Hi Russ: I don't have much time at the moment but I did want to give a quick response. I don't think I have the analytical acumen you have displayed here and elsewhere but I'll give you my impressions.
I think these low cost small operations still have value today, I think the hitch, as you point out,is San Francisco is acting as a negative, which I think is incorrect. Although not a positive worthy of any valuation now, it will not be a burden and remains an asset in a higher p.o.g. scenario. If we go by share price very few gold mines of any sort are being ascribed value relative to their assets.
I think the finance deal is the best they could get and although the terms are generous, shall we say, I don't think they break GEO's legs. In answer to your 3 questions; 1. Yes capital is basically non existent for start ups (i.e. Nevsun, Orvana and you know more of them than I), 2. I would liken the banks' attitude to these situations as the same as small business loans, if you don't need the money they are happy to help but if you do actually need the money, they can't help. 3. No I don't think GEO made a bad deal I think they made the deal that was available to keep their company going and still achieve their goals, otherwise it was all over. Those with money are always in a position to get a good deal from those who truly need the money. This financing is more like venture capital money and that isn't just a straight interest rate charge, which in this case was a fair 5%. At least they have a vested interest in GEO's success.
Unlike Greenstone this Geo's first loan versus over $70 million in debt for GRE, who had too many mines operating at high cash costs. As I stated to Claude, it is hard to have conviction that you see a value play in something like GEO in this market but I do own it and at $.22 I think there is more upside than downside at this point. Mackenzie funds for sure and I think a Royal Bank fund have been adding to their positions.
Best wishes to you Russ, I look forward to another article from you on Gold Eagle sometime. Ogi |
