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I'm with you 567. The shorters are panicking. Never seen so much unsupported trashing.
The report will probably be in an SEC report to be filed soon.
Your math seems logical but the result isn't quite as clear. If the investor ends up with $300,000 + worth of stock, why is the company only booking $58,678 in value. If the value booked is $58,000 (after the discount), that should translate to $58,678/$.02 or about 2,933,900 shares.
That was my reasoning here. However, what I missed was that the discount is also booked as a liability. I defer to your analysis.
Nevertheless, we're still looking at under 100,000,000 OS and about 50,000,000 float if all shares were converted.
Hi Sanbruno,
Something doesn't seem right with your analysis. If, for example, we take your figures for the Delaware investor and they are able to convert their investment into 16.4 million shares at $.02 pps, that makes their investment worth 16.4 million x $.02 = $328,000
However, CGFI lists the carrying value at $58,678 ???
Hi Ficose,
Thanks! I'm not trying to be exact. Just want to give everyone a rational feel for where we are.
The official OS on the boards as of today is 73,167,462. Of that, 260,000 shares can not be sold until at least September 2014 with 36,000,000 restricted until 2016 (and we're not sure about another 6 million+ shares). That leaves roughly 37 million shares float. I don't consider another 4 million shares to be significant dilution. Nowhere near what you shorts have been predicting.
Yes, we'll see more dilution before we go live with the mill. But anyone predicting we'll go through 1 billion AS by the end of the year is smoking something other than tobacco.
I was thinking primarily of the stock used to purchase property, but as of the latest 10Q (pp 10-14) here are the committed shares:
1.) 36,000,000 shares issued for purchase of Champion and Silver Wing mines are 4 year restricted shares (presumably until 3/6/2016).
2.) 260,000 shares for purchase of King Solomon Mine, 250k of which are restricted for two years until 9/18/2014
3.) 50,000 shares for purchase of uranium claims, 25k of which are restricted until 6/13/2013
4.) Brooklyn Mine: "On November 1, 2012 the Company issued 6,397,300 shares of restricted Class A Common Stock, valued at $660,834 on the date of issue to satisfy all terms of the lease." (The restrictions are not disclosed).
5.) Delaware Partnership:
"At September 1, 2012, the Company owed the Delaware Partnership Investor $60,536 (net of unamortized discounts of $136,465), under multiple funding arrangements. During the three months ended November 30, 2012, the Company issued one convertible note under a funding arrangement with the Delaware Partnership Investor, totaling $52,000, which bears interest at 6.25% per annum and matures on October 3, 2013. The note is convertible at any time, at the option of the holder, into shares of Class A common stock of the Company at a conversion rate of 50% of the average of the two lowest volume-weighted average closing prices of the Company’s Class A common stock for the ten trading days immediately prior to the date a conversion notice is received by the Company. The Company recorded a discount in the amount of $52,000 related to the conversion feature on the note issued during the three months ended November 30, 2012 (Note 8). During the three months ended November 30, 2012, $85,000 of the convertible notes were converted into common stock (any unamortized debt discount related to the converted notes was immediately charged to interest expense on the day the notes were converted). During the three months ended November 30, 2012, the Company recorded $46,930 of debt discount amortization and the carrying value of the notes was $58,678 (net of unamortized discounts of $105,322) as of November 30, 2012."
6.)New York Investor:
"At September 1, 2012, the Company owed the New York Private Investors $69,913 (net of unamortized discount of $12,087), under multiple funding arrangements. During the three months ended November 30, 2012, the Company issued one convertible note for $53,000 under a funding arrangement with the group of New York Private Investors. The note bears interest at 8% per annum. The note matures on July 29, 2013. The note is convertible at any time after 180 days from the date of the note’s execution, at the option of the holder, into shares of Class A common stock of the Company at a conversion rate of 35% of the average of the three lowest volume-weighted average closing prices of the Company’s Class A common stock for the ten trading days immediately prior to the date a conversion notice is received by the Company. The Company recorded a debt discount of $53,000 relating to the conversion feature of the note. During the three months ended November 30, 2012, $71,000 of the convertible notes were converted into Class A common stock (any unamortized debt discount related to the converted notes was immediately charged to interest expense on the day the notes were converted). For the three months ended November 30, 2012, the Company recorded debt discount amortization of $18,614 and the carrying value of the notes as of November 30, 2012 was $18,054 (net of unamortized discounts of $45,945)."
