Comparing production numbers in the Prospectus to other information sources
In post #4 and post #5 (on this board), I took a detailed look at the Production numbers in the Prospectus that was recently published. Someone on another message board pointed out a discrepancy between the numbers in the Prospectus, and the production expectations we have seen in other sources of information.
I try to deliver precise and honest analysis, and I replied to person’s concern in this post below. I copied this here for the readers of this board.
I did get a reply to this. The reply was:
“Benson, I think you are right about Andre et cie (company) downplaying estimates (under promise over deliver?”
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SUBJECT: KlrKt - The number differences in the Prospectus
Thanks for your Question on Tuesday. You were comparing the Copper Rand production estimates that we have been hearing all along (15 copper million lbs per year, plus gold), to what I extracted from the Prospectus (12 million lbs in 2007, plus gold. Rising in 2008 - 2010).
I posted my calculations (extracted from the Prospectus) here:
(see post #4 and post #5 on this board)
First of all, the 12 million lbs copper number was my calculation. It came from the detailed Copper Rand production plan on page 48. All they list is the tons of ore, and the grades.
Readers have to do a simple calculation to get pounds and ounces, and everyone should realize these are “short tons” (2,000 lbs per ton). A “long ton” 2,204 lbs (1,000 kilograms). Long tons are usually spelled “tonne”.
Yes, you are right; the number for 2007 is lower than the 15 million we have seen in other press releases. But in 2008, they list a higher copper production number (16 million lbs from that one mine). So in 2008, we beat the earlier number.
My only explanation for this is that the Prospectus is written from a very conservative point of view. Perhaps Campbell management only wants to list what they are 100% sure they can deliver, with no margin for error.
There are definitely other examples of this conservative approach. The 5 year production plan uses copper prices of $3.00, $2.80, $2.60, $2.40, $2.20. And it uses gold prices dropping down to $500 and $480 in 2010. Even at these metals prices, Copper Rand will be hugely profitable.
I think those metals prices are way conservative. And, as side point, I don’t agree with several things that “Paul Van Eeden” (Kitco) has written about copper prices.
I also think that Mr. Fortier (CEO) has been asked, by own Board of Directors, and by Sprott Securities, to tone things down a little bit in conversations. For example, if I mention the total size of the resource at Corner Bay (all 3 categories of resources), all he is willing to comment on is the ore targeted for initial development. It’s like he’s trying to help me not become too excited about Campbell.
Let me emphasize that I think Mr. Fortier is an exceptionally honest man, and has been totally available and communicative.
But he’s been trying to quash the excitement a little bit.
I think he is being pulled from a different direction: Maybe Sprott and Nuinsco want their Deals to close, and the Rights offering to pass, before Campbell goes into promotion mode. They might be hoping there are some left over Rights, after all shareholders have exercised.
This sentiment is reflected in the numbers: the numbers in the Prospectus are conservative.
Another example is the “Cedar Bay” mine. One of the April 24th press releases says that they will move towards production at Cedar Bay. In the Prospectus, Cedar Bay is only mentioned in a footnote. Read my post above for my comments on Cedar Bay production potential.
For example, if Campbell can produce 10 million lbs copper, and 25,000 ounces of gold from Cedar Bay, that’s another $25 - $35 million in earnings right there (those are my assumptions – use a lower assumption, and it’s still good).
The production numbers from the Prospectus still show the profits I have been writing about. I can still easily see over $30 million in earnings by the middle of 2007.
Cedar Bay production wouldn't start until the 2nd half of 2007, but they can easily start pulling Cedar Bay ore through the Copper Rand shaft (there is a beautiful diagram on the Campbell website, and in the Prospectus.
I hope this helps,
Benson |
