Of all the weird psychological phenomena in the stock market...

...one of the most common that never ceases to amuse your humble scribe is how a stock has to go up by 50% or so before a whole bunch of people realize that it's damned cheap at the new, higher price.

DYODD dudette, DYODD dude.

Rio Alto Mining (RIO.v): Just in case you were wondering...

...why Rio Alto Mining (RIO.v) has been hanging tough and shaking off the gold price downturn today (it's actually green on the day), the likely reason is that Ian Parkinson of CIBC World Markets (along with assistant Matthew Gibson) published an opening of coverage report on the company yesterday after the bell, called RIO.v as a buy and stuck a $3.80 target on the thing. I've read the report and must say it's a very well written and strongly constructed argument too, so kudos to Parkinson.

Just so you know. DYODD dude, cos I'm long this one.

UPDATE (post closing bell): What? You'd like to read it too? Ok, here you go, download a copy and knock yourself out.

Rio Alto Mining (RIO.v): Two quick Qs and two quick As

Question 1: Who's buying Rio Alto Mining (RIO.v)?

Answer: Smart European instos are buying RIO.v.

Question 2: What's the difference between a Peru junior that's in a miner-friendly region and one that's in an anti-mining region?

Answer: About 12%

UPDATE: I'm sorry, did I say 12%....?

Rio Alto (RIO.v): Looks like Albino's call got its reaction

We put up the GMP report as part of this post yesterday. Since then, the stock has done this:

From $2.29 to $2.61, an upmove of 14%. George Albino must be pretty pleased with it all.

UPDATE: I'm sorry, did I say $2.61....?

Rio Alto (RIO.v): GMP's George Albino puts a $5.75 price target on RIO.v

Not so often that you get a Canadian brokerage analyst sticking such a high upside target on a gold stock, but that's what happened today with George Albino of GMP (along with associate Matthew Sheppard). The stock is Rio Alto Mining (RIO.v) (disclosure, your humble scribe is long RIO.v so generally agrees with the call) and Albino says it's going to $5.75, which represents an upside of 151% to the $2.29 of right here right now.

You can read the whole analysis note by clicking here and downloading your copy, but here's the front page blurb to get you in the mood. DYODD, dudettes and dudes.

Home Team Advantage at La Arena

Rio Alto’s key asset is the La Arena gold/gold-copper project in northern Peru – it is located in a highly mineralized area which includes Barrick’s 1mm oz/yr Lagunas Norte mine - Rio purchased the property from IAMGold.
 

We believe that RIO, as a brand new producer, represents a de-risked development story trading at early development-stage multiples. In our view the company’s current market valuation is supported by the base case oxide dump leach project (which poured its first gold on May 6).
 
We see 3 principal sources of upside - the potential for significantly higher grades in the oxide deposit, development of the deeper copper-gold project and the significant exploration targets elsewhere on the La Arena.
 
La Arena – already producing with tonnes of porphyry potential
 
La Arena is located in northern Peru - infrastructure is outstanding and the mine lies immediately on a (mainly) paved road that links the mining town of Huamachuco. A major power line crosses the mine property within a few kilometers of the La Arena pit – there is sufficient capacity on this line with low (probably <$0.06/kwh) costs.
 
At the 24k tpd rate and at the average reserve grade of 0.44g/t, gold production is expected to average 100k oz/yr. Production guidance for calendar 2011 is for 75k oz. LOM production, based on current reserves, is projected at 640k oz.
 
Past work by Rio Alto suggests that grades obtained by diamond drilling may significantly understate actual in situ gold grade. During the early years of production at its nearby Lagunas Norte mine, Barrick indicated that actual mining grades were often significantly higher than reserve grade.
 
The porphyry copper-gold deposit provides, in our view, most of the value at La Arena. The company expects to complete a feasibility study by year-end 2012, and anticipates production beginning in 2015. The PFS study by Coffey Mining examined a 24k tpd project that is expected to cost approximately $300mm to build and would give annual production of 60m lb/yr copper and 31k oz/yr gold over 21 years mining a 180m tonne deposit with an extremely low 1.1:1 stripping ratio.
 
