CGG - Citadel Resource Group

[Sean K]

The fishy results are out.

Awesome intersections here.

Highlights of the new drill results reported for the first time today include:
o 103.4m at 2.9% Cu, 0.6g/t Au, 15.4g/t Ag from 130m downhole, including, 46.5m at 4.1% Cu, 0.9 g/t Au, 29.8 g/t Ag from 131.5m (BDH2032A)
o 101m at 2.9% Cu, 0.4g/t Au, 11.6g/t Ag from 239.1m downhole, including, 30.95m at 4.1% Cu, 0.5g/t Au, 15.1g/t Ag from 239.1m downhole (BDH2037)
o 74.9m at 2.3% Cu, 0.2g/t Au and 5.7g/t Ag from 270.1m downhole (BDH2038)
o 87.3m at 4.5% Cu, 0.5 g/t Au, 23.2 g/t Ag from 276.5m downhole including 43m at 7.4% Cu, 0.8 g/t Au, 43.0 g/t Ag (BDH 2040)
o 83.95m at 2.4% Cu, 0.3 g/t Au and 15.6 g/t Ag from 186m downhole (BDH2041)

They are very good results.

I think they are only firming up the current resource though aren't they?

 

[Sean K]

The 16 or so cent level was discussed some time ago as breakout point. Looks very strong here on great volume. Cu up a few % will hold it up you'd think. GEC still ticking bomb though.

 

[jman2007]

The 16 or so cent level was discussed some time ago as breakout point. Looks very strong here on great volume. Cu up a few % will hold it up you'd think. GEC still ticking bomb though.

Had a very strong opening this morning at 19c, but has since fallen back to 17.5-18c, but still promising that it is showing signs of bucking the sideways trend. CGG have also just out an ann that shareholders have voted to ratify the $22M placement - no surprise there.

Some very healthy Cu intersections from J-S kennas, in general a strong Quarterly release from CGG with diamond and RC drilling ongoing at several of the outerlying gold projects/prospects, and some seemingly good progress with the J-S DFS.

I'm still a little concerned with the Q1 2009 timetable for the startup of the gold heapleach pad at J-S. Although Lode 1 precious metal credits have been calculated, Lodes 2 and 4 have not. Considering they look to be lagging with getting a revised JORC figure out for Shayban, they might have a little bit too much on their plate?

 

[Sean K]

I think the build up here from the cap raising low may be due to expectations for the upcoming resource announcements.

Had a great run since the bottom, and that support area has held well.

 

[Sean K]

Holding well, bit of a triangely thing happening. Well held above 16, looking more solid.

ASX looks like it needs to consolidate however, so conflicting messages.

 

[Sean K]

Breaking up from triangely thing, and confirmed 15/16 as good support now.

Been a nice run since tripple bottoming at about 10.

 

[jman2007]

Breaking up from triangely thing, and confirmed 15/16 as good support now.

Been a nice run since tripple bottoming at about 10.

kennas I've noticed CGG have released a third call on the partly paids recently @ 12.5c. I'm wondering if this has contributed to the increased volume we've seen today? I'm not 100% sure on how the partly paids work, but does this mean that once the payment is executed, that those particular holders are getting one hell of a fantastic deal right now? Certainly looking good, haven't seen 20c for a loooong time

 

[jman2007]

Another nice little update from CGG this week,

The deepest ever drillhole drilled into Jabal Sayid (approx 625m TD) has returned an unexpected surprise, 76m @ 3% Cu from 530m to the end of hole. Also, another intersection closer to surface also looks interesting, 59m @ 1.84% Cu from 25m in the same hole. This hole was drilled from the existing decline, so the collar will be about 300m below surface.

Nice little leg-up in the chart recently, looks like 21c is now recieving some solid support. Cu hitting US $2.20/lb, looks like CGG may be timing their run very nicely indeed.

 

[Sean K]

Another nice little update from CGG this week,

The deepest ever drillhole drilled into Jabal Sayid (approx 625m TD) has returned an unexpected surprise, 76m @ 3% Cu from 530m to the end of hole. Also, another intersection closer to surface also looks interesting, 59m @ 1.84% Cu from 25m in the same hole. This hole was drilled from the existing decline, so the collar will be about 300m below surface.

Nice little leg-up in the chart recently, looks like 21c is now recieving some solid support. Cu hitting US $2.20/lb, looks like CGG may be timing their run very nicely indeed.

