Peak Gold Ltd Winston Reports on Peak Gold (PIK-TSXv) by 24hgold

Mots clés associés : Bear Stearns | Dollar | Euro |

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Issue 11 Vol.15 March 24, 2008
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Hello everyone, I hope you had a good Easter weekend!

This past week started out with more devastating news for the U.S. dollar as Bear Stearns, a major US investment bank, crashed and burned. Such a blow had the expected results. Gold and silver experienced wild volatility, the stock market bled red and even gold and silver stocks couldn�t avoid the negativity.

As bad as this latest bank crash is, I always feel concerned that so many investors fearfully sell their gold and silver stocks which are backed by real assets and opt to sit in cash. Clearly and sadly, many investors have yet to make the connection that at this time; the U.S. dollar is one of the worst vehicles to hold your wealth and security.

In the course of world history, fiat money systems have never worked as the value of the currency is based entirely on the ability and guarantee of the citizens to pay it back in exchange for their labor and hopefully good investments. As governments invariably put their citizens in debt the burden grows. And therein lays the flaw.

The Federal Reserve with its easy credit policies, continuing bailouts from the sub prime mortgage fiasco, dealing with the Federal Governments� trade deficits and mounting debt in the public and private sector, is fuelling the fire as more money is printed out of thin air every week which is forcing the dollar downward.

The dollar has made another historic low versus the euro last week. $1,000 gold will soon be the new floor price as it heads higher toward $1500.

The U.S. dollar and its buying power internationally will continue to go down.

It is interesting to note that since the Bear Stearns collapse that gold has been hammered and the dollar has actually perked up a bit. Don�t be fooled by this short term adjustment. Here�s what�s happening.

Bear Stearns was long on large positions of gold assets. These assets are being sold off to offset their losses. The company also held a large short position on ten year treasury bills. Again these are being liquidated and have made the dollar look stronger then it really is.

Consider this your short term window to take a gold position.

Rather then sitting in cash, investors would be well advised to sit in solid gold stocks like Yamana or Goldcorp � both of which our readers have positions in thanks to investments that started at pennies per share and now represent dollars per share with dividends payouts every quarter.

More great leveraged plays are ahead just like Peak Gold which is also in the news this week�

Peak Gold (PIK, TSX-V)

This past Monday, March 17th, Peak Gold reported their first year financial results that highlighted earnings of $14.6 million or 3 cents per share for the 13 month period ending December 31, 2007. Production from their two mines was 212,933 ounces of gold at a total cash cost of $364 per ounce.

Since the formation of Peak Gold last spring when they acquired the Amapari Mine in Brazil and the Peak Mine in Australia from Goldcorp, the management has focused on cutting operational costs and increasing cash flow � mostly at Amapari.

Additionally, two financings were completed which have cashed up the company to the tune of $182 million. These funds will not only be used to expand organic growth but the management has made it clear they are shopping for mines which have the potential to add value to Peak. And monthly cash flow is increasing that cash position by $5-8 million a month.

Amapari Mine

The Amapari Mine has the greatest upside for the company. Over 2008 the operating cash flow is estimated to grow substantially from $6 million to $39 million as gold recoveries and throughput increase. Cash costs will also go down because of improved operational management that has led to lower manpower requirements and other efficiencies.

The gold production of 96,400 ozs over 2007 represented a 15% increase over 2006. Production could increase substantially to 300,000 ounces per year if a wash plant and a CIL (carbon-in-leach) mill were built to process the sulphide ore. Peak has already ordered some of the longer lead time items for the wash plant. So their growth curve towards 300,000 oz/yr will start in earnest early in 2009.

08-03-28 PIK
Ampari Chart.GIF

*Based on Gold Prices of $850 oz in 2008

Peak Mine

The underground Peak Mine has successfully replaced its reserves and resources for the past 15 straight years. Old and new zones are continuing to be found at depth. A new surface decline into the mine has increased the access to ore and will save money in transporting the ore and mine equipment.

08-03-28 PIK
Peak Chart.GIF

*Based on Gold Prices of $850 oz in 2008

Conclusion

With the market cap of the company currently at about $450 million, $182 million of which is in cash awaiting an investment, and the robust cash flow projections for 2008, it seems clear to me that Peak�s current market valuation is low.
Three factors will move Peak�s share price higher this year. The first is stronger cash flow quarter over quarter. Over 2008 we can look forward to improved cash flow and earnings from Peak particularly with gold hovering around $1,000 per ounce.
The second factor which could increase the speculative premium of Peak is the near term organic production increases from both the wash plant in 2009 and the CIL mill in 2010.

I think the most interesting news this year though will come by way of an investment in another gold mine. Adding another producing or near producing mine to the company�s portfolio has been in the works since day one. We�ve seen how the management has streamlined operations to lower costs and increase organic growth with their two mines. With $182 million on hand, Peak is positioned to shop for a high potential mine.

In a conference call last week Bob Gallagher, Peak Gold President and CEO stated that all gold producing companies are now cash cows and looking for high quality acquisitions is difficult if not impossible. The company�s plan therefore will be to look at mergers where Peak Gold can apply their management expertise and cash to help develop mines. Whether it�s a merger, buying a mine or taking a partnership interest in a high potential mine, Peak Gold will expand its production portfolio this year.

Peak is a buy for growth.

Disclaimer
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The profiles, critiques, and other editorial content of the Winston�s Growth Stock Report may contain forward-looking statements relating to the expected capabilities of the companies mentioned herein. The reader should verify all claims and do their own due diligence before investing in any securities mentioned. Investing in securities is speculative and carries a high degree of risk. The information found in this profile is protected by copyright laws and may not be copied, or reproduced in any way without the expressed, written consent of the editors of Winston�s Growth Stock Advisor. We encourage our readers to invest carefully and read the investor information available at the web sites of the Securities and Exchange Commission ("SEC") at http://www.sec.gov and/or the National Association of Securities Dealers ("NASD") at http://www.nasd.com. We also strongly recommend that you read the SEC advisory to investors concerning Internet Stock Fraud, which can be found at http://www.sec.gov/consumer/cyberfr.htm. Readers can review all public filings by companies at the SEC's EDGAR page. The NASD has published information on how to invest carefully at its web site.

Peak Gold
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