7.) Accounts Payable:
"During the year ended August 31, 2011, the Company entered into an agreement with a vendor whereby the balance owed to the vendor for past services of $28,661 was exchanged for a convertible promissory note bearing interest at 6.5% per annum. The Company is required to make monthly payments under the terms of the note; however, the note holder has the right at its election to convert all or part of the outstanding principal and interest into the Company’s Class A common stock at a conversion rate of 70% of the average of the two lowest volume-weighted average closing prices of the Company’s Class A common stock for the ten trading days immediately prior to the date a conversion notice is received by the Company. The Company recorded a debt discount of $27,550 relating to the conversion feature of the note. In August 2011, the Company and the vendor agreed to increase the amount of the convertible promissory note for additional past services owed totaling $2,081 and agreed to defer the initial monthly payment on the note until January 2012, while all other terms of the note were unchanged. The Company recorded a debt discount of $2,081 related to the conversion feature of the increased portion of the note. For the three months ending November 30, 2012, the Company recorded debt discount amortization of $389 and the carrying value of the note as of November 30, 2012 was $7,904 (net of unamortized discount of $119)."
If I'm reading this correctly, CGFI still owes the following in convertible stock:
- $58,678 to the Delaware investors (convertible any time)
- $18,054 to the New York investor
- $7,904 to a payables vendor
For a total of $84,636 ...although I find this part of the discussion confusing (it's hard to follow the math - maybe someone can clarify).
At the current pps (around $.02)we're talking about around $4,000,000 shares. Even if my math is off and we quadruple this number we're not looking at really significant dilution here.
Most, if not all, of those convertibles came with 2 or 3 year restrictions on conversion/trading. Hopefully, the price will be well over $1.00 by the time they start converting. Also, they won't all convert at the same time. I'm not sure if they were impacted by the reverse split but most were granted before the split.
My understanding is that the B shares do not count against the earnings per share and can not be traded on the market. Consequently, they have no market value, only voting power. Some were granted to shareholders a few years ago but the vast majority are owned by Guyer and Rice. The rational was to protect against a hostile takeover. Maybe some of the B share holders can confirm/comment on this.
Thanks LJ. Good to see you online too.
Also, in response to SanBruno, Banks don't typically do third mortgages. They refinance the whole baby at a higher loan face amount conforming to the increased appraised value.
When I've spoken about "traditional financing" I've had in mind a loan based on real property. For example, if the mill met all of the permitting conditions it would be much more valuable than when they purchased it. I recall reading in one of the Q's that they purchased it for around $500,000 but that the property was really worth around $12 million (probably if it were operational).
They are currently putting together several NI43-101 reports on the mining properties. If any of these can prove that there are definite ore reserves, these properties again would have more value and could be used as collateral for a loan. I'm thinking that specifically the uranium claim could have been purchased with this in mind. The preliminary estimate is that it holds about $50 million in reserves. If this could be proven and all of the permiting for the mill were in place, a $10 million traditional loan might not seem unreasonable. Better yet, they could sell the property and have all the cash they need to open the mill. A promise of smelter royalties could also be used as an inducement (their profit margin should still be much bigger than other milling operations that have to build their facility from scratch).
None of these options would necessarily result in further dilution of shares.
I use Scottrade mainly for the pennies and speculative stuff, although I anchor it with some high yield dividend stocks to give me some margin and more predictable growth. My main account is at Morgan Stanley which I use mainly for high yield dividend investing. I'm buying my retirement income. I'm hoping CGFI may let me do it a few years early.
OK I tried to enter a short sale on 1,000 shares of CGFI after hours on Scottrade and got a message that short sales aren't allowed for stocks priced less than $5 and non-marginable stocks.
Les
I agree, Tradestation is the best trading platform out there. Especially if you're into charting and Fibonacci analysis. Unfortunately their fees are pretty high and when you add in access to NYSE & OTCBB data it becomes pretty excessive for a small investor/trader, especially if they categorize you as a professional user like me (even when you're only using it for personal trades). However, if you have a large portfolio it can be very worthwhile. I'll probably go back to them once I make my million $$$ with CGFI.
Les
ScotTrade seems to allow short sales. I haven't actually submitted one but it lets me enter the order parameters. I'd be willing to bet that you could also do it with a TradeStation account (I used to have one but gave it up due to the cost - I'm considered a professional user since I have a Series 6 license).
Les
If you made over $8,000 the other day you're trading a hell of a lot of shares. I think you alone could have drove the price down IMHO. It wouldn't take much.