We reiterate that, in our opinion, the oxide project alone supports the current market cap of the company and that the real driver of the share price is in the copper-gold project. We also believe the election in Peru will end speculation on the potential impact of a socialist incumbent. We initiate coverage of Rio Alto with a BUY rating and a $C5.75 target price representing 75% of our NAV6% using GMP commodity prices.

CONTINUES HERE

Scotia pumps Rio Alto (RIO.v)

Here's the chunk on Rio Alto Mining (RIO.v) as it appears in Scotia's Mining Scoop morning letter today. By way of disclosure I'm long RIO.v and I think Scotia is right about this stock, but i can't understand why they insist on pumping other dogs on their list like Duran Ventures (DRV.v). Anyway, WTFDIK, here's the RIO.v promo:

Looking for a Takeover Target?  Scotia Mining Sales likes Rio Alto - Scotia Mining Sales thinks Rio Alto is a strong candidate for takeover in the coming year.  The company has current gold oxide production and a copper-gold porphyry project that looks to be getting bigger with ongoing drilling. 

1)  Current Gold Oxide Production - Guidance is for 100kozs/year for 7 years at cash costs of $500/oz - however early indications thus far is that grades are reconciling much higher than their mine plan - if this continues production could be over 170kozs/year.  Management says it is still too early to increase guidance given they just poured their first gold bar 2 weeks ago but are encouraged by the early production numbers.  Even at 100kozs/year - Rio Alto is trading around 4x EBITDA so we think the market is ignoring the company ' s copper-gold porphyry project at this point.

2)  La Arena Porphyry - Watch for drilling results over the course of this year pointing to a much bigger resource than the current 187MT at 0.4% cu and 0.3 gpt gold - we think this resource grows to over 400Mt with similar grades - we expect the new resource update in Q1/12 followed by metallurgy which is likely to show improved gold recoveries to 60% by Q2/12.  A 50,000 tpd plant, capex of $1.2B, total cash costs net of gold production of $1.10/Ib, $2.75 copper price & $1,000 gold price, with 130MIbs copper production & 100kozs gold production would lead to a US$400 to US$500M after-tax NPV project.

Conclusion:  Scotia Mining Sales thinks you can buy Rio Alto for their Gold Oxide Production and get their Porphyry Project for free - a project likely to show a value of US$400 to US$500 NPV discounted at 8% by this time next year.   And remember that the company only has a market cap of ~C$380mm

Rio Alto (RIO.v) first gold pour and....

...we got the pictures!

First the news, and here's a link to the NR out this morning that tells you all about this important moment in a junior's life. 

And now with a roll on the drums, here's the first pour actually happening....

....here's a very happy company President Alex Black with the new delivery.....

 ....and here's the newly arrived baby getting its vital statistics measured.

And before we go, let's just zoom in for the gold porn shot:

A happy day at Rio Alto (RIO.v) last Friday, that's clear. DYODD, dude.

So what does Alex Black, Pres & COO of Rio Alto (RIO.v), think of his company's chances in 2011?

This hit the Bloomberg terminal service (i.e. not public web) wires yesterday and as it's now being partly reported on the interwebnetpipes, we'll paste it out. On reading the headline you gotta think he likes where the company is heading. DYODD, dudette&dude.

Rio Alto Stock Will Likely Quadruple Next Year, COO Black Says

2010-12-14 19:06:30.660 GMT

 

By John Quigley

 

     Dec. 14 (Bloomberg) -- Rio Alto Mining Ltd., the best-performing stock in Peru’s main index this year, will quadruple in 2011 as it starts producing gold and explores for reserves, said Alex Black, the company’s chief operating officer.

     Rio Alto’s La Arena mine in Peru’s northern Andes region will probably yield its first gold by the second quarter and is likely to produce 70,000 ounces next year, Black said. High metals prices will also help propel the shares, he said.

     “We should be a $500 million to $1 billion company next year,” Black said in an interview in Lima today. “There are plenty of other companies that have valuations two or three times more than us with assets that are not quite as robust or big as ours. As long as metals prices stay strong, we will see that price appreciation in our stock.”

