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Hi Moit, just with respect to that particular cross trade in RED. I happened to be watching the trading at the particular time that the 600,000 shares went through, but it didn't appear within the queue, and seemed to jump the queue - I think it was a pre-arranged trade between parties (maybe related or friendly insto's in same broker?), but can't be sure of course.

RED has hit 19 cents finally after a long struggle downwards, perhaps this will re-ignite the expectations of a re-rating, if that happens you won't want to be chasing the stock higher - tomorrow opening could be an exciting time IF the overseas markets are not overly depressed or gold is not down!
 
Hi RED clubhouse members, well DB's notice has appeared. So hopefully if there are any disgruntled insto holders, they will not commence selling down but swallow their disgruntlement( is that a word lol?) and sit back and let things now move along. Beatle is quite right in his thoughts that some of the huge instos now there will not sit back with smallish stakes but will commence on market buying. If the disgruntles(??) want out then I hope the newer instos will simply take them out without too much SP disturbance. Only remaining matter seems to be the question of the gold loan and whether the conditions precedent can be fully satisfied. As I understand it, this is related to the corporate structure and the Philippines limitations on foreign ownership. This translates into the basic question of who owns the gold production? Same question apparently arose with DB but they made a commercial decision. The interesting thing is that RED/Greenstone has a similar type of corporate structure to most other foreign companies operating in the Phils. In addition, Sprott is well versed in the Phils, and was actually a holder of quite a chunk of MML earlier on. So the gold loan will probably proceed, but if not, then RED has the position covered anyway. So the scene is now pretty much set to see some real action. I am tipping 24c in next few weeks. AB:cool:
 
Hi all RED club members and apologies for being absent the last couple of weeks.
First of all, hi Beatle, and whats with that bud. A bloke makes one mistake and is branded for life, lol. I will admit though, i couldn't take note in todays trading activity, as i have had work commitments to attend to. I agree with you, obviously todays xts were in fact planned and executed through a brokers agreement (IE the 17.7 cent for the 3.8 odd million or the 4 million at 18 cents... But what a great day. The instos and are truly working in REDS favor and are simply topping up.
Secondly we are getting some major names on the registry, JP Morgan and Chase, extremely well known and an interesting point made by Beatle (they don't like to sit there idled). Obviously they still want to buy on market and increase there current portfolio and of course profit. Currently $2 odd million profit in a couple of days. Not bad.( But keep in mind i am only speculating who the instos are. It could be Sprott or another great insto pushing that sp up, or all putting ther two bobs worth in.
Thirdly AB and Beatle, i agree whole heartedly that this is the infamous RE-RATING we have all been longing for. Everything is in place. The placement is now complete, the instos have purchased, and are now topping up. The cannon ball is loaded and is ready to fire. I'm with you AB, I believe we will see that Sp at the 24-25 cent mark before XMAS. We all know( and in past ) when RED runs it doesn't crawl, it sprints. Now pending on overseas markets and the gold price over the next couple of days, it certainly looks positive. Market futures are certainly green and the gold price just shy of 1400.00 an oz. It should make for an interesting day Beatle. Lets just hope the instos and the bot trading continues as RED is truly ready to take off... Cheers Moit
 
Hi RED members, good to see some positive volume trade this morning near its recent highs. I have confidence that if its an insto thats buying a few more, eg JP Morgan, then the trading will slowly grind away at each level before moving to higher ground - so you know the solution to that? DON'T sell!

What should be considered by RED investors is that whilst the market has not fully valued the Siana gold project based on fundamental value, RED remains attractive to larger insto's such as JP Morgan as well Baker Steel etc since it remains a possible takeover target for gold companies wanting to build gold production and gold inventories. RED only has to come online and demonstrate that it has made the move from explorer to producer to become a major RED flag for corporate acquisition. I wonder if that is the exit strategy JP Morgan will be working on in the coming months.

Anderbond, your comments about the outstanding loan due diligence is an interesting observation, and as you rightly point out, whether RED gets that loan or not is now immaterial, as on my reckoning the company will have more than enough from its recent capital raisings to both complete Siana development as well as carry on Mapawa exploration at its current rate for at least 12 months, and before the end of the year RED will be traveling on free cash flows!

