RED - Red 5 Limited

[Moit]

Hi Beatle, yes you are quite right in regards to the shallower drilling results for Mapawa. Ive been so excited about the debt finance ann, that the Mapawa results were kind of put at the back of my mind. Lets hope it is reasonable , grams per ton, quality, then we should see RED really propel.

The sky is truly the limit in regards to RED 5 at the moment. Ive now bought my final lot of shares, {well for the time being anyway} and i think the time when i really start to get excited will be the day of the trading halt, if there is one of course... Then we'll definitely know the finance ann is only 48 hrs away...Cant wait...

Go RED...

[Huitzii]

I got a bit bored today so I had another close look at the RED 5 chart.
Take note of the rectangular box,5 out of the last 6 trading days it has been bouncing off of the 15.5 cent resistance line with low volume.
IMHO this week we will see RED 5 break this 15.5 cent resistance line if it gets some investor support with some high volume.
As we know Macquarie Research have started to support RED 5 as a "strong buy" this could well be the push that RED 5 needs to head in a northerly direction.
Does anyone know if they have secured their finance yet? Or is this news yet to come? ....hopefully Monday
I'm open to views on this chart as im only a learner with chart analysis and any guidance would be appreciated.
Upwards and onwards to 19+ cents hopefully
DYOR

RED.JPG

[Huitzii]

News on proactive investor website another helping push for RED
Monday, July 12, 2010
Red 5 sees potential for gold-copper mineralised porphyry at Mapawa
Red 5 (ASX: RED) has reported that a 254 metre intersection at 1.2g/t gold and 0.16% copper was recorded in follow-up drilling at the Mapawa Project in the Philippines, confirming potential for a gold-copper mineralised porphyry.

Hole MDD003 recorded the results within a broader zone of assays returned to date of 290 metres at 1.1g/t gold and 0.15% copper, also from 380 metres.
http://www.proactiveinvestors.com.au...pawa-8532.html

DYOR

[Moit]

Hi Huitzii, 2 things, first of all and just regarding finance, it is imminent, forecast for the end of July. We are expecting a trading halt in the early part of this week, so no information can be passed around before the announcement...

Secondly, drilling results at Mapawa, as on proactive investors web site, dated back to the 12th of July. I'm pretty sure those results were from 14th of April. On that day RED 5 opened at 19 c and had a high of 19.5c and closed at 18.5, as a result of the porphyry confirmation at Mapawa. We are expecting further results, possibly this week or next in regards to the shallower holes drilled... Please correct me if i'm wrong Beatle. I know you can go into a little more depth, than what i can...

Just keep in mind Huitzii, our main focus for this week is the debt finance announcement, it is very exciting times as it is the one huge and significant step to be taken for the project development of Siana. As Beatle said with a bit of luck the momentum will follow through with the, expected results from latest Mapawa drilling which in turn will keep heading RED 5 in the right direction, UP.... It should be a great week..

[beatle]

Hi Moit and Huitzi. Moit you summarised it well esp regarding the finance, and no one will know officially about when/if the offer happens before RED announces it (and whether they will call a Trading Halt or not) but RED has certainly made it known that its expected any day now (refer to the latest presentation)! And thus if Huitzi has got a good hand on the technicals then we can say the stars are becoming aligned, even the gold price has pushed up from the lows of the week to end at US$1,181/oz and that is a wildcard we simply can't predict.

As for the shallower drilling it should be noted that based on historic Suricon drilling of the top levels at LSY prospect, Mapawa (the former owners of the lease) RED has previously referred to an expectation of a resource totalling 3 - 4 million tonnes at shallow depths less than 100 metres, grading between 1.5 - 2.5 g/t. That suggests the top levels of these shallower holes holes at least should have significant mineralisation. Note that RED's comment about that historic Suricon drilling is that there was insufficient certainty to be able to regard those resources as JORC compliant, but that doesn't mean that it won't become a JORC resource in due course with more compliant recording and attention to detail regarding drilling/sampling/assaying techniques required under JORC code guidelines.

I feel that this week is going to be an exciting week, and to boot the Diggers/Dealers are on at Kal so there is likely to be lots of time for rumours and news to float amongst those attending, lets hope RED becomes a popular topic of discussion amongst delegates (in a positive way!)