    Rio Alto, based in Calgary, has surged fivefold this year, the steepest advance in the 36-stock Lima General Index, after announcing in July that La Arena would start processing ore this month. Gold surged 29 percent this year to a record $1,432.50 an ounce on Dec. 7 after investors lost confidence in currencies

and bought precious metals as a protection of wealth.

     Rio Alto lost 0.5 percent to $1.89 at 1:33 p.m. New York time today.

 

To contact the reporter on this story:

John Quigley in Lima at +511-614-6811 or

jquigley  at bloomberg.net

 

To contact the editor responsible for this story:

David Papadopoulos at +1-212-617-5105 or

papadopoulos at bloomberg.net

 

Rio Alto (RIO.v) in last weekend's IKN Weekly

Last weekend's edition of The IKN Weekly (IKN63) featured (amongst plenty other things) write-ups on several company meetings that happened during last week's roadtrip. One of those was at the nerve centre of Rio Alto Mining (RIO.v) and here's what subscribers got to find out last Sunday. Since then we had the news through that RIO.v has been awarded its key environmental permit and sure enough the stock traded strongly yesterday on that news. DYODD, but also file this one under 'subscribers knew'.

Rio Alto Mining (RIO.v)

The meeting at RIO.v was outstanding. Present were President & COO Alex Black, Peru country manager Jaime Soldi (driving force in the company) and CFO Anthony Hawkshaw (the guy who really knows the purse strings). The main takeaway was the very high level of confidence exuded by the RIO.v team as regards the months ahead as they move to production. We talked about the main points of the project and how they were already doing what they could on a “pre-construction” level before the environmental and construction permits were emitted. On those scores, the company has fielded all observations made by the government of Peru and the company sees no reason to expect any problems. This was as far as they could really go with positive statements on permit timings that are, in the end, out of their control, but I’d like to add that on a personal opinion level and having watched permitting procedures go through the bureaucratic stages in Peru on several occasions, all this permitting procedure needs is a little (and not a lot) more time. Basically, it’s a lock and it’s going to happen.

As for the somewhat delayed resource study done by Coffey, we can expect that to be published “soon”. Again, the delays seem to be nothing of a substantive nature and rather the technical, procedural side of things that have to be waded through before the relevant authorities allow a report to go public.

Community-wise, relationships are reported as good. Money-wise, the CFO looked me in the eye and said that there’s no more money needed and there are no more equity raisings being considered for 2010....they won’t even start considering a strategic placement before La Arena starts operating and in the words of Alex Black, by that time next year “Rio Alto will be a completely different company”. Regarding the timeline to production, the company expects “mid 1q11” to be when the first pour happens and commercial production levels will follow on from that very quickly. Given a reasonable result from the permitting people that timeline will be achieved. Tight as it might seem right now. Again, confidence exudes.

The bottom line is that I trust my own judgment when it comes to juniors and the people that run them. From the numbers, from the people and from the newsflow about to run through the market regarding RIO, this author thinks the current 70c-or-abouts prices for RIO to be an absolute steal. As mentioned in last week’s Flash update I’ve added yet again to my position in RIO.v and it’s now a pretty big one compared to others. But once all the usual caveats are applied (gold price collapse, nuclear war, OhMyWe’reAllGonnaDie, etc) this stock today is one that needs its long argument banged on the table...and hard. I’m very close to upgrading it to a “Top Pick” on the back of last week’s meeting and its expected newsflow to come, but for the moment we’ll stick with the fact that I left that meeting then wrote “I’m buying more” to you subscribers about an hour later....and then did just that.

RIO.v is cheap. Buy some or buy some more because you will not regret doing so. Table-banging over, thank you for your patience.

Rio Alto (RIO.v) doing a Lazarus

When RIO.v touched 92c just a few days ago, I was all shock-n-awe and wrote as much to a couple of pals. Well one wrote back to me this morning on the same thread with "..Will it touch .72? or .64?...".

Yup, that's a selloff. Maybe we got news coming soon about a possible financing? It's certainly the right time ballpark-wise.

One to watch, I own, not selling, DYODD, dude.