to sh. They have two Chinese cornerstone investors and I didn't raise a word about that (for those prone to throw the xenophobe card around).

Could we have something as clearly stated instead of "nature of opportunities"? Thank you.

I leave to others more knowedgable to turn up some answers and analysis to the questions above on financials and sp increasing.