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XMFSinchiruna (27.78)

Alexandria Drills 6.66g/t over 22.7m at Sleepy

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September 08, 2011 – Comments (21)

Alexandria Further Expands Potential at its Sleepy Gold Project Drills 6.66 g/t Au Over 22.70 m Below 400 m

http://www.azx.ca/news/2011/news20110908.html

This is terrific news, and helps provide some supremely positive news flow while we await the initial resource from Akasaba. 

Keep in mind, Fools, that the company will be needing to raise some capital soon, and as with most exploration companies of its scale a share offering is the most likely method. Although it is obviously not ideal to have to issue shares at a price-point that I think the entire community views as a depressed valuation, I can see no other alternative. Nonetheless, I actually am hoping for a relatively large offering that will permit the company to drill aggressively, and I have every intention of maintaining my percentage stake in the company regardless of the size of the offering.

21 Comments – Post Your Own

#1) On September 08, 2011 at 12:35 PM, Frankydontfailme (27.29) wrote:

Any thoughts on PPP's revised outlook?

The strike should have been priced in. The slighly higher cost/lower ore grades a dissapointment.

Seems oversold but I'm interested in your opinion:

 

Primero Provides Revised Operating Outlook12:05p ET September 8, 2011 (Market Wire)

Primero Mining Corp. ("Primero" or the "Company") (TSX: P)(NYSE: PPP) today announced that as a result of a month long strike and lower than anticipated gold grades it has provided a revised operating outlook for 2011.

Primero has revised its production outlook for 2011 to 80,000 to 85,000 ounces of gold and 4.5 to 5.0 million ounces of silver, versus original guidance of 90,000 to 100,000 ounces of gold and 4.5 to 5.0 million ounces of silver. Cash costs are expected to be in the range of $610 to $630 per gold equivalent ounce or between $340 and $360 per gold ounce on a by-product basis; versus original guidance of $550 to $570 per gold equivalent ounce or between $350 and $370 per gold ounce on a by-product basis.

Gold production is expected to be lower than anticipated due to a month long mill workers strike in April 2011 and continued lower than anticipated gold grades in the Roberta and Robertita veins in the Central Block. Consequently cash costs are expected to be proportionally higher than anticipated. Despite the revision to gold production the Company's exposure to higher than anticipated silver prices resulted in a smaller reduction to the gold equivalent production outlook.

"During the mill worker strike, we continued to mine ore and had hoped to meet original guidance by processing the stockpiled ore in addition to daily production," said Joseph Conway, President and C.E.O. "While the mill exceeded nameplate capacity during the second quarter, the stockpiled ore was not assayed due to the closure of the lab during the strike and was lower grade than anticipated. This and encountering lower gold grades since the end of the second quarter has required us to revise down gold production guidance for 2011." 

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#2) On September 08, 2011 at 12:42 PM, XMFSinchiruna (27.78) wrote:

Franky,

Doesn't bother me in the least. It's a 9% reduction from prior GEO guidance. Lower grades than geological modeling predicts is a fact of life for miners, and can just as easily go the other way in a subsequent vein segment. The grade issue does not reflect on management at all... it's simply part of the business. As they explain, they had hoped to make up the difference from the strike's downtime, but now it appears they will not.

These are all short-term issues creating more attractive entry points for investors with a long-term view.

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#3) On September 08, 2011 at 12:43 PM, DarthMaul09 (29.63) wrote:

A better option may be a purchase by AEM, GG or another miner with lots of available cash.  It seems that this may be the season for consolidations, before the prices get too high.

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#4) On September 08, 2011 at 12:47 PM, XMFSinchiruna (27.78) wrote:

I was just going to say, today's overreaction by the market simply makes it that much more likely that a secondary deal will be imminent for the company.

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#5) On September 08, 2011 at 12:49 PM, XMFSinchiruna (27.78) wrote:

And yes, look at the RSI.

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#6) On September 08, 2011 at 1:06 PM, Frankydontfailme (27.29) wrote:

It's funny. I'm always waiting for the companies I want to add positions to fall to a certain level. And when they do, I start to worry. If investing was easy we'd all be millionaires :)

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#7) On September 08, 2011 at 1:10 PM, Frankydontfailme (27.29) wrote:

Also (unrelated) the SVM short covering today was fun.

Something about the pain of shorts that makes me giddy. 

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#8) On September 08, 2011 at 1:22 PM, XMFSinchiruna (27.78) wrote:

Franky,

Look at it this way: the company just cut 2011 GEO guidance by 9% with only a few months left to go for the year, and the market removed 11+% from the company's mcap. Okay, so 2 quarters of results will have to have expectations shaved downward a bit.

But ask yourself what has just changed regarding the company's outlook for 2012, 2013, 2014, 2015, etc.,  etc., etc. Precisely nothing. I LOVE it when traders get this myopic.

Go back to the original thesis for Primero, and my article covering the founding transaction.

http://www.fool.com/investing/small-cap/2010/06/04/an-amazing-day-for-a-bad-night.aspx

The value proposition
Going back to our discussion of San Dimas reserves above, Goldcorp's willingness to essentially guarantee 220 million ounces of payable silver production stands as a strong testament to the wide divide between San Dimas' stated mineable reserves of 60.9 million ounces and the far-greater production potential anticipated by the mine's operators. If the market fails to account for that divide in its initial pricing of Primero shares, this could inject a strong value component into what is already shaping up as a compelling growth stock.