As for the RED corporate structure in the Philippines, it was fortuitous that RED managed to acquire Merrills and in the process get hold direct ownership of the Siana MPSA plus the outstanding 10% that RED did not hold previously. With regard to its project though, the route that RED has taken to hold its interests via a local Philippines registered company is in fact a more acceptable basis for Philippine corporations law, and will mean that RED enjoys a 50% tax break on each project it operates, such as Siana, AND separately 50% of Mapawa in the end of it having reserves (that is almost a given now, its just a matter of where the ore goes, either to Siana mill or its own standalone mill). From what I am led to believe MML has not had the same favourable tax treatment as it has a different ownership arrangement, with transferred ownership and contract pricing between the mining section (in a separate legal entity) and the processing section (another separate legal entity). This was done to obviate the local 60%/ foreign 40% ownership stipulation to comply with Philippines corporations law.

Moit, I'm so glad to see you posting again on ASF, and know that we are on the same team (regardless of our anonymity). Can I say that you are too kind to Smity in hoping he has some RED shares - he has actually tried to do a real disfavour to all RED shareholders that read his bitter and twisted comments in downramping RED and effectively urging them sell - I still believe that he has something other than share investment in mind with his comments that possibly relate to a past falling out with one of the executives (and I wouldn't mind betting that his off-sider Bsredoje is somehow involved, maybe they are one and the same party!).

Back to RED - go RED go, (UP!)
 
Thanks Beatle. I believe you are 100% correct in your comments re the favourable tax treatment retained by RED/Greenstone and also in respect of the situation with MML. My comment re Sprott's prior involvement with MML was to indicate that Sprott is experienced in Philipino corporate law and foreign ownership restrictions and that the legal side of RED should not necessarily faze them with the gold loan. Interestingly I understand it is the same legal adviser for Sprott's that advised DBA! In any case, arguably the concessional tax treatment for RED should make the coy more attractive?
I also understand that Baker Steel participated in the recent CR (as you would expect) and were perfectly happy to see the greater than expected amount raised as in their view "this further derisked the company financially".
They like the company a lot and expect a major rerating of RED by the first gold pour........don't we all lol! AB:cool:
 
Red 5 own 97.5% of the Siana gold mine in Northern Mindanao in Phillipines, a region with huge gold history particularly in 1950's. Near neighbour is the fabulously cash positive Medusa Mining which has a market cap.of $1.2B (b.t.w. 65c 1/12/2008 and $6.50 exactly 2 years later)

Red 5 also has a very prospective gold-copper porphyry at Mapawa, while no value has been attributed they have definite and substantial hits.

A summary of Siana from the Beatle (post 697 on ASF)
QUOTE
....putting things in the right perspective, for RED's share price:
1. RED has now got the money to develop Siana;
2. Siana development remains on track for first gold production late April/early May 2011;
3. Gold production after commissioning will come online at a rate of about 6,000 ozs per month;
4. Operating costs are sub US$400/oz;
5. Operating margins per month will be huge;
6. Mapawa drilling will carry on without any hindrance due to high cash reserves!
END QUOTE

CONSIDERATIONS:

a.) Having raised $45m Dec09 & Jan10, the company stumbled in debt financing process and had to raise a further $50m. Since then a gold prepay facility of $US25m has been agreed, additional to the $A95m capital raised.

The company now has quality holders - the Top 8 holders hold 56%.

Mathews Capital 187.7m
Merrill Lynch BoA 165.1m
Baker Steel 79.1
JPMorgan Chase 73.4
Sprott Asset Mgmt 66.2m
Deutsche Bank 59.5m
Lujeta 50.0 m
Equity Trustees 42m

Most others will not be short termers as there has been good information and discussion on HC, ASF as well as recommendation this year from Fat Prophets, notably when not de-risked.

b.) Everything in place from finance, permits, contracts, plant & equipment, power, local staffing and community amenities etc. Key contractor is major Aust. Corporation. Project Manager ex Masbate mine construction. Geology & plant is uncomplicated.

c.) Minimal hedging of 28,700oz repayable over 21 months commencing Oct.2010

So my DCF valuation using these factors:
Gold USD$1300
Silver USD$25
AUD/USD 0.96
Discount 9%
LoM 10 years
Opex; numbers per company model. $US347oz over 10 years
Capex; $US 72.539m. Replacement capex during the 10 years assumed funded by depreciation.
Assumed deprec. of 10%SL
Output; per company model of Au 848,900oz and Ag 1,442,600oz
Tax; tax free first 4 years and at 30% thereafter

