It's been an exciting 9 months and hopefully everyone here has had stront stomachs...Here's part of an article in todays (Sat.Mar.15/97) Financial Post:
Shares of BXM received a modest lift Friday from an analyst's positive recommendation. The stock was the seventh most heavily traded on the Toronto Stock Exchange. Daniel McConvey, a gold analyst with Lehman Brothers in New york, raised his outlook on Bre-X to "outperform" from "neutral".
Analysts who cover Bre-x have been split on what the Freeport deal has done to the value of the company. Some say it has made Bre-X far less valuable, because the company gave half of its 90% share of Busang to mainly Indonesian interest, without receiving compensation.
Pessimists also point to BRE-X's lack of control over the property--Freeport will be Busangs operator--as another value-draining aspect of the deal.
Bre-X's appeal as a takeover candidate is tarnished, they argue, because no major gold miner will want to buy a passive 45% stake in Busang.
ON THE OTHER SIDE..HAVE BEEN ANALYST (MY VIEW AS WELL) who say investors should forget the 45% giveaway, and concentrate on Bre-X's remaining 45% in what will almost certainly be the MOST PROFITABLE GOLD MINE IN THE WORLD.
Kerry Smith, of First Marathon Securities in Toronto, has been in the latter group.
In a March 10th report, Smith said the huge annual gold production expected from Busang, and the resulting cash flows to Bre-X, make him confident the stock will climb to at least $29.00.
"While many prefer to fixate on the fact the Bre-X lost 45 percentage points of Busang for nominal consideration, we prefer to accept this as the penalty to Bre-X for finding such a large deposit in Indonesia," smith wrote.
Smith also said he beleives Bre-X will be able to show 100 million ounces of gold at Busang within the next 6 to 12 months.
A stock trader in New York, who shorted Bre-X shares as they fell in the aftermath of the Freeport deal, said yesterday he now believes the stock has been oversold.
"This thing's going to heat up again," the trader said.
"Let's not forget, this is the largest gold deposit ever found. There is a lot of value here.
"Today's stock price doesn't give credit for any of that value. It's trading at a discount of 45% of 71 million ounces--and Bre-x says there might be as much as 200 million ounces.
"I think it's a $22.00 stock," the trader said.
(wish I had a scanner)
Bresea is also a great trade. They own 49 million share of Bre-X and other deposits around the world. (TSE: BSR-$9.15Can.) |
