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VAU - Vault Minerals

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Today's trading in RED has played out very well I believe, with the BOT continuing to nibble away and with a couple of bigger bites along the way most of the 12.5 cents is gone, and increasing interest of buyers at 12 cents. I have no doubt that there is a very serious game of cat and mouse being played out, and possibly on a different basis than we have seen in past months between insto's playing their games to take out smaller investors.

The 13 cents cap of 29.4 million remains in place, and its doing a good job of funnelling weaker hands into the market selling at 12.5 cents, and importantly this cap always remains in place at the end of each trading day, just to show its hand to any would-be sellers and other traders. I believe its a psychological game to force weaker hands to sell out while there seems to be no further news in place for the finance.

Only time will tell, but its possible that this trading has been orchestrated by a trader soaking up stock on behalf of a bigger gold company before a possible hostile bid for RED. Only time will tell, but time is now on our (shareholders) side, with the finance offer already tabled presumably putting pressure on the mystery buyer to get as much stock before a sweetened finance offer by DB or another competing offer is provided to RED. If an interested gold company is behind it then the game will move up a gear soon -I would imagine as once any finance offer is accepted by RED the share price will likely move higher threatening the 29.4 million cap at which time the cap will be withdrawn, causing the price to move up at a fastened pace.
 
The other thing that of course affects RED's value is the gold price, and while the RED share price has not reflected gold price all along, at some point RED share price is likely to rise to a position at a premium to the fundamental value indicated by DCF analysis.

Of course with the likelihood that the funding package now likely to be a mix of debt plus warrants (ie equity) the old cash flow model used as a tool for valuing of RED is not as definitive to that underlying cash flow model, but it remains as an upside guide to RED share price value based solely on Siana.

On that old cash flow model, assuming:
US gold price of US$1,240/oz
US silver price of US$19.00/oz
Aud/US$ = 0.885
988 million shares (including escrowed shares issued)
97.6% Siana interest

RED value attributed to Siana alone = 38.1 cents
(this EXCLUDES any cash in RED treasury)
 
Well the buffers gone.......................................now what?

Looks like the person with 30 odd million shares at .13 is going to be losing them
 
Hi Hurricane, well you have posed the big question now. In this game of cat and mouse I'm sure everyone is edgy about the next move, and with regard to the trading I'm excited. BUT with regard to the fundamentals of RED value and status of Siana I'm very confident that things remain on track with value way beyond 13 cents even if there is a capital raising to assist with the final funding, therefore I'd be nervous if I was shoving 29.4 million shares of a company worth lots more, for sale!

The 'seller' may well keep them out there for a day or whatever, but as you say Hurricane, one thing I'm sure about is if they keep dangling them they are gonna lose them! THEN the share price will rocket IMO, and if they pull them it will also force the price up! So they now have a big decision to make, do they want to keep pushing them out there and for how long do they do that to achieve what they want, whatever that is.

Maybe they will put another couple of million in the front row at say 12.5 cents just before close today to keep things intact.

One thing for sure, I AIN'T SELLING, and I'm confident time is on OUR SIDE this time!

BTW - the few shares sold at 13 cents were crossed, so does that have some relevance, it could do. Also, how do we know that all the shares traded this morning, 5.5 million of them, didn't go to an ally, even if they weren't crossed!
 
all boils down to churning, imo - the 10 mill placed on the buy side yesterday has been split into 2 x 5 mill, with no advancement in sp - funny how the 29.4 mill 'seller' isn't being touched

props and cappers
 
Yeah, good point Fatsoh. In fact it would be interesting to find out how many shares actually change hand with this game of the big players possibly influencing traders to stay out of the market and restricting any real movement in share price!

Perhaps the whole aim is to nullify share price movement so that no competing financing deal can be achieved at much better pricing on the equity side of things to what has been offered to date by DB. And when you think of it in those terms, losing 1 cent on say 5 or 10 million shares, is small bickies compared to some exorbitant equity tranche included in the funding arrangement!
 
hi beatle

nothing in the news pipeline means people get stale and tired of waiting - that's what the big boys are sweating on as they would be better informed than us on timeframes

a friendly word of caution if i may - suggesting that the sp will rocket soon may be a tad over exuberant - you may be deemed a ramper, when in fact you have a very good handle on the fundamentals - :)

consensus suggests maybe real increases in sp closer to gold pour, but as we know, who really knows
 
I take your point Fatsoh (and yes I'm over-exuberant on RED).

