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Gold/Mining/Energy : Mining News of Note -- Ignore unavailable to you. Want to Upgrade?

To: LoneClone who wrote (45627)	10/21/2009 10:31:17 AM
From: LoneClone	Read Replies (1) \| Respond to of 193686

The Boardroom Bust Up At Troy Resources Is Detracting From An Otherwise Compelling Investment Story By Our Man in Oz minesite.com Gold up. Troy down. You don’t need a double major in mathematics and investment theory to know that it’s a bit odd to see a gold mining company’s share price slide when the price of its commodity is rising. That, however, is what has been happening over the past few weeks at Troy Resources, a small Australian-based gold miner with a portfolio of nice-looking assets in South America, and an enviable track record of posting profits and paying dividends. The problem, which must be galling to Troy shareholders as they miss the early days of what looks to be a sustainable gold boom, is not in the field, it’s in the boardroom. There, it’s lawyers and public relations consultants at 10 paces – at least they can afford to smile as they trouser their fees. Minesite’s Man in Oz recently got a stiff dose of Troy when he spent the day listening to both sides of the current boardroom brawl arguing their respective positions. First came a lunchtime briefing in a private room at Perth’s Burswood casino with Troy chairman, and former senior Newmont Mining executive, John Dow. Then came a telephone chat with the man who has dropped a stink bomb into the Troy boardroom, former Troy frontman John Jones. It is Jones who has called for the sacking of most of the Troy board, arguing that a series of proposed mergers and a possible share issue could have hurt existing Troy shareholders. Trying to judge the merits of the claim and counter-claim in what appears to amount to a personality clash is impossible for an outsider – or for an insider for that matter. So, what Minesite’s Man tried to do today was to listen politely to both sides and then consider a question: after the dust has settled, and a vote is taken at an extraordinary meeting on 16th November, what will Troy look like, whoever wins? Pretty damned good, is the answer, and for several reasons. First, because Troy is developing a crackerjack gold deposit in Argentina, and has two other gold mines in production, making it beautifully exposed to the gold price. Second, because its gold mines are in Brazil and Argentina, Troy has a much stronger exposure to the gold price than some of its Australian rivals which are being held back by the rising value of the Australian dollar. And third, because the share price is poised to spring back after being artificially held down by these recent events away from the mines. On one way of thinking, Troy’s current share price of A$2.37 should really be around A$2.63 if it was just to stay abreast of the rise in the gold index on the ASX. The missing A26 cents is the “boardroom discount” being applied by the market, a number derived from factoring in Troy’s one per cent share price fall since John Jones served his request for a meeting to “spill” the board on 25th September with the 11.3 per cent rise in the gold index. In fact, if you use John Dow’s presentation, circulated at the recent lunch, the value gap could be wider because of the likely impact of the new Casposo mine in Argentina on Troy’s future earnings. This asset was acquired earlier in the year from Intrepid Mines for the bargain basement price of US$22 million. Just how much of a bargain that was has become evident over the past six months as Troy has moved to marry the mine with a spare and only partly used gold processing plant that had been kept in mothballs in Australia. There was also another value-creating aspect to the Casposo deal: a rise in resources after the analysis of 61 holes that Intrepid had drilled but not included in resource calculations was completed. The net result is that Casposo’s indicated mineral resource is up by 32 per cent and the capital cost down by 47 per cent. The infuriating aspect to this remarkable good news story is that neither side of the boardroom battle disputes it. The areas of dispute are not business fundamentals. No, they are questions of style and issues around financing options. One side of the dispute has favoured equity. The other thinks debt is a viable route. But, when John Dow and John Jones start to talk about the company and its mines they sing from the same hymn sheet. Troy, they say has a “compelling valuation profile, an enviable track record as a dividend payer, a strong balance sheet, cash flow, and exploration blue sky”. Shame they can’t sing it in the same room at the same time.