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Gold/Mining/Energy : North American Palladium(AMEX:PAL)- PGM Producer -- Ignore unavailable to you. Want to Upgrade?

To: Ptaskmaster who wrote (546)	4/4/2000 8:52:00 PM
From: Elizabeth Andrews	Read Replies (2) \| Respond to of 976

I think if you're looking backwards you can't look forward and you won't make any money on this once in a lifetime opportunity. Let's try and figure out what the enterprise is worth given two assumptions. First, Pd averages US$500 per oz over the life of the mine. Second, the mine can produce 248,000 per year at the price the feasibility study suggests, ie $130 per oz. That implies the mine can produce operating cash or EBITDA of US$91.9 million per year for 11 years or a total of US$1.011 billion over life of mine. If you discount that back it gives you a present value of about US$500 million at a reasonable DCF. From that deduct the C$119 current debt and the US$126 million capital required. That leaves about US$295 million present value. That leaves an enterprise value of about C$20 per share based on 22 million shares issued with no blue sky for better grades more reserves or higher Pd prices. Note that most mining companies with any kind of proven reserves trade above the DCF rate. Now, I think the share capital may increase to 35 million or so in the near term but clearly Kaiser is in no need for money or more shares and note that they have personally guaranteed the US$90 million bank debt which is now not subordinated to the C$119 million already owing to them. And, I don't believe that the banks are worried about the hedging because they have the loan guaranteed. The question is who is going to be PDL's partner with respect to needing the Pd production? The feasibility study had to be based on 100% equity because the balance sheet is a mess and the consultant could not assume further debt, yet it actually happened. The bank loan tells me that some smart people are looking forward. What if the same consortium of banks is arranging the equity financing? Is that going to be the perk here? Will that signal future value? Are you normally this paranoid about things that I'm normally paranoid about?