Fom and investor that goes by Heinz:
this was a very bullish event, as what Anglo would have had to pay to exercise its back-in right was not commensurate with the mine's value. Anglo only didn't go forward with it because the mine is deemed too small , and Anglo's current strategy is to cull all marginal operations and concentrate on the sizable ones. it's absolutely the best thing that could have happened.
now CGLD can concentrate on expanding the business, which due to the current mine's profitability and good margins very likely won't require any share dilution. plans to expand Chanate's production capacity from its current 40K oz./p.a. to first 70, then 80 and ultimately 100K o.z/p.a. production are proceeding within budget and on schedule. the company is busy drilling a new prospect very close to the existing operations, and has begun to look around for new acquisition targets. we should continue to see good earnings for the remainder of the fiscal year (1-2 cents per share/quarter at a minimum, rising when the first phase of the capacity expansion is in place), plus there should soon be drilling news (it can't be foreseen how those will look, but the new prospect looks good as per grab samples and surveys), plus potentially an acquisition of a second producing or very close to producing mine.
furthermore, if we look at Chanate once it is at full capacity, we'd have nearly 900K oz. in proved reserves, over 2m. oz. in indicated total resources, producing 100K oz. p.a. at a cash cost of $245/oz. - which normally should be valued by the market at approx. $350 m., implying a price target of $ 1,80-$2 per share, ceteris paribus. that target would change if the gold price rises a lot further of course. this, mind you, is on Chanate alone. as an aside, the company has renegotiated its credit conditions with Standard Bank, which are now more favorable (lower interest rate, and access to additional capital if/when needed).
summary, we have a cash flow and earnings producing junior here without financing problems, a growth strategy in place the execution of which can be expected to proceed smoothly, and production costs well below the industry average. imho it remains a steal at current prices, with the only caveat being the gold price - as long as gold prices remain stable or go even higher, i would expect CGLD to produce sizable returns for shareholders. in the event of a falling gold price, the company would still be profitable due to its good margin, but the stock would probably not perform well anyway.
AI
