*********************************************************
Company: AG Armeno Mines & Minerals Inc.
Symbol: AROYF / AGM
Exchange: OTC:BB / VSE
52 Week Low-High: CDN$0.05 / 0.25
Current Price: CDN$0.20
*********************************************************
THE MINING DESK
2409 Eastridge Court
Ft. Collins, CO 80524
Tel.: 970-482-6113
1-800-547-9091
Fax: 970-482-6124
Email: minedesk@earthlink.net
February 18, 1999
This is a preliminary report about a situation which seems to hold
exceptional promise. There will be much publicity about it in coming
months. This report is to alert clients about the publicly released information
before it becomes common knowledge, providing you chance to benefit
from it.
Setting The Stage: A major gold and copper mine is currently being
developed on the island of Sumbawa in Indonesia. It is scheduled to begin
production in December 1999. The major participants in the development
are Newmont Gold Company of Denver, Colorado (NGC.NY), holding 45%,
Sumitomo Mining Corporation of Japan, 35% and PT Pukuafu Indah (PI), a
private Indonesian company, with 20%.
The mine, called BATU HIJAU, is presently ranked as one of the largest
start-up mining projects in the world. It has a resource of 7.25 million tons,
or almost 14 billion pounds of copper (today's market value approx. $10.5
billion @ 75 cents/lb.) and 16.5 million ounces of gold (approx. $4.9 billion
@ $300/oz.). It is truly a $15 billion dollar glory hole! It is expected to
produce an average 245,000 tonnes (540 million lbs) of copper and 540,000
troy ounces of gold each year for the next twenty-five years. The market
value of that is $431 million dollars a year. The cost of production will be in
the lowest fourth of all mines in the world.
The Play Begins - Act 1: In May, 1998, Armeno Mines & Minerals (AGM)
arranged with PI to buy 90% of their interest in the BATU HIJAU mine. This
would effectively have Armeno owning an 18% interest in a mine with a
gross mineral value at market, of $15 billion. Armeno's share of that is
valued at $2.7 billion dollars. AGM was to pay PI US$2 million dollars cash
plus 50 million shares of Armeno stock
Act II: Pukuafu Indah (PI) is controlled by a man named Jusuf Merukh, an
Indonesian businessman. In October 1998, it became apparent that PI was
not planning to honor its agreement. AGM immediately filed suit in British
Columbia to compel enforcement. On January 7, 1999, AGM was granted a
default judgement with damages and costs to be assessed against PI. A few
days later judgement was also granted against Jusuf Merukh personally. On
January 11, 1999 the Court included Newmont Gold Company as a
defendant in the action. The reason was because prior to the January 7th
order, Armeno had found and submitted written evidence that Newmont had
attempted to interfere with the agreement between PI and AGM. In effect,
both defendants are now being held responsible for damages to AGM!
Newmont Gold Company has put a Net Present valuation of $1.1 billion
dollars on Armeno's 18% interest.
Act III Is About to Start: At this point, Armeno Mines & Minerals is awaiting a
response from Newmont Gold. PI is virtually bankrupt caused by the
Indonesian economy, and Jusuf Merukh personally, is penniless, according
to Bedo Kalpakian, AGM's President. He is unable to sell his interest in the
BATU HIJAU project to any Indonesian company, because most of them are
also near bankruptcy. It is Armeno's feeling that PI cannot afford to pay the
judgement. What then can they do? Before AGM can know more clearly
what it must do next, they must wait for Newmont's reaction to the lawsuit,
which should occur by the end of February.
The Final Act: The script has not yet been written, but we see a very
interesting possible outcome. It is this. As a result of the judgement of the
British Columbia court, both Newmont and PI are in checkmate. PI will not
be able to monetize (sell) their interest to an Indonesian company. If an
attempt is made AGM will present their judgement to the Indonesian courts.
The judgement could be ignored, but even if it were, a potential sale would
present questions about the legal ownership which would make any careful
person or company hesitate. That is not to say it is impossible, only unlikely.
Should PI attempt to sell to a company in Australia or another country,
reciprocal treaties, not to mention disputed ownership, would block the sale.
Newmon Gold is in a legal hole as we see it. If they are found to have
interfered, they could be liable for damages to AGM. What then would be a
logical course for them? Probably to (1) attempt a settlement, or (2) honor
Armeno's claim (which they are obliged to do anyway) as 18% participant, or
(3) attempt a takeover of AGM,. If a settlement or takeover is sought, Armeno,
being in the driver's seat, would be a hard bargainer.
At this point, Armeno, having won the suit against PI, expects to get the
18% interest in BATU HIJJAU without having to pay the $2 million or the 50
million shares called for in the original agreement, since PI is guilty of
defaulting. Keep in mind the estimated $75.8 million dollar mineral value
of Armeno's share of the annual production would not be all profit. Mining,
administrative costs, depreciation and depletion, would be deducted before
they received a check. Still, the remainder, (a wild guess is 30% or $22.74
million dollars - 87.5 cents/share) every year for 25 years, would add
significantly to Armeno's net worth and the value of the stock very quickly.
These figures are far from accurate, but a profit on this order would, at six
times earnings, suggest a stock value of US$5.25 plus or minus. Check that
against today's price.
Armeno's treasury is not empty. We don't know exactly how much the
company has, but we'll find that out before we do the longer report we are
planning for the end of the month. As we have said, this is a brief preliminary
report prepared and given only to clients of The Mining Desk. We see little
downside risk and extraordinary upside potential.
QUESTION: Will the economic situation in Indonesia have a negative
bearing on this?
ANSWER: No one can read the future, but the Indonesian government, the
only entity with the authority to block development, has historically favoured
mining ventures. Mines are a source of employment and considerable
income. It would seem expropriation is highly unlikely. Should there be a
revolution however, with the democratic government overthrown, and a
dictatorship established, who knows? On the other hand, any government,
dictatorship included, needs money and should welcome the benefits
mining brings.
Les Reid
For any further information please contact
Mark O'Hara
Director of Investor Relations
Ag Armeno,
1-800-665-3119 U.S. or 604-681-1519
and please visit our website at agarmeno.com
*********************************************************
This bulletin is sponsored by the company and/or another party and
has been sent to you for no charge. This is a service provided by
StockHouse to public companies so they can disseminate recent
significant developments, which potentially can affect their share
price. This is not an offer to buy and sell any security which can
only be made through a registered representative. StockHouse makes
no warrantees as to the accuracy or completeness of the above
information.
Visit StockHouse.com at stockhouse.com
********************************************************* |