In regard to the timeframes, well I believe we all know the project timeframes very well, unless there is a change in plans at which time RED will be forced to provide a status update to the market since its a critical market sensitive subject. So i don't believe anyone saying that the big boys are better informed on that than us shareholders (perhaps a few days in advance maybe to the insiders in the company but nothing significant in respect to first gold pour).

With regard to the finance, IF Anderbond is correct, we may have slightly over another month to go before an alternative competing offer is made and accepted by RED, ie beginning of October, but in the mean while RED remains on track for development works.

What i am wondering about is Mapawa, as it has been quite a while for news to come through on the first couple of shallower holes, and that is something that might have relevance to some of the sellers who maybe bought purely on the upside of Mapawa than the core Siana gold production.
 
One thing that can’t be denied about current trading in RED is the intense activity by larger traders. It appears that these larger players are trying to either channel or restrict the RED share price into a fairly narrow trading band, around 12.5 cents. The “cap” of 29.4 million shares has not be affected even though it appeared to be threatened late Friday afternoon, and its as though there is an “understanding” by these larger players not to upset the cap and the market. This MAY be a result of these larger groups realising that its important to “bed down” the finance for Siana in the coming days/weeks/month (?) to maintain the schedule to first gold pour in April 2011.
Clearly the “prize” for the development of Siana is the unlocking of a project that contains a minimum 849,000 ounces of gold plus 1.4 million ounces of silver. Total revenue for the base case model assuming current gold price of US$1,238 and silver price of US$19.00 amounts to US$1.08 billion!

I have already posted many DCF valuations for RED based on its holding in Siana, which by the way, currently amounts to 97.6% (with the remainder held in a “superannuated company” for RED Filipino employees accounts). But this DCF valuation assumes an all debt final tranche of US$40 million, which appears not likely to occur now due to the spanner in the works that Deutsche Bank has offered, with a separate warrants issue sought (apparently with an exercise price of 35% above 14 cents, ie ~ 19 cents). But without exact terms of that warrant issue being provided its not possible to evaluate its impact on share price valuation precisely).

I have prepared a number of differing scenarios, of debt plus equity, for the final US$40 million now sought to finalise project funding requirements, and have decided to table some of those results to give readers a more informed understanding of fundamental impact on share price value. For this exercise I refer to a 10% discount rate for Net Present Value, and have used current values of metal prices, AUD/USD exchange, and estimates of debt plus equity costs. This gives a good indication of underlying value on RED share valuation, purely for Siana development.

It should be emphasised that the DB offer of finance has not been taken up to date but clearly remains the backstop position for RED, and therefore provides a surety that Siana development WILL proceed into production in the first half of 2011, but the overall valuations will vary depending upon whether RED takes up the DB offer or some other which maybe comprises a mix of debt plus equity.

I have ignored excess cash that RED may hold, that could also impact on the final amounts raised for Siana development (ie RED does not actually need to take up an entire US$40 million funding to complete development PLUS maintain exploration for its 97.6% owned Mapawa project to the north of Siana due to its current cash position that must still be around A$57 million).

I have ASSUMED additional equity at 12.5 cents which I suggest is EXTREMELY CONSERVATIVE, so this will have a profound negative impact on additional fund raising as a means of funding:

Therefore, if we look at the different scenarios, all in millions except CPS (being cents per share):
DEBT(US$) EQUITY(US$) TOTAL(US$) NPV(A$) ISSUED SHARES RED CPS
40 0 40 377 989 38.1
20 20 40 395 1,170 33.8
10 30 40 404 1,260 32.1
0 40 40 413 1,350 30.6

Thus under ANY scenario, whether debt or highly priced equity funding RED share price is valued at greater than 30 cents per share, compared to current price of 12 cents ie 2 1/2 times more than current share price!

I stand by my view that its only a matter of time now for RED share price to move appreciably above current level. NO argument such as management mediocrity, past share price performance, etc etc, used by other posters, will mean anything once the market decides ITS TIME to go UP!
 
Thanks Beatle, great fundamental analysis. I'd be interested to hear from anyone that has some technical insight into RED.......
 
interesting to see over 30 mill taken out on open with no x trade:)

you would think that is a positve, but market still looks wary

then there's always stale bulls as well
 
Interesting to see the cap taken out, and I do confirm that I'm not an insider so have no idea of who was the seller, and I would be interested to know if the capper really was a seller - until its confirmed I am of the view it was not meant to be taken out! My view is that it was meant to remain in place until the final negotiations are completed re the US$40million funding to complete the Siana build.

