PRU - Perseus Mining

[exgeo]

The "something happening" maybe BGF Equities Warwick Grigor released another note on PRU today, with a valuation of $2.47. Last line of the commentary reads:

A billion dollar market capitalisation is almost procedural from here based on two quality gold projects.

 

[Sean K]

Well, this had been a pretty good run for holders and followers on this thread.

As far as comparisons, I'd be happy with CNT's $130 and ounce. Bit further advanced and more ounces, but I think PRU will close that gap once they upgrade Sissengue. CNT aiming for 200k ramping up to 500k sounds like the PRU story. Their EV is $1.8b. Billion! PRU $330m. Quite some upside there.

I like the BGF valuation but always suspect of his calls. He clearly has a vested interest in some stocks he sprewks. However, $2.50 ish is about $100 and ounce EV for PRU, so clearly achievable.

Chart wise, the support lines I drew last page look to be going out of range, but I think will be important for any longer term significant pullback. Some new one's appearing now perhaps for short term swing trading..

 

[jman2007]

Quite bizaar they didn't keep drilling on SRC637. The last 2 m was at 39 g/t. Surely visual inspection would have arranted a few more meters? Is that possible? Maybe there's another reason why they stopped.

Another thought just occurred to me

It's also possible that the hole was drilled 'down-plunge' of the high-grade shoot, which would mean that the intersection does not actually represent the true thickness, but grossly over-estimates it. Plunge is hard to describe without a diagram, but it means the orientation of the ore body at an angle measured from the horizontal.

So if the plunge of this shoot was say 60 deg to the south, and the rig was positioned at the correct azimuth i.e. drilling south, and the hole was drilled at 60 deg, it would be possible to get a spectacularly long intersection, even if the true thickness of the body was only say, 5m. Down-plunge holes, accidental or otherwise are often called "Director Specials".

This is just purely speculation, and I'm not for a minute suggesting they drilled this hole in this way to put a rocket under the sp, but it is just one possible common-sense explanation. The other explanation is that they found the Mother of all Mother lodes!

But yeh, weird how it was stopped where it was, as I said I suspect a lack of supervision in this case.

 

[Miner]

Another thought just occurred to me

It's also possible that the hole was drilled 'down-plunge' of the high-grade shoot, which would mean that the intersection does not actually represent the true thickness, but grossly over-estimates it. Plunge is hard to describe without a diagram, but it means the orientation of the ore body at an angle measured from the horizontal.

So if the plunge of this shoot was say 60 deg to the south, and the rig was positioned at the correct azimuth i.e. drilling south, and the hole was drilled at 60 deg, it would be possible to get a spectacularly long intersection, even if the true thickness of the body was only say, 5m. Down-plunge holes, accidental or otherwise are often called "Director Specials".

This is just purely speculation, and I'm not for a minute suggesting they drilled this hole in this way to put a rocket under the sp, but it is just one possible common-sense explanation. The other explanation is that they found the Mother of all Mother lodes!

But yeh, weird how it was stopped where it was, as I said I suspect a lack of supervision in this case.

Interesting Jman

I guess half of the people investing money will not decipher the technicalities but will pump the share price on the half full and half empty result published by PRU management. That will do the job as they have told you what they thought and investor beware. I am amazed how the result can be interpreted and to be a selfish holder of PRU I wish you are wrong this time (but I got a suspicion you could be on the money )

Disclaimer : I still have part of PRU intact.

 

[Ajax]

Australian Gold Conference at Novatel, Langley, Perth.

Presenters on Tuesday 13 October include:-

COMPANY PRESENTATIONS – PRODUCTION & EXPLORATION UPDATES
3:40pm Perseus Mining Limited
--------------------------------------------------------------------------------
Mark Calderwood, Managing Director

 

[Sean K]

Not a bad break, would have been nice to be in a bit earlier. he he

Traders might be looking to lock in some profits again about here, so be prepared for a halt, or even another stupid ASX 'please explain'. Yes, the stock is going up, because it's fvckin good you idiots!!

New support around these lines.

Can USD keep disintegrating and POG keep running though?

 

[awg]

A question about Perseus.

As Perseus exploration sites are located overseas, does that mean that their sales of gold (when they have sales) will not be affected by the appreciating Aussie dollar, that is capping the price rise of some Oz Gold companies?

 

[prawn_86]

A question about Perseus.

As Perseus exploration sites are located overseas, does that mean that their sales of gold (when they have sales) will not be affected by the appreciating Aussie dollar, that is capping the price rise of some Oz Gold companies?

If/when they do start mining, their income will be in USD (from gold sales). They will then need to convert some into the African currency to pay their costs there (or possibly use USD), and then some in AUD to pay for any costs here. The remaining amy be held in USD or AUD, or hedged, but as they are an Aus company they need to report in AUD, menaing that the currency values will be marked to market for their reports.

