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January 26, 2009 Dear Friend, We modeled Mercator Minerals with 193.3 mm future shares outstanding, nearly threefold dilution, assuming another $30 mm common stock and warrant financing in coming months identical to the January 9th financing just done. Mercator has not shipped moly yet, and just bagged its first one ton sack of moly concentrates as we visited last Friday. It had not been paid for its first copper shipments beginning January 5th, as roughly two week customs paper work delays at the Mexican border set back first arrivals to the Guaymas port to roughly January 20th. Mercator had collected no mill revenues yet as we visited last Friday January 23rd. We reason that Mercator must immediately install its third and fourth ball mills slated to arrive in May to lower unit costs as much as possible to compete in the tough climate. Either the company will raise the necessary equity, assemble the final grinding mills smoothly and generate above a breakeven cash flow in the 2009 second half, or it will enter bankruptcy. In effect, surviving 2009 to prosper in the future is the key. Future warrant exercise proceeds and cash flows may repay the January 2012 bond maturity if only Mercator can get through 2009. Its key is to expand to cut milling costs towards $5.00 per ton as soon as possible. Faithfully, John C. Tumazos |
Copyright © 2008 John Tumazos Very Independent Research,
LLC
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