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Gold/Mining/Energy : Gold and Silver Juniors, Mid-tiers and Producers

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To: koan who wrote (13637)	6/17/2006 8:50:14 AM
From: tyc:>	Read Replies (2) of 78419

If you're looking for new ideas, take a look at Rio Narcea. RNG.t or RNO on the American exchange. This company is building a new open pit gold mine in Mauritania that will be in production next year. You will find details of the feasibility study on the old Sedar site of Defiance Mining,in a news report dated April 29, 2004. The report indicates that with Gold at $450 per oz, the project IRR was expected to be 32% (Capital cost $48M). IMHO this project seems to be valued at zero in current market price, for (again IMHO) the current market price is justified by their Spanish Nickel/copper mine, which is expected to show a $60M cash flow this year (from my memory only) ! Their website has a presentation of the quarter's results to end of March that would enable you to confirm this. It is worth listening to. 60% of their copper production for the next two years is hedged @ ~$1 US per lb. The first quarter's results showed a profit despite the booking of a $9M loss on the value of this hedge book. Don't be fooled by this; the total negative value of the hedge book is included on the balance sheet, and amounts to only ~$11M.... that's about .17c per share. And if copper FALLS in value below the March 31 price, the value of the hedge book would be enhanced !! Koan, there are warrants that I consider to be very well leveraged. With the price of the stock @~$2, and the warrants at ~.25c gearing is ~ 8:1. I estimate the delta at ~23% so I'm guessing that the warrants might outperform the volatile stock by 1.8x (i.e 23%of 8:1).

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