Pele Mountain Resources, GEM

After a long and discouraging wait, some of us decided to sell Pele... early of course, and we either lost money or broke even. But now its back to its usual bear trend, which enticed me to look back through their website to see whats happening. They have no really recent updates, but their presentation is dated in early March and mentions the next news release, a compliant resource update, being in the second quarter. This isn't just an update, it will include a preliminary economic assessment of the project with combined urainium and rare earth projected revenues. There are also some options and warrants outstanding that could represent a 20% dilution, although I don't know when they expire, and I think if they were filled that it would be a good thing, because they would raise nearly $9 million and it would show managements fundamental beliefs that the stock is going to move upwards. One thing that is missing from their website is an updated schedule of events. The one posted is from 2007, and I think they are somewhat behind on it. Additionally we have to remind ourselves of the turmoil in the uranium market at the moment.

What does a financial analysis show us about this company?

Share Count 150M conservative diluted estimate (125M actual)

Cash $0.03 per share
Current Assets / Current Liabilities 17.6x
Book Value $0.15
Debt $0.00

EPS is -$0.01.

Really, there is not much of interest in the financial statements, but you are absolutely right about the potential for 20% dilution, since the company has 12 million options and 16 million warrants outstanding. Bul of options are exercisable at $0.42, but the majority of warrants are exercisable at $0.27.

Its pretty hard from their financial statements to figure out what the resource property estimates are based on (gold, uranium and diamonds being three diverse major business units). The recent news seems to be regarding the rare earth oxides (what kind?), which may be a saleable by-product of their primary business (whatever that is?). Lots of uncertainty here, and they basically have to double book value in order to justify the current price, while they are continuing to lose money.

Hope the NI 43-101 will turn up good news, but it is likely this has already been included in the balance sheet and in the stock price.