CGX - Central Asia Gold

[jman2007]

Just sent these questions off to Michael Carrick:

1.) The recent Masbate Mineral Resource upgrade, which resulted in a substantial increase in the Indicated and Inferred ounces appears to be a re-modelling of existing drill hole data, using a substantially lower cut-off grade of 0.36 g/t. Can you please explain the rationale for using this new parameter, and the objective of the re-modelling?

2.) In the first 2 years of operation, I understand the ROM head grade will be in excess of 2g/t. Is it correct to suppose that during years 2-5, and throughout the remainder of the LOM, that head grade in the mill will fall below 2g/t, and will require a corresponding increase in daily milling rate to compensate for this? Is it also possible to give me an indication of expected ROM head grade during years 2-5?

3.) In regard to the high-grade vein system that was discovered adjacent to the planned Libra North open pit (incl 42m @ 10.5 g/t), what plans does CGA have to explore this area further with a focused RC drilling campaign?

4.) And finally, does the company intend to incorporate the Panique Resource into the global Resource figure for Masbate, which as I understand it is currently not part of?

-------------------------------------------------------------------------

Got a very quick reply from Michael Carrick tonight!!

(Reads as follows)

"Thank you for your email.

I have only just got back to Manila from site and am pleased to say things are progressing really well.

My responses to your specific points are as follows:

1. Correct. The original resource estimate was done at $450 gold- the updated resource was done at $750 gold, which gave rise to the lower cut-off of 0.36g/t. Objective-more relevant and it will form the basis for the new reserve compuitation.

2. Yes - first two years approx. 2g/t. Initial throughput (first 2 yrs) 4Mtpa. Thereafter 5Mt pa +. New reserve is presently being calculated with a scoping study looking at a the feasibility of an upgrade to 7Mtpa.

3. Follow up drilling currently being done.

4. Yes we will - good results which we would expect will add to reserves.

If you would like to drill down deaper on any point, please shout and I will have the relevant technical person address it comprehensively for you."

Regards
Mike

 

[jman2007]

1. Correct. The original resource estimate was done at $450 gold- the updated resource was done at $750 gold, which gave rise to the lower cut-off of 0.36g/t. Objective-more relevant and it will form the basis for the new reserve compuitation.

So I think I get it now. They basically just updated their optimized pit shell to reflect the actual trend in the POG. Possibly the old $450 pit shell is a hangover from Thistle Mining days? It's probably reasonable to expect up to a 25% increase in Reserves now too.

2. Yes - first two years approx. 2g/t. Initial throughput (first 2 yrs) 4Mtpa. Thereafter 5Mt pa +. New reserve is presently being calculated with a scoping study looking at a the feasibility of an upgrade to 7Mtpa.

Maybe a little bit evasive with this one, although based on current inputs, head grade could be in the range of 1.8-2.0g/t during years 2-5? The 7Mtpa upgrade could potentially boost production to 240-250K oz pa.

3. Follow up drilling currently being done.

4. Yes we will - good results which we would expect will add to reserves.

Well that pretty much speaks for itself, Panique will add substansial resource ounces as well as more than likely contributing to reserves too.

jman

 

[jman2007]

Horrible time to be trying to make positive announcements given the POG,

but anyway, probable Reserves increase by 54% to 3.03Moz @1.0 g/t, reasonably large dilution in grade though. If I rememeber rightly.. old Reserve figure was something like 1.67g/t?? Probably arose from using updated financial parameters such as a $US 750/oz
They still haven't incorporated the ounces from Main Vein/Boston area or Panique drilling into the Reserves yet. Hopefully should happen by end of the year. Should have about 7.8M oz in the book for Masbate now. Remember they use 0.4g/t as lower cut-off grade.

jman

 

[Sean K]

Horrible time to be trying to make positive announcements given the POG,

Simply a horrible time for any company digging up gold or worse, searching for it. NCM under $20! eeek!!!

If gold ever settles along with the rest of the world, this looks to have some good prospects jman, and a bit of cash on hand to get them through this 'credit tsunami', caused by the tsunami master himself AG.

Recent reco by Stock Resource to buy up to $1.50...lol. Perhaps they should have said buy down to $1.00.

Haywards price target $3.20....crikey!

Long term support down there around 70-75 c...

Is the POG still alive???

 

[jman2007]

CGA have been making good progress with development of the Masbate project, as of now construction should be approx. 90% complete.

As ususal, CGA have gone practically unnoticed and the stock is now testing $2.00 on its characteristic low-volume basis. This would have been a great pick-up at 90c, I used to own this stock but clearly missed the signals in early December.

