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Gold/Mining/Energy : T.ITE: iTech Capital (TSE) -- Ignore unavailable to you. Want to Upgrade?

To: David Raine who wrote (787)	8/16/1999 9:08:00 PM
From: keith massey	Read Replies (2) \| Respond to of 5053

The 2nd quarter financial came out on Sedar a couple of days ago. These are for the period ending June 30, 1999. I talked to Jim Graham at JDX about them today. The cash is still holding up and the burn rate is still low. Total asset are at $21,518,000 with zero debt. (.72/share). The reason for this small dropped is assets is explained below. Burn Rate (average for the last 6 month) Depreciation, Exploration and Professional fees = $12,000/month General and administration = $34,000/month .....This is low in comparison to companies of similar size and staff Investors Relations = $10,000/month ....This is very low which has both a good and bad side. A company of this size should be spending $40-60,000 a month if they are really promoting the company (dog and pony shows, newsletters, etc.). Last year they were spending double the present amount and they weren't even in promotion mode then. The bad side is that this explains the current price...no pennies move without promotion. The good side...the promotion is still coming or just about to start. I asked Jim why the amount being spent of promo was so low and was told that the promotion will not start until the deal is announced.... this is what I have been waiting for this whole time. They will probably spend some money around the Medsite.com IPO time since they have already said they will be putting out an update at that time. Project Evaluation = $30,000/month. ......Jim said they have been able to keep the project evaluation cost down because meeting are being done in New York (Mr. Staudt office) which save on travel costs. So total burn for all of these expenses comes to $86,000/month which I would consider low in comparison to other similar companies. Although it won't happen...at this burn rate they could go for 25 years <ggg> The other part of the balance sheet which initial I didn't like was the Foreign Exchange Loss and Interest and other income sections. The Foreign Exchange loss for the last 6 months was $808,000...$550,000 in the last 3 month. I looked into this right away to see what the hell happened. It turns out that JDX has all of their money in several different low risk bonds until the deal is done (written on Balance Sheet). These bonds would be almost all quoted in U.S dollars. From Sedar "the short-term investments, comprised of high grade primarily US denominated bonds" In the year ending Dec 31 1998 JDX had a gain due to foreign exchange of $1.3 million. During this period the Canadian dollar was dropping like a rock and JDX made out like a bandit. When they did their finacials on Dec 31 1998 the Canadian dollar was almost at an all time low of .65 which would have inflated this gain compared to the start of the year. From Dec 31/99 to March 29/99 the Canadian dollar rallied from .65 to .663. In the period from March 29/99 to June 30/99 the Canadian dollar rallied from .663 to .685 (3.1%). On an $18 million investment this equal $550,000 for the last 3 months and accounts for the $800,000 in the last 6 months. Since June 30/99 the Canadian dollar has fallen and is now at .674 (today)...a gain of $300,000 since the June 30/99 results. So what is my point.... last year they made $1.3 million because of exchange rates and ended up giving some of those gains back in the last 6 months. They have since made money on the exchange rate ($300,000) which boosts the assets a little more that the $21.5 million quoted. The sell off in the last couple of days could be groups seeing these numbers and not putting any thought into them. This $800,000 expense is not a recurring expense and is now actually lower because of the drop in the Canadian dollar.. If the Canadian dollar drops more against the U.S JDX will make up this loss and could turn it into another gain. Personally I think getting all the money out of the Canadian dollar 2 years ago was a very smart move. Because of this they still have far more money now than they did two years ago. The other number is Interest and other income = $176,000. This is profit but I was expecting the number to be slightly larger (around $350-400,000). According to the 2nd quarter results they have a $246,000 unrealized loss on their bond investment for the period ending June 30 1999. This loss would be minused off interest income even know they haven't taken the loss yet. Although they are getting interest from the bonds the bond price has fallen which causes a slight loss. According to Jim G., since June 30 1999 the unrealized loss has been erased (the bonds rallied). So to make a long story short..... They have $21.5 in assets according to the 2nd quarter. However the also have an undocumented $300,000 foreign exchange gain and a $250,000 gain in bonds in the last two months. This gives them around $22 million in assets which isn't to shabby. I think JDX is doing a great job at conserving their money. The have managed to increase their assets in the last two year with little risk to the shareholders by putting it in very safe bonds. They have also kept the burn rate at a very reasonable level. I can only guess if the recent sell-off in the last couple of days is because of the most recent 2nd quarter report. If it is, then by my above math you can see that someone didn't so their homework. Best Regards KEITH