Heritage Gold...HGD

[croesus]

Good post Jesse I concur.......had'nt picked up on the Cobalt listing is that for sure? and do you have a time line for that.
Regards Croesus

[Jess9]

Hi croesus, check out comments in the last quarterly, I'll post it below, maybe I read to much it it, but maybe not...

I also note it's valued at cost within the accounts at approx $1m. I would expect this to move up somewhat, to fair value.

[Jess9]

HGD
28/04/2006
QUARTER

REL: 1629 HRS Heritage Gold NZ Limited

QUARTER: HGD: Fourth Quarter Activities Report

HIGHLIGHTS:
- New Strategic Direction
- Gold Projects Reviewed
- New Areas Targetted

STRATEGIC DIRECTION
During the quarter Heritage undertook a strategic review of the company's
operations and its medium term objectives.

Announcements to the stock exchanges will be made as the strategy is
implemented.

Initially, it involves establishing a specific management team to advance
evaluation of all of the company's gold projects in the Waihi gold district.

GOLD PROJECTS (New Zealand)
Heritage's gold properties are all within a 15km radius of New Zealand's
largest gold deposit at the Martha mine in Waihi. The total production from
Martha since its discovery is 7.3Moz gold 50.2Moz silver.

The three major projects held by Heritage are at Golden Valley (abutting the
Favona and other permits held by Newmont Waihi Operations), Waihi North
(adjoining the northern boundary of the Martha Open Pit mine) and Karangahake
(about 15km west of the Martha Mine and containing extensive historic
underground mine workings).

Heritage has 100% equity in the gold projects.

Karangahake
The project has a JORC-compliant resource base of 205,000oz gold and
800,000oz silver. A current review of the project involves consideration of
alternative development paths for the contiguous Rahu, Talisman, and Dominion
Knoll permits which cover the mineralised quartz vein zone for approximately
4km along strike.

The purpose of the review is to define the optimum path to the establishment
of a processing plant near the project.

During the quarter the following work was completed:
- Further channel and bulk sampling in the No. 8 level to extend evaluation
work.
- Further fieldwork was completed at Dominion Knoll and recent drill hole
results interpreted.
- Collection of baseline water chemistry data continued.
- A site visit with a mining contractor was followed by a review of operating
costs.
- The No. 8 level portal (entrance) was rebuilt and strengthened.
- Ventilation (fresh air flow) throughout the No. 8 level was improved by
closing off old drives and stopes to reduce air "leaking" into the old
workings.

Other Gold Projects
Further detailed work is being planned for the Waihi North and Golden Valley
permits to supplement the geological and geophysical database established to
date and expand geochemical knowledge of the areas.

The Waihi North property contains the northern part of the hydrothermal
alteration system that hosts the Martha mine, and also the Mataura
hydrothermal alteration system that lies between Martha and the Golden Cross
mine to the northwest. Golden Valley lies along the eastern margin of the
line of strike of Newmont Waihi's Favona underground deposit.

Northland Project (100%)
Northland Minerals Ltd ("NML"), a subsidiary of Heritage, has applied for two
prospecting permits in the Northland region of the North Island.

The region has had very little modern exploration but has significant
exploration potential, as evidenced by its favourable geology.

NML has identified high mineral potential for epithermal gold-silver and
porphyry copper deposits, as well as gold-rich volcanogenic massive sulphide
base metal deposits. The Hikurangi area is prospective for epithermal
gold-silver and porphyry copper deposits, similar to those found in the
Coromandel volcanic zone which hosts the 7.3Moz Martha gold deposit.

The Tangihua application is prospective for gold-rich volcanogenic massive
sulphide base metal deposits, signs of which have been noted by previous
explorers in the region, although no systematic exploration for major
deposits has been undertaken.

Heritage is planning a comprehensive prospecting programme including
geophysics, geological mapping, geochemical sampling, and computer-aided
deposit modelling, to delineate areas of mineralisation for subsequent
detailed evaluation.

[b]BROKEN HILL COBALT LIMITED (New South Wales) (3

[croesus]

Thanks Jesse,....the proposed Cobalt Listing looks promising
cheers Croesus

[Jess9]

Hi croesus, have you been following HGD for awhile? I was looking at some 2004 public releases and noted the following that maybe of particular interest now (in light with gold being alot higher than $380USD)...

