I’ve been looking hard at gold companies over the last few...

I’ve been looking hard at gold companies over the last few months and I feel that DIO is one of the best investments out there atm.

It looks to me that the market cap is very low considering the companies assets:

- Market Cap $23m only!
- Frog’s Leg 296 koz reserves / 472 koz resources at 5 g/t
- South Kal. 516 koz reserves / 1675 koz resources at 1.5 g/t
- They own a 1.2mtpa mill (Jubilee at SKO).
- 5 year mine plan entailing ca 95 kozpa @ < 800$/oz.
- Very little debt (ca $10m to BNP Paribas vs $4.2m cash).
- Very small hedging exposure (38 koz for fy10 at 1004$/oz)
- Currently cash flow positive and able to fund capex from cash flow.
- Their assets are fully paid-for. They raised a lot of equity at high share prices (mainly 2007/2008) which has made past share holders suffer but creates great opportunities for new share holders.

I guess the problem with DIO is that their operations have under-performed over the past few quarters (eg production problems at Mt Marion and HBJ and resulting higher costs). The requirement to raise and extra $14m in Aug 08 must have been disappointing to the market.

I believe that there is upside potential for the DIO share price once they demonstrate satisfactory operations. They have a lot going for them (as listed above). Next quarterly expected about 1 April 2009.

What do ya think?

Cheers

Bayer