Shares on issue: 1,277,288,043 today
a.) add 12,000,000 for balance from corporate restructuring which is owed to local JV partner,
b.) less 5,609,955 treasury stock relating to same (which I assume they hold and will cash at a higher 20c raising $1.12m)
c.) add Sprott structure fee 9,500,000 shares
d.) add Sprott 3 year options converting at 22.95c for $6.426m
Total diluted 1,321,178,088 before adjustment
Adjusted for the effect of additional raising the company will now ring-fence for


PROJECT-BASED NPV RESULTS

After tax NPV $A 360m.
After tax IRR 103%
Valuation per share consists of 3 components
i) Project-based NPV of 27.3c (above)
ii) added to which should be 2.0c of [pre-Capex Plan] expenditure regarding Mine Development from the balance sheet (I used $26m per Note 10 & 11),
iii) add the effect of the $US25m "extra" raised in Nov. that the company has tagged for Mapawa exploration, of 1.9c

Giving a total of 31.2c.

Current SP of 19.5c is at a 37% discount to this value. Given that production is only 6 months away I'd guess that a discount of, say, 20%-25% (23.5 to 25c) is a useful fair value short term target range.

SENSITIVITIES:

POG; Overall there is +/- 3c for every $100 change in gold, using static POG over 10 years.
I played around with some huge numbers in year 1-5 and dropped to a more historical average for remaining, the answer is fairly similar +/- 5c.

Discount rate: I have dropped from my earlier 10% rate as the project now only has a commission risk. The company used 8% in their BFS, this would add 1.5c if used

Fx: the most volatile; +/- 1.2c for every 4c change in cross rate

LoM; most recent comment from the Chairman indicates they will extend the reserves by accessing a lower cut-off to extend the mine. Mention was made of 11 years. Moving Yr 10 output to Yr 11 and copying Yr9 to Yr 10 adds only 0.5c to the project NPV.

OTHER COMMENT:

1.) The valuation does not assign any value to Mapawa, ither than the cash value of funds reserved for exploration. The Red 5 SP is now very leveraged into future Mapawa results - they have a definite strike and with a $US 25m for this there should be big rewards.

2.) There a real possibilities for T/O given the grades, reserves, Mapawa and the few and powerful hands of the top 8 holders. The recent AGM resolutions to ratify placement (i.e dilutions) meet stiff opposition to re-election for 2 directors. Insto discontent may not be constrained only to directorships and any one may seek to accelerate value creation by actively selling to mid to major goldies interested in growth by acquisition. It makes sense to do this sooner before production and / or Mapawa results are confirmed and then built into the price.

3.) My valuation has no premium - again refer to MML.AX for an idea on what this could do above valuation once gold is pouring; a p/e of 10 would take it near 40c straight away. Also think of MMLs mkt cap and compare with their June'10 net assets of $175m

4.) Fortuitously RED will be significantly have cash flow positive during first 5 years of operations with low costs because of being open cast and very favourable POG.(likely to take at least 5 years for world debt mess to sort itself)

CONCLUSION

Holders can expect solid short term gains to mid 20's now that capital raising approved and with mkt cap. exceeding $200m will have meet investment hurdle for more instos.
 
Mgm1a, I congratulate you for an absolutely first class analysis and assessment of RED and the positive outlook you conclude from that analysis.

To be honest (and I'm sure you exactly the same as me), its been frustrating changing the model for Siana to cover the possibilities of debt plus additional equity tranches. Thus I assume this latest model of yours covers the additional likelihood of RED drawing down the debt of US$25 million - my model has not been updated the past weeks leading up to the AGM to incorporate the addition of the debt, it was modeled assuming one or the other but not both (the variation is unlikely to change the valuation cps much though).

I believe that your view that the discount rate can now be lowered below 10% (or sometimes analysts are using slightly higher than that, so I hope they are also considering reducing accordingly using your same logic) is very fair and logical.

If I can make one other observation: With regard to your other most relevant inputs can I suggest your view remains quite conservative, considering the apparent linkage of US$ gold price and aussie dollar exchange rate as a complementary set of parameters -in your analysis you reduce the gold price from current price of around US$1,385/0z or thereabouts down to US$1,300 but do not change the aussie dollar exchange rate from its current around $0.96. This softening of the aussie dollar with assumptions that the US$ gold price will drop in following years is an important consideration that all the analysts don't seem to consider, thus putting in a relatively conservative outlook.
 