It's OK. I think the $.02 to $.03 range is where the bulk of ordinary demand is for the bargain hunters. I just loaded up on another 40,000 shares. Only have to reach $.11 for me to break even now. Anything above that is huge profit
I've seen too many penny stock companies crash and burn when management didn't meet their projections. There are too many variables right now for them to be real specific or accurate. The DRMS could not act quickly to remove conditions, weather could cause delays, funding may take longer than anticipated to complete, economy could collapse, etc. Guyer and Rice are not young guys. They probably realize this and are being cautious. Better to save news for when things are closer to fruition so market will see steady progress rather than setbacks and misinformation. As ficose indicated in an earlier post, we are a secondary market. Private Placement investors are probably getting more data.
I agree. I doubt that Guyer would have committed 36 million non-refundable shares to the purchases without having a good idea where the funding would come from to complete the deal.
The company has issued resource estimates based on old surveys which admittedly aren't proven reserves but is the basis for their purchasing the properties.
Silver Wing Mine = $141,000,000
Champion Mine = $234,000,000
Uranium Mines = $ 50,000,000
---------------
Total 425,000,000
If these turn out to be "Proven Reserves", and we had to issue another 200 million shares ($10 million raised at $.05/share) to cover the purchase prices and start-up costs for the mill, we should still have a book value of about $1.40/share (all rough estimates). This is before you factor in the value, profits, and revenue from the mill.
I think the proven reserves will actually come out higher than these estimates JMO.
Apple Computer, total liabilities = $176 billion
By your logic, we're doing 100,000 times better than Apple. Not bad
Another reason to ignore you guys.
It's curious they didn't make the same claim for the King Solomon mine. Quote:
"We completed our 2011 exploration program on the King Solomon Mine during first the quarter of fiscal 2012.
On October 11, 2012, we entered into a three-year Extension and Renewal of Mining Lease with Option to Purchase the King Solomon Mine under substantially the same terms as the original lease. Plans to develop the King Solomon property are moving forward."
You have to keep in mind that the stock price right now is based purely on speculation. Until actual revenue is generated, the pps can be easily manipulated (the shorts have been successfully doing this for some time). It is also a function of supply and demand and what price buyer's think is a bargain. When revenue starts flowing or is reliably projected we'll start seeing a rational support level for the pps. Releasing sound resource estimates at this time might force a bump in the pps but would not guarantee that the pps wouldn't drop back down to the $.02 to $.03 range as it did before. Keeping the numbers close to the vest for fundraising until they can put the mill into production or get committed funding may be a sound strategy to get the pps to a level that corresponds to the actual financial condition of the compny.
quote from 10Q:
"Furthermore, the Company has prepared a preliminary technical report using NI 43-101 guidelines report for the Silver Wing to be used in fund raising activities."
" The Company has prepared a preliminary technical report using NI 43-101 guidelines report for the Champion Mine to be used in fund raising activities. "
"The stock issued for both the Silver Wing and Champion Mines is non-refundable and represents one component of a contemplated comprehensive funding transaction"
Regarding the Uranium property:
"An initial internal analysis by Company president Lee R. Rice indicates that the historical information used by others did not account for all possible sources and additional potential resource at depth. For that reason, we have engaged Allan P. Juhas, Ph.D. in Economic Geology, University of Manitoba 1973, to undertake the preparation of an NI43-101 technical report based upon the Company’s exploration plan and previous work that can be verified. Dr. Juhas has over 50 years’ experience in a broad spectrum of precious metals and base metals geological pursuits. He is well recognized in the industry, and prepares a number of NI43-101 reports each year.
We are in the process of constructing an NI 43-101 compliant report to confirm and verify the value of these assets."
There have been reserve estimates based on older surveys that total about $800 million on all of the properties but the SEC requires that certain conditions be met (I believe one is that the ore can be profitably extracted) before such estimates are included on their reports. These requirements either haven't yet been met or perhaps management is holding back their timing to have maximum impact on the stock price at a later date when the mill is closer to activation.
Other may have more info on the SEC conditions.
Les
Hey mod, you're complaining that even two people are getting paid. Tell me you'd be more confident if it were 20 or 100. Contractors work for me
Les
From CGFI 5/3/12 press release:
"The Company has received over $9 million in preliminary purchase orders for toll gold/silver ore milling in advance of the permit process completion from operating gold/silver ore mines in the area, including: The Silver Wing, Red Arrow, Golden Wonder, and Ruby Trust."
