Crocodile Gold fka CRK

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FWIW...Grandich's comments..

Aug 17
Grandich Client Update – Crocodile Gold Croc has start up pains but has potential for long term gains


http://www.grandich.com/

Crocodile Gold issued a press release announcing their Q2 2010 results and production results to date. First and foremost, Croc has produced 41,700 ounces of gold to the end of July. They declared commercial production as of June 1, 2010, and poured 8,697 ounces of gold during June and produced 8,200 ounces in July. Their cash costs were high in June at $1051 per ounce, but this included an inventory writedown of $77 per ounce and they just declared commercial production so these costs should decrease as the operations progress and monthly production increases.

They discussed a number of things in the press release, but before getting into other details, of note is that Croc has reduced its 2010 production guidance from 100,000 ounces to 85,000 ounces based on several factors including the delayed start up of the Tom’s Gully underground mine which accounted for 8,000 ounces. They think it is best to defer production, and mill commissioning at the Tom’s Gully mill, which should allow the mine plan to be optimized and lower the risk of any issues after startup. Croc is also modifying their mine scheduling due to the monsoonal wet season that occurs in the Northern Territory beginning late this year. They are taking actions to minimize disruptions during this season. They are being prudent in their decision and even though it will affect the production profile, the growth in this company is still there. They will now be able to really focus on optimizing the current operations and spend their efforts on developing the large Cosmo underground mine which is ahead of schedule. While a disappointment in the short term, they have not lost focus on the more important growth of production in the long term.

Croc has had its share of growing pains since it began producing from its mines in the Northern Territory of Australia in November 2009, but I think it is important to focus on the bigger picture of what this company has to offer – a growing production profile, decreasing costs and huge exploration potential. They have the assets and the management team to execute on their growth plan. Keep in mind a number of guys on the team previously worked at Goldcorp – the CEO, CFO and COO in addition to some Board members, so they have the experience of working with the majors. They purchased the assets for US$9 an ounces and have moved quickly into a junior gold producer.

The team is working on improving the operations and so far mill availability and recoveries are at or above target levels. They are also now developing a new small open pit mine called Princess Louise, which is near the operating North Point open pit mine, which should help in increasing mill throughput and in building ore stockpiles. Crocodile Gold personnel are also actively researching historical exploration information and I expect that there can be some news in the coming months on some of this potential.

The future of the company is the Cosmo/Howley corridor which contains over 2 million ounces of gold over a 5 kilometre strike length, and is full of exploration potential and targets. Croc is currently mining from the Howley open pit mine and is developing Cosmo as an underground mine ahead of schedule. Cosmo should be in production in mid-2011 and will be a significant contributor to Croc’s planned growth in production. The exploration potential here is huge and they’ve only scratched the surface.