CGX - Central Asia Gold

[jman2007]

Hi fellow CGX troops,

just wishing you all a Merry Xmass, and hoping this Company brings you a nice Xmass present over the coming years! Congrats to those who rode the recent breakout from 75c and maybe even sold at 1.85? . Happy to wait patiently on this one and look forward to what could certainly be a dynamic year for CGX in 2008.

Over and out till mid Jan08
jman

 

[jman2007]

From a technical viewpoint, appears to be strong support currently in the 1.40-1.50 range. I was more than happy to see that this survived almost unscathed during the recent correction.

Operationally wise, the Masbate construction phase appears to be progreesing ahead of schedule, further exploration drilling has also interesected some decent grades around the project area. If Mkushi proves to be a viable operation, the startup at Masbate later this year could coincide nicely with the transferal of tech staff from Masbate to Mkushi. Detailed fs at Mkushi due to be completed by end of 2008, after initial studies indicated the project has robust economics.

Apparently they're using a Turkish diamond drilling company for the drilling in Nigeria at Segilola, a bit of an odd-ball choice imo, but perhaps they can undercut the drilling contractors from SA by a fair margin??

Fundamentals still strong here. Cash at end of last quater $55.6M

jman

 

[Sean K]

From a technical viewpoint, appears to be strong support currently in the 1.40-1.50 range. I was more than happy to see that this survived almost unscathed during the recent correction.

Yep, has held up really well. Pretty thinly traded...just a few shares on issue? Definately support at 1.40, but I'd shift the lower range to 1.20, which would connect with the 200d ma.

 

[jman2007]

Yep, has held up really well. Pretty thinly traded...just a few shares on issue? Definately support at 1.40, but I'd shift the lower range to 1.20, which would connect with the 200d ma.

Yes a reasonably tight capital structure here, 162M shares on issue. Seems to have been a favourite of private & institutional investors in the early days. Reasonably thin volumes for sure, could be a by-product of their relatively low investment profile in Australia.

jman

 

[jman2007]

Nice move today,

Up 26c to 1.86, according to commsec currently 24 buyers for 230,000 units vs 7 sellers for 44,000 units, and a healthy volume of 440,000 shares trading hands 2day.

Pretty thinly traded in general though, whether it can sustain support in this range, is the real question.

Thoughts?

jman

 

[jman2007]

Yep, has held up really well. Pretty thinly traded...just a few shares on issue? Definately support at 1.40, but I'd shift the lower range to 1.20, which would connect with the 200d ma.

Kennas,

Would love to hear yor opinion here. Currently trading at 1.97, although sparsely traded CGX seems remarkably resilient to volatility. Sellers almost seem to be able to dictate the terms at will atm, I'm sure there is some kind of quasi-financial term for this. Perhaps some insider knowledge here?

jman

 

[Sean K]

So, the gap up was in response to the progress report, or shareholder notice? Can't imagine the tax holiday to be the cause..

Chart wise, that's a massive gap, that probably needs to be filled considering the no news. It's not caused by anything re-rating the company, so provides less of a fundamental floor. Anything that should have rerated the company at this time? Just the shareholder change? Maybe there's something greater behind this?

The break through 1.90 should now be support but I think there's still a chance we may see near 1.60 again, unless there's a more fundamental reason for it to have moved like this.

I'm not sure of any other more direct short term TA picture here, except hold while it's running, and sell on a break through 1.80. With the chance to pick it back up at 1.60 ish when it finds a floor and starts trending back up. Re-evaluate according to the price action along the way.

I'm still concerned about the lack of volume which means short term dramas can significantly effect the price trend, and a black swan will put all TA in the dog house.

 

[jman2007]

So, the gap up was in response to the progress report, or shareholder notice? Can't imagine the tax holiday to be the cause..