Haywood Securities will be loving this stock too, they made a lazy $1.25M through acting as the agent during the most recent placement to sophisticated investors, 20M shares issued at $1.25!

Another outstanding breakout gone begging!...

jman

 

[jman2007]

Poor old CGA Mining never really quite took off on ASF did it? ..

Nevermind, it's starting to shine through (again) as a great potential defensive gold stock - if the market continues to fall over (again). Thinly traded - actually rarely traded, since the vast majority is held by the top 20 (93% ??). Some definite similarites between CGA Mining and Perseus Mining, as both Ayanfuri and Masbate are large low-grade, bulk-mining operations. Bear in mind it has only taken CGA 2 years from acquisition to get Masbate up an running. Not bad at all.

Masbate looks to be becoming substansially de-risked in terms of construction and finance, first gold pour was a couple of months ago actually. Finance-wise, still probably A$20 million in the bank, courtesy of -the Canadian instos, who look to be heavily backing this. The mill is massive, current capacity is 4.5mtpa, but there is capacity to expand this to 6.5mpta as they have a spare ball mill in reserve, fella's love ya work . Hopefully Masbate can successfully ramp-up to its nameplate capacity of 200,000oz pa without any major difficulties, followed by a further ramp-up to 300,000oz pa by 2012.

More info here:

http://www.minesite.com/nc/minews/singlenews/article/cga-mining-accelerates-its-production-ramp-up-at-masbate-while-segilola-looks-like-another-potentia/1042.html

Current Resource base is 7.8Moz @ 0.9g/t, with LOM currently at 10 years. The second link is a really interesting audio-visual presentation from the Syney Mining Club. Take note of the closing remarks, CGA are on the hunt for another similar size project in the Australasia region from July 1st 2009... jeez, are there any this big left in our back yard?! Lol!

http://www.sydneyminingclub.org/presentations/2009/june/CGA/player.html

If this starts trading in the $1.20-1.40 range I have to say I would be tempted to pick up few, various broker reports on the CGA Mining website value the stock from between A$2.00-2.20 p/s, but in this climate these valuations may not be too relevant. No substansial re-rating has occurred on commencement of production, so perhaps the window remains open?

 

[Sean K]

Gee that's low grade jmann, I didn't realise that when I had looked at it before. I wouldn't have expected anything under 1 g/t would make it to mining. I suppose when you've got a 4-6mtpa mill you can make it work. No idea what they would go for in Australasia. They can buy PRU or AZM off me for $2.50 and 40c respectively if they like.

 

[jman2007]

Gee that's low grade jman, I didn't realise that when I had looked at it before. I wouldn't have expected anything under 1 g/t would make it to mining. I suppose when you've got a 4-6mtpa mill you can make it work. No idea what they would go for in Australasia. They can buy PRU or AZM off me for $2.50 and 40c respectively if they like.

Ok, so the Mineral Resource statement probably wasn't the best example to use to get my point across! I admit it is a little confusing to follow the logic, and understand how this is actually economic, but I'll give it a shot.

Basically, the original 10.5 year mine life estimate CGA were originally using came from an April 2006 Resource and Reserve report on Masbate. This report outlined an initial Probable Reserve of approx 2.3Moz at 1.5g/t using a cutoff grade of 0.7g/t. The gold price used was $US450/oz.

In October 2008, an updated Probable Reserve of 3.03Moz at 1.0g/t was released to the market, applying a more realistic gold price of US$750/oz and a lower economic cutoff of 0.4g/t. Remember however, during its initial 2 years of operation, the mill will be producing gold at an average headgrade of 2.0g/t. So basically they'll be high-grading it generate cashflow asap. Cash costs are predicted to be approx US$450/oz throughout the LOM.

Ok, so basically what has happened is that with the new Oct08 parameters applied, particularly the updated gold price, a greater % of material now qualifies as ore - or the "money making part" of the project. The tonnes have been bulked up, but with that comes a corresponding dilution in the overall grade, which is reflected in the expanded Ore Reserve. Remember there is still a high-grade "core", or component to Masbate, of 2.3Moz at 1.5g/t, which if the worst came to the worst and the POG went off a cliff, could still be mined profitably (unless the POG really crashed!!). Another factor which allowed such a low economic cuttoff of 0.4g/t to be applied, is probably the stripping ratio, which reduced from 3.43:1 to 1.03:1 as part of the Oct08 report.

Cheers!

 

[jman2007]

Actually while we're talking about CGA, another broker report appeared on the website which can be accessed here:

http://www.cgamining.com/releases/broker_reports.php

Generally it gives a very positive picture, and has labelled CGA as an outperform stock, with a target of AUD$2.30.

