TVI completed another shipment today for another 12M$ in revenues. Great Job.
Now here is my update in regards of Q3 2011
Q3 results were surprising to say the least.
I was very surprise by the sudden decrease in production cost. From 1,65$ to 1,33$ was a major improvement (roughly 20%) in 1 quarter.
Naturally that improvement trend is not sustainable and I think that cost will remain at about 1,33$ for the next 1 or 2 quarters .
The great cost improvement was essentially the major factor allowing TVI to achieve 3M$ in profit during Q3. If they can ship copper and zinc on time, TVI could again show a good profit in Q4 (before oil asset write off).
But the biggest factor that strokes me was the fact that mine life was decreased only by .1 during the quarter due to the blend with mineral that was not include in the original ore reserves. If that trend was to continue, it could easily expand Canatuan mine life by a couple of years and this would be fantastic.
Look also at gold and silver produced as the grades were quite high and the best of the year.
The overall shareholder equity has increased by almost 10M$ compared to December 2010 and accumulated deficit is now standing at only 1,4M$. This is a very good indicator of TVI’s financial health at this moment.
In regard to the cash on hand, 23M$ is a huge pile of money and even if all low interest short term loans were to be repaid, they would still be left with money in the bank.
What it is telling me is that the cash flow generated by Canatuan is enough to finance Balabag bootstrap without additional long term loan at high cost.
We should not also underestimate Malasok and SE Malasok as they could encounter significant reserves there also. It would be very surprising that Canatuan would be the only part of the area having enough mineral to be a profitable mining site.
TVI also mentioned that they were still pursuing other possibilities and they now have the money needed to go ahead with some other major mining companies out there. It would be purely speculative at this time to name them or try to identify the projects but looking at all the different and recent press releases there is at least one interesting project where TVI could be associated with.
In regard to Canatuan, we all know what happen with the provincial government and that a ban was established to take effect in November 2012. TVI has mentioned that they will take all possible legal actions against that illegal ban and I think they have a good chance to win their case and if otherwise, I think that Balabag will already be in operation at that time avoiding some months without any revenues.
Also interesting to note is that TVI is for the second quarter in a row a 100M$ company and this is absolutely not reflecting in the share value. Again major price disconnect between share value and share price and still a lack of interest from the buyers as volume is unbelievably low.
TVI sold Alaska right after the quarter for a price almost double of what was paid for Alaska, Niger and Philippine properties when you include all the credits they also received. Naturally some write off will have to take place but it is not affecting cash position being only book value for properties that have been sold. The high interest loan was also repaid in full. (LIM loan)
Now, for Balabag, it is clear that the 43-101 is late and has been pushed many times. But is this something that they absolutely needs? For the investors’ confidence it is a yes but because they do not need any financing to develop Balabag, it is not the most important thing at this time. Based upon remarks and financial statements page 20, (item 15) it is clearly stated that Balabag expenses have started to be capitalized. I think the message right there is very clear: Balabag will be a mine!
So what are the different scenarios for 2012:
BEST: Ban on Canatuan is lifted and TVI is able to increase mine life to about 3 years with ore not coming from indicated resources. Canatuan should be able to generate another 10M$ in net profit per year and a 100M$ gross revenues. Then Balabag should be in production near year-end 2012 adding up a 5-10M$ in revenue (maybe a 5000 ounces in Q4 2012).
WORST: The ban is not lifted and Canatuan must cease operations end of 2012. TVI will still had pocketed 7-8M$ in net profit and 80M$ in gross revenues. Q4 would be a bit difficult with only 1 shipment from Canatuan before closure and minor revenues from Balabag.
If we add up all the other possibilities from JV, new prospects, Tamarok, Malasok etc, it would be very surprising that TVI would not be able to succeed in 2012. It is third world mining and we never know exactly what could happen (or we would be all very rich persons) but I still think that TVI has a great chance of success over there as they already prove with their Canatuan operations and no matter what will happen in Canatuan, TVI will still be a profitable mining company and results from Balabag by itself will be a lot more valuable than the actual value affixed to TVI. Producing gold in the Philippines has nothing to do with operations in North America. Cost to produce gold is very low and ore reserves are there. I do not see any reason for TVI to fail at that project. Remember that TVI has a lot of experience in producing gold (referring to Gossan mines from 2004-2008)
In conclusion I think that TVI is still a good buy, Q4 could be another solid quarter (before 1 time event) and future is bright.
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