18 Stages Of Mining Ruin

http://youtu.be/LQ9xjcuE524

Thank you Weeble for posting to stockhouse.

This interview is a very important reality check on GBN.V to listen to. The implication is that should average realized gold price from production rise as a consequence of the continued bull market in gold, then free cash flow should rise dramatically.

On friday GBN.V closed down 6%, but the quote was delayed and I had posted just before the quote changed. GBN.V is stongly inversely correlated to long dated treasuries prices, and that this is evident in the trade on Friday. GBN.V will move 4X inversely to TLT.

You can say that junior mining companies are being naked shorted, and its preventing them from advancing, but you have to take into account that their valuation is being assigned by the market at any rate. Naked shorting can only push the share price so far. However, if dynamic hedging strategies are involved, this would mean that a gold mining company will have to pay dividends to qualitatively change the model in use that determines the value of the share price.

GBN.V's P/E is ~11, according to Bloomberg

Production rates are said to be rising from 350 tpd to 500 tpd and into 700tpd for Q1, with no required financing. This outcome has been long awaited, if not significantly delayed. The required financing for startup was slightly below budget according to the 2009 PEA, and completed in February, 2011, and reported in the Q4 fiscal 2011 news release. (PEA = $51m) With the rise in gold prices to continue, and processing rate to rise, its a no brainer that the P/E will decline drastically on a fully diluted basis.

Fixed costs and consistent grades are a great help. Strict grade controls are in evidence. Production rates are as stated. 45k for the first year. 70k anticipated next. Eventual production of 100k in the third year. Guidance, minimal though it may be, has been correct.

But my opinion on this company is that they keep secrets from their shareholders, this may be due to Netolitzky maintaining managerial and minority control over the company. ~$130m will have been poured into the project in the last 18 months by then end of fiscal 2012. Can you say you know how that money was spent, exactly?

On the other hand, if this is true, then to imagine the company desperately requires financing says you did not do your due dilligence.

-F6