not selling...., page-30

Goodonetwo

Total costs of production these days is around USD1100-1200/ounce. The project may cost in the order of $240-300m to develop a mine etc in a remote location for a 150k ounce pa operation. I suggest you do the sums. How much additional equity would they need to raise and how much borrowings. What would the payoff then be to the shareholders - ie when would they actually expect to receive a dividend and how much?

Lets make a simple assumption that they find the extra 400k ounces of gold in oxide ore, that the BFS is positive at USD1300 (like the GRY BFS) and that the market gets excited enough to push the share price up to 35 cents.

AMX then raises $120m in equity at 30 cents a share. That would mean another 400million shares to be added to the existing 250 million shares - all up 650 million shares in total.

They borrow the balance needed for the project - perhaps $USD150m and take a hedge at USD1350/ounce.

Their nominal profits before tax at USD1100/ounce would be $250, or $37.5m pa. The tax rate in BF is around 25%, so after profit tax of $28.125m, which on 650m shares is 4.32 cents per share. Lets give them a generous PE of 10 and you get a share price of 43 cents.

However note that the market will currently discount them because they would probably not be able to pay a dividend for many years until they had paid off the loan,

Does anybody really believe that investors are willing to take the risk of investing in Africa for 5 years in the hope of doubling their investment in 5 years - think of all the risks that are to be faced.

People have learned the hard way that these companies will only make you money if there is a boom in their shares and you are sensible enough to pass the shares onto somebody else at a profit as soon as possible rather than to wait for some vague future reward in dividends. The other possibility is a takeover for a premium by a cashed up major.

Sorry, I am being realistic about these things because it is the only way to be in this market.

On the other hand if govnuts ever manage to create inflation several percentage points above the risk free interest rate (usually considered to be 10 gov bonds) then for a while gold and goldies will be the place to be again.

The ones who saw the light and sold their AMX shares in the $1.50-3.00 range ought to be congratulated for their good business sense (or luck).

Good luck

loki (the goldiebug dream impaler)