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Message: My thoughts...

My thoughts...

posted on Dec 02, 2009 12:22AM

Aside from answering a quick question, I've been waiting to post after the last week's developments. Partly because I wasn't sure what I thought or how I should express it, and partly because I wanted to be sure I wasn't making any rash statements. I’m sure you’ve all been holding your collective breaths waiting for my take! :-)

There are a number of things to consider:

The drill results: Basically, more of the same. Yes, there is a new find (Milestone) that’s possibly amenable to open pit. Lots of ounces according to cedar’s calcs, but nothing as exciting as the initial Golden Mile results that brought so many of us into this stock. We’re still waiting for the motherlode, or at least something that fulfils the expectations and hopes built up by the initial results. Some of the GM results were downright disappointing. Some posters have attributed that to drilling intended to define the outer edges of the resource- but knowing that deposits that were previously “open” in most directions are now defined and limited (at least in some directions) isn’t much consolation. I know much of the drilling was “routine”- infill drilling to better define the resource and for which results were not expected to differ much from the surrounding holes. Still, if the results presented in the last few news releases are indeed all the results from this year’s drilling program, then this year has not met my minimal expectations. Maybe I’m unrealistic, but I expected both more holes and better results.

Focus: Kodiak still seems to have a serious case of ADHD- constantly adding or dropping properties, drilling all over the place instead of focusing on the properties with the most potential, looking for new prospects to drill. Yes, finding new areas with potential is “nice”, BUT NONE OF THIS GENERATES REVENUE. I have always stated that I thought Kodiak’s properties have huge potential, but that I was worried about whether they would bring anything to fruition (sale, JV, backing by a major, production, etc.) before they ran low on money and had to dilute. Kodiak’s first priority should be getting at least one property to the point where it can be used to generate enough revenue to avoid (more) dilution and fund the development of other properties to the revenue generating stage.

The pp: Dilution is my biggest worry about this stock. The lack of focus and subsequent spreading out of expenditures on too many projects (many of them still years from producing revenue even if they pan out) means that they have p*ssed away much of the cash generated at a much higher sp. This latest pp occurs when Kodiak’s sp is at its lowest level in a long time. Why now? Cash on hand was supposed to be sufficient to carry them through 2010. Is there something they need the money for now? If it’s another acquisition, then it better be something that can produce revenue very soon. The last thing they need is another bottomless hole to throw money down. Or maybe Brian thought that by the time they really did need money in a year that the sp would be even lower? I sincerely hope that they use this money more effectively than the $40M they spent of the last pp.

The news releases and IR: My biggest complaint has been Kodiak’s handling of communication. We’ve gotten relatively few news releases. Go back and re-read the posts on this board for the past 6 months or so. Much of it is speculation on how many drills are where, when results are going to be available, and other questions that could be cleared up by regular updates. Even when we do get news, it often just raises more questions. Why are they drilling one property, and not another? Why get rid of a property that was touted so highly before? I’d appreciate some explanation, even if it’s the obvious one. I’d rather have IR having to come up with stuff to say in a regular update than what they seemingly do now, which is to figure out how long they can hold onto information. There is no reason they could not have released the latest results as they came in. The usual excuse for holding them up is that they want to present the “big picture”, an analysis of the results with maybe a couple of nice 3D plots to boot. But they didn’t do that- they basically just mentioned a few drill hole results and said go to the website for the complete table. And the more-of-the-same results basically mean that barring unexpected news that the sp will languish or drift down until next year when the 43-101 comes out. I’m not a trader, but if I had had at least some of these results as they were coming in I would have seriously considered moving at least partially into other stocks that have had great runs while Kodiak was fading. Kodiaks’ failure to release, as it came in, what I consider significant information to the investors who own the company is in my opinion inexcusable. And the timing of the drill results news releases was just bush league. The first one came out on a US holiday, and the second one came out the next day after the US market had closed early. During that time, the price went from .62 up to .69 and down to .55. Anyone in the US who wanted to take advantage of these swings was screwed. How smart is it to alienate a whole country of investors? Many of the long term investors on this board have finally given up. Investors on other boards not only dumped their shares but had some choice words for management. Brian’s explanation that he had to release results when he got them rings hollow- I simply don’t believe there was not even a couple of days leeway in releasing the results of a year’s drilling program.

Sorry about the rant, guys- but the more I write the more I get worked up. I’m still hopeful- there’s got to be a motherlode or two somewhere on those properties- but I’m really beginning to wonder about this management.

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