I just noticed that the Silver Wing mine is one of the customers. CGFI just purchased the Silver Wing Mine. They refer to it as an "operating mine". I wonder if this means that there is a current revenue stream?
Level II doesn't tell it all. Buyers/Sellers can hide bid/ask. There's more than 10k shares being asked hiding at .065
Hi Bruno,
Please check my post #59159. There is a funding source. We just don't know much about it. Whatever they've been doing it doesn't seem to have resulted in additional shares being issued.
I've contended all along that the Jan 6 date was simply a target date for closing the mine deal. The deal has already closed which means that the funding must have already been lined up.
As far as start up costs, I'm not sure what costs we'd be looking at. The mill was operational when they purchased it. It had been closed previously due to environmental concerns, most of which they've already corrected. A conditional permit to open the mill has been granted by the DRMS and the conditions are in the process of being corrected. There are roughly 30 million shares still available to pay contractors and employees and a known funding source although details of the arrangement are murky (perhaps they've been promised smelter royalties or given a lien on property - we just don't know). There are $9 million in orders from third party mines in the area already lined up with the probability that there will be more to come since they are one of the only milling facilities in this ore rich area. The permit to do toll milling has already been granted.
Yes there may be some additional dilution before the end of the year but I don't see a lot of need for it.
Glad you're on board Bruno. I wouldn't be surprised to get to 100 million shares by year end but I think management has been prudent so far considering all of the costs involved. If they issue more shares I think they'll be looking hard at the return on the investment (e.g. more mining properties, mill expansion etc.)
As far as delivering shareholder value, you have to keep in mind that this was/is an exploration stage company and has no current revenue. The value I see is in the mill and properties and they've been diligently following their business plan for the last several years and winding their way through a number of regulatory hurdles. There have been delays and surprises but in retrospect I think management has done a good job since I've been folowing them from 2 years ago.
Les
What we're referring to as traditional financing would not involve issuance of new shares but loans (or bonds) using their property and/or business plan as collateral. I'm not a CPA and my projections are simply an attempt to keep the expectations somewhat rational. Keep in mind that they do not include the effects of speculation or the actual value of their reserves which both could add signicantly to the pps.
At this point I do not see the number of shares increasing to significantly more than 83 million before production starts. However, none of us are privy to the true startup costs. Guyer probably has a good estimate but the numbers haven't yet been made public. As I said before, it's hard to imagine that Guyer would have been able to purchase the new mines unless he already had the financing for opening the mill and if this required issuance of additional shares it would have had to have been disclosed in a timely manner to the SEC.
As far as the convertibles are concerned, I believe most of them were issued with restrictions as to when the conversions could take place.
Les
There has been no mention of convertibles from management or anyone on the board but you. If all goes according to plan, revenue will start comming in about August and it will be more than enough to cover operations. They've claimed that they already have $9 million in orders lined up from 3rd party mines. Company currently only has two paid management employees. The rest of the work is contracted. Management is probably getting paid from the 20 million allocated to the stock plan, although, as LJ indicated earlier, traditional financing using their property as collateral is the probable and preferred method for getting the startup funds.There's also the 20 million shares allocated for contractors. It will make things easier if the share price keeps going up like today.
As I said in one of my previous posts, I seriously doubt that Guyer would have purchased two new mining properties if he hadn't already arranged the startup financing for the mill. I expect we'll see some clues in the 10Q. If new stock was issued it would have had to have been disclosed on the SEC reports. There have been several indications that some form of financing is available, including the fact that they closed the deal on the mines and paid $3 million+ in cash. The mill was purchased on the cheap for about $500,000 and it alone is estimated to be worth over $12 million.
The convertible notes were all issued at a much higher share price, pre-5000 to 1 reverse split. Their annual report list total dollar amount of convertibles at $141,000 as of the end of August. At today's pps that would translate to about 2 million shares.
As of today, we know that there were about 7 million shares issued and outstanding post reverse split last September. 36 million shares were issued for the purchase of the Champion & Silver Wing mines and these have a four year restriction on trades. 40 million shares are authorized for employee and contractor stock plans but only a fraction of these have already been issued.
7m+36m+40m = 83m potentially issued.
7m+36m = 43m currently the official number of shares issued and outstanding according to the brokerages.
I've seen some posts report 56m shares (?) and this may be true, and, if it is, it may just be that about 13 million of the 40 million shares authorized for employees and contractors have been issued. These shares will probably be used up for startup costs.