------------------------------------------
29 July 2004
Market Information Services Section
New Zealand Stock Exchange
Level 9
ASB Bank Tower
2 Hunter Street
WELLINGTON
BY EMAIL PAGES: 1
FOR PUBLIC RELEASE

Tennent, Isokangas Pty Ltd (“TIP”), consulting mining engineers, has reported to Heritage on a conceptual mining study at the Talisman mine at Karangahake near Waihi, New Zealand.

The conceptual study was based on mining 150,000 tonnes of ore annually from underground operations to produce 50,000 oz of gold equivalent (gold+silver) per year, initially on a toll treatment basis. The study found “no fatal flaws” in the mining concept, subject to Heritage identifying the gold (+silver) resource needed to support such an operation.

The initial capital cost indicated by TIP is approximately NZ$23.5M.

Heritage would expect to fund the majority of this through an appropriate loan and/or by contracting the underground mining development and operations.

The indicative annual gross margin is approximately NZ$11.5 – 12.0M at a gold price of US$380/oz, based on the TIP study.
--------------------------------------------------

I might crack the above through a spreadsheet to rough model the impact (of current gold price) on above projected earnings and possible share price, I'll post if worthy of discussion ; )

[Jess9]

earnings per share on current issued capital (132m) $0.163 p.a. therefore at a PE ratio of 6, share price = $0.98 (i.e. 98c!)
earnings per share (fully diluted - 184m) $0.117 p.a. therefore at a PE ratio of 6 share price = $0.70 (70c)
earnings per share (diluted + allowance for est additional capital raising - 204m) $0.105 p.a. therefore at a PE ratio of 6 share price = $0.63 (63c)

[Jess9]

Significant Assumptions for above estimates:

CAPEX
Total mining assets to date, to be amortised over the life of mine (in NZD) $8,000,000 (see est depn below)
Est CAPEX (NZD) for mine based on 2004 TIP study cost $23,500,000
Inlation adjustment (from 2004 to say 2007 costs) 20% $4,700,000
EST CAPEX for mine in 2007 dollars $28,200,000

GROSS PROFIT
Assume USD$ $0.620 per NZD
Assume gold price at $700 USD per oz
TIP budget was estimated with gold at $380 USD per oz
therefore additional gold revenue from price change is $320 USD per oz
Gold targeted to be produced per annuam 50,000 oz
additional projected profit purely from gold price change $516 NZD per oz
total additional projected profit (NZD) based on prodn volume above $25,806,452
Forecast cash profit from TIP study (NZD) $12,000,000
adjust/reduce for est increase in costs due to inflation (NZD) -$2,400,000
adjusted 2004 cash profit to 2008 dollars $9,600,000

Total estimated cash profit $35,406,452
Reduce the (above) cash profit for estimated non-cash expense
Depreciation on new mine CAPEX (as above) at 10% -$2,350,000
Amortisation of exisiting mining expense (per 2005 Balance sheet) at 10% -$800,000
Total estimated non-cash expenses -$3,150,000

NPBT $32,256,452

Less tax (33% etc) -$10,752,151

Estmated NPAT (p.a. etc) $21,504,301

Capital Structure Assumption
Issued Capital 131,599,399
Fully Diluted Capital 183,912,080
Possible Capital Raising Issues?? 20,000,000
Fully Diluted (including possible cap raising issue - as direct above) 203,912,080

[Jess9]

therefore, if (and a risky if here...) HGD can dig the yellow stuff out and sell it as assumed above, this one could be a 10 + bagger based purely on earnings, at 50,000oz pa : )

[croesus]

Hi Jess9 yes had shares, and HGDCAs for some years.......a bottom drawer stock, every (almost) dog has its day... hopefully this one will bark soon.
Regards Croesus
P.S Thanks for the research

[Jess9]

Hi croesus, not sure if interest expense was included in TIP's study above, assumed it was. If not the impact affects the above model thus; 89c, 64c and 58c per share.

I also reckon say devide these prices by 3 to get a rough estimate to adjust this production model back to a "potential case" to reflect where HGD is today (i.e. this "discount" would unwind if/as the coy evidences it will achieve forecast prodn rates, at price specified etc), therefore HGD right now could reasonable be worth 20c/share, if small cap goldies become flavour of the month with investors and start to sparkle in the sun!

We wait and see.

DISC: finished taking my position over the last 4 weeks.