Chart wise, that's a massive gap, that probably needs to be filled considering the no news. It's not caused by anything re-rating the company, so provides less of a fundamental floor. Anything that should have rerated the company at this time? Just the shareholder change? Maybe there's something greater behind this?

The break through 1.90 should now be support but I think there's still a chance we may see near 1.60 again, unless there's a more fundamental reason for it to have moved like this.

I'm not sure of any other more direct short term TA picture here, except hold while it's running, and sell on a break through 1.80. With the chance to pick it back up at 1.60 ish when it finds a floor and starts trending back up. Re-evaluate according to the price action along the way.

I'm still concerned about the lack of volume which means short term dramas can significantly effect the price trend, and a black swan will put all TA in the dog house.

Fantastic analysis Kennas,

I'm struggling to find anything that would have caused a dramatic re-evaluation of the company, although in saying that, I'm not exactly sure who/if any brokers are actively covering this and may have initiated a buy recommendation.

In the last Quaterly, CGX alluded to additional ounces outside the present Masbate pit shell, such as the Panique vein system (inferred 900K oz) and the Boston area immediately to the south and along strike of the main ore zone. With the base of transitional weathering around 20-22m, perhaps this represents the opportunity for a pit cutback in the future. I'm really not sure mate, I'm clutching at straws a bit here in terms of the price re-rating! I would really like to know who has been buying lately.

Yes likewise a little concerned about the thin volumes, it will be interesting to see how the 1.90 level holds up as new support.

Cheers
jman

 

[Sean K]

Fantastic analysis Kennas,

I'm struggling to find anything that would have caused a dramatic re-evaluation of the company,

Cheers
jman

Perhaps these results just ann have something to do with it. Wonder which Director's mates have been buying up? LOL

NEW HIGH GRADE VEIN SYSTEM DISCOVERED
RECENT SUCCESSFUL DRILLING RESULTS INCLUDING:
37m @ 3.57 g/t Au
19m @ 9.39 g/t Au
27m @ 9.88 g/t Au
42m @ 10.51 g/t Au
29m @ 4.70 g/t Au
MASBATE GOLD PROJECT IN THE PHILIPPINES

42m @ 10.51 g/t! From 1m down hole!!! cripes...

 

[jman2007]

Anything that should have rerated the company at this time? Just the shareholder change? Maybe there's something greater behind this?

Intersting you mentioned that Kennas,

Announcement just released announcing a new high-grade vein system discovered very close to the planned open pit. Thank goodness they carried out sterilisation drilling and didn't build the plant over this:

37m @ 3.57g/t
19m @ 9.39g/t
27m @ 9.88g/t
42m @ 10.51g/t
29m @ 4.7g/t

Mineralisation mostly shallow in the oxide/transitional zone, between 1-45m, so good free-milling potential here.

A touch of "insider" knowledge in the recent trading perhaps?

Cheers
jman

 

[jman2007]

Just broke 2.00

What do you think Kennas, enough impetus here to create another mini-break and hold above 2.00?

Only 6 sellers vs 27 buyers! Lol, next highest bid in line at 2.04.

Cheers
jman

 

[Sean K]

Looks good to keep going with those great results and very few sellers. Should be support as you've mentioned pending any dramatic shifts in the market or POG major correction.

With those grades and near surface results it should really add some further spec value you'd reckon.

How's the MC to oz au comparison here for a developer?

Still cheap?

Then add Zambia potential in.

 

[jman2007]

Looks good to keep going with those great results and very few sellers. Should be support as you've mentioned pending any dramatic shifts in the market or POG major correction.

With those grades and near surface results it should really add some further spec value you'd reckon.

How's the MC to oz au comparison here for a developer?

Still cheap?

Then add Zambia potential in.

Yep,

And don't forget the 500K oz potential at Segilola in Nigeria. MC currently sitting around $320M, but determining actual value cf to Oz explorers/producers could be tough, as you would need to factor in CGX's significant cash reserves and also that much of Masbate is already classified as a Probable Ore Reserve, representing a significant level of confidence and understanding of the ore body. But agreed mate, some great intersections close to surface should provide some additional ammo.