Actually how's this for a conspiracy theory: In the May presentation CGA mentioned that they were "...currently in discussions with another gold project that is ready for construction", so they're clearly in acquisition mode.

Remember that Oceana Gold have moth-balled their Filipino project, Didipio, until they can find another partner to help fund and develop the project through to completion. This has current Total Reserves of approx. 1.65Moz at 1.5g/t. Also, it also hosts significant copper credits, and is actually one of the highest grade porphyry copper-gold projects in the world.

Now CGA don't strike me as a group of professionals content to sit on Masbate for the next 3-4 years. They're movers and shakers, imo they'll retain it as long as it takes to reach steady-state production before selling it, retiring the BNP Paribas debt facility, returning a portion to shareholders as a special divvy and retaining the rest as a deposit towards their next development project.

They've been in the Philippines for 2 years now, they understand the Mining and Environmental legislative and political system - and there would have to be a clear synergy between a Oceana Gold-CGA Mining relationship. So why the hell not then?

I say watch this space closely.

 

[Sean K]

Ok, so the Mineral Resource statement probably wasn't the best example to use to get my point across! I admit it is a little confusing to follow the logic, and understand how this is actually economic, but I'll give it a shot.

Basically, the original 10.5 year mine life estimate CGA were originally using came from an April 2006 Resource and Reserve report on Masbate. This report outlined an initial Probable Reserve of approx 2.3Moz at 1.5g/t using a cutoff grade of 0.7g/t. The gold price used was $US450/oz.

In October 2008, an updated Probable Reserve of 3.03Moz at 1.0g/t was released to the market, applying a more realistic gold price of US$750/oz and a lower economic cutoff of 0.4g/t. Remember however, during its initial 2 years of operation, the mill will be producing gold at an average headgrade of 2.0g/t. So basically they'll be high-grading it generate cashflow asap. Cash costs are predicted to be approx US$450/oz throughout the LOM.

Ok, so basically what has happened is that with the new Oct08 parameters applied, particularly the updated gold price, a greater % of material now qualifies as ore - or the "money making part" of the project. The tonnes have been bulked up, but with that comes a corresponding dilution in the overall grade, which is reflected in the expanded Ore Reserve. Remember there is still a high-grade "core", or component to Masbate, of 2.3Moz at 1.5g/t, which if the worst came to the worst and the POG went off a cliff, could still be mined profitably (unless the POG really crashed!!). Another factor which allowed such a low economic cuttoff of 0.4g/t to be applied, is probably the stripping ratio, which reduced from 3.43:1 to 1.03:1 as part of the Oct08 report.

Cheers!

Ah yes, I should have read back more closely.

Another broker report done in Jan by Euroz:

Initiation of Coverage

Investment Highlights

CGA Mining (CGX) is poised to pour fi rst gold from its 7.8moz Masbate Gold Project in the Philippines from Q1 CY’09.
The US$168m project is on-track to be delivered on time; an excellent result from management. We expect a signifi cant re-rating upon delivery.
Existing cash reserves of US$29m (US$27m cash on hand; US$21m undrawn debt) fully funds the project to production from Mar’09.
Production of 200kozpa is forecast from 4mtpa feed from open pit at an operating cost of US$345/oz for 2yrs.
CGX’s current reserves of 3.03moz (92Mt @ 1.01g/t) support a +10yr project at an av. cash cost of US$460/oz.
CGX is undertaking an expansion study to increase through-put to 6.5-7mtpa, supporting production of +250kozpa from CY’12.
Philippine Government incentives provide the Masbate Project with a corporate taxation ‘holiday’ of 6 years.
CGX offers good exposure to gold price with hedging equivalent to 1 year’s production or approximately 10% of ore reserves.
Highly profi table from July’09, PER of 4x FY’10, falling to 3.3x and 3x in FY’11 and ’12 make CGX look very cheap against its peers.
Seasoned management and technical team with signifi cant gold mine experience and an extensive Filipino corporate and governmental network.
Euroz valuation and price target $2.48/sh.

 

[Miner]

Actually while we're talking about CGA, another broker report appeared on the website which can be accessed here:

http://www.cgamining.com/releases/broker_reports.php

Generally it gives a very positive picture, and has labelled CGA as an outperform stock, with a target of AUD$2.30.

Actually how's this for a conspiracy theory: In the May presentation CGA mentioned that they were "...currently in discussions with another gold project that is ready for construction", so they're clearly in acquisition mode.