In fact I’m also of the view that we have not seen any news re the shallow drillhole results at Mapawa because management didn't want to upset the state of play with finance discussions that must be happening currently.

Of course I’m only speculating on that, BUT one thing I am not speculating on is that it’s just a matter of time for RED to really have a genuine market re-rating, and move closer to its fundamental value, which is in the 30’s cents range depending upon the final mix of debt and equity and equity pricing for the US$40 million.
 
That move looks mega suspicious. Like an inside deal or bet someone made. Surely such a move hits some red flags along the way. Interesting to see what announcements are made in the following days.
 
Well, yesterday was interesting. The takeout of the 29 million odd shares at commencement set the scene for a very solid day. I heard a rumour the big seller might be BT, and that it was a genuine sale, however it is a rumour only. It does however seem that it was a genuine sale, although in discussing the manner in which it was done with a broker, he says he cannot recall such a large parcel in a small stock being placed on the open market like this. The great thing is that after a few days it was taken out, and we may see the emergence of a new player, or an existing one taking the opportunity to build a bigger position. Either way, it should now give some blue sky to the SP. Yesterday's moves must surely prove that everything is on track as reported by management. I have wondered if the recent North America presentation may have raised interest and resulted in a decision by an institution to get involved. Further news from the company is now eagerly awaited. Beatle, your number crunching is much appreciated as I am sure it gives a lot of support to the thinking of other holders, and potential new ones. Hopefully, the negative posts might now start to disappear, as most of them add absolutely zero to the discussion. I get sick of the rubbish that some seem to delight in posting, especially on HC for reasons that completely escape me.
AB:)
 
Anderbond, I agree with your sentiments re the negative posters completely, and at times I wonder if they are posting on behalf of a corporate trying to cool the price and trading activity down!

As for yesterday's raging trade for 1 day followed by todays lull - to me it supports my view that the big cap was not planned to be taken out yesterday and perhaps was a surprise opportunistic strike by some group (maybe a gold producer?) going against the general grain of RED market makers.

With your past comment about DB exclusivity lasting till end of Sept I have a feeling we will see another month of this malaise, but your comment that the trading yesterday confirms the value of RED in the longer term I agree with entirely.

As I mentioned yesterday I find it interesting there is no news out re Mapawa shallow drilling, and I don't think its a coincidence, I feel as though RED management are not in a big rush to have those holes sampled and assayed before bedding down the funding - for concern it could ignite the market ahead of the right time for it to go!
 
It should be noted that the 29.4 million shares traded on Monday may never become part of a substantial shareholder notice, as it represents less than 5%and therefore unless part of a larger parcel will not find its way into the public arena.

The gold price has spiked, if it stays at around US$1,276 in the next hours gold stocks will be the rage for tomorrow, but I'm still of the view that RED is unlikely to share in the activity (UNLESS the funding is resolved!). RED has its own timeframe and that must revolve around funding being finalised prior to any more trading action in my view.
 
We live and learn - I'm surprised that RED has traded relatively strongly this morning, although its surely related to the strengthening gold price unless the traders have a view that the funding is close to being finalised. (And of course there was a typo with my last post, that I meant US$1,246/oz not US$1,276!).

But my view remains that the real re-rating for RED should follow soon after the ASX release of the final funding package being completed. Then any insto's wanting to get on board won't be able to rely on cheap shares being dangled out as we have seen recently.

AND IF RED's announcement of the funding package coincides with a rising gold price around current levels THEN I would expect the re-rating will be most exciting!
 
Hi Guys, On Monday RBS Morgans made RED its High risk/High reward Trading Call of the Week. It recommended buying at 13 cents with a target of 15.5 cents. Today it has closed the call as the stock hit the target price yesterday with a take profits recommendation. They have claimed a 19% profit in 4 days. I wonder what the total impact of the initial call was, and particularly what impact today's call will have. AB
 
Another most informative post Anderbond. I wonder how RBS made that call, its almost they have predicted one of the mini-cycles that RED seems to being going through month after month, but did it cause the take out of the cap, I don't believe it did - my view is that it was taken out by a longer term opportunistic investor.

Its amazing to have RBS then put cold water on RED 4 days later when it arived at the early call sell price. Its clearly just a trading view i am sure.

As I mentioned earlier Anderbond, if your call of the DB exclusivity runs out at end of September I can't see RED moving up much until that date, UNLESS RED achieves a favourable funding package prior to then (either with DB on a modified basis or an alternative funding group, debt and/or equity).
 
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