Looks like a 3 way hedge will probably be needed (if not already in place), just to minimise currency exposure.

 

[jman2007]

Traders might be looking to lock in some profits again about here, so be prepared for a halt, or even another stupid ASX 'please explain'. Yes, the stock is going up, because it's fvckin good you idiots!!

Great finish on the close today which has to be a further good sign, I've been following and commenting on PRU for almost 2 years now and it finally seems that it is beiginning to fulfill its potential (plus I don't think I've seen the stock this bullish before). Yeh I am totally expecting a speeding ticket to be issued any day now too. Wish they'd tell us some more about that boomer of a hole over at Tengrela though!

 

[Sean K]

Great finish on the close today which has to be a further good sign, I've been following and commenting on PRU for almost 2 years now and it finally seems that it is beiginning to fulfill its potential (plus I don't think I've seen the stock this bullish before). Yeh I am totally expecting a speeding ticket to be issued any day now too. Wish they'd tell us some more about that boomer of a hole over at Tengrela though!

Yeah you picked this one pretty well jman, wish I had have taken notice of the thread earlier. Been a fantastic recovery since Dec, doesn't get toom uch more V shaped than this. Breaking through all time highs so easily is very surprising, I thought 1.50-1.60 would have been a sticking point for a little while with consoliation above 1.30 likely. I suppose POG going balistic has been a little handy! If anyone wanted to take them over, they may be close to missing the boat. Why someone didn't pounce when it was under $1.00 is a terrible missed opportunity. Some boards must be kicking themselves. I wouldn't be surprised to see the likes of LGL with their tremendous M&A success to wait till this hits $5.00 and then make an offer. Idiots!

 

[jonojpsg]

If anyone wanted to take them over, they may be close to missing the boat. Why someone didn't pounce when it was under $1.00 is a terrible missed opportunity. Some boards must be kicking themselves. I wouldn't be surprised to see the likes of LGL with their tremendous M&A success to wait till this hits $5.00 and then make an offer. Idiots!

Too right! Man, we could have all chipped in at 30c and got it for what, an easy $60m Seriously though, there must be some shortsighted big companies out there - if I ran a biggie and could have snapped up 7m+ oz for under $100m, I mean what is the story??

Anyway, I'm more than happy to sell mine to LGL for $5 a share

 

[Sean K]

Any other holders a little peeved at the free options been handed out to directors recently?

First Sean Harvey joins the team and is handed 600,000 (to be approved) excisable at $1.30 on or before 31 March 2012. YES! $1.30 in two and a half years. Lots of incentive there.

Now, a new director is appointed, Michael Bohmand, handed 400,000 free options excisable at $1.80 expiring 31 March 2012. While the current share price is about $1.60.

WTF is going on here!!!!

 

[GumbyLearner]

Any other holders a little peeved at the free options been handed out to directors recently?

First Sean Harvey joins the team and is handed 600,000 (to be approved) excisable at $1.30 on or before 31 March 2012. YES! $1.30 in two and a half years. Lots of incentive there.

Now, a new director is appointed, Michael Bohmand, handed 400,000 free options excisable at $1.80 expiring 31 March 2012. While the current share price is about $1.60.

WTF is going on here!!!!

What else do you expect?
To reward you? This is the game. The directors make way more cash than investors. Simple!

 

[flyboy77]

Too right! Man, we could have all chipped in at 30c and got it for what, an easy $60m Seriously though, there must be some shortsighted big companies out there - if I ran a biggie and could have snapped up 7m+ oz for under $100m, I mean what is the story??

Anyway, I'm more than happy to sell mine to LGL for $5 a share

Simple fact is a bid at 1.00 or even $2.00 would be given short shrift by the PRU board and its major shareholders, even if the prevailing market price was 30c. Lihir know that as well as anyone. Let's not also forget that Lihir are a relative midget in the scheme of things and that Mr Hood has punctured his own sails rather effectively. To suggest otherwise is simply failing to understand the dynamics of m & a, especially as it relates to a tightly held stock.

Market price can often not equate to fair market value.

However, to digress, Mark Calderwood presented at a conference last Tuesday in Perth. The brr report is on the PRU web site but these were my quick comments from the audio:

At Corporate Level:
1. TSX listing "later this year".
2. Aiming to become a 400k oz p.a. @ ~ USD500/oz cash cost
3. Wants to be another Redback which boasts a 3.5 BILLION market cap. (yet similar resourece base to PRU, PRU are 2-3 years behind them).
4. Secret is low capital costs - combined capex + opex only USD 600/oz!! (which is why I say a 300/oz takeout price is very reasonable)
5. 8 rigs going full tilt at Ayanfuri and Cote d'Ivoire - alluded to recent results (released presumably) at Sissingue of 60m @ 20 g/t etc.
6. Banks aggressively pursuing financing options with PRU.
7. EBITDA in yr 1 @ 950 gold is USD 120m!

