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Strategies & Market Trends : Ride the Tiger with CD -- Ignore unavailable to you. Want to Upgrade?

To: Frankly Speaking who wrote (75962)	2/21/2007 7:16:37 PM
From: zoo york	Read Replies (1) \| Respond to of 313335

Hi FS! I am still digesting all the angles on the deal. My gut reaction is that SST got the better end of the deal. I own a big chunk of my PF in both companies, and have SST as one of my top 5 picks for the year, so I do not feel screwed as a shareholder. Here are the comments that I posted on my forum just a few minutes ago: 1) This transaction is basically the final step in the division of assets that was accomplished with the SST spinnoff. CS will be base metal focused, and SST is fully leveraged to silver. 2) CS will be forward selling the silver at about $8.40 US per ounce, a 40% discount to spot. On the surface this looks thin, but the addition of the SST shares through the transaction means that CS will carry a minority ownership on their books and still be leveraged to profits from rising silver. In addition they get part of the money for all that silver up front. Cash is king, and I assume that management have some plans for that cash. 3) SST is the big winner in the deal as far as I can tell, since they will be a mini-Silver Wheaton leveraged to earn profits on the silver production without the risk of the production costs. This will help them to underwrite the exploration costs for their suite of properties. I am expecting the analysts will be very happy with the deal. The big question is how much was the silver production factored into the market value for CS? We will see a hit to the earnings because the company will not realize the revenues from the silver except for the $4.00 per ounce in future years. Will the clean focus on base metals make the CS story more attractive in the future to attract a higher multiple? Management is betting it will. A final comment is that the deal may be the final transaction before a firendly merger bid is announced with a larger copper player. Rolling all the silver assets into a separate company would look very smart if the Cozamin Mine is sold for a premium to another player. It is worth considering. cheers! COACH247 PS: I should also disclose that CS is a paid advertiser on my website, but I do not have any obligation to post comments about either company. The above is strictly my opinion.