Michael -
We are in business. I asked all of the questions that Scott posed, and received some very good answers. The meeting was excellent. There was a variety of people in attendance including contractors from Kemess, News media, share holders etc.
I will try to give a summary of the meeting however I do have 5 pages of notes.
The financial state of the company looks very good. This was as a result of closing the non-profitable mines last year. The question Scott posed - What is the current cash position of RYO - Their cash position is good. They showed a profit in the 1st quarter of the year, and the 2nd quarter results look the same. That is the reason for the conference call on July 8th, they did not want to call a conference call until the mine is in full production for 1 month. The date chosen is after both the U.S. and Cdn Holidays, so all investors, institutional investors, and stock brokers will be aware of it. They have also given lots of notice.
It is not true that trilons loan indenture prevents the use of trilons funds to make interest payments to the other note holders. The money has been put into general revenue in the treasury and may be used for whatever they like. That aside, there is an interest payment due in August of the exact figure that Scott quoted in item 3 however the Trilon money will not have to be used, as other cash is coming in from the existing mines still operating, plus there is $5,000,000 U.S. they have from a smelter pre-payment for concentrates from the Kemess project, which will more than adequately cover the payment due. The answers to these questions were quick, concise, without any hesitation. Both Peggy and the chief financial officer were on the ball, and had the information instantly.
After 6 weeks of operation at Kemess, all expectations have been exceeded. As of yesterday, they were running at 80% of capacity. Peggy Witte was just glowing when she made this statement, and seemed very excited. The mining costs are very good, the ore is fracturing better than expected, reducing explosive costs.
Another thing that assists is the weak Canadian Dollar. It costs them $6.25 Canadian per ton to process the ore including all costs right down to the smelting. They are paid in U.S. dollars for the final product which is the gold and copper, which really helps the bottom line. The costs are in Canadian Dollars, the receipts are in U.S. dollars. The recoveries are excellent.
They also have discovered another poryhery anomoly as large as the current known deposit, and are very excited about that, and will explore it further.
The Fiji property is also very exciting, but they will not proceed on it until they get on better financial footing. She mentioned they would like to take the entire crew from Kemess, and duplicate the efforts in Fiji, and this will come in time. The time frame to develop the Fiji site is probably about 5 years away.
Peggy Witte chaired the meeting, and I was very impressed with her knowledge, and depth. When questions were asked, she had the answers immediately from all ranges of topics including the price of gold, the world market etc.
Other hi-lites are as follows -
Royal Oak Mines has survived the worst gold prices ever seen. In order to survive, all non- profitable ventures had to be curtailed, including closing 2 of their mines. All projects are on hold, and there are some excellent prospects around the Colomac mine area, which shows promise for the future, but they will not be explored until the price of gold exceeds $350.00 per ounce.
They have everything in place to meet their financial obligations through 1999. According to the numbers posted there is $175 million of senior notes due in 2006, and $120 million in senior secured notes due in the year 2000.
They expect to product 337,000 oz of gold in 1998, and 477,000 in 1999.
Goals for 1998/1999 is to explore fiji, and pay down the debt. The debt can be paid down any time. They have no major capital expenditures remaining on Kemess. They are looking at alternatives to reduce the debt level, such as re-financing at a better rate.
When the institutions see how solid Kemess is they feel there will be a lot of interest in the site, and better financing will come available.
The recovery is 2 oz gold/ton, which equates to 250,000 oz gold per year, and 60 million pounds of copper.
The cost to retrieve the gold is $133 per ounce. Final costs per ounce of gold will be $222 in 1998, and $192 in 1999, including the average for all mine sites.
Namosi - in Fiji - they intend to spend $2,000,000 in exploration. 254 holes have already been drilled in the past. They would like to move the project team from Kemess to Fiji, and build a similar mine to that in Kemess. They will pay down their debt before moving forward.
I am not sure of the figure, but either a figure of 200 tons, or 500 tons of concentrate to date has been shipped.
Pegasus was mentioned by Ms. Witte along with 7 or 8 others who have failed, and they were very proud that they have been able to bring Kemess on line and profitable. After the meeting I mentioned to Peggy that RYO has been equated with Pagasus on the internet, and she said "on the day that they failed, the executives from Pagasus were flying around on 2 corporate jets." She said, we don't spend a penny unless it is absolutely necessary. We always think twice before we fly anywhere. The stock options offered to employees were also discussed. She mentioned that for 2 years, none of the employees have had a bonus or a pay increase. People have been working 20 hours per day to bring Kemess on line. The stock options are an incentive to keep good people. The argument seemed very reasonable.
Also asked about was the future price of gold. An individual was quoted, someone who is quite famous in the realm of gold, I should have written his name down, but in his study, it was indicated that people and institutions have been shorting gold. The estimate according to some report from Bloombergs is 8000 tons of gold has been shorted. The Short position today is more than ever before. When the shorts have to cover, it will be drastic, and the price of gold could rise significantly. Until that happens, Kemess is in good shape to produce at lower levels and keep the company alive. I talked to an older gentleman from Denver who is an investor in RYO, and according to him, he also quoted this gold expert, and when the shorts have to cover their position, panic is going to ensue. In fact one expert on gold is saying that the gold they are shorting on no longer exists in the world market, it has already been utilized for jewelery, electronics etc.
Environmentally they are also in very good shape. There were some problems during construction, all were overcome, but the operation is very good environmentally with no problems at all.
I questioned them about the native issue. That issue as I have seen seems to have gone away, but RYO has also employed several native people, and had given them contracts worth several million dollars, which means the natives appear to be on side.
I met a contractor from Fort St. John who worked on the site, and he was very happy with the work he did there, and he has been paid.
Cheques were being sent out to all contractors, or bank transfers were sent on larger contracts. Everyone has been paid.
They had a superb video on the Kemess site, one that everyone should see.
Also mentioned was a large German investor who has been buying up tons of "Homestake." This indicates a big move to investing in Gold plays, and the feeling is that gold will go up. A statement was made that 8 weeks after investment moves into gold equities, the price of gold always goes up. There seems to be some relevance to this.
I asked, as well as another person mentioned AGC Americas Gold Corp. It is exploring in the area in a joint venture with Antares. I said to Ms. Witte "it is obvious that $470 million dollar mills don't drop out of the sky, would they utilize this mill with other companies in the area?" Her response was that they will be talking to all juniors in the area, and if the grades of 2 to 3 oz per ton are indeed coming out of the ground at AGC, they would be very interested in talking to them.
All in all, I felt it was an excellent meeting. Everyone there felt the same, including the two gentlemen I met that drove all the way from Denver for the meeting.
At $1.30 per share, I think I might purchase some more shares before the conference call on July 8th, and the announcement of the results from the Creek Zone at AGC Americas Gold Corp/Antares.
I was taking notes so fast, that I might be a little incorrect on some of the figures, so I apologize, but indeed I believe RYO will be around for a long time to come, and Ms. Witte and the people there seemed quite sharp.
Thats the way I see it,
Mike G
|