Ayanfuri:

1. 650 sq. km holding, only 8 of 18 old pits drilled to date.
2. Best deposit found to date was beneath an old waste dump - doing new geochem across the entire tenement - the old stuff is rubbish.
3. Targetting Q3 2011 prodiction, construvtion to start Q1 2010.
4. Lump sum tenders all in - 3 of 4 under budget (in DFS).
5. Key to deposit (despite lowish grade) is large tonnage, low strip, wide zones and free milling nature of the ore. Predictable ore bodies.
6. 2.1m oz reserve off only 3 of the pits to expedite the approval process. Mining licence to be renewed for 15 years, EPA approval likely next Jan 2010.
7. Reserve expected to double in 2010.
8. Exploration upside is a minimum 500,000 oz per annum - easily replacing production.
9. Year 1 production est'd 230,000 oz @ high 300s opex.
10. Payback @ USD950 gold is 1.25 yrs; @ 1050 ~ 1 year. Tengrela shorter payback period again thanks to tax holiday.
11. 100% conversion of inferred to measured and from resources to reserves thus far. Exceptional!

Tengrela et al.:

1. 2700 sq. km. holding in the country.
2. Sissingue part of 4.5km of mineralized strike but potentially 11-15km of strike.
3. 1000m of that strike has given 1m oz+ thus far.
(1.5m - 2m oz this year is my opinion)
4. Feasibilty due mid 2010.

My conclusion:

If capex and opex COMBINED is only 600/oz, even a takeout price of 300/oz looks cheap given 1050/oz gold?

I don't really care whether historical deals have happened at 105/oz or whatever - times have changed - forever!

Lihir-Equigold and CDE-Bolnisi have set a strong precedent.

Ayanfuri and Tengrela are both world class assets. Accordingly, imo, PRU will receive a premium when the inevitable 'friendly' bid arrives....

Take $5 at your own peril. PRU is worth a lot more than that imo (assuming the gold price remains anywhere near current levels).

Go PRU. Bring on the TSX listing.

 

[Sean K]

Take $5 at your own peril. PRU is worth a lot more than that imo (assuming the gold price remains anywhere near current levels).

flyboy, I doubt anyone will pay more than their current EV to oz au rating. LGL and NCM are sitting at about $130 an ounce, which is about double PRUs current valuation at $57 an ounce. No where near $5 a share - that would be about $210 an ounce. $3 is probably more reasonable at the moment which would sit them at about the $130 an ounce mark. Disregard the EQI and BSG takeovers - at the top of the market and overpriced. Rediculous. I'm surprised you didn't use BGF as an example. What a good buy that was. Having said that, I'll take $5, but if I said that it's worth that now, I'd be ramping.

 

[flyboy77]

flyboy, I doubt anyone will pay more than their current EV to oz au rating. LGL and NCM are sitting at about $130 an ounce, which is about double PRUs current valuation at $57 an ounce. No where near $5 a share - that would be about $210 an ounce. $3 is probably more reasonable at the moment which would sit them at about the $130 an ounce mark. Disregard the EQI and BSG takeovers - at the top of the market and overpriced. Rediculous. I'm surprised you didn't use BGF as an example. What a good buy that was. Having said that, I'll take $5, but if I said that it's worth that now, I'd be ramping.

Not so kennas, at the top of what market??? Overpriced? I doubt CDE would say that!

EQI deal was done when gold was what 900/oz? BSG less again. It's now 1050, so how can you say what you've just said? Absolutley no logic in your position.

The projects and the numbers speak for themselves, believe what you want to believe.....

 

[Sean K]

Not so kennas, at the top of what market??? Overpriced? I doubt CDE would say that!

EQI deal was done when gold was what 900/oz? BSG less again. It's now 1050, so how can you say what you've just said? Absolutley no logic in your position.

The projects and the numbers speak for themselves, believe what you want to believe.....

Those takeovers were done when the market was at or above 6000 points. And BSG was more a silver miner anyway. I still think the EQI buy was rediculous by LGL, their M&A work thus far is has been abysmal, so maybe it wouldn't surprise me if they go and pay $500 an ounce for PRU. Tell me something with your numbers, how do you get over $300 an ounce as a takeover price for PRU? Straight out of your @rse I think. Maybe you could toss up the last 4 takeovers that I know of as some sort of example. Maybe DIO (about $60 an ounce) ASG - Solomans ($25), SGX ($220) and MGL - Moto ($22 ish) No, they are not exactly the same companies. It could be argued SGX is superior, so PRU probably shouldn't go for more than that. Of note, not one of my 25 or so gold stocks is trading close to $300 an ounce, with MML the highest at $288 and the average at about $90. I think you're too emotionally involved flyboy.

