AAOI

Indeed she did! It's time for a new glass/steagall http://brontecapital.blogspot.com/2008/10/1934-securities-exchange-act-and-all.html

Exactly! This recent interview is interesting in that regard. Ann seems a little crazy to say the least but much of what she says regarding the CME in particular is worth paying attention to. http://www.financialsense.com/contributors/2011/12/02/ann-barnhardt/interview-transcript

It looks like this could be the biggest scandal/shoe to drop since subprime. Scary to think about the implications to this. What does everyone make of this? Any thoughts? http://newsandinsight.thomsonreuters.com/Securities/Insight/2011/12_-_December/MF_Global_and_the_great_Wall_St_re-hypothecation_scandal/ http://m-currents.westlawbusiness.com/Article.aspx?id=3a6afdcc-59b3-46f4-9fb1-c126ab1f0f2a&cid=&src=&cid=74920079999999&src=PE111206005&sp= http://www.zerohedge.com/news/why-uk-trail-mf-global-collapse-may-have-apocalyptic-consequences-eurozone-canadian-banks-jeffe

Fan, Fantastic stuff, really appreciate you taking the time to provide the high level overview on SMT Scharf. Give me a week or so to review it and get back to you with any questions. Best, Ryan

I hear you regarding the dilution fears but one needs to keep in mind that over the period in question the rig count/share grew 3x faster so I don't believe the "dilution" was ultimately dilutive if you follow me as per share value grew faster. For various reasons outlined in the write-up and in the comment section of the blog (which is currently being fixed due to a technical issue) I don't believe any additional equity raises will be necessary anyhow so I think your fear here is very much misplaced. As far as ROIC, are you looking in the rearview? Take a look at the ROIC table in the write-up when you get the chance...I think that should remove your concerns in this regard. As far as how far EGD will be able to push prices, its hard to tell but $200/meter at some point going forward seems more than achievable at this point. Would love to get your thoughts on your German investment, must be insanely attractive if its comparable to EGD :)

A few thoughts on the spectacular quarter (its only just beginning :))... Revenue per meter increased 8.3% sequentially, from $169 to $183. This resulted in an 8% gross margin expansion in mineral drilling, from 28% to 36%. This is much further along than I was expecting. 40% gross margins should be attainable at $190/meter pricing (assuming all of pricing gains continue to fall to bottom line). My guess is that they will be there by year end. I don’t know exactly what the mix shift is or what the breakdown of revenue per meter is when looking at brownfield vs frontier, but +40% gross margins by this time next year seems very attainable. Tough to get a feel on what Dando and Bertram will be contributing on a full year basis and we don’t have financials to see the SG&A or cash flows, but I think it is safe to assume that this is trading below 5x 2012 earnings using some commentary from the last conference call. Bottom line is that this business remains crazy/unsustainably cheap all things considered. The numbers below were calculated a little earlier today when the stock was up 14%. Valuation - Normalization of Existing Asset Base Rig Count 129 Meters Per Rig 6,500 Average Revenue Per Meter $190.0 Total Revenues (MM) $159.3 Cost of Drilling $95.6 Gross Profit $63.7 Dando Gross Profit Est $3.8 Bertram Gross Profit Est $13.5 S,G&A $20.0 Operating Income $61.0 Taxes $20.1 Net Income $40.9 Shares Outstanding (MMM) 48 Current Price $4.25 Market Cap 204.00 Debt $10.0 Unadjusted Enterprise Value $214.0 Less: Cash $25.5 Impact Silver Stake $12.0 Adjusted Enterprise Value $176.5 EV / NI 4.32x EV / Operating Income 2.89x

Myth, I think you meant you were low on cash right? I do not think this stock is only about playing mining. The environmental issues are very real in any exploration activities. I once watched something on the TV about this. The locals gave concessions to the companies that promised good prospects, but only were disappointed when juniors found nothing and left a mess to them. Those activities are very pollutive and it will take years if not decades to clean it up. When we read a junior company's presentation on how many meters it has drilled over a year, have we ever thought about the influences on those local poor people? Local governments are very eager to sell the rights and let the common people bear the consequences. Is it fair? Definitely not. Can they do anything about it? Well, no companies want uncooperative local residents. I never thought the way AAOI did when he said the organizational structure running man-portable is different from running traditional rigs. I do not know if he is right, but from experience, I think this makes sense. For any incumbent, there are always conflicts of interest preventing them from developing new technologies or adopting new equipments. However, I am also fully aware of the fact that EGD will not become a first-class franchise since this industry is very competitive. For first class, I meant to have a strong brand(or exclusive technology) AND lowest cost(economies of scale). Most of the time, one of those contributes will make your efforts worthwhile. A lot of work to do. Again, thanks AAOI to bring such a detailed account of EGD to get me start with. I have been looking at this on and off for a year and finally decided to take a hard look of this. Baoxiadoa, thanks and I'm glad I could help get you started. As far as the first-class franchise issue above, I think we are just having a semantics issue here (just trying to point out that I believe Energold will be the premier frontier drilling franchise within the space for a long, long time to come, not necessarily that its in the same league as a KO for instance).

Myth465, I wouldn't worry about too much about the cash balance given Energold's significant financial flexibility (liquid excess assets, highly variable cost structure, etc.) and the waterfall of cash flow that's about to hit the bottom line from their existing/fully deployed asset base. At this point internal cash generation should be more than sufficient to fund growth going forward.

Let me know if you guys have any questions. Here is a link to my blog post with a few key questions answered for those just getting started... http://www.aboveaverageodds.com/2011/08/09/energold-drilling-egd-cn/#comment-9218