The following article regarding the Eritrean government, is both right, and also wrong.
My investment style is sometimes high risk, and I rank Chalice a medium term high risk buy.
If you like high risk, and you have little morality regarding politics and human rights (like myself), then you would be well suited to an investment in Chalice, and I encourage it.
This article demonstrates the nature of the Arab/Eritrean politic.
The article is correct in that the Eritrean government did borrow $60 million in late 2007 from the China Import-Export Bank to pay for 40 percent (10 percent free carried) of the Bisha gold project in Eritrea, developed by the Canadian gold company Nevsun (validated by the China Import-Export Bank).
You will note that the Eritrean government made the agreement with Canadian gold miner Nevsun for June 30, 2011 as the deadline for payment.
Surprisingly (or not), Nevsun had to delay the deadline of June 30 for the Eritrean government's payment and stake in the mine, without setting a new deadline (no doubt at the Eritrean government's demand - for what type of company would actually prefer not to be paid $60 million on time).
So will Nevsun ever be paid? Or is the Eritrean government waiting to collect the money from their proportion of the proceeds of the gold production and then pay it back to Nevsun (in effect, paying Nevsun with Nevsun's gold)?
Perhaps they could then pay Chalice with the gold they get from Nevsun.
So what has the Eritrean government done with the $60 million, and where has the money gone?
And why is the Eritrean government now saying they will pay their portion of the Bisha mine costs to Nevsun (ie. the portion the borrowed $60 million was supposed to pay for) from their 40 percent of current gold production, and not from the $60 million dollar loan.
It still begs the question, what has happened to the $60 million?
The other question this begs of course, is will Chalice ever see their $32 million Eritrean government contribution. The Eritrean government has 6 months to pay.
Having a deadline on this Eritrean government payment is good for investors, and they should watch this date closely.
The Eritrean government has reneged on paying Nevsun on time, so it will be interesting to see if they do the same with Chalice.
If the Eritrean government attempts to delay or postpone this payment to Chalice, then intelligent investors will be able to make a decision on whether to remain, or close out their position - largely based on whether they trust the Eritrean government.
This is what I will personally be doing at the 6 month anniversary date of the agreement. For me, if we are paid the money by the Eritrean government, then I stay, if not, I am gone - pure and simple.
This makes for an interesting January 2012, though I will be approaching the company for a definitive day by which the payment must be received.
This is one method of investing in small cap resources.
Set your risk tolerance.
Do your research.
Know your company and it's directors, your company's finance, and know the politics of the country your company is operating in.
And know your mine operating agreements.
I support Chalice, and I support anyone who invests in the company, provided you do so with all the objective information that you need.
This is fundamental.
Good luck, and here is hoping we all make money, including the directors of Chalice.
My sentiment remains a buy, and with further good drilling results in the second half of the year, we should see a rising appreciation in the current share price.
Gw
CHN Price at posting:
30.5¢ Sentiment: Buy Disclosure: Held
(20min delay)