 

[flyboy77]

Those takeovers were done when the market was at or above 6000 points. And BSG was more a silver miner anyway. I still think the EQI buy was rediculous by LGL, their M&A work thus far is has been abysmal, so maybe it wouldn't surprise me if they go and pay $500 an ounce for PRU. Tell me something with your numbers, how do you get over $300 an ounce as a takeover price for PRU? Straight out of your @rse I think. Maybe you could toss up the last 4 takeovers that I know of as some sort of example. Maybe DIO (about $60 an ounce) ASG - Solomans ($25), SGX ($220) and MGL - Moto ($22 ish) No, they are not exactly the same companies. It could be argued SGX is superior, so PRU probably shouldn't go for more than that. Of note, not one of my 25 or so gold stocks is trading close to $300 an ounce, with MML the highest at $288 and the average at about $90. I think you're too emotionally involved flyboy.

kennas

I understand you are one of the 'big boys' on this forum but don't stoop to cheap tacky personal shots - clearly you are smarter than that (well you'd hope so). If you disagree with me so be it, i have no problem with that. I will say that I have worked in the game (m & a in the resources sector) so I have half an idea....or close thereto!

I'll say a couple of things in response given that takeovers are based on macro and micro factors:

1. Market valuations often have little relevance when it comes to pricing a takeover - all these EV/oz you talk about certainly go to suggest there are many 'undervalued' stories out there, nothing more nothing less.

2. Gold is at all time highs and only the uninformed would be so brave to suggest it has peaked. Barrick's decision to remove its hedge book speaks volumes?

3. The Eldorado Sino deal - i'll take your word on 220/oz. Good deal for Eldorado me thinks at face value (and without knowing the ins and outs of SGX). Yet in the weeks leading up to 26 August 2009 when the deal was announced, gold had traded as low as the low 930s.

Gold is now 120/oz HIGHER (oops, now what is 120 + 220?) and moving higher imo.

SGX 'better' than PRU - time will tell. DIO, Moto and that Solomons Island gig - well do you really want me to go there?

4. Ayanfuri and Tengrela - I haven't seen the NPVs, IRRs and paybacks on the SGX mines but I'd be (happily) surprised if they hold a candle to Ayanfuri - and Tengrela will be better again as it proves up more gold in ground.

5. Why 300/oz?

We know PRU's total costs (opex + capex) are likely in the order of 600/oz. So at 1050 spot gold, there's 450/oz 'extra' to divvy up?

So at 50/50 split there's you SGX price - 220/oz but what about the upside at Ayanfuri and Tengrela - MC has mentioned 500k oz pa (Ayanfuri) and 300k oz pa (at Cote d'Ivoire) exploration potential over 10 years - that's a further 8m oz.

PRU don't NEED to do a deal they will have no problems financing Ayanfuri and can most likely fund Sissingue out of that cashflow.....

So, a buyer will have to pay up (and not to mention buyers always pay more for high quality assets of size in good jurisdictions). Maybe 60/40 or 65/35?

Let's not forget about the power of a competitive bidding process (or the mere threat of one) - there are numerous companies that would like to acquire PRU (and Lihir it won't be - unless they pay way over the odds)

If you were a big boy in the gold sector and were of the view that gold was likely to be at 1200, 1500 or higher for an extended period, what would you pay?

You do the maths.

For the record, the All Ords at over 6000? So what? No relevance to takeovers in the gold sector; BSG more a silver company - no relevance to this discussion whatsoever.

My last post. Your tantrums are pathetic. :disgust:

 

[Sean K]

My last post. Your tantrums are pathetic. :disgust:

Huh? Tantrum? Oh my dear, once again you display your lack of objectivity.

Once again, your emotion shines through and displays your clouded judgement and reveals your true motives to the spectators. I'm sure you made great coffee for your supervisor of the sanitation section when working in M&A when you probably recieved a few free shares from the company according to how many stools you sampled.

This really is amusing. I am a holder and want PRU to go to the moon, but to post criticising someone for being overly bullish must put things into perspective, I hope.

flyboy, glad I don't have to read your BS again. It will mean that others reading this thread will see fact, instead of your posts...

 

[awg]

My last post.

I thought your posts were of high quality, and food for thought Flyboy, and hope you continue to post.

I wouldn't let forum disagreement put you off, thats par for the course on forums.