Why we like Minefinders:
* We think gold and silver prices will continue to go up from here.
* Minefinders is very undervalued on the basis of gold and silver in the ground compared to other mines, owned by larger mining companies.
* Their cost per ounce will come down as they are able to get into the higher grade ores now and reach steady state recovery rates. Also, some one time costs will disappear.
* They have other properties and prospects in Mexico and after working there 15 years are developing an expertise in Mexico.
* They do not hedge their production, any gains in gold and silver prices will go directly to the bottom line.
* They are an attractive take over candidate.
* They have new equipment, specially designed for the Delores site, which should keep breakdowns to a minimum.
* They are already in positive cash flow, and should show a profit in the third quarter of this year.
* There is no more need to issue stock or obtain debt financing. Therefore there should be no dilution going forward.
* They are practicing good mining methods. We believe they may have higher recovery rates than they have forecast on their leach pads, which would have a large impact on the bottom line. Their ore appears to be very amenable to heap leaching. But the true recovery rate for gold and the slower leaching silver will not be known for some time.
* With positive cash flow and Delores maturing in the coming years, they will be able to buy properties in Mexico that other juniors may not be able to finance and that the majors may deem to small a mine property.
* Because of delays with village relocation and the road blockage, the need to mine low grade ore at the beginning of the year, one of the screens being a lemon, projected costs per ounce turning out to be way to low for the first 2 quarters of 2009 and other problems some people perceive management as being inept. There are problems with any mine start up, and Minefinders is no exception. We think we finally can make a fair evaluation of the company. We believe the surprises forward will be good ones and that the share price is very undervalued.
Note on trading: When MFN hit the $10.50 area, the stock gapped down which is negative from a technical analysis point of view. We think it may be weak hands giving up the stock, folks that have been disappointed in the past. If these shares are being replaced by stronger hands and the surprises going forward are positive, the price of the stock could do quite well. What do you think?
weeklyinvestmentreport.blogspot.c... |