Remember that Oceana Gold have moth-balled their Filipino project, Didipio, until they can find another partner to help fund and develop the project through to completion. This has current Total Reserves of approx. 1.65Moz at 1.5g/t. Also, it also hosts significant copper credits, and is actually one of the highest grade porphyry copper-gold projects in the world.

Now CGA don't strike me as a group of professionals content to sit on Masbate for the next 3-4 years. They're movers and shakers, imo they'll retain it as long as it takes to reach steady-state production before selling it, retiring the BNP Paribas debt facility, returning a portion to shareholders as a special divvy and retaining the rest as a deposit towards their next development project.

They've been in the Philippines for 2 years now, they understand the Mining and Environmental legislative and political system - and there would have to be a clear synergy between a Oceana Gold-CGA Mining relationship. So why the hell not then?

I say watch this space closely.

Dear Jman

Looks like market behaved reading your posting and CGX shot up.

Good work and yes this space will be under watch

 

[jman2007]

Dear Jman

Looks like market behaved reading your posting and CGX shot up.

Good work and yes this space will be under watch

Well it was hardly a booming trading session Miner, with a paltry 2000 shares trading hands. I think at one point on Friday, both the buy and sell sides had practically disappeared. You would have to think it would be incredibly easy to manipulate a thinly traded stock like this.

Having another shuffle throught the Masbate material today made me realise that there is a reasonable amount of near-mine exploration being planned on the adjacent tenements -25,000m during 2009 from memory. I suppose if they're confident of adding extra Reserves in the next 12-18 months, the additional milling capacity in their back pocket is a winner.

Well I guess if someone else read this thread, that would make at least 5 of us.

 

[jman2007]

An article about Didipio in the Philippines, may have some relevance here.

"Strong Interest in Joint Venture for Didipio, says Oceana"

New Zealand Herald Article, 22nd June 2009

http://www.nzherald.co.nz/grant-bradley/news/article.cfm?a_id=351&objectid=10579878

The Didipio project has been put on hold while the company re-examines the scope of the capital required to move it out of "care and maintenance".

Vice-president of corporate and investor relations Darren Klinck said several potential joint-venture partners had expressed "very strong" interest in becoming involved.

The company, which has three mines operating successfully in the South Island, said when it parked operations at Didipio it was doing so to protect and preserve assets. It had by late last year spent about US$70 million ($109 million) developing the mine but was caught by skyrocketing costs and then by paralysed credit markets.

"We expect the capital [cost] will be significantly less than it was a year ago but those are internal studies that are going on right now. There's always bumps in the road when it comes to mining companies."

Investors have been concerned about the company which is listed on the New Zealand, Australian and Toronto stock exchanges and has seen its share price take a rollercoaster ride during the past year.

Klinck said it had convertible bonds worth A$155 million that matured in 2012 and 2013 and around $16 million in project debt. "It's definitely an issue that's come up in the last nine months but it's not debt that needs to be refinanced right away."

Production from its Macraes open-cast mine and nearby Frasers underground mine, along with its underground project in Reefton put it in the top five gold producers in Australasia.

The company expected to produce between 280,000 and 300,000 ounces of gold this year, up from 183,000 ounces in 2007. It would also put more resources into the Macraes site, about 100km north of Dunedin and Reefton.

ABN Amro Craigs investor adviser Peter McIntyre said Oceana's New Zealand operations were performing strongly but it faced a challenge in bringing down debt and finding a joint venture partner at Didipio.

"The concerns we have are all around Didipio - it's been money down a big hole to this stage. There's never any real doubt about the New Zealand operation - they're extremely profitable for them."

 

[Sean K]

It's been a while since CGX stated they were after an acquisition. Wonder what's on the cooker? Looks like nada to me.

This came on the radar again for me while reviewing the Gold Stock Comparison chart which gives them an EV to Oz Au price of $48 which is less than some explorers and half most other producers. Looks very undervalued by rule of thumb, even though it's made tremendous gains.

Exploration drilling at Libra looks pretty interesting. High grade stuff. Wonder when a resource comes out for that?

Why did they just do a $25m placement? This is pretty vague:

The net proceeds, in combination with existing cash reserves, will be used to fund further enhancements in the plant and exploration activities at the Masbate Gold Project and general corporate purposes.

By my accounts they already had $30m cash and are producing. Maybe it's some debt owed?

'General corporate purposes'?

Looks to be coming up against significant resistance here.

 

[Sean K]

Still hovering under that resistance area even after gold has gone sky rocket and they see to be on track to reach 200k pa as planned. With all seamingly going to plan I wonder why they're still on $46 an ounce when some junior explorers are on $60 plus and way way behind any sort of production.