Yeah, some pretty good intersections there to eoh, that will increase the recource.

They are doing quite a lot this quarter, due for some more anns...

PLANNED WORK PROGRAM DURING THE JUNE QUARTER

JABAL SAYID PROJECT
• Continued work associated with the Definitive Feasibility study including, water, environmental/community impact assessment and planned infrastructure review.
• Continued in-fill and Resource extension Diamond Core (both underground and surface) and RC drilling associated with the DFS (completion brought forward to approximately 6 weeks time).
• Follow through with Government authorities for the mining license application.
• Project financing including, legal and technical due diligence.
• Copper concentrate specification sheets and samples to be sent to smelters and traders.

JABAL SHAYBAN PROJECT
• Continuation of the drilling program to support an upgraded resource which will be finalised after the planned drilling programs have been completed.
• Diamond core drilling to test the along strike, down dip, and down plunge potential of the copper mineralization below 100m.
• Further metallurgical test work including column leach testwork on diamond core samples.
• Surface exploration along the 15km strike within the greater exploration area.

LAHUF PROJECT
• Ongoing RC and diamond core drilling program.
• Regional surface exploration of structural, geochemical and spectral anomalies.

BARI PROJECT
• Initial RC drilling program commenced late in March and will continue during the current quarter.
• Regional surface exploration of structural, geochemical and spectral anomalies.


This has been running like a champ since the bottom. Along with many other Cu/Au players I guess. Maybe it's just a general market recovery. Lots of juniors making 200% plus gains. Bit of resistance up ahead at 25.

 

[Sean K]

JABAL SHAYBAN PROJECT
• Continuation of the drilling program to support an upgraded resource which will be finalised after the planned drilling programs have been completed.
• Diamond core drilling to test the along strike, down dip, and down plunge potential of the copper mineralization below 100m.
• Further metallurgical test work including column leach testwork on diamond core samples.
• Surface exploration along the 15km strike within the greater exploration area.

Wonder how long before they get an upgraded resource out. Pretty vague time frame.



MORE HIGH-GRADE GOLD INTERSECTIONS FROM CITADEL’S SHAYBAN PROJECT, SAUDI ARABIA

LATEST RC IN-FILL AND EXTENSIONAL DRILLING CONTINUES TO DELIVER HIGH-GRADE GOLD RESULTS

Highlights:
• Results include:
• 43m at 9.38 g/t gold from 11m (SH091RC)
Including 16m at 19.38 g/t gold from 20m
• 11m at 6.29 g/t gold from 21m (SH090RC)
• 13m at 4.19 g/t gold from 22m (SH079RC)
• 21m at 3.08 g/t gold from 55m (SH080RC)
• 40m at 1.66 g/t gold from 58m (SH088RC)

 

[BSD]

After-market announcement of A$25m placement to European offtake partner at 34c - good premium to prevailing market

http://asx.com.au/asxpdf/20090819/pdf/31k5r0r1k4yxj6.pdf

The instos interested in getting set after the recent company presentations will have to buy on market now. Stock should be well bid.

http://asx.com.au/asxpdf/20090819/pdf/31k5js1rrfv8tb.pdf

Drill results set down for early October release in announcement

 

[Sean K]

The 16 or so cent level was discussed some time ago as breakout point. Looks very strong here on great volume. Cu up a few % will hold it up you'd think. GEC still ticking bomb though.

At the risk of looking like a Radge, this level did seem to be important.

Would have liked to be involved around then.

Only up 100% + ish.

 

[shag]

yes i wish i could have brought more at 18
i love the cu/au mix, copper is such a versatile metal.
cheers and thanks for yr spot on graph.

 

[goin4gold]

jumped in at .15c and decided to profit take last week at .32.5c just before the gold rally and bailed out ...a wee bit early ...think this still has some way to go..looks to be in a good uptrend.

 

[jman2007]

jman you clown you totally dropped the ball on this one @26.5c...

Chartwise looks great, must have broken through to a new all-time high by now surely. Yet another potential multi-bagger that has gone begging since the start of the year. Still no new updates on Jabal Shayban which is a little odd. J-S still looks like it is trucking along nicely though.

