Use access key #2 to skip to page content.

goldminingXpert (99.76)

Banro (BAA) +50% today: Is it golden?

Recs

7

January 27, 2009 – Comments (8) | RELATED TICKERS: BAA , GET , GOLD

This post is in response to a question I got from Goodvibe4ever. I hadn't looked into this company until today, so this is just my quick take.

I've never invested a dime in a miner dealing with a politically iffy country. BAA being in Congo alone is enough to stop me from investing in it, but for those more daring...

The data looks good but not great, I wish the g/t figure was a bit higher.

The company appears to not have enough capital to build this half billion dollar mine. It's already been diluting itself significantly at prices under $2 a share which shows the desperation of the company in raising capital. I assume the company will have to A) sell itself entirely, B) dilute itself extremely, or C) sell off a large chunk of the mine at a price that doesn't suitably compensate shareholders.

All that said, if Banro gets to keep this mine to itself, this stock is probably worth well north of $2/share. However, I except that in this difficult cash crunch the economy faces, BAA will not be able to build and operate this mine independently, and thus shareholder value will not be achieved to the degree one might wish for.

Disclosure: No position/in fact, this is my first research into BAA in response to a question from Goodvibe, so my research may be incomplete and missing something, do your own DD.

8 Comments – Post Your Own

#1) On January 27, 2009 at 2:06 PM, Tastylunch (29.98) wrote:

what's the deal with electricity in Congo? Gov't set the rates?

If so then you never know what BAA's input costs will be...

I cna't remember why but I passed on this one a long while ago.

Report this comment
#2) On January 27, 2009 at 2:59 PM, GoodVibe4Ever wrote:

Thanks for taking the time to respond.

The thinking of Lance Lewis who buzzed about that company is the following:

BAA has no debt, so assuming $1000 gold, 3.67 mln. ounces of proven & probable reserves, an average cash cost of $429 per ounce over the life of the mine (which is based on feasibility study), and the estimated $410 mln. Required for cap ex, we get an NAV of almost $15 a share (which gives zero value to the company's current cash balance of around $20 mil. and its remaining 5.6 mln. ounces resource at Twangiza, not to mention the resource estimates at its other properties).

There are very few 10 mln ounces resources out there these days that are not already in the production phase. NEM paid $135 per resource ounce for a very similar 10 mln. ounce resource just two years ago when the price of gold was lower. The same price for BAA would equate to nearly $34 a share.

Lewis has a position in BAA

....

To be frank, I don't understand much of the above, not my cup of tea. :) I thought if I don't know jewelry, better I know the jeweler. Lewis is a trusted expert on the topic and I wanted to know what do you think of what he said?

Thanks!

Report this comment
#3) On January 27, 2009 at 3:34 PM, bullshiite (97.91) wrote:

Great post.  I noticed the spiked, contemplated a buy, but decided to search the blogs first.  I'm glad I came across your post.

Operating a mine in the Congo is enough risk as it is.  To get an idea of how unstable the region is, youtube the program Shadowforce and look for the illegal charcoal  trade episode.  The Congo and surrounding countries are a complete mess.  On the plus side, for BAA, millions are unemployed and the average wages are $0.02 per hour.

Report this comment
#4) On January 27, 2009 at 5:40 PM, goldminingXpert (99.76) wrote:

Lewis is correct about all that, but the question is the financing. $20 million in cash doesn't build a $500 million mine. How they get that money with the credit markets shut down is the question. I assume dilution or sale at a low price. If Banro manages to keep ownership of the mine and acquires funds to build it out at a reasonable cost of capital, shares are worth many multiple of $2... assuming issues don't develop with the government there.

Report this comment
#5) On January 28, 2009 at 1:30 AM, MGDG (73.54) wrote:

This reminds me of Apex Silver a few years back. A huge resource with no funds in hand to develop it. By the time they had raised the financing to develop it, the Banks had strangled them with enough hedges to make any chance of profits remote.

Report this comment
#6) On January 28, 2009 at 11:32 AM, goldminingXpert (99.76) wrote:

BAA plunges 15% today. Beware of big pops...

Report this comment
#7) On January 28, 2009 at 4:35 PM, SuperPicks (30.14) wrote:

GMX, congrats on hitting 10,000+ points today

Report this comment
#8) On January 28, 2009 at 7:12 PM, herztical (28.86) wrote:

Unrelated, but you want another red thumb...try DRYS here is my rant:

http://caps.fool.com/blogs/viewpost.aspx?bpid=133944&t=02009005112621729295

 

I even got the #1 rank in Google for keyword "DRYS":

http://www.google.com/search?hl=en&q=drys&aq=f&oq=

 

BTW Caps is much easier if you stay on top of your picks!

Report this comment

Featured Broker Partners


Advertisement