Not aware of too many companies in Oz that could say with confidence that they could restrict cash costs to of $US306, per/oz. Although in CGX's case this obviously still represents a hypothetical, but realistic target.

Perhaps a comparison with IGR would be worthwhile here, $30M in cash reserves, 100% ownership of a gold processing facility etc, perhaps showing many similarities in-line with CGX's development and recent success.

Cheers
jman

 

[jman2007]

Yikes, looks like it's on again,

Yesterdays break through 2.00 confirmed (?) with interest currently hovering around 2.15.

Kennas, some of the sell orders look a little unusual, there is a whole host of 5000-parcel orders ranging from 2.38-2.80, most of them conveniently separated from the next lowest by 15c eg. 2.45, 2.65, 2.80.

Coincidence perhaps? Or I wonder if it's ones person's strategy to break up their holdings and try and force the price up even more?

jman

 

[Sean K]

Yikes, looks like it's on again,

Yesterdays break through 2.00 confirmed (?) with interest currently hovering around 2.15.

Kennas, some of the sell orders look a little unusual, there is a whole host of 5000-parcel orders ranging from 2.38-2.80, most of them conveniently separated from the next lowest by 15c eg. 2.45, 2.65, 2.80.

Coincidence perhaps? Or I wonder if it's ones person's strategy to break up their holdings and try and force the price up even more?

jman

Yeah, it's looking good jman. Even with POG profit taking, or the PPP doing it's work, if you believe that stuff.

Those sells are a little strange, no idea of the tactic there, could only speculate. Still very few sell orders really and with further very good news would probably move quickly due to that before profit takers come in.

Had an outstanding year.

 

[jman2007]

Yeah, it's looking good jman. Even with POG profit taking, or the PPP doing it's work, if you believe that stuff.

Those sells are a little strange, no idea of the tactic there, could only speculate. Still very few sell orders really and with further very good news would probably move quickly due to that before profit takers come in.

Had an outstanding year.

Sounds like good sensible advice,

I guess it's a case of watching the sell orders very carefully here. I've never really got rid of stock before under these circumstances, but would definitely consider this option. With the majority being held by institutional investors, I don't really know what their intentions would be at this stage, purely speculative.

Definitely one of the standout performers on the ASX recently, lol Kennas, we seem to be the only ones following this atm.

jman

 

[jman2007]

Those sells are a little strange, no idea of the tactic there, could only speculate. Still very few sell orders really and with further very good news would probably move quickly due to that before profit takers come in.

Sold out at 2.18

Limited follow-through on the buy side yesterday afternoon, definitely would look to come back in if this re-adjusts to around 1.85-2.00, currently a build-up of volume between 2.10-2.12 on the buy side.

jman

 

[jman2007]

Perhaps these results just ann have something to do with it. Wonder which Director's mates have been buying up? LOL

42m @ 10.51 g/t! From 1m down hole!!! cripes...

Lol Kennas!...

CGX starting to receive some serious market coverage now. Since we began our musings a week or so ago and the release of the near-mine drilling results, 2 positive broker reports have come out.

The Haywood Securities coverage is very comphrehensive, and without wanting to get overly technical, here are a couple of the main points (the full report is available on the CGX website):

Haywood rate CGX as a sector outperform stock, and are predicting a 12-month price target of $3.00 (Canadian $ I think), and have issued a buy reccomendation.

At the end of 2006, with A$78M in cash, CGX were on the hunt for a another advanced-stage project to develop following their exit from the Taldy Bulak gold prospect in Kyrgyzstan. At roughly the same time, Thistle Mining who were trying to bring Masbate online were experiencing severe financial hardship. Macquarie bank approached CGX on behalf of Thistle Mining creditors, and that's where the story began.

