Member Info for Daisan

In your opinion. But is that a reason not to post the negatives at all?

I'm flattered that you cut and pasted my post from a few days ago Timeless. Would you like me to post the negatives as well?

They are 40p convertible loan notes. Doesn't mean the shares are worth 40p but that is the price they can convert at. Should the price rise above 40p then they may well convert which would probably be beneficial for all concerned. Repeat though - it does not mean that the shares are worth 40p now.

I have been looking around some of the darker corners of my share portfolio and found some of these lurking around. I knew they were there but couldn't bring myself to acknowledge just how much they had gone down. It all looked so good at one point but they have to be one of the unluckiest companies around that none of their JVs with the majors paid off. To be honest, I had written them off but thought I would have a look and, surprisingly, the company looks like it has a reasonable prospect! The share price is reasonably underpinned by cash and this can be used to fund the exploration on the Serbian asset without needing to raise money. I have found that, whilst you can't guarantee the accuracy of some of these old resource estimates, they do tend to be a reliable indicator that there is something there to look at. In this case the sub-plot seems to be gold. If the first drilling campaign starts getting assay results pointing to gold then this would have been an inspired buy. As it is the property already seems to have small scale potential. Interesting times and good to see TPJ coming back to life!

And there is the sharp increase in gold as a result of the FOMC meeting! Up $30/oz in an instant.

I can only agree. The fundamentals for the company are excellent but it is difficult to shake off the past and there will be people with higher averages or who bought in when it was in the 4-5p zone who will view a rise as a good opportunity to dump shares. Eventually the fundamentals will win through, particularly in a rising gold price environment when the profitability becomes impossible to ignore.

Agreed again. But in my experience the technical analysts are far better at predicting gold's price trends in the short/medium term than the fundamentalists. And they are all saying that the short-medium term looks difficult for gold, even if the FOMC gives gold a short term boost today. This is why the 1280/1320 area is critical as these mark resistance points. But if, for some reason, this is a new paradigm and the bulls grab the price firmly then the commercials will have to close some huge positions. In that scenario the gold price could go ballistic. I suspect that this won't happen and I would prefer a more orderly but no less stratospheric rise over a period of years.

Absolutely agree Korg. The only way to get out of the debt situation is to inflate. Which can only be good for gold ultimately. Companies who are struggling with the gold price at $1000-$1200/oz and have considerable debt will do the best provided they can last it out. AAZ is an obvious candidate.

Timeless, As usual you resort to abuse when somebody disagrees with you. If you re-read my post I didn't say that you posted the nominal value as a negative. I said that it was negative for the company currently as it means they cannot raise. And they will need to raise to progress any of their projects should any of them get going. They may not need to do so now but they will need to. To be honest, when it was clear that you didn't understand what a short squeeze was I didn't pay much more attention to your posts. Anyway, I will leave (much to everyone's relief!). But Dibs, you come across as sincere so I would suggest being careful here.

Dibs, I didn't know who he was until recently. I came across MTR a couple of months ago but even then I didn't remember his name. Now I hear about him everywhere! I am a researcher at heart so when something keeps cropping up I start to dig. There are things about the investment approach of MTR that I don't like. One thing I would point out about KGLD is the nominal share price that Timeless keeps banging on about (7p). I didn't understand why he did as this is a negative for the company as they can't raise cash below that level and this company if it is to do anything will desperately need to raise cash. So the implication is that they need the share price to go above 7p and, as Timeless points out, more likely 10p so that they can get a fund raise away. Considering that the price was under 1p at the time of the strategic review, the company deemed this as not a viable option. They were right in most normal circumstances.

Ah! Thanks. I confess that something doesn't feel right about MTR or Paul Johnson

Is it though? There are three different names on that release. Which one is it?

itsaduster, Thanks for the response. The reason I suggested that there was little to invest in is that they seem to have lost most of their main asset. Have I read that wrong? Have I missed something? It would certainly not be the first time!

Yes it does at the moment and this is currently troubling the chartists. It changed somewhat when Yellen answered the question about NIRP. Gold was poised to go down at that point but her answer made people consider that negative interest rates could hit the US. 1280 and 1320 are considered key chart points 1280 has been difficult to break but 1320 looks like it is the one. If that breaks I believe that the chart position will change. If not then it is back to 1150 ish or quite a bit lower according to some.

