Pure speculation on my part:
So far today RYO is down $.21 to $1.68 CDN, roughly -11%. Likelyhood is that it will continue to drift lower. Factors affecting the market price include the continuing bear market for gold, and the resulting negative effect that this has on the company's operating results. Also, the company's currently profitable hedge position will evaporate at the end of the month.
The one bright star on the horizon for RYO is the Kemis mine under construction in BC. Although completion is still several months away, once in production the company's average cost of production is expected to drop significantly due to very low operating costs of the new mine. The only uncertainty here is RYO's ability to continue paying for additional mine construction costs.
Generalizations, I know, but they set the stage:
If the Kemis property is as good as management says it is, what is to prevent RYO from becoming a takeover target for any cash rich major gold producer looking to acquire low cost mining operations? As RYO's stock price drifts lower the company's becomes increasinly undervalued in terms of asset or book value.
In my opinion, there is not likely any immediate upside to this stock unless the price of gold rises (or the company becomes a takeover target). The cash flow problems associated with the high cost operations and low cost of gold will only get worse in the short term. Add to this the remaining construction and start-up costs still necessary to bring the new mine on stream, and management will face some interesting choices in the next few months.
Until the company proves to the marketplace that it has the financial resources to weather this probable cash flow shortage there will be continued selling pressure on this stock. With little or no change in the price of gold, I would expect that RYO's share price will not bottom out until 2-3 months in advance of the Kemis mine opening.
If the company can convince enough investors at that time that they will be able to bring the mine on stream there might be some positioning taking place then, but I wouldn't exect too many investors to be rushing in to load up on cheap stock until that time.
Not a pretty picture. What is a poor long term shareholder to do? If you managed to average down over the past several months you might be well positioned to take advantage of any possible takeover attempt. If not, are you prepared to ride it out until the new mine is in operation? Tough choices!
To all the RYO shareholders out there, I wish you all the best.
Comments, anyone?
Disclaimer: Not a current shareholder, shorter, market professional, or otherwise associated with the company. Just another investor looking for a buying opportunity and wondering if/when RYO's troubles might be over.....
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