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Gold/Mining/Energy : Corner Bay Silver (BAY.T) -- Ignore unavailable to you. Want to Upgrade?

To: Lalit Jain who wrote (3879)	4/24/2002 11:48:46 AM
From: Claude Cormier	Respond to of 4409

<1. Current price of Ag is $4.60. Need sustained higher prices for marginal profitability to increase. > Not true. Very profitable at $4.50. IRR near 45%. <2. C'bay is an exploration company and has no mining, processing and production experience.> Not true. Have you seen who they hired in the past year. The people are the company and they come with their esperience. <3. Deposit is in the hills of Mexico and may be prone to anti-government forces. It not exactly US or Canada.> Well not true. Sonora is one of the most pro-mining place in Mexico. <4. Geology and deposit metallurgy is still unproven and raise the cost of processing. Avg. recover is currently only 75%.> The 45% IRR is based on 70% recoveries. Leaching tests over the last 18 months have demonstrated recoveries up to 80% on the high grade stuff. <5. Cost of mine construction can be much higher than anticipated> In fact. It is likely to be lower as they will possibly contract the fleet and buy used crushers. <6. Environmental Issues still to be addressed. > There appears to be no problem on that side. But you are right, Permits must be obtained. <7. Mine reclamation cost could be high. > Standard stuff.. and cost are minimal. <<8. Current cash burn is about $1m/yr for C'bay. Plus, metallurgy and feasibility studies can burn a lot cash fast. May need to go for funding again. > No. They have all the cash they need. They can even spend on additional exploration. <10. Mining and processing costs are estimated at $3.75/t, mine capital cost are $45M. Small -ve changes in these figures can adversely affect production profitability.> With a IRR of 45% at $4.50 silver...they have some room! <11. Contained reserves of Ag equiv. are about 125m ozs. Current estimated recovered equiv. are only 95m ozs. > In fact I expect reserves to decline due to lower silver prices and they increase cut-off. But they will recover more silver as they will process higher grade. Still very positive IRR 45%+ I think. <12. C'bay has to still pay $400K US to get 100% interest in deposit. > Peanuts. <Will need funding.> No. Thye have $6M in the bank. <13. C'bay is a single deposit company> True. And indeed the risk is higher. But that doesn't change valuation by a lot. <14. Current s/h equity is only about 60c/sh.> Irrelevant. Reserves are not on the balance sheet. <All the above makes me value C'bay around $2.50/sh. > You are about 50% lower than the consensus.