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Gold/Mining/Energy : Naxos Resources (NAXOF) -- Ignore unavailable to you. Want to Upgrade?

To: carl who wrote (8736)	1/30/1998 4:02:00 PM
From: mark silvers	Read Replies (1) \| Respond to of 20681

Carl--- I think you make it just on enthusiasim alone!!!!! Mark

To: carl who wrote (8736)	1/30/1998 4:05:00 PM
From: GlobalMarine	Read Replies (1) \| Respond to of 20681

Carl: These analysts always give a rosy price target to generate sales commissions. The runup in PGM price last year wasn't accompanied by a rise in SWC stock because people felt the price move would be fleeting in nature. At it was. Something major would have to happen to drive the stock price to $50. The company is probably sitting on a resource of some 200 million oz of PGMs altogether (the US government surveyed this area back in the 1960s or 1970s (I forget when) and came up with this resource estimation. The mineralization is narrow but extends for many miles lengthwise and to great depths. The problem is that the underground deposit is expensive to drill and assay. You can't just poke holes from the surface and prove the whole thing out at once because the PGMs are at great depth and extend to great depths (too bad...the stock price would have been worth hundreds of dollars). So they must drill from a mine shaft underground to add to p/p reserves. Their past policy has been to drill and assay enough reserves to replace what they produce each year. But more recently, they've been proving out more oz than produced, thereby increasing total p/p reserves. They do hedge because they're in business to try and make a profitable mine, not speculate on future PGM prices.

To: carl who wrote (8736)	1/30/1998 5:11:00 PM
From: Tom Frederick	Respond to of 20681

Carl, you've got my vote! You certainly deserve the door prize for putting that much time into that analysis. It all works on paper (or on screen I guess). The only challange we have is to get the market to do the same math and start valuing this stock accordingly! We still have some work to do on proving the ore, but we are quite clearly heading in a great direction and forward motion is steady though never at the pace we investors prefer. Thanks for that diligent posting! Respectful Regards, Tom F.

To: carl who wrote (8736)	1/30/1998 7:15:00 PM
From: GlobalMarine	Read Replies (2) \| Respond to of 20681

Carl: Your SWC post certainly has you in the running for Naxonian of the Month. The sheer size and implications and FL may preclude the ability to model a target value per share based on other mining companies' valuations. Suffice it to say that the stock could be worth a lot. I used to own SWC and the company used to calculate gold- equivalent p/p reserves at 18 million oz. It rather looks like they've abandoned that in favor of simply stating total ounces. On the other hand, given that gold is cheap and palladium is getting up there, let's assume 23 million oz in gold equivalents for a moment. On a market cap basis, if we capitalize that at $30 an oz (a rough figure I like to use is 10% of the current market price of gold), $30 X 23 million oz / 20 million shares = $34 a share. However, Stillwater is a PGM mine and its relative lack of sexiness compared with a gold mine gives SWC a lower market cap per p/p ounce, and this has always been the case with the company. On the plus side, thery're in production, and Wall St. gives value to yearly production, though I forget the ballpark formulae. For Naxos, if we go only with a PE ratio calculation, using your 20,000 tons a day figure and assuming 3 oz/ton yield and 1 oz/ton cash production costs (yes, $300 a ton is high but I like being conservative), the company gets $600 a ton X 20,000 tons X 365 days a year / 50 million shares o/s (I expect lots of dilution if we ever get as far as building a mine) = $88 a share in cash flow. I don't know how much it would cost to build the mine but let's suppose the net income after depreciation and taxes is only $30 a share. Assume a PE of 15 and you get $450 a share. If we switch to a market cap per p/p reserves, let's suppose a billion oz in p/p reserves. At $30 an ounce and 50 million shares o/s, you get 1 billion X $30 / 50 million = $600 a share. I personally don't think this is how Naxos will be valued because the p/p reserves are too staggering to apply any normative valuation standards. I hope I'm wrong but I don't think Naxos can do 20,000 tons a day. To shake and bake 20,000 tons of head ore a day requires an enormous amount of equipment, power and real estate, IMO, and I don't think it'll happen. I think a more reasonable number like 500 to 1000 tons a day is doable.