 

[BuffetJr]

gday guys

BIG fan of both CGG and another company just getting into Saudi Arabia called Syrah Resources (ASX code SYR). The latter has gone absolutely ballistic recently, mind you with only 30 million shares on issue, didn't take much to go soaring

Unfortunately, its so hard to get a decent amount of shares in it Took me ages to get a decent quantity.

Great writeup on both companies by Garimpeiro (Barry Fitzgerald) in today's Age newspaper...you can see it at www.theage.com.au if interested.

BuffetJr

 

[drillinto]

April 08, 2010

Citadel Edges Ever Closer To Putting The Finance In Place For Its Jabal Sayid Copper Project In Saudi Arabia
By Our Man in Oz
www.minesite.com/aus.html

There is only one thing wrong with the Jabal Sayid copper project of Citadel Resources in Saudi Arabia - it’s not in production. More to the point, it’s not in production at a time when the copper price has rocketed up to US$3.60 a pound, which is more than three times the mine’s forecast cash cost. “We would love to be producing right now”, Citadel’s chief executive, Ines Scotland, told Minesite’s Man in Oz. “But I don’t believe we’re going to miss anything because the outlook for copper is strong for years into the future.” If missing the first few months of the strong rebound in the copper price is frustrating, there is some good news in the situation. The company’s ability to finalise the funding package for the US$280 million development has been made much easier, as the profit margin on the projected total copper cash cost of US94 cents a pound looks very sweet indeed at that US$3.60 per pound price.

The basic plan for Jabal Sayid involves output of 57,000 tonnes of copper over an initial 10 year mine life, with the first three years delivering 61,000 tonnes. But interest in the project is driven by more than just the basic output parameters. It’s also a question of Citadel’s role in the opening of Saudi’s hard-rock mining industry, an industry which has traditionally played second fiddle to the country’s giant oil sector. Then there is the issue of what comes next, as metal-hungry investors cast their eyes over other parts of Citadel’s portfolio of base metals and gold projects on the Red Sea side of the Arabian Peninsula. In effect, Jabal Sayid will be first cab off Citadel’s very busy rank.

Deals involving exploration assets, such as the Jabal Shayban copper and gold prospect, the Wadi Kamal nickel, copper and platinum prospect, and the Bari copper and gold prospect are possible, as the metal-price revival gathers strength. But, interesting as those assets might be the immediate aim, and what investors in the Australian-listed company want to see, is finalisation of the funding package for Jabal Sayid, and a possible increase in Citadel’s existing 50 per cent stake in the project. An extra slice of the project is likely because the point has been reached where the other 50 per cent owner, a wealthy Saudi family, is required to start contributing to the cost of the development.

“We’ve been saying to the investment market for some time that we would like to increase our stake in Jabal Sayid”, Ines said. “Whether that happens, or how it happens, is now part of the discussion we’re having.” Significantly, that turn of events is occurring as Citadel reaches the final round of financing talks with its bankers, Saudi-based Riyad Bank and Germany’s WestLB. Ines said in a report to the ASX last month that key due diligence talks had been completed, with no problems or issues identified. A term sheet, she said, had been agreed, which reflected strong interest in the project. Aside from the lead banks, expressions of interest had also been received from a group of Saudi and international banks offering more debt than Jabal Sayid requires. “It is intended that a group of up to seven banks will form the final syndicate of lenders”, Ines said.

While the paperwork is finalised Citadel is charging ahead with planning and the early mobilisation of key equipment and personnel. After construction of the 2.6 million tonnes a year underground mine, and the above-ground processing plant, commissioning is scheduled start in the third quarter of 2011 with full-scale production reached soon after. Two lodes of ore, No.2 and 4, will start the operation. Both are open at depth, and there are additional lodes nearby. Large open stopes should make for simple mining. Truck haulage will be used to bring the ore to the surface, and the underground development will leverage off the existing 3.9 kilometres of existing declines.

“We are at a very busy stage of development”, Ines said. “As well as the financing and equity discussions we have ongoing engineering and design work. We’re doing all of the engineering for the long lead items. We’ve ordered key items of equipment such as the mills, float circuit, and thickeners. The mine contractor is mobilising to site. We’re pretty much on schedule.”