[beatle]

On another matter, I have become aware of another poster on HC which has posted on RED, referring to it being worth no more than high 20's based on fundamentals of Siana, and making very uninformed calls regarding the potential (or lack of potential) economics of Mapawa (poster bsredoje).

Those ill-informed comments are completely without any reasonable basis whatsoever, both the Siana fundamental value referred would have to be based on some significant discounting of the existing cash flow model that competent and very experienced consultants have developed for Siana, and/or using excessively high discount rates for the NPV calculation. It should be noted that the cash flow model forms the basis for the bank syndicate that is looking to offer the finance to RED for Siana's development. It should also be noted that the cash flow analysis previously used by Southern Cross Equities for their valuation used a further discounting of the consultants cash costs to come up with their analysis along with the assumption that gold would fall below levels towards and down below US$1,000/oz. Furthermore, the tax regime being used for Siana will INCREASE the NPV beyond that released by RED, as it will allow for a 5 years tax free period up front, whereas RED at the time of publication assumed a 4 year tax free period.

Additionally, comments that Mapawa will require billions of dollars to develop, take 10 - 15 years to develop, that porphyry deposits require high copper grades in excess of 0.16% Cu are all fallacious. IF Mapawa was to become a 100 million tonne deposit, with mineralisation from the surface or close to surface down to 600 metres, with a grade of 1 g/t or more gold, then it doesn't need Cu mineralisation to make it profitable but any small percentage of copper could increase overall profitability. Also, it doesn't necessarily require development over a 10 - 15 year timeframe. Its very existence in an area with substantial infrastructure in place cannot be overlooked, its not in the highlands of PNG or in the Andes of Peru, its sitting within a bulls roar of power, water, labour, transport etc.

I only comment upon this as I believe that ill-informed posts are very dangerous and in this case can be easily persuasive when the audience may not have a technical background to comment on it. I do have a technical background and the argument put forward is erroneous and provides mis-information to all that read it!

I may be a bull on RED but I am not full of bull!

[fastbuck1]

Hi Beatle in regards to hc poster whom i must admit asked the question and got an answer that stired up a hornets nest.....low to mid twenty's what a joke and can only be regarded as laughable what was failed to be mention is that the in groung gold price will be worth much more once the plant is up and running, and the poster also failed to mention why we now have so many insto's on board?????surerly not to make a lousey .05 cents per share and sell out at .20 i really think the figure in mind is more like .50 per share....regards fastbuck....


"if you want to make a fastbuck do'nt buy the share i hold"

[beatle]

Hi Fastbuck and thanks for your comments. Before I reply I want to completely DISAGREE with the "disclaimer" you put on your post...""if you want to make a fastbuck do'nt buy the share i hold". You still hold RED shares, therefore how could I agree with your disclaimer, when my view is that RED holders will get a huge bump up in value in the next short period of time, Lol!!!

As for Mapawa, I would like to make the following observations:
Petard's post is entirely accurate, that in the event that Mapawa cannot support its own plant then RED has already indicated the intention to truck higher grade ore the 30 odd km's down the road to Siana.

BUT, in the event that Mapawa can support its own processing facility then clearly RED will not truck the shallower ore from Mapawa to Siana as it does not give the same economics. Just note, that Siana has a long life mining operation that will support its own processing facility for at least 10 years. If you add another few years of processing Mapawa ore to Siana you don't do anything for the NPV at all (after 10 years the discounting of time value results in minimal return).

If Mapawa can support its own operation then it is by far the best outcome for a few reasons:
1. You get economies of scale on the mining and processing, with a plant that is focused solely on recovering the economic minerals, likely to be principally gold and by-product copper, possibly with a little silver. (Note that Siana processing facility is based on a rated capacity of 1mtpa with no floatation circuit at present unless zinc is to be recovered from the deeper primary ore).
2. You get parallel gold production from both Siana and Mapawa, thus annual gold production is substantially increased beyond the approximate 100,000 ozs sole production from Siana regardless of whether that processing facility is treating ore from Siana alone or in combination with Mapawa ore feed.
3. You don't cop the additional trucking cost from Mapawa to Siana.

