As I have stated a few times the Gold Symposium was a great event. I jotted down a lot of notes and would like to share some of my favourite quotes with you. Please be aware that the quotes may not be 100% word perfect (had to write fast) but do reflect the general words of the presenter.
David Evans:
The combined value of all the worlds gold miners is less than that of global corporation, such as Exon.
Expect governments to ridicule sound money experts. They will call you a nut, a conspiracy theorist, etc. They will try and frighten you out of owning sound money.
Eric Sprott:
The supply of gold has hardly increased over the last ten years. It is currently only growing at 1.4% each year. (This is significantly less than the rate at which fiat money is being inflated away)
Exports of gold from Hong Kong to China were 57 tonnes in September 201 alone – a six fold increase.
Gold Assets only represent 1.5% of the totals world’s assets.
Louis Boulanger:
Up until August 15, 1971, there has never in history been an era when no paper currency was linked to gold.
Since 1961 the US national debt has never gone down.
If we had sound money today, gold would be at $10,000 an ounce.
Ludwig Von Mises:
There are three types of money:
1. Money that is worthless (Zimbabwe Dollars)
2. Money they will be worthless (US Dollars)
3. Real Money (Gold)
The 1980 gold price of $850, adjusted for inflation equals $7,000 per ounce
Dear investorpaul....
ReplyDeleteWould like you analysis of another ASX goldie nearby.
CVR (Market cap 25m <-- yes no joke)
just a quick breakdown... 1.285m JORC gold with silver
Producing in dec 2011 at average 25000oz/year. 30000oz/year in 2012.
Capex already spent (only 10m) and costs/oz 540$. EBIT estimated to be 30m+/year.
Will be 70000oz self funded in 2013.
Worth having a look and i enjoy your Hotcopper posts.
Hi Anonymous
ReplyDeleteThank you for bringing CVR to my attention.
I have had a quick skim over their website and some HC posts and it warrants further research IMO.
I will post my thoughts on HC or my blog in the coming days (have a bit of work to catch up on at the moment after the 2 days at the gold symposium).
Thanks again for your comment and talk soon.
Investorpaul
Hi Anonymous,
ReplyDeleteI ended up finishing some work off earlier than expected and have taken a preliminary look at CVR and their projects.
My main concern is over managements ability to actually deliver on time and on budget. Reading through past announcements indicates that they were going to start mining/production in 2009, then 2010, then 2011 and now late 2011 (perhaps even early 2012).
Also their capital management skills have a questionmark because they went to the market to raise funds for a project that was surposedly half way through construction (in 2010)? Then the underwriter jumped ship and everything was put on hold.
I did notice in early 2011 the old MD resigned, so maybe the new management team is better. This is something I will have to look into over the coming days.
Perhaps you are able to shed more info on why the delays occured (if you have been a shareholder for sometime)?
I don't necessarily dismiss projects just because they are/were delayed (for example I still hold KGL and their Andash project is delayed by 12 months) but I believe that management must always underpromise, over deliver and at least have the funds to see the project through to the end.
I will keep going through these ann's in more detail and run some basic numbers on the project tomorrow. I will then post my thoughts on the blog. I might just post them as a comment, rather than an article, depending on how much info I think I need to provide.
I look forward to any additional info you might be able to offer on CVR and their projects.
Thanks,
Investorpaul
PART ONE
ReplyDeleteHi Anonymous,
I just wanted to let you know that I have looked into CVR in some more detail. As per my original post, managements ability to execute the project would be my main concern. There has however been a change in management & there is only so many times you can miss a deadline before you finally get it right.
In regard to the future potential of the SP the main benefit of the Dalabai project is that it will help fund their future exploration and development program. This will help reduce the effect/potential for any capital raising in the future which would only serve to dilute existing holders. This is a big positive IMO as I like companies that are fully funded/majority funded (i.e. KGL).
Given the MC is very low <$30m & the projet is projected to make an average annual after tax profit of US$19m (as per latest presentation) then there is the potential for the SP to re-rate based on this. However, the mine life is also low at only 2.7yrs. If we compare this to companies such as NST (who originally had a low mine life, but not any more) it is hard for them to trade at any great multiple. From memory NST was trading on a multiple of up to 2.5 (if not less than 2) for some time.
If you used a similar multiple on CVR that would only indicate a MC of circa US$50m on this original project. Obviously if they are able to further define the resource/reserve then mine life should increase & along with it the MC. Also, I would not expect the SP to jump as much as it could just on production commencing. Shareholders will be waiting for management to prove that they can hit the targets they have predicted (especially given the previously missed timeframes) & over time this will lead to increased confidence (and is likely to be positive for the SP).
It is also important to note that the NPAT was based on silver at US$40/oz (Silver is currently in the low 30's). This is however offset by a higher gold price (currently >$1,700 compared to the figure CVR use in the presentation of $1,500).
Moving on from Dalabai we have the Bizhe project which could provide additional feed for Dalabi in late 2012/2013. This will obviously be positive as it will help extend the mine life and may allow CVR to trade at a higher multiple (as per info above).
PART TWO
ReplyDeleteFollowing that the next major catalyst will be the results of the resource definition, feasilibity studies and eventual production at Alyntas in late 2013. This starts with the heap leach ops in 2013 which are estimated to produce 40k oz over 5 years. I have not seen any estimates from the co on this, but if we run with gold at US$1,500 and costs of $600/oz this would generate $60m in revenue & a cash surplus of 36m. Even if you took a more conservative figure & added a low multiple you can see that it has the potential to be many times that of the current MC.
In 2015 the CIL will come on line & add 100k oz to the project. I'll leave you to do the figures but it could add 100odd m to free cash flow, if not more (depending on the price of gold, etc).
This project is the game changer, Dalabai is just a stepping stone to get there.
So in summary,
1. Does the company have potential: Yes
2. The main risk I see is managements ability to execute the project. Second is the soverign risk and ability to get all necessary permits without any delay/interference, etc
3. The SP should rise on Dalabai alone, but the real increase will come later on with the Altyntas project.
I will keep an eye on it for now & if management can prove their ability over the next 6 or so months it may be something I jump on. For the time being though I would prefer KGL not CVR (not a recommendation to buy, just my opinion).
Disclaimer: As always please do not rely on my figures. They are obviously very rough at this stage and I would normally run more detailed DCF analysis if I was closer to making an investment decision for my portfolio. Please also Do your own research and consult a licenced financial advisor.
Thanks again and please let me know what you think.
I just had an after thought and wanted to add this as a general comment for all mining companies. (This is not directly related to CVR, just general thoughts)
ReplyDeleteThe Gold Symposium highlighted a heap of companies all with a "great project or story" (there opinion, not necessarily mine). Based on the information and projections there were many that had the potential to increase by many multiples. However there are so many roads to cross to get there and that is why the mining sector is typically high risk/high return.
Not only does management actually have to meet their projections but you have all the risk associated with getting finance, mine approvals, evironmental studies, soverign risk, commodity prices, achieving production targets, defining the resource, etc.
Along the way ordinary shareholders face the threat of dilution or wild swings in the SP as the market fluctuates between fear and greed. In the end I am a firm believer that fundamentals will prevail over technical analysis (hence why I held MHM even when it went alot lower, there had been no fundamental chage).
That is why I also look for a company that has the potential to increase in value 10 times over. If it doesnt have that potential, then it is not worth it (the risk) in my opinion.