Geo2 Ltd. - Processing & Refining Gold Message Board

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Gold/Mining/Energy : Geo2 Ltd. - Processing & Refining Gold

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To: baystock who wrote (35)	6/14/1999 2:34:00 PM
From: richard badauskas	Read Replies (1) of 52

I agree completely with your statement. The HuLuDao Refinery business grew out of an invitation by the Chinese to assist with gold production in a province where the use of cyanide is banned in the field. Geo2's total cash investment into the HuLuDao (51%) to date is less than A$2M (US$1.33M). For this money they purchased (in March/June '98) a refinery with a capacity to treat about 20 tonnes a day of concentrates, but which was mismanaged and flowing red ink. Geo2 restructured the whole enterprise and built an additional production facility boosting production to a capacity of 50 tonnes per day (recently completed), but which can be "tweaked" to run at an optimum rate of about 75 tonnes per day. Through the first nine months average concentrate treatment has run at about 30 tonnes per day for revenues on an annual basis of A$8M (US$5.28M). The new plant is being "run in" on batch processing of high grade material and will settle down over a period of months to gradually run at 50 tonnes per day and then at 75 tonnes per day (or thereabouts), to be reached in twelve months time. This result should see the refinery produce revenues of A$17M/US$11.22M with an after tax dividend of A$1M/US$.66M (Geo2 share A$0.5M/US$0.33M) by June of 2000. All profits enjoy a tax free holiday in the first few years of the operation. The third year of operations should see revenues double of the A$17M annual rate by the construction of additional plant capacity. Ultimately the rate may reach 300 tonnes per day (revenues at +A$100M/US$66M per annum) in about four years time. Profits from the refinery are mostly not affected by the fall/rise in the price of gold. Several formulas are used to buy concentrates. Most of the profits flow from the sale of by-product metals (which are obtained for free, i.e. copper, silver, sulphur etc.) or discounts on the purchase of gold concentrates from mines. A series of other mining operations/refinery operations have been offered to Geo2. Geo2 intends to go slowly on these ventures as its limited cash resources are devoted to the development of environmental technologies to remediate water, oily water, soil and separation of liquids (see other Geo2 thread) The second gold venture will start field trials of non-cyanide, gold process heap leaching technology in about 8 weeks time. To get back to your original question about cash flow/earnings per share. Geo2 is a small, international technology company, it has just started the sales process of some of its already developed technologies. See the June Newsletter at aircommunications.net For more details about its sales plans read the Newsletter and also the additional SI thread on Geo2 and its environmental technologies. Remember that the total market cap of Geo2 at the moment is about A$22M/US$15M, so in my opinion the upside is quite great. By way of comparison, another small Australian environmental technology company called Memtec started out with a similar market cap and was bought by US Filter last year for US$0.5 Billion. Disclaimer-I manage the Geo2 ADR program in the US. Seek professional advice from licensed investment counsel at all times.

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