CGX have a strong track record of success, which includes development of 3 mines in Australia, and 2 in Africa.

Capital-cost escalation controlled through the signing of a fixed-price, lump-sum construction contract with Leighton. Filminera have secured all permits and certificates to allow mining to commence. Operating costs expected to fall post 2010 with the introduction of the thermal coal-fired power generating plant on Masbate island.

Several near-mine targets still to be delineated, further enhancing the potential exploration upside for current holders.

CGX trades at a 27% discount for reserves and a 44% discount to comparable emerging gold producers (refer to report, as many companies used in the comparison are listed on the TSX only).

The propsed revised tax laws yet to be implemented by the Zambian Govt, including a windfall tax, which will be applied to base metals at a min rate of 25% and will increase mineral royalties by 3% from 0.6%. This could have a substansial impact on Mkushi Copper, hence Haywood do not attribute as much value to this prospect in the sp as one would initially think. Segilola is still viewed as a much less advanced "exploration" play.

Just in case anyone was wondering, I sold out of this as I was convinced that the breakout ceiling had been reached. It was certainly not due to any misgivings I had about the company, or its potential. On the contrary, I definitely view CGX as one of the more appealing prospects around atm. I still believe there is real potential for a suitable re-entry into this stock, and I will be watching closely over the coming weeks.

Cheers
jman

 

[jman2007]

Say what?....

A rather curious resource "upgrade" released by CGX today for Masbate, which tbh I am struggling to get my head around, as the market seems to be as well.

Indicated and inferred resources increased significantly, the former by 79% and the latter by 59% for a combined total of 7.7M oz, up from 5.07M oz. Personally, I am wondering why none of the indicated ounces have failed to make it to the measured category for this re-modelling. As the term suggests, it looks like the new figure is actually based on a re-modelling of the deposit, rather than any near-mine exploration drilling results.

The original resource calculation used a cut-off grade of 0.6 g/t...whereas this new model applies a cut-off grade of 0.36 g/t....which seems particularly, ahh...generous to say the least. Robbing Peter to pay Paul?

Are they getting these ounces from the old waste dumps?..lol. Sorry, but I prefer my ounces to be based on holes drilled in the ground. The 20,000m of planned infill and extensional drilling can't come soon enough, lets keep it real guys.

jman

Disclaimer: DNH

 

[jman2007]

Haven't been following CGX much recently,

Although probably this is one of the few gold stocks that has resisted the pressure to head south, if you had bought in the last 2-3 months, you probably wouldn't be too disappointed.

Masbate construction looks to be almost two-thirds complete, and still ahead of schedule, the project financing side of things looks to be under control with capex more or less in line with initial estimates. Probably due to the well thought-out fixed-price contract arrangement with Leighton. SAG and Ball Mill refurbishment also looks to be succssfully completed.

Still looks to be an opportunity for investors to be able to capture some more value from Masbate's brownfield setting. It appears as though there are substansial contained ounces to the south of the main pit in the Panique area (15.3Mt @ 1.87g/t) , and in the high-grade vein system discovered at Libra north, Panique is certianly outside the current resource model. The area around Masbate does look to be a little underexplored.

I would like to know what the avergae head grade is predicted to be from years 2-5, during the first 2 years CGX are saying it will exceed 2g/t, with a very low strip ratio of 2:1. If they maintain a 200,000oz p/a operation throughout the LOM, then by 2012 their bulk mining approach will need to allow for a 25% increase in the daily milling rate to compensate for the lower grades. That's one factor investors should be aware of, that in all likelihood grades will reduce during the lifetime of the project, based on current resource numbers that is. And the near-mine exploration upside shouldn't be underestimated either.

The other thing to realise is that their bulk mining approach will only target resources above 0.7g/t, even though the re-modelled resource uses a 0.36g/t cutoff. So a portion of the resource will not be eligible to be converted to reserves. That really low cutoff grade still has me confused.

jman