I got into ADU early this year and added to me initial holding. Basically I want to hold it long term, i.e. to when gold has its blow-off phase, so I do not want a takeover. I would like to see them using the profits to fund expansion, both by increasing future production at their existing tenements and by some acquisitions.
Two main constraints I see are the MacBank hedge at $1075/ounce for around 290,000 ounces over 5 years (there is some flexibility to deliver the gold earlier) and that a significant portion of the gold they are likely to find is complexed with sulphide which requires more costly processing than the oxides they are planning to mine.
One other thing I noticed is that the management/directors do not have much skin in ADU. For this reason I do support the issuing of some performance options.
Basically, I do not see ADU as being in the same category as PRU. What ADU provides is exposure to a gold producer with a useful sized deposit and potential to expand so that we can benefit (hopefully) from future increases in the price of gold.
I am pretty sure that institutional investors are now taking a lot more interest in ADU. I wish ADU had some of its shares trading on the TSX so that we could benefit from the higher PE multiple that applies to such companies (I think ADU is listed there but has no Canadian shares to be traded). I expect ADU to hit $1 sometime after production has commenced next year.
Anyone going to the AGM? I live too far away. If anyone goes then some feedback on the meeting would be appreciated.
loki
ADU Price at posting:
78.5¢ Sentiment: LT Buy Disclosure: Held