As for the economics of Mapawa, of course its early days now, but we have got some solid mineralisation from deeper drilling, which is continuing with 1 drill rig to plumb the bottom potential of Mapawa, plus 2 rigs concentrating on developing the shallower resource in terms of distribution and grade tenor.

What the posters (and analyst who appears to have been quoting generalities of porphyry systems worldwide with the comments about "billions of dollars capex" and "10 - 15 year development period") fails to realise is that Mapawa will only cost significant amounts of money to develop if a HUGE resource is defined, and if say only 100 million tonnes of ore, amounting to around 3.5 million odd ozs of contained gold is defined then a relatively smaller processing facility, maybe sized around 8 - 10 million tonnes per annum and costing maybe a couple hundred million dollars. Its horses for courses, so the generalities that have been used to "cast away the real value of Mapawa" has been mis-information.

AND what has failed to be noticed is that LSY is shaping up to be a significant GOLD porphyry with minor copper, not the standard mixed metal (say copper or copper moly) plus gold credits that have been developed in many other parts of the world. And as I have mentioned previously, Mapawa infrastructure does not demand the challenges that others developing huge porphyry projects elsewhere in the wilds of the world, such as many of those located in PNG or Indonesia, or high in the mountain ranges of South America. Mapawa is located close to a small regional city (of Surigao), it has power, water, access and labour sitting on its doorway. The comparison is significant to others being used as the generalisation for Mapawa development!

I should also point out, and what seems to have been lost by analysts and posters on HC regarding Siana potential, the last resource upgrade PRECEDED the final drillholes that intersected considerable additional wide intersections of gold at around 200 odd metres depth, thus the comments of blue sky below the deepest underground is not the only blue sky, there also is considerable upside to the resource laterally along strike at open pittable depths! This could considerably impact on final pitwall boundaries in year 3 onwards, to support a longer mine life of the open pit phase and allow considerable additional gold production from the open pit.

[Huitzii]

RED done its usual and couldnt break the 15.5 cent resistance line, we need the finance announcement to break out of this resistance so it can head north.
Still waiting patiently
DYOR

[fastbuck1]

Beatle whats your veiws on todays trading?? looks like someone is dumping.......share holders could be starting to get restless due to no ann regarding finance.....

[beatle]

Hi Fastbuck, yes its the $64 question, and of course I don't have an answer either, it could have been dumping, but if you looked at the sellers side at the close (maybe its still there) there were 23 sellers, most of which I think it was 17 shares each for sale, at 14.5 cents! So someone was certainly playing some kind of game to make people think lots were trying to get out.

You and I both know from our history with RED that they tend to have a very poor understanding of meeting timeframes, and actually if the finance doesn't come soon it may well be out of RED's hands as the banks have all the control in this situation. BUT what RED has failed to realise (once again!) is put out a time expectation on the closing of the finance - and unbelievably (and i commented on it at the time!) only 1 week ago they were still of the belief that that closing would be by the end of July! So one would imagine they still had a fair degree of confidence to put that out so close to the deadline! (I don't need to remind you of how long for RED to put out that initial JORC resource for Siana back in about 2004, it went from quarter to quarter, same with the granting of MPSA title!).

So Fastbuck, the ONLY thing i can suggest is that IF the time does slip then its still unlikely to have a major impact on the development schedule, but subject to it being announced within the next month then we are going to be looking at some more cheap shares on the market! But i don't believe it will be the insto's selling, it will be the smaller HC type investor who punts on something that expects a return within a short period of time. I will not be selling, and I may be buying more if the price drops back to 12 cents or thereabouts.

Good luck to all RED holders.

[beatle]

I stand corrected - in my last post I was referring to possible seller manipulation due to the number of sellers "wanting to get out" each with 17 shares for sale, actually its 21 sellers each wanting to sell either 177 or 178 shares. What a lot of rot! (Surely there is some guard that the ASX should put in place to at least investigate such trading activity!).

In my view RED remains one of the best BUYS in the resources sector, but it will have its day soon enough - then it will be too late to get back in!

