🕐26.03.10 - 13:52 Uhr

Peter Grandich Client Update on Formation Metals



Re: Formation Metals Inc.

News Release Thursday, March 25, 2010 Peter Grandich Client Update on Formation Metals To: tsx Client Update -- Enough is Enough When It Comes to Formation Metals Posted by Peter Grandich at 12:12 PM on Wednesday, March 24th, 2010 I spoke with FCO (T-FCO $1.22) management today to see if they had any insight for me on their recent rapid decline in share price.

The short answer is no.

They, like me, have been fielding a lot of enquiries lately and are quite stumped at this market reaction.

I could sense the frustration in their voice, when they have worked diligently to get their 100% owned Idaho based cobalt mine to the final permitting and construction stage only to see a lackluster response in their share performance.

According to this persistent management, there is no material reason for the panic selling weve seen of late.

At the risk of being wrong on defining a "bottom" of any stock, it seems to me the stock is over done to the downside. Management pointed out to me the valuation given them by a respected independent mining analyst as recently as last month.

Readers can check out their website to track down this source.

Remember, this valuation was made when the then current proposed financing arrangements ($60 million in equity and $100 million in high yield notes) was much more dilutive than todays proposed financing arrangements. Regarding their financing efforts, it seems they have changed paths at least three times in as many months, and although this may have sent a confusing message to the public, each time the terms were re-done under more seemingly favorable conditions for the existing shareholders (less equity to issue, and/or better terms on the debt) -- although once again, the markets failed to react favorably to this. At the end of the day management decided to go it alone on a small equity raise (the current $8.6 million non-brokered equity financing at $1.50 announced March 18), as they have been working with commercial banks on the debt side versus dealing with hedge funds and high yield notes.

It seems that cobalts recent listing on the LME has given cobalt some credibility in the markets and has drawn the attention of commercial banks to funding the project, although this wont likely happen overnight.

This should be very good news for the shareholders as commercial bank rates are usually far better than the previously proposed high yield notes.

They have also informed me that there exists a lot of interest in off-take arrangements (selling product forward) for all of their proposed production metals, namely copper, gold and of course cobalt.

This is another way management is seeking to minimize equity dilution in raising the funds to build the mine. They still have time to pull this off without impacting their proposed production start-up date of Q2, 2010.

Stage I of construction, designed for the winter months, is underway and is comprised of surveying, site preparation and tree clearing -- you can review some of this progress in new photos posted on their website.

Stage II is planned for later in the spring, when the bulk of the snow is off the hills and breaking ground and concrete pouring starts.

They wont need to raise the bigger dollars until then, and this current smaller financing is designed to get them to that stage.

Stage III expected to start later in the summer or in the fall, and is the final stage of construction.

It is at this stage management hopes to have the bank debt in place to take their first draw down, and the later the better for that move as, logically, they are looking to minimize the time between starting to pay interest and starting to generate cash flow from mining operations. As far as upcoming news goes, most likely it can be finance related as management is anxious to get this behind them.

This could either be regarding current non-brokered equity financing, or news on commercial bank debt financing and possibly associated off-take arrangements.

They could also put out news on an update on Stage I of construction although that is no secret and would unlikely have an effect on the share price.

As well, they could announce an update on their Athabasca Basin Virgin River Uranium Project, joint ventured with Cameco and AREVA, where two rigs have been turning.

Cameco (the operator) has been spending al lot of time and money defining the extent of their Centennial Deposit on that project, where quite spectacular results have been coming from in the past.

That program must be drawing to a rapid close with the approach of spring breakup. FCO Management has taken a number of hits over the years, and they appear not about to back down now.

This is one persistent and dedicated group of people.

It seems more patience is the current prescription for ailing FCO shareholders. Remember its always darkest before the dawn. http://grandich.agoracom.com/2010/03/client-update-enough-is-enough-when-it-comes-to-formation-metals/ You can also view this News Release on our website at: http://www.formationmetals.com/s/News.asp?ReportID=391330 ======================================================================= Copyright (c) 2009 FORMATION METALS INC.

(FCO) All rights reserved.

For more information visit our website at http://www.formationmetals.com/ or send mailto: ----------------------------------------------------------------------- To Unsubscribe from this email list, click here: http://www.formationmetals.com/s/Unsubscribe.asp? =======================================================================



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