Was it this Research Capital report that precipitated the collapse in GEO's stock price in late August ? If they are also GEO's investment banker I wonder why they were so harsh less than 6 months after coming out with a buy rating:
GEOMAQUE EXPLORATION LTD.
GEO-TSE :$0.23 — RATING SUSPENDED
22 AUGUST 2001
Barry Allan 416.60.7612
barry.allan@researchcapital.com
Jacob Bout,416.60.6790
2Q01 Results – A Company On The Ropes
•
Per Share Data
Price:$0.23 Basic Shares O/S (k):57,286
Target Price (1 yr.):$0.1 Fully Diluted sh (k):79,362
Projected Return:-22%Float (Shares):57,2 6
52 Wk.Range:$0.50-$0.22 Market Cap:$13.1 m
Dividend:$.0.00 NAV ($C/sh):$0.1
FY Dec.31 1999A 2000A 2001E 2002E
EPS ($US/sh)($0.33)($0.25)($0.04)$0.06
P/E n/a n/a n/a 2.4x
CFPS ($US/sh)($0.00)($0.07)$0.00 $0.14
P/CF n/a n/a 57.9x 1.1x
REASON
• Geomaque released 2Q01 results.
REACTION
• Reducing our target price to C$0.18 from C$1.00 and SUSPENDING our speculative buy SUSPENDING our speculative buy SUSPENDING our speculative buy SUSPENDING our speculative buy
rating rating rating rating.
RECENT DEVELOPMENTS AND ANALYSIS
• Geomaque released 2Q01 results.EPS was a loss of (US$0.02)and CFPS was a loss of
(US$0.01).This compares with 2Q00 EPS of US$0.01 and CFPS of US$0.02.These results
were materially lower than our expectations of US$0.00 for EPS and positive cash flow.
The poor quarter is the result of continued start-up problems at Vueltas del Rio mine in
Honduras.
• The Vueltas del Rio mine was expected to achieve commercial production in 2Q01,at
which time we had forecast the company to return to profitability.We had originally
anticipated the mine would achieve commercial production by the end of 1Q01.
However,the mine is six months behind on start-up and continues to experience
operating problems (even though mine has technically achieved commercial status).
While the technical elements of grade and recovery appear to be in line,Geomaque is
unable to operate at capacity.A pad extension is required to provide for sufficient space
to allow for leach solutions to be applied to ore being mined.The expansion is not
expected to be completed until October (i.e.positive cash flow).
• In addition,as a result of lower palladium prices,the Marathon project now has
marginal indicated economic potential,sharply reducing even further our calculated
NAV for the company.
• At the end of 2Q01,Geomaque had a working capital deficit of US$4.8 million.Without
the prospect of positive cash flow from the Vueltas del Rio mine,the financial condition
of the company will deteriorate further.By the end of 3Q01,Geomaque has a high
probability of being in financial default.
INVESTMENT CONCLUSIONS
• Our fundamental opinion of Geomaque has changed.With slower start-up of Vueltas
del Rio and lower palladium prices,the asset value behind the company has been
sharply reduced.In addition,as a result of on-going operating problems at the only
potential source of cash flow,there is a very real probability Geomaque will be in
financial default by the end of 3Q01.
• We therefore SUSPEND our speculative buy SUSPEND our speculative buy SUSPEND our speculative buy SUSPEND our speculative buy rating rating rating rating and recommend investors seek to
liquidate holdings. |