Interestingly, raising the equity component for Jabal Sayid might not have the watering down effect that can often worry investors. Those “other” projects on Citadel’s books have a value, and that value is rising every day that metal prices continue their recovery. “We have got a number of corporates in Saudi looking at joint venturing on some of the projects”, Ines said. “Some of those we would be hoping to get a cash payment as well, and bring equity in that way.” If there are secondary deals to be done the obvious starting point will be in the gold assets, given the understanding of gold that already exists in Saudi Arabia. “There is a long history of gold production, and that certainly means there is a preference for gold when it comes to hard-rock mining”, Ines said. “Jabal Sayid will be the country’s first base metal mine.”

On the ASX Citadel has been attracting fresh interest as the copper price rises and the full-scale development of Jabal Sayid gets closer. Since slipping to a late February low of A28.5 cents, the shares have rallied to trade at around A38.5 cents, which is not far short of their all-time high of A46 cents reached late last year. At its current price, Citadel is capitalised at A$565 million, a potentially modest value, given the news about to start flowing at a corporate, financial and construction level. Not to mention that first production is now only about 18 months away now.

 

[BSD]

With copper again in the spotlight, CGG is worthy of another update...


The situation continues to improve as management keeps ticking boxes on the way to production in 2012.

BFS completed for 2.6million tonne throughput of 2.4% Cu and 0.4gtAu equiv ore. Costs sub $1.00lbCu. Try and find grades like that in something else ready to produce in the coming 5 years.

At $3.00lbCu and $1000ozAu, CGG is generating cashflow around US$300m per annum for 10 years from production of 60ktCu and 40koz of Au equiv.

They are building the project for US$280m and complete the purchase of the remaining 30% of Jabal Sayid for US$120m as announced this week (an extremely accretive transaction).

Leaving some cash spare, they can use US$180m of the US$200m they have in the bank, leaving another $200m for the banks to fund (who are willing and able) after they issue another 150m shares to the partner for 50% of the bill.

Debt would be paid back in less than a year.

So using 10% discount rate, NPV of 10 years of US$300m after taking off the US$200m debt is US$1.6bn

Fully diluted post the final 150m of issuance we get 2.6 bn shares.

Rough val of about US$0.60 or A$0.65

Trading today at A$0.36


Apart from attractive exploration properties, upside comes initially from expansion of 2.6mt plant, to 3.0mt and onto possible 5mt (before being restricted by decline capacity).

JBWere, Petra and Morgan Stanley cover stock and have vals from $0.40 to $0.60 under various levels of expectation. Haven't seen all updates since this week's deal, but they will be positive.

As a long term supporter, anticipation is now high in the countdown to production and inclusion in ASX 200.

 

[Sean K]

Was just looking at Citadel again yesterday and I do like their prospects. I was hoping their gold projects would develop into something bigger but I suppose they have a focus on the Cu for the minute.

What's the profit pa by your figures?

 

[BSD]

Accounting profit? No idea!

Estimating Depreciation, hedging, interest costs etc ??? - I am a trader not an accountant and don't care too much for regulatory numbers.

I just look at funding requirements and crude cashflow levels and add a big enough discount rate and low commodity prices to provide cushion.

My "trading/investment model" uses 12% IRR and $2.50Cu/$1000Au and still gets $0.45 for Jabal Sayid alone (similar to most analyst targets).

Most of the analysts like to cushion their numbers by using higher cash costs (40% in one model I follow) - this allows them to apply very "scientific" calcs of WACC that impress academics but in reality dont mean much, while still having a discretionary cushion to adjust as the actual price approaches the "price targets".

My model does not put any value on the reinvestment of accumulated surpluses either. In the case of CGG this could be immense. They haven't really announced anything yet on Lahuf, RamRam - all high grade gold targets.

Saudi has attractive fiscal terms - 20% corp rate, no royalties etc. They also have 6 lane highways, spare port capacity, ultra cheap energy and an intent to grow their economy and provide employment.

The gold project Jabal Shayban now has over 400,000oz resource and only from scratching around. Nice grade above 2gt - just a sideshow at this stage - probably 2c-4c of valuation now with cap approaching $800m.

The Baydan drilling recently released showed some more potential (4%Cu, 25%Zn with Au and 600gtAg off the top of my head) in a 4-10m section. But it is hard to get excited about compared to 200m+ at 2%+ Cu at Jabal Sayid being developed.

Interesting to see what comes of the Bari porphyry target. It would cost $100m to explore that properly so I can imagine it could be better farmed-out to a major. Who knows? but it would be an massive gamble to tip too much money into this.

I can't find any company with a similar project or portfolio of targets.

Open to hints!