On Proactive Investors yesterday:

CGA is listed on both the Toronto Stock Exchange and Australian Securities Exchange. The Masbate Gold Project is the largest gold project in the Philippines and was successfully developed with first gold poured on 12 May 2009. The project, which is currently ramping up to full production, has a total indicated resource base of 4.55M ounces, total inferred resource base of 3.22M ounces with a probable reserve of 3.03M ounces of gold. The project is currently forecast to produce over 200,000 ounces per annum.

The 4Mtpa plant was constructed by Leighton Contractors Asia Limited (“Leighton”) without one lost time injury. The mining contract for the Masbate Gold Project has been awarded to Leighton, the largest mining contractor in the world. CGA is completing a scoping study for the expansion of the plant throughput at Masbate.

CGA has a disciplined acquisition program focused on acquiring new gold projects with a substantial initial resource with the capacity to grow materially and where the development and operational experience of CGA can be applied to enhance shareholder value.

Dual-listed gold producer CGA Mining (ASX: CGX, TSX: CGA) has achieved a record daily throughput at the Masbate Gold Project in the Philippines.

A record daily throughput was achieved for 17 November 2009 with 17,123t’s milled (106 microns). This equates to a feed rate of 713dt/h.

Design for the plant was 4mtpa (500t/h or 12,000t per day) at a grind size of 150 microns.

CGA produced 29,751 oz of gold and 15,898 oz of silver from Masbate during the September quarter from an ore blend consisting largely of softer oxide and transitional ore types.

The mine is currently ramping up to full production. Steady state operations are forecast to produce over 200,000 ounces per annum.

The total indicated resource base at Masbate is 4.55M ounces, with a total inferred resource base of 3.22M ounces and a probable reserve of 3.03M ounces of gold.

Cash costs at $437 is pretty darn OK, and unhedged first year. Years 2-5 hedgeing 200k ish at $860 looks like it could be a pretty nasty loss, but must have been needed for financing.

Still nothing more on Libra drilling success and follow up...

Maybe in the poo house because Masbate is a re-run?

Project Finance a forward problem.

Overall I think maybe Mr Market will wake up shortly and re-rate them. Really should be in the producer category at above $100 an ounce. ie, double the current EV, or about $3.60 ish ish. No idea on a DCF valuation, they're for accountants.

 

[bacon]

Hello, first year apprentice signing on here.

Re CGX, I noticed that there has been no threads for this company for a good year or so, but it has come to my attention today looking like an interesting buy due to current Gold Production and projected 30 cps dividend in 2011 which makes it in excess of 10%. The price trend is continuing to push up.

I have added SLR a couple of months ago for a very good gain and as they are trading at about the same price, their Projected Earnings are no where near as high as CGX.

I would be interested in the thoughts of any one who cares to reply.

 

[springhill]

CGA ANNOUNCES 500,000 OUNCES MILESTONE AT MASBATE GOLD PROJECT

CGA Mining is pleased to announce that on 2 August, the Masbate Gold Project poured it’s 500,000th ounce of gold.
This significant milestone for the operation follows on the back of a record quarterly production for the June Quarter, record half yearly production and a 17% increase in reserves announced in May.

JUNE QUARTERLY HIGHLIGHTS
• Record gold production from the plant of 50,817 ounces (March Qtr 49,199 ounces)
• Record mill throughput of 1,728,751 tonnes (March Qtr 1,586,549 tonnes)
• Average throughput rate for the quarter equivalent to 6.9mtpa
• Cost per tonne fell to $22.76 from $23.24 in the March Qtr
• Cash operating cost US$784/oz (March Qtr $753/oz)
• Gross project operating cash flow of US$28.8M
• Cash and liquid assets as at 30 June 2012 were US$151.4M

CORPORATE
As at 30 June 2012, cash and liquid assets were US$151.4 (March quarter: $153.9M). Cash and bullion on hand represented US$110.1M of that balance - including the cash reserves of Filminera Resources Corporation while cash and bullion at 31 March was US$99.2M. This was after having paid the interest and principal repayment on the BNP arranged project finance facility for the June quarter of US$4.5M. The outstanding project finance facility has now reduced to US$27.2M at 30 June 2012 (March quarter: $31.4M). During the quarter, 50,000 outstanding options due to expire on 30 June 2012 were exercised for total gross proceeds of A$32,500 and 150,000 unexercised out of the money options expired. At 30 June 2012, the Company had 6,471,250 options on issue and the total issued capital was 337,775,726 fully paid ordinary shares.




What do the gold bugs think of CGX? Not much chat for a company with these kind of figures.