I would refer you to my post #58965 re-posted below for an educated guess on the stock price based on known shares issued and outstanding and Steven Guyer's (CFO) revenue and margin projections for the next threee years.
******
FY13 FY14 FY15
Revenue (millions) $12M $53M $65M
Gross Margin 37% 45% 49%
EPS .0535 .2873 .3837
PPS @10xEPS $ .54 $2.87 $3.84
PPS @18xEPS * $ .96 $5.17 $6.91 median
PPS @21.1xEPS ** $1.13 $6.06 $8.10 average
* 18xEPS is the median Forward PE of several similar companies in the mining industry
** 21.1xEPS is the average Forward PE of several similar companies in the mining industry
PE estimates were taken from Thompson Reuters stock report on ANV (Allied Nevada Gold) which Scottrade considers to be a peer of CGFI
The EPS projections assume that Class B shares are not counted in the EPS calculation and it also assumes that all employee SOP allocations (20m shares) and Consultant SOP allocations (20m shares) are issued along with the shares for the Silver Wing and Champion mines (36m shares)for a total of $83,000,128 shares outstanding. This last assumption is probaly too high but as I said the estimates are conservative. The projections also do not take into account any extra bump in PE that CGFI may get from resource estimates and speculation
You guys just love to make stuff up don't you. See the December announcements on the mine purchase. "Acquired" means "bought", "purchased" like "done deal". Nothing magic about January 6 except a target closing date.
Hemi, your 75 million shares include about 60 million restricted shares. I've done the count too. I expect about 83 million total once all announced shares are issued which may not be for a year or two unless there are more purchases (the count includes allocations for employee and contractor stock options).
Keep in mind that most of those are restricted shares (locked up for up to 4 years) and can't be traded. I believe the float (tradeable shares) is somewhere around 15 million.
By the way, I expect we'll learn a lot from the 10Q and dispell some of the rumors from the shorts, but I caution against expecting too much lest we get disappointed. Hopefully, we'll find out how the mine purchases were financed (maybe a mortgage on the properties).
Not to quibble, but I think you missed a stock split and dividend payment during that time. Probably really less than half that amount. Also, big management changes since then.
Les
Other than bragging rights on voting, I'm not sure the B shares have much value. As I've said before, as long as one person controls more than 50% of the votes the rest of the votes don't amount to much. It's my understanding that the B shares can't be traded and don't have any intrinsic value.
Les
Hey Bio, panic must be setting in on all you shorts with the price going up. All these posts in the last few minutes?
As I've said before, the Jan 6 date was meaningless. It was merely a target date for closing the deal on the Champion and Silver Wing mines. THE DEAL WAS DONE IN DECEMBER! The 10Q should give us a better idea of how it was financed. It should be out around mid-month. Keep in mind that it's a required report by the SEC regs. So far, unlike most scam stocks, CGFI has been current on it's reporting. It's not nice to fool the SEC ;o)
Les
Current management started running the company shortly before the Pride of the West mill was purchased in June 2007. Since then we've seen steady progress on the business plan. CGFIA and CGFID were temporary symbols assigned by the SEC to cover the periods while new share certificates were issued during previous stock splits - NOT DIFFERENT COMPANIES!!!
PS the first split was normal the second one was reverse.
Les
Having watched penny stocks for a few years I've seen a number of real scams and unfortunately I've also invested in several of them (see BRZG, NSRF, GWGI, TAON, etc.). You learn from your mistakes. The real scams usually are touted by several Penny Stock advisors to drive up the price after they've bought a bunch of shares. Then they sell their positions and the stock falls as fast as it rose. The underlying companies are always late in their SEC reports or don't report at all. You never see any solid progress toward their business plan, only plan changes and new strategies.
We could still (involuntarily) be latched on by the penny stock advisors and see a price spike but CGFI has made solid progress on their business plan and has consistently filed all necessary SEC reports. They're not acting like a scam at all.
Some interesting points on that link. Shares outstanding is only 43 million and float is 27 million. I expect total OS to rise to about 80 mill mostly restricted shares once the Champion and Silver Wing purchases are fully reported and the employee SOP and contractor SOP is fully used up. That's a far cry from 1 billion shares. As I've pointed out before, most companies keep far more authorized shares then OS for flexibility. There are only 101 shareholders of record (we have more members than that on our board). The only market makers are hemi and his cohorts. No wonder the pps has tanked. Thanks Hemi, you keep selling and I'll keep buying on the cheap until things turn around.