[anderbond]

Hi Guys, back from trip to Japan. Didn't notice any small investment opportunities there but wasn't really looking. Also didn't manage to divert across to the Phils unfortunately. However have watched all the RED action. A little puzzled over the Ross Stanley sale. I note he sold at 16c to Baker Steel. If my memory serves me correctly, I think he paid approximately low 8c for most of the holding so nice profit but still a puzzle with so much more to come. The Baker Steel acquisition is very positive as the company is highly regarded for its resources expertise including smaller gold stocks. In a blurb on them it says
"Baker Steel researches and models gold mining companies in a value- oriented and fundamentals-based investment process. The Manager undertakes extensive company visitations,and constructs discounted cash flow models for the individual mines of each underlying company. The Manager looks for three key qualities of a compelling gold company investment (1) Quality Assets (2)Strong Management (3)Robust Capital Structure.
The level of experience and technical expertise of the team is the Fund's clearest edges, with Trevor Steel a trained Geologist and David Baker a Metallurgist. Both Principals also have extensive capital markets experience. The other members of the team include geologists and mining engineers."
I must say I feel very encouraged by the fact that Baker Steel have identified the attributes mentioned above in RED. It puts RED into fairly select company as Baker Steel are canvassing many opportunities and has a global market to select from.
On the matter of the RED SP. There is no doubt in my mind that the SP has been manipulated for quite a long time now. In the last couple of days there has been plenty of evidence of this going on, but IMO it has been going on for months. The emergence last week of another corporate investor with a largish parcel purchased on market is proof positive that the dreaded "bots" are busily capping the price while accumulating shares. Obviously for this activity to be successful, there have to be sellers, so it may run on for a while yet. The expected finance announcement should give the SP another legup, but I feel it may yet be some time before we see a really big runup. The "X" factor we need is most likely to be further exciting drilling results from Mapawa.Then we might finally see the "alignment of the stars", to pinch from Beatle. AB

[beatle]

Hi Anderbond, good to read that you got back safe and sound, and I note you didn't mention about our mate in Tour de France (such a shame, I watched the night he wore the jaune which was the night he lost the jaune, that stage was very cruel!).

Back to RED, it seems this "interesting" trading activity we are experiencing is managing to destabilise the confidence of some of the smaller investors so whilst that continues I am sure we will see more of the same. What can change it in an instant is if RED puts out a positive announcement on anything, but especially on finance or Mapawa! Its so frustrating though for RED to have put the expectations into the market without delivering on it within the timeframe!

On the finance of course banks have their own agenda to contend with, both internally with credit committees and subbies, so i guess how far we are down the path is the unknown question. But for me it remains not a case of IF but WHEN it happens (of course you have heard that from me for a number of years and I have been saying it to myself for more than a decade!).

By the way, Stanley actually got his first lot (the majority of his shares) for around (less than) 3 cents! But its been a subject of much debate as to why sell at the time when the water is about to boil!

[anderbond]

Hi Beatle, That is interesting about Stanley's initial purchases. I too bought a swag at around the 3 cents level when all was doom and gloom and many people thought the world would end. I won't bother chasing back though as it is all history now. Yes I overlooked mentioning about Cadel. In the end he had a disappointing tour I guess, but he seems to be far more relaxed than previously (except when the media is all over him asking questions on the day he lost the jersey!). He is one tough bike rider and will bounce back. He seems to improve through the season so I expect he will put in a good showing when the World Championships are on in Geelong in a couple of month's time. The course does not suit him much but I am sure he will still show out as he is incredibly proud of his World Champion's Jersey.I had problems getting cable TV at a number of places I stayed in Japan and when I did there was no commentary at all, very strange! You will recall I mentioned THX a few months back. Having seen what some positive news has done to its SP in the last few days (on the coat tails of the other big mover too) I look forward to something similar eventually happening to RED. The Baker Steel purchase and the move back up to maximum strategic weighting by Matthews Partners are both very significant pointers IMO. I have been wondering if the inflation/fiat currency/gold story having been around for a while now has become boring to some and there has been a lessening of interest by some in the sector.
Cheers AB
PS. I discovered my Japanese is about on a par with my Tagalog. Not sure what to work on first!

[Huitzii]

Debt financing package under review

Deutsche Bank AG and Ashmore Investment Management Limited have provided term sheets to deliver a US$40 million package to fund the Siana gold mine development.
http://www.asx.com.au/asxpdf/2010080...vzmqbp7yd8.pdf

DYOR

[mardo]

Hi Beatle,Anderbond.
What do you make of the latest debt financing package (under review) looks like they maybe shopping arround for somethibg else,or perhaps a different package from someone else say Macquarie .
Any ideas as it may stall the SP for a while.