If the last decade following gold and gold miners has taught me anything it is that the buying of physical gold does not immediately translate into higher prices. The futures market dictates that is the short to medium term. Long term prices are certainly influenced by physical. Russia and China have been buying gold for years, even during the 40+% drop so this is not necessarily bullish short term. Buying into the ETFs is more so in my opinion but it needs to be so overwhelming that the futures market can no longer hold back the tide. Consider that the futures market controls more gold than actually exists! It's a bizarre world.

Dibs, Absolutely. A sharply rising gold price will change the fundamental picture enormously and companies like KGLD will come into their own.

Timeless, Dibs, Thanks for the positive responses. My position on KGLD is that it is high risk and the board know this which is why they are undertaking a strategic review. But that gives potentially high rewards! Which I am sure is your position. At the moment having done the research I cannot invest as it is too risky. As I said previously, I am looking for small producers with a revenue stream. This clearly doesn't have one and will not have for some time. This may mean that I miss a large rise. It wouldn't be the first time! In response to your great posts: 1. Based on their accounts, the historic cash burn has been about £80k a month. This has been reduced somewhat recently but I estimated that there was about 9 months left. The next financial report should tell us more but their last one 3 monhs ago indicated that they had enough for 12 months not including money required to advance their other projects. 2 I put down the resource that actually is there as well as exploration targets. However, a valuation for a fund raising will only be based on what is there. If their assets can prove up significant resources then obviously this changes. GMSI are doing an initial resource. This will not be their exploration target and is likely to be in the indicated/inferred category rather than in the measured category which has a considerably higher valuation associated with it. 3 The valuation is what the valuation is. Currently the market is valuing this at 1.5p per share. There is no way that a fund raising will take place at over 7p unless the market radically revalues the company (which, of course, you are betting on!). At 1.5p dilution would be massive and the discount high. 4 If the company does not raise money then it cannot progress any of its projects. Personally I think they should sell their stake in GMSI once a resource is defined, although I suspect that they wouldn't get book value if they want to sell it quickly. But money raised from this would allow them to progress their other projects to a point that they could raise money on more favourable terms. 5 Personally I think that it is rarely a good thing to lose your CEO even if it is financially prudent to do so 6 I would not rely on the Indian bureaucracy for anything. After all, it is based on the British system! The one thing that radically changes the picture is a rapidly rising gold price. There is every possibility that this will happen in the next couple of years. Until that happens this is a company that will need cash in the near future. Timing is significant. If they don't require cash before the gold price rises considerably then the share price will likely be multiples of the current price and they can raise on favourable terms. Good luck guys. It will be a great ride whatever happens!

OK. I confess that I forgot their own prospective region which has a defined resource of 138k oz and an exploration target of 1-10m oz. As with their other opportunities, this will require a lot of investment and some form of fund raise. Sorry. Stupid miss!

I have been doing a bit of research on this to see how much substance there is to the rise. Please point out any errors I have made as it is more than possible that I have misread the news releases. There are some interesting positives and negatives: Positives: Early mover advantage in a location that loves gold Very prospective area for gold (25m oz having been produced historically with a geology similar to the world's major gold locations) Very good local contacts Have not had a history of diluting shareholders since the initial £12m IPO About £600k in the bank based on £750k at 8th December and cash burn Their share of GMSI has a book value of just over £3.2m based on most recently published accounts GMSI should be about to declare a maiden resource Very real potential for significant gold price increases in the next few years Comparable company has recently raised £5.1m suggesting that this may be possible for KGLD Potential for merger with said company makes strategic sense Negatives Recently lost two significant board members including the CEO Cash burn is high and cash on hand will only last a maximum of 9 months In order to progress ANY of their opportunities they will need to raise a considerable amount of cash compared to the market cap Their stake of GMSI amounts to approx. 23% (with the potential to increase to 29%) GMSI does not yet have a resource declared but the target is 0.5-1.0m, meaning KGLD's stake is less than 250k oz Indian bureaucracy is horrendous and has resulted in severe delays in their projects and them burning through nearly all of the money that they had allocated to progress their projects. Despite the current government being investment friendly, not much has changed in the last 2 years Environment remains difficult for raising finance It's a finely balanced investment case at this point. The fact that they are currently undertaking a strategic review indicates that the board understand this well and they may need to sell a significant asset to progress their most important opportunities if they cannot access finance which they will certainly need to do in the coming months, particularly if any of their opportunities start progressing. Of course, if that is the case then the potential for raising that finance at more favourable terms becomes likely.

Stocks, Yes, I forgot. Thanks for pointing this out. You are half right! Namely they hedge around half of their production, maybe a little bit over, although I don't know how much they have currently hedged and at what price. On that basis, you will probably have to trim about $1-2m from the calculations below.