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#9) On September 08, 2011 at 1:33 PM, SN3165 (< 20) wrote:

I just wish I would have held off a cople of hours before picking up shares and warrants... lol

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#10) On September 08, 2011 at 1:34 PM, Jbay76 (< 20) wrote:

Sinch,

Not to detract from ALXDF's progress, but did you happen to see AXU's most recent press release?  Definitely good things a brewing there....bt back to ALXDF....do yo think that the inevitable stock offerign will occur at  a price lower than what their stock sits at now?  I ask becuase I remember how earlier this year, after loading the truck up to get GPL, shortly thereafter they announced a public offering at a lower price than my purchase price.  So I wonder if the same will hold true here....any thoughts.

Many thanks as always!

John 

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#11) On September 08, 2011 at 1:40 PM, Frankydontfailme (27.29) wrote:

Don't have to sell me anymore Sinch. I bought shares at 3.50 and added a little today.

Of course, the market can stay irrational, so I'm keeping a bit of dry powder in case it gets down to 3.00 or so. With the huge boom in gold prices, I want the majority of my money in the low cost producers that are simply printing money (real money that is) like auy gg (auq for growth). I also love the streaming model because I believe oil prices will remain somewhat elevated even in the slowdown.

For the little guys, I have small positions in brigus, ppp, and a bunch of others. I'm selling the rallies though, and waiting for better spots to fully sink my teeth in. Volative markets can be unfriendly to juniors, not enough for me to liquidate (especially with potential consolidation) but enough for me to be cautious. 

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#12) On September 08, 2011 at 2:00 PM, XMFSinchiruna (27.78) wrote:

JBay,

Yes, I did see Alexco's awesome release yesterday, and yes, the enormous organic reserve-growth potential that Silver Wheaton referenced years ago is playing out according to plan. Everywhere they stick a drill in the ground, great things happen. And that's the sort of company Fools will want to stick with.

There is not much room to price the offering at a discount here. Companies experiencing rapid share price appreciation will often come in beneath market value, but it all boils down to where the market demand lies. The safest approach, of course, is to reserve some dry powder to purchase into the offering announcement, as you can bet the broader market does not follow the company as closely as we collectively do.

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#13) On September 08, 2011 at 2:01 PM, XMFSinchiruna (27.78) wrote:

Franky ... sounds like a sensible strategy. :)

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#14) On September 08, 2011 at 3:04 PM, Jbay76 (< 20) wrote:

Thanks for the info Sinch!

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#15) On September 09, 2011 at 12:53 AM, ShelleyB12 (< 20) wrote:

RE: PPP

Although the lowering of the gold output is disappointing, isn't it made up for by the $25 million that PPP will receive from NXG for cancelling the buyout? That's a nice fat chunk of change in their pocket. How will it affect the company?

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#16) On September 09, 2011 at 1:09 AM, traderbach (< 20) wrote:

Thanks Sinch for the news on ALXDF.  I saw it up in my portfolio today but didn't have time to research it.  Am adding on dips.

Frankydontfailme

 Thanks for the PPP question.  I had the very same press release ready to paste into a comment before I took a look at TMF tonight & lo & behold there was Sinch's post & your question directly below!   Synchronicitity or what!?

FYI :- Been watching Copper Fox & looking forward to the results of the feasibility study.  They've lost more than 40% since they peaked out in April but fortunately I got them way below current price (thanks to Sinch's tip & following up w/ DD).  Thinking of buying more. Shouldn't be too long before the study is released :-

"The Company is working on completing a feasibility study on the Schaft Creek deposit, one of the largest
undeveloped copper, gold, molybdenum and silver deposits in North America.  The feasibility study is being led
by Wardrop, A Tetra Tech Company on a minimum 120,000 tpd open pit mine and is expected to be completed during the fourth quarter 2011."

Is a stock offering inevitable at that time too w/ this company?  A pretty giant resource to exploit there.  Would enjoy opinions going forward.

 

 

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#17) On September 09, 2011 at 9:05 AM, Jbay76 (< 20) wrote:

@traderbach

See here for info on the private stock offering that Copper Fox released on Sept. 7th.  The entire offering was a private, inside transaction set to sell 2 million units at $1.50, with each unit consisting of one comon share and one half warrant, for a total value of 3 million.  I have been considering doubling down on my CPFXF holdings for some time, and may very well do so today.... 

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#18) On September 09, 2011 at 9:07 AM, XMFSinchiruna (27.78) wrote:

ShelleyB12,

Great point about the $25m! That will show up as income on the current quarter, and remind traders just how irrationally they responded to the latest news.

The cash gives the company a bit more wiggle room on the silver stream tax issue, buying them time to sort the matter out. It also, as mentioned, will pad 3rd quarter earnings at an opportune time.

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#19) On September 09, 2011 at 1:34 PM, FleaBagger (29.46) wrote:

Franky - Shorts aren't all bad! I'm shorting BGU right now. It's fun. You should try it (I'm shorting a 2x ultrashort as a safety measure). Or were you just hatin' on PM shorts? Cause I can stand behind that.

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#20) On September 09, 2011 at 3:08 PM, Frankydontfailme (27.29) wrote:

Not against shorts at all. I'm againt shorts for the companies that I own though... and I love it when they rush to cover :) (simple minded I know).

I personally don't bother to short because I don't want to use margin and know this market to be absurdly manipulated to the point where bad news becomes good. Heck, I was sure the market would rally today on hopium, but I guess Europe trumps hope in this case. Still too inexperienced and too cautious I suppose. 

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#21) On September 13, 2011 at 7:27 AM, skypilot2005 (< 20) wrote:

 Brigus FYI:

 

http://www.snl.com/Cache/1500035742.PDF?D=&O=PDF&IID=4288058&Y=&T=&FID=1500035742

 

Brigus Reports High-Grade Gold Assays at the Contact Zone of the Black Fox Complex

(Wed, 07 Sep 2011 11:30 GMT)

 

Sky Pilot

 

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