[beatle]

Hi Mardo.

To answer your question, of how I consider the debt finance package, I suggest there are some positives and negatives. The fact you ask the question is in itself reflective of the uncertainty surrounding it, which judged by the market is fairly negative.

Of course not knowing specific details it is hard to fully assess it, but in its most simplistic form as we understand it:
If the debt package offered is taken up as spelt out in the announcement, including debt plus warrants:
1. The development of Siana is assumed subject to development proceeding as planned,
2. There will be warrants over additional shares, thus an increase in share capital.

The questions then are:
1. What specifically is the detail regarding the warrants;
2. What are the specific conditions precedent for project milestones required under the roll out of debt facilities.
3. What are the specific details that relate to security.

Personally I suggest that the offer at least guarantees Siana development assuming the work proceeds as expected, but that the provision of warrants is a sting in the tail that is not usual with project debt and suggests to me that the bank is exceptionally unreasonable - maybe its an indication that RED has made a mistake in giving a mandate so soon to 1 bank syndicate rather than keep broader options open. I suggest that Deutsche Bank should be avoided like the plague by other project sponsors because they are are
trying to "kill a pig" with this financing!

Furthermore, if the number of warrants are considerable, one would have to ask the question, is a bank ALLOWED to offer a debt package with a sizeable equity kicker in the tail, as to my way of thinking it is crossing the bounds of Chinese walls normally set up to isolate a debt financing structure from an equity financing structure! This conflict of interest of course becomes more relevant if the warrant package is considerable.


IF your well informed and RED does still have other options available to finance the project, then I hope that RED management pursues those options. The fact we don't know the quantum of warrants over shares makes my comment less emphatic, but if Deustsche are seeking considerable warrants at a discount to market price or on some structured basis even at a slight premium, I suggest that RED should fully re-consider those alternative financing options. I would far prefer RED take up a gold loan, or a fully equity funded financing if the warrants are considerable. In the case of the gold loan, then although RED management seem to be taking pains to make the market know they retain no hedging, with the gold price at current prices a gold loan is not a big deal for hedging, it is a low cost source of funding and the fact the gold price is locked in is neither here nor there, it just reduces opportunity flexibility and is not necessarily an opportunity lost if the gold price softens!

I do think its a shame that the financing remains outstanding after todays announcement, I can't see management making a decision to take it up so quickly, in fact I hope they don't take it up at all!

[mardo]

Thanks Beatle,
I agree with a lot of your comments on the warrents as the shares have already been diluted by the slow timeframe and particularly if the Bank wants shares as well as the finance dollar.I've followed this company on and off since 2003 but have managed to pick their downturns fortunately.I now have the feeling its time to stick .I've been to several AGMs over that time and CJ appears a very good operater as is evident by his recent increase price for IAU(Intredid) when he renegotiated an increase in the sale price for Paulsens Gold Mine.I hope he has more options for Red as now is a great time to lock in some hedging and de-risk the bussiness.

[beatle]

Hi Mardo, and I agree with your sentiments, especially CJ in his role as Non-Executive Chairman, as he appears to have been instrumental on the financing side of things for RED from what I have observed. But I'm not impressed that Deutsche Bank has tried to take on the equity upside with what I assume remains basically a debt style of financing.

Although there may well be a downside risk to RED price in the immediate short term there are certainly dangers in selling down at this late stage if either of the following happens:
1. Mapawa drilling results are put out on the shallower drillholes, with the possibility of it confirming mineralisation from close to surface. If that happens then Mapawa value, whilst still at the speccy exploration risk stage, should begin to increase and have a positive contribution to RED share price.
2. An alternative funding arrangement is negotiated with either Deutsche or another financial institution.

In either case, those that might take a risk in selling out in the short term with the intent to get back in later on, might risk getting caught with their pants down! With the upside promise to happen in the next months I don't think its worth the risk, and I'm like you in that I have held shares in RED (or Greenstone) for a looooong time! So waiting another month or three is no big deal having waiting more than a decade for the big re-rating!