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

To: geoffb_si who wrote (312)	10/7/2001 12:18:54 PM
From: russwinter	Read Replies (1) \| Respond to of 578

Fly on the wall, my debate at Stockhouse. MFL is probably at the (defacto) developmental stage. Technically it's not however. There has not been a feasibility study done, but only what they call a preliminary economic analysis (scoping study). On the otherhand everybody and their brother has looked over the data, so predictablity is likely pretty high. A deposit like this is going to be valued on an all-in-cost basis. That takes cash cost, adds in capex, and then adds in the acquisition price of the deposit. IMO, operators are looking for under 200 AIC, maybe well under, based on 290 POG. The debate I've had with you relates to even higher POG, and will the buyers be willing to go to a higher AIC if POG trades at say 325. I'm not a fly on the wall, but I'd say not really. Even bullish producers are going to want a good return based on cycle lows, not cycle mid-points. Go to the 11/20/00 IR. minefinders.com There is an analysis done based on 300 POG/$5 POG. I think it's fair to use. It gives cash cost at Delores at $149.30, and add capex (mine development costs) for a total of $183.60 on 3.2 million Aueq recovered. Those evaluating this will be quick to key on the $5 POS used. However, even if a lower price is used, say $4.50 it doesn't seem to hurt economics that much. The most important IR out of the company in my opinion was 6/7 on silver recoveries. Claude Cormier and I discussed this at SI then, and SWAGed that cash costs would drop below $140, which in turn brings capex down below $175. So that's the genesis of the valuation discussion, and why I come up with $20/oz. I mean you can just guess the talks between the operators and Bailey. Operator: You aren't at feasibility. Bailey: It's not necessary, look we are at defacto feasibility based on all our drilling and data. Operator: It's only three million ounces. Bailey: Tell me where you find more, and besides it's expandable. Operator: But we have to expand it at our expense. Bailey: It's high probability and inexpensive, just pay me a fair price for my three million ounces and you can have it. Operator: Let's make the price based on $275/4.50, and we will give you $12/oz. Bailey: It's not a $275 world any more and you know it, should be $325/$5.50. If you paid me $30 an oz, you would have a $120 profit over your AIC. Operator: Oh really? Well, OK, let's base it on today's price, we will pay you $20/oz for three million ounces, that's an AIC of $195, we will assume the feasibility and expansion risk and cost, and hopefully, we have a $95 profit over our AIC and can get a bigger deposit in time. Bailey: Good move, you guys have taken bigger risks than that before, a lot bigger. Operator: Yeah, that's true but it's gotten us in trouble. We've buried ourselves in bloated hedge positions. How much capital do we have, really? We can't afford a mistake. But, jeez louise, we are going to be out of product in five to seven years. Then what? And how about you guys with that $1.15 private placement and $1.25 warrants just to keep your lights turned on and drill a few holes in Sonora. How much of that can you afford if you want to protect shareholders? Bailey: Yeah, we both need to get rolling don't we? Operator: This is a good start. Besides, our stock is overpriced especially relative to yours. Those loons (and I don't mean Canadians <g>)out there have no idea how much trouble we are in, so we will pay in rich currency, a stock swap. That will make our real cost a heck of a lot lower. Bailey: Fair enough, I understand cash is dear, we will do a merger, where do I sign?