Hi Mgm1a,
Absoulte top presentation of the virtues of Red 5 at this time of their development.Its a pity management dont have a proper marketing division to help them get some type of appropriate profile.Good work.
 
hi beatle - yes i waited till all the cap. & debt raise was done before i had another go at this because of the time it takes.
As for key numbers..these models have a pretty long view, anything can happen within 10 years and all of the factors could be debated endlessly.
Over the last 10 years:
PoG has risen steadily from mid 200 to a tickle under 1400
AUD/USD has spent most of recent years in .75-.95, with a plunge in 2008 to low 60.

So i ended up choosing recent values. AUD has been re-rated to close to parity and likely to be somewhere there for medium term with the US in such an economic mess, but its so big that it could turn quickly. As for PoG yes there's more definite upside so i figured i'd be conservative with that and using the floor price used in the prepay facility also on the basis that RED could grab some hedging if PoG looked like correcting long term.

Realistically I figure also most investors are comfortable with recent values rather than forecasts too far in the future and that's how they will decide on SP.

My focus was to see how far away the SP is from a conservative value, now that the company is very close to being a producer that is extracting gold and turning it into cash and is viewed as such with attendant premium.

Over the last 1 wk trade range (low to high) RED has had a 27% spread, MML 11%, pretty volatile even though PoG didn't move much - sentiment counts for a lot.
 
beatle said:
Mgm1a, I congratulate you for an absolutely first class analysis and assessment of RED and the positive outlook you conclude from that analysis.

To be honest (and I'm sure you exactly the same as me), its been frustrating changing the model for Siana to cover the possibilities of debt plus additional equity tranches. Thus I assume this latest model of yours covers the additional likelihood of RED drawing down the debt of US$25 million - my model has not been updated the past weeks leading up to the AGM to incorporate the addition of the debt, it was modeled assuming one or the other but not both (the variation is unlikely to change the valuation cps much though).

I believe that your view that the discount rate can now be lowered below 10% (or sometimes analysts are using slightly higher than that, so I hope they are also considering reducing accordingly using your same logic) is very fair and logical.

If I can make one other observation: With regard to your other most relevant inputs can I suggest your view remains quite conservative, considering the apparent linkage of US$ gold price and aussie dollar exchange rate as a complementary set of parameters -in your analysis you reduce the gold price from current price of around US$1,385/0z or thereabouts down to US$1,300 but do not change the aussie dollar exchange rate from its current around $0.96. This softening of the aussie dollar with assumptions that the US$ gold price will drop in following years is an important consideration that all the analysts don't seem to consider, thus putting in a relatively conservative outlook.
Click to expand...

then what will the sp be if gold hits $1500 is the next six months and the way gold is going at the moment it most likely will be $1500 when red starts to pour, its all starting to get exciting ......bring on the mapawa results.......
 
Hi all RED club members. Mgmla, fantastic analysis and valuation of REDS current and future status. Some really interesting points bought forward. It was that good, ( and right on par with Beatles i believe ), that it has actually enticed a couple of true RED club members to invest even more coin into this little GOLD MINE !!!
Keep up the great work. We have a lot of really knowledgeable and intelligent people posting on this RED forum, which enables other, less fortunate people like myself to get the true and accurate information that isn't available on any given website. Thank you.
Fastbuck1, mate it is very exciting times at the moment. Please don't wish to hard for the Mapawa results. I need a week or so to pick the low. I'm guessing 18c. But well see. As the April, May quarter is fast approaching things will really start to heat up, especially if the gold price does hit $1500.00 an oz. RED will be truly cashed up and hopefully the Sp will reflect that. Go RED GO !!!
 
Hi All, and some encouraging comments from Fastbuck and Moit over the weekend, with a move in the US$ price (shame the aussie is also now strengthening to offset its rise slightly), but I agree with your sentiment.

Moit, why do you think it will drop to 18 cents, I agree it fell away on Friday, but beware that it may be a continuation of the shenanigans that has successfully suckered some retail investors into dropping stock - my view is that the insto's are not sellers at all but playing a game with us modest holders. I guess your charts tell you a different story with the momentum of share price but I can't see it continuing for too long with the time getting closer each week for first gold pour!

