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Gold/Mining/Energy : Minefinders, MFL -- Ignore unavailable to you. Want to Upgrade?

To: geoffb_si who wrote (289)	9/10/2001 9:32:37 AM
From: russwinter	Respond to of 578

More debate about valuation issue at Stockhouse. My response to metaldog over there: I don't see them getting $20/oz even for the three million or so contained ounces, let alone the resources. That would put all in costs up to around $200 and still leave the operator with some exploration left to do. As far as the waiting game, this is the problem: biz.yahoo.com MFL's has been very good about dilution and keeping it under control, so I'm not a critic at all, just concerned. When you have to give shares away at 1.15 it takes it's toll on the final payout because it keeps splitting the pie up with more and more investors. Also consider that MFL's market cap is a mere US$14 million, and the total deposit 4.45 million Au eq. That means that to be non-dilutive to current shareholders their exploration efforts would have to turn up new ounces for under $3/oz discovery cost, and that's impossible. Nor can they really convert resources to reserves for that. From my conversation with him, Bailey feels he can open up a new front in Sonora that will create value inexpensively. If he can, great, but if it's just a 300,000 oz deposit that costs $3 million to discover, I'm going to be very critical. And if you have to dilute just to keep your office open and just pay light bills, and NOT improve the deposit it's even worse. There comes a time when you have to factor that into the equation, and ask if the cost of the waiting game offsets squeezing a few extra bucks an ounce out of operators. By my calc, that time has come. Bullish on POG/POS? Well, me too. But let's look at it from the point of view of operators. If we get over 300, how much more will they pay? Could be quite a bit actually. The problem as I see it though, is that POG needs to STAY above 300 for a period of time, not just GO to 300, before the buyers use this number in their assumptions. So another year goes by, and MFL's dilutes some more. I think the best Bailey can do, is work the numbers so that he can get as high an assumption as he can, and I'd say 275-280 is about tops? The other strategic consideration is the tremendous value for an explorer of getting hard cash NOW, even if much less than that assumed in the early days. Assume MFL's picked up the US50-60 million. Not only do you have the cash, but you now have a stock currency that's worth something. And you have no competition. They could use it for all kind of things: quickly prove out an economic deposit (and then $8-10 oz discovery cost doesn't matter) in Sonora, exploit all the institutional knowledge that MFL has gained from exploring down there over the years. Or they could take 25 million, and get carried into a share of production for the rest. FN (unlike some majors) likes those kind of deals. Who knows what kind of leverage could come out of that? How about getting involved with NGT at Salamandra? The possibilities would probably boggle the mind.