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

To: GlobalMarine who wrote (16371)	9/28/1998 10:01:00 AM
From: Tom Frederick	Respond to of 20681

Rand, actually it's a very shrewd business move. There are many properties owned by the larger producers which are too small to produce the volume they need to justify creating the infrastructure that is part and parcel of the larger producer. For example, the larger producers need for a mine to be creating significant output for lets say, 30 years. Therefor, they own a lot of equipment that is sturdy, expensive and with life spans of 30 years. Smaller properties, while marginally profitable when PM prices are high, are not only losing money when PM prices drop, but they are sucking resources (like 30 year lifetime equipment) down the drain of a property which may, at best, have a 10 year life. Translation? Too much expense to set and run a non profitable property. The current PM prices have created a buying opportunity for small properties with shorter life spans. John Norton is very familiar with this situation from South Africa. What some companies over there have done is create "small mines" division which use smaller, modular designed mining equipment designed for 10 to 15 years use. The cost is much lower, and the life span is appropriate to the property. In addition, with the modular design, it is easy to expand the output based on the production needs of the property or shrink them as well with no significant affect on overall operations. So while it is easy to make a joke about "distressed" properties, it is more exciting to do some DD and find out this is not only logical, it is also highly probable and a smart business move. We still need to see a successful reopening of any of the new acquisitions (Mexico to start), but Naxos is at least on a path that is based on real world experience and has a solid, logical, business plan to support it which is buy up these small properties with proven reserves and known assets, restart recovery operations with a plan for expenses vs. revenue to balance out to a solid profit, and buy enough of them to make Naxos a company with a future and also be a real player in a whole new market niche of small property mining. They are not there yet, but at least it's a plan that I think makes sense. You have to make up your own mind. With or without the tin foil hat. Tom F.