Mgm1a, as we all agree your analysis was spot on and actually still is conservative albeit objective. Your comment about the top 8 holders having 56% of RED stock is interesting, I wonder how many shares the insto's such as Matthews (and those not substantial holders) picked up in the recent placement, they may also have added but yet to report, as with some of the other insto's, so it could be that they hold a tad more than 56%, and combined with the other 20 odd insto's I wouldn't mind betting that the free shares being traded is much smaller than we realise (relatively speaking of course).

As Moit says, Go RED Go (UP!).
 
Hi all RED club members, hi Beatle. I honestly dont think it will get to 18 c, well not in the immediate future anyway. Im just going to monitor it over the next few days and see how things progress. (Though i am quite willing to buy in at current price range). I think if it can break the 22.5 c mark, the skys the limit then we could see the 24 to 25c range around Xmas.

Sorry if i offended anyone and particularly you Beatle, it was rather a negative comment compared to a usually biased ol me, lol..

cheers Moit Go RED Go !!!
 
Thanks Moit and certainly there was no offence taken by me. In fact since I have little understanding of charting I presumed your comment was more based on current trading momentum than anything else, and thus was interested to hear of your chartists interpretation (I enjoy understanding how other people with a different basis for investing/trading form their particular views).

Just on another point you made earlier, its a shame that the RED threads on HC have resorted to tit for tat argument which are related to entirely different matters than the issues surrounding RED and its move toward gold production April/May next year. ASF is a good alternative website and I agree that the posts on RED here are mostly constructive, even if not always positive for the company's share price! Keeping things objective and on topic is always a benefit for all of us true followers of RED.
 
Hi Beatle yes you are quite right, more so the trading activity, the volatility and especially the bot trading, that could possibly point toward a bit of a dip... Rather than the technical analysis of charting.

As for HC, i really cant be bothered with it, because the majority of the time they are negative or bad mouthing someone in management. I'm certainly not saying that about all the posters on Hc. Just a particular few, and the likes of a certain someone that hasnt even got RED shares, that likes to comment on RED. Geez get a hobby... The only time i do jump over, is to have a look at a comment that one of us here on ASF have heard about.

And as for todays trading activity, it looks as though the bots are at it again, just in larger parcels. Just my thoughts, Moit.
 
Hi All, and thanks Moit.

Moit with regard to your comments about the Bots working, to be honest yesterday trading in RED was quite confusing, I was not sure what the Bots wanted to do, it seemed they were trying very hard to keep treading water on the same spot of 20 cents! I assume it might be a tactic to keep the market steady, and to try to have any weakholder at this level drop stock.

I wonder what will happen now that gold and silver are i record territory! Esp since we have N American major financial insto's likeJP Morgan in the game. I would imagine they would have to be pretty bullish for a discounted gold developer cum producer such as RED!
 
RED has struggled over the the last year to hold every 0.5c tick.
the 21 only lasted an hour & half today. Nothing stopping this, assisted by PoG uplift and additionally the free float investors aren't being tempted to sell into this strength.
 
Good Day All,

It looks like RED is finally back around the prices before the share issuance. Like Beatle said, now that the financing is bedded down and gold prices surging before xmas, i think it looks like we will all have a merry xmas indeed ^^. Red just went through 21c ^^. Congratulations to all current holders, and Go Red Go!
 
Hi all Red Club members,
Great work by all of you to keep I and many others so well informed.
I am addicted to Red now and watch all posts both here and on HC several times a day.
I am slowly building my holdings as my limited income allows each week.
I am neither a chartist or a TA so all info is much appreciated.
Does anyone know why I cannot access Reds website?
Thanks all in advance
 
Hi Rick64 and Wtang89, and good to hear you are following the unfolding (neverending!) story of RED.

An interesting question you pose about the RED website, I have asked and understand that the server that RED uses is currently down, but will be up again soon. Its not related to them updating the website (unfortunately) or anything like that.

I think we are watching the gradual process of re-rating going on with probably more accumulation by instos, and its an interesting time as there is a significant wall at 22 cents to be overcome. I guess its got something to do with that being the price where many bought in when the project financing package was first announced, from which it began to fall back after Resolution 10 came to light. Thus the resistance needs to be moved before we advance to new highs (although the all-time high is around 26 cents several years ago).

I have no doubt that we will overcome the resistance, but it would definitely be helped by an increasing gold price in coming days of course! And as Wtang89 states it could be a very merry Xmas as gold traditionally does have stronger physical demand at this time of year.
 
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