It has been a while since I have been able to share a few thoughts regarding PFG in the near term but I thought I would end the year with this:
A number of warrants and stock options are coming due in early 1999. Two stand out in particular, the Jan 31 $1.52 warrants and the Feb 3 $3.85 "Incentive" Stock Options.
exchange2000.com
Options and Warrants Outstanding:
Number Expiry Date Potential Proceeds
Share Purchase Wts. 2,475,000 $1.52 Jan. 31,1999 $3,762,000
Compensation Options 75,000 $6.375 Apr. 4,1999 $478,125
Stock Options 1,295,000 $3.85 Feb. 3,1999 $4,985,750
Stock Options 60,000 $5.17 Apr. 18,2002 $310,200
Stock Options 330,000 $3.85 June 2,2000 $1,270,500
My thoughts:
1) From a PFG management perspective, it makes sense that the $1.52 options should be exercised. This would add an additional $3,762,000 to the coffers in addition to the current $7,000,000 approx. Also note that the warrant holders are for the most part past or current management. Therefore, I look to see a share price slightly greater than $1.52 by Jan month end. I would suggest the rise in share price over the last month or so demonstrates this will happen and new announcements should put us over the top.
2) From a PFG management perspective, it does not make sense to have the share price above the $3.85 range in order to exercise the $3.85 options, therefore these "incentive" options will left to expire and new options will be issued to replace them at a much more attractive exercise price.
I would suggest that from a mining company management perspective that this is good business. As a shareholder, do I begrudge them this … in the past I might have, but not in this case, as I believe no action will take place in this stock until management is ready and the pieces of the puzzle have fallen into place.
Now the final pieces of the puzzle in my mind, are firstly the expiry and re-issuance of the "incentive" stock options, while the second piece remains Diablillos.
I continue to believe a decision regarding opting out or moving forward on the Diablillos property will be made by Barrick in the near future, and I still lean toward the properties purchase by Barrick. Why must a decision to opt out or move forward take place soon? Two big reasons, the cost and timing associated with preparing a feasibility study and a capital budget.
Contractually, a Production Decision must be made by June 2000 or Barrick must invest $4,000,000 per year thereafter. A production decision requires a feasibility study and a capital budget. To be able to produce a feasibility study, Barrick must spend a great deal more money to increase the drill density, conduct many more metallurgical tests, build a mine plan, engineer the deposit, etc. PFG has indicated a Production Decision may take a year or so but E Charters indicates 9 months as the average timeframe at a cost of approx. $10,000,000 US exchange2000.com 207.102.243.58
In a Jan 1998 release, PFG indicates Barrick will conduct an internal resource calculation upon completion of the May drilling campaign, for which we actually received the final results a short while ago. In turn, PFG relays in the same release that " Upon receipt of the updated resource calculation and results of the metallurgical test work, Pacific Rim will have sufficient information to conduct an independent scoping study which should be completed in the second quarter.
exchange2000.com
I would suggest that this is happening right now and these will be the final negotiation points in advance of a decision/buyout.
At the Pacrim Homepage a clue is given as to the expected timeframe for a decision as PFG will not drill Fantasma until a decision from Barrick regarding their future plans at Diablillos is made.
pacrim-mining.com
The Fantasma CSAMT results will be used in conjunction with structural interpretations to define drill targets for a program planned to commence on the project prior to March 1999.
A SEDAR filing confirms this.
sedar.com\public\q299b.doc
Pacific Rim is extremely encouraged by the results of this survey, which indicate excellent potential on the Fantasma property for the continuation of the Oculto mineralization and for the discovery of a new mineralized zone on strike with a known silver-gold occurrence. Management will await a decision from Barrick regarding their future plans at Diablillos before proceeding with drilling at Fantasma.
I'll stop there for now as I am about to head out for a family get together …
Good investing to everyone!
Rick
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