Jacq,
Let's try this again and see if I can answer your questions more completely.
From the BGI press release it states:
"Terms of this agreement include a cash payment to Birim of US$500,000 as well as an advanced royalty. The former will be paid to Birim upon signing a more formal agreement (2-3 weeks) while the amount of the advanced royalty, paid prior to the commencement of mining (expected to occur within the next six months), will be
based on the number of recoverable gold ounces as defined in an upcoming feasibility study to be conducted by Ashanti and audited by Birim. The royalty schedule for the heap leachable ore is as follows:
- US$20 per recoverable ounce of gold for the first 40,000 ounces;
- US$25 per recoverable ounce for the next 20,000 ounces;
- US$30 per recoverable ounce on production exceeding 60,000 ounces.
An "independently calculated resource of 600,000 ounces of gold already exists for the Mampon deposit. Management believes that out of this indicated resource,approximately 175,000 recoverable ounces, grading 5.0 g/t gold, can be extracted by means of an open cast operation."
"Ashanti has also agreed ... to purchase US$500,000 of Birim treasury shares. As well, Birim is to issue to Ashanti US$500,000 of convertible debentures..."
Based on this info., Birim would see the following cash infusions within the next 6 months:
$20.00 X 40,000 oz. = $ 800,000
$25.00 X 20,000 oz. = 500,000
$30.00 X 115,000 oz. = 3,450,000
Cash payment = 500,000
Shares purchased by Ashanti 500,000
Convertible Debenture 500,000
Total = $6,250,000 or ($C 9,125,000 @ $US 1 = $C 1.46)
I should mention that this is the same total of US dollars that John Kaiser arrived at in his recommendation.
As to the 'price per ounce of oxide gold' that Birim would receive, I believe that with this deal, and excluding funds that Ashanti will provide for the share purchase and the convertible debenture, Birim will receive an average $US 30.00 per ounce for every ounce recovered - while gold is priced under $300.00 and 20% of each dollar thereafter up to $350.00.
I arrive at this figure of $30.00 by taking the total amount of the cash infusion ($6,250,000) and subtract $1.0 Million, derived from the Ashanti share purchase and the issue of the Convertible Debenture. If you then divide the remainder ($5,250,000) by 175,000 ounces, you get an average of $US 30.00 per ounce.
Now, is the stock cheap at $Cdn 0.29? I think so. With this single deal with Ashanti the company will have approximately $CDN 0.35/share on hand and in cash sometime within the next 6 months. They could possibly end up with a lot more if the feasibility study reveals more than 175,000 recoverable ounces in the oxide zone.
This means that not only is Birim trading right now for much less than projected cash on hand, per share, within the next six months, but no value is being given by the market for the remainder of the company's assets/properties. They have to worth something since other companies have already shown an interest in obtaining some of them.
Anyway, the market will ultimately decide what the shares are worth. I did want to show you, however, how I arrived at some of the valuations and trust that the above is useful. I hope I haven't